10/31/01: The Incredible Shrinking Economy

SUSIE GHARIB: Spooky news about the US economy on this Halloween. It posted its first negative GDP reading since 1993. While the report was not as bad as expected, experts say it still means that the economy is in recession, a reality that is of serious concern to President Bush. He urged Congress to pass an economic stimulus package by the end of November. We have two reports this evening from Washington and Wall Street. We begin with Suzanne Pratt in New York with a look at today's GDP news.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: For the first time in more than eight years, the US economy is contracting. According to the Commerce Department, gross domestic product, the broadest measure of the nation's economic health, shrank at an annual rate of 0.4 percent of 1 percent in the third quarter. That follows a meager gain in the second quarter. Even though the drop in third quarter GDP was smaller than expected, it still was the largest decline since 1991, when the country was in the depths of the last recession. And experts say there's no question the economy is in recession again.

JOHN RYDING, SR. ECONOMIST, BEAR STEARNS: I think it confirms, as we thought, that the economy had moved into recession. But it was a fairly mild start for the recession, especially when you think how rapidly inventories were liquidated and how much capital spending declined.

PRATT: Commonly, a recession is defined as two straight quarters of declining GDP. However, the National Bureau of Economic Research does the actual dating of a downturn, basing it on a number of economic indicators turning negative beyond GDP. And economists believe the group will most likely backdate the official start of this recession.

JOSHUA FEINMAN, CHIEF ECONOMIST, DEUTSCHE ASSET MANAGEMENT: You could, and I think you probably will, see this business cycle peak backdated to the spring, even though the economy in terms of GDP managed to eke out a very small gain in the second quarter.

PRATT: More important than when this recession ultimately began is when it will end and how severe it will be. Despite the terrorists attacks on September 11th, many economists are predicting a somewhat shallow slowdown, one that will come to an end by early summer of next year.

FEINMAN: I think the reason that I'm anticipating this recession to be a bit shallower than the average is that the policy response has been extremely synchronous and powerful and timely.

PRATT: Still, economists say a recovery by next summer depends a lot on the psyche of the consumer. They say the fear and uncertainty that Americans have been feeling must subside before the economy can snap back strongly. 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.

10/31/01: The President's Push For Economic Stimulus

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: This is Darren Gersh in Washington. The president said the latest economic numbers show that people are facing tough times. Speaking to manufacturers today, the president prodded Congress to move quickly on a stimulus plan focused on tax relief.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: And so my call to Congress is, get to work and get something done. The American people expect us to do just that.

GERSH: The president asked Congress to act by the end of November, but it now looks like the debate will drag into December. Economists worry that may push back a strong recovery to next summer.

DAVID WYSS, CHIEF ECONOMIST, STANDARD & POOR'S: A basic problem is Congress continues to dither over what should be in there, what should be in the terrorism bill, what should be in the insurance bill. It is important to get something done. We're facing a crisis. This is a war economy; we've got to treat it that way.

GERSH: A few weeks ago, some economists thought Congress might act in time to put cash in consumers' pockets this holiday shopping season, but not now.

MARK ZANDI, CHIEF ECONOMIST, ECONOMY.COM: So Christmas is going to be very difficult. In fact, we could see dollar Christmas sales lower this year compared to last, and that would be the first decline in Christmas sales since Christmas '53, which was in the wake of the Korean war.

GERSH: Most economists agree issuing rebate checks for low income workers and speeding up income tax cuts are good bets to stimulate the economy quickly. But they are skeptical of other ideas. Government-funded construction projects take too long to ramp up, and business tax cuts, such as enhanced expensing on equipment purchases may not yield much bang for the buck.

RICHARD BERNER, CHIEF US ECONOMIST, MORGAN STANLEY: My concern, in this environment where all the fundamentals affecting capital spending are so weak, that expensing would not get you a lot in terms of stimulating the economy.

GERSH: Economists also caution a stimulus package to prop up the economy should not squeeze out spending on other more important priorities like national security. 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.

10/31/01: One On One With Jack Welch, Former Chairman and CEO of General Electric

SUSIE GHARIB: A lot of action in the bond market. Well, Paul, with the economy shrinking and businesses struggling, we turn to one of corporate America's most experienced leaders for his thoughts. Earlier today, I met with Jack Welch, the former Chairman and CEO of General Electric. I began by asking Welch how bad off is the economy and business environment?

JACK WELCH, FORMER CHAIRMAN & CEO, GENERAL ELECTRIC: The fourth quarter is going to be a lot worse than the third quarter. In my opinion, unemployment will see six or more. It's rough because you have an economic cyclical downturn which we have been able to deal with before, and laying on top of that is the psychological impact of the 11th. And no one, at least I'm not smart enough to tell you what's that, what that's going to do to the shape of the recovery.

GHARIB: Mr. Welch, what kind of economic future are we looking at?

WELCH: We've got a vital economy. We've got a more unified country. We've got people with plenty of money in the-on the sidelines waiting to invest in good ideas. And yet you've got a terrorism situation that we never had before. Now, we're only six weeks into this so we don't know. But every day there's something. There was an anthrax death here in New York today that no one has any idea how. So there's, every time these uncertainties occur, you jolt what would be a normal recovery.

GHARIB: So what is it going to take to get the U.S. going forward again?

WELCH: Well, I think it's going to take a stimulus package. I think it's going to take continued action by the Fed. I think it's going to take great leadership like we've see in New York and like we've seen with the president. And I think it's going to take a feeling that the government's got this thing under control.

GHARIB: Are you concerned that the government has gotten, taken on too big of a role in business?

WELCH: No, because clearly when a terrorist issue like this occurs, it's a new paradigm and the facts are the government had to step in when they did to support the airline industry. The airline industry was on its back. No one would have flown planes. They wouldn't be insured.

GHARIB: What kind of leadership is necessary in corporate America right now?

WELCH: Up front, reassuring, not blind cheerleading but saying exactly what they know. CEOs have got to be more visible than ever before. They've got to be visible to every constituent-their analysts, investors, their communities, their employees. They've got to tell them what they know today, be willing to change it tomorrow if it changes. They've got to try and get the uncertainty that everyone's feeling relieved as much as possible. Look at the president last night. First, as I understand it, and I read this this morning and I thought it was extraordinary, the first president, sitting president to ever go to a World Series game standing in the-on the mound throwing out the first pitch trying to show let's get on with life. I mean that was a huge move.

GHARIB: If you were CEO right now, what kind of moves would you be making?

WELCH: I'm not.

GHARIB: If you were?

WELCH: I'm not.

GHARIB: If you-

WELCH: Well, first of all, you ought to do what I just said. You ought to be up front doing all those things. But you want to be looking at what is business all about. Change. Opportunities come with change. There's never been a bigger change than this one.

GHARIB: What kinds of new industries do you see that business will be focusing on in the aftermath of September 11?

WELCH: Well, let's face it, if you were sitting in the security business on September 9, your business was OK, but it wasn't off the charts. If you're sitting on it on September 14, you had a whole new business. Security, defense, all these things are going to obviously happen. Short-term you don't want to be in travel and resort businesses. But if we get our arms on this-we are going to win this thing. I don't know how long it's going to take or exactly what shape it will take, but we will win it. We're determined to win it and we will do it. We've got the resources to do it. And when we do, those that have taken the bold steps to position themselves for the future will be better off than those that hunkered under a rock.

GHARIB: Thank you very much. We appreciate your talking to NIGHTLY BUSINESS REPORT.

WELCH: And thank you, Susie.

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.

10/31/01: A Preview Of The Security Bill Showdown

SUSIE GHARIB: An aviation security bill is heading for a showdown vote tomorrow in the House of Representatives. The Senate has already passed a version of it. But as Stephanie Woods explains, a political battle is now growing as Republicans and Democrats disagree on details of how to make the skies safer.

STEPHANIE WOODS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Flanked by pilots and flight attendants, House Democrats stepped up their call for airport security personnel to be federal workers and they challenged Republicans who want security personnel to remain private employees.

REP. DICK GEPHARDT (D-MO), MAJORITY LEADER: We ought to be asking them, do you want to contract out the Capitol police function? I don't think they would. Do you want to contract out the U.S. Marines? I don't think they would.

WOODS: But President Bush and House Republicans don't want 28,000 baggage screeners on the federal payroll. They want stricter government oversight, but favor keeping in place the companies and their employees who now do it.

REP. TOM DELAY (R-TX), MAJORITY WHIP: It takes three months to hire a federal employee and it takes forever to fire one.

WOODS: To bolster that stand, Transportation Secretary Norman Mineta is promising tough federal oversight of security firms.

NORMAN MINETA, SECRETARY OF TRANSPORTATION: What I want to do is certify the companies, certify the individuals who work for these companies and if the companies aren't doing their work, decertify the company.

WOODS: But that hasn't been the case in the past. One security firm, Argenbright (ph), which employs 10,000 screeners, admitted it hired convicted felons even after being fined by the Justice Department for security breaches. The security industry says before September 11, the airlines weren't willing to pay for properly trained screeners.

MIKE RUTTER, BOARD MEMBER, SECURICOR: What's changed is not the security companies. What's changed is that the airline attitude has had to change in the outcome of September 11 and knowing that one way or another this is going to federalized or nationalized.

WOODS: Aviation experts say security needs to be overhauled top to bottom. The legislation currently being debated doesn't do that, but analysts say at least it's on the right flight path. Stephanie Woods, 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.

10/31/01: "Money File"-Making A War Plan For Your Money

SUSIE GHARIB: You could call tonight's money file commentator a man with a plan. That's because he thinks you should have a plan, too-a plan for your long-term investments. Here's Charles Jaffe, Personal Finance Columnist for "The Boston Globe."

CHARLES JAFFE, PERSONAL FINANCE COLUMNIST, "BOSTON GLOBE": Have you looked at your investments since September 11? A lot of people haven't, and I'm one of them. But unlike most of the no look crowd, I'm not scared of what I'll find in the envelopes. I'm just adhering to a personal policy of only looking at my investments twice a year, in December and June. Deviating from that program would mean I'm investing for times like these, trying to make moves based on what's happened recently and what will happen next. But I'm not worried about times like these. I'm worried about times ahead, and I'm not investing for this time. I'm investing for all time. That being the case, I don't have to peek at my investments right now. But many people who haven't looked are simply letting account statements pile up unopened in the mistaken impression that they're practicing buy and hold investing. Nope. Not looking without a plan in place is buy and hope investing. It's giving yourself over to fate. To take the no look approach and not lose sleep at night you need to have a carefully chosen asset allocation plan, a thorough understanding of your investments and a scheduled time every three, six or 12 months at which point you open your eyes. You also need a reasonably long time horizon so that market moves during the shut eye period don't have an exaggerated impact in the short time before you need the money. If you don't have those elements in place, don't confuse your desire to keep your eyes shut with any accepted investment strategy. Without a plan, no look investing is simply a manifestation of fear. I'm Charles A. Jaffe.

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.

10/31/01: Paul Kangas' Wall Street Wrap Up

PAUL KANGAS: The stock market opened moderately higher today as investors cheered that news that third-quarter GDP did not fall as steeply as feared. Of course, the market was also overdue for a technical rebound after the Dow Industrial Average had fallen 423 points, or 4.5 percent, so far this week, while the NASDAQ Index was down 5.8 percent. So by 10:30 this morning, the Dow bounced back with an 82-point gain. NASDAQ was up 50 points. The early upturn ran into resistance for the rest of the morning, partly due to weakness in Eastman Kodak (EK) stock after Moody's cut its debt ratings and Wal-Mart (WMT) announced an exclusive deal to market Polaroid (PRD) 35 millimeter film. Hardly helping was the report of a third quarter loss at Qwest Communications (Q). At 1:00 p.m., the Dow fell to a 48-point deficit. The NASDAQ Index was up only 12 points. The blue chips then became quite volatile and the Dow ran up to a 70-point gain at 3:00 p.m., only to fall back to post a closing loss of 46.84 putting it at 9075.14. The NASDAQ Index gave up about half of its early gain, but still settled with a gain of 22.79 at 1690.20.

Big board volume moved up just a touch from yesterday to 1.328 billion shares and a little bit more up volume than down volume, but not too impressive there.

Transport Index edged up .58.

The Utility Index up 2.63, a decent gain there.

The Closing Tick modestly bullish at +443.

Standard & Poor's 500 down just .01.

The 100 off .63.

But the MidCap 400 managed to gain 2.31.

While the Bridge Futures Price Index was down .02.

A loss of .40 in the New York Composite Index.

Value Line up 2.85.

A5 1/3 point run up in the Russell2000 Small Cap Index.

And the broadly based Wilshire 5000 up 18.39.

Bond prices, especially longer maturities, soared today on the Treasury surprise announcement it would no longer sell 30-year bonds. So investors stampeded to snap up the shrinking supply. The drop in third quarter GDP also helped bonds rally as did a decline in the Chicago purchasing managers business activity index.

At the close, tax free and corporate issues were up 1 full point to as much as 1 ½ points and the Treasury market had one of its best days ever.

The 5-year notes jumping 16/32.

And the 10-year note, look at the yield, 4.24 percent. Now since mortgage rates are pegged to this yield, if this doesn't bring mortgage rates down, I don't know what will.

Finally the 30-year bond had its best one day rise ever, up 5 8/32.

And finally the Lehman Brothers Long-Term Treasury Bond Index had a massive gain of 44 1/3 points.

The stock market ended the month of October on a sour note. That's true. But for the month overall, the Dow was up 227 1/2 points, or 2.6 percent. Today, down about 47 points, but the advances outnumbered the declines by a 9 to 12 margin. 47 new yearly highs, 65 new lows.

Qwest Communications (Q) topped the active list on 33.1million shares. The stock down $3.05. The company today reported a third quarter loss of $0.08 a share, Wall Street was expecting earnings of about $0.03.

Enron (ENE) up $2.74, a technical rebound after sharp recent weakness and a "Wall Street Journal" article today suggested the sharp drop in the stock recently is making it attractive as a takeover candidate. After the close, incidentally, Enron said it's appointed a special committee to prove its own finances and communicate with the SEC, which incidentally has now made its probe into the company a formal investigation.

EMC (EMC) up $0.32.

And then Conseco (CNC) dropping $0.73. The company reported a third quarter loss of $410 million. That's $1.21 a share in the red. It did have operating earnings of $0.18 a share, but even that was a $0.01 below the Street estimate.

AT&T (T) down $0.49, fifth in volume.

CVS (CVS) down $0.45 after dropping over $7 yesterday on lower third quarter earnings.

General Electric (GE) edged up $0.07.

Lucent Technologies (LU) a $0.20 gain there.

And then Eastman Kodak (EK), the biggest mover and the biggest loser in the Dow, off $2.23. Yesterday, incidentally, Moody's cut long-term debt ratings from A2 to A3. That's the fourth lowest investment grade. And then, of course, I told you about the Wal-Mart

(WMT) selling Polaroid (PRD) 35 millimeter exclusively.

The NASDAQ Cubes (QQQ) were up $0.49.

Alcatel (ALA) up $1.17. The company did post a third quarter loss and it's going to lay off 10,000 people. But analysts are positive on the company's cost cutting measures.

Autozone (AZO) up $4.05. First quarter same store sales up between seven and eight percent, the company estimates, and it said it could exceed the Wall Street first quarter earnings estimate of $0.57 a share.

Beverly Enterprises (BEV) down $0.91. UBS Warburg Brokerage downgraded it from "buy" to "hold."

Continental Air (CAL) up $0.84 even though third quarter a loss of $1.76. But not as bad as the Street estimate of a loss of $2.25 a share.

Fluor (FLR) down $3.46. As reported after the close yesterday, the company reported a third quarter loss of $0.68 a share.

Micron Technology (MU) moved up $1.68 today. The company said orders for its chips have strengthened since the end of August.

Martha Stewart (MSO) up $2.35. Third quarter earnings, $0.10, up from $0.08 last year. That was a $0.01 above the Street estimate and revenues were up 12 1/2 percent.

Pediatrix Medical (PDX) had a good day, up $3.54. The company reported third quarter earnings $0.40, way up from last year's $0.24, and it increased 2002 earnings estimates from the $2.15 to $2.30 range all the way up to $2.30 to $2.40 a share.

Readers Digest A (RDA) up $2.05. A first quarter loss of a $0.01 but the Street was expecting a loss of $0.05 a share and the company is increasingly optimistic about the second half of 2002.

Allied Waste (AW) down $2.54, the big percentage loser. The company's President And Chief Operating Officer Larry Hank (ph) has resigned to pursue other interests.

And then Avista (AVA) down $1.66. Third quarter operating earnings of $0.12, way down from $0.76 a year ago.

And John Harlan (JH) down $2.33. The company prints business forms like checks and things. Third quarter earnings were higher, $0.42 versus $0.41, but it cut its own fourth quarter estimate down to the $0.37 to $0.42 range from $0.56.

NASDAQ trading, for the month overall, that Index was up 191 1/2 points, or 12.8 percent. Volume today down or up a touch from yesterday. About 22 stocks higher for every 13 lower.

Microsoft (MSFT) topped the active list, down $0.73.

Followed by Intel (INTC), up $0.88.

Cisco Systems (CSCO) a fractional gain.

Ad was Sun Micro's (SUN