Chicago Tribune from Chicago, Illinois • 77

BEST COPY AVAILABLE FOR MICROFILMING i tV 111 SJVCS' Section 7 (ThicaBD (Tribune Sunday, January 15, 1934 How Consolidated Foods Corp. stacks up jt mm 1TO -i I CO IUsK.reT I i i W-J if. jWB I I I. 1 I I financial situation. FIRST FEDERAL, which has Iwn-n losing money since 19W), is sufknrig losses of $8.5 million a month.

Kdwm P. Hoffman, a Citicorp executive vice president, testified. "A delay will kill this institution," he said. "That's how bad it is." Hoffman refused to say how long Citicorp would keep jts offer on tin-table if Illinois opponents manafn-d to forestall its purchase of the through court battles or through persuading the Federal Reserve or Federal Home Loan Bank Board to hold new public hearings on the issue. "If the situation continues to deteriorate dramatically, we would have to take another fook at it," he said.

"We have a time frame for doling the deal, but I don't think it's relevant to say what it is." Bradfield also dashed hopes of some state bankers by saying the Fed was unlikely to hold additional hearings on the issue in Chic ago, as they requested. WHILE HE DIDN'T make a specific forecast on the Fed's decision, Bradfield seemed to indicate tin-probable line of the board's thinking. He repeatedly asked the Illinois groups how their efforts to defend the state's historic branch-banking ban applied to savings and loans, which nave been free to branch throughout Illinois since the mid 1970s. Volcker asked the same question of Sen. Charles Percy Iil I ci.ci received a vague reply.

State law allows Illinois banks to of rate only three banking facilities ithin a l'i iiiile radius of their home ofliees. First Federal's branches are siatU'red through much of the state, although most of them are in the Chkiiiio area. If the Federal Reserve rejects Citicorp's application under the Holding Company Act, the matter would go back to the bank board "to find a new buyer," said Viigil Mattingly, associate general counsel of the Fed. OF THE SEVEN parties who submitted bids lo buy First Federal last April when the board asked for of-teis, but two had dropped out ix tore the winner was picked if besides Citicorp, the other re-rmiining bidder was Chicago banker Eugene I', lleytow, who had made arrangements to obtain loans from First National Bank of Chicago and Continental Illinois National Bank mwl Trust Co. of Chicago to finance his bid.

ilcytow and the Illinois Bankers Association filed motions last week in the S. Court of Appeals Chi-cmn. ioining an earlier suit by Illinois Att.y. Gen. Neil F.

Hartigan seeking-a stay of the bank board's order pending a review of its decision awarding First Federal to Continued on page 2 By William Gruber BARRING SOME unexpected financial or legal development, Citicorp of New York, the nation's largest bank holding company, will win approval from the Federal Reserve Board to take over First Federal Savings and Loan Association of Chicago and network in Illinois. That was the reluctant conclusion of many bankers after the Federal Reserve, held an informal hearing last week in Washington and heard arguments against the Citicorp bid from a number of small bankers, banking association executives and state officials. "It's a done deal," said one Loop bank official who keeps a close eye on government activities. "The Fed will impose restrictions on how Citicorp can run First Federal, but its financial problems are so big there are very few others around who could take them on." Michael Bradfield, general counsel of Federal Reserve, who presided at the hearing, said the testimony would be considered by the central bank's board of governors, including Chairman Paul volcker, who briefly sat in on the one-day session. Bradfield declined to predict when a decision would be announced, but he said the board could be expected to take quick action because of the emergency nature of First Federal's 1 Sales In billions of dollars 00 Chkago Tribune Graphic by Jack Stoltag; I 7 6 5 4 3 Farmers fume over prices iet success of Qu 2-i 1 0 Big CBT trades to blame, they say Consolidate Food 1979 '80 '81 '82 '83 '84 Earnings In millions of dollars $200- 175 150 125 -4 100-75-50 25 Dennis Uittmer 1979 '80 '81 82 '83 '84' "Value Una estimate By Laurie Cohen IN 1978, farmers drove their tractors to LaSatle Street to protest low prices.

They blamed speculators at the Chicago Board of Trade, the nation's center for grain and soybean futures trading, for driving down prices by selling contracts in droves. Though they aren't rolling into Chicago again, many farmers are fuming about the unexpected price collapse that began last fall and the big daily price swings on the way down. Farmers have parked their complaints at the Board of Trade. "All of a sudden, we're all a little suspicious," said Leroy Stier, who farms 1,000 acres in Columbus, Wis. 'Who's profiting by is what we're asking." Extreme price volatility, especially in soybean futures, has been bothering others, too.

'The damn markets, should perform better than this one has," said Thomas Hieronymus, an agricultural economist at the University of Illinois and a futures trading authority. Experts are seeking explanations for tne jumpiness in soybean prices, but attention has focused on the activities of two of Chicago's most successful futures traders and their companies. The traders are Richard Dennis, managing partner of Commodities, and Thomas Dittmer, chairman of Refco Inc. CRITICS CONTEND that the two firms are strong-arming the market by trading in huge quantities. "The amounts are so huge that they do have an unstabilizing effect on the market," said an executive of one major futures brokerage firm, who asked not to be identified.

Prompted by such complaints, the Board of Trade and the federal Commodity Futures Trading Commission have studied the trading of and Refco to determine if affiliated traders have violated laws limiting the number of contracts an individual may hold. No abuses have been uncovered. "Allegations of price manipulation are not supported by our surveillance data, said Susan Phillips, CFTC chairman, in a recent letter to Rep. Ed Jones chairman of a House Agriculture subcommittee that oversees the futures agency. and Refco say their influence is vastly overblown.

"Farmers are being sold a bill of goods about By Herb Greenberg THE PAINTINGS and sculpture lining the hallways of Consolidated Food Loop headquarters make up one of the city's most pres-tigious corporate collections, boasting such names as Pissaro, Matisse, Chagall and Renoir. The company doesn't talk much about the collection, though, because it doesn't want strangers drop in. unexpectedly to view the works. Such lack of promotion is consistent, however, with a deliberately understated style and low profile kept by management of the $6.5 billion diversified company. "I don't see any great advantage in seeking and having been written said John Bryan, Con-solidated's 47-year-old chairman.

"What purpose does it serve? Satisfying some ego?" The native of West Point, whose first managerial post was with his family's small specialty meat company there 24 years ago, doesn't even read stories about Consolidated. "If they're I might believe them," he said in a refined Southern accent, "and if they're bad, I might get upset." But little could be written about Consolidated these days that would upset Bryan. A REORGANIZATION HE spearheaded in the mid-1970s, years anead of current consolidation programs by such giant competitors as Beatrice Foods Co. and Ralston Purina has been judged an overwhelming success. The transformation included the sale of 60 businesses and the purchase of two major companies.

It bought Hanes, the underwear and hosiery manufacturer, and a major stake in Douwe Egberts, a Netherlands-based coffee producer. Other well-known Consolidated brands include Sara Lee, Hillshire Farms specialty meatsf Shasta soft Popsicle, Electrolux vacuum cleaners and Fuller Brush. Although the changes occurred in typical Consolidated fashion without much fanfare they gave the company a strong consumer orientation with a long-overdue emphasis on marketing. While the company's stock still lags behind the food group as a whole, with one of the cheapest prices relative to other food companies, it's getting high marks from most of Wall Street lately for its earnings power, competitiveness and overall improved financial performance. IN FACT, in the last few months nearly a dozen analysts have issued "buy recommendations on Con-sol ida ted 's stock, which at the end of the year had risen only 15 percent compared with a 22 percent rise for 'the Standard Poor's 400 industrials.

"Like the comedian Rodney Dangerfield, this one just didn't get any respect," said Al Jackson, food industry analyst for First Boston Corp. That's changing, of course, as is why the market is going down," said Dennis, 34, who is believed to have made Jioo million, in the commodity markets since tie began trading 14 years ago. Dennis said, "One man's volatility is another man's' profit. There's a large Hinount of sour grapes." BOARD OF officials attribute the increased volatility lo changes in the tax treatment of futures profits, enacted in over the objections of the futures industry. They say the changes make it less attractive to trade in contracts for delivery far in the future, causing volume to be concentrated in a few close delivery I Futures are ts to buy or sell commodities at a specified price at a future date.

Traders rarely take or make delivery ol the commodities; instead, they offset, their positions in the futures' market, pocketing gains or' paying out losses, before the contracts expire. Others blame price swings on the growth of managed commodity accounts, in which individuals invest at the discretion of professional trading advisers. Many advisers use computerized trading systems that allegedly accentuate price moves. Experts worry that extreme volatility might drive Continued on page 5 the company's image. The company has smoothed out upper management problems of a year ago, when two presidents resigned within a month of each other.

Several analysts now rank Consolidated as one of the best-run food companies, citing improved controls, better planning and management's ability to deliver on promises. Since 1976, for example, every quarter has shown improved profits as the effects of the reorganization have taken hold. In addition, the company's return on average equity has leaped to 18.4 percent in the last fiscal year three years ahead of schedule from 14.5 percent in 1977 and 11.9 percent in 1972. "There are other companies that have higher return on equity," Jack-Continued on page 3 Trade between U.S. and China China steps carefully into world finances Technical indicators say bulls on last legs U.S.

exports and Imports In billions of U.S. dollars $4 Exports I Imports I 1 uonman "82 '83 IlIi '81 '80 1978 '79 ft tu4 i 3 lit A Id (Mi inSti wStM fwj MtiJfbu i iifl 1 By Vincent J. Schodolski CHINA, ONE of a half-dozen nations with large foreign exchange reserves, has been carefully expanding its international investments and lending actively on world credit markets. While its direct investment abroad, in terms of joint ventures, real estate and equity purchases, has been cautious and, except for Hong Kong, relatively small scale, China's role as a lender has been extremely active, bankers and financial experts agree. The change has been striking given China's history of shunning financial ties with the world.

China's willingness to take part in the world financial system was underscored last week when Chinese Premier Zhao Ziyang signed two bilateral agreements, one on industrial cooperation and the other on cooperation in science and technology, with the United States. But China is still a developing country with access to concessionary loans and interest-free credits from the World Bank, despite its status as a net creditor. Because of its foreign exchange surplus, estimated at alxmt $17 billion at the end of last year. China has had spare funds to participate in international lending at commercial rates. By.

comparison, the International Monetary Fund estimated that at the end of September Switzerland's foreign exchange reserves were about $13 billion; Italy's, $17.7 Klllinn (91 Killinn anrt and IF YOU'RE a stork market player, make merry while you may, because the 17-month old bull mar ket is on its last legs. In fact, by mid- to late February a full blown bear market will get underway that should send stock prices skidding 15 to 25 percent by sometime in the third quarter. It'll be a wicked decline that'll knock IBM down from $122 to SW, General Motors from $7ti to $55 and General Electric from $58 to $35 or $40. This grim market outlook, which clearly runs counter to general market thinking, comes from a couple of sharp technical analysts with a better tnan-average record of fore casting slock prices. They're Joe Barthel and Richard Vashewski of the Big Board broker vage firm of Butcher Singer, Philadelphia.

The technical duo, a team for 15 years, advises nearly 5(W institutional clients both here and abroad for commission dollars. They also publish a biweekly market letter. DURING THE NEXT four to six weeks, Barthel and YashcwsV.i see the Dow as having a good shot al rising to a record 1350 -1375 level but then, rapid decay sets in, driving it down to 1050 to 1100 by August or September. For the last month, the pros, such as the specialists on the lloor of the New York Stock Exchange and the Big Board member firms I in their own trading have been betting heavily that the seven month old nnu'ow trading range in most lauo The main source of foreign exchange earnings for China is trade with and through Hong Kong, bankers say. It also amassed funds to pay for development projects that were canceled, resulting in a bulge of exports over imports.

WHARTON ECONOMETRIC Forecasting Associates Inc. estimates that China wound up 1983 a net creditor by $11 billion. That compares with a net credit of $8.1 billion in 1982, as estimated by Wharton based on figures from the Bank for International Settlements in Basel, Switzerland, and a net debtor status of $3.6 billion in 1981. Bankers point out that this has led to some concern at the World Bank. "At the last World Bank meeting, more than one country raised questions about this situation," said one expert on the Chinese economy.

Other experts said World Bank officials were eager to see China increase borrowing from its two lending arms, the International Bank for Reconstruction and Development I IBRD and the International Development Association IDA, to make it a net debtor. They said China's situation was a political Irritant rather than a serious economic problem. In its annual report, the World Bank estimated China had $1173.5 million outstanding in loans and credits from the IBRD and the IDA as of June 30, 1983. "THE CHINESE HAVE argued that they should not be treated as a cajjtal rich country, but rather what bi -I'll -n- Mil ti I et avei ages will be broken with a ii burst of buying that will send stinks to new highs. Both Barthel and Vashewski see this expectation coming to pass, but they fee it as a very short-lived phenomenon because the slew of indicators they track reveals that the majority of the stock -market leaders have clearly broken IN OTHER WORDS, after virtual- straight up advances from their lows, the market leaders have run a'nul of months of stalling action.

To i technical duo, this means they're fin ruing important tops because distributional lor selling) pressure has set ill. These are stocks like AMP, Advanced Micro Devices, Capital Cities Communications, NCR, Marriott and I'itnev Howes. Bai thel and Yashewskl relate the current market situation but in reverse-to what transpired before the bull market got underway in August n( 'KV Thrv note that many stocks and stock groups had bottomed as early as September of '81 and that by Through November, with an estimate for December ''Estimate Note: The figure for 1984 exports to China does not Include the impact of less stringent "controls on high technology exports, which could mean an additional $1 billion to $2 billion Chtoago Trlbun. Graphic; Sourest: S. Dspartrrwnt of Comnwrot and National Council for Unitod St1e-Cnlnfl Trada they are a poor developing coui try," said James Stepanek, editor of the China Business Review, a publication of the National Council for United States China Trade, an organization of American companies that facilitates trade with China.

A World Bank spokesman said the organization also views the Chinese exchange surplus as temporary and its investments and lending as "a normal practice for countries in such a position." In per capita gross national product, China is among the world's poorer nations. The latest World Continued on page 4 l'ontlniif-1 on page Wat uermany $37 iulllon. ft 7' 4.