University Daily Kansan / Wednesday, October 18, 1989
5
U.S. merchandise trade deficit widens
The Associated Press
WASHINGTON — The U.S. merchandise trade deficit grew sharply to $10.77 billion in August as imports flooded into the country at a record pace, the government said yesterday in a dose of bad economic news that captured the attention of a skittish stock market.
The Federal Reserve Board, faced with continued market turmoil, moved for the second straight day to soothe investors' worries by pumping $1.5 billion into the banking system one day after making a $2 billion cash infusion.
The money is intended to calm shaky markets by showing the Fed's resolve to make sure banks have enough reserves to keep loans flowing. The mortgage houses caught in a squeeze because of the plunge in stock prices.
The Commerce Department said the August trade shortfall between imports and exports was the largest imbalance in eight months and was 31 percent larger than a revised July deficit of $8.24 billion.
The unexpectedly bad trade report added to the problems of an already nervous stock market, which has been on a rollercoaster ride since Friday, when the Dow Jones industrial average suffered its second biggest point drop in history.
At the White House, the Bush administration expressed disappointment in the trade report.
"This is, of course, an unwelcome increase, and we're hopeful that it simply is a one-month situation and will turn around," said presidential press secretary Marlin Fitzwater.
The market did retreat significantly in the hours after the trade deficit announcement but then rallied. With an hour left in the trading day, the industrial average was down nearly 14 points.
Private analysts said they feared that the worsening trade deficit signaled a return to much higher imbalances, which would act to dampen
domestic growth in coming months.
The August imbalance resulted from a 0.2 percent decline in exports, which fell to $30.4 billion, and a 6.4 percent increase in imports, which rose to a record $1.2 billion. The trade deficit is the difference between imports and exports.
Economists blamed the record imports on the strength of the U.S. dollar through much of this year. A stronger dollar makes foreign goods cheaper for American consumers while making U.S. exports more expensive on overseas markets
Through the first eight months of this year, the U.S. trade deficit was running at an annual rate of $109.7 billion, down slightly from a 1988 deficit of $118.5 billion. The 7.4 percent improvement compared to a 22 percent decline in the deficit for all of 1988, a year when a narrowing trade gap contributed almost half of the total growth in the economy.
Analysts are worried that if the trade performance deteriorates too much in coming months, it could seriously jeopardize economic prospects for next year.
U.S. trade deficit
U. S. trade deficit Begin between U.S. imports and exports. Gap between adjusted billions of dollars.
-$20 S O N D J F M A M J J A
| Time (millions) | July |
| :--- | :--- |
| Japan | $-4,043 $-3,981 |
| Canada | $-471 $-1,162 |
| W. Europe | $-850 $-717 |
| OPEC | $-1,701 $-1,897 |
SOURCE: Census Bureau
Knight-Ridder Tribune News
Experts say go long during short-term turmoil
By Steve Buckner Kansan staff writer
For those stock market investors looking for direction in these days of heavy trading with big gains and losses, the consensus opinion appears to be. "Don't worry, invest long term."
A KU professor, the manager of a local investment firm and the president of the Kansas University Endowment Association each echoed that reassuring theme despite the recent market fluctuations. The Dow Jones Industrial Average regained 81.12 points and regained 81.12 points Monday and lost 18.65 yesterday while trading more than 640 million shares in that time span.
Jack Gaumnitn, professor of business,
said if he were teaching a class
on investments this semester he would tell the students to be long-term investors.
"I'd tell them to buy good stocks and not worry about it," he said.
A good stock, Gaumitz said, had a low price earnings ratio and represented a company that was a leader in its industry.
"Obviously the markets are very volatile these days," he said. "But you need to separate short-run considerations from long-run considerations." The short-term fluctuations you should not be bothered by short-term fluctuations."
Gaumitz said that despite his long-term (five years on out) optimism about the market, he saw two storm clouds on the horizon in the budget and trade deficits. He said that Congress and the Bush Administration manipulated and mishandled the reporting of the national budget, and that the August trade deficit of $12 billion would be blamed for yesterday's loss.
Stephen Hill, manager of Dean Witter Reynolds, said that his investors were staying put in the stock market, and that his company was shopping for bargains.
"We're looking for the opportunity to buy stocks that were hit hard on Friday and some others that are still cheap," he said.
Todd Seymour, president of the Endowment Association, said the association had from 60 percent to 70 percent of its $206 million marketable securities in equity investments. Although the association incurred an $8 million paper loss from the sharp declines of the October 1987 market,
he said the association would not try to calculate any losses from Friday's drop.
Seymour said one reason the losses on Friday did not bother him was a result of an experience earlier that day.
"I had been in Kansas City listening to a world-renowned economist who said all was great," he said. "But he also said the market would do some wild things. I'm not terribly concerned right now if the market does not make horrible swings."
Seymour said the association's investment objectives were long-term oriented.
"We're long term all the way," he said. "We do not make short-term investments because that's where you really get hurt."
vived this so far."
Continued from p. 1
vived this so far."
Fire engines and ambulances, sirens howling, picked their way through a darkened San Francisco. Car headlights and an occasional car building running on emergency
generators stood out. Buses were jammed and traffic was backed up.
Ouake
Commuters were left with no major transportation routes east out of San Francisco. The top deck of the San Francisco Oak Bay Bridge
Tourist ferries helped fill the void,
giving stranded commuters free
collapsed onto the lower road. The subway was closed. Sections of the two-tiered Nimitz Freeway collapsed.
rides from San Francisco to the East Bay.
People walked around San Francisco, sat outside dingy hotels, or on stools and curbs, listening to radio reports of the disaster.
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