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Program: Tuesday, December 16, 2003
12/16/03: The Landmark CALPERS vs NYSE Lawsuit JEFF YASTINE: A stunning move today by the nation`s largest public pension fund. The California Public Employees Retirement System, or CalPERS, is suing the New York Stock Exchange and seven of its specialist trading firms, accusing them of "front running" stock trades. At a news conference in Sacramento, CalPERS` President Sean Harrigan accused the big board of knowing there were rampant problems with specialist trading. But Harrigan said the exchange looked the other way because it allegedly profited from the abuse. CalPERS says the specialist firms took advantage of confidential knowledge of public investors orders, by buying stocks for their own accounts before completing those of investors. The pension fund also alleges that orders weren`t filled at the best available prices and that the big board deliberately failed to oversee, regulate, supervise or discipline its members for not following the rules. The New York Stock Exchange refused comment on CalPERS` charges, saying, as a matter of policy, it does not comment on pending litigation. Now joining us to talk more about lawsuit is Phil Angelides, California state treasurer and a member of CalPERS board of administration. So you`re saying the specialists are front running, the exchange management is looking to other way, that`s quite a set of allegations. Where is the proof that you`re basing the lawsuit on? PHIL ANGELIDES, CALIFORNIA STATE TREASURER: Well, our legal office and based on what we know from the work of the Securities and Exchange Commission indicates to us that there has been substantial abuses and fraud committed here by the specialists. And I will say that we also believe the New York Stock Exchange knew these practices were going on and did nothing to stop them. You know, it was three months ago to the day that I joined with my colleagues, the head of CalPERS and CalSTERS to call for the resignation of Richard Grasso, and at that time we weren`t seeking the resignation of just one man but rather reform of the exchange because it needs to be viewed and be in reality an open, honest and fair forum for American investors. And what we have seen both in the Grasso compensation saga and in the work of the SEC and the belief and the facts that our legal office has come to see is that this exchange has not operated with the kind of openness and fairness that is required of it to function well in the American economy. So we`re serious about reform. We`ve called for separation of business and regulatory functions. It`s very clear the exchange failed to police its business practices... YASTINE: Right, Mr. Angelides, let me ask you a question though. What would you say to some who think this might be a publicity stunt or perhaps payback to the New York Stock Exchange because you have a difference with interim chairman or interim chief John Reed regarding the reform plan that he`s proposing to the SEC? ANGELIDES: We would never do that. We have a fiduciary obligation to defend the assets of our members, the 1.4 members of CalPERS firefighters, police officers, school employees. We have a fiduciary obligation and it is our firm belief, and we believe that it will come out during the litigation, that in fact it was built out of substantial sums of money, as you know, the SEC itself has said they believe the front running practices have cost at least $155 million to investors. So this is about our fiduciary obligation. We sue infrequently, only when we believe we have an obligation to seek restitution, and in this case also reforms. YASTINE: Well, this is a quote from today`s press conference, the CalPERS press conference, you said "the last few years the SEC has been a day late and a dollar short every step of the way, there has been no instance where the SEC has driven to conclusion fundamental reforms that are needed in the marketplace." How much of this is an attempt to out-pressure the SEC to reject the plan that`s currently in front of them from John Reed? ANGELIDES: Well, the plain truth is that the SEC has been slow on the mark, whether it was on investment banking practices that Eliot Spitzer pursued or mutual fund practices which Eliot Spitzer pursued or other market reforms which we have pursued as investors representing working men and women who invest in the markets. This is not an attempt to do anything other than seek restitution for our pensioners and tax payers and the many investor who were bilked by these front running and trading ahead practices, and yes to seek reform ultimately of this institution. We believe firmly that the New York Stock Exchange did not do its regulatory job during the worst wave of corporate scandal that permeated this market over the last three years and it`s time to have a separation of business and regulatory practices. YASTINE: Mr. Angelides, one last question, I`ve got about 20 second left. You talked about restitution. A figure I heard during the call today was $155 million, perhaps more. Is that in the ball park? ANGELIDES: We believe that`s the minimum based on the work of the SEC. And we`re doing further due diligence and we`ll do discovery and we believe that in the end unfortunately that number may climb significantly higher. YASTINE: All right, we`ll have to end it there. Mr. Angelides, thank you for joining us. ANGELIDES: Thank you. YASTINE: Our guest, Phil Angelides, the California state treasurer and a member of CalPERS board of administration.
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.
PAUL KANGAS: Alliance Capital Management (AC) is facing a double whammy tonight. The Securities and Exchange Commission and New York`s attorney general have reached a deal to impose on Alliance the biggest fines ever on a mutual fund company. As Darren Gersh reports, the impact could top half a billion dollars, but the deal is causing friction between the SEC and the AG. DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: In the next few days, New York Attorney General Eliot Spitzer and the SEC will make another public display of solidarity, issuing a joint announcement of a settlement with Alliance Capital over late trading and marketing timing abuses. But despite claims of united action, the two regulators are heading off in very different directions. Sources tell NIGHTLY BUSINESS REPORT Alliance will pay the SEC a $100 million fine and $150 million in restitution. That money will go to investors who were directly harmed by any misconduct. The New York Attorney General`s Office confirms Alliance has agreed to reduce the management fees it charges investors by 20 percent over the next five years. That could save Alliance investors several hundred millions dollars. But the SEC opposes Spitzer`s decision to force Alliance to slash its fees. The SEC calls that price fixing, and argues investors will have to stay with a firm that harmed them in order to benefit from the lower cost. The mutual fund industry agrees, saying fees are not the issue here. MATTHEW FINK, PRES., INVESTMENT CO. INST.: This case involved market timing through a hedge fund. Fees were not involved, so it strikes me as the punishment having no relationship to the crime. GERSH: But critics of high mutual fund fees applaud the New York attorney general. HAROLD EVENSKY, FINANCIAL PLANNER, EVENSKY BROWN & KATZ: I think this is a Solomon-like proposal, in terms of a punishment; that the free market has not been working well for investors, it has been working great for the fund industry. And I think it`s about time someone started working for my clients and other investors. GERSH: Next month, the SEC will adopt tougher requirements for disclosure of mutual fund fees. But critics say it is time to send the industry a strong message. EVENSKY: These problems have existed for a long time. GERSH: This fight is not going away. The New York Attorney General`s Office says it sees the fee deal with Alliance Capital as a template for settling other investigations into mutual fund trading abuses. 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. 12/16/03: Housing Starts' Record Run JEFF YASTINE: Positive economic data helped fuel today`s stock market rally. Wall Street was pleasantly surprised that housing starts soared last month, surpassing the 2 million mark. Erika Miller runs down the numbers. ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Housing starts have been going through the roof. Starts surged 4.5 percent in November, to a 2.07 million unit annual pace. That`s the fastest rate in almost two decades. The strength cane as a surprise to Wall Street economists. Most were expecting starts to decline, given the uptick in mortgage rates over the past six months. HENRY WILLMORE, CHIEF U.S. ECONOMIST, BARCLAYS CAPITAL: Part of the reason why today`s number was a bit of a surprise is that at this point we should really be seeing starts start to taper off a little bit. But it might be delayed because, for example, consumer confidence has been rising. We`ve been seeing some improvement in job growth. So those two factors might be sort of mitigating the rise in mortgage rates. MILLER: But building permits, which are a barometer of future building activity, fell more than 5 percent during the month, to a $1.8 million unit annual rate. And economists say a pullback in housing demand is on the horizon. WILLMORE: A collapse is unlikely, but I think given the direction of mortgage rates, and we expect those to keep climbing, we`ll probably see some decline in activity next year. MILLER: But those concerns did not seem to bother investors. Shares of most home building companies rose today, and many of the stocks are up more than 80 percent this year. And even if mortgage rates creep higher, some analysts predict many of the big names in the sector will continue to shine. STEPHEN KIM, HOMEBUILDING ANALYST, SMITH BARNEY: The reason that the homebuilders are seeing such tremendous growth is that they are taking share from smaller builders. That is the primary reason why the homebuilding stocks are growing as rapidly as they are. MILLER: A strong housing market is good for more than just homebuilders. When people buy homes, they almost always buy furniture and appliances to go in them, spreading the wealth throughout the economy. 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.
JEFF YASTINE: Motorola has a new chairman and chief executive officer tonight. Edward Zander was named to the company`s top spot this morning, officially ending three generations of leadership under the Galvin family. Motorola has been struggling over the last few years, first as companies slowed their telecom spending, and now it`s facing challenges with delivery problems with some of its wireless phones. That`s why the choice of a new chairman is critical to the firm. Until June of last year, Zander was the president of Sun Microsystems (SUNW). When I talked with Zander earlier today, I began by asking him why he thinks Motorola`s board chose him for the job. EDWARD ZANDER, CHMN. & CEO, MOTOROLA: I can only guess by the interview process they were looking for someone that had come from technology, that had been in businesses with high growth rates and where innovation happens very quickly, and time to market, results-oriented are important, and somebody that understands I think the next wave of digital convergence in technology, where it`s going. So it`s hard for me to put it all together, one that hopefully has high character, and high values, and I`ll leave it at that. YASTINE: Well, you`re taking this job in January, becomes effective in January, what are the first steps that you`ll be doing when you take the helm at Motorola? ZANDER: Well, as tempting as it may seem to go make decisions very quickly and have some preconceived notions, because I`ve read a lot about the company and talked to people on the outside, the most important thing I can do is discipline myself to listen and learn, and communicate at a very high level with as many employees as possible, certainly spending a lot of time with the management teams, spend a lot of time with customers and spend a lot of time with partners. And I really can`t give you the five things I`m going to go do. There is obviously a need to improve execution. There`s a need to focus a little better, and get results to the expectations that we have internally as well as meeting shareholder expectations. And those are the blocking and tackling things you have to go do. The bigger question, really, taking the company over the next decade or next few years, I`m going to have to wait and understand a little bit more about the businesses, and take what I`ve learned on the outside and see if it`s true on the inside. YASTINE: Well, you mentioned executions. Talk about that, because just earlier this month news had come out that there are part shortages and not as many of those new camera phones - the new camera phones that Motorola is coming out with, would be able to hit store shelves. What do you do to fix those sorts of glitches which have to some investors appeared to be just too common that have occurred in recent quarters at Motorola? ZANDER: Right. Here is, by the way, the new camera phone. You`ve got to go out and buy one. It`s a great device. But I think that`s part of what I ultimately can bring to the party. It does take, unfortunately, a little time to turn a company of this size and getting in the right direction. But there are things happening here, they`re trying to address those issues that I feel good about. And I think that I have to take root cause with some of these issues and understand them, treat the symptoms, and treat the disease actually, and put the changes in that are necessary to get execution to the degree of which we want it. And... (CROSSTALK) ZANDER: I`m sorry, go ahead. YASTINE: Well, just broadly speaking, do you think that Motorola in these five and 10 years ahead is still a growth story or is it really a restructuring story? The board has talked about spinning off the semiconductor unit already. That is in play. That is part of restructuring. Is that where you get the growth from, basically unlocking value? ZANDER: No, boy, I hope not. Spinning off semiconductors, you know, if you look at great companies, I don`t care where it`s GE (GE) or IBM (IBM), that are constantly adding things and potentially things that don`t make sense in their portfolio, that`s part of an ongoing long-term business process. This has to be a growth story. We`re in the communications business. We`re in the mobile wireless business. We`re playing in some of the biggest markets and the biggest technology discount annuities over the next decade. And we`ve got $3 1/2 billion R&D to go apply to this thing. We have got a global brand. We`ve got great people. So I`m looking at growing the business. I`m looking at getting into a lot of the great opportunities I see. YASTINE: Still a growth story then. ZANDER: I think so. YASTINE: Still a growth story. All right, we`ll have to end it there, Mr. Zander, sorry about that. ZANDER: Thank you. YASTINE: Our guest, Ed Zander, the incoming chief, chairman and CEO at Motorola.
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.
12/16/03:
"Paul Kangas' Stocks In The News"
PAUL KANGAS: Wall Street`s blue chips staged a brisk opening rally, on good economic news. Last month consumer prices dropped 0.2 percent, industrial production grew a stronger-than-expected 0.9 percent, and housing starts rose 4 1/2 percent. We`ll have details on that shortly. After 30 minutes of trading the Dow was up 55 points, but the NASDAQ Index was down about 3 points. News that another former senior Iraqi official was captured kept the blue chips buoyant, but profit-taking in the high-tech sector kept the NASDAQ market lower. In early afternoon, the Dow was up 74 points, but NASDAQ down 12. And that was the same trend that lasted to the end today. The Dow Industrial Average closed up 106 3/4 points at 10,129.56, a 19-month high. But the NASDAQ Composite managed to rise only 6 points to 1924.29. The S&P 500 gained 7 points to 1075.13. In the bond market, the 10-year note rose 12/32 to par and 9/32, putting the yield 4.21 percent.
Topping the New York Exchange active list, Motorola (MOT) on 34.1 million shares. The stock moving up $0.54 or 4.2 percent. You heard the news about the new chief executive.
And then Lucent Technologies (LU) showed no change.
Followed by General Electric (GE), a $0.32-gain.
Caremark (CMX) down $1.26. Negative reaction to news that AdvancePCS, which it is in the process of acquiring, lost a major health care account to Prime Therapeutics Corp.
Time Warner (TWX), number five in big board volume, was down $0.09.
And then we see Wal-Mart (WMT) recovering $0.65 after a sizeable loss yesterday.
Pfizer (PFE), a $0.16-gainer.
Nokia (NOK) moved up $0.04.
Advanced Micro Devices (AMD), a $0.37-loss.
And Ford Motor (F), tenth in big board volume, move up $0.07.
Honeywell (HON), a member of the Dow Industrial Average, down $0.34. The company sees 2004 earnings between $1.40 and $1.55. But that`s well below the Wall Street estimate of $1.59. The company notes it will have a $0.30 per share increase in expenses for pension benefits to former employees.
And then Sears Roebuck (S), which used to be a member of the Dow but is no longer, down $0.91. UBS research downgraded from buy to neutral due to discounting and strong competition in the retailing area.
Celanese (CZ) had a good day, up $4.26. Blackstone Partners has made a 3.1 billion euro buyout bid. That works out to 32 1/2 euro per share. Translated into dollars, that`s just about $40 per share for Celanese.
Amdocs Limited (DOX) down $3.27. Now the company reaffirmed its previous first-quarter revenue and earnings guidance even through Sprint PCS (PCS) has cancelled a planned switch to the company`s billing software.
And interestingly, the company that got that contract was Convergys (CVG), up $1.30. It`s a seven-year deal to support Sprint PCS` billing needs. Raymond James financial upgraded Convergys stock from underperform to market perform.
And then LaBranche & Company (LAB) down $0.71. It`s among the specialist firms under pressure after CalPERS filed that trading abuse lawsuit that we talked about earlier.
And then Coachmen Industries (COA) down $2.65. The company cut its 2003 earnings estimate from previous guidance of $0.52 down to $0.41 to $0.45. The company blames the shortage of recreational vehicle ovens and ranges and says that shortage will continue through the month of February.
And then York International (YRK) down $4.26. The company did reaffirm its previous 2003 operating earnings estimate, but says 2004 will come in lower than its earlier forecasts.
NASDAQ`s most active, Microsoft (MSFT) up $0.32.
Followed by Intel (INTC), a $0.02-gain.
Oracle (ORCL) was up $0.42, better-than-expected earnings out yesterday after the close.
SanDisk (SNDK), however, down $5.61. Weakening prices for Flash memory chips due to more than adequate supplies is hurting that stock and those similar to it.
Cisco (CSCO) down $0.21.
AdvancePCS (ADVP), we talked about that earlier, down $3.35.
And then Amgen (AMGN) moving up $0.65. After the close yesterday the company had some positive comments.
Applied Materials (AMAT), a $0.31-loss.
Dell Incorporated (DELL), a $0.36-loss.
And Yahoo! (YHOO) tenth in volume, was down $1.55.
Immucor (BLUD) fell $2.93. The company sees second-quarter earnings of only $0.14 a share. That`s $0.06 below the Wall Street estimate of $0.20.
Extreme Networks (EXTR) falling $1.84, almost, well, 22 1/2 percent drop. The company sees a second-quarter loss of $0.02 to $0.06 because its losing market share, apparently to Cisco and Foundry Networks (FDRY), or so says the W.R. Hambrecht brokerage.
And then Trust Company of New Jersey (TCNJ) up $3.24. North Fork Bancorp (NFB) is going to acquire this company for $726 million in North Fork stock on a one-for-one share basis. North Fork closed at $39.05, up $1.40. So that`s what Trust Company is worth today, $39.05 a 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.
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