The BusinessWeek 50 (Cover Story, Apr. 5) brings two things to mind: The first is the "random walk" theory, which says that stock prices are optimized, and it is impossible to tell in advance which stocks will outperform the index. Since it is cheaper to invest in the Standard & Poor's (MHP) 500-stock index [than buy individual stocks], this theory suggests that my money should stay there.
The second is the "dogs of the Dow" theory. You are selecting the "Stars of the S&P 500" and thus are consistently running into trouble. These stocks have already been rewarded for their good performance. I haven't done the analysis, but I expect that the BW50 will perform better if you leave out "total return" from your analysis, and they'll perform even better if "total return" counts against the company rather than in favor of it.
Olawale J. Ogundana
In 1983 a certain U.S. motorcycle manufacturer petitioned the International Trade Commission for tariff relief. These tariffs, levied for four years, not only allowed the company to survive but also enabled it to prosper and grow. Now, in a deliciously ironic twist, Harley-Davidson (HDI) finds itself in the BW50 despite your incessant hectoring about the goodness of free trade and your doctrinaire faith in unfettered globalism. Or are you prepared to argue that America is worse off for being able to enjoy an alternative to Hondas (HMC), Yamahas, and Kawasakis?
Richard A. Surwilo
Wellpoint Health Networks (WLP) was No. 3 and UnitedHealth Group (UNH) No. 4. Both managed-care companies increased profits 35%, to $900 million for Health Networks and $1.8 billion for UnitedHealth Group. In explaining these large gains, you neglected to mention how many millions were saved by denying patients needed medical care.
Baltimore Re "The gravy train may be drying up" (News: Analysis & Commentary, Apr. 5): More than any other chief executive officer, SBC Communications Inc.'s (SBC) Edward E. Whitacre Jr. has been instrumental in reshaping today's telecommunications industry while ensuring the company's leadership position despite intense competition, unequal regulation, and a challenging economy. SBC's board of directors has compensated him accordingly.
Meantime, SBC's board has already made the [transition] from stock options toward more at-risk, performance-based long-term compensation for our CEO. The value of performance shares fluctuates directly with the price of SBC stock and is paid out only to the extent specific internal financial and/or operational objectives are achieved.
Contrary to your story, SBC has in the past year embraced significant changes in the company's executive-compensation policy, consistent with those advocated by many investors.
Senior Executive Vice-President
Human Resources and Communications
SBC Communications Inc.
San Antonio "The hard lesson of Madrid" (News: Analysis & Commentary, Mar. 29) says that the "chemical industry argues it can manage safety [anti-terrorism] issues on its own." Wrong, wrong, wrong.
The members of the American Chemistry Council (ACC), who produce nearly 90% of the chemicals manufactured in the U.S., strongly believe that protection of our nation's critical infrastructure requires a partnership between the public and private sector. ACC supports meaningful and responsible federal security legislation that empowers the Homeland Security Dept. to require all chemical facilities to address security as rigorously as the members of the ACC do.
Fortunately, we didn't wait around for government direction. Under a comprehensive and mandatory security code, all ACC member-company facilities have completed rigorous security-vulnerability assessments. The highest-priority facilities have already implemented security enhancements where appropriate, and the remaining facilities are on schedule to implement additional security measures by the end of this year.
President and CEO
American Chemistry Council
Arlington, Va. "A really selective service" (Up Front, Apr. 12.) suggests that the Defense Dept. requested that the Selective Service System develop a plan for a special-skills draft for the U.S. Armed Forces. More accurately, the SSS' emphasis on planning for a special-skills draft is based on informal conversations with Defense Dept. manpower officials and this agency's own analysis of the most likely emergency military personnel needs in the 21st century. The requirement for the SSS to be ready to identify and select individuals practicing critical skills is a 17-year-old provision of the Military Selective Service Act. Today's discussions about a broader special-skills draft are a practical outgrowth of normal contingency planning and are conceptual only.
Lewis C. Brodsky, Acting Director
Selective Service System
Arlington, Va. The picture accompanying the article on Enrico Fermi ("Unleashing the atom," The Great Innovators, Apr. 5) is most interesting because of an unexpected error. The equation in Fermi's handwriting just above his head,
Since Fermi certainly knew this well-known equation for the fine structure constant, and he was famous for his accuracy and correctness, the error was cause for much speculation when the picture appeared some time ago in a technical publication.