1£ rE uu
Ninety-eight years of editorial freedom
Vol. XCVIII, No. 29 Ann Arbor, Michigan - Tuesday, October 20, 1987 Copyright 1987, The Michigan Daily
ran vows war in response
MANAMA, Bahrain (AP) -
U.S. warships destroyed two Iranian
oil platforms in the Persian Gulf
yesterday, and Navy commandos
raided a third. Iran said the Americans
had begun a "full-fledged war" to
which it promised a "crushing
President Reagan called the 85-
minute attack "a prudent yet re-
strained response" to Friday's missile
strike on a U.S.-flagged tanker off
Kuwait. The missile was believed
launched from the nearby Faw
Peninsula, which Iran has conquered
in its seven-year-old war with Iraq.
The Pentagon said no Americans
were injured in yesterday's oper-
ations. Tehran said the attack
wounded some Iranian "civilian
crewmen" but did not mention fa-
The White House said gunfire
wiped out two platforms at one
location and U.S. Defense Secretary
Caspar Weinberger said the battle
area was the Rostam oil platforms.
After some initial confusion,
Tehran said the two platforms hit
were at the Reshadat, or Rakhsh,
field 75 miles east of Qatar and 60
miles from the Iranian coast. Rakhsh
University professors a n d
Michigan politicians react to
yesterday's events in the Per-
sian Gulf. See story, Page 3.
and Rostam are about 20 miles from
the Iranian coast.
The disrepancy between the
Iranian and U.S. reports could not be
immediately resolved. On all except
very detailed maps of the gulf, the
two fields appear to be very close.
The oil platforms, which have an
See U.S., Page 5
Defense Secretary Caspar Weinberger displays photographs of an Iranian oil drilling platform. The platform
was among two destroyed by U.S. warships yesterday in the Persian Gulf.
Stock market drops 500 points
NEW YORK - (AP) The stock
market took its severest drop in
modern times yesterday as the selloff
that hit Wall Street over the past two
weeks reached historic proportions.
The Dow Jones average of 30
industrials, by Anofficial calcula-
tions, plunged 508 points t o
1738.74, for a loss of 22.62 percent.
In the two worst days of the Great
Crash in October 1929, the Dow
recorded back-to-back declines of 12.8
and 11.7 percent.
The debacle wiped out $503.18
billion in stock's market value, as
measured by Wilshire Associates'
index of more than 5,000 issues,
which closed at $2.31 trillion.
Since it reached a record high of
2722.42 on Aug. 25, the Dow Jones
industrial average has fallen more
than 980 points, losing more than
half of all the ground it gained over
the previous five years. It stood at
776.92 when the bull market began
in August 1982.
Declining issues swamped ad-
vances by nearly 50 to one on the
New York Stock Exchange.
Big Board volume totaled an
estimated 604.4 million shares,
eclipsing Friday's record of 338.48
"I don't have the words to describe
this," said Suresh Bhirud, an analyst
at Oppenheimer & Co.
"What we have is a full-scale
financial panic," said Hugh Johnson
at First Albany Corp. Johnson said
investors were fearful of "a collapse
in cooperation among the inter-
national monetary authorities."
Brokers said the market was
caught up in a chain reaction of
events that created what William
LeFevre at Advest Inc. called a
"terrible washout" as the trading
Stock markets in Tokyo and
London fell sharply in reaction to
Wall Street's drop last week, when
the Dow lost 235.48 points. U.S.
bond prices tumbled in early trading,
then rcovered as they apparently
attracted money fleeing the stock
LeFevre said it appeared that
mutual funds were being forced to
sell stocks as their shreholders
switched money out of stock funds
and into safer money market funds.
In addition, he said, brokers were
selling stocks from so-called "mar-
gin" accounts in which investors
who bought stocks earlier with
borrowed money declined to put up
World markets also had to contend
with heightened tensions in the
Middle East. The United States
confirmed that it had attacked and
destroyed and Iranian oil platform in
the Persian Gulf.
Bhirud said computer program
strategies that allow professional
traders to transmit huge prders in a
matter of moments were exacerbating
the rout in the stock market.
Though the situation appeared
grim from the moment that trading
began, some analysts expressed hope
early in the day that the market slide
had reached a "blowoff" stage that
might lead to at least a short-term -Associated Press
rally. But those hopes were dashed as Traders on the floor of the NYSE wave and shout in frantic trading
the session passed. yesterday as popular stock indices plunger in extremely heavy trading.
The Dow Jones Industrials fell more than 500 points by day's end.
October 19: Tracking the Plummeting Dow
..,.-. ;p - 4 - e a --- - - - - 3 -- .-. -
11:30 a.m.: 2,121-08
2,100 -.-1:30p:05565 .
2,000 . - - . .
0:00 a: 25040 63
-Previous 1987 b
1,900 --Jan. 2 1,927.31 ...
.-----------------.............. ............:................................................... ........ .... -....
,800 ~ - .-.
'U' experts so
By JAMES BRAY
The 508-point blow dealt to the stock market
yesterday is not as bad as it sounds, said one
University economics professor. But he said a
resurgence of the bull market Wall Street has
enjoyed the past five years is unlikely to return.
Compared with the increase in stock prices of
more than 300 percent since 1982, the 22 percent
drop yesterday is "a relatively minor dip," said
Hal Varian, professor of Economics and Finance.
The latest fall in prices has negated much of
the 44 percent increase experienced by the market
over the eight months prior to the August peak
of over 2700. Yesterday the Dow Jones Industrial
Average tumbled from 2,246 to 1,738.
According to Varian, it is difficult to say how
the rest of the economy will respond.
The latest set of leading economic indicators,
which came out in August, predicted a stable
economy, but Economics Prof. Jeffrey Mackie-
Mason said "the stock market has proven to be a
good, but not perfect, indicator of the economy"
ee end of the bull market
in the past. He said he would "expect the
economy to head down in the next year."
The latest figures on the trade and federal
budget deficits may have been one of the many
factors that influenced the pull out of the market
'Compared to the percentage of
increase over the last five years,
this is a relatively minor dip.'
- Hal Varian, Economics prof.
by investors, whom Varian described as "looking
for an excuse to get out."
Economics Prof. Paul Courant cited the
federal budget deficit as a causal factor. "In the
long run, this country has to get serious about
the federal deficit."
Concerns over the effect of higher interest
rates on the economy might have also fostered
part of the pessimism in the market as interest
rates last week hit a two-year high.
Stocks represent shares of ownership in
companies and therefore should theoretically be
valued at a level corresponding to companies'
worth. Companies sell stock to raise money for
But they also serve as an object on which
investors gamble. If they think stocks are going
up, they buy, without regard to the value of the
company. Thus, a "speculative bubble" can be
Varian said the "market had been over-valued
for a long time" and that the pessimism of
institutional investors was reflected in the drop in
stock prices earlier last week. This, in turn,
prompted private investors to pull out of the
market. The exodus of private investors was
demonstrated by the liquidation of mutual funds
during yesterday's flurry of trading, Varian said.
11 oo Noon
UAC loses money
on Hart speech
New women's home
proposed to council
The U.S. should end military
intervention in the Persian Gulf.
OPINION, Page 4
Celibate Rifles bust their guts.
ARTS, Page 7
Bo Schembechler leaves Univer-
By FAITH PENNICK
The University Activities Center
paid for about 80 percent of the total
cost of former Presidental candidate
Gary Hart's campus visit on Oct. 4.
qr%, looo ra noim t'A ire th
"If we couldn't handle i t
financially, then we would have said
'no' to the co-sponsorship," Green
According to Jim Speta, the vice
Tr..A.Ant fnr 'nn n-A"thp[ a . nt
By CARRIE LORANGER
A proposal to sell land to be used
as a home for displaced women was
undecided by the Ann Arbor City
Council as of press time last night.
But Councilmember David
T V7 -. . .. _/ 1 - - -1 ...!1 - . .
homeless, which closed September
11, would be donated to the city and
then sold to the association for a
nominal fee if the resolution passes.
The house, now located at 117 S.
Division St., would be moved to the