Program: Tuesday, August 26, 2003

The Economy & Stocks Show Signs Of Coming Around
One On One With Richard Breeden,Corporate Monitor for MCI
The CBOE Outlook- More Red & More Debt
Market Outlook With Jack Rivkin of Neuberger Berman
Commentary: The Rising Cost Of Everything
Paul Kangas' Stocks In The News
Market Stats

08/26/03: The Economy & Stocks Show Signs Of Coming Around

SUSIE GHARIB: A comeback on Wall Street today. Stocks ended higher thanks to some late day buying. The Dow rose 22 points and the NASDAQ edged up 6. Investors shrugged off several reports out today that paint a mixed picture of the U.S. economy. Scott Gurvey has details.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: The score in today's economics derby was one positive, one negative, and one that tried to lean in both directions at the same time. It was the all important consumer who was conflicted in August. The Conference Board reporting that consumers are slightly more confident about the future of the economy than they were just one month ago, but consumer's view of current conditions declined.

KEVIN LOGAN, ECONOMIST, DRESDNER KLEINWORT WASSERSTEIN: So they have hope for the future, but they recognize that currently things aren't that good. In particular, the job market looks worse. More and more people, a greater percentage of people, are reporting that jobs are hard to get. So even though they think things will get better, they recognize that currently they haven't really gotten better yet.

GURVEY: In a separate report, the Commerce Department said orders for durable goods rose a better-than-expected 1 percent. That makes for the first back-to-back gain in this important measure of the manufacturing sector in more than two years. The negative report concerned the sale of new single family homes. That number fell in July from a record level set in June. Sales declined a much greater-than-expected 2.9 percent. Economists say the drop off in sales may have been caused by rising mortgage rates. Overall, today's reports present a mixed picture, which economists say is to be expected at this point in an economic cycle.

DREW MATUS, SR. ECONOMIST, LEHMAN BROTHERS: Confidence is up, but not for the right reasons. Housing is down, but you know, it's coming off such a high level it's really not that upsetting. Manufacturing seems like it's starting to improve, but we really don't have enough data to find out whether it's going to be sustainable. So these are exactly the sort of things that you see when the economy is in a turn. Things don't all point in the same direction, they point in opposite directions and you just kind of have to read your tea leaves as you can.

GURVEY: The next reading of those tea leaves comes on Thursday with the first revision to the GDP report for the second quarter. 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. Copyright (c) 2003 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.

08/26/03: One On One With Richard Breeden,Corporate Monitor for MCI

SUSIE GHARIB: MCI is in for a major overhaul. The company formerly known as WorldCom must adopt sweeping reforms in order to emerge from bankruptcy. That's the recommendation of MCI's court-appointed monitor, Richard Breeden, who released a report today with 78 directives aimed at preventing the abuses that led to the company's $11 billion accounting scandal. Breeden's rehab plan calls for the separation of the CEO and chairman posts, 10-year term limits for directors and auditors, shareholder veto power over the selection of new directors, and a $15 million cap on executive pay. Joining us now to talk about the NCI overhaul is Richard Breeden, MCI's court appointed monitor and former chairman of the Securities and Exchange Commission. Mr. Breeden, welcome to NIGHTLY BUSINESS REPORT.

RICHARD BREEDEN, CORPORATE MONITOR, MCI: Thanks very much, good to be here.

GHARIB: Are you confident that these measures that you're recommending will root out the corruption at MCI?

BREEDEN: Well, I think most of the corruption has already been rooted out. Before this report was done, the company itself commissioned a very thorough study of the fraudulent accounting done by an outside law firm, and an accounting firm. And the bankruptcy examiner has done his own exam. And all the people who were found to have engaged in wrong doing have long since been fired and cleaned out of the company.

GHARIB: Your report doesn't really address the new allegations against MCI, and I'm referring here to those under paying of access fees. Critics say that these allegations need to be addressed and need to be resolved before MCI can move forward. Do you agree with that?

BREEDEN: Well, those critics happen to be company's major competitors. The bankruptcy laws in the United States for several decades have provided a very simple rule, that the creditors get to vote on whether a company should be reorganized or not, not its competitors. And the creditors have spoken very clearly here, 90 percent of them have signed up for a reorganization plan. So I think the company will come out of bankruptcy, and those arguments from the competitors, if they are legitimate problems, they should be followed up on and dealt with. But I think there's an awful lot of funny coincidence that events that happened nine years ago suddenly surface three weeks before the confirmation hearing.

GHARIB: But what about the public trust, as you know the whole WorldCom scandal eroded the public trust, how can investors be sure that MCI is really cleaned up and that the corrupt people have been removed?

BREEDEN: Well, for one thing, a former chairman of the SEC, for a year, has been sitting inside the company, two doors down from the CEO, watching everything that goes on there. They have cleaned up, they have cleaned house as thoroughly as any company in America ever has. And I just think that you can never go back and find every single event in all of history. A quick example over the last six years, in shoring up the amounts owed back and forth between MCI and the RBOCs, it actually turned out that MCI thought it had been overcharged by 1.9 billion and they all agreed that they had been overcharged by 1.1 billion. So they didn't run to the press and accuse people of fraud, they sat down and worked out their differences.

GHARIB: Let me ask you about this, one of your directives called for the separation of the chairman and CEO jobs it at MCI. When do you think that MCI will have a new chairman and do you have any candidates in mind?

BREEDEN: Well, I think that it will happen shortly after the new board takes office, which will be when the company emerges from bankruptcy. And it's really up to that board to decide which among the members will become the non-executive chairman.

GHARIB: OK. Many of the people I talked to today, in preparation for speaking with you, feel that your recommendations on ground-breaking. Just wondering, do you think that they could become a model that the Securities and Exchange Commission might adopt and require all companies to adopt them?

BREEDEN: Well, I hope that there are models that all companies will look at, I don't think that the SEC needs to put these recommendations in by regulation or the Congress needs to adopt them. This is a good example of the private sector being able to adopt reforms on its own. And I think there is a lot of work to be done in corporate governance. Every one of these recommendations that I made was, I thought, a good idea for any company, not just for MCI. But I think the process of reviewing them and deciding which ones might be healthy in any particular company should be done in the private sector, not by the government.

GHARIB: All right. Thank you very much, Mr. Breeden. A pleasure having you on the program.

BREEDEN: Delighted to be here.

GHARIB: We've been speaking with Richard Breeden, MCI's court-appointed monitor and former chairman of the Securities and Exchange Commission.

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. Copyright (c) 2003 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.

08/26/03: The CBOE Outlook- More Red & More Debt

PAUL KANGAS: New estimates from the Congressional Budget Office put the deficit next year at a record $480 billion. For the decade, the federal government is now projected to run almost $1.4 trillion in the red. As Darren Gersh reports, the new numbers also highlight the tough choices facing the nation.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Since its last report just five months ago, the Congressional Budget Office says the government's fiscal outlook has deteriorated substantially: swinging by almost $2.3 trillion from surplus to deficit. But even with next year's red ink projected to hit almost half a trillion dollars, the CBO says there's been little economic impact so far.

DOUGLAS HOLTZ-EAKIN, DIRECTOR, CBO: I think the evidence is we have not seen striking economic damage from the deficits of recent years. There's been a lot of slack in the economy, no real evidence of pressure upward on interest rates.

GERSH: Democrats blamed the new projection of deficits through the year 2011 on the president's tax cuts.

REP. JOHN SPRATT (D), SOUTH CAROLINA: There's no way to gloss over these numbers. We've got a grave problem on our hands and it will not correct itself.

GERSH: An administration spokesman said the deficit will be cut in half if Congress restrains spending as the president has demanded. A look at the possible budget outcomes shows that crucial decisions lie ahead for the nation's fiscal outlook. The CBO estimates if Congress keeps increasing spending at the current rate of 7.7 percent, it will add another $2.8 trillion to the deficit over 10 years. Making the Bush tax cuts permanent would add $1.6 trillion. Adding a prescription drug benefit to Medicare: $400 billion. Fixing the so-called alternative minimum tax problem also adds $400 billion to the deficit. In a worst-case scenario, CBO estimates the federal deficit could approach 7 percent of GDP by 2013.

HOLTZ-EAKIN: And I certainly think that there would be cause for concern if we were to run deficits that were 7 percent of GDP both one time and for the foreseeable future in an economy that we would have expected to recover at full employment by then.

GERSH: And in the next decade, 77 million Baby Boomers will begin to retire, placing enormous new demands on the federal budget. 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. Copyright (c) 2003 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.

08/26/03: Market Outlook With Jack Rivkin of Neuberger Berman

SUSIE GHARIB: Our market guest tonight says the stock market has returned to quote, "a more normal, but still strange investment environment." Joining us now, Jack Rivkin, chief investment strategist at Neuberger Berman. Hi, Jack, nice to see you again.

JACK RIVKIN, CHIEF INVESTMENT STRATEGIST, NEUBERGER BERMAN: Nice to be here.

GHARIB: All right, normal but strange. Tell us what you mean by that.

RIVKIN: Well, it's a bits of an oxymoron. But we're living with a very different geopolitical environment than we've had in many previous investment cycles, and that's what adds to the strangeness. I think it means that investors and companies in general are tending to be a bit more risk averse. So there's an element of what they're doing that is very much associated with being cautious. Getting away from that, though, to investing in stocks and bonds, I think there we have returned to an environment where normal, analytical analysis, normal multiples, normal variations in growth from company to company, are going to lead to what I would call a normal investment environment.

GHARIB: And what do you say of the economy, particularly today's batch of economic reports that came out on consumer confidence, on housing, on durable orders, what do you make of all that?

RIVKIN: Well, I think in general the economy is going to continue to surprise people on the upside. I think the second half of this year, the numbers will be astonishingly good, probably 5 percent real growth in both this quarter and the next quarter. I think consumer sales are going to be very good. I think profits are going to be very good. We may have a little bit of a problem if people begin annualizing that for all of next year. But I think the next few months we're going to see surprises, positive surprises, and I think the market will pond to that.

GHARIB: Well, we're obviously in those dog days of August, but from September and going to the end of the year, how much do you think the market is going to respond to those economic progress that you refer to?

RIVKIN: Well, if you're looking for a number of how much the market will be up from here, that's a very hard thing to predict. I think it's more a case of you're going to have individual companies that are going to do very well, probably overall the market could be up another 4 to 5 percent between now and year-end. But there are certain companies that will be down, others that I think will be up substantially from here.

GHARIB: I know you don't like to talk about specific stocks, but talk us through some of your thinking on stock sectors.

RIVKIN: Well, I think anything that is related to the consumer, as I said, I believe retail sales are going to be surprising, pretty much across the board. And that I think means the retailing sector will be good. Any company that's a bit more economically sensitive, so that pushes us more toward basic industries and basic materials. I would also, though, want to have a fairly good exposure in the energy sector as well. That's a bit of a hedge on the one hand because energy is the one thing that could be sort of a governor on how fast this economy grows, on the other hand the stocks are relatively fairly valued here, which makes them reasonably attractive.

GHARIB: All right, Jack, we're going to have to leave it there. Thank you so much for coming on the program.

RIVKIN: My pleasure.

GHARIB: We've been speaking with Jack Rivkin of Neuberger Berman.

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. Copyright (c) 2003 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.

08/26/03: Commentary: The Rising Cost Of Everything

SUSIE GHARIB: In tonight's commentary, from tomatoes to haircuts, prices are rising everywhere. Here's Irving R. Levine, dean of international studies at Lynne University and former chief economics correspondent at NBC News.

IRVING R. LEVINE, COMMENTARY: I went to the barber yesterday for a trim and found he's raised the price by 20 percent. That's not the only price increase to hit me in recent weeks. Our real estate tax has soared. So have the premiums on our medical and homeowners insurance, and our natural gas bill has been inflating like the Hindenburg. These increases fly in the face of the latest Consumer Price Index which shows inflation running at only 2.2 percent. If you also find your costs exceeding the inflation rate, the problem lies in what you're spending your money on. For example, buy a TV set and you'll pay 13 percent more than last month, but a computer costs 23 percent less. Tomatoes are up 10 percent, while potatoes are down. Drink coffee which is up 2 percent, drink milk and pay 2 percent less. And this may surprise you: the price of a product may rise sharply, and yet the CPI won't show it as an increase if the quality of the product has improved. For example, if the price of a car goes up by $200 because of improvements, the CPI will show no increase in price, although the windshield sticker will. So maybe that 20 percent increase for my haircut is due to quality improvement. Frankly, though, I don't see much improvement. Do you? I'm Irving R. Levine.

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. Copyright (c) 2003 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.

8/26/03: "Paul Kangas' Stocks In The News"

PAUL KANGAS: Stocks on Wall Street opened modestly lower despite that solid rise in durable goods orders and a strong earnings report from home builder Toll Brothers (TOL). So the market extended its downturn into the third straight session. After a half hour of trading, the Dow was off 13 points and the NASDAQ Index down 11. The 10:00 a.m. release of that rise in consumer confidence along with the new home sales figures failed to prevent continued weakness in stocks, which were clearly suffering from a lack of interest as many, many money managers were away on vacation. In early afternoon, the Dow fell to an 80-point deficit while the NASDAQ Index was off 23 points. That relatively sharp downside spike gradually began attracting buyers, especially when selling pressures dried up and then a solid rally, helped by short covering, followed. So the Dow Industrial Average bounced back to close with a gain of 22.81 points at 9340.45. The NASDAQ Composite snapped back with a 6 1/3-point gain, putting it at 1770.65. The Standard & Poor's 500 Index ended with a 3-point gain at 996.73. Bond prices rose across the board despite more evidence supporting an economic recovery. The 10-year note climbed 13/32 to 98 6/32, putting the yield at 4.48 percent.

Topping the active list on the New York Exchange was Nokia (NOK), trading 14.1 million shares. The only news I saw, there is some talk that Nokia might bid for the 60 percent of Nextrom that it doesn't already own. Nextrom is a Swiss fiber-optic manufacturer.

There was some general strength in the cell phone makers today. Motorola (MOT) moving up $0.42, pretty good percentage.

Pfizer (PFE), a $0.14 gain.

Citigroup (C) rose $0.39.

And there you see General Electric (GE) rising $0.03 per share, number five in big board volume.

AOL Time Warner (AOL) edged up $0.09.

Xerox (XRX), an $0.85 gain. Good percentage move there. The S.G. Cowen brokerage upgraded it from market perform to a strong buy, citing the prospect of rapid earnings growth for the rest of this year and into 2004.

Texas Instruments (TXN) rose $0.07.

NorTel Networks (NT), a penny's gain.

And then Disney (DIS), tenth in big board volume, down $0.40.

Americredit (ACF) moved up $1.35, over 15 ½ percent gain there. The company restated its 2002 and the first nine months of 2003 results lower by a pre-tax $56 ½ million, and then went on to say it will earn $0.92 a share in the year 2004. I think that's what gave the stock a boost.

Then we see General Dynamics (GD) moving up $1.94. The story here, Morgan Stanley brokerage increased its price target by $15, from $85 to $100 a share.

Sears (S) closed up $0.26 in regular trading, and then after the close the company said that same store sales for August are running well above the company's plan. In after hours trading, Sears stock was as high as $44 a share, so it moved up just about a dollar.

Toll Brothers (TOL), the home builder, down $0.12 even though it reported third quarter earnings up 27 percent over the last year, $0.90 versus $0.70. And that was $0.09 above the Street estimate, but a lot of these stocks have already discounted those good earnings.

Chicago Mercantile Exchange (CME) rising $3.90. making a nice comeback from recent weakness. Today the Jefferies brokerage upgraded it from hold to a buy.

Freeport-McMoRan Copper & Gold (FCX) rising $1.45. J.P. Morgan repeated an overweight rating. And of course, the rise in gold today in New York, December contract up $4.40 to $366.80 an ounce, that helped. And then interestingly, Friday Morgan Stanley downgraded that stock. I guess that's what it takes to make a horse race (ph).

Mobile TeleSystems ADS (MBT), this is the Russian telecom firm. The firm posted a 50 percent rise in its second-quarter profits, and a nice reflection in the stock.

Endurance Specialty Holding (ENH), this is the Bermuda-based casualty insurance company. It went public late February at 23. And C.S. First Boston upgraded it today from neutral to outperform. Also its chairman recently bought 54,000 shares, a little insider buying can't hurt the reputation.

Catalina Marketing (POS) down $2.57. Its auditors, Ernst & Young, resigned after discovering revenue recognition accounting issues. Bear Stearns downgraded the stock from peer perform to underperform.

Intel (INTC) topped the active list on NASDAQ, up $0.47, although its CEO is backing away from last week's very upbeat outlook. Now he says projected strong quarter results doesn't really single a major - signal a major rebound in the chip sector. So he's backing down a little.

A $0.07 gain in Microsoft (MSFT).

Cisco (CSCO), a $0.12 rise.

Dell (DELL), a $0.13 loss.

Amgen (AMGN) was down $0.67, number five in dollar volume.

Oracle (ORCL) gained $0.07.

And eBay (EBAY) up $0.67.

Qualcomm (QCOM), a $0.62 gain.

Applied Materials (AMAT) fell a quarter.

And KLA-Tencor (KLAC) was up $0.43.

Comtech Telecommunications (CMTL), look at that gain, $5.15. The company increased its fourth-quarter earnings guidance due to better-than-expected sales of mobile communications to the U.S. Army.

And Engineered Support Systems (EASI) did well, up nearly $8 share, really strong third-quarter earnings, $0.72, way up from last year's $0.41.

And on the downside we see Myriad Genetics (MYGN) falling $2.01. The company had a fourth-quarter loss of $0.26 a share. That was $0.04 worse than the loss Wall Street was expecting, namely $0.22. In the meanwhile, C.S. First Boston brokerage downgraded it from outperform to neutral.

And those are the "Stocks in the News."

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. Copyright (c) 2003 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.

08/26/03: Market Stats

                                      NET    PERCENT
                         CLOSE     CHANGE     CHANGE
DOW CLOSE              9340.45     +22.81       + .2
HIGH                                         9353.86
LOW                                          9233.08

NASDAQ COMP.           1770.65      +6.34        +.4
HIGH                                         1771.22
LOW                                          1737.15

VOLUME                                       1,186.7
PREVIOUS                                       957.4
UP VOLUME                                      733.7
DOWN VOLUME                                    419.3

DOW TRANSPORTS         2636.70      +3.69       + .1
DOW UTILITIES           238.80       +.71       + .3
CLOSING TICK                                    +593

S&P 500                 996.73      +3.03       + .3
S&P 100                 499.28      +1.62       + .3
MIDCAP 400              506.46       +.71       + .1
REUTERS/CRB             241.08       +.76       + .3

NYSE COMPOSITE         5597.49     +11.85       + .2
VALUE LINE              318.23       +.91       0.29
RUSSELL 2000            486.51      +2.64       0.55
WILSHIRE 5000          9637.01     +29.02        0.3

U.S. TREASURIES
5-YEAR NOTE 3.25%
Aug. 15,2008          99  2/32      +8/32       3.46

10-YEAR NOTE 4.25%
Aug. 15,2013          98  6/32     +13/32       4.48

30-YEAR NOTE 5.375%
Feb. 15, 2031        101 15/32     +14/32       5.27

LEHMAN BROS.
LONG BOND INDEX        1686.02     + 5.84


DOW CLOSE              9340.45     +22.81       + .2
ADVANCES                                        1817
DECLINES                                        1419
NEW HIGHS                                         60
NEW LOWS                                          25

                                      NET    PERCENT
NYSE MOST ACTIVES    4PM CLOSE     CHANGE     CHANGE
NOK    Nokia             15.79       +.35       +2.3
MOT    Motorola          10.73       +.42       +4.1
PFE    Pfizer            30.01       +.14        +.5
C      Citigroup         43.31       +.39        +.9
GE     GE                29.88       +.03        +.1
AOL    AOL Time Warner   15.83       +.09        +.6
XRX    Xerox             10.39       +.85       +8.9
TXN    Texas Instrument  22.68       +.07        +.3
NT     Nortel Networks    3.23       +.01        +.3
DIS    Disney            20.85       -.40       -1.9

NASDAQ CLOSE           1770.65     + 6.34       + .4
VOLUME                                       1,384.4
PREVIOUS                                     1,122.9
ADVANCES                                        1656
DECLINES                                        1496

NASDAQ ACTIVES
INTC   Intel             27.71       +.47       +1.7
MSFT   Microsoft         26.57       +.07        +.3
CSCO   Cisco Systems     19.10       +.12        +.6
DELL   Dell Inc          31.93       -.13        -.4
AMGN   Amgen             65.53       -.67       -1.0
ORCL   Oracle            12.44       +.07        +.6
EBAY   eBay             112.16       +.67        +.6
QCOM   Qualcomm          39.60       +.62       +1.6
AMAT   Applied Matl      20.95       -.25       -1.2
KLAC   KLA Tencor        57.40       +.43        +.8

AMEX CLOSE              965.74     - 1.27       - .1

INDEX SHARES
DIA    DIAMONDS TRUST    93.60       +.12        +.1
QQQ    NASDAQ 100        32.54       +.03        +.1
SPY    S&P DEP.RECEIPTS 100.11       +.18        +.2

STOCKS IN THE NEWS
ACF    AmeriCredit       10.00      +1.35      +15.6
GD     General Dynamic   85.06      +1.94       +2.3
S      Sears Roebuck     43.03       +.26        +.6
TOL    Toll Brothers     29.50       -.12        -.4
CME    Chicago Mercant   70.31      +3.90       +5.9
FCX    Frprt-McM Copper  28.44      +1.45       +5.4
MBT    Mobile Telesys    65.61      +3.48       +5.6
ENH    Endurance Splty   28.48       +.98       +3.6
POS    Catalina Mktg     12.58      -2.57      -17.0
CMTL   Comtech Telecomm  22.95      +5.15      +28.9
EASI   Engineered Suppor 54.77      +7.95      +17.0
MYGN   Myriad Genetics   12.36      -2.01      -14.0