MACROECONOMICS IN THE WALL STREET JOURNAL

The period from Sep.10, to Nov.8, 1999 was characterized by the same low inflation that basically led the bull market.

September's PPI report, showed a 1.1% rise, the highest monthly figure since 1990, which had a serious impact on the Dow.

The chart below shows the volatility of the Dow during the period of this assignment.

Regarding globalization, an Oct. 29 story about Rite Aid spoke to the macroeconomic impact of derivatives exposure. As Berner reports, Rite Aid Corp. has to pay higher interest rates and hefty fees under the terms of $2.7 billion in loans it renegotiated. "The nation's third-largest drugstore chain said it will pay the London interbank offered rate plus three percentage points on a $1.3 billion line of credit. In addition, it will pay Libor plus 3.5 percentage points on another $1 billion credit line, a $300 million term loan and $100 million in other credit facilities" (Berner, 1999, 12).

Libor has become one of the leading economic indicators globally and the increase suggests the escalating power of FX, and the risks inherent in derivatives exposure. Part of the problem with the exposure is that Rite Aid's interest rates on the renegotiated bank loans are above 9%. Berner states that as Rite Aid's credit rating slipped to below investment grade last month, it could no longer roll over its commercial paper, forcing it to turn to the bank loan

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that market. But under accounting and regulatory rules, a closure triggers requirements to have reserves to pay for the capping and monitoring of the dump for at least 30 years" (Bailey, 1999, 14). Regarding accounting, a story in the Oct. 28 issue related difficulties in the PricewaterhouseCoopers marriage. The announcement by the world's biggest accounting and consulting firm that it was laying off 1,000 administrative and internal support staffers, brought a new round of discussions about the economics of mergers. "PricewaterhouseCoopers, the result of last year's merger between Price Waterhouse and Coopers & Lybrand, said in an internal memo that the firm will lay off about 700 to 750 support staffers, such as secretaries, nationwide. Another 250 positions will be erased through voluntary attrition and a hiring freeze already in place (McDonald, 1999, 1). One of the most important articles was on Nov. 3, discussing the auto market, one of the prime indicators of macroeconomic health. The consumers bought new cars and trucks at a strong pace in October, but Detroit's Big Three manufacturers slipped, as rival Asian and European companies gained. According to White, sales of cars and light trucks in October rose 3.2%, acco

Category: Economics - M