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08/26/05:
Rising Gas Prices Are Slowing Consumer Spending
JEFF YASTINE: Red flags about the economy, both now and
down the road, were the talk on Wall Street today. Stocks fell on concerns
about a big drop in consumer sentiment and comments about the housing
market by Federal Reserve Chairman Alan Greenspan. As Erika Miller
reports, economists blame consumers` growing pessimism on skyrocketing
gasoline prices.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: For many
months now, motorists have been grumbling about rising gasoline prices.
But the latest sentiment data has economists concerned that consumers are
moving beyond words to action. They fear Americans are starting to cut
discretionary spending to cope with higher energy costs.
RICHARD YAMARONE, DIRECTOR OF ECONOMICS RESEARCH, ARGUS: We used
to complain about them, that is higher prices. We don`t really like it
that much, but, now it`s "hey wait a second. Maybe we have to start cutting
and trimming some of our spending habits a little bit.
MILLER: It`s the University of Michigan consumer sentiment survey
that`s raising red flags. It showed a sharper than expected drop in
August, falling to 89.1 from 96.5 in July. That is the largest decline
since February. Economists say what is particularly troubling is a decline
in consumers` optimism about the future. The expectations component of the
survey fell to 76.9 in August, from 85.5 in July. Economists say that may
mean consumers view high fuel costs as a long-term problem for the
economy.
The average price of regular unleaded gasoline hit a record percent $2.61
this week, a 40 percent increase from last year. As a result, economists
are betting the next consumer confidence figure will be even lower.
STEVE WIETING, SR. ECONOMIST, CITIGROUP: We`ve lost about 10
percent of our incomes gain last year. During these peak summer months, it
may be approaching 20 percent of the income gain. So, I think that you
could see some softer readings in the consumer sentiment readings,
certainly in the month of September.
MILLER: Over the past few years, there hasn`t been much correlation
between consumer sentiment and spending. But some analysts say that`s
starting to change as fuel prices continue to hit new highs.
YAMARONE: I don`t think it`s at a calamitous stage where hey,
families are gathering around the table saying we`re going to cancel our
trip to Disney world because it costs an extra $25 to fill the tank. But I
do suspect that consumers are pulling back on their superfluous spending.
MILLER: No one is expecting consumer spending will dry up
completely. But some economists predict retail sales will be weak in
August and September, typically the biggest selling season after
Christmas.
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) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
08/26/05:
Fed Chairman Alan Greenspan Offers Warnings About Investment Risks
PAUL KANGAS: Fed Chairman Alan Greenspan is taking a longer-term view of
the economy tonight and he doesn`t like what he sees. At a conference in
Wyoming, Greenspan issued a sharp warning about risks in housing and
financial markets and cautioned investors about the risks they take, versus
the rewards they get. Darren Gersh reports.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: For years, the
Federal Reserve has insisted it doesn`t target the price of homes, stocks
or other assets when setting interest rates. Today, Fed Chairman Alan
Greenspan amended that view somewhat, telling a conference on monetary
policy quote, our forecasts and hence policy are becoming increasingly
driven by asset price changes. Greenspan also expressed concern that
investors are not demanding enough return for the risks they are taking.
And that could be painful, if the current era of easy money comes to an
end. Any onset of increased investor caution elevates risk premiums
Greenspan said, and as a consequence, lowers asset values and promotes the
liquidation of the debt that supported higher asset prices. This is the
reason that history has not dealt kindly with the aftermath of protracted
periods of low risk premiums.
It was the toughest Fed warning on asset prices since the words
"irrational exuberance" left the chairman`s lips in 1996. Fed watcher
Steven East says the chairman is stepping up the warnings as he prepares to
leave office early next year.
STEVEN EAST, CHIEF ECONOMIST, FBR: He sounds to me like a Fed
chairman who is not quite pleased with the state of affairs and I think the
inference from that is they are going to continue to do something about
that, i.e. continue to raise interest rates.
GERSH: Economic forecaster Jack Albertine also detects some
frustration in Greenspan`s speech. The Fed has been raising short term
interest rates aggressively, but long term rates, which are more crucial to
the economy are not following that lead.
JACK ALBERTINE, ECONOMIC FORECASTER, ALBERTINE ENTERPRISES: In
other words, mortgage rates for example 10, 15, 30 year mortgage rates, I
think he believes they should be higher than they are. And the fact that
they`re not, means that there are an awful lot of borrowers that are
betting that future inflation rates will be very low. They may or may not
win that bet. And I think that is what he is worried about.
GERSH: And the Fed is growing more worried about inflation. The
central bank`s favorite measure of rising prices was recently revised
upward from 1.5 percent to 2 percent, near what many think is the upper
limit of the Fed`s comfort zone. 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) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
08/26/05:
The Outsourcing Security Risks
SUSIE GHARIB: As a growing number of American companies outsource
their business to India, there are growing concerns over one aspect of that
trend and that`s data security. Recent instances of theft of confidential
information are forcing India`s booming business processing outsourcing or
BPO sector, to beef up security. As Smita Prakash reports from New Delhi,
the key now is to assure customers their data is safe.
SMITA PRAKASH, NIGHTLY BUSINESS REPORT CORRESPONDENT: The BPO
sector has been described as India`s cash cow, growing at 60 to 70 percent
per year. Low cost, processed maturity, time zone advantages and the
availability of educated manpower has helped build the multibillion
industry that serves as the back office for customers around the world.
But the theft of confidential information followed by a sting set up by a
British magazine created major concerns among businesses about the security
of their data at Indian BPO companies.
ANANTH KOPPAR, PRESIDENT, MPHASIS TECHNOLOGIES: One very good thing
is that we have good cyber laws and cyber security is very good, compared
to many of the developing countries and the developed countries. This kind
of fraud happens day in and day out in many large countries and where it
happened, in a very small operation in India, but I think we have given the
full control.
PRAKASH: India`s BPO responded with stronger background checks of
employees, heavier security, and monitoring through state-of-the-art
technology at call centers handling confidential information. Employers
also stepped up security training and established ethics hotlines to try
and stop any illegal activities by workers.
ASHEESH MISHRA, ASST. SALES MANAGER, TECHNOVATE: (INAUDIBLE)
recruitment, (INAUDIBLE) there were three checks that were made, the
previous history with the employer that I worked with. Then we had another
course which is called BSM799. It`s a mandatory course that we have to go
through and clear it before we join a company like this. That course is
all about where we learn about the data, how to keep the data secured. And
part of procedures that you have to go through. Once you finally cross it,
that`s how you get it, get a chance to join this company.
PRAKASH: Along with new ways to track offenders, the government
began titling its cyber laws. Indian officials know the sector is the
biggest contributor to the economy. They promised to do all that is needed
to protect it.
KIRAN KARNIK, DIRECTOR GENERAL, NASSCOM: We have set up a
(INAUDIBLE) laboratory because of (INAUDIBLE) fingerprinting of forensic
laboratory where you`re really able to start collecting, collect
evidence, get it all together. So this (INAUDIBLE) goes on. But it`s an
ongoing one.
PRAKASH: Security which had always been important has now become
more important than ever before at the BPO centers.
These are the modern Taj Mahals of India, gleaming glass buildings that
house thousands of English-speaking customer service representatives who
answer tech support calls and credit card questions. They realize
that if they are to grow their business, they need to protect customer data
in order to sustain global consumer confidence, without which the Indian
BPO industry cannot survive. Smita Prakash, NIGHTLY BUSINESS REPORT, New
Delhi.
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) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
08/26/05:
"Market Monitor"-Alexander Paris Jr., Vice President & Director of Research at Barrington Research Associates
PAUL KANGAS: My guest "market monitor" this week is Alexander Paris Jr.,
vice president and director of research at Barrington Research Associates
based in Chicago. Welcome to NIGHTLY BUSINESS REPORT, Alex.
ALEXANDER PARIS, RESEARCH DIRECTOR, BARRINGTON RESEARCH: Hi, Paul,
it`s great to be here.
KANGAS: Since this is your first visit as a market monitor with us,
give us a brief sketch of what your recent strategy towards the stock
market has been.
PARIS: Well, at Barrington Research, we have been largely focused
on small and mid cap over the last few years and it is a strategy that has
paid out pretty well.
KANGAS: Of course, these days it`s almost imperative we get an
analyst`s thoughts on oil. So let`s divert for a moment. What are your
thoughts?
PARIS: Well, I think oil is higher than most people expected it to
be. Oil at $65 to $70 a barrel in our opinion is not sustainable. If we
were to kind of hold these levels for a long period of time, I think it`s
going to have an impact on global economic growth, which will impact demand
and in turn it will impact prices and hedge funds, which have piled into
energy long plays, chasing return will be the first out on any signs of
momentum shift. So I think if we were to maintain the $65 to $70 range, I
think it`s going to slow down the economy and provide some price relief to
consumers.
KANGAS: Understood. Well, the other major topic these days, of
course interest rates. Do you think they`re close to topping out?
PARIS: Well, in July, I think most people felt they were close to
topping out. A lot of strategists were talking about the Fed was in the
8th inning of the rate increase cycle. The economy was slowing, that sort
of thing and here we are in August. I think after several strong economic
reports, including the job report, I think mostly that we would agree that
the Fed`s not done yet. I would not be surprised to see the Fed raise
interest rates each and every meeting for the balance of the year,
finishing the year at about 4.25 percent. I`m not too worried about that
however. Interest rates are rising from what has been historically low
levels. I don`t think they`re restrictive at this point. We are sort of
neutral to slightly stimulative at current levels.
KANGAS: All right. Now tell us about some of your current asset
allocation strategy.
PARIS: Well, we sort of think at this point in the economic expansion,
a mid cycle adjustment or rebalancing of portfolio is reasonable. I think
a strategy shifting from small cap stocks to larger stocks, from value
stocks to growth stocks and from cyclical stocks to more defensive issues
might be appropriate. It`s really a reversion to the mean strategy. That
and the former group that I mentioned there, they all out performed the
latter group over the last several years and they`re due for their period
of out performance, probably going forward.
KANGAS: Now I understand you do like some micro cap stocks. Is that
true?
PARIS: Yeah, we have been spending a lot of time in the micro cap
sector. Notwithstanding what I said with regard to cyclical asset
allocation, we think there`s a real secular trend in micro cap investing.
KANGAS: OK.
PARIS: Micro caps are those stocks with market caps below $500
million. Micro caps are really the new small cap.
KANGAS: OK We`re running out of time Alex. Maybe you have some
specific micro cap suggestions.
PARIS: Absolutely. I have four ideas today. They`re all very
similar in that they`re micro cap, that they`ve very under followed by Wall
Street. They have low debt, lots of cash and attractive evaluations.
KANGAS: OK, let`s start with number one here.
PARIS: Number one is Concord Career Colleges. It`s a $17 stock
with about $100 million market cap. It`s the smallest of the publicly
traded for-profit education stocks. It`s got a crystal clean regulatory
record. The stock was once 28. Today as I said at 17. It`s $3 a share in
cash and we got a $20 price target.
KANGAS: Moving along, number two?
PARIS: GP Strategies, it`s a leading peer play provider of
corporate training to "Fortune" 500 companies and government. It`s a play
on e learning. It`s a play on business process outsourcing and homeland
security. The stock is currently about $8 and we got an $11 price target
on it.
KANGAS: OK and then three and four. We hurry, we can get them both
in.
PARIS: Sure, Cyber Optics, symbol CYBE, $13.75 on the NASDAQ. It`s
about a $125 million market cap. It supplies sensors to the electronic
circuit board assemblers. The stock has $5 a share in cash. We think it
could be $20 in a year.
KANGAS: And the last one?
PARIS: Last one is Quixote Corp., symbol QUIX. It`s a Chicago-
based pure play, direct beneficiary on the Federal highway bill just
recently signed. It`s $20 now. We think it could go to $30.
KANGAS: Do you own them all?
PARIS: I personally own the first two. We own all of them through
our sister company Barrington Asset Management and in the Barrington long-
term opportunity fund.
KANGAS: OK. Very interesting Alex. We appreciate your input.
PARIS: Thank you very much. It`s great to be here.
KANGAS: My guest, Alex Paris Jr. of Barrington Research
Associates.
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) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
08/26/05:
"Paul Kangas' Stocks In The News"
PAUL KANGAS: Stocks opened on the defensive as oil prices hovered near
record highs. The Dow fell 44 points at the outset of trading and the
NASDAQ lost 11 points. That larger than expected drop in consumer
sentiment and Fed chief Greenspan`s warning sent the market still lower.
The Dow was off 57 points in early afternoon, the NASDAQ down 15. A late
rally attempt lost out to pre-weekend caution and the market ended broadly
lower.
The Dow industrial average closed off 53 1/3 points at 10,397.29.
This week, the Dow rose twice, fell three times, had an overall loss of
161.94 points. The NASDAQ Composite fell 13.60 today to 2120.77. It too
rose twice and fell three times this week and loss 14.79 points overall.
Standard & Poor`s 500 dropped 7.30, ending at 1205.10 today. In the bond
market, the 10-year note fell 7/32 to par and 16/32, putting the yield at
4.19 percent.
Volume leader on the big board, trading 12.7 million shares was
Pfizer (PFE) edging $0.02 higher.
Followed by General Electric (GE) with a $0.12 loss.
Wal-Mart Stores (WMT) moved up $0.41.
Lucent Technology (LU) a $0.03 drop.
Verizon Communications (VZ), fifth in volume, was a $0.09 loser.
Citigroup (C) fell $0.32.
But Hewlett-Packard (HPQ) bucking the trend here, up $0.11. The
board of directors has authorized the repurchase of an additional $4
billion in common stock of Hewlett.
ExxonMobil (XOM) down $0.77.
And then Sprint Nextel (S) $0.37 loss.
Tenth in volume was Time Warner (TWX) with an $0.08 drop.
Saks Incorporated (SKS) fell $2.23. The trade publications "Women`s
Wear Daily" reports the company failed to get a buy out offer for the
entire firm, just certain parts. It is expected Saks will announce results
as early as this weekend.
Liberty Corp (L) the star of the day, up $10.06, almost 29 percent
gain. Raycom Media will acquire this company for $47.35 a share in cash.
Precision Cast (PCP) up $6.73. Positive reaction to the company`s
news it`ll acquire Special Metals Corporation, a private firm. Price: $540
million and it said this acquisition will result in $10 to $15 million in
synergies in just the first 12 to 15 months after that acquisition.
Seagate Technology (STX) down $0.88. Morgan Stanley downgraded it
from "over weight" to "equal weight."
Chico`s Fas (CHS) dropped $3.09, about an 8 1/3 percent drop. After
the close yesterday, Chico`s reported higher second quarter earnings,
$0.27, versus only $0.20 a year ago and that was in line with estimates.
But then the company went on to say its gross margins will be narrowing in
the third quarter and that apparently is what hurt the stock.
Engelhard Corp (EC) moving up $0.89. JPMorgan upgraded it from
"neutral" to "over weight" because of its attractive valuation says JPM.
First Bancorp of Puerto Rico (FBP) up or down $1.79. This is Puerto
Rico`s second largest bank and it received a letter from the SEC saying the
agency was conducting an informal investigation regarding accounting of
mortgages and interestingly, Doral Financial, Puerto Rico`s largest bank,
got a similar letter from the SEC. Doral stock dropped $0.73 to close at
$13.85.
Google (GOOG) was the volume leader on NASDAQ with a $0.99 gain.
Then Microsoft (MSFT) $0.06 drop.
$0.05 loss in Intel (INTC).
Cisco Systems (CSCO) fell $0.08.
Dell (DELL) $0.16 drop there, fifth in dollar volume.
Ebay (EBAY) moved up $0.09.
Apple Computer (AAPL) a $0.32 loss.
Research in Motion (RIMM) fell $1.14.
Symantec (SYMC) a $0.32 gain.
And then tenth in volume was Yahoo! (YHOO) with a $0.09 gain.
Omnivision Technologies (OVTI) moving up $1.27. First quarter earnings
$0.24, down from $0.32 a year ago, but the company sees second quarter
earnings rising to $0.33 at best, so that would be $0.04 above the Street
estimate.
DOV Pharmaceuticals (DOVP) losing about 16 1/2 percent with that drop
of nearly $3. The company has halted late stage trials of its anti-anxiety
drug on concerns that it may cause liver damage.
American Technical Ceramics (AMK) over on the American exchange, down
$1.18. The company had sharply lower fourth quarter earnings of $0.16, well
below last year`s $0.36 a share.
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) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
08/26/05:
Market Stats
Market Stats
DOW CLOSE 10397.29 -53.34 - .5
HIGH 10450.95
LOW 10383.98
NASDAQ COMP. 2120.77 -13.60 -.6
HIGH 2133.17
LOW 2118.04
VOLUME 1,179.7
PREVIOUS 1,200.6
UP VOLUME 234.9
DOWN VOLUME 930.6
DOW TRANSPORTS 3667.36 -28.59 - .8
DOW UTILITIES 399.90 -2.21 - .6
CLOSING TICK -260
S&P 500 1205.10 -7.30 - .6
S&P 100 558.79 -3.10 - .6
MIDCAP 400 698.24 -6.61 - .9
REUTERS/CRB 317.10 -1.23 - .4
NYSE COMPOSITE 7379.86 -54.72 - .7
VALUE LINE 403.01 -3.73 - .9
RUSSELL 2000 648.64 -9.06 - 1.4
DJW 5000 12042.41 -80.94 - .7
U.S. TREASURIES
5-YEAR NOTE 4.125%
Aug. 15,2010 100 5/32 -8/32 + 4.09
10-YEAR NOTE 4.25%
Aug. 15,2015 100 15/32 -8/32 + 4.19
30-YEAR NOTE 5.375%
Feb. 15, 2031 115 6/32 -6/32 + 4.38
LEHMAN BROS.
LONG BOND INDEX N/A N/A
DOW CLOSE 10397.29 -53.34 - .5
ADVANCES 974
DECLINES 2311
NEW HIGHS 61
NEW LOWS 40
NET PERCENT
NYSE MOST ACTIVES 4PM CLOSE CHANGE CHANGE
PFE Pfizer 24.89 +.02 +.1
GE GE 33.38 -.12 -.4
WMT Wal-Mart Stores 45.70 +.41 +.9
LU Lucent Tech 3.05 -.03 -1.0
VZ Verizon Comm 32.60 -.09 -.3
C Citigroup 43.10 -.32 -.7
HPQ Hewlett-Packard 27.01 +.11 +.4
XOM Exxon Mobil 58.41 -.77 -1.3
S Sprint Nextel 25.39 -.37 -1.4
TWX Time Warner 17.56 -.08 -.5
NASDAQ CLOSE 2120.77 - 13.60 - .6
VOLUME 1,298.7
PREVIOUS 1,337.3
ADVANCES 941
DECLINES 2050
NASDAQ ACTIVES
GOOG Google 283.58 +.99 +.4
MSFT Microsoft 26.97 -.06 -.2
INTC Intel 25.41 -.05 -.2
CSCO Cisco Systems 17.40 -.08 -.5
DELL Dell 35.32 -.16 -.5
EBAY eBay 38.97 +.09 +.2
AAPL Apple Computer 45.74 -.32 -.7
RIMM Rsch In Motion 77.18 -1.14 -1.5
SYMC Symantec 20.33 +.32 +1.6
YHOO Yahoo! 33.57 +.09 +.3
AMEX CLOSE 1617.36 - 10.36 - .6
INDEX SHARES
DIA DIAMONDS TRUST 103.90 -.54 -.5
QQQ NASDAQ 100 38.46 -.13 -.3
SPY S&P DEP.RECEIPTS 120.76 -.79 -.7
STOCKS IN THE NEWS
SKS Saks 21.82 -2.23 -9.3
LC Liberty Corp 47.51 +10.06 +26.9
PCP Precision Cast 96.75 +6.73 +7.5
STX Seagate Tech 17.27 -.88 -4.9
CHS Chico's Fas 33.98 -3.09 -8.3
EC Engelhard 28.39 +.89 +3.2
FBP First Bancorp 18.23 -1.79 -8.9
OVTI Omnivision Tech 14.65 +1.27 +9.5
DOVP Dov Pharma 14.99 -2.98 -16.6
AMK Amer Tech Ceramic 11.21 -1.18 -9.5
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