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Program: Monday, September 22, 2003
09/22/03: The Dollar Dumping Domino Effect
SUSIE GHARIB: A turbulent day in the currency markets today. Traders dumped the U.S. dollar, sending the greenback to its lowest level against the Japanese yen in almost three years. That led to a sharp sell-off in stocks and bonds. The Dow tumbled 109 points and the NASDAQ lost 31. As Darren Gersh reports, the sell-off was in reaction to comments by finance ministers of the world's top industrial nations. DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: That thud heard around the world today was the sound of traders dumping the dollar. The fall began this weekend when finance ministers from the G7 group issued a statement reaffirming that exchange rates should reflect market forces. They also added that more flexibility would be better for countries that now tightly fix their currencies to the dollar. TOM GALLAGHER, POLITICAL ECONOMIST, ISI GROUP: The call for more flexible exchange rates determined by market forces is being interpreted as an expression of preference for a weaker dollar. So overnight, Asian stock markets were down, reflecting the economic affects of stronger currencies in that part of the world. And then today of course, the dollar is weaker and the stock and bond markets in the U.S. are substantially weaker. GERSH: If economic fundamentals rule the day, traders fear Japan, China, and other Asian nations that now buy massive amounts of U.S. bonds to keep their currencies low would stop buying, and that would suck money out of the U.S., leading to higher interest rates and a lower dollar. Gallagher says that's what traders think the G7 said, but it doesn't mean that's what the finance ministers meant. GALLAGHER: I think the reality is much more benign than the markets interpretation of it. I think there is probably some desire to give Treasury Secretary Snow something to show for his efforts. GERSH: For weeks now, Secretary Snow has been pressuring the Chinese to relax their currency peg to the dollar, which U.S. manufacturers say gives Chinese competitors an advantage. And today, the National Association of Manufacturers declared itself delighted by the signal Snow and his colleagues sent to China and the rest of Asia. FRANK VARGO, V.P. INTL. ECONOMIC AFFAIRS, NAM: You know, the whole region basically has maintained an undervalued set of exchange rates in order to have export-led growth to the United States, and we're really coming to the end of the period when that can continue. GERSH: Secretary Snow in Dubai today said U.S. dollar policy remains unchanged. But markets disagree, and sent the dollar to near three-year lows against the yen. 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.
SUSIE GHARIB: The appointment of John Reed as interim chairman of the New York Stock Exchange got a thumbs-up today from the chairman of the Securities and Exchange Commission. William Donaldson told reporters in New York that Reed has his confidence, and the confidence of the SEC. Donaldson says he'll leave it up the NYSE's board to decide whether to separate the chairman and CEO positions, as well as what to pay the permanent successor to Dick Grasso. But Donaldson stressed that corporate governance reform should be a priority for the Exchange. WILLIAM DONALDSON, SEC CHAIRMAN: I hope that the stock exchange will become the exemplar for corporate America. I hope that in the changes coming down the pike, they will stand as a beacon for corporate governance rules and regulations that they are implementing themselves for the rest of corporate America. GHARIB: Also today, Donaldson told a lawyers group that CEOs and boards of directors should be promoting a company-wide mindset to quote, "do the right thing."
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.
09/22/03: Should The NYSE Go Public?
PAUL KANGAS: Now that Dick Grasso is gone, investors are wondering what "the right thing" might be for the future of the New York Stock Exchange. The big board is now considering whether to become a public company, a move that could dramatically change the way Wall Street is policed. Erika Miller reports. ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Proponents of an initial public offering say it is the best way to fix conflicts of interest in the current NYSE structure and shore up investor confidence. That's because in order to go public, the Exchange would be required to split its regulatory and market divisions. It would also have to create an independent board of directors. WILLIAM FREUND, PACE UNIVERSITY'S CTR./STUDY OF EQUITY MKTS.: In view of the fact that the New York Stock Exchange has to repair its image, it has to do everything it possibly can to minimize or eliminate conflicts of interests or the appearance of a conflict of interest. MILLER: Outside observers say an offering could also give the Exchange a competitive edge: a currency to make acquisitions. JAMES ANGEL, FINANCE PROFESSOR, GEORGETOWN UNIV.: Another advantage is that with publicly-traded stock, they would find it much easier to merge with other markets. So if they wanted to take over a market in another market or in the United States, it would be much easier to do it as a standard corporation than it would as a membership organization. MILLER: Public stock exchange ownership has widespread precedent abroad, including London and Toronto. The NYSE even considered an IPO in the late '90s. But then Chairman Dick Grasso scrapped the plan before members could vote on it. And some people think an IPO would be a mistake now, too. The NYSE could split its regulatory and market units without going public. That's how NASDAQ operates. Plus, many Wall Street firms are said to be happy with the current big board structure. Because they perceive its regulatory arm to be more lax than other monitors like the SEC. Another drawback: the process of going public would likely take years. ANGEL: The question they have been asked for years is why aren't they public, and one of the answers is that the U.S. regulatory environment makes that very difficult. It takes years for the SEC to come to a decision on even fairly simple issues. MILLER: A special NYSE governance committee has been hearing testimony on whether the Exchange should go public. The committee is expected to make a recommendation to the full board October 2. Erika Miller, 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.
09/22/03: One On One With John Bogle, Fmr. Chairman of Vanguard Funds
SUSIE GHARIB: Our guest tonight has been calling for structural changes at the New York Stock Exchange. Joining us now from Valley Forge, Pennsylvania: John Bogle, the former chairman and founder of the Vanguard Funds, the second-largest mutual fund company in the country. Nice to see you, Mr. Bogle. JOHN BOGLE, FMR. CHMN. & FOUNDER, THE VANGUARD GROUP: Nice to see you, Susie. GHARIB: Well, you heard our report, speculation about the New York Stock Exchange going public. Do you think that move would be a positive for investor confidence? BOGLE: I think it's much too soon to do anything like that. The Exchange is under enormous pressure. The first thing that should happen, whether they go public or not and certainly before they go public, would be the separation of the business side of the Exchange, the trading side, if you will, and the regulatory side. And that has got to be accomplished first and then we can talk about whether the business side should go public or not. It's interesting that the NASDAQ came up to this split of regulatory and business functions and did it and announced their plans to go public but they haven't been able to go public yet because their earnings are under such pressure. GHARIB: So you think it's really just a matter of time before the NYSE will no longer be in the business of self-regulation? BOGLE: I don't see how you keep these two sides of the business together under the present structure. The reality is that the New York Stock Exchange system and the specialist system in particular is making huge amounts of money for the specialists and the traders on the floor. And we've got to move regulation away from that. GHARIB: Let me ask you a little bit about today's news about John Reed, the former chairman of Citigroup (C), becoming the interim CEO of the NYSE. Do you think he's a good choice? BOGLE: I think he's an absolutely inspired choice. He doesn't have an awful lot of background in the securities business directly, but he's a brilliant guy, he knows the financial business probably as well as anybody in the United States. And I happened to have met him personally on a number of occasions. He is a very independent, integrity-laden person. So I would say A-plus to the selection. GHARIB: If John Reed decides that he does not want to stay on as the permanent chairman and is going to continue with the search for a new chairman for the NYSE, if you were on the search committee, who would you suggest to be the next NYSE chairman? BOGLE: Well, kind of the top of the head, one of the names I really like is John Biggs, the former head of TIAA-CREF. He's a pillar of integrity, he is also a very brilliant, well-educated man. He's been in the securities business as a money manager. And he'd be my top choice. GHARIB: Traditionally the New York Stock Exchange has had a chairman who comes from Wall Street. Do you think they have to break with that tradition? BOGLE: Well, that's always a tough problem because you need somebody that knows how the system works. And that's really important. But I think you can accomplish that with an outside chairman and an inside floor sort of a fellow as the president. GHARIB: So you think that there should be a split. It seems from what - inferring from what you just said, a split between the chairman job and the CEO job rather than keeping them as one person? BOGLE: Yes. I feel very strongly, not just for the New York Stock Exchange, but for corporate America generally, what we've got to do is have the managers manage and have the governors govern. And one of the big problems we've had in this country is we've turned owner's capitalism, with inadequate governance, into the manager's capitalism where the manager in many cases is kind of running off with the farm. So I like the idea of a split between governance and management, it's a very high priority. GHARIB: I just want to bring up on a different subject but somewhat related the recent news about improper trading practices at mutual funds. Investors during this whole period of turbulence in corporate America and Wall Street have looked to mutual funds as the one safe place to park their money. What do you say to investors who have money in mutual funds? What should they do? BOGLE: Well, they've got to be very wary if they own any of the funds that have already been subject to the attorney general - Attorney General Spitzer's settlement. Those funds have clearly - they don't say they've done anything wrong. You don't have to read much of the complaint to know that they have done something wrong. So I would examine those funds with great care and I would look to management to make big changes, as Bank of America (BAC) has already done, before I would trust them again. And I'd also be wary of every company in this industry that the investor has the right to get some good assurances that those things aren't going on in this industry elsewhere. GHARIB: That's good advice. Thank you so much, Mr. Bogle. BOGLE: Good to be with you. GHARIB: We've been speaking with John Bogle, former chairman and founder of the Vanguard Funds.
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. 09/22/03: Commentary: When Productivity Becomes A Bad Thing
SUSIE GHARIB: Tonight's commentator says too much of a good thing can be a bad thing for the economy, and he has an example. Here's Louis Uchitelle, economics reporter for "The New York Times." LOUIS UCHITELLE, COMMENTARY: The economy is clearly doing better. But is this surge in economic growth sufficient to sustain an upturn and put the weak recovery behind us? Probably not. The barrier is productivity, which ironically is surging. Simply put, the nation's workers are capable of producing more in a normal schedule than their employers can sell. So employers are getting rid of workers to bring supply back into line with demand. Not since World War II has supply outstripped demand in the aftermath of recession, and if that unusual trend continues, the upturn seems doomed. The dynamic is straightforward. While labor cost-cutting fatten short-term profits, it also undermines demand. Workers who lose their jobs or have their hours cut are also consumers. As their spending declines, supply runs even further ahead of demand and employers respond by dismissing even more people. This negative process feeds on itself until we are back in the soup of a weak recovery. Don't get me wrong. Rising productivity is a wonderful thing as long as the demand for the rising output grows even faster. Insufficient demand is the problem today, and stepped-up government spending may be necessary to supplement inadequate demand in the private sector. Other than rising outlays for the military, that is not happening yet. I'm Louis Uchitelle.
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. 9/22/03: "Paul Kangas' Stocks In The News"
PAUL KANGAS: KANGAS: That tumble in the dollar first sent the bond market down sharply on indications the greenback's weakness was triggering foreign selling of U.S. Treasuries. The resulting jump in interest rates caused a steep opening sell-off in stocks on Wall Street. At the outset, the Dow dropped nearly 120 points, the NASDAQ Composite lost 37. Continuing weakness in the dollar and bonds kept stocks on the defensive and many investors felt a correction of recent substantial gains was overdue anyway. This afternoon, the Dow fell as much as 140 points, the NASDAQ down as much as 40, but there was some late improvement. At the final bell, the Dow Industrial Average was off 109.41 or 1.1 percent, putting it at 9535.41. The NASDAQ Composite ended down 31 points or 1.6 percent at 1874.62. While the Standard & Poor's 500 Index was down 13 ½ points, or 1.3 percent and now stands at a 1022.82. In the debt market, the 10-year note slid 15/32 to close at par and 8/32, that lifted the yield to 4.22 percent. And there you see it, at the top of the active list on the big board, traded just shy of 50 million shares, it traded as high as $12.33, ended up with nearly a dollar gain. And among the many brokerages that upgraded it were: Merrill Lynch, from neutral to buy; Morgan Stanley from equal weight to overweight with a $16 a share target; and RBC Capital from sector perform to outperform with a $14 a share target. Lucent Technologies (LU) dropped $0.07. Followed by NorTel Networks (NT) with a $0.13 loss. Liberty Media (L) was down $0.31. Prudential Securities downgraded it from overweight to neutral and also cut its price target for the stock from $16 down to $13 a share. Pfizer (PFE), fifth in volume, was down $0.31 as well. Then General Electric (GE) losing $0.53. Similar loss in Nokia (NOK). Citigroup (C), a $0.61 drop. AOL Time Warner (AOL) was off $0.15. EMI Group is in formal talks with the firm to buy Time Warner's music business which is said to be worth somewhere around $1.5 billion. Tenth in big board volume was EMC (EMC), losing $0.47. FTI Consulting (FCN) plunging $5.02. The company said third-quarter earnings will be a little lower-than-expected, around to $0.35 to $0.37 a share. Also the company did not meet Wall Street's expectations of a recovery in the current period. In the meantime, Janney Montgomery Scott brokerage downgraded it from buy to hold. And down went the stock. Kerzner International Limited (KZL), a nice gain. The company is going to form a joint venture with an entity of the government of Dubai. And they will develop a $650 million resort and theme park. That's phase one of the their. Then Wal-Mart (WMT), down $1.07, although current sales are running below the high levels of August, the company is still at the high end of its forecast, and that's despite Hurricane Isabel. So Wal-Mart backing off on a little profit-taking. Williams-Sonoma (WSM) dropped $1.57. CIBC World Markets brokerage downgraded it from sector outperform to sector perform, just one notch lower. Unifi (UFI) down $1.17, a big percentage loss there. And the company says because of continued weakness in the textile business it's going to have a first-quarter loss of $0.10, maybe as much as $0.16, and sales will drop 15 to 20 percent. And LaBranche (LAB), which is, of course, a big board specialist firm, down on news the SEC is ramping up its investigation into alleged illegal New York Stock Exchange floor trading practices. Kyocera (KYO) down $2.71. The Japanese maker of the electronic components Friday had its stock drop over $4 ½ when the company cut by 41 percent its first half earnings estimate. And that was due to inventory write-downs, continuing weakness in the stock. Timken (TKR) down another $0.87. It traded as low as $15.40 today. Last Friday it was down $1.14 when the company cut its third-quarter earnings guidance from $0.10 to $0.15 to just break-even or maybe $0.05 in earnings. And today BB&T Capital downgraded the stock from buy to hold. In one of the few strong groups today, the golds, Newmont Mining (NEM) moving up nicely. Of course, December gold in New York up $5.40 at $388.30 an ounce. And the strength was into some of the other gold stocks. These are all fractional gains. But practically every gold stock was a bit higher today. NASDAQ's most active issue, Microsoft (MSFT) topped the list, down $0.89. A $0.65 drop in Intel (INTC). Cisco Systems (CSCO), a $0.24 loss. Amgen (AMGN) down $0.43. Applied Materials (AMAT) dropped $0.81. "Barron's" lead columnist, Alan Abelson, notes that he thinks the stock is priced at a fantasy level. Then Dell (DELL) down $0.78. A $0.15 drop in Oracle (ORCL). eBay (EBAY) lost $0.80. Yahoo! (YHOO), a $0.66 drop. And more red ink in Amazon.com (AMZN) which was off $0.11, tenth in volume. Spectrum Pharmaceuticals (SPPI) up $2.26, what a huge percentage gain there. The FDA has granted fast track status to the company's cancer drug. And it's called Satraplatin. And finally, another good gainer, the Thistle Group Holdings (THTL) jumping $6.64 a share. That's almost 35 percent. And the news here, Citizens Bank of Pennsylvania will acquire Thistle for $136 million in cash. That works out to $26 per share. And those are the "Stocks in the News" tonight.
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.
09/22/03:
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