The Los Angeles Times from Los Angeles, California • 101

End? Superboom's 1 1 Jl 1 UUIOOK Economists Divided But Most Agree FRB's Restrictive Policies Will Not Stop Inflation BY AKELO SEDERBEEG, Times Staff Writer Business Finance Automotive SECTION I SUNDAY, MARCH 2,1969 i I 111 If INSIDE THE MARKET RCA: Better Off Now St. Regis Paper's Erased? BY ERNEST A. SCHONBEKGER Times Staff Writer WALL STREETEKS have been fine-tuning their monitors into the latest developments involving Radio Corp. of America. It might turn into a classical case-study in corporate Images.

Most of them hope the message la that RCA has regained its old sense of direction or is at least stumbling in what they consider to be the right direction. After all, RCA's stock rose sixfold at one point from its 1962 low of $11. (It's now $44.) The view isn't unanimous, but most contend RCA would have hurt itself in the long run if it had acquired St. Regis Paper. They are pleased that St.

Regis last week called off the proposed merger, NEW YORK When will the big. bad U.S. economic superboom come tfi an end? Interviews with economists here Indicate answer-seekers to that question can take one of several choices and still be in tune with experts. a The end of the boom is near. The end is here now.

There won't be an end; the Inflationary boom will continue. The majority of economists interviewed would circle Some would favor however, and a few mavericks, whose ranks are growing, would red-pencil One obvious factor emerges: right now, there's widespread disagreement among private economic soothsayers on the outlook, whereas there usually is a fairly close consensus. There may be one area of agreement. The restrictive monetary policy of the Federal Reserve Board, much in vogue now, plus fiscal restraint through federal tax increases, probably will not have the desired effect of breaking the back of inflation. Most economists anticipate a rise in the consumer price index of about 3.5 this year.

Although less than last year's 4.7, that would be nonetheless high relative to past years. OTHER DISAGREEMENTS aren't so much over projections for the 1969 economy as a whole. The consensus holds that U.S. gross national product the dollar amount of the output of goods and services will rise some 7.5 to 8 this year, with perhaps 3.5 of the gain traceable to higher prices. Thus, the majority of economists say, there will be a slowdown only in the rate of increase in the economy, since last year's boom pushed GNP up a brisk 9.1, with the 4.5 from increased prices included.

When will the slowdown appear? On that question disagreement has developed. Some economists say there is enough evidence in the early figures on retail trade and other softening economic indicators to pronounce U.S. business "flat" right now. Others say that isn't necessarily so. "You can see the softening right now in consumer buying of both durable and non-durable goods," says John W.

Enders. vice president of the economics division, Lionel D. Edie an investment counseling firm. "Government ing is flattening out. The only strong component is business spending." The Edie firm, Enders says, expects a "very flat first half, and an economic resurgence in the second half." Sidney Homer, partner in the Wall Street bond house of Salomon Bros, and Hutzler, says his firm is sticking to a radically different model of 1969 GNP.

"WE SEE a very good first quarter," Homer says. "The boom is still with us and there's no evidence today of a slowdown. We expect a declining second quarter, with the third and fourth quarters very flat, with even the possibility of a recession, depending upon how you define a recession." Salomon Bros, anticipates that. GNP will amount to some $925 billion for the year, close to the standard forecast, but the quarter-by-quarter makeup is quite different from the standard forecast. The basic assumption most forecasters are making this year is that the Federal Reserve Board through its various control mechanisms will continue to keep pressure on bank lending and that the 10 federal tax surcharge will have some dampening effect on consumer and business spending.

This combination of fiscal and monetary restraint, coming together by coincidence more than by deliberate design, is bound to-have a slowing effect on the economy. And that, indeed, is the goal of federal planners. A BOOM is nice, they agree, but an inflationary boom such as last year's, is in reality a false boom. In times of inflation, companies and individuals are more apt to spend and companies usually find it easier to raise prices. Thus in a way the expectation of inflation creates more inflation.

Also restraint on the economy could have some beneficial international economic implications. Less inflation, for example, would tend to make U.S. exports more competitive in world markets, thus helping to improve a sagging trade balance (caused mostly by an upsurge in imports, which often occurs in boom times). Most economists anticipate this "beneficial" slowdown soon and some say it's here now. Albert T.

Sommers, vice president and director of economic research Please Turn to Page 2, Col. 1 JIGSAW PUZZLE "Things just fall into place," according to financier Kirk here describing his huge and growing stake in hotels, casinos and land in Las Vegas. A shrewd trader, he started Trans International Airlines in 1947 and recently sold the charter line for $90 million. Times photos by Bruce Cox Reckon With Another leaving RCA in two major areas where it has an image, (a) consumer products and services and (b) communication and technology. William G.

Schaefer is in league with those Wall Streeters who were greatly disenchanted with the St. Regis-RCA engagement. An analyst with Francis I. DuPont, Schaefer dropped RCA from his list of recommended "buys" when the proposal was made. SCHAEFER THINKS it was bad enough that Radio Corp.

acquired the Hertz car rental system in 19G7. Although it's possible to debate that RCA would be smart to press into varied consumer areas because of its strong brand name, Schaefer saw no excuse for St. Regis. He looked upon the possible acquisition as an outright violation of RCA's corporate concept. Vsm Vif ilia rforal 4a nff 1m feela Well as That of Hughes flashing his mischievous boyish grin.

LIKE HUGHES, Kerorian is bent on putting together a business complex catering to the growth of leisure time. Hughes is purchasing an airline (Air West) and Kerkorian has bought 30 of a bigger one (Western). Hughes' people talk of major growth for Vegas and so does Kerkorian. "It's strictly all go for the town and the state," he declares. Kerkorian displays some other Hughesian traits, like disdain for personal publicity.

The only time he's been known to really belt dQwn a couple of drinks is before he has to Vegas Must LAS VEGAS Howard Hughes is the biggest name in this town, but there's another fellow who might just wind up controlling a whole lot more hotel space than Hughes. He is Kirk Kerkorian. He's such an unobtrusive sort of guy it's difficult to believe he's built a $200 million fortune from a career that started in the Depression's Civilian Conservation Corps. He built that fortune primarily by supplementing an eighth grade education with lots of horse sense. "My knowledge all came from practical experience every time you buy and sell anything, you gain experience," he explains.

He's bought and sold a good bit; old cars, real estate, airplanes nd, lately, entire airlines. Now this modest, quiet but athletic 51-year-old, who prefers scribbling a few figures on the back of an envelope to making detailed financial analyses before he buys, has added Las Vegas hotel-casinos to his collection. Looking out the window of his comfortable office in his personally Name as is flat and consumer spend- 0 Br JOHN F. LAWRENCE Times Financial Editor owned racy Investment Co. (named for the eldest of his two daughters, who are nine and three), he can see the biggest of 'those hotels, the International.

It's currently about four months from completion. Its 1,500 rooms will make it the largest hotel in town. But that's only for starters. Kerkorian already has plans to add three more GOO-room towers to the International. He tells The Times he plans a 250-room high-rise addition to the SOO-room Flamingo, the old Bugsy Siegel palace he's purchased and refurbished.

With the Bonanza (140 rooms), which he purchased out of bankruptcy, and a sizable plot of ground next to the International, he has room for two more big hotels, if and when the spirit moves him. Even without that, he'll have 4,000 rooms to offer compared with Hughes' current 2,700. (Hughes has mentioned expansion, too, but hasn't started.) "We'll be controlling a lot of rooms, I guess," Kerkorian says, HUtV Iliad bii UI.U1 i 1 vvia more kindly toward RCA although he still is concerned about competi-tipn in the color TV field and about the time lag until RCA picks up steam in computer and related markets. Schaefer's not alone. The stock market seemed to agree.

RCA stock climbed and St. Regis fell after the proposed merger was called off. RCA stock had weakened and St. Regis gained when the consolidation was proposed. Some disliked the St.

Regis deal for still another reason. A spokesman at an Investment banking firm said he was pleased the merger fell through because RCA "would have been diluting its growth potential with a cyclical company a second-rate one. St. Regis' record was certainly not awe-inspiring. Its profit margin was less than for comparable companies." He conceded, however, that the below-normal profit margins at St.

Regis left room for RCA to phape them up and thus sweeten RCA profits. This thought is in line with the view of Mort Sloan, analyst for Muriel Siebert, the one woman member of the New York Stock Exchange. SAYS SLOAN: "I liked the St. Regis deal. I know my view contrasted with that of many other Fecurity analysts.

I'm acquainted with St. Regis and it will earn very substantially over the next few years. I expected it to add very handsomely to RCA earnings this year and next at a time when some RCA programs are not going to show earnings gains. They have problems, particularly in the color TV area." There are some who believe RCA need a few more breaks this year than appear to lie in the cards in order to continue Its earnings growth, uninterrupted since 10. Since then it has quadrupled per-hare profits while doubling sales to more than billion.

Every year has been letter than the last. Mlchiirl Shanahan. research direr tor for Capital Research Management Co. thinks this year RCA "may have a little trouble tailing $2.37." Its pcr-harc net In the year Ju-t ended. He doesn't think the outlook for 'Urz ticket durable.

which Includes TV net Is especially eorl leeaus of the Nte of the federal tax lurcharpe and tlht money Al any rate, two mutual funds manasH by Capital Research Investment Co. of Amerlra ami American Mutual Fund nld their combined hoMinc of 112.W0 shares Us of the Ui Vlckert report) shortly after the St, Regis proposal. In addition to his worries over TV wlr, fchanahan felt paper Industry wai much too cyclical for eotr.pany with the growth Imag of RCA ftratt Tvra It Ft 3, Cel. I What's So Favorable About 40-Cork Gap? BY CHAKLES D. WOOD, Times Staff Writer HAVE YOU BEEN rejoicing that the United States finally came up with a favorable balance of payments? There are great fears we may slip back again.

But at least we can dance In the Ftreets for a few months. You know how we did it? Well, our favorable balance of trade was a great help. How do you get a favorable balance of trade? In this hand I hold a stick of chewing gum. In my other hand is a cork for a wine bottle. Each costs about the same.

All right, so we'll export 100 sticks of chewing gum that a firm that manufactures chewing gum in the United States will sell 100 sticks to a merchant In a foreign country. Good. We're getting rid of something we might otherwise have to use ourselves. A CALIFORNIA wine bottler needs corks. So he contacts a cork grower abroad and buys corks.

If he Imports only 60 corks, then the United States trade balance out of these two transactions will be favorable. We sent away more than we got back, and what could be more favorable than that? We reduced our standard of living, you might say, by 40 corks. So. hurray. In exchange for the 40 corks we didn't get.

the central bank of the cork-producing country Issued an 10U to the Federal lleserve Bank of New York, and that made the New York Fed people happy, too. Because with that 10U they could grab 40 corki worth of some foreign country's gold, or more likely they could cancel out some foreign country's existing demand for 40 corks worth of our gold. Most people think Spanlhh rorks and German autos and Scotch whiskey and Irish linens and French perfumes and Japanese radios and Swlsi cheeses are more ticful than lumps of metal burled In vaults in New York and Ft. Knox gold that It is mostly illegal for an American eitlien to own, anyway. They don't understand what's favorable about favorable balance of trade.

They should ak the Went Germans, they know. THE WEST GERMANS are expert at export. They are si good that everybody, In their nation Is almply working his head off making goods for tii Americans, and the Lngllnh, the Swedes, the French and the South Americans, Precious little of ll stays In Germany. They export much more than they Import. Remember.

That's favorable. The result Is that the Germans may not have their hare of the cood thine In life, but they sure set to work hard. make a formal public appearance. "There's no way anyone is going to get Kirk to make a speech in this life," says one close associate. The comparison with Hughes can be carried a step further.

Both were fliers. While Kerkorian wasn't the daredevil test pilot Hughes was, he once set a transatlantic speed record, ferried a good many old crates over large expanses of ocean and once narrowly avoided a ditching at sea. BUT THERE the parallel stops. Hughes hasn't been seen in a decade; Kerkorian is quite visible. Once or twice a week he's on the tennis court (typically not with the other big powers in town but rather his barber, his tennis coach and the son of the man building his new hotel).

His Brltlsh-born wife of 14 years is active in civic endeavors. And where Hughes In his pre- recluse days was known for tennis shoes and baggy trousers, Kerkorl-an's business garb is stylish turtle-neck, plaid Fport coat and tailored slacks. Moreover, there's nothing frenetic about his work schedule. The last eight years I've gotten out of day to day operations to give myself more free time." As this suggests. Kerkorian Is no one-man show, 'lie delegates authority extremely veil," says a cnslno official at Caesars Palace, which Is built on land once owned by Kerkorian.

And he pets good men to delegate It to. Like Fred Iknnln-ger, former executive vice president of Hying Tiger Line, who is president of KcrkorUn's main enter-, prises. And William Fingiclon, his counsel, one of Vegas' top homegrown lawyers. WHEN HE BOUGHT the flamingo In 10C7, he wooed and won one of Vejras' top hotel-easlno manEen, Alex Shoofey, from Del Webb's Sahara. Fhoofey brought hli key people with him.

(In all some 3-1 made the twitch, anfering folks al the Sahara enough that they mailed )me of their former employes' W2 tan withholding forms to General Deliver the following January In-Hea of to their homes.) It wii att part of i Kerkorian fUn. The Wa was to break In the staff at the Flmlno, then sell that place hcn the International ppened and teste Tarn Tf 3 Ctl. 1 I ire 9- MS A) vu- rax A- 4 1 1: I and thrlr money it's niroply fabulous, A Old Charley tie Gaulle, youll notice, fooling around with the West German mark the war he ued to snipe at the Ameri ran dolUr. In fact Charlet'i French subjects hnt Wen butr tridlng their francs for Vt Cermsn marks. Thai's bow well Hmm Tar tt Tt I CL NIWIJT AND IIGCIST Thcta ihoi koU model of Kirk Ktdorion't IntemotioMl Hotel, Hich cet $60 million ttni trn Jul 3.

Not ilown or thrc moft plcinrtd loen, coch ith 500 roomi..