1£ rE uu 4&J Ninety-eight years of editorial freedom Vol. XCVIII, No. 29 Ann Arbor, Michigan - Tuesday, October 20, 1987 Copyright 1987, The Michigan Daily U.S. warships destroy Iranian oil platforms 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 response." 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- talities. 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 -Associated Press 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. Plunge! 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 million. "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 week began. 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 market. 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 additional collateral. 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 2,178.69 -68.05 ..,.-. ;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 ~ - .-. 17(preliminary) 1,700 '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 projects. 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 created. 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. 10:00 11 oo Noon 2:00 3:00 4:00 UAC loses money on Hart speech New women's home proposed to council INSIDE 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 said. 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 F