9/21/05:
Energy Worries Fueled By Hurricane Rita
SUSIE GHARIB: Another volatile day for energy
prices on concerns that hurricane Rita could damage or destroy key oil
facilities in the Gulf of Mexico and Texas. In New York trading, crude oil
prices, gasoline prices, and natural gas futures all moved higher, as Rita
grew into a monster category five hurricane. Erika Miller has more on
Rita`s potential impact on the energy markets.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: It was even
more frenetic than usual in the oil pit of the New York Mercantile Exchange
as traders bet on possible destruction from hurricane Rita. Traders were
riveted to weather reports tracking the path of the storm, which was
upgraded to a category five late today.
ERIC BOLLING, INDEPENDENT OIL TRADER: The real interesting part is
which direction it`s going to take. If it takes the path that`s projected
right now, you will probably see some substantial damage to the
infrastructure along the Gulf coast.
MILLER: Crude oil futures for November delivery closed up $0.60 at
$66.80 a barrel. That was well off the highs for the day. Gasoline
futures for October lept $0.08 to $2.05 a gallon. Prices pulled back after
fresh inventory data showed an unexpected rise in some petroleum supplies.
Gasoline stockpiles rose by 3.4 million barrels. Distillates, which
include heating oil, gained by 800,000 barrels. Crude inventories bucked
the trend, falling 300,000 barrels. Most traders agree, the direction of
crude prices depends entirely on the path of Rita. Of particular concern
is damage to Texas oil refineries which escaped the wrath of hurricane
Katrina three weeks ago.
JACK AYDIN, OIL ANALYST, KEYBANC CAPITAL MARKETS: I think you`ve
got 26 percent of U.S. refining capacity in that area. So, any refinery
that goes down is going to have an impact on gasoline supplies, distillate
supplies that are available in the country.
MILLER: Oil companies like ExxonMobil have already evacuated
workers and cut production. And some refiners are already reducing their
output. Under the worst case scenario, Aydin predicts crude prices could
hit $70 a barrel in coming sessions. That, he says could send gasoline
prices at the pump back to record highs. If on the other hand, there is
minimal damage to oil facilities in the area, Aydin expects crude prices to
retreat sharply. There are concerns that hurricane Rita could become even
more dangerous as she makes her way across the Gulf of Mexico. Right now,
the hurricane is projected to make landfall late Friday or early Saturday.
Erika Miller, NIGHTLY BUSINESS REPORT, New York.
SUSIE GHARIB: Joining us now for more analysis of the energy
risks of hurricane Rita, Bill O`Grady, assistant director
of market analysis at AG Edwards. Hi, Bill.
BILL O`GRADY, ASSISTANT DIRECTOR OF MARKET ANALYSIS, A. G. EDWARDS:
Hi, Susie.
GHARIB: All right, let`s talk worst case scenario, that Rita shuts
down the bulk of refineries for a month. What does that mean to the U.S.?
O`GRADY: Well, it would take out just shy of 20 percent as I
estimate of U.S. refining around this area, plus the additional 4 percent
to 5 percent that`s already out because of hurricane Katarina. We would
lose about 25 percent of our refining capacity. This would mean a
significant increase in product prices, gasoline is where we would see it
first but it would also affect diesel and heating oil. Interestingly
enough, it might not actually be all that bullish for crude oil because you
would lose -- losing this productive capacity also depresses the demand for
crude and so we may see margin expansion for refiners but it may come from
mostly increases in product prices and less so with crude oil.
GHARIB: So how real is $5 a gallon gasoline?
O`GRADY: Well, you know, it`s a really interesting question. I`ve
seen this bandied about in the media today. And I think to get to $5 you
have to assume that there is no sensitivity or little sensitivity on
consumers to higher gasoline prices. And I`m just not quite sure that is
the case. We`re in a seasonally weak period of the year for gasoline
consumption. And I suspect that at above $3, we already saw some reaction
by consumers. If prices move significantly above $3, I suspect you would
see a significant reaction by consumers to conserve.
GHARIB: So let`s say that Americans do become very conservation
conscious because of high prices, what does that do to the whole
supply/demand picture? What does it do to the demand side?
O`GRADY: If you look at what happened in the United States from
1980 to 1985, you saw significant decline in energy consumption and a lot
of that was done because prices got high, and consumers changed their
behaviors. You remember, we ditched our larger cars. We bought smaller
ones. We went to 55 miles an hour on the highway. These are all things
that we can do again and in fact we could do even better. For oil
producers, this is frankly the nightmare scenario because once that demand
-- once these changes occur that demand growth is generally lost for a
number of years. And I think this is one of the reasons why OPEC has
attempted to jawbone the market lower.
GHARIB: Let me get back to Rita and the potential risks here. You
were telling me earlier that Rita is what you call a refinery storm in that
it is going to really impact the refinery, so it is understandable why
there is a potential for gasoline prices and natural gas prices to be going
up. But why are we also seeing crude prices rising?
O`GRADY: Well, one of the interesting things that comes up with
this is that as product prices go up, it increases refining margins. And
it tells refiners, not just the United States, but more importantly
worldwide, that there is money to be made by buying crude oil, refining it
and shipping it to the United States. And so as worldwide refining margins
increase, the demand for crude oil rises. Now what is interesting is that
if we do get the worst case as I put it and we do see another significant
choke of U.S. refining capacity taken off line, there may be enough taken
off line to where the demand effect for crude oil ceases to exist.
Frankly, we have never seen it happen before so we really don`t have a
history to go on.
GHARIB: Let me see if I can squeeze in one more question before we
run out of time. We saw that the dollar was down today and gold was up
sharply. So what is the message of these markets?
O`GRADY: One other market I would like to throw in there too, we
also saw falling long-term interest rates. I think it is a signal from the
markets that the Federal Reserve probably went a step too far. And that we
run the risk of depressing growth, especially if we start to see another
lift in energy prices because of hurricane Rita. So the Fed may have made
a mistake and that was the message of the markets today.
GHARIB: All right, Bill, thank you very much. Nice talking to you.
We`ve been speaking to Bill O`Grady, assistant director of market analysis
at AG Edwards.
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.
09/21/05: The High Cost Of Hurricanes
JEFF YASTINE: Only three category five hurricanes have made landfall in
the United States since records have been kept on the subject. If Rita
becomes the fourth, the economic damage will come on top of Katrina`s toll.
As the debate over how to pay that bill is underway in Washington, in
Texas, evacuations are underway as well. Darren Gersh reports.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: These are the
first of what`s expected to be one million people ordered to get out of
Rita`s way. The president urged citizens to heed the warnings to evacuate.
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We hope and pray
that hurricane Rita will not be a devastating storm, but we`ve got to be
ready for the worst.
GERSH: First, Katrina, now Rita, it`s an understatement to say the
massive storms have upended the nation`s agenda. The fight to reset
priorities is just beginning. Conservatives in the House of
Representatives today launched "operation offset," calling for spending
cuts to cover the cost of the hurricanes. Some even want to postpone or
scale back the new Medicare drug benefit.
REP. ZACH WAMP, (R) TENNESSEE: The big dollars are in the
prescription drug bill, if you want to look at big dollars. There is no
question, if we could redo it, replace it with a more limited benefit to
help needy seniors, that would be the ideal thing.
GERSH: But the top Republican in the House rejected that idea out
of hand. He also brushed aside calls to strip out special projects in the
highway bill.
REP. DENNIS HASTERT (R) SPEAKER OF THE HOUSE: Some people say we
ought to do away with the highway bill. It`s exactly the highway bill that
we need, especially in southern Mississippi and other parts to rebuild the
infrastructure.
GERSH: Democrats want to abandon many of the Bush tax cuts.
Republicans fire back that would tank the economy. Meanwhile, members of
the congressional black caucus say spending cuts in Medicaid and other
programs would hurt the survivors of Katrina.
REP. MELVIN WATT, (D) NORTH CAROLINA: We will oppose any cuts
that we believe will disproportionately impact poor people and African
Americans.
GERSH: Now with Rita, the likelihood of cutting spending to cover
the cost of rescue and rebuilding for both storms seems even more remote.
SEN. CHARLES GRASSLEY (R) FINANCE COMMITTEE CHAIRMAN: We`re in an
emergency if we`ve ever been in an emergency. This is the biggest natural
disaster to ever hit our country and we are an insurer of last resort in
many instances.
GERSH: The president emphasized his commitment to his pre-storm
agenda by meeting briefly today with his commission on Social Security
reform, but the White House is quick to add that hurricane Katrina and now
Rita remain top priority. 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.
09/21/05: Immigrant Carding Biometric Style
SUSIE GHARIB: By next October, countries whose citizens can
now enter the U.S. without visas are required to have adopted passports
with a new kind of technology embedded in them. The so-called biometric ID
chips match fingerprints or eye scans and they were mandated under the
patriot act after 9/11. But for years now, Malaysia has been using the
system. As Rian Maelzer reports, one Malaysian company has led the way on
making the system work.
RIAM MAELZER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Malaysians
whip through the immigration check at Kuala Lumpur international airport in
seconds. That`s thanks to a decision the government made in the mid `90s
to combat rampant forging and tampering with Malaysian passports, the
introduction of the biometric or e-passport.
TAN SAY JIM, CEO, IRIS CORP.: It attracted a bit of criticism in
the sense that so what, it can only be used in Malaysia and a fair bit of
cynicism, in the sense "are you sure it`s reliable. How can you put a
piece of silicone, which is so fragile into the back cover of the book?"
MAELZER: After a lot of trial and error, local company Iris
Corporation came up with a robust and workable design and in 2000 Malaysia
became the first country to have a fully operational e-passport system.
The first generation compressed and encrypted the photo and information
from the front page and put it on a chip embedded in the back cover.
The second generation contains thumb prints, which a reader then
scans for a match. Many countries are now following Malaysia`s lead. And
that`s providing opportunities for Iris Corporation. Iris has a $64
million contract to provide the technology and implement an e-passport
system for Nigeria and a contract to provide components for Thailand`s
electronic passport. It has also partnered Hewlett-Packard on New
Zealand`s e- passport program. Iris may have been the pioneer, but some
formidable competition has rapidly sprung up.
EDDY CHEAH, AGAPE CONSULTANTS: Because this kind of system
encompasses so many disparate technologies, there are various players now.
The smart card manufacturers, the biometrics providers and then systems
integrators for identity type systems.
MAELZER: European smart card makers Axalto and Gemplus, as well as
U.S. firms like IBM and Biometrics specialist Cogent Systems are among
those battling for a slice of what`s soon expected to be a $7 billion a
year industry. But consultant Eddy Cheah says a company like Iris can also
team up with its competitors on projects. Iris can now do everything in
the production and implementation of e-passport systems short of binding
the actual books. And the company believes it has another, unique
advantage.
TAN SAY JIM: We know the problems faced by security printers. We
know the problems faced by immigration departments, how to issue the travel
documents. We can lay claim to being the only company that has got a
reference site, live, and five million test cases for you to verify.
MAELZER: Iris may be a success at home, but the Malaysian
company knows if it`s to keep growing in the years ahead,
it needs to find other countries keen to keep their borders
secure, without inconveniencing their citizens. Rian Maelzer,
NIGHTLY BUSINESS REPORT, Kuala Lumpur.
To learn more about this topic, click
here.
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.
09/21/05: "Money File"-The Vacation Time Donation Program
SUSIE GHARIB: In the "money file" tonight, a way to help those hurt by the damage
done by hurricane Katrina that won`t cost you a penny. Here`s Kathy
Kristof, business writer for the "Los Angeles Times" and author of
"Investing 101."
KATHY KRISTOF, AUTHOR, "INVESTING 101": Normally, people who don`t
itemize deductions can`t enjoy tax benefits for giving to charity. But, a
program that the IRS kicked off last week creates an exception to that
rule. The IRS approved a temporary regulation that would allow companies
to create "leave-based donation programs" to provide help for hurricane
victims.
These programs would allow employees to essentially give away their
accrued vacation time. The company in turn provides a check for the value
of the vacation days to a relief organization. The donated time could be
spare hours that the employee had banked or it could simply be time that
they won`t take in the future. Neither the company nor the worker pays tax
on the value of the paid time off and that provides tax benefits to
everyone.
There is just one catch: employees may have to convince their
companies to go along with the program. That`s because there are
significant administrative challenges associated with cashing out a
worker`s vacation days. Nonetheless, some employer groups say that they`ll
seriously consider doing anything they can to help. And the IRS is giving
companies until the end of 2006 to adopt a program because the agency
believes displaced hurricane victims may need help for a very long time.
So if you like the idea, it`s worth asking your benefits department whether
this is or soon will be an option. I`m Kathy Kristof.
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.
09/21/05:
"Paul Kangas' Stocks In The News"
JEFF YASTINE: Those high oil prices and the after effects of yesterday`s
Federal Reserve`s rate hike, rattled the markets today. The Dow losing
about 50 points in the first half hour. Financial stocks were notable
decliners. American Express fell by more than 2 percent on the Fed`s
apparent commitment to more rate hikes. The NASDAQ was even weaker, with
small cap techs and retailers leading the way lower and the Dow closing off
103.49 points to 10,378 and a fraction, the NASDAQ sliding over 24 points
to 2106.64 and the S&P 500 dropping 11 to 1210.2. And in the bond market,
the 10-year note closing up 18/32 to 120/32 putting the yield at 4.17
percent.
And starting things off, Avon Products (AVP) down $3.60. The cosmetics
firm blaming the disruptions from hurricane Katrina and weakness in
overseas markets for that downfall. Full year profits expected to be a
fraction of what it earned a year ago.
Wal-Mart Stores (WMT) down $0.72 and a new yearly low for the stock.
Lucent Technology (LU) rising $0.07.
Sprint Nextel (S) down $0.45.
Pfizer (PFE) losing a fraction.
General Electric (GE) finished down $0.29.
As did Time Warner (TWX). CEO Dick Parsons says the company remains
committed to its AOL unit but more stock buybacks could also be in the
cards for Time Warner shareholders.
ExxonMobil (XOM) gaining $0.44 on a new all-time high as hurricane
Rita heads potentially for the Texas Gulf coast refineries.
And here`s Bank of America (BAC) ending off $0.74. BAC was among the
financials on the downside as the Fed maintains its stance of raising
interest rates at quote, measured intervals.
And taking a look at some of the financials heading south today,
American Express (AXP), Citigroup (C), Capital One Financial (COF),
JPMorgan Chase, Merrill Lynch (MER) all down significantly.
And rounding out the most actives, Motorola (MOT) falling $0.40.
Here`s another hurricane Rita play. Shares in Valero Energy (VLO), the
largest U.S. gasoline refiner gaining more than 3 percent and it is a shade
below its all-time high.
And a look at some of the other oil stocks, Frontier Oil (FTO), Sunoco
(SUN) and XTO Energy (XTO) all gaining on the plus side today.
Shares in General Motors (GM) falling $0.38. Kirk Kerkorian`s Tracinda
Corp. wants to raise its ownership stake to nearly 10 percent of GM`s
outstanding shares and will seek a seat on General Motors board of
directors.
Mcdonald`s (MCD) a big Dow loser today for the trading of stock ending
off about $1.20. McDonald`s going to pursue an IPO of its Chipotle Mexican
grill chain. McDonald`s also said it will not convert the land underneath
its restaurants into a real estate investment trust as some had recently
speculated.
And then turning to Jack in the Box (JBX) tumbling nearly $6. That`s
due to a disappointing profit forecast and the chain is also closing its
JBX Grill concept restaurants.
Autozone (AZO) tumbling over $4. It`s posting lower than expected
fourth quarter profits that were about a quarter below analyst estimates.
And shares of Diebold (DBD) taking a hit, sinking nearly $7, a profit
warning as Diebold sees third quarter results of just half of analyst
projections. The president is resigning as well.
Constellation Brands (STZ) falling over $2. JPMorgan says lower prices
for wine could hurt that company`s growth in the U.S.
And another beverage company, Cott Corp (COT) with the shares losing
$4, as it warned full year profits will be substantially lower.
Over on the NASDAQ, Google (GOOG) jumped almost $4.
But Microsoft (MSFT) falling $0.35.
Intel (INTC) gaining a fraction.
Qualcomm (QCOM) up $0.31.
Cisco Systems (CSCO) down about $0.12.
Sears Holdings (SHLD) finishing down over $4. That stock`s down about
30 percent from its highs.
Apple Computer (AAPL) falling for the day.
Amgen (AMGN) losing as well.
Dell (DELL) and Yahoo! (YHOO) also down for the day.
Inamed (IMDC) shares jumping over $6. The FDA granting its approval
for Inamed silicone breast implants for use in cosmetic surgery.
Possis Medical (POSS) falling over $2. The medical device maker saying
profits in its fiscal fourth quarter falling by more than 60 percent.
And finally, Stein Mart (SMRT) shares tumbling over $4 on a Sun Trust
Robinson brokerage for its recommendation for the retailer.
And those are our 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.
09/21/05:
Market Stats
NET PERCENT
CLOSE CHANGE CHANGE
DOW CLOSE 10378.03 -103.49 - 1.0
HIGH 10484.55
LOW 10375.24
NASDAQ COMP. 2106.64 -24.69 -1.2
HIGH 2129.96
LOW 2106.64
VOLUME 1,933.8
PREVIOUS 1,720.3
UP VOLUME 485.2
DOWN VOLUME 1,441.6
DOW TRANSPORTS 3597.05 +15.60 + .4
DOW UTILITIES 421.78 -5.49 - 1.3
CLOSING TICK -65
S&P 500 1210.20 -11.14 - .9
S&P 100 560.78 -5.28 - .9
MIDCAP 400 696.37 -9.10 - 1.3
REUTERS/CRB 327.04 +1.88 + .6
NYSE COMPOSITE 7515.02 -47.82 - .6
VALUE LINE 400.48 -5.60 - 1.4
RUSSELL 2000 649.94 -10.69 - 1.6
DJW 5000 12071.89 -125.65 - 1.0
U.S. TREASURIES
5-YEAR NOTE 3.875%
Sept. 15,2010 99 16/32 +10/32 + 3.99
10-YEAR NOTE 4.25%
Aug. 15,2015 100 20/32 +18/32 + 4.17
30-YEAR NOTE 5.375%
Feb. 15, 2031 113 26/32 +1 + 4.46
LEHMAN BROS.
LONG BOND INDEX 1798.91 +8.32
DOW CLOSE 10378.03 -103.49 - 1.0
ADVANCES 1112
DECLINES 2228
NEW HIGHS 136
NEW LOWS 149
NET PERCENT
NYSE MOST ACTIVES 4PM CLOSE CHANGE CHANGE
AVP Avon Products 27.00 -3.60 -11.8
WMT Wal-Mart Stores 42.49 -.72 -1.7
LU Lucent Tech 3.05 +.07 +2.4
S Sprint Nextel 23.55 -.45 -1.9
PFE Pfizer 25.31 -.09 -.4
GE GE 33.55 -.29 -.9
TWX Time Warner 18.08 -.29 -1.6
XOM Exxon Mobil 64.97 +.44 +.7
BAC Bank Of America 42.26 -.74 -1.7
MOT Motorola 22.26 -.40 -1.8
NASDAQ CLOSE 2106.64 - 24.69 - 1.2
VOLUME 1,822.7
PREVIOUS 0,000.0
ADVANCES 772
DECLINES 2282
NASDAQ ACTIVES
GOOG Google 311.90 +3.99 +1.3
MSFT Microsoft 25.49 -.35 -1.4
INTC Intel 24.50 +.02 +.1
QCOM Qualcomm 43.73 +.31 +.7
CSCO Cisco Systems 17.85 -.12 -.7
SHLD Sears Holdings 115.15 -4.41 -3.7
AAPL Apple Computer 52.11 -1.08 -2.0
AMGN Amgen 84.35 -.63 -.7
DELL Dell 33.36 -.44 -1.3
YHOO Yahoo! 31.97 -.67 -2.1
AMEX CLOSE 1731.43 + 9.19 + .5
INDEX SHARES
DIA DIAMONDS TRUST 103.75 -.97 -.9
QQQ NASDAQ 100 38.50 -.43 -1.1
SPY S&P DEP.RECEIPTS 120.91 -1.14 -.9
STOCKS IN THE NEWS
VLO Valero Energy 113.14 +4.03 +3.7
FTO Frontier Oil 43.27 +3.61 +9.1
SUN Sunoco 78.10 +3.35 +4.5
XTO XTO Energy 42.66 +1.23 +3.0
GM GM 30.70 -.38 -1.2
MCD McDonald's 31.42 -1.20 -3.7
JBX Jack In The Box 27.70 -5.82 -17.4
AZO AutoZone 86.11 -4.16 -4.6
DBD Diebold 37.47 -6.90 -15.6
STZ Constellation 25.81 -2.16 -7.7
COT Cott Corp 18.74 -3.75 -16.7
IMDC Inamed 77.42 +6.36 +9.0
PQUE Petroquest Energy 10.49 +1.11 +11.8
POSS Possis Medical 11.11 -2.28 -17.0
SMRT Stein Mart 18.54 -4.12 -18.2
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