Program: Wednesday, October 27, 2004

Oil Prices Dive Fueling A Stock Rally
Ray Niedl, Airline Analyst of Calyon Securities On The Latest Delta Drama
One On One With Kerry Economic Advisor Gene Sperling
"My Greatest Challenge"-Peter Lynch, Vice Chairman of Fidelity Management & Research
The Hummer 3 Is About To Roll Out
Paul Kangas' Stocks In The News
Market Stats

10/27/04: Oil Prices Dive Fueling A Stock Rally

PRATT: For traders in the New York oil pits, today was anything but calm. The price of crude plunged after a U.S. government agency said crude and gasoline stocks rose in the previous week. But that same weekly supply data also showed a greater-than-expected drop in heating oil inventories, marking the sixth straight week of declines. And some traders say it's the decline in heating oil supplies, as we enter the winter season that should be viewed as most important to the future direction of prices.

RAYMOND CARBONE, OIL TRADER, PARAMOUNT OPTIONS: I interpret these numbers as long-term bullish numbers. We may be seeing a pullback right now. I think it is a "buy" at certain levels down here, where I'm not sure. But this is a bullish number because of the heating oil stat.

PRATT: traders also took notice today of the surprising news that OPEC is urging the U.S. to tap its strategic petroleum reserve to bring down prices. OPEC, which is pumping at just about full capacity, is worried that continued high oil prices will encourage use of alternative fuels. In response to the request, the white house said, as it has said before, that it would not use the reserves to influence market prices. Some oil experts were critical of that reaction.

FADEL GHEIT, OIL ANALYST, OPPENHEIMER & CO.: Without an active participation of the U.S. government to calm down market fears, I do believe oil prices will remain inflated.

PRATT: Exactly how inflated is anyone's guess. Despite today's sharp sell-off in crude, most oil experts are still comfortable saying prices are headed higher in the coming months. A target of $60 a barrel seems most popular.

CARBONE: I see oil prices as heading higher. I know the OPEC minister said a number of $80 today. It's very possible. I think it's a bit high. I see us going through the high $50s into the low $60s.

PRATT: What will it take to push crude prices to $60 a barrel or even higher? Some experts say a long bout of cold winter weather is the most likely trigger. 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.

10/27/04: Ray Niedl, Airline Analyst of Calyon Securities on the Latest Delta Drama

SUSIE GHARIB: Delta Airlines is meeting with its pilots union tonight in a session that could result in the carrier filing for bankruptcy or not. Delta must get $1 billion in pay cuts and other concessions from its pilots, the highest paid in the industry. But the pilots union says concessions depend on Delta's other employees and financial stakeholders. Delta is also negotiating with creditors, hoping to defer $200 million in debt payoffs until 2006. Joining us now to talk more about the Delta situation, Ray Neidl, airline analyst with Calyon Securities. Hi, Ray.

NEIDL: Good evening.

GHARIB: Do you think that Delta can avoid bankruptcy?

NEIDL: I still think that Delta probably will avoid bankruptcy. It strictly is up to the pilots. If the pilots don't come to the $1 billion figure, Delta will declare. If they do, then Delta has taken the first major step, first giant step to dodging bankruptcy for the time being.

GHARIB: What do you think is holding up that negotiation with the pilots union?

NEIDL: I understand they're pretty close, that the thing that's holding it up is the percentage of stock ownership the pilots will get and the breakdown between workload changes and salary cuts.

GHARIB: Even if Delta gets these concessions from the pilots, it still could file for bankruptcy. It has something like $20 billion in debt, right?

NEIDL: If oil goes to $60 a barrel the whole industry remains very much in danger. If they can't get true price increases. Somebody will have to go under to take the seats out so airlines can get the prices up to meet the high oil prices.

GHARIB: Ray, if Delta does have to file for bankruptcy, what are the implications of that for the industry, for Delta and for customers?

NEIDL: Well, for customers, initially they won't see a thing. The planes will be flying, the employees will be there, the frequent flyer programs will be in place. For the industry, it means that there's one more carrier that's going to even more sharply cut their costs than they would outside of bankruptcy. And that means that's much more they've got to have to do. For Delta in bankruptcy, then they will go for very deep cuts, especially with the pilots. Maybe getting rid of their pension program. And that will make them that much for cost competitive against the other legacy carriers.

GHARIB: A very turbulent time for all the airlines. Which airline carriers are going to survive?

NEIDL: The carriers that cut their costs the deepest the soonest while maintaining service. American is probably in the best position right now. But all the legacy carriers are in danger.

GHARIB: Ray, thank you very much. Appreciate you coming on the program. We've been speaking with Ray Neidl with Calyon Securities.

10/27/04: One On One With Kerry Economic Advisor Gene Sperling

SUSIE GHARIB: Last week we heard from the Bush campaign on Social Security. Now for the other side. Senator Kerry says he would not cut benefits, would not raise the retirement age, and would not privatize Social Security. Our Washington bureau chief Darren Gersh spoke with Kerry economic advisor Gene Sperling earlier today and asked him to respond to charges by the Bush camp that the Senator has a "do- nothing" approach to Social Security.

GENE SPERLING: Well, Senator Kerry is being straightforward in saying that the first step to responsible Social Security reform is restoring fiscal discipline. The goal of Social Security reform is to increase national savings now so that when we fix Social Security we're not passing on the debt to our children or severely cutting benefits for seniors. That's why President Bush's plan is so disingenuous. The privatization part does add more risk to Social Security, but it does nothing to increase solvency. In fact, what studies have shown from the University of Chicago is that it would actually take $940 billion out of Social Security and transfer it into hidden fees to people who manage the accounts.

GHARIB: The Congressional Budget Office has looked at these administrative costs you're talking about and estimated they'd be about 0.3%, which is about what you'd pay in a mutual fund. Why is that such a bad idea in order to give people some of their own savings?

SPERLING: Well, that's just not true that you'd give people some of their own savings. You're taking an amount of money that people are now saving in Social Security, which is able to save that money at extremely low administrative costs and add significant administrative costs. And let's be honest. The more that you have choice in the Social Security privatization plan, the more you have the choice to pick stocks, pick mutual funds, all the things that are advertised, the higher the administrative costs go, so that people could lose tens, hundreds of billions of dollars in Social Security to these hidden fees.

GHARIB: What's going to happen to people who retire at the wrong time when the market goes down?

SPERLING: But they'd get an annuity, which is a guaranteed income stream under one scenario of individual accounts the president's commission on Social Security had looked at. No, that's not the point. The point is that when you have this degree of risk, you know, you could have two twin brothers. One could have retired in 1999; the other could retire in 2001. If they both had different amounts of money in Nasdaq, et cetera, one could be getting 30%, 40% less benefits for the rest of their retirement. Are people going to put up with that or are they going to ask for a bailout?

GHARIB: But in Senator Kerry's plan, if you keep the current system the way it is, the Congressional Budget Office has said that the system will only have enough money to pay 75% of the benefits that have been promised. Isn't that a 25% benefit cut?

SPERLING: First of all, when President Bush took office we had a $5.6 trillion surplus. There was enough money in our projected surpluses to actually save Social Security without doing benefit cuts. To give you an example, if you just took the tax cuts that President Bush gave to the top 1% and extended those over 75 years and used those revenues for Social Security, you could have saved Social Security for 75 years without cutting benefits. President Bush chose to give enough resources to the top 1% in new tax cuts as he could have used to save Social Security without benefit cuts.

GHARIB: Senator Kerry has suggested that we can grow our way out of the Social Security problem. But under the current system benefits are tied to wages, which reflect economic growth. So if we grow faster, doesn't the problem grow faster?

SPERLING: If you look at what Senator Kerry said in the debates, the first and foremost thing he said was to restore fiscal discipline. And that's to acknowledge that you have to be increasing savings now. His main point was that President Bush inherited a surplus, a degree of resources, that we could have as a society have committed to saving so that Social Security could be kept solvent. President Bush made the choice to use that money for tax cuts for top 1%. Now there's no question we're in a more difficult situation.

GHARIB: Gene Sperling, economic advisor to Senator Kerry. Thank you.

SPERLING: 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) 2004 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.

10/27/04: "My Greatest Challenge"-Peter Lynch, Vice Chairman of Fidelity Management & Research

SUSIE GHARIB: This year Nightly Business Report is celebrating its 25th anniversary. As part of that celebration, we worked with the Wharton school of the University of Pennsylvania to select the 25 most influential business people over the last 25 years. Now Wharton and NBR have published a book titled Lasting Leadership that profiles those leaders. This week, NBR’s Linda O’Bryon features three of those leaders talking about the challenges they've faced. Tonight, we begin with Peter Lynch, vice chairman of fidelity management and research. And Linda began by asking him about his greatest challenge.

PETER LYNCH, VICE CHMN., FIDELITY MANAGEMENT & RESEARCH: I think, when I had to decide what stocks to buy every day and when you make something a big position, the larger ones are 5 percent of your funds. Those are the ones that really make a difference. If something is one percent, and it falls in half or doubles, it obviously doesn't make as much difference as 5 percent. So you're making your 4 or 5 percent positions, and you have to be very careful you hit them right.

O’BRYON: You're representing so many others at that time?

LYNCH: Yeah, it was an amazing responsibility. Maybe one out of every 100 Americans was in my fund. So it was a great. Thank goodness the market went up, or we would have had to dye my hair and move to Fiji. But it was a good thing we had a good market.

O’BRYON: In 1982, when you decided to invest in Chrysler, the company was bankrupt. Almost no one wanted to buy the stock. Why did you take that risk?

LYNCH: Well, at the point I bought it, I don't think people had really done their homework. The company had a massive loan from the Federal government. They actually had the ability to borrow money. It was like a billion and a half and they hadn't used any of it. And at that point they were close to breakeven. The auto industry is very predictable when you have 4 or 5 bad years. There are inspections in 49 states, cars wear out, car loans are paid off. You usually have 4 or 5 good years. So we had 4 terrible years in a row, and it looked like the next couple of years would be good. And because of the problem Chrysler was in, the UAW, their union, was allowing them to reduce a lot of costs they weren't allowing General Motors and Ford to do. So they were close to breakeven. They had gone from losing $6.00 a share to losing $2.00, which I think is a $4.00 a share improvement. And when they went from losing to making $2.00, people really cared. But people didn't notice when they were going from losing $6.00 to losing $2.00, and I looked at that. I said they're doing better. The economy is doing better. They'll make a lot of money, and they've got the money to make it through the next 2 years.

O’BRYON: I understand that after you appeared on the program Wall Street Week in the early eighties and said you thought Chrysler was attractive as a stock. Some of your relatives called you up and said don't you know Chrysler is bankrupt?

LYNCH: Yeah, I mean it was funny how people said I enjoyed your presentation but what the heck were you thinking about Chrysler? Sorry about that one. That's hopeless. So that actually encouraged me. People hadn't done their homework.

O’BRYON: What was the investment that you most regretted?

LYNCH: Well, actually, the biggest regret by far was... I visited Home Depot I think when it had 5 stores. Loved the story. And I was dumb enough to have it double and say, well, I think it's got ahead of itself. And then it went up 20-fold after that and 30-fold after that. So it's the ones you sell that go up that hurt you the most. That was a huge mistake. The same, I think with Toys R Us. So that's like watering the weeds and getting rid of the flowers. It makes no sense. And that was really stupid.

O’BRYON: In the 13 years that you managed Magellan, the fund averaged annual gains of about 29 percent, almost double the returns on the S&P 500. Would that be possible today?

LYNCH: Well, I think it's possible. I think you have to be lucky. You have to work with a great company. I work with Fidelity. Great analysts, great fund managers, a lot of flexibility. I can buy companies that are in bankruptcy, in trouble. I can buy companies with unions, companies without unions. I can buy small companies. I have great flexibility, and I think that's a huge positive that I had. So I think you need that flexible approach. If you're locked in to just buying one type of company, I don't think you can do very well.

O’BRYON: You took early retirement at age 46. You’re still remaining very active, but why did you decide to retire when you were so successful at that point?

LYNCH: Well I worked every Saturday for 11 years. I was traveling 7 or 8 days a month on the road. I had a great wife. Still have that great wife and 3 wonderful kids, and I wasn't seeing enough of them. My father got sick at 43 and died at 46. I said maybe I’ll live to 146 but I think I’m just spending too many hours. So I was lucky enough to say cut it back. And my wife and I have averaged 100 days vacation in the last 10 years now.

O’BRYON: Given your challenges and successes, what are the lessons for today's leaders?

LYNCH: I think the point is to be flexible, no be stubborn. There's a huge difference between persistency and stubbornness. You have to look at the facts and say whoops I’m wrong and admit it and sell and go on to the next thing. Or say the company's getting better, the stock's going down, I’m right. And if I’m right the majority of the times, it'll make up for the times I’m wrong. So this is not like in the school where you get a lot of a-plusses and a-minuses and b-plusses. You get F's in the stock market. You can say that's it. I did everything right. Something happened I had no control over. But if I continue to do my homework, and I use a consistent system, I’ll be a winner.

O'BRYON: Thank you very much.

LYNCH: Thank you.

O'BRYON: Peter Lynch.

YASTINE: Tomorrow, John Bogle of Vanguard's greatest challenge and why his heart is in his work, quite literally.

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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.

10/27/04: The Hummer 3 Is About To Roll Out

SUSIE GHARIB, NBR CO-ANCHOR: And finally tonight, consumers who can't afford a Hummer H2 or the gas it guzzles are getting a break... sort of. Hummer is rolling out a smaller version of its tank-like SUV. Here's Diane Eastabrook with a preview of the Hummer H3.

DIANE EASTABROOK, NBR BUREAU CHIEF: General Motors debuted its Hummer H3 today at the California Auto Show. The Sport Utility Vehicle is about 1700 pounds lighter and about 17 inches shorter than its big brother the H2. It will also cost $10,000 to $20,000 dollar less.

SUSAN DOCHERTY, GENERAL MANAGER, HUMMER: This vehicle will be priced somewhere between $30,000 and $40,000 -- which is the price at which mid-sized sport utilities transact at. We can expect to get between 16 and 20 miles per gallon on the Hummer H3.

EASTABROOK: The H3 could provide an elixir for the Hummer brand's recent anemic sales which analysts blame partly on higher gas prices. GM bought the brand from AM General in 2,000 and rolled out its first product--the H2--in mid 2002. The giant H2 gets less than 10 miles per gallon of gasoline. Hummer sold about 36,000 H2s last year. But it's expected to sell far fewer this year. Docherty calls this year's sales estimates respectable for Hummer and thinks sales could more than double in the coming years with the H3 in showrooms.

DOCHERTY: This vehicle should hopefully be north of 40,000 units on an annualized basis.

EASTABROOK: But some industry watchers wonder if the novelty of the Hummer has worn thin with consumers and if the Hummer brand remains a good investment for GM.

CHRISTOPHER STRUVE, AUTO ANALYST, FITCH RATINGS: You'd have to see the business case to understand if it's a financial disappointment. I think they would obviously prefer to see volumes remain where they were.

EASTABROOK: Still Struve thinks the H3 could score well with consumers looking for a
mid-sized SUV. And it could even steal sales away from competitors like the Ford Explorer and the Jeep Cherokee. Diane Eastabrook, Nightly Business Report, Schaumburg Illinois.

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10/27/04: Paul Kangas' "Stocks In The News"

JEFF YASTINE: Today's decline in oil prices put stock buyers in a party mood, as the major indexes all posted nice gains for a second day. Traders looked past a weaker-than-expected report on durable goods orders and bid stocks higher based on those lower oil prices. The Nasdaq also helped out, with semiconductor stocks doing better than they have in recent days. Intel and Texas Instruments posted nice gains. The techs and blue chips stairstepped higher straight into the close of trading. The Dow, now back above 10,000, jumping over 113 points to 10,002.03. The Nasdaq rose 41 points to 1969.99, while the S&P 500 ended up 14 points at 1125.40. Demand was weaker-than-expected for the treasury's two-year bond auction. That sank bond prices. The ten-year note fell 23/23 lifting the yield to 4.09%.

10/27/04: Market Stats

                                      NET    PERCENT
                         CLOSE     CHANGE     CHANGE

DOW CLOSE             10002.03    +113.55      + 1.2
HIGH                                        10018.55
LOW                                          9841.95

NASDAQ COMP.           1969.99     +41.20       +2.1
HIGH                                         1971.28
LOW                                          1926.25

VOLUME                                       1,747.9
PREVIOUS                                     0,000.0
UP VOLUME                                    1,270.1
DOWN VOLUME                                  0,457.0

DOW TRANSPORTS         3475.20     +39.59      + 1.2
DOW UTILITIES           312.41      -2.13       - .7
CLOSING TICK                                    +729

S&P 500                1125.40     +14.31      + 1.3
S&P 100                 537.78      +6.09      + 1.2
MIDCAP 400              601.61      +9.09      + 1.5
REUTERS/CRB             285.40      -2.79      - 1.0

NYSE COMPOSITE         6665.87     +67.42      + 1.0
VALUE LINE              364.93      +5.14      + 1.4
RUSSELL 2000            587.18      +9.57      + 1.7
DJW 5000              11035.85    +142.07      + 1.3

U.S. TREASURIES
5-YEAR NOTE 3.375%
Oct. 15,2009         100  4/32     -12/32     + 3.35

10-YEAR NOTE 4.25%
Aug. 15,2014         101 10/32     -23/32     + 4.09

30-YEAR NOTE 5.375%
Feb. 15, 2031        107 25/32    -1 4/32     + 4.85

LEHMAN BROS.
LONG BOND INDEX        1767.79     -17.19


DOW CLOSE             10002.03    +113.55      + 1.2
ADVANCES                                        2285
DECLINES                                        1017
NEW HIGHS                                        237
NEW LOWS                                          28

                                      NET    PERCENT
NYSE MOST ACTIVES    4PM CLOSE     CHANGE     CHANGE
LU    Lucent Tech         3.49       +.04       +1.2
PFE   Pfizer             29.04       +.71       +2.5
NT    Nortel Networks     3.29       -.10       -3.0
TWX   Time Warner        16.39       +.16       +1.0
GE    GE                 33.95       +.32       +1.0
C     Citigroup          43.95       +.61       +1.4
HAL   Halliburton Co     36.72       +.99       +2.8
CAH   Cardinal Health    47.35      +8.02      +20.4
PG    Procter & Gamble   51.78      -1.43       -2.7
DAL   Delta Air Lines     4.94       +.31       +6.7

NASDAQ CLOSE           1969.99    + 41.20      + 2.1
VOLUME                                       2,088.6
PREVIOUS                                     1,833.7
ADVANCES                                        2143
DECLINES                                         927

NASDAQ ACTIVES
GOOG  Google            185.97      +4.17       +2.3
MSFT  Microsoft          28.15       +.25        +.9
INTC  Intel              22.00       +.60       +2.8
AAPL  Apple Computer     50.30      +2.33       +4.9
CSCO  Cisco Systems      18.55       +.44       +2.4
EBAY  eBay               98.67      +3.42       +3.6
QCOM  Qualcomm           41.02      +1.52       +3.9
AMAT  Applied Matl       16.14       +.45       +2.9
SINA  Sina Corp          35.29      +7.10      +25.2
YHOO  Yahoo!             36.18      +1.09       +3.1

AMEX CLOSE             1314.84     + 3.27       + .3

INDEX SHARES
DIA   DIAMONDS TRUST    100.14      +1.07       +1.1
QQQ   NASDAQ 100         36.73       +.89       +2.5
SPY   S&P DEP.RECEIPTS  112.88      +1.34       +1.2

STOCKS IN THE NEWS
BA    Boeing Co          50.10       +.12        +.2
LLY   Eli Lilly          56.20      +3.75       +7.2
AFL   Aflac Inc          35.79      -1.85       -4.9
BBI   Blockbuster         6.81       -.28       -4.0
AAI   AirTran Holdings   11.64      +1.39      +13.6
AAII  aaiPharma           2.64       +.98      +59.0
LSCP  Laserscope         26.20      +6.49      +32.9
ZRAN  Zoran Corp          9.85      -2.84      -22.4