Tough Week Precedes Market Slowdown

If you thought last week was ugly, just wait a few days. Even while traders were bemoaning their woes last week due to a dead market, they promised this week would be worse.

The reason? Donaldson Lufkin & Jenrette, the underwriter that brought more paper to market than any other year to date (see story on page 5), will deliver the knock-out blow this week to a slow market by draining hundreds of investors to its annual conference in Colorado Springs.

One trader said he handled 10 trades a day last week, whereas he usually would do about 50. And as far as next week is concerned, he is not expecting anything better. "You may as well call in the week," he said.

Overall, the high yield market fell off between a point and two points on the week, traders said.

There are, consequently, some very good opportunities in the market, one trader said. Some good names are trading too low, but still, nobody seems interested. "I don't know, you can't force anybody to buy," he said.

Investors, for their part, had a whole different gripe last week: quoted bids. Buy-siders met with some difficulty finding the quoted levels in the real world, they said, indicating that investment banks were lowering their positions in some names.

The other big story on the buy-side, though, is the redemptions.

With people pulling money out of the market, portfolio managers are selling what they can to meet those obligations. And that meant that telecom names were off.

Benchmark telecommunications name Level 3 Communications was traded down about a point and a half to 92, traders said.

As of Thursday, one trader said his firm had bets riding on how bad the AMG numbers were going to be once they were reported on Friday. He was guessing anywhere from $250 million to $750 million. The latest number that is available from AMG is for the week ending July 28, and that shows a $513 million cash outflow.