SUSIE GHARIB: Controversy today over America's budget surplus: new numbers from the White House show that the surplus is shrinking. It is now projected to be just $158 billion. That's almost half of what was previously expected. As Darren Gersh reports, this big revision is stirring up a big political debate.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: The economic slowdown has sharply reduced Federal revenues, but the White House still says the government will end fiscal year 2001 with the second largest surplus in history. And even after figuring in the president's tax cut, the Office of Management and Budget projects a surplus of $3.1 trillion dollars over the next 10 years.

MITCH DANIELS, DIR., OFFICE OF MGMT. & BUDGET: The nation is awash in extra money, and it is going to be. The real issues we're engaged on are how to maintain that kind of momentum, and of course, how to apportion that extra money most prudently.

GERSH: The Office of Management and Budget now projects the fiscal 2001 surplus at $158 billion; that's $123 billion less than the April estimate, and $157 billion of that is set aside for the Social Security trust fund. But Democrats charge the administration has resorted to accounting gimmicks to avoid dipping into the trust fund, and they say the president's tax cut has left the nation in a fiscal straightjacket.

REP. KEN BENTSEN (D) TEXAS: Where is the money to fix Social Security and to fix Medicare? It's gone. The money is not there.

GERSH: The president's budget director says the challenge is to get the economy moving while keeping spending under control, and he dismissed charges that the tax cut is the problem.

DANIELS: The word bunk comes to mind.

GERSH: The OMB forecast calls for economic growth of 1.7 percent this year, and 3.2 percent in 2002. That's higher than the 2.8 percent forecast by private sector economists. Even so, the budget for next year also remains tight, with a surplus not counting Social Security of just $1 billion.

BOB BIXBY, EXEC. DIR., CONCORD COALITION: I think this is a real moment of truth for those that have said that we can wall off the Social Security surplus and still cut taxes and still raise spending. If they really meant it, now is the time to prove it.

GERSH: But that job is likely to get harder next week when the Congressional Budget Offices issues what is expected to be a more pessimistic estimate of the incredible shrinking budget surplus. Darren Gersh, "NIGHTLY BUSINESS REPORT," Washington.

Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. © 2001 Community Television Foundation of South Florida, Inc.

SUSIE GHARIB: How are money managers factoring in the Federal Reserve's latest interest rate cut into their investment strategy? Let's find out from Bob Doll. He's the chief investment officer of Merrill Lynch Asset Management where he oversees $550 billion in investor portfolios and he joins us live from Merrill Lynch's offices in Princeton, New Jersey. Hi, Bob.

ROBERT DOLL, CHIEF INVESTMENT OFFICER, MERRILL LYNCH ASSET MGMT: Good evening Susie.

GHARIB: Well, let's begin with you've had a little bit of time to assess and analyze yesterday's Fed rate cut. How are you factoring that into your investment strategy?

DOLL: Frankly, not a whole lot of change Susie. The Fed did exactly what we all thought they would do. They gave us 25 basis points. I guess we might quibble with the language that went around it. Many of us hoped that they would indicate a little more aggressiveness about what might they do going forward if they needed to for the economy. They didn't give markets a whole lot of assurance and that's why we got the sell off yesterday afternoon.

GHARIB: Did anything in the statement influence the direction of your investment strategy?

DOLL: Not really. The point is, the Fed has been aggressive. They've lowered rates a bunch of times now. There might be a time or two left. It's pretty clear that they're going to do what it takes to get the economy back on track to the extent it's within their power which of course has investors debating these days.

GHARIB: All right. So we've got a weak economy still. We've got a struggling stock market. You're managing $550 billion. What is your strategy in this market?

DOLL: Well, I think we should step back Susie and realize the market is doing perhaps what should be expected. We've had a very weak economy. The Fed only started easing the first of the year and our history books tell us that it takes about 12 months before Fed ease begins to have a positive effect on the economy. And that's a few months away. So our guess is the late March, early April lows which were pretty significant lows, are likely to hold. We had a vicious rally from there. We've given about half back. We're going it tread some waters when we digest the bad news of the third quarter and my guess is toward the end of the year, we'll get a year end rally as the markets anticipate a slightly better economy next year.

GHARIB: As you look at this economic scenario that you've just painted, I mean what are the areas that you find attractive to investing right now?

DOLL: It's very hard because there's very little leadership in the market and a healthier market requires stronger leadership. Having said that, the consumer discretionary sector, retailers, some of the home builders we still think make sense. Energy stocks, they've sold off with a decline in the commodity. Our belief continues to be that at $3.00 gas and $25 oil, companies can make money.

GHARIB: What are some of the stocks specifically in those areas that you're investing in?

DOLL: Retailers like the Venator (Z), the old Woolworth, the Foot Locker company, IGT, International Game Technology (IGT) in the gaming sector, would be examples in the consumer discretionary space. Within the energy sector, Amerada Hess (AHC), Occidental Petroleum (OXY), Phillips (P), Chevron (CHV) would be some names that come to mind.

GHARIB: OK. We just have 30 seconds left Bob. The weak dollar. I that influencing at all your investment strategy?

DOLL: Yes. We're beginning to spend a lot of time on that issue. The dollar's been strong almost non-stop. As you know, the last bunch of years, this could be the beginning of a change. And a weaker dollar is probably eventually good news for the economy but probably not good news for the markets. We begin within the equity holdings to look at companies that begin to get earnings outside the United States.

GHARIB: Like what?

DOLL: Gillette (G), some of the drug companies, Merck (MRK ), Johnson & Johnson (JNJ). Some of the technology companies eventually also would fit that bill.

GHARIB: All right. Well, we're going to have to leave it there. Thank you so much for all this interesting information.

DOLL: Thanks.

GHARIB: My guest tonight is Bob Doll, chief investment officer of Merrill Lynch Asset Management, live from Princeton, New Jersey.

Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. © 2001 Community Television Foundation of South Florida, Inc.

08/22/01: The Emerging IMF

PAUL KANGAS: Looking outside the United States, there's new money to help Argentina cope with its financial crisis. The International Monetary Fund has pledged another $8 billion in loans on top of the $14 billion it has already committed. Meanwhile, economic conditions around the world are deteriorating, a concern highlighted by the Federal Reserve at its policy meeting yesterday. Suzanne Pratt takes a look at what all this means for the United States.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: As if the anemic US economy doesn't have enough trouble, it looks like much of the world economy is in the same pickle. The latest data show several economic superpowers are all experiencing stagnant growth. In fact, Lakshman Achuthan from the Economic Cycle Research Institute, says global conditions haven't been this bad in about 25 years.

LAKSHMAN ACHUTHAN, MANAGING DIR., ECONOMIC CYLCLE RESEARCH INSTITUTE.: We have a global synchronous downturn. Germany, Japan and the U.S.-the three largest economies in the world-are at the same time in a cyclical downturn, and this is affecting and infecting their immediate neighbors.

PRATT: A J.P. Morgan Index, which measures economic growth in 42 countries, projects global GDP contracted in the second quarter of this year. It's probably no shocker that Japan is in deep recession, and Mexico is also battling the economic demons of recession. But now many experts say Europe could also be headed for a serious slowdown, and that is a real disappointment because the US was counting on Europe to help keep it out of recession. What's more, some economists say past widespread global downturns have resulted in long recessions for the U.S.

ACHUTHAN: The lack of a locomotive abroad of demand to offset the weakness at home is going make this recession more of a problem to get out of than it otherwise would have been.

PRATT: As for how long this global economic malaise is expected to last, some worry that the worst is yet to come. But others say while recovery isn't imminent, there's a sense that things may be leveling off.

BRUCE KASMAN, ECONOMIC RESEARCH DIR., JP MORGAN: I think the bottom line is if we do start to see a bottom here, it's going to be an extended bottom. Don't look to see a recovery like we did after the Asian crisis in 1998. Things may improve a bit here, but they're going to be slow growing, at least for the next six months or so.

PRATT: In this otherwise gloomy assessment, there is a twinkle of good news. Experts say inflation worldwide is not a problem, and that makes it easier for central banks to lower interest rates. Suzanne Pratt, "NIGHTLY BUSINESS REPORT," New York.

Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. © 2001 Community Television Foundation of South Florida, Inc.

SUSIE GHARIB: Corporate America has been slashing jobs at a record pace, but a new study shows that it is still funding job training. Hewitt Associates, that's the employee benefits consulting firm, has found that many firms increased training last year despite the sagging economy. Diane Eastabrook looks at why training is so important in this tight business environment.

DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: In this corporate classroom, some veteran Edward Jones brokers are learning how to increase business at their branches.

BRETT CAMPBELL, SALES &B TRAINING DIR., EDWARD JONES: This is what we're trying to drive home at this state of your development. Teamwork is so critically important in your branch.

EASTABROOK: Training is a top priority at Edward Jones. The company spends roughly $35 million a year coaching its 8,000 brokers. Analysts say that is several times higher than the industry average. The company believes training and education build sales and helps retain employees.

MARK VAN BUREN, RESEARCH DIRECTOR, ASTD: It's very expensive to provide training, particularly since most of it's done here in our home office in St. Louis. But as we look at what it costs in terms of the outlay, we find it's one of the best investments that we can possible make.

EASTABROOK: Additional training may benefit companies in other ways. The American Society for Training and Development polled nearly 600 firms from 1996 through 1998. It found companies that spent an average $1,700 per employee on training experienced higher profit margins, higher employee salaries, and higher market to book ratios the following year than firms that spent just over $100 per employee.

RAY KOLLAR, CHIEF NETWORK EXECUTIVE, INTEL CORP.: We believe that many firms see the importance of investing in their employees, and especially as we move into a knowledge era, understand that their real competitive advantage is in the people that they have and the skills that they have.

EASTABROOK: Many firms like Intel have been able to increase employee training by tapping the Internet. E-learning, as it's called, allows Intel to reach employees all over the world. The employees save time training at their convenience and Intel saves money by not flying far-flung workers to classrooms.

UNKNOWN: Once the material, the media if you will, is created, it costs us probably a dollar per view for somebody to watch, compared to a face to face training event which would be something more like $150 per student to go attend.

EASTABROOK: Industry watchers say training is especially important during market downturns. They say better trained employees can give firms a leg up as they come out of economic recessions. Diane Eastabrook, "NIGHTLY BUSINESS REPORT," St. Louis.

Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. © 2001 Community Television Foundation of South Florida, Inc.

SUSIE GHARIB: Tonight's money file commentator says that playing "follow-the-leader" will get you nowhere. Here's Don Phillips, managing director of Morningstar.

DON PHILLIPS, MANAGING DIR., MORNINGSTAR: Have you noticed that many of the same analysts who told us that tech stocks still had room to run at the peak of the Internet bubble, are now telling us that the very same stocks aren't yet cheap enough to buy? While any 10-year-old can recognize the folly of this logic, such statements routinely pass as reasoned judgments on Wall Street. The problem is that what Wall Street calls analysis, isn't what the rest of us would necessarily think of as such. These commentators aren't trying to divine the underlying value of the businesses that these stocks represent. Instead they are trying to outguess the near- term direction of market sentiment. That may benefit brokerage firms by generating added trading activity, but it's unlikely to enrich investors. Sadly, far too many of us follow these seers and craft portfolios in response to their pronouncements. As a result, many investors held portfolios that were grossly over weighted in technology stocks last year. Today, many of these same investors are trying to purge every last vestige of tech from their portfolios, further amplifying the boom and bust cycles of Wall Street. It's time to stop this folly and inject some common sense into the discussion. Investors make money when they buy good businesses at reasonable prices and hold them for the long run. Often times those opportunities appear in those areas that are the most beaten up, like tech and telecom today. It takes courage to buck the consensus and buy stocks when others are fleeing them, but that's how money is made, and now may be the time to do so. After all, you won't make amends for last year's losses by ignoring this year's opportunities. I'm Don Phillips.

Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. © 2001 Community Television Foundation of South Florida, Inc.

PAUL KANGAS: Stocks on Wall Street opened modestly higher today in what was widely considered a reflex rally following yesterday's steep sell-off which sent the Dow Industrial Average to a 145 point, or 1.4 percent closing loss, and the NASDAQ Index down 50 points, or 2.7 percent. At 10:00 this morning, the Dow rebounded with a 35 point gain. NASDAQ up 16. Unimpressed by the lack of depth of the early technical rally, traders turned to the sell side over the next hour and by 11:00 a.m., the Industrial Average was down 20 points; NASDAQ off 5. The market then took a turn for the better, thanks in part to a nice gain in General Motors (GM) stock after the company reaffirmed its third quarter earnings estimate of $0.83 per share,$0.02 above the consensus. The semiconductor sector also rallied on news the industry's July book to bill ratio rose .67.

By 2:30 this afternoon, the Dow bounced up to post a 54 point gain. NASDAQ was up 3 points. The market gathered upward momentum for the rest of the session and the Dow Industrial Average closed with gain of 102.76 points, or 1 percent, putting it at 10,276.90. The NASDAQ Composite rose 28.71 ending at 1860.01.

The volume on the big board picked up on the rally and up volume exceeded down volume by nearly a 7 to 4 ratio, not quite. Transport Index up 21.41. The Utility Index rose 2.20.

And the Closing Tick modestly bullish at +408.

Standard & Poor's 500 gained just over 8 points.

Nearly a 4 1/2 point run up in the S&P 100.

The MidCap 400 gained just over 5 1/4 points.

The Bridge Futures Price Index down 3/4 of a point.

A gain of just over 3 points in the New York Composite.

Value Line up 2.78.

Almost a 5-point gain in the Russell2000 Small Cap.

And the broadly based Wilshire 5000 gained 73.85 or 7/10 of a percent.

The bond market felt the sting of some modest profit taking today in the wake of yesterday's broad rally triggered by the Fed rate cut. Bonds were also undermined by the solid rally in stocks today, which siphoned funds away from debt instruments. Another negative factor was a weak US dollar in foreign exchange trading.

Tax free and corporate issues fell 1/8s and 1/4s and the Treasury market posted relatively small losses across the board.

A drop of 7/32 in the 5-year note.

10-year note down 9/32.

Bellwether 30-year bond down 2/32.

And a gain in the Lehman Brothers Long-Term Treasury Bond Index, just fractionally though.

A nice rally on Wall Street today, but look at the first five figures of the Dow close, 10,276 and 90 and look at the net change. The first five figures identical, a statistical oddity, very unusual. Broader market nicely higher by an 18 to 12 margin, 187 new yearly highs, only 55 new lows. Maybe that's a good omen.

Taiwan Semiconductor (TSM) topped the active list on 14. 8 million shares. The company confirmed that Merrill Lynch is selling derivatives in the form of discounted warrants on the company's ADRs.

Qwest Communications (Q) down $1.22. Davenport & Company brokerage has downgraded the stock today from "buy" to "underperform."

General Electric Co. (GE) moved up $0.38.

EMC Corp. (EMC) moved down $0.39.

And then the NASDAQ Cubes (QQQ) in there with a 1 point gain.

AOL Time Warner (AOL) lost $0.40.

Lucent Technologies (LU) edging up $0.17.

Pfizer (PFE) a $0.04 loss. And Global Crossing, a $0.04 gain I should say on Pfizer.

Global Crossing (GX) up $0.16.

And Citigroup held steady, tenth in volume.

DaimlerChrysler (DCX) up $1.46, getting a boost from

General Motors (GM) which was up $1.50 after GM as I mentioned reaffirmed its third quarter earnings estimate of $0.83 a share, $0.02 better than the Street estimate.

Guidant Corp. (GDT) gained $1.80. ABN Amro upgraded it from "hold" to "add" which I guess means "buy." Yesterday the stock was up $3.70 on news of a pact that Guidant has with Cook Inc., a stent manufacturer.

J.C. Penney Company (JCP) down $1.33. The company repeated its earning guidance for the third and fourth quarters but didn't give the pleasant surprise that the Street apparently was hoping for.

3M (MMM) was the best point gainer in t he Dow, rising $2.66.

And SBC Communications (SBC), the biggest dollar and cents loser in the Dow, off $0.84.

Pharmaceutical Resources (PRX) had a good day, rising $4.31. A Merck subsidiary in Germany sold its 43 percent stake in the this firm for $230 million to raise money for research and Bear Stearns said there was very strong demand for Pharmaceutical Resources stock.

Vimpel Communications (VIP) up $.174. A real turnaround, second quarter earnings of $0.22 on the ADRs versus a loss of $0.18 last year. Revenues up a whopping 44 percent.

Applera Corp-Applied Biosyst (ABI) gained $2.30. Company spokesman told us no corporate developments to account for that. We saw no news on the wires.

Frontier Oil (FTO) gained $1.29. The Friedman, Billings, Ramsey brokerage issued a "buy" on Frontier today.

Watson Wyatt and Company (WW) losing $1.95. This is a human resources consulting firm. Friday the company had good fourth quarter earnings, $0.34, well in line with estimates, but no other news.

VF Corporation (VRC) down $1.94. Lehman Brothers downgraded the stock from "strong buy" to "buy" on concern about a glut of denim wear in the clothing market. Could possibly lead to a price war.

NASDAQ trading a gain of 28 ¾ points or 1.6 percent. Volume up nicely from yesterday and 20 stocks higher for about every 16 lower.

Microsoft Corp. (MSFT) topped the active list, down $0.12.

Intel Corp. (INTC) moved up $0.89. Positive reaction to the company's all