09/27/04:
Costly Crude Continues To Climb
SUSIE GHARIB: It looks like $50 a barrel oil is here. Late today, electronic trading of crude oil futures on the Nymex hit $50 a barrel. It came after rebels in Nigeria declared war against the government starting on Friday, advising oil companies to shut down production by then. Oil prices during the regular trading session were already heading towards that psychologically important number, the highest level ever in the futures market. November crude futures closed up $0.76 to $49.64 a barrel, as traders reacted to production shutdowns in the Gulf of Mexico because of recent hurricanes and that unrest in Nigeria. Scott Gurvey reports.
SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: For a long time it seemed like a distant nightmare. Now $50 a barrel oil seems to be just around the corner. Hurricanes Jeanne and Ivan are getting most of the blame as traders react to fears of shortages because the storms have made it difficult, if not impossible to unload imported oil. Many domestic wells in the Gulf have also been shut down by the weather. Traders are also concerned about renewed fighting between militants and government soldiers in Nigeria. That nation is the fifth largest supplier of crude oil to the United States.
IRA ECKSTEIN, OIL TRADER, AREA INTERNATIONAL TRADING: If we settle above $50, that`s dangerous. If we go to $50, just like we came off the first time, if we come off, then it`s OK. But if we settle above there, at $50, then I`d watch out.
GURVEY: Traders do not expect to see any near term relief, especially with weekly inventory numbers due out on Wednesday. Analysts are expecting that report to show an inventory decline to the lowest levels in 28 years. Even a technical bounce after that report is released may not last long. The investment bank Morgan Stanley today warned its customers that crude oil prices could top $60 a barrel. Most analysts are less pessimistic.
JAMES STEEL, COMMODITIES ANALYST, REFCO: Clearly, we`re so close to $50, I`m sure it will get over there any day now and we may take a further stab a little higher simply on follow through buying. If things deteriorate in Nigeria or in fact we get some further disturbances in the Middle East, we could be pushed up a dollar or two for some time. But I think as we go on and more non-OPEC oil comes into the market, we`re going to relax it down towards the lower forties level.
GURVEY: As high as today`s oil prices are, if you adjust historic prices for inflation the record shows we`ve seen higher. The price of crude approached the equivalent of $80 a barrel, in today`s inflation adjusted dollars, just after the revolution in Iran in 1980. 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) 2004 Community Television
Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms
of use.
09/27/04:
The Outlook For Oil From Pat Daniel, President & CEO of Enbridge
Back now to our top story, those high oil prices. Joining us now with his perspective, Pat Daniel, president and CEO of Enbridge, the Canadian pipeline company that is the biggest provider of crude oil to the United States. Mr. Daniel, pleasure to have you on the program.
PATRICK DANIEL, PRESIDENT & CEO, ENBRIDGE: Thank you, Susie, good to be here.
GHARIB: In a report to clients today, Morgan Stanley says that it sees $61 a barrel oil before there`s any meaningful sell off. I`m wondering what your thoughts and analysis are on that.
DANIEL: Well, with all the uncertainty we have right now around crude oil supply, I think that scenario is definitely a possibility. I personally don`t think that that`s very good for the economy in North America. It`s not even very good for upstream producers who would rather see a steady consistent increase in crude price, instead of this price shock that we`re going through right now. But it`s very difficult to tell with all the uncertainty around the world and the political unrest as to what that price might become.
GHARIB: I was speaking to an oil analyst recently on this program and he was saying that if you really just looked at market fundamentals and the fundamentals for supply and demand, that the fair value for oil should be more in the neighborhood of $30 a barrel and that would be excluding the fear premium and worries about supply disruptions. Do you agree with that?
DANIEL: Yes, I do. I think fundamentally there`s no reason on a supply demand basis for the price of crude being much north of $30. In fact, the majority of producers have been working with forecasts in the $24 to $26 range, expecting that to go on for a number of years and relatively pleased if they got some steady increases from that level. Certainly there is no fundamental need for crude to be that high in price. It simply is related to all this political uncertainty.
GHARIB: Do you think the big oil companies are drilling enough and looking for new oil and searching for oil in those hard to get places, given now that the prices are high enough and make it economically feasible to do that sort of thing?
DANIEL: I think you can be very confident Susie, that they are drilling as fast as they can, working as hard as they can to get every barrel of crude oil on production that they possibly can with the kind of price, they`ve got every incentive to do that. Drilling levels are very high around the world right now and development for example of the oil in western Canada is going at a break neck pace. So certainly the price driver is there.
GHARIB: As you know, there`s been considerable debate in the United States about whether or not to drill in the Arctic wildlife reserve in Alaska. It would be very interesting to get your perspective as a Canadian oil man, do you think that drilling in that area would be a solution to the current oil crisis?
DANIEL: Well, it`s always dangerous for someone from one country to comment on policy in another. So I am a little cautious in doing that. I think it`s fair to say that oil and gas companies have become very responsible in terms of their environmental approaches to drilling, and I think that we could drill in the wildlife reserves in Alaska without having a significant negative impact on the environment and certainly any production coming out of there would help meet this supply demand imbalance. But that really is to be decided here in the U.S. and I know it`s a very important and emotional issue. Obviously environmentalists are concerned about the footprint and the impact there, but again I would go to the recent record of oil and gas companies and suggest they could do that in a very feasible and environmentally friendly way.
GHARIB: Most people are focused right now on the price of, the rising price of crude oil. But what about natural gas? What is the price outlook for natural gas and also supply, especially if we`re going into a particularly cold winter?
DANIEL: Well, natural gas prices have steadied out since the spring. And that has been largely as a result of the fact that we had a normal winter and inventories have built significantly with regard to natural gas. Certainly we`re in a position, though where there`s not a lot of new supply being brought on stream in Canada or the U.S. and demand continues to increase. Therefore we`re going to find that if we have a cold winter and very high demand, we`re going to see a significant increase in gas prices again. I think it`s very important until we get new supply, LNG, northern gas on stream, in order to meet some of the increasing demand.
GHARIB: All right. Thank you very much. We appreciate hearing your insights on this important subject.
DANIEL: Thank you, Susie.
GHARIB: We`ve been speaking with Pat Daniel, president and CEO of Enbridge.
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) 2004 Community Television
Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms
of use.
09/27/04:
Fannie Mae To Fatten up its Financials
PAUL KANGAS: Mortgage finance giant Fannie Mae is going to have to keep a lot more cash in its coffers, 30 percent more. Today, the agency reached a deal with regulators to boost cash reserves while its accounting is under scrutiny. The move comes after the Office of Federal Housing Enterprise Oversight, or OFHEO as it`s called, found pervasive problems in how Fannie Mae kept its books. Stephanie Woods reports.
STEPHANIE WOODS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Regulators are giving Fannie Mae 45 days to outline a plan to come up with billions of dollars in cash. The government sponsored enterprise has agreed to keep a 30 percent capital surplus. Last week, Fannie`s regulator, the Office of Federal Housing Enterprise Oversight, came out with a scathing report alleging that the firm skirted accounting rules, smoothed out earnings and fattened executive bonuses. OFHEO Chief Armando Falcon would not comment on camera, but in a statement he called today`s agreement an important step in resolving these concerns. Experts say this is just the beginning.
BERT ELY, PRESIDENT, ELY & COMPANY: It launches a formal clean up process of the many accounting problems at Fannie Mae. This is a process that is going to take many months, and we`re not sure yet how it`s all going to play out.
WOODS: Fannie Mae has hired former Senator Warren Rudman to conduct an independent review. The Securities and Exchange Commission is informally investigating the firm. Standard & Poor`s has placed Fannie Mae debt on credit watch, pending the outcome of the probe. The key concern is how much cash Fannie will be required to keep on hand.
VICTORIA WAGNER, CREDIT ANALYST, STANDARD & POOR`S: The degree of us lowering their ratings one notch or affirming them will ultimately be decided on what is their regulatory capital measure and what is their level of capital cushion they are maintaining above those minimum regulatory standards.
WOODS: Fannie Mae`s agreement with OFHEO also calls for the mortgage giant to review how it pay its executives. Franklin Raines has been CEO of the company since 1999. Last year, he received about $20 million in compensation. Critics say the problems at Fannie came about in a culture of arrogance.
TOM STANTON, PROFESSOR, JOHNS HOPKINS UNIVERSITY: My hope is what this will do is change their culture, so that they are willing to understand they are using the government`s credit card and that they need to be subject to reasonable regulation.
WOODS: Top lawmakers have scheduled hearings into Fannie Mae`s accounting. House financial services committee Chairman Richard Baker says the accounting problems at Fannie Mae dwarf those at Enron, since Fannie Mae has more than $1 trillion in debt tied to taxpayers. Stephanie Woods, NIGHTLY BUSIENSS 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) 2004 Community Television
Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms
of use.
09/27/04:
Commentary: Taxes & The Race for the White House
Capital
PAUL KANGAS: Tonight`s commentator is talking taxes: taxes and the presidential election. Here`s Glenn Hubbard, professor of economics at the graduate school of business at Columbia University and economic adviser for the re-election campaign of President George W. Bush.
GLENN HUBBARD, GRADUATE SCHOOL OF BUSINESS, COLUMBIA UNIVERSITY: We passed Labor Day earlier this month going from summer to fall. In this election year though, with domestic discussion centered on taxes and jobs, it`s useful to take stock of what we know about taxes and Labor Day. Economists have for many years argued that high marginal tax rates on work discourage both hours worked and effort. And reductions in those rates, the tax rate on the last dollar of income, have been a key part of President Bush`s economic agenda.
But tax policy also plays a role in entrepreneurship for two reasons: first, becoming an entrepreneur is a labor decision about self employment. Second, entrepreneurs create new jobs for new employees. On the first, tax policy can play a significant role in encouraging or discouraging entrepreneurial risk-taking. And, because it is the individual income tax that apples to many starting business owners, lower marginal tax rates reduce the cost of hiring new employees. The evidence supports this. Recent analysis concludes that reducing marginal tax rates, as with the Bush tax cuts, encourages both new entrepreneurs and new hiring by entrepreneurs.
Now, Democratic candidate Kerry tells us that these tax cuts are just a giveaway to the rich. But among the highest income households, most are entrepreneurs. Raising marginal tax rates on these individuals as Senator Kerry has proposed, would decrease their willingness to take on risky business and hire additional workers. Something to think about between Labor Day and Election Day. I`m Glenn Hubbard.
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) 2004 Community Television
Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms
of use.
09/27/04:
Last Word - Happy Birthday Taj Mahal
SUSIE GHARIB: And finally tonight, one of the most beautiful and recognizable buildings in the world is celebrating an anniversary. It`s been 350 years since the Taj Mahal was completed. It was built as a monument by an Indian emperor to his wife. Now the 17-century marble masterpiece is a world heritage site. It was also one of the most visited tourist spots in the world until the 9/11 terrorist attacks, and fears that India and neighboring Pakistan might go to war. Indian officials are hoping six months of anniversary celebrations will bring back the visitors. By the way, Paul, historians say it took 20,000 people more than 22 years to build the Taj.
KANGAS: 350 years old, they must have had some kind of strict building code back in those days.
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) 2004 Community Television
Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms
of use.
09/27/04:
Paul Kangas' "Stocks In The News"
PAUL KANGAS: Wall Street headed lower on those record high oil prices, but the sell off was cushioned by a brisk 9.4 percent jump in August new home sales when just a 1.4 percent rise was expected. In mid-morning the Dow was down 40 points, NASDAQ off 12. A Prudential securities downgrade on communications equipment sector and a Morgan Stanley downgrade on the semiconductor stocks kept the market on the defensive all day. So the Dow Industrial Average closed down 58.70 points at 9988.54. The NASDAQ Composite was down 19.60 points at 1859.88. Standard & Poor`s 500 lost 6 1/2 points, ending at 1103.52.
The Treasury market ended higher. The 10-year note rose 11/32, pushing the yield back below 4 percent.
New York exchange volume leader on 21.3 million shares, Calpine (CPN) down $0.14. The company`s in the process of offering $1.4 billion in notes, $600 million of which are convertible into the common stock.
Then Fannie Mae (FNM) managing to gain nearly $1. Of course it`s been weak in the last several sessions. You just heard the story.
Pfizer (PFE) a $0.04 drop.
And then Citigroup (C) lost $0.54. Sally Krawcheck, who has been the chief executive officer of Citigroup`s brokerage unit, Smith Barney, has been chief financial officer of Citigroup. Meanwhile, Todd Thompson, who`s been the chief financial officer of Citigroup will go over and head up Smith Barney, so a little switch of positions there between those two.
General Electric (GE) $0.29 drop, fifth in big board volume.
Lucent Technologies (LU) lost $0.07.
Texas Instrument (TXN) down $0.55. Morgan Stanley did downgrade the semiconductor sector from "attractive" to "in line."
NorTel Networks (NT), $0.15 loss there.
Time Warner (TWX) fell $0.17.
And EMC Corp. (EMC), tenth in volume, down $0.32 a share.
Wal-Mart (WMT) was down $0.29, even though Bank of America upgraded it from "neutral" to "buy" in the belief the stock is cheap at this level.
Tommy Hilfiger (TOM) down $2.87. Prudential Securities downgraded it from "overweight" to "underweight" pending results from a grand jury investigation which could force the company to pay some back taxes as well as some fines. Stock down substantially.
Georgia Gulf (GGC) managed to buck the trend up $0.64. The brokerage called Soliel (ph) has upgraded it from "hold" to "buy." Georgia Gulf is a chemical producer.
Perot Systems A (PER.A) up $1 and it traded as high as $15.39. The company boosted its third quarter earnings estimate from the range of $0.17 to $0.18 up to $0.21 to $0.23 and last Friday the company made some top management changes.
Cablevision Systems (CVC) losing $1.42. The company said late Friday, three of its top executives had resigned as an SEC investigation continues all about the company`s accounting practices.
Allergan (AGN) up, down $2.25. The FDA has issued a non-approval letter for the company`s capsules to treat psoriasis. The company said it will continue to work with the FDA to get approval for those capsules.
And Martha Stewart Living Omnimedia (MSO) down $1.77. "Barron`s" lead columnist Allan Abelson (ph) made some negative comments. He noted the company, despite its recent run up in price, is going to have a loss this year of around $1.30 a share and it`s also going to have a loss next year.
KB Home (KBH) up $2.02. Home building group very strong today on that 9.4 rise in August new home sales that I mentioned earlier.
And finally CEMEX S.A. de C.V. (CX), that`s the big Mexican cement giant is going to acquire United Kingdom-based RMC Group, price, $5.8 billion in cash. Part of that is debt assumption.
NASDAQ`s most active Microsoft (MSFT) down a dime.
$0.21 loss in Intel (INTC).
Cisco Systems (CSCO) fell $0.36.
eBay (EBAY) losing $0.49.
Research In Motion (RIMM) finally a gainer, up $0.55.
Yahoo! (YHOO) down $0.76.
Oracle (ORCL) up $0.15.
QUALCOMM (QCOM) $0.24 loss.
Google (GOOG) down, a little profit taking there.
And Dell (DELL) managed to gain $0.03.
Nastech Pharmaceutical (NSTK), look at that percentage gain, up 70 percent. The company is going to co-develop and market along with Merck, a nasal spray which is going to be used to treat obesity and it looks promising. The company will get $5 million from Merck in cash up front to get things moving.
VSE Corp. (VSEC) up $7.78 or 42 percent. It`s got a U.S. Navy contract worth just over $1 billion to maintain the Navy`s ships.
And finally Ultralife Batteries (ULBI) tumbling $4.25. The company cut its 2004 earnings and revenue guidance because military orders have not materialized.
Those are the stocks in the news tonight.
09/27/04:
Market Stats
NET PERCENT
CLOSE CHANGE CHANGE
DOW CLOSE 9988.54 -58.70 - .6
HIGH 10046.65
LOW 9985.37
NASDAQ COMP. 1859.88 -19.60 -1.0
HIGH 1871.94
LOW 1858.88
VOLUME 1,263.3
PREVIOUS 1,250.8
UP VOLUME 310.2
DOWN VOLUME 940.5
DOW TRANSPORTS 3177.35 -24.76 - .8
DOW UTILITIES 293.89 +.91 + .3
CLOSING TICK -238
S&P 500 1103.52 -6.59 - .6
S&P 100 531.02 -3.35 - .6
MIDCAP 400 582.76 -5.74 - 1.0
REUTERS/CRB 281.27 +3.50 + 1.3
NYSE COMPOSITE 6496.37 -35.00 - .5
VALUE LINE 352.39 -3.92 - 1.1
RUSSELL 2000 558.36 -7.61 - 1.3
DJW 5000 10764.88 -73.42 - .7
U.S. TREASURIES
5-YEAR NOTE 3.375%
Sept. 15,2009 100 15/32 +8/32 + 3.27
10-YEAR NOTE 4.25%
Aug. 15,2014 102 3/32 +11/32 + 3.99
30-YEAR NOTE 5.375%
Feb. 15, 2031 109 +18/32 + 4.77
LEHMAN BROS.
LONG BOND INDEX 1785.92 +5.80
DOW CLOSE 9988.54 -58.70 - .6
ADVANCES 1185
DECLINES 2118
NEW HIGHS 124
NEW LOWS 59
NET PERCENT
NYSE MOST ACTIVES 4PM CLOSE CHANGE CHANGE
CPN Calpine 3.14 -.14 -4.3
FNM Fannie Mae 66.50 +.99 +1.5
PFE Pfizer 29.62 -.04 -.1
C Citigroup 43.61 -.54 -1.2
GE GE 33.12 -.29 -.9
LU Lucent Tech 3.11 -.07 -2.2
TXN Texas Instrument 21.14 -.55 -2.5
NT Nortel Networks 3.26 -.15 -4.4
TWX Time Warner 16.33 -.17 -1.0
EMC EMC Corp 10.85 -.32 -2.9
NASDAQ CLOSE 1859.88 - 19.60 - 1.0
VOLUME 1,325.1
PREVIOUS 1,362.4
ADVANCES 867
DECLINES 2216
NASDAQ ACTIVES
MSFT Microsoft 27.19 -.10 -.4
INTC Intel 19.92 -.21 -1.0
CSCO Cisco Systems 18.04 -.36 -2.0
EBAY eBay 88.73 -.49 -.6
RIMM Rsch In Motion 75.12 +.55 +.7
YHOO Yahoo! 31.82 -.76 -2.3
ORCL Oracle 11.19 +.15 +1.4
QCOM Qualcomm 38.01 -.24 -.6
GOOG Google 118.26 -1.57 -1.3
DELL Dell Inc 35.08 +.03 +.1
AMEX CLOSE 1263.14 - 1.83 - .1
INDEX SHARES
DIA DIAMONDS TRUST 100.13 -.59 -.6
QQQ NASDAQ 100 34.48 -.33 -1.0
SPY S&P DEP.RECEIPTS 110.75 -.71 -.6
STOCKS IN THE NEWS
WMT Wal-Mart Stores 52.52 -.29 -.6
TOM Tommy Hilfiger 10.30 -2.87 -21.8
GGC Georgia Gulf 40.59 +.64 +1.6
PER Perot Systems 14.71 +1.00 +7.3
CVC Cablevision Sys 19.45 -1.42 -6.8
AGN Allergan 75.64 -2.25 -2.9
MSO Martha Stewart 15.30 -1.77 -10.4
KBH KB Home 85.54 +2.02 +2.4
CX Cemex Sa de CV 27.95 -2.24 -7.4
NSTK Nastech Pharm 13.15 +5.41 +69.9
VSEC VSE Corp 26.28 +7.78 +42.1
ULBI Ultralife Batter 9.80 -4.25 -30.3
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