European Stars and Stripes (Newspaper) - January 13, 1991, Darmstadt, Hesse                                Sunday january 13, 1991. The stars and stripes. Page -13business news Wall Street heard Roar crisis i of the Bear in 1 990 financial markets were racked last week by uncertainty Over whether there la be peace or War in the Middle East and the turmoil is Likely to continue at least until the . Deadline for iraqis withdrawal from Kuwait is reached tuesday. Currency analysts believe the Dollar could make further gains in the next few Days while the threat of War persists. Last week the Dollar gained roughly 3 cents against the British Pound and three pfennig against the Deutsch Mark. In Germany the military Exchange rate jumped from 1.46 Marks for a Dollar a week ago to 1.50 Marks this weekend. Late Friday afternoon the Dollar was trading at 1.536 Marks in Frankfurt Germany. One British Pound was Selling for $1,905. Petra Ott an economist with Citibank in Frankfurt said currency markets were particularly volatile last week swinging Back and Forth by two or More pfennig within a trading Day. A i think this sort of thing will continue a she said currency traders said their attention would be. Focused on the weekend debate in Congress Over a War Resolution supporting president Bush As Well As on . Secretary general Javier Randy Mcclain Perez de Cuellari a 1 Ltd hour peace Mission to Iraq. A if the . Secretary general is successful this will Hurt the Dollar a Ott said. A if there Are indications that War is More probable this will underpin the Dollar.�?�. A she declined to speculate How High the threat of War might push the . Currency but other analysts have suggested the Buck could easily reach 1.60 or 1.65 Marks whil6 Gulf tensions persist. A in this situation it is really hard to make any forecasts of a serious nature a Ott said. A there Are so Many rumours in the  economic experts disagree about what might happen if shooting starts. Mike Young european Market strategist for Merrill Lynch in London thinks the Dollar would continue to make gains against other currencies in the event of War even a Long lasting one. A i clearly see the Dollar As a Safe Haven a he said. If Oil prices Rise to $40, $60 or even More per barrel and the world Economy suffers further Dis. Eruptions Young believes the Dollar still will look attractive to investors. A Europe and Japan Are More dependent on Middle Eastern Oil than the . Is a he said. However other financial a markets including the new York Stock Exchange might be harder hit Young said. He sees the Stock Market falling 4 percent or 5 percent if hostilities with Iraq begin followed by a a secondary Shock if the United states is not the Clear Winner after a week or 10 Days of Battle. Ott has a slightly different View. A everyone is assuming that War with Iraq will be quite Short. If this does no to materialize it will be bad news for the Dollar a she said. Rising Oil prices the financial Burden of going to War and worries about the United states being dragged into a quagmire Akin to Vietnam will All weigh against the Buck. For the time being though Ott said the Buck is Likely headed higher not Only because of the Gulf situation but also because of unrest in the secessionist minded soviet Republic of Lithuania As Well. The presence of soviet paratroopers in the Region and the threat of a further crackdown could damage the Mark she said. Until now the Mark has been viewed As Likely to Benefit from the fall of communism in much of Eastern Europe due to increased Trade and investment opportunities. Young said soviet strife will have a a Subtle Impact on Exchange rates but nothing w ill outweigh the Impact of the iraqi Factor in the Short term. The stars and stripes by Stan Hinden. Washington Post writer in the 1960s, investors did Well in the stocks of fast growing companies. In the 1970s and 1980s. They made Money in undervalued stocks. In 1986 and 1987, takeover stocks offered big rewards. And after the 1987, Market crash a Bottom fishing made Many investors Rich. But in 1990 investors found it difficult to make Money no matter what strategy they used. Gripped by recession fears and uncertainty about the persian Gulf the Stock Market ended  below where it began for the first time since 1984. Blue Chip stocks lost the least dropping about 6,5 percent. But stocks of Small companies which make up most of the Market took a heavy beating falling More than 20 percent. A the Best thing you can say about 1990 is a Good riddance a a declared Rob Brown chief Market strategist at the brokerage firm of Ferris Baker Watts inc. In Baltimore. A. / the stocks of Banks savings and Loans and real estate firms endured their own form of Purgatory. The real state lending Boom of the mid-1980s continued to go bust destroying Many financial institutions profits and knocking Down their stocks by 35 percent. Investors also found that Many of their favorite investment techniques did not work in the bearish mood of the Market. Investors in Utility stocks normally regarded As steady faithful performers watched in dismay As those Stock prices dipped in the face of rising interest rates Early last year and finished 1990 Down an average of about 10 percent. Nor did it prove Wise to buy . Oil company stocks when the invasion of Kuikit sent Oil prices soaring prices of major Oil company stocks were lower on dec. 31 than Thev were on july 31, just before the iraqi attack. Gold bugs too. Found that the old rules had changed. Although the precious Metal is supposed to be the Placebo invest in troubled times Large Gold sales by the soviet Union and several Middle Eastern countries helped depress its Price. Thus Cash was King in 1990. Investors who stuck to Money Market funds found themselves 7.8 percent Richer at the end of . Then again if you consider that inflation ended  at about 6 percent even Cash delivered a marginal gain. One of the leading advocates of sticking to Cash is Veteran Money manager Charlesw Allmon head of the growth Stock Outlook Trust of Bethesda md., Ait investment fund. For several years Allmon has contended that the Stock Market was overpriced and although he missed several rallies he kept 70 percent to 85 percent of his assets in Short term Treasury  his strategy. Gave him a 4.2 percent gain in 1990. A i just feel the Market is no bargain a Allmon said. The bargains that were around were few and far Between. Health related companies did Well. Mutual funds that invest in health and biotechnology stocks gained 19.4 percent. Fixed income investments produced varied results As interest rates gyrated during . Long term govern in Cut Bonds achieved a total return of about 5.8 percent. Municipal Bonds also did Well returning a non taxable 7.6 percent. With 1990 in the history books the Stock Market is keeping a wary Eye on the Calendar and the persian Gulf. Professional investors generally believe that a shooting War will Send Stock prices broadly lower but that a Quick end to the fighting would partially reverse that trend. Oil prices would also come Down with peace. Analysts finding it difficult to get recession s measure by Stephen e. Nordl1nger los Angeles times Washington a recessions come in various shapes and sizes but the one now engulfing the United states is unusually hard for economists to gauge. Although there is no remaining doubt that the . Economy began to shrink Over the past few months the depth and extent of the first downturn in eight years will depend on one major unknown what happens in the persian Gulf. A prolonged War that damages Oil production facilities could Send Oil prices skyrocketing which would Drain . Economic resources further undermine the Confidence of Consumers and investors and probably. Deepen and stretch out a recession. If War is avoided or is Over quickly with the United states the Clear Victor Oil prices could Tumble and the Economy could move ahead again regaining at least part of its Luster. But the persian Gulf confrontation is not the Only uncertainty making 1991 the hardest year in memory for economists to forecast. Their predicament is compounded by the crisis Era a broiling . Banks a Linchpin for the nations Economy. Their books riddled with unpaid Loans and their capital stretched thin gun shy Banks Are unlikely to fulfil their past role in propping up the Economy regardless of persistent efforts by the Federal Reserve Board to lower interest rates. Despite these unpredictable elements must economists Are cautiously guessing that w without a Long War the Economy will pull out of the recession by midyear. Although Only fitfully. A the next six months Are going to be weak ones but. We May see a moderate recovery in the second half of  a said David Hale chief economist for Chicago based Kemper financial services. A if there is a War and it is Over quickly it should have Only a modest effect on the Economy.�?�. Ital w. Boltz vice president and financial economist at i. Rowe Price associates predicted a a Short and sour recession ending this summer. Economists said there Are Sev ral forces at work that should soften the blow despite the banking troubles and the continuing savings and loan crisis the relatively Low inflation rate gives the Federal Reserve Board greater latitude in towering interest rates without fear of sending prices spiralling again. Many economists expect interest rates to decline by a percentage Point or More in the first half of . A companies using sophisticated computers have kept tight controls Over inventories so that slumping sales should not trigger major production cutbacks a prime cause of past recessions. Auto companies Are planning increases in production in the current Quarter that could generate some recovery. A a the Steep slide in the Dollar Over the past year should buttress exports especially to Japan and Germany which Are in relatively stronger economic shape than the United states at this Point. A fiscal policy including a deficit of More than $250 billion this year and free spending on operation desert shield should help stimulate the Economy. The official arbiter of recessions a seven member committee of prominent economists at the National Bureau of economic research estimates that the recession probably began Between june and september. On that basis since most economists Are predicting a recession of average length a which Means about a year a the Economy should be slowly bottoming out by sum. Mer. A a a a. The consensus forecast of 52 economists surveyed by Blue Chip economic indicators in mid december said the . Economy would expand at a rate of Only 0.3 percent from the fourth Quarter of 1990 to the fourth Quarter of 1991. Almost half of those surveyed projected no growth or a contraction. While the pm Edrul Reserve continues to ease interest rates and is encouraging Banks to make More Loans the Banks remain Short of both capital and solid customers to whom they want to loan Money. A the feed had to ease credit conditions aggressively to get the Banks to ease this much a said  of dub securities in new York referring to the recent Cut in the prime interest rate from 10 percent to 9.5 percent. A it shows just How weak a position Money Center Banks Are in a he said. \