The Dow Jones industrial average jumped 420 points on Tuesday - its biggest one-day point gain in more than five years - as investors decided that a bigger credit crisis has been avoided, at least for one day.

[Related story: Fed tries to shake stubborn rates with cut]

The rally was led by beaten-down financial stocks, but it was widespread. All 30 Dow stocks were up.

The Dow average was up 300 points even before the Federal Reserve delivered its latest dose of medicine - a three-quarter-point cut in the federal funds rate.

The early rally was led by Goldman Sachs and Lehman Bros., two investment banks that reported earnings that were sharply lower than last year, but still better than expected.

Lehman's shares were pummeled Friday and Monday on rumors that it, like Bear Stearns, could face life-threatening liquidity problems.

But Lehman did an impressive job of dispelling those notions in its earnings conference call with analysts and investors.

"Lehman's call was perhaps the best conference call in a couple decades," says banking analyst Richard Bove of Punk Ziegel & Co. "They went element by element through their financial statement, and they showed how much excess liquidity they had, they showed how they had backed up their positions, how they had hedged. They provided an incredible amount of data."

Lehman's shares soared 46 percent Tuesday, putting them slightly ahead of where they were a week ago.

Subprime exposure

Lehman, like Bear Stearns, was a major seller of subprime-mortgage-backed securities. Bove says Lehman is stronger than Bear Stearns, which was forced into the arms of JPMorgan Chase & Co. over the weekend after other banks and brokerage firms stopped trading with or lending money to it.

But over the past few weeks, reality gave way to perception. If Wall Street believed a company was going under, it might stop doing business with the company and push it under. Lehman's tour de force instilled confidence in the company and the broader credit markets, at least temporarily.

"That was a critical event," Bove says.

The Fed's rate cut contributed to Tuesday's euphoria. Investors were expecting the Fed to cut its key short-term interest rates by one-half to one percentage point. By coming in halfway, the Fed pleased those who wanted a bigger cut to stimulate the economy and those who feared a bigger cut would further torpedo the plunging dollar. As it turns out, the dollar rose against the euro and yen Tuesday.

Although the rate cut gave markets a psychological lift, it was probably less important than other, more targeted steps the Fed has taken in recent weeks to lubricate lending markets and restore confidence in the financial system.

On March 11, the Fed agreed to lend up to $200 billion worth of its Treasury securities to primary dealers for up to 28 days (rather than overnight) and accept a wide range of collateral including highly rated residential-mortgage-backed securities.

That move sent the Dow up 417 points on March 11. But the gain fizzled over the next four trading days as the fear factor resurfaced.

Extended borrowing

Late Sunday, the central bank announced that for the first time, it would let securities firms, for six months, borrow from the Fed on much the same terms as banks. It also cut the interest rate it charges on such loans, called the discount rate, by 0.25 percentage point to 3.25 percent. It also extended the maximum term on such loans to 90 from 60 days.

The Fed on Sunday also prevented a fire sale of Bear Stearns assets by providing JPMorgan up to $30 billion in takeover financing backed by Bear's hard-to-sell mortgage securities.

Bove believes that these actions, taken together, have averted a financial meltdown.

"Every crisis comes to a crescendo. Something has to happen to move everybody off the dime, and Bear Stearns was it," he says.

"But that doesn't mean the economy is going to turn around rapidly or we are not going to suffer as a result of these depredations," Bove adds. "We are in a period of slow economic growth and rising inflation."

Dave Campbell, principal, Bingham Osborn & Scarborough, points out that during a recession, the stock market typically falls about 25 percent.

From its all-time high in October to its recent March 10 low, the Standard & Poor's 500 index was down about 18.6 percent, Campbell says.

With Tuesday's 4.2 percent gain, the S&P is still about 15 percent below its all-time high.

That suggests the market could go lower if we are in or headed into a recession.

But Campbell does not think long-term investors should sell stocks now with the hope of getting back in when they hit bottom.

"You have to make two decisions right: know when to get out, know when to get in. Even if you get one right, it's very difficult to get both right. And you end up with transaction costs," he says.

However, "If (you) are going to need the money in a year or two, you should not be in the market," Campbell adds.

Paul Krsek of K&A Asset Management in Napa, who bailed out of the stock market in early November and tiptoed back in this January, says he is now "turning bullish short term, with fear and trepidation."

"We think the S&P 500 could rally another 5 percent. Then we don't know. "

Krsek says he is encouraged to see transportation companies, retailers, home builders and small-cap stocks doing well over the past five days. Those are the stocks that led the latest downturn.

But he doesn't think we're out of the woods just yet.

"We think this is a rally in the context of a bear market," he says. Going below the March 10 low "is a distinct possibility."

Net Worth runs Tuesdays, Thursdays and Sundays. E-mail Kathleen Pender at kpender@sfchronicle.com.

This article appeared on page C - 1 of the San Francisco Chronicle

100 taxi drivers suspended for not taking council course on personal hygiene and 'conflict management '

Comments

The stunned cabbies were slapped with the ban after refusing to sit a BTEC qualification in taxi driving.

The course covers topics such as how to talk to customers, assessing their body language in the rear-view mirror and even "conflict management".

Another part deals with how to lift a suitcase.

Scroll down for more...

Uproar: Frank Shaw has been driving cabs for 25 years and is refusing to take the test

This teaches the driver to "risk assess" before doing so by sizing up the shape of the load, the surrounding environment and their fitness level.

Cabbies must attend eight, two-hour classes at college and are given three text books to help them to revise.

But a large proportion of the cabbies in Bournemouth, Dorset, opted out after branding it "patronising common sense."

Council officials have now suspended 101 licenses and they will only be given back if the drivers sign up to the tax-payer funded course within the next two months.

One driver, who did not wish to be named, took the course over fear of losing his license but has branded it an "idiots test".

He said: "I have been driving cabs for 20 years yet they are now trying to tell me how to do my job.

"I admit that some of the information is useful, like how to react if you come across a serious accident, but the majority is just common sense.

"It's an idiots course, it's ridiculous.

"You are even told how to say hello to a customer and lift luggage - it's quite patronising really.

"I took the exam and passed but I only did it because I didn't want my license taken off me as it's my livelihood.

"I can't believe the council have suspended the 101 drivers who didn't - I honestly didn't think it would come to that."

The BTEC in Transporting Passengers By Taxi and Private Hire was first brought in by exam board Edexcel in 2005 with the help of the Department for Transport affiliated organisation GoSkills.

It is up to individual local authorities to adopt it as a requirement for all their drivers and Bournemouth Borough Council was one of the first.

Their drivers were given until February 2008 to sit the exam and were told they would be suspended if they did not meet the deadline.

They were handed the text books covering topics including licensing regulations, carriage of luggage, route planning, disability awareness and customer service.

In the customer service book, drivers are told to revise a diagram about how to talk to passengers.

It has three green speech bubbles with examples of greetings to say as a customer climbs into the vehicle, like "hello Mrs Smith", "nice to see you again" and "good morning, how are you?"

Drivers are also told to learn how to read body language from their rear-view mirror.

The book states: "Being able to recognise body language and facial expressions is essential when dealing with customers.

"Are you able to recognise 'annoyance, anger, vagueness, humour, worry?"

Drivers are also advised on "conflict management techniques" to help cool difficult situations with passengers and are recommended to remember five symbols to help them.

They are a "wise owl" which symbolises teamwork and co-operation to achieve a solution, a "wily fox" which represents winning something while losing a little.

The "soft teddy bear" approach appeases others by down-playing conflict, the "man-eating shark" represents the driver winning the argument or conflict while the "elderly turtle" approach means you walk away.

Another book has a large section on "Carriage of Luggage and Parcels".

There is a diagram showing a human-shaped model bending down to lift a box.

Councillor Stephen Chappell, chairman of Bournemouth council's licensing board, said the BTEC is vital to ensure drivers are of a high standard.

He said: "This qualification is vital to ensure our drivers are of a high standard and that residents and visitors receive the best possible service.

"Bournemouth council was the first authority to adopt the course as a requirement for the town's taxi and private hire drivers.

"Other's have now jumped on the band wagon and I understand the government are very much behind it.

"We are proud to be an authority who is leading the way by providing our drivers with this training.

"Almost 700 of our drivers have successfully qualified and should be congratulated on their achievement with a number of others currently training.

"We have to take firm action against those drivers who have not trained."

As well as the 700 drivers who have completed the course, another 200 have signed up to it while the rest have been suspended.

ADVERTISEMENT

Iconocast is about learning and teaching without borders; we offer eMarketing, Internet Advertising, Internet Marketing, Search Engine Optimization, Search Engine Marketing, Online Branding, and eMarketing News Services.

Iconocast Home Page

Contact Iconocast

Iconocast Health Articles

© 2003-07. ICONOCAST is a trademark of iconocast.com.