The Tax-Avoidance Tango

One of the stock market's underlying principles is that all shareholders are supposed to be treated alike. Then there's the way that Times Mirror Co., the owner of the Los Angeles Times, deals with its controlling shareholders, the Chandler family. At least three times in the past five years, the Chandlers have gotten sweet deals from Times Mirror that weren't available to regular shareholders. The most recent touch of honey is a convoluted Sept. 3 transaction in which the Chandlers in effect sold more than half their Times Mirror stake to the company while keeping majority voting control and ducking every penny of capital-gains taxes on an indicated profit of almost $1 billion. The problem with this deal, which neither Times Mirror nor the Chandlers would discuss, isn't that it's illegal--it's not. The problem is that dodging taxes once or twice is fine, but dodging them all the time is unseemly. And, the Chandlers get terms not available to anyone else. If a regular shareholder...

A Long Season Of Wall Street Weirdness

If you're feeling grumpy these days, don't feel guilty about it. After all, this is a grumpy time of year, what with Labor Day marking the unofficial end of summer. Bye-bye, vacation. Hello, work or school. Yechh! And if you've tried to make sense of the day-to-day moves of this summer's market, you're probably feeling a little grumpy about that, too. As you can see from the accompanying chart, stocks have lurched sharply up and down for three months, winding up a couple of percent above where they were on Memorial Day. Things could be a lot worse--despite the decline from the market's Aug. 25 peak, the broad stock indexes are still close to record levels. If you took the summer off and drifted with the market, you did fine. If you took the short-term view and obsessed over every 100-point Dow move, you worked yourself into a frenzy, largely for nothing.One of the reasons stocks have been so erratic is Federal Reserve chairman Alan Greenspan's attempt to cool off the market by...

Masters Of Their Own Universe?

One of the insights you get from watching Wall Street is that there are two kinds of money in the world--Other People's Money, known as OPM, and Your Personal Money, which is the kind that really matters. When Wall Street traders or hedge-fund managers hit a bad patch and drop a few million or a few billion dollars, they're losing Other People's Money. But if you're a day trader who hits the skids, you're generally losing your own money. That's vastly harder on the pocketbook--and the ego--than losing OPM.Which brings us to the difference between your typical Wall Street trading floor and the growing hordes of day traders speculating in the market for their own accounts. And, possibly, to an insight or two into Mark Barton, the man who gunned down nine people at two day-trading firms' offices in Atlanta last week after first killing his wife and kids.To be sure, the typical big trading floor looks like a white-collar madhouse. It's filled with traders, mostly men, looking at screens...

Media's Week Of Wampum

Making wampum is turning into one of corporate America's fastest-growing businesses. No, companies like General Electric, Disney and Time Warner haven't taken to carving beads out of seashells, the way East Coast American Indians once did. Rather, they're creating their own Internet currencies, known as "wampum" in the Net biz. Last week was Wampum World's biggest ever, involving no fewer than four of the world's best-known companies. Disney announced plans to create a new "tracking stock" called Go.com based on Infoseek and various Disney Internet assets; Time Warner and Sony agreed to trade their jointly owned Columbia House business for 74 percent of struggling CDNow, on which they will bestow promotional services and a spiffy new, yet-to-be-chosen name, and GE filed plans to create a new, 49.9 percent-owned Net company called NBCi, whose assets will include Xoom.com, Snap.com and a 10 percent stake in CNBC.com. Meanwhile, Microsoft stock soared Friday on speculation that the...

Leaping Through The Loopholes

What does Neiman Marcus, the fancy department-store chain, have in common with the Gartner Group consulting outfit? No, the answer isn't that they both get to charge high prices because they have such upscale images. Rather, it's that both companies are using fancy financial footwork to declare independence from their parent companies--and from the tax collector, too. Which seems especially appropriate for the Fourth of July season.Let me explain. The games involving Neiman and Gartner are part of one of America's more interesting indoor sports: the eternal battle between corporate loophole users and loophole closers. It's not as much fun as the pro-basketball playoffs or the Fourth of July, but it has its moments. In this case, Neiman, Gartner and their controlling stockholders--Harcourt General and IMS Health, respectively--are squeezing through a loophole that seems likely to shut on July 16, when the tax-writing House Ways and Means Committee is scheduled to introduce this year...

Bell Of The Brawl

AT&T's $60 billion purchase of cable-TV giant MediaOne isn't your typical boring megabuck takeover. Rather, it's a corporate soap opera, with big money, intrigue, tax-avoidance games and double- and triple-dealing. All that's missing is sex. Here's the plot outline: Boy 1, Comcast, woos and wins MediaOne. Boy 2, AT&T, flashes a bigger wallet. Money talks. MediaOne ditches Boy 1, but keeps making eyes at him, hoping he'll come back with bigger bucks to rebuy her affections. Instead, Boy 1 and Boy 2, afraid of being played for suckers, agree to sublimate their lust and split up MediaOne.Meanwhile, Boy 3, Microsoft, which is richer than God, talks to both sides and also makes its own pass at MediaOne, but decides it would rather be buds with Boys 1 and 2 than fight them. So it buys a $5 billion piece of AT&T, which agrees to seed part of the cable world with Microsoft software. And all three players get in bed together to cooperate against their common enemy: the tax man....

How High The Moon?

FOR THE PAST FIVE YEARS, DELL Computer has coined more money than the U.S. Mint. Making even Microsoft look like a low-flier, Dell's stock-market value has risen from less than $1 billion in February 1994 to more than $100 billion. Chairman Michael Dell, who's all of 34 years old, has become one of the dozen richest people in the United States. And there are plenty of Dellionaires keeping Michael company. Anyone lucky or farsighted enough to have plunked down $2,100 for 100 shares of Dell on Feb. 18, 1994, now owns 3,200 shares, worth around $256,000 at last Friday's closing price. A 120-to-1 return in five years. Not too shabby. ...

Washington's Math Problem

IF YOU LISTENED TO PRESIDENT CLINTON'S State of the Union Message last week, you might have wondered why ""saving'' Social Security and Medicare sounded so easy. After all, we've heard for years that Social Security and Medicare would soon start running out of money, and would require benefit cuts, tax increases or massive borrowing to stay afloat. Yet here was the president promising to make these programs even more generous without raising taxes. In addition, he proposed a trillion dollars of other goodies. How did he do it? With Beltway budget math. ...

A Simple Plan (Part Ii)

IN ONE OF SIR ARTHUR CONAN DOYLE'S best-known Sherlock Holmes stories, ""Silver Blaze,'' the key element is something that didn't happen. To wit, a dog that didn't bark. Which brings us to a somewhat different piece of literature: a 325-page tome that AT&T has inflicted on its 3.5 million or so shareholders. No one will ever confuse this mass of legalese with one of Sir Arthur's nifty stories. Or, for that matter, with anything that normal people would ever read. But as in ""Silver Blaze,'' the most interesting element in this document, which describes AT&T's pending purchase of cable-TV giant Tele-Communications Inc., is something that didn't happen. To wit: a stock that AT&T isn't launching. ...

Clash Of The Indexes

IF YOU THINK THE COMPETITION IN THE National Football League playoffs is intense, take a look at Wall Street's index playoffs. These big-money games pit the nation's most popular stock indicator, the Dow Jones industrial average, against the nation's most important stock indicator, the Standard & Poor's 500 Index. ...

Nice Triple Play

IF SOMEONE HAD TOLD YOU AT THE end of 1994 that he would put you into stocks that would double your money in three years, you would have gone running for either a straitjacket or a cop. Probably a cop. After all, the Federal Reserve Board had raised short-term interest rates sharply in 1994, long-term Treasury bonds had had their worst year in history and stocks had barely broken even. Gloom was in the air. ...

Don't Look Down

WHEN THE BIBLICAL KING SOLOmon observed 3,000 years ago in the Book of Proverbs that "pride goeth before ... a fall," he obviously wasn't talking about the U.S. economy in 1997. But he could have been. ...

Millionaires Next Door

WHEN IT CAME TO celebrating Thanksgiving last week, Microsoft's employees were among those with the most to be grateful for. As the holiday dawned, Microsoft employees' paper profits on their stock options averaged more than $1 million per person, thanks to the stock's 80 percent rise in the past year. ...

After All, It's Only Money

WHEN CAN $40 BE worth more than $41.50? When you're comparing the two hostile mega-offers for MCI, the big long-distance company. GTE, the former General Telephone & Electronics, shed its image as a stodgy old phone company last week by lobbing in a $40-a-share bid for MCI. Of cash money. That amounts to $29 billion, the biggest cash offer in history. GTE is plenty competitive with WorldCom's earlier $41.50/$30 billion offer, which would be the biggest all-stock deal in history. The reason: cash is safer than stock, especially one like WorldCom, which is high risk, high reward. The battle was nostalgic. For a few giddy moments, you'd have thought the 1980s were back, a time when no company was too big to be raided and no offer was too big for Wall Street to finance. For the proper fee, of course.For now, the fight is between WorldCom, whose shares have done fabulously well but have more ups and downs than an elevator with hiccups, and GTE, which is offering cash on the...

No Hits, Lots Of Errors

WATCHING AT&T THESE DAYS brings to mind the deathless line uttered by manager Casey Stengel about his 1962 New York Mets, the worst team in major-league history: ""Can't anyone here play this game?'' ...

Thanks, I Needed That

THERE WAS LOTS OF OOHING AND aahing the other day when giant defense contractor Lockheed Martin announced it would spend $11.6 billion to gobble up one of its biggest rivals, Northrop Grumman, and become a megagiant. This purchase, the fifth multibillion-dollar deal pulled off by chairman Norman Augustine in five years, would make Lockheed Martin the dominant defense contractor in the United States. So Augustine and Northrop chairman Kent Kresa took bows, thanking all and sundry for making their combination possible. ...

A Tale Of Ups And Downs

THERE WERE TWO BIG BUSINESS stories that dominated the news this year: ""downsizing,'' which is a polite word for mass corporate firings; and the stock market's gut-wrenching downsizing and upsizing of stock prices. It was real interesting to observe these things. But if you were involved in one of them-- or, God forbid, both--it was more than any but the toughest stomach could take. ...

Breaking Up Is Hard To Do

THE UNITED STATES HAS ALWAYS been the land of the fresh start. Persecuted in your homeland? Immigrate to America. Mess up in the East? If so, go West. Which brings us to Westinghouse Electric, the once great industrial company trying to make a fresh start by plunking down $11 billion to buy CBS and Infinity Broadcasting. In order to boost its stock price and give top managers something fresh and fun to run, Westinghouse intends to break up into two separate companies. One, a sort of dowdy Drusilla, will inherit the venerable Westinghouse name--along with a lot of Thermo King freezers and whatever else remains of the shrunken industrial empire. The second, a yet unnamed broadcast group that is the glamorous Cinderella of the duo, will own CBS and the Infinity radio empire. Guess which the current top brass will run? ...

Profits? What Profits?

WHEN YOUR COMPUTER ACTS UP and all else fails, you reboot the beast by turning it off and then on again, praying that a fresh start will make the problem go away. Rebooting can wipe out a lot of data, but with luck your computer will actually work, if only briefly. America Online, the world's biggest online company, in effect rebooted its financial statements and business plan last week, trying to convince Wall Street that this time it has figured out how to make its first real profits. ...

John Walter, Call Home

THERE MUST BE SOME sort of glitch in the phone lines running from Manhattan to Basking Ridge, N.J., where AT&T's corporate headquarters sprawl across the landscape. How else can you explain how Wall Street always seems to misdial when it comes to AT&T? ...

The Howling Wolves

ARROOOOO! ARROOOOO! THAT BAYING sound you hear echoing through the canyons of Wall Street is the wolf pack howling for someone to blame for the stock-market debacle at AT&T. A year ago, when staid old AT&T announced it was breaking into three pieces, its stock soared and chairman Robert Allen was a hero to the Street. Now he's a bum, with even some of his former fans saying it may be time for him to go. To see why, look at the chart adjacent. You see the stock has fallen 24 percent since Jan. 2, when AT&T announced it planned to cut 40,000 jobs as part of its breakup. Meanwhile, the stock market has risen about 11 percent. This price drop has reached out and touched AT&T's 3.3 million shareholders in the pocketbook, slicing $25 billion from the value of their stock. ...

Tales From Cyberspace

SSST. WANT TO MAKE A SURE BUCK off cyberspace? Well, you don't need to be a programming whiz or a genius in the field of marketing. You can do just fine by earning a doctorate in economics and becoming famous as a passionate preacher against stagnation and economic inequality. Failing that, try getting a law degree. ...

What Price Is Right?

INVESTING OUR MONEY WITH MIchael Price, the superstar mutual fund manager, has always been like handing Michael Jordan the hall in the fourth quarter of a hard-fought playoff game. it's practically a sure thing: slaaam-DUNK! Price usually underperforms hot trend-surfing funds during wildly rising markets, such as those of 1995 and early 1996. But when the going gets tough, when it's crunch time in a treacherous and uncertain market like the one we have today, he's the guy you want managing your money. ...

Step Right Up

BUYING INITIAL PUBLIC OFFERINGS of stock and holding them for the long term is a sucker's game. Owning an index fund is generally just as good, and you get lots fewer heart palpitations. And buying IPOs is a walk in the park compared with buying hot IPOs shortly after they come out. That's because when you chase a hot issue, you're paying a fat premium over the offering price, which is pretty high to start with. ...

Stop Kicking Yourself

OK, WARREN BUFFETT FANS. LISten up. You missed the chance to buy into Buffett's Berkshire Hathaway at $18 a share in 1965, when he took control of what was then an ailing textile company. You didn't buy at $38 in 1975, when Berkshire had become a modest conglomerate. Or at $550 in the early 1980s, when Berkshire was starting to roll and Buffett was becoming a minor investment deity. And you didn't buy at $20,000 in 1994, when he had become a major financial god, and Buffettmania was sweeping the world. Now Berkshire is going for about $34,000 a share and Buffett's Berkshire stock is worth $16 billion, making him the richest person in the United States. So for years, lots of us have kicked ourselves black and blue for not buying Berkshire, thus missing one of the greatest investment opportunities in the history of money. And guess what? Soon we will all get a chance to buy Berkshire without taking out a second mortgage. If all goes as announced, Berkshire next month will offer Baby...

Elephant Dance?

THERE WAS LOTS OF BIG NEWS LAST week at Fidelity Investments, the world's mightiest mutual-fund company. In its biggest shake-up in history, Fidelity shuffled managers at many of its stock funds, including such well-known ones as Blue Chip Growth, Puritan and Asset Manager, whose performance has been less than world-beating the past few months. And it wasn't all that long ago that Fidelity shook up its bond funds, too. ...

Going Out With His Boots On

DO YOU REMEMBER Boone Pickens? You know, the guy with the swagger and the cowboy boots, the guy who 10 years ago was a Wall Street cover boy? The Investor From Hell for entrenched corporate managers, a man who made millions for himself, his Mesa Inc. and other stockholders by successfully raiding the likes of Gulf Oil and Unocal? ...

Northrop's Stealthy Deal

PSSST. WANT TO SEE HOW A COMPANY can get taxpayers to fork over a billion dollars to help it make an acquisition? Perfectly legitimately. Without even having to dodge through obscure tax loopholes? Then take a look at the nifty way one of the nation's biggest military contractors, Northrop Grumman, is buying Westinghouse Electric's defense and electronics businesses. ...

Following The Golden Rulers

Wall Street is strictly a dog-eat-dog place, where the Golden Rule is "He who has the gold makes the rules." But the proposed takeover of Turner Broadcasting by Time Warner has elevated that old greed standard to a new height: "He who rules gets the gold." That explains why cable-TV titan John Malone, who can singlehandedly block the deal, will knock down far more than his share of the gold if the deal gets done on the terms announced 10 days ago. ...

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