The Press Democrat from Santa Rosa, California • 38

E2 THE PRESS DEMOCRAT, WEDNESDAY, JULY 1 1 992 IN BRIEF ROBERT nflETZ: IRKfESTIMG Managed long bonds cure muni-bond blues Credit report firm agrees to overhaul You can hear older Americans aconizine Jl across the country, from retirement Wall Street is, of course, well aware of the pain and has developed all kinds of "products" to help investors maintain their incomes and present lifestyles. But skepticism and caution should be your attitude in dealing with the situation. When a broker offers a safe return in excess of 10 percent, be cautious indeed. Irickson, aBostonian, i argues that it is not a good I idea to reach for yield. In UPI sale 'a done deal' WASHINGTON United Press International and Middle East Broadcasting Centre Ltd.

signed an agreement Tuesday for the purchase of the 85-year-old American news agency by the Arabic television network, UPI announced. "It's a done deal in every respect," said Steve Geimann, executive vice president and editor of UPI. He said officials of Middle East Broadcasting, who offered the $3.95 million winning bid for the news service at a bankruptcy sale last week, would continue meeting with UPI officials to discuss their plans. Stocks, bonds issued at record levels NEW YORK Corporate America took advantage of low interest rates and a strong stock market to -issue record levels of stocks and bonds in the first half of 1 992, data released Tuesday show. The robust market activity led to a record $3.6 billion in underwriting fees for Wall Street firms, up from $2 billion in the January-June period a year ago, according to the research firm Securities Data Co.

Vegas hotel to close LAS VEGAS Workers prepared Tuesday to close the El Rancho Hotel, the second Las Vegas resort to close in the past month because of declining business. The resort's race and sports book, bowling alley and slot machines were scheduled to close at midnight, with the Las Vegas Strip resort shutting down all operations on Monday. The resort has been a victim of the recession and a customer exodus to newer and more extravagant resorts on the Las Vegas Strip. Some bitter employees also blame years of disinterest and lack of promotion by owner Ed Torres. Torres announced in May that he planned to close the resort, which employees 324 workers.

Hotel attorney Peter Bernhard has been trying unsuccessfully to sell the 21-acre property for some $25 million to $30 million. Press Democrat news services Hughes Aircraft to cut 9,000 jobs LOS ANGELES Defense electronics giant Hughes Aircraft Co. said Tuesday it will lay off 9,000 employees, shed businesses and products and consolidate its facilities to remain competitive. Hughes, a General Motors Corp. unit whose stock trades separately, said it will take an after-tax charge of $749.4 million in the second quarter related to the restructuring and another charge of $40 million to cover a change in the way it accounts for certain commercial businesses.

Hughes' chairman and chief executive, C. Michael Armstrong, said the company should be more profitable as a result of the streamlining. He said he hoped revenues in core defense and commercial businesses would eventually expand. The layoffs, 15 percent of Hughes' work force, will take place over the next 18 months. Airline to cut 250 joiis EAGAN, Minn.

Northwest Airlines is reducing its management staff by about 250 positions through job eliminations and early retirements, the airline said Tuesday. These reductions follow last Wednesday's announcement that the carrier based in this St. Paul suburb would lay off 110 pilots as a cost-cutting move. It is part of Northwest's effort to improve efficiency and control costs, the airline said. Alcoa to idle 2, 1 0O PITTSBURGH Aluminum Co.

of America said Tuesday it will cut 2,100 jobs, or about 3 percent of its work force, by the end of the year to improve competitiveness and profitability. Alcoa, the world's largest producer of aluminum, joined the growing list of American companies announcing job cuts during a modest economic recovery marked by nagging unemployment. The Alcoa announcement was welcomed by investors, however, who saw it as a solid move toward improved long-term profitability. Alcoa's stock, a component of the Dow Jones industrial average, rose $1 a share on the New York Stock Exchange to close at $75.87 12 villages to small business and professional offices everywhere: Some with tax-exempt bond incomes of $50,000 a year may be making do with $25,000 today. And the income of some with half as many bonds may drop from $25,000 to $12,500.

An indicated $7 billion worth of high-coupon municipal bonds mature today. By year's end, muni-bond redemptions will reach a total of $30 billion. In addition, municipalities are "calling" bond issues early at a furious rate, as they refinance to take advantage of interest rates that are at half the levels of 10 years ago. Some investors got the bad news from the newspaper. This week, CitiCorp, as agent for New York City's Municipal Assistance used the Sunday New York Times to say that $750 million in "MAC tax exempts would mature today.

In New England, Massachusetts Wholesale Electric Authority is retiring $400 million in muni bonds linked to the Seabrook nuclear plant. Investors who earned almost $1,400 a year per $10,000 bond (at a 14-percent rate) will be lucky to get $650 now. By ROB WELLS Associated Press NEW YORK Faced with angry consumers in 18 states, Equifax Inc. agreed Tuesday to overhaul its credit reporting practices, the second major credit reporting agency to undertake major reforms. Last December, TRW another major credit reporting agency, settled a lawsuit with 19 states and the Federal Trade Commission.

The agreement required the Cleveland-based TRW to make sweeping changes in its credit reporting business, including providing reports to consumers who ask within four days. The Atlanta-based Equifax, however, was not formally charged with any wrongdoing because it agreed with 18 states to improve Its policies, said Richard Barr, a spokesman for New York State Attorney General Robert Abrams. State officials had to sue TRW to bring about similar reforms. "Consumers throughout the country have complained that their credit reports are riddled with errors and that their attempts to correct these errors have fallen on deaf ears," Abrams said in a statement. "This settlement will compel Equifax to maintain reasonable procedures for clearing up these inaccuracies and preventing them in the future," he said.

Equifax maintains a data base on 170 million consumers nationwide. Consumers complained that Equifax frequently mixed up the credit histories of people with similar names, Barr said. That's because the company lacked details such as social security numbers, the date of birth, full names and addresses of the consumers, he said. "For two people with the same name, there was a good chance of getting them mixed up." Credit reports play an important role in the decisions of banks, credit card and finance companies on whether they will loan money to consumers. Equifax spokesman John Ford said it voluntarily signed the agree many municipal bond I issues are being quietly 'redeemed in thousands of the low-interest-rate environment of today, he does not believe investors should allow their money to rest in the low end of the market bills andor money-market funds.

The yield curve is steeper now than at almost any time in the past 50 years. That is, the longer you put your money to work, the higher the rate of return you can earn. The inflation-adjusted rate on 20-year Treasuries is about 5 percent. Deflated (real) rates were higher in 1983-84 at 7'2 percent. He believes the Federal Reserve will continue to take steps that will hold the inflation rate in the 3- to 3'2-percent range for the next three to five years.

It is in that environment that he urges investors to go for long bonds in managed municipal-bond funds, funds like the one he runs for Putnam Group. He stresses "managed." And his argument is sound for most busy investors. The choice is to call your broker and seek out one or more bonds for your portfolio, hope you have chosen well and worry about whether the inflation rate will climb and erode your capital. Suppose you bought a 20-year, Double A-rated municipal bond for a 6 y2 -percent tax-exempt yield. Erickson says that, should the inflation rate trend upward (from the current 3 to 3 y2 percent) to 5 percent in three to four years, you will take a 10-percent hit.

No one can say whether the inflation rate will remain in the current range, as Erickson believes, but a managed fund can react if inflation goes higher. Meanwhile, Erickson does not believe that municipal-bond interest rates are headed significantly higher for the foreseeable future. Those who sit on the sidelines are earning the lowest rates in some time. Short rates are about 3'2 percent, taxable. Robert Metz's column is distributed by United Feature Syndicate.

His column appears Wednesdays and Fridays. Rules He said he believed the borrowing limit was high enough and that the agency could pay off the loan within 15 years by charging banks increased insurance premiums. Bowsher, however, warned that the FDIC may have to use some of the $30 billion In borrowing to cover thrift failures, which would leave too little for bank failures. After Sept. 30, 1993, failures will be handled by the FDIC rather than the Resolution Trust the temporary cleanup agency created by the 1989 law.

The RTC has spent $88 billion handling 650 failures but has been forced to suspend its operations since April, when Congress let its spending authority lapse. If the delay drags on past the election, many of the sick institutions remaining may wind up in the hands of the FDIC, which so far has collected only a scant $90 million for its insurance fund. Continued from Page El The Federal Deposit Insurance Corp. was judged to be $7 billion in the red at the end of last year and the agency's chairman, William Taylor, said it would soon start borrowing from taxpayers under its new authority. communities, it's not easy to get the story out to holders.

Some muni holders may not learn their bonds have been called until they try to cash in an interest coupon. Holders of 10-year municipal bonds issued in the high-interest-rate environment of the early 1980s have earned 12 to 14 percent returns on investment-quality munis. Early redemptions offer a wonderful respite for hard-pressed municipal governments. But this is terrible news for retirees and other holders. The Putnam Companies' James Erickson, chief investment officer in the Boston-based mutual fund group's tax-exempt group, offers an investor profile: Holders average 58 years of age with average investments of $200,000 and household incomes averaging over $50,000.

Likely occupations: professionals and small business owners. Those now retired typically earned at least $50,000 a year. A Redwood -jix ment with the 18 states, while TRW settled a lawsuit. However, Equifax said, many of the agreements have been in place for some time. The company, which didn't admit any wrongdoing under the settlement, agreed to pay $150,000 to the 18 states to cover investigation costs, Abrams said.

In addition to New York, Abrams said the Equifax settlement was signed Tuesday by the attorneys general of Alabama, Arkansas, California, Connecticut, Florida, Idaho, Illinois, Michigan, Minnesota, Missouri, Nevada, New Mexico, Ohio, Pennsylvania, Texas, Utah and Washington. UlllUil UL Ruble Borrow Now Save! Lowest Rates New Used Auto Loans 8.00 APR. 24 Mos. 8.25 APR. 36 Mos.

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The new rate was expected to have little immediate effect on the average Russian consumer, beyond making imports more expensive. But by bringing some order to the nation's chaotic economy, it was likely to accelerate Russia's incorporation into the world financial community. The Soviet, and then Russian, governments artificially set the ruble's exchange rate for decades. The rate varied widely depending on who was buying or selling the ruble and for what purpose. This, coupled with laws preventing companies from taking rubles or foreign currency earnings out of the country, has been one of the key obstacles to Russia's integration into the global economy.

Until today, the ruble had two commonly used exchange rates. The "market rate," 120 rubles to the dollar, was the rate at which tourists and Russians can buy and sell rubles. It's set by the central bank and closely mirrors the black market and currency auction rates. The much less favorable "special commercial rate" of .55 rubles to $1 was the rate at which businesses were required to sell the government up to half their foreign currency earnings to help pay the former Soviet Union's foreign debt The government also had a large number of hidden exchange rates it used to subsidize imports. That cost the Russian government 500 billion rubles in 1992 alone, said Sergei Glaziev, first deputy minister for foreign economic affairs.

"It is a vast sum. The budget cannot sustain such a level of subsidies," Glaziev said at a recent news conference. The full impact of the currency reform plan was unclear Tuesday as many key questions remained unanswered. Stores that accept only foreign currency as payment said they did not know whether 4hey would have tf take rubles. Interest compounded daily.

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