Reagan financial trio rates well with market-watchers
One of them delights in revising statistics until 3 in the morning. Another tries to leave the office by 5 p.m. The third is a card-carrying member of the Professional Rodeo Cowboys Association.
What do people in the Wall Street brokerages think of these men whom President-elect Ronald Reagan has picked to fill three key business and economic Cabinet posts?
The late-night worker is David A. Stockman, nominee for director of the Office of Management and Budget, a smooth-faced Michigan congressman strongly committed to supply-side economics.
Donald T. Regan, tapped for Treasury, likes to set out for home at a decent hour -- but has risen to the corporate heights as head of Merrill Lynch & Co., the investment house. Industry observers describe him as "well respected" and "innovative."
Malcolm Baldrige Jr., Mr. Reagan's choice for secretary of commerce, loves riding and roping.At present he runs Scovill Inc., a Connecticut company best known for producing Yale locks and Hamilton Beach appliances.
"Just looking at their background," says Tony Brush, director of research for Bradley Woods, "I would think the financial community will be impressed."
On the whole, financiers seem pleased with the clothes. Two of the three have extensive corporate experience and thus are assumed to be responsive to business needs; and only Mr. Stockman's name was linked with President-elect Reagan's during the campaign.
"If you look at the three, two were not early on identified with the Reagan camp," says Steve Einhorn, a vice-president at Goldman Sachs. "I think that's positive. It shows the [Reagan] is bringing in people more to the center."
Mr. Baldrige is the least-known quantity. He is viewed as favoring decentralized management, a style the business community would like to see more of in government. If confirmed, he will have abandoned padlock and blender production problems to face such smoking-hot issues as auto import quotas and the validity of the 1980 census.
The Michigan workaholic, Representative Stockman, seems to hunger to cut budgets. A former student at the Harvard Divinity School, his terrier-like tenacity made him the logical choice as Mr. Reagan's sparring partner when preparing for the presidential debate with President Carter.
"Of the three, he's the most committed to supply-side economics," Mr. Einhorn says. "Wall Street favors that."
The nomination for secretary of the Treasury is the only one tinged with even a hint of controvery.
"The only mixed reviews you get is on Regan at Treasury," says Ed Garlich of the Washington Forum, a public policy research arm of Drexel Burnham Lambert. Since Mr. Regan is one of Wall Street's own, some observers think any objections are merely pangs of jealousy.
"He's stepped on a lot of toes as far as the Street's concerned," says Monte Gordon, director of research of Dreyfus Corporation. "It would be surprising if everybody loved him."
And official statements are glowing.
"Don Regan is an excellent choice. His career has been unparalleled and he will bring thorough and practical knowledge to the Treasury Department," says Harry A. Jacobs Jr., chairman and chief executive officer of the Bache Group Inc.
On the whole, the ticker-tape stewn and gray-suited world of Wall Street seems bullish about the choices. But most sources contacted said they would reserve final judgment until the policy starts pouring in.
Last week the stock market stared a skyrocketing prime rate straight in the face and decided that retreat was in order. Opening at 956.23, the Dow Jones industrial average suffered its third-steepest decline of the year on Monday, falling more than 22 points. The index finished the week at 917.15. An 8.7 -point rise on Friday halted a decline that cost the Dow almost 40 points for the week.
Though skittishness about the situation in Poland was definitely a factor, most observers felt the fall was mainly caused by gloom over interest rates. Henry Kaufmann, the respected head economist at Salomon Brothers, exemplified the Street's mood when he suggested Monday at a private gathering for Salomon clients that he, too, couldn't predict when the prime would top out.
On Wednesday, just before 10 a.m., the other shoe dropped and Chase Manhattan raised its prime rate to a record-tying 20 percent. Bravely trying to rally in the face of facts, the market was up 1.67 as late as 2 o'clock -- but closed at 916.21. It was a fall of 17 points in three hours.
"These ever-climbing interest rates are now having a real psychological impact on investors," says Burt Siegel, director of research at Drexel Burnham Lambert. "And it's finally having an impact on brokers' ability to leverage themselves. Look what happened to commodities."
"What happened to commodities" was one of their sharpest declines in history. On Thursday most major commodities fell as far as permitted under exchange rules: Soybeans for January delivery down 30 cents; December wheat down 20 cents; December corn down 10 cents.
On Friday commodity pries stabilized somewhat, but they were still down for the week.
"I'm not heading for the storm cellers yet," says Nicholas Pishvanov, a broker at E. F. Hutton's Washington office. "There are enormous cash balances being accumulated by pension funds and other large institutional investors who aren't eager to go into bonds. Stocks may well benefit. The market has gone up in the face of 20 percent interest rates before."