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Program: Wednesday, December 3, 2003
12/03/03: The SEC Rewrites The Rules For Mutual Fund Trading SUSIE GHARIB: The Securities and Exchange Commission is cracking down on mutual funds. It unanimously approved new rules today to curb widespread trading abuses. The measures come after large-scale trading improprieties at major fund companies and harsh criticism of the SEC itself for being too lax in policing the industry. Stephanie Woods reports. STEPHANIE WOODS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Regulators liken late-trading to betting on a race after the horses cross the finish line. To curb it, the commission proposed a hard cutoff of 4:00 p.m. Eastern time for mutual fund orders to be received. Commissioners say the change will go a long way to address the abuses uncovered by state and federal regulators. HARVEY GOLDSCHMIDT, COMMISSIONER, SEC: Investigations are ongoing, but at this point it`s clear that venal self-interest has been widespread. Late-trading is realistically kind language for a basic form of looting. WOODS: The hard 4:00 rule could put some small investors at a disadvantage. That`s because brokers or third parties might not be able to process late-day trades. But the commissioners agree the widespread abuses warrant a hard and fast rule. WILLIAM DONALDSON, CHAIRMAN, SEC: It has become extraordinarily clear that our current rules are insufficient to combat this practice. Broker dealers engaging in or facilitating late-trading have successfully concealed their activities from our examination staff and self-regulatory organization. It also appears that late trades have been conducted through fund intermediaries that are not subject to commission examination. WOODS: The commission also adopted new rules requiring mutual funds to appoint a chief compliance officer. And it is considering forcing funds to give more specific disclosure about quick in and out trading in funds, known as market-timing. But some analysts say cracking down on mutual fund abuses can be easily done. NANCY SMITH, SECURITIES CONSULTANT: One of the things they absolutely need to look at is the technology that can be employed to stop these problems and prevent these investor losses. The good news is the technology exists; the bad news is it`s not being used. WOODS: Today`s action by the commission is just the beginning. Next up on the docket are new rules to force mutual funds to give investors more information about their fees and expenses. 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. Copyright (c) 2003 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
SUSIE GHARIB: The American dollar remained under pressure on world markets today, including those here at home. In New York, the dollar closed down against the euro, the Japanese yen and other currencies. It`s a trend experts agree will continue. But, as Scott Gurvey reports, they disagree on its impact on the U.S. economy. SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: The dollar is trading near a record low against the euro. The euro having gained nearly 40 percent in the last two years. This, in spite of a string of economic reports showing U.S. growth is far outpacing growth in other parts of the world. Currency experts say the dollar`s weakness is in part due to momentum, but they also see other factors at work. MARC CHANDLER, CHIEF CURRENCY STRATEGIST, HSBC: What we`re having is relatively thin markets. And because we have thin markets people aren`t - no one has the incentive to fight these trends. So oftentimes in these holiday-thin markets, trends get accentuated and exaggerated. But the driving force does seem to be fundamental considerations. GURVEY: The fundamentals include the huge U.S. trade deficit, about $500 billion a year; the large U.S. budget deficit, $375 billion for the current year; and the extremely low interest rates, with the Federal Reserve holding Fed funds at 1 percent to stimulate growth. Net foreign investment of $1.5 billion a year is needed just to keep the dollar stable. But foreign investment in the U.S. has been declining for more than five years. Some financial leaders, including Warren Buffett and George Soros, say the lack of current investment by foreigners marks a structural change, recognizing a weakening of the American economic engine. But others say it is no more than a result of interest rates running at a 45-year low and that when rates rise, foreign investment will return. MICHAEL WOOLFOLK, SR. CURRENCY STRATEGIST, BANK OF NEW YORK: Right now you have considerably higher yields in most foreign countries, with perhaps Japan being the exception. And foreign investors, by and large, chase after yield. And they are yield-hungry, and so attractive yields in such countries as Australia and England are much more attractive then the low yields being held here in the U.S. GURVEY: The Federal Open Markets Committee meets next week but is expected to leave interest rates unchanged. Currency experts say until the rates start to rise, the dollar will remain under pressure. 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. 12/03/03: One On One With Former Treasury Secretary Robert Rubin SUSIE GHARIB: There`s a good chance Robert Rubin will be remembered as one of the most influential Treasury secretaries of modern times. We say "a good chance" because, as Rubin himself says, nothing is certain on Wall Street or in Washington. In his new book, called "An Uncertain World," Rubin argues the key to good decisions is making them with a deep understanding of the odds of success and failure. Washington bureau chief Darren Gersh sat down with Rubin and began by asking him about his most difficult decision in his six-and-a-half years in Washington. ROBERT RUBIN, EXECUTIVE COMMITTEE CHMN., CITIGROUP: I think that probably substantively, the most difficult decision was a set of policies put in response to the Asian financial crisis as it unfolded, because each country has a different set of situations and circumstances. And at least one country, Indonesia, we had a government that fundamentally wouldn`t take ownership of reform. So I would say substantively that was probably the most difficult. Politically I think the most difficult was when we had a crisis around the debt ceiling because we had to find some way to fund the federal government when Congress refused to raise the debt ceiling and we borrowed from the trust funds. And that became an immense political uproar. And I think in terms of significance - just significance for the country, I would say President Clinton`s 1993 deficit reduction program was the most important. DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: You do say in your book, it`s not very encouraging, but you say that future crises are likely - future economic crises are likely to be more severe. RUBIN: I think what I said was it seemed to me that the probability was very high that there would be future crises. It`s something inherent I think in human nature that it tends to go to excess every once in a while. I then said that with the size of markets growing and the rapidity of markets and all of the rest that it could well be that a future crisis would be larger than any that we`ve yet encountered. GERSH: Have we made much progress in putting together the financial architecture to contain these future crises? RUBIN: I think what we have done and what the system has done is to make some very constructive changes in our architecture. For example, we now have flexible exchange rates in most of the world although there are some notable exceptions as we know. And there`s far more transparency. There won`t be anymore situations like we had in Korea where the public information on the reserves, the foreign exchange reserves turned out really to be very misleading. There is now real transparency. On the other hand, very wise former senior partner of Goldman Sachs once said to me that you could do everything you can to protect against the kinds of problems you`ve experienced in the past, but the trouble is that your new problem may come from an entirely new direction. GERSH: One of the crises that everybody has always been warning about, since as long as I can remember, it hasn`t happened, is that the Europeans or the Asians are going get tired of financing our budget deficit, our trade deficit and they`ll pull their money out. RUBIN: I don`t think - I, at least personally, don`t fear that they will make a deliberate policy judgment to pull their money out, as you put it. But I think that that - a variant of that I think is a very real risk. We now have horrendous long-term policy fiscally, horrendous projected long-term fiscal conditions, and we have a very large trade deficit, current account deficit. And what could happen is that international investors, international markets will have diminished - diminution of their confidence in our currency. And it`s not they`ll make some deliberate policy decision of some sort to pull out, but they`ll simply be less confident about our currency. And if that happens then they`re going to ask a higher interest rate to lend us their funds, their capital. And so that would have an upward impact on interest rates. And if they lose confidence to a significant degree, they could ask for substantially higher interest rates. GERSH: Now you do talk about the stock market bubble in your book. I`m wondering, I hear people talk about an echo bubble that NASDAQ is up almost 50 percent this year. Is there an echo bubble? RUBIN: It`s interesting. If you look at the emerging market spreads, that is to say, the prices of emerging market debt versus the United States Treasuries, those spreads have narrowed to historic levels. And if you look at corporate spreads, American corporate issuers, the interest rates on corporate debt have now fallen, relative to Treasury, to relatively low levels although not historically low levels, all of which suggest at least in those markets with interest rates on Treasuries being very low, people look like they may be reaching for yield. And they may be going to excess. I`m not saying they are but they may be. Whether the same phenomenon is happening in the stock market or not, I don`t know. But I do think this, Darren. I do think that it is absolutely imperative if you`re going to invest in the stock market that you have a very strong sense of how to think about valuing stocks and that you apply that sense with strong discipline. And I think there may be some loss of discipline at the preset time. GERSH: Robert Rubin, author of "In an Uncertain World," thank you. RUBIN: You`re welcome. It`s very good to be with you, thank you.
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: With all of the problems of mutual funds recently, many investors are in a quandary about what to do next. In the "Money File" tonight, a suggestion. Here`s John Waggoner, mutual fund columnist for "USA Today." JOHN WAGGONER, MUTUAL FUND COLUMNIST, "USA TODAY": The mutual fund scandal has spread so far that you`re wondering if your next statement will come from Leavenworth. If you`re thinking of leaving funds entirely, consider exchange-traded funds, a cheap, highly diversified alternative. State and federal regulators allege that some funds allowed big investors to zip in and out of their funds, reaping quick profits at the expense of long-term investors. At the same time, the funds prevented small investors from doing the same thing. Mutual funds are designed for the little guy. Even if the actual damages are small, the funds involved in the scandal have put their profits first and their investors last. If you`re angry enough to vote with your feet, consider an ETF. They follow stock indexes, such as the Standard & Poor`s 500 stock index, so no manager is involved. Furthermore, you can jump in and out of ETFs all day long. ETFs are traded on the stock exchanges, so they`re made to be traded. If you like, you can take out a margin loan backed by your ETF. You can even sell it short, which is a bet on falling prices. The largest ETF, Standard & Poor`s depositary receipts, or SPDRs, tracks the S&P 500. But you can get ETFs that track even broader indexes, such as the Wilshire 5000. Others track specific indexes, from industry sectors to individual countries. But there are dangers, too. If you invest a little bit each month, forget ETFs. You`ll pay a commission each time you buy. More importantly, ETFs are an invitation to trade, and frequent traders lose early and often. If you think an ETF will appeal to your baser instincts, don`t buy them. You may not wind up in the big house, but you could wind up in the poor house. I`m John Waggoner.
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.
12/03/03: "Paul Kangas' Stocks In The News" PAUL KANGAS: Buyers took the upper hand on Wall Street`s opening, encouraged by news third-quarter U.S. productivity growth was revised upward to 9.4 percent, the biggest surge in 20 years and 0.2 percent above the consensus estimate. After the first half hour of trading, the Dow was up 58 points and the NASDAQ Index rose 16. The market eased on the purchasing managers` November index of service activity, which, while still showing growth at 60.1, was weaker than expected. However, positive analyst comments on Merck (MRK) and General Motors (GM) led to a rebound. At midday the Dow was up 83 points, the NASDAQ up 17. The NASDAQ Composite crossed the 2000 level in mid-afternoon, but that triggered a flurry of selling, which spread into the blue chips. So the Dow Industrial Average gained just 19 3/4 points at the close, putting it at 9873.42. The NASDAQ Composite actually came in with a loss of 19 3/4 points at 1960.25. Standard & Poor`s 500 Index down 1.89 at 1064.73. Over in the bond market, the 10-year note fell 6/32 to 98 25/32, lifting the yield to 4.5 percent. Topping the active list on 22.4 million shares, Motorola (MOT) down $0.38, although it traded as high as $14.14. After the close yesterday, the chief operating officer confirmed the company`s previous fourth-quarter guidance on earnings of $0.11 to $0.15 a share. And there you see Lucent Technologies (LU), dropping $0.09. Followed by GE (GE) which was up $0.04 a share. Disney (DIS) down $0.73, although it traded as high as $22.60 during the day. The company`s global box office sales this year reached a record $3 billion way back there last week on Thanksgiving Day. Wal-Mart Stores (WMT) continues to ease, down $0.33. NorTel Networks (NT) gained $0.01. AT&T Wireless (AWE), a $0.10 gain. Merck (MRK) up another $1.50. The stock has been strong this week. Today the company says 2004 earnings should be up about 7 percent and could be as high as $3.17 a share. That`s a penny above the Street estimate. General Motors (GM), one of its best gains in a long time, up $2.26. Goldman Sachs says the strong stock market is making GM`s pension plan look a lot better, and believes that the company could increase 2004 earnings guidance. Micron Technology (MU) down $0.35, was tenth in big board volume. Deutsche Bank (DB) up $3.90. Standard & Poor`s upgraded the outlook for the company from negative to stable. And on top of that, there was a rumor making the rounds that Citigroup may be eyeing Deutsche Bank as a possible takeover target. General Dynamics (GD) had a good day, up $2.50 a share. Banc of America upgraded it from neutral to buy and has a $95 a share target for the stock within the next 12 months. Goodyear Tire (GT) up $0.73, nearly an 11 percent rise. UBS Financial brokerage upgraded it from reduce to neutral. Then RehabCare Group (RHB) up $1.38. J.P. Morgan upgraded it from underweight to overweight saying that fourth-quarter earnings should be higher than the third-quarter levels due to cost-cutting measures the company has been taking. Wendy`s International (WEN) edged up $0.36, it traded as high as $41.20. The company`s November same-store sales up over 9 percent, very strong. So Wendy`s increased 2003 earnings guidance from about $2 a share to as high as $2.04 a share. Kohl`s (KSS), the big department store chain, down $1.38. Banc of America downgraded it from buy to just a neutral rating. And another big loser was Capital Source (CSE), off $2.35. Smith Barney downgraded this stock from buy to hold on concern that the stock has become overvalued. You remember that this company just went public on August 12 with IPO priced at $14.50. So it has had a really good run. Microsoft (MSFT) edged up a penny, topping the active list on NASDAQ. F ollowed by Cisco (CSCO), up $0.19. Then Intel (INTC) dropped $0.51. Oracle (ORCL) managed to gain $0.50 after UBS Financial upgraded it from neutral to buy. Career Education (CECO), look at that drop, a 28 percent tumble with that loss of $15.28. The story, a former employee has accused the company of inflating enrollment figures, which the company denies. But the news, nevertheless, sparked a major sell-off in other for-profit school stocks. Let`s have a look at some of them: Apollo Group (APOL) down $3.42 a share; Corinthian (COCO) off over $4; big losses in DeVry (DV); and ITT Education (ESI); as well as the University of Phoenix (UOPX), a rough group today. Electronic Arts (ERTS) continuing the active list, down $1.63. And SanDisk (SNDK), I think that was just simple profit-taking, the stock has had quite a run, down $6.31. Amgen (AMGN) dropped a nickel a share. Applied Materials (AMAT) off $0.32. Tenth in NASDAQ dollar volume, Nextel Communications (NXTL) managed to gain $0.25 a share. Nanogen (NGEN) up $1.95, 51.5 percent gain today. And the news is that Nanogen received a U.S. patent that broadens its proprietary position in nanotechnology. Nanotechnology, of course, builds electronic circuits from single atoms and molecules. And that`s our look at "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.
NET PERCENT
CLOSE CHANGE CHANGE
DOW CLOSE 9873.42 +19.78 + .2
HIGH 9942.01
LOW 9851.42
NASDAQ COMP. 1960.25 -19.82 -1.0
HIGH 2000.92
LOW 1960.13
VOLUME 1,418.4
PREVIOUS 1,383.3
UP VOLUME 608.9
DOWN VOLUME 782.8
DOW TRANSPORTS 2939.51 +3.15 + .1
DOW UTILITIES 252.16 -.73 - .3
CLOSING TICK +423
S&P 500 1064.73 -1.89 - .2
S&P 100 524.42 -.29 - .1
MIDCAP 400 569.25 -5.46 - 1.0
REUTERS/CRB 257.76 +1.02 + .4
NYSE COMPOSITE 6142.78 +3.16 + .1
VALUE LINE 351.61 -2.69 -0.76
RUSSELL 2000 545.19 -8.41 -1.52
WILSHIRE 5000 10402.34 -39.34 -0.38
U.S. TREASURIES
5-YEAR NOTE 3.375%
Nov. 15,2008 99 24/32 -3/32 3.43
10-YEAR NOTE 4.25%
Nov. 15,2013 98 25/32 -6/32 4.40
30-YEAR NOTE 5.375%
Feb. 15, 2031 102 22/32 -17/32 5.19
LEHMAN BROS.
LONG BOND INDEX 1706.60 -2.95
DOW CLOSE 9873.42 +19.78 + .2
ADVANCES 1518
DECLINES 1749
NEW HIGHS 472
NEW LOWS 8
NET PERCENT
NYSE MOST ACTIVES 4PM CLOSE CHANGE CHANGE
MOT Motorola 13.67 -.38 -2.7
LU Lucent Tech 3.05 -.09 -2.9
GE GE 29.52 +.04 +.1
DIS Disney 21.85 -.73 -3.2
WMT Wal-Mart Stores 52.69 -.33 -.6
NT Nortel Networks 4.57 +.01 +.2
AWE AT&T Wireless 7.31 +.10 +1.4
MRK Merck & Co 43.63 +1.50 +3.6
GM GM 45.54 +2.26 +5.2
MU Micron Tech 12.41 -.35 -2.7
NASDAQ CLOSE 1960.25 - 19.82 - 1.0
VOLUME 2,247.9
PREVIOUS 1,821.5
ADVANCES 1141
DECLINES 2073
NASDAQ ACTIVES
MSFT Microsoft 25.67 +.01 +.0
CSCO Cisco Systems 23.30 +.19 +.8
INTC Intel 33.34 -.51 -1.5
ORCL Oracle 12.90 +.50 +4.0
CECO Career Educatio 39.48 -15.28 -27.9
ERTS Electronic Arts 42.27 -1.63 -3.7
SNDK Sandisk 71.90 -6.31 -8.1
AMGN Amgen 58.84 -.05 -.1
AMAT Applied Matl 23.74 -.32 -1.3
NXTL Nextel Comm 25.80 +.25 +1.0
AMEX CLOSE 1117.17 unch. unch.
INDEX SHARES
DIA DIAMONDS TRUST 98.95 +.20 +.2
QQQ NASDAQ 100 35.27 -.42 -1.2
SPY S&P DEP.RECEIPTS 107.18 -.20 -.2
STOCKS IN THE NEWS
DB Deutsche Bank 75.80 +3.90 +5.4
GD General Dynamics 83.45 +2.50 +3.1
GT Goodyear Tire 7.52 +.73 +10.8
RHB Rehabcare 19.25 +1.38 +7.7
WEN Wendys Intl 40.05 +.36 +.9
KSS Kohl's 45.29 -1.38 -3.0
CSE Capitalsource 21.35 -2.35 -9.9
APOL Apollo Group 69.30 -3.42 -4.7
COCO Corinthian Coll 62.08 -4.18 -6.3
DV Devry 26.20 -1.40 -5.1
ESI ITT Education 52.09 -3.90 -7.0
UOPX Univ of Phoenix 73.80 -5.21 -6.6
NGEN Nanogen 5.74 +1.95 +51.5
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