11/15/01: Economic Outlook With Robert Hormats of Goldman
Sachs International.
LINDA O'BRYON: Joining me from New York is Robert Hormats, vice chairman of Goldman
Sachs International. Bob, welcome.
ROBERT HORMATS, VICE CHAIRMAN, GOLDMAN SACHS INTL.: Good to be with you.
O'BRYON: On September 12, just a day after the terrorist attacks, you appeared
on this program and at that time you said that the attacks would clearly make
the economic slowdown considerably worse, and consumers, at least for a period,
would take a sort of bunker down mentality. Now some eight weeks later, what are
your thoughts?
HORMATS: Well, I think consumers have come back quite strongly in many cases.
But there are still lots of concerns out there. There are concerns about terrorism,
although they have abated substantially. And of course people are feeling a lot
better about the war in Afghanistan, as we see from the results of today and the
last few days. But there's still growing unemployment, industrial production has
collapsed substantially in many areas, particularly information technology, households
still have a lot of debt on their books, and the global economy is deteriorating.
So there are some negatives, there are also some positives of course. Fiscal stimulus
is coming down the road. We've had very effective monetary stimulus so far.
O'BRYON: You mentioned the war in Afghanistan, has that been the main driving
force for this positive stock market that we've seen?
HORMATS: I think the progress in Afghanistan has helped. What really I think is
fueling the market is the fact that the Fed has lowered interest rates, which
means short term interest rates are very low, that pushes some money into the
stock market. And there's also the hope that monetary stimulus and fiscal stimulus
down the road will lead to a strengthening of the economy sometime next year,
probably in the middle part of next year. There's still a
lot of caution flags out there, however, but there's a more bullish attitude than
there was.
O'BRYON: Do you think investors are overly optimistic especially if a guerrilla
war drags on?
HORMATS: Well, there are certainly risks and that's one of them, that as in Chechnya,
when the Chechen fighters vacated the main cities there, they went into the hills
and sustained a guerrilla warfare for some period of time. That could happen.
There's also, of course, as we are reminded constantly by people in Washington,
including the vice president, risk of additional terrorism. That, I think, is
a concern. And then holding this alliance and the front together, keeping Afghanistan
and the Saudis - keeping Pakistan, the Saudis and others in this coalition is
going to be very important. And that will be tricky as we go forward.
O'BRYON: Do you think the market has overreacted a bit here then?
HORMATS: Well, I think the markets are feeling more positive than they were and
they are responding to that. There are, of course, these economic and security
risks that are something that we're going to have to take into account as we move
forward. And we need fiscal stimulus, Congress is still debating that. We need
things, for instance, like a tax holiday for state income taxes or state sales
taxes, paid for by the federal government. A holiday on state sales tax would
increase spending, also some kind of tax rebate for low income people who only
pay a payroll tax who didn't get rebates last time, and maybe an investment tax
credit. But we still need a fiscal stimulus because we still have a weak economy.
O'BRYON: Well, considering the deadlock in Congress, how likely is that by the
end of the year?
HORMATS: Well, I'm getting concerned about that, because there was a hope that
there would be bipartisanship on this issue, but that seems to have eroded substantially.
I think if the Congress does not come up with a substantial fiscal stimulus, it
will do two things. One, it will mean we won't get the economic boost we need.
And two, it will undermine political confidence in the ability of Washington to
get its act together on this very important subject. So it's a double negative
psychologically and economically.
O'BRYON: And very quickly, Bob, the International Monetary Fund sees world growth
at about 2.6 percent. What's your view of the global economy?
HORMATS: Well, we're in the first synchronized global downturn that we've had
among the major economies since 1993, 1994, which was the oil crisis. I think
the global economy is weakening, much of Asia, except for Japan, is weakening.
Europe is weakening. Most of the Americas are in recession. So this is a big problem
for the US and it means we can't export our way out of our weakness, and exports,
it should be borne in mind, account for a larger portion of US GDP than new housing
sales and new car sales combined. So weak exports are harmful to our growth prospects.
O'BRYON: All right, we'll keep a good watch on this. Thank you very much.
HORMATS: Thanks for having me.
O'BRYON: Robert Hormats, vice chairman, Goldman Sachs International.
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.
11/15/01: Congress Navigates An Aviation Security Bill
PAUL KANGAS: The president could have a new aviation security bill on his desk
next week. More than two months after the terrorists attacks crippled the airline
industry, Congress has finally hammered out a compromise to boost airport security.
Both the House and the Senate will vote on the bill tomorrow. Stephanie Woods
reports.
STEPHANIE WOODS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Democrats were quick to
declare victory. The federal government will immediately take control of airport
screening.
REP. RICHARD GEPHARDT, MINORITY LEADER: It's a victory for the people of this
country who want to feel safe on airplanes. It will put federal law enforcement
agents at almost all airports. It will finally scrap the private security system
that is failing people as we speak.
WOODS: Republicans say they chalked up a win, as well, since the plan gives the
federal government flexibility. Under the compromise, within two years some 28,000
baggage screeners, who are now private sector employees, will become federal employees.
But some airports could opt out after three years if they meet certain standards.
The Transportation Secretary says he will set high standards, but the immediate
challenge will be handling the transition.
NORMAN MINETA, SECRETARY OF TRANSPORTATION: The workforce will be federal employees.
What we have to do in this one year period is to make sure that contractors or
their employees just don't walk off the scene.
WOODS: Some experts worry the government may not have the resources to get the
job done.
JAMES HALL, FORMER CHAIRMAN, NATIONAL TRANSPORTATION SAFETY BOARD: And what it
depends upon now is going to be the individuals that are put in charge of this
responsibility, that they are given the authority and the funding to put in place
a real effective security system at all of our airports.
WOODS: The promise of the legislation is to restore travelers' confidence. That's
not likely to happen overnight. The industry now expects holiday traffic to be
off 20 percent from last year. 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.
11/15/01: Microsoft Opens The X-Box
LINDA O'BRYON: Let the games begin. The holiday season is always Olympic season
for the video game industry and this year the sector welcomes a new player from
a familiar name. Scott Gurvey has the latest on Microsoft's (MSFT) entrance into
the video gaming market.
SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Bill Gates made a brief midnight
appearance at a Times Square toy store, sticking around just long enough to sell
Microsoft's first X Box, an indication of how important this product is to the
giant software company. X Box is a video game console getting rave reviews for
its high powered game play and high quality graphics. Football on an X Box looks
like the real thing and if the game is one sided, the audience leaves early. X
Box went on sale today priced at $300.
ROBBIE BACH, CHIEF XBOX OFFICER, MICROSOFT: It's really part of a broader consumer
strategy. You know, our theory is our enterprise business is a great business
and continues to grow. But Bill Gates and Steve Ballmer made a decision two or
three years ago that said hey, we want the consumer business to grow as well.
GURVEY: Video gaming is a consumer business now worth about $20 billion in annual
sales worldwide. But it is a new business for Microsoft and success is by no mean
assured. Forty percent of U.S. homes already have a game console. Sony's PlayStation
2 is as powerful as X Box and has been on the market for a year. There are over
100 PlayStation 2 games available. X Box has only 20 today. And rolling off the
assembly lines for release on Sunday is the Nintendo Game Cube. The Cube will
be priced at only $200, but is seen as less powerful than X Box or PlayStation.
Still, it comes from the current industry leader and targets a younger market.
Nintendo says it is ready for Microsoft.
PETER MAIN, EXECUTIVE VICE PRESIDENT, NINTENDO OF AMERICA: We keep our eye on
everybody that enters this business and I don't have to say anything about that
competitor and his many attributes. The real key is, does he really have the insights
to succeed in this business?
GURVEY: Veteran Microsoft watchers see X Box as having a key role in the company's
strategy in future years.
MELISSA EISENSTAT, SOFTWARE ANALYST, CIBC WORLD MARKETS: Right now, Microsoft
is focusing on it as a game box and only a game box. But given how much power
is in that unit, I think there could be some other things down the line. So I
think it's pretty important.
GURVEY: Both Microsoft and Nintendo believe they can sell every game console they
can build this holiday season, roughly one million each. Scott Gurvey, 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.
11/15/01: Commentary: How Revenue Sharing Could Revive
The Economy
LINDA O'BRYON: In tonight's commentary, taking a new look at an old concept-revenue
sharing. Here's Alice Rivlin, Senior Fellow at the Brookings Institution and former
Vice Chair of the Federal Reserve.
ALICE RIVLIN, COMMENTARY: The downturn in the economy combined with fears of terrorism
is devastating state and local government budgets. Revenues from sales and income
taxes are dropping, especially in tourist dependent areas. At the same time, law
enforcement and security costs are rising dramatically. Unlike the federal government,
states and localities have to keep their operating budgets balanced no matter
what happens to the economy. Their rainy day funds, if they have them, don't last
long. So they cut services, freeze hiring and lay off workers. This means less
spending both by governments and by the laid off workers and less spending makes
the recession worse. A temporary infusion of cash from the federal government
would forestall these cutbacks and keep state and local services flowing smoothly
when we need them most. If you think this sounds like reviving the revenue sharing
program, you are exactly right. This is the moment to return to a good idea-having
the federal government share its revenue with states and localities when
recession threatens jobs and services. Republicans prefer tax cuts to spending
as an antidote for economic distress, but they also believe governments closest
to the people do the most good. Moreover, revenue sharing was a Republican idea
launched by Richard Nixon. Its temporary revival in the current crisis would be
a godsend to hard pressed governments on the firing line and an effective economic
stimulus. I'm Alice Rivlin.
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.
11/15/01: Paul Kangas' Wall Street Wrap Up
PAUL KANGAS: Stocks on Wall Street opened narrowly mixed with the blue
chips trying to edge higher in an extension of yesterday's 72 point closing gain
in the Dow Industrial Average, while the tech sector was slightly lower following
Applied Material's (AMAT) lower than expected post-market earnings report yesterday.
At 10:00 a.m., the Dow was up about one point, but the NASDAQ Index was down nearly
11, braced up by growing investor confidence that the US economy would begin to
show improvement by the middle of next year in response to the strong monetary
and fiscal stimuli it's been given. Blue chip stocks showed steady improvement
during the rest of the morning, and by 1:00 p.m. the Industrial Average was sporting
a 75 point gain, NASDAQ up 12 points. Acting as somewhat of a drag on the market
for the rest of the session was the energy group with sizable losses as oil prices
neared two year lows. The Dow Industrial Average saw its closing gain trimmed
to 48.78 points, putting it at 9,872.39. The NASDAQ Index ended with a small loss
of 2.62 points at 1900.57.
Big board volume moved up a little bit from yesterday, about 34 million shares
or so. And up volume exceeded down volume by about 7 million shares.
The Dow Transport Index up just over 61 points. The airlines firm on lower oil
prices.
But the Utilities Index fell nearly 4 points.
The Closing Tick neutral at -74.
Standard & Poor's 500 up just over a point.
Just over a point and a quarter point gain on the 100.
The MidCap 400 down nearly 3 1/2 points.
And the Bridge Futures Price Index down 2.90.
A gain of about 1/3 of a point in the New York Composite.
Value Line down 2/3 of a point.
The Russell2000 Small Cap Index fell nearly 3 1/2 points.
And the broadly based Wilshire 5000 gaining 0.60.
The bond market had one of its worst sell-offs in recent times today as investors
swung to the belief that the Federal Reserve is through cutting interest rates
now that the picture seems to be brightening for the economy. Falling oil prices
quashed inflation fears and the progress in the war along with the recent rally
in stocks are reducing the need for safe haven investments. Against this setting,
tax free issues fell one full point on average, corporates were down as much as
2 points and the Treasury market went into free fall.
The 5-year notes tumbling 1 2/32.
The 10-year note down 2 1/32.
The 30-year bond down 3 9/32.
And finally, the Lehman Brothers Long-Term Treasury Bond Index tumbled almost
39 1/2 points.
Well, executives won't be complaining about the action of the stock today. It
was one of the biggest gainers on the New York Exchange. And there were a lot
of good gainers and some big losers, too, unfortunately. But the Dow did all right,
up 48 3/4 points or 1/2 percent. The broader market actually a little bit lower,
by a 16 to 15 margin, but 111 new yearly highs, only 40 new lows.
Compaq Computer (CPQ) topped the active list, moving up $0.70 on 28 ¼ million
shares. It seems that Hewlett-Packard (HWP) is still intent on acquiring Compaq.
Lucent Technologies (LU) down $0.13. The company did say it's close to selling
its fiber optic cable unit to a Japanese firm.
ExxonMobil (XOM) certainly hurt the Dow Industrial Average with that loss of $1.51.
And, of course, New York December oil futures tumbled $2.29 a barrel, down to
$17.45, a two year low.
Tyco International (TYC) moved up $0.95. The company reaffirmed its earnings guidance
over the next several quarters and an analyst at Merrill Lynch says Tyco's stock
is under valued.
Corning (GLW) moved up $0.34. That was fifth in volume.
AOL Time Warner (AOL) down $0.70 after recent gains.
EMC (EMC) moved up $0.60.
Enron (ENE) a $0.43 drop.
And then Cendant (CD) was up $0.89. The company sees fourth quarter earnings coming
in around $0.20 a share. That's above its previous estimate of $0.15 to $0.19.
Finally, tenth in volume, NorTel Networks (NT), a $0.03 loss.
Baker Hughes (BHI), one of the examples of the weak energy related group, down
$4.35.
Eastman Kodak (EK) moved up $1.34. The company's getting into the ink jet printer
business. It's buying Enkaid Incorporated for about $25 million.
The Gap (GPS) down $0.53. After the market closed, Gap reported a third quarter
loss of $0.06 a share, not as bad as the $0.07 loss that was expected on Wall
Street. The stock didn't do much in after hours trading, however.
Goodyear Tire (GT) a nice gain of $2.46. Alex Brown says if the company matches
new price increases expected from Michelin, it could add $1 a share yearly to
Goodyear's earnings, and of course, the lower oil prices are also a boon for a
tire maker.
Philip Morris (MO) was up $0.41. And then after the close, the company said it's
proposing a name change. It wants to become known as Altria Group Incorporated.
Well, that comes from the Latin word Altus, meaning high or superior. Shareholders
have to approve any change in the name, however.
Slumberge down $2.92. A huge 9.4 million shares were traded today on the down
side, indicating institutional selling.
Buhrmann (BUH) was up $2.45, the biggest percentage gainer. It's the world's largest
office products company, based in the Netherlands. It reported a $0.26 drop, a
26 percent drop in third quarter earnings, but that was better than expected and
the company gave no fourth quarter earnings warning, as was widely expected among
analysts. So a positive there.
Then we get to see Weight Watchers' (WTW) shareholders getting fat on the stock
today, up $5.50. 17.4 million shares offered at $24.
The stock opened at $29.75, went as high as $30.20 and then lost a little.
Wipro (WIT) up $4.19. The company and Mosaic Soft have signed a pact with Heidelberg
Corp. (ph) for worldwide distribution rights for a product called Doc Smart (ph).
It's for information solutions.
And National Golf Properties (TEE) down $3.26. Third quarter earnings were higher,
but the company cut its fourth quarter estimate and the full year estimate and
said it may restructure and might change dividend policy. It is a real estate
investment trust.
Grant Prideco (GRP) yet another weak supplier of oil drilling equipment, down
$1.55.
Midway Games (MWY) fell $1.89. The company says its NFL Blitz video game for PlayStation
2 has been delayed until next March.
The NASDAQ down only 2.62 there. Volume was down a little bit from yesterday,
about 150 million shares fewer. For every 17 stocks higher, 18 lower.
Microsoft (MSFT) topped the active list, moving up $0.17.
Followed by Intel (INTC), down $0.54.
Cisco Systems (CSCO) moved up a $0.25.
And then Applied Materials (AMAT) down $1.62 after reporting those disappointing
earnings.
And then Del |
