10/11/04:
Oil Prices & Interest Rates
LINDA O'BRYON: For the fifth time in five trading sessions, oil prices gushed to a new record high today as traders worried about supplies for the upcoming heating season. In New York, November futures rose $0.33 to close at $53.64 a barrel and the impact is also being felt at the gas pump. The latest Lundberg survey shows gasoline prices jumped an average of nearly $0.08 a gallon in the past two weeks. This trend is likely to continue as traders see little relief for oil any time soon.
IRA ECKSTEIN, OIL TRADER, AREA INTL. TRADING: Oil prices are going to be, I think, pretty firm to the end of the year. And as far as `05 goes, I think we`re going to be in the mid-$40s to this range, maybe $45 to $55.
O`BRYON: And production problems still remain from the summer hurricane season. Nearly half a million barrels of daily crude output are still off the market nearly a month after hurricane Ivan blew through the Gulf of Mexico.
PAUL KANGAS: Those higher oil costs are likely to be attracting a lot of attention these days at the Federal Reserve. Nevertheless, economists say monetary policymakers are expected to stick to their plan of raising short-term interest rates. Suzanne Pratt reports.
SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: For months the Federal Reserve has been telegraphing to Wall Street that it would raise interest rates several times this year. And so far policymakers have been true to their words, hiking the Federal funds rate three times from 46-year lows in June to the current 1.75 percent. And while it`s still widely expected that the Fed will raise rates at its November meeting, some experts say there are reasons developing for it to stop now. Reason number one: the disappointing September jobs report. Some experts say the soft September data makes four straight months of lackluster job creation and suggests the economy may not growing very quickly. They say tighter monetary policy will do nothing to create more jobs. Still, others say the job market data is not yet weak enough to cause the Fed to alter its plans.
MAURY HARRIS, CHIEF ECONOMIST, UBS: I think that some of the signs that the economy is faltering or will be faltering are signs that aren`t sufficiently comprehensive yet to convince me that, in fact, the economy will falter and without a faltering economy, rates are going to go up.
PRATT: Reason number two: surging oil prices. Experts agree rising energy costs have been acting as a tax on businesses and consumers. That`s because money is going into gas tanks rather than toward other purchases. It would seem reasonable that the Fed might hold off raising rates until it becomes clear that high energy prices won`t derail the economy. But other economists say the Fed is still more concerned about what higher oil prices will do to inflation than to growth.
GARY THAYER, CHIEF ECONOMIST, A.G. EDWARDS: We`ve had some decent moderate inflation numbers over the last few months, but if we see the inflation numbers pick up again, that would erode consumer purchasing power, and I don`t think the Fed wants inflation to get out of control.
PRATT: The bottom line on the Fed is it`s fairly optimistic about the economy. Even though there may be good reasons for taking a break from raising rates, policymakers are unlikely to do that, at least for now. Suzanne Pratt, 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.
10/11/04:
Rep. Jim Kolbe of AZ Vs. Dem. Ben Cardin of MD In A "Taxing" Debate
PAUL KANGAS: Taxes will be discussed Wednesday night in the third and final presidential debate, which will focus on the economy and social policy. Also sure to come up: Social Security. Washington bureau chief Darren Gersh talked with two members of congress who are leaders on the issue: Republican Jim Kolbe of Arizona and Democrat Ben Cardin of Maryland.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Congressman Kolbe, let me start with you. You`re supportive of the president`s goal of reforming Social Security with some kind of personal account. What`s wrong with the system right now that it requires such a dramatic and fundamental change?
REP. JIM KOLBE (R) ARIZONA: What`s wrong with the system is that we`re facing a cash flow crunch, a problem with Social Security. In a few years, somewhere around 2017 there will be more benefits being paid out than taxes being collected to go into the Social Security trust fund. That means Social Security will have to start cashing in its IOUs. That means the Federal government`s going to have to replenish those IOUs with cash to run the rest of the government. A few years after that, the IOUs have gone and then we have a serious problem. So it`s - we need to face it now while we can deal with it in a fashion that`s not too expensive.
GERSH: Congressman Cardin, Senator Kerry`s response on Social Security seems to be no problems. We don`t need to do a dramatic overhaul. I`m not going to touch benefits. I`m not going to touch retirement age. Doesn`t the system need some kind of reform?
REP. BENJAMIN CARDIN (D) MARYLAND: There`s no question that if we don`t do anything, we`re going to run out of money in Social Security by the year 2017. The problem is though that the president`s proposal will take money out of the system. He wants to allow people to take some of their payroll taxes and put it into private accounts. That takes money out of the Social Security system. The older people have no options how they`re going to be able to take care of their own needs. As a result, we`re going to run out of money even sooner. Senator Kerry has indicated there`s enough money to take care of our retirees now. We should be reforming the system. We should have taken the Social Security surplus funds and put them back into Social Security and we could have solved this problem.
GERSH: I just want to ask you though, because my son, somebody born around 2000, the year 2000, is looking at maybe at best a 1 percent return on their Social Security dollars or a negative return of about 1 percent. Can we do better than that if we change the system?
CARDIN: Social Security is a good investment for everyone. It`s not just your (INAUDIBLE) retirement when you retire. It also has disability and death benefits for your family. It is a good program. By the time a young person retires and collects Social Security, it`s going to be a good investment for that individual. It`s been the most successful program in government. What we need to do is to shore it up to make sure there`s adequate resources to take care of future generations.
GERSH: Good investment?
KOLBE: No it`s not a good investment as you said, it`s going to be a negative investment for somebody who`s born around the turn of this century. By the time they retire in 2065, it`s very definitely a negative investment, because if we make no changes to the system, you will have a massive cut in benefits or you`ll have a massive increase in taxes. Neither of those is very satisfactory.
GERSH: But at the same time, there seems to be a trend across the board that employees have - are taking on more risk. They`re taking on more of the payments for their health insurance. They`re taking on more of the responsibility for their own retirement in 401(k)s. If you do that for Social Security, aren`t they taking on yet more risk in terms of the market?
KOLBE: The model that Congressman Stenholm and I have introduced is one which would create something along the lines of the Federal thrift savings program where you would have an option, investing a portion of your fund, and we`re only talking in our bill of two percent out of the 12.4 percent that`s paid in taxes now, of putting that into a fund that would be an index fund for stocks or an index fund for bonds. So it`s not buying particular stocks, not buying particular bonds. We know that over the long haul, any 20-year, 30-year, 40-year period that you look at in American history, the securities market is going to outperform government instruments. I think the risk is relatively minimal. The rewards are very large.
GERSH: Minimal market risk?
CARDIN: I`m very much for people supplementing their Social Security with private savings and retirement. Social Security is only one part of your security when you retire. But Social Security is a guaranteed lifetime inflation proof annuitant and you can`t get that through a private account. What we should have done is take the cash surpluses that are being generated today and rather than use that to mask our government spending the size of our deficit, we should have taken that money to strengthen our Social Security system and we would not have the problem of a cash problem in the future if we would have done that.
GERSH: Congressmen Cardin, Congressman Kolbe, thank you very much.
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.
10/11/04:
Market Outlook With Ned Riley, Chief Investment Strategist for State Street Global Advisors
PAUL KANGAS: With us now to analyze what`s been going on in the stock market and where it might be going is Ned Riley, chief investment strategist for State Street Global Advisors. Welcome back to NIGHTLY BUSINESS REPORT, Ned.
NED RILEY, STATE STREET GLOBAL ADVISORS: Thank you, Paul.
KANGAS: Is the stock market`s failure to make much upside progress recently a reflection of an economy that is bogged down?
RILEY: I think so, basically. We`ve had a pretty significant correction since February. I think most importantly is that the markets now I think fully discounted a lot of this. I`m very positive going forward for several reasons. First of all has to do with the slowness in the economy. A growth rate of 3 to 4 percent isn`t that bad. I think once the Federal Reserve recognizes that, the slower growth would produce much lower inflation in the future, and therefore, you know, kind of negate the necessity to raise interest rates. But I think the market`s going to move much higher. Investors are fearful that the Federal Reserve may go too far in terms of tightening the funds rate.
KANGAS: How much higher do you think this market can go within the year?
RILEY: Within a year I think we can get up at least another 10 or 15 percent. I also believe when you start to look at the profits trends, I think they`re going to start to look positive vis-a-vis the expectations. Analysts have cut their estimates for 2005. They only expect about a 7 percent gain in profits in the first quarter, I think it could be closer to 10 or 12 percent.
KANGAS: How about the third quarter, which we`re going to start hearing about in a gusher later this week starting then?
RILEY: I think the numbers are going to be pretty good. They`re going to still be some disappointments, but 13 to 14 percent looks pretty good and it might come in a little higher. The key is to watch out what the CEO`s say, because they`re going to set a very low expectation level for the next several quarters and that`s actually a positive for the market as well.
KANGAS: Will the high price of oil trigger an inflation problem?
RILEY: I don`t think so, Paul. Actually in the previous two periods we did have an inflation problem when the price of crude got this high. This time around it`s a much smaller percentage of the total inflation rate and I really think that we`ve got deflation worldwide and disinflation we`re importing from China.
KANGAS: Let`s go back to February 20th, your last visit with us. You had some buy recommendations and let`s have them up on the screen here. Unfortunately, Merck was one of them and it`s just taken a real tumble. We all know about that. What are you doing about the stock here?
RILEY: I think it`s a good time to average down. Obviously they`ve had a big problem with Vioxx. They have recalled the Vioxx itself, two and a half billion in revenue, that`s a hard thing to replace. But the stock has dropped as you know 15 points.
KANGAS: And Pfizer what do you think of that?
RILEY: Same thing, I think they`re both now infected by this problem of simply they`ll be over analyzation of the products themselves. I think the best thing to do is to average down and hold onto the long term, because we are still going to see some lawsuits with Merck.
KANGAS: You just didn`t have two losers. You had a couple of gainers in your recommendations, Proctor and Gamble up nearly 5 percent, J&J, Johnson & Johnson up nearly 4 percent. So that offset it a little bit. We just have a minute left. Where are you going in this market now, you say you`re positive. What would you own?
RILEY: Well, I would own an exchange traded fund in the health care sector. It gives you a lot of diversification. For those people that owned the Merck and the Pfizer, it`s a way of averaging down, because the pharmaceuticals are a big percentage of that component. I would also buy the technology area, same thing, exchange traded funds, 100 stocks basically in an exchange traded fund in the technology sector and it gives you all of them.
KANGAS: Do you still own Merck and Pfizer incidentally and Proctor and Gamble and the other issue that we saw?
RILEY: Yes, we do, Paul. We still own all four of them and long term we still like the fundamentals and the demographics.
KANGAS: All right and we have time maybe for one other, the ETF, exchange traded fund.
RILEY: I like the QQQs again, heavy tech., biotech and medical instrumentation.
KANGAS: All right, you like that diversification of the exchange traded funds.
RILEY: No question. The Spyders, that`s the way to go.
KANGAS: All right. Thanks very much, Ned for being with us again.
RILEY: Thank you very much.
KANGAS: Ned Riley, chief investment strategist for State Street Global Advisors.
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.
10/11/04:
"Commentary"-The Presidential Candidates & Their Tax Plans
LINDA O'BRYON: The issue of taxes has gotten a lot of attention during this year`s presidential campaign and tonight`s commentator says that`s a good thing. Here`s Glenn Hubbard, professor of economics at the graduate school of business at Columbia University and economic adviser for the reelection campaign of President George W. Bush.
GLENN HUBBARD, FORMER CHAIRMAN, COUNCIL OF ECONOMIC ADVISERS: On the campaign trail, John Kerry promises that, if elected, he will roll back tax cuts on saving, particularly cuts in the double taxation of corporate dividends and capital gains. The idea that Kerry`s plan is bad for coupon clippers but good for workers doesn`t survive scrutiny and that`s why there`s support for what the president is doing.
Capital tax burdens can wind up on workers` shoulders. What if workers own no capital and spend all of what they get each month? And what if savers live off the income from their past investments? If savers were to save less, investment falls, worn-out machines are not replaced, and the capital stock shrinks. As workers are left with fewer machines, they become less productive. Their wages decline. Having two layers of tax on corporate income, rather than just one, raises the tax on capital. Reducing the capital tax raises the return to saving and capitalists would save and invest more.
As capital increases, productivity rises and so do wages. But doesn`t the Bush tax policy just increase the share of the pie going to savers? No. To see why, think what happens when taxes are cut. The capital stock grows and so does output the size of the pie. And workers are left with a higher standard of living even if they own no capital. Workers would find it in their economic interest to vote to reduce taxes on saving. Maybe that`s why Senator Kerry`s proposals aren`t generating much applause. 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.
10/11/04:
Last Word:The Nobel Prize For Economics Goes To...
LINDA O'BRYON: Finally, an American and a Norwegian won the Nobel Prize for economics today. Edward Prescott and Finn Kydland will share the $1.3 million award for showing how government policies and actions affect business cycles. In the 1970s, many countries had high inflation because their central banks didn`t have a consistent monetary policy. But work by Prescott and Kydland showed that was due to policymakers abandoning long-term aims for short-term benefits. Their analysis shifted policymaking to longer-term goals and helped stabilize world economies. We spoke with winner Edward Prescott today, and he says he was caught by surprise this morning.
EDWARD PRESCOTT, NOBEL PRIZE WINNER, ECONOMICS: I was sleeping 4:00 in the morning, my cell phone rang, and then I heard the Swedish voice and I guessed that it might be them, because who else would call at that hour of the morning?
O`BRYON: And Prescott calls the Nobel Prize a great honor and says he`s not sure if winning will ever sink in. He`ll attend the ceremony in Sweden on December 10, and plans to take his children and grandchildren along for that celebration.
KANGAS: A hardy congratulations from all of us on NIGHTLY BUSINESS REPORT, that`s for sure, great prize.
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.
10/11/04:
Paul Kangas' "Stocks In The News"
PAUL KANGAS: Wall Street staged a rebound this morning from last week`s losses, but buyers weren`t aggressive in light of oil prices at record highs. A brokerage "sell" recommendation on Texas Instruments and Micron Technology also made investors cautious. Even so, at midday the Dow was up 30 points, NASDAQ up three points.
Optimism about upcoming third quarter earnings helped the market hold its gains this afternoon. The Dow industrial average closed up 26 3/4 points at 10,081.97. The NASDAQ composite rose 8 3/4 points to 1928.76. Standard & Poor`s 500 up 2 1/4 points to 1124.39. No bond trading today. That market was closed for the Columbus Day holiday.
Most active big board issue with 16 million shares traded Merck & Company (MRK) finally a gain, up $0.40 today. Published reports say that while the company has long stated it would replace its current CEO with a corporate insider, it is now looking for potential candidates outside the firm. So says that report.
Lucent Technologies (LU) a nickel gain.
And Pfizer (PFE) moving up $0.51.
Calpine (CPN) was down $0.22.
Texas Instruments (TXN) fell $0.16. Deutsche Securities downgraded it from "buy" to "sell" on the belief that falling chip prices will hurt revenues and earnings next year. Micron Technology also was downgraded by Deutsche Securities from "hold" to "sell" for that same reason.
And we move along to Corning (GLW) with a $0.33 gain.
Followed by Home Depot (HD) up $1.05. Home Depot the subject of a very positive article in this week`s "Barron`s" financial magazine.
Schering-Plough (SGP) dropped a nickel.
Citigroup (C) moving up $0.30.
And General Electric (GE) a $0.26 gain, tenth in big board volume.
Lone Star Technologies (LSS) major casualty down $8.95. Company
Makes oil field equipment and high steel prices have been seen as hurting earnings. For example, the company now sees third quarter earnings at $0.85 to $0.95. The Street was looking for $1.36. RBC Capital downgraded it from "sector perform" to "under perform." And speaking of the sector, other stocks in that field lost ground.
NS Group (NSS) down $1.82.
And Maverick Tube (MVK) down $2.31, getting downgrades from RBC as well.
General Maritime (GMR) plunging $2.87. Allan Abelson (ph) lead columnist in "Barron`s" notes the huge run up in the oil tanker stocks and he thinks it`s overdone and he says a lot more tankers are being built. Competition will stiffen. Hybernia Securities downgraded this stock from "buy" to "hold" and the whole sector was on the weak side.
Tsakos Energy Navigation (TNP) down $2.66.
And Stelmar Shipping (SJH) held up pretty well, just a $0.09 loss.
Charles River Laboratories (CRL) moved up $1.14. Jefferies brokerage upgraded it from "hold" to a "buy" recommendation.
And then Longs Drug Stores (LDG) down $2.02. Friday the company did report September same store sales up 1.7 percent. Today JPMorgan brokerage downgraded the stock from "overweight" to just "neutral."
Microsoft (MSFT) topped the active list on NASDAQ, moving up $0.07.
Intel (INTC) up $0.06.
Google (GOOG) down $2.47, profit taking there.
Applied Materials (AMAT) $0.08 gain.
$1.14 rise in eBay (EBAY), fifth in dollar volume on NASDAQ.
Apollo Group (APOL) down $0.53.
Cisco Systems (CSCO) $0.20 gain.
Yahoo! (YHOO) moved down $0.15.
Sirius Satellite Radio (SIRI) down $0.18.
And tenth in volume, Amazon.com (AMZN) edging $0.15 higher.
SanDisk Corporation (SNDK) down $1.24. Third quarter earnings are due out this Thursday and there`s some concern over the company`s inventory levels.
And then Global Crossing (GLBCE) plunging $3.09. That stock is down on concerns about the firm`s financial condition and the possibility it might need to file for Chapter 11 the second time around.
And finally there you see SFBC International (SFCC) rising over 12 percent today. Jefferies upgraded the clinical trial management firm from "hold" to "buy" with a $33 a share price target.
10/11/04:
Market Stats
NET PERCENT
CLOSE CHANGE CHANGE
DOW CLOSE 10081.97 +26.77 + .3
HIGH 10098.78
LOW 10056.09
NASDAQ COMP. 1928.76 +8.79 +.5
HIGH 1930.66
LOW 1920.76
VOLUME 943.7
PREVIOUS 1,295.8
UP VOLUME 452.5
DOWN VOLUME 476.9
DOW TRANSPORTS 3336.17 +.17 + .0
DOW UTILITIES 300.17 +.09 + .0
CLOSING TICK +576
S&P 500 1124.39 +2.25 + .2
S&P 100 539.92 +1.45 + .3
MIDCAP 400 594.31 +.15 + .0
REUTERS/CRB 288.24 +.64 + .2
NYSE COMPOSITE 6643.17 +6.75 + .1
VALUE LINE 361.82 +.42 + .1
RUSSELL 2000 577.56 +1.91 + .3
DJW 5000 10985.95 +21.43 + .2
U.S. TREASURIES
5-YEAR NOTE 3.375%
Oct. 15,2009 99 29/32 unch. + 3.40
10-YEAR NOTE 4.25%
Aug. 15,2014 100 31/32 unch. + 4.13
30-YEAR NOTE 5.375%
Feb. 15, 2031 106 29/32 unch. + 4.91
LEHMAN BROS.
LONG BOND INDEX N/A N/A
DOW CLOSE 10081.97 +26.77 + .3
ADVANCES 1729
DECLINES 1508
NEW HIGHS 84
NEW LOWS 27
NET PERCENT
NYSE MOST ACTIVES 4PM CLOSE CHANGE CHANGE
MRK Merck 30.74 +.40 +1.3
LU Lucent Tech 3.44 +.05 +1.5
PFE Pfizer 30.31 +.51 +1.7
CPN Calpine Corp 2.64 -.22 -7.7
TXN Texas Instrument 21.89 -.16 -.7
GLW Corning 10.58 +.33 +3.2
HD Home Depot 40.07 +1.05 +2.7
SGP Schering-Plough 17.51 -.05 -.3
C Citigroup 44.86 +.30 +.7
GE GE 34.00 +.26 +.8
NASDAQ CLOSE 1928.76 + 8.79 + .5
VOLUME 1,177.6
PREVIOUS 1,675.1
ADVANCES 1821
DECLINES 1230
NASDAQ ACTIVES
MSFT Microsoft 28.06 +.07 +.3
INTC Intel 20.61 +.06 +.3
GOOG Google 135.26 -2.47 -1.8
AMAT Applied Matl 16.29 +.08 +.5
EBAY eBay 93.73 +1.14 +1.2
APOL Apollo Group 69.28 -.53 -.8
CSCO Cisco Systems 18.98 +.20 +1.1
YHOO Yahoo! 34.02 -.15 -.4
SIRI Sirius Sat Radi 3.52 -.18 -4.9
AMZN Amazon.com 40.15 +.15 +.4
AMEX CLOSE 1284.73 - .47 - .0
INDEX SHARES
DIA DIAMONDS TRUST 101.14 +.44 +.4
QQQ NASDAQ 100 35.75 +.19 +.5
SPY S&P DEP.RECEIPTS 112.97 +.46 +.4
STOCKS IN THE NEWS
LSS Lone Star Tech 29.25 -8.95 -23.4
MVK Maverick Tube 28.07 -2.31 -7.6
NSS N S Group 17.11 -1.82 -9.6
GMR Genl Maritime 38.01 -2.87 -7.0
TNP Tsakos Energy 37.30 -2.66 -6.7
SJH Stelmar Shipping 38.25 -.09 -.2
CRL Chrls River Labs 46.58 +1.14 +2.5
LDG Longs Drug Store 23.30 -2.02 -8.0
SNDK SanDisk 28.96 -1.24 -4.1
GLBCE Glbl Crossing 12.79 -3.09 -19.5
SFCC SFBC Intl 29.57 +3.36 +12.8
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