12/21/05: What's At Issue In The NY Transit Strike
SUSIE GHARIB: It was day two of New York City`s transit
strike as commuters struggled to get to work on foot, by bike or by
carpool. A New York state supreme court justice said today he might
sentence union leaders to jail for refusing to end the strike, even though
top union officials are meeting with a mediator. As Erika Miller reports,
the major sticking point appears to be pension benefits, an issue that`s
familiar to many American businesses.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: The New York
transit strike highlights a growing clash nationwide over benefits for the
workers -- in this case, government workers. New York and many other
cities want employees to push back their retirement age and pay more for
their pensions and healthcare. Workers, not surprisingly, want to keep
their existing benefits and get bigger raises. In New York, the tipping
point for the transit strike appears to have been pension benefits for
future employees. The transit authority proposed that new employees pay a
greater share toward their pension than current employees. That was flatly
rejected by the union. But experts say a two-tiered benefit structure is
becoming increasingly common.
DAVID GREGORY, LAW PROFESSOR, ST. JOHN`S UNIVERSITY: Clearly, what
are called two-tier wage systems are the preview of coming attractions. So
I think we will see all sorts of situations where entry-level workers,
newly hired workers will have more of an obligation to fund their
retirement security and their healthcare costs.
MILLER: The transit strike also highlights the difference between
public and private sector benefits. Over the past decade, private sector
employees have been shifted into defined contribution plans like 401ks,
which make workers almost entirely responsible for retirement planning.
Meanwhile, taxpayers still pay most of the cost of pension benefits for
government employees, although experts say that`s starting to change.
SYLVESTER SCHIEBER, VICE PRESIDENT, WATSON WYATT WORLDWIDE:
Governments are facing exactly the same phenomena that private employers
are. Their populations are aging. They`ve got many other competing needs
for these funds, and so I think exactly the same pressures are coming to
bear.
MILLER: The transit strike comes at a time when the labor movement
nationwide has suffered significant setbacks. Workers in the airline and
automotive industries, for example, are being asked to take huge cuts in
pay and benefits. Observers say that`s forcing labor unions to become more
militant.
GREGORY: There`s the palpable odor of desperation in many quarters.
If you have a great deal and you are seeing that wiped out in the last
several years of your working career, then you wonder what do you leave
your children, et cetera. So there`s a sense of a sort of line being drawn
in the sand.
MILLER: Experts say the outcome of this strike will likely have ripple
effects setting the tone for labor negotiations in other municipalities
throughout the country. 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.
12/21/05: Merrill Lynch's Richard Bernstein's 10 Forecasts For The Future
SUSIE GHARIB: Our guest tonight says he thinks investors should consider
incorporating his 10 forecasts for 2006 into their portfolios. Joining us
now to tell us what they are, Richard Bernstein, chief U.S. investment
strategist at Merrill Lynch. Hi, Rich.
RICHARD BERNSTEIN, CHIEF U. S. INVESTMENT STRATEGIST, MERRILL LYNCH:
Hi, Susie.
GHARIB: Well, let`s go down your list. We`d like to hear your thoughts
on the forecast. Your first one has to do with the Fed. And you say that
the new Fed Chairman Ben Bernanke may have to raise rates more than
expected. Why so?
BERNSTEIN: Well, I think that`s the biggest risk for 2006 is that the
Fed actually raises rates higher than people now believe. There a huge
consensus on Wall Street that the Fed`s almost done, an overwhelming
consensus. Therefore, the risk is the Fed may go farther and with inflation
expectations still pretty high, that is probably a substantial risk.
GHARIB: You say that large cap capitalization stocks will
outperform small cap ones. We`ve been hearing this for a while. Why will
it happen in 2006?
BERNSTEIN: Well, I think one of the main factors that affect small cap
reform is the availability of credit, the availability of capital. And the
Fed`s goal is clearly to begin to constrain the availability of capital.
So if the Fed does continue to tighten more than people think and profits
continue to slow, I think we`ll see large caps outperform. That typically
the environment when large caps outperform.
GHARIB: Your third prediction is about the Republicans in the mid-
term elections, saying that they`re going to maintain a majority during
those elections. Why is that important for investors?
BERNSTEIN: Well, I think the risk here is that both sides of the
aisle, both Democrats and Republicans start to become very populist in
2006. They try to appeal to the people. And populist policies have a
habit of being very inflationary. So if you are somewhat of a bond bull as
I am, any kind of inflationary policy, whether it be tariffs or trade
barriers or things like that could be very, very damaging to a bond bull
like me.
GHARIB: Your fourth prediction is about the housing market. You
say that housing prices stagnate. What is your forecast?
BERNSTEIN: I think housing prices are likely to stagnate. I mean they
could go up or down a little, who knows. But I think the best guess is
stagnate. But I think the important side is that that could have a very
meaningful impact on consumption. Consumption has been fueled in the
United States by the withdrawal of equity from homes. If housing prices
stagnate, that withdrawal of equity is bound to slow and people may
actually start saving which would be amazing in the United States.
GHARIB: That would be amazing. Growth versus value, this is always
a debate. This time you say not to worry about that, look for quality.
BERNSTEIN: Yeah, that`s right. I think people are too caught up in is
it growth or is it value? And you know, I think what is more important
right now is to think in terms of high quality stable growth companies.
This group is not done as well as we had thought in 2005. But as I said,
if the Fed continues to tighten, history says you really want to stick with
these high quality companies.
GHARIB: You said a moment ago you are a bond bull, your sixth
prediction is that bonds and stocks remain competitive.
BERNSTEIN: Yeah, I think people don`t even realize that in 2004, stock
and bond spreads were amazingly narrow. In fact, it was about the fourth
or fifth narrowest year between stock and bond returns in `04. And now we
are in `05. The same thing has happened in `05. We expect it to happen
again in `06.
GHARIB: You say that some large industries tend to outperform. You
mentioned drugs, media, diversified telecom, why so?
BERNSTEIN: Well, I think these are the three industries you just named
are three industries that I think are universally disliked by most
investors. And the story is that they will never grow again. I think if
you have a contrarian streak in you and you have a little bit of patience,
I think you should be looking at some of these bigger cap industries now.
Because I think that there is such an overwhelming consensus that they
won`t grow, the odds are they probably will in the next few years.
GHARIB: And you say that utilities are growth stocks, but I`m going
to skip ahead because we just have a few seconds left. You say that
capital spending boom does not occur again and that pension defaults, to
get prepared for that. Can you just wrap it up on your views on those?
BERNSTEIN: Yeah, I think in terms of utilities, growth stocks and
pension defaults, those are actually linked in terms if long-term interest
rates fall, utilities probably do very well, but pension liabilities become
a bigger problem for companies. So I think we want to watch very carefully
if the bond market
rallies, what that does to companies and their funding.
GHARIB: OK. Well, very interesting forecast. You`ve given
investors a lot to think about and we really appreciate you coming on the
program.
BERNSTEIN: Thanks, Susie.
GHARIB: Thank you, Rich. We`ve been speaking with Richard
Bernstein, chief U.S. investment strategist at Merrill Lynch.
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.
12/21/05: The Budget Bill Passes But Oil Drilling Stalls
SUSIE GHARIB: A last minute flurry of activity on Capitol Hill today, as
lawmakers try to wrap up work to get home before Christmas. A plan to
drill for oil in Alaska`s Arctic wildlife refuge appears to be dead for
this year, but Senate Republicans were able to squeak through a budget bill
which includes the first reins on mandatory spending in almost a decade.
Darren Gersh reports.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Republican
Senate leaders said this was the one vote lawmakers could cast this year to
cut the budget deficit. They were right in a way. The bill did pass, by
one vote. Five Republicans bolted their party and it was up to Vice
President Dick Cheney to break a 50 to 50 tie, giving Senate leaders a
victory.
SEN. BILL FRIST (R) MAJORITY LEADER: We are going to cut
entitlement spending, slow that growth by $40 billion. It demonstrates
fiscal responsibility. It shows that we`re going to eliminate wasteful
Washington spending.
GERSH: The budget trims Medicaid spending by $4.7 billion, cutting
payments to drug companies and increasing co-payments for poor people
seeking health care. It also reduces by $12.7 billion subsidies to lenders
making student loans. Democrats accused Republicans of taking money from
the poor and giving it to the rich, paving the way for a $70 billion tax
cut early next year.
SEN. KENT CONRAD (D) NORTH DAKOTA: Their own estimates show they
are going to increase the debt of the country by more than $600 billion
each and every year of this five-year budget agreement. That is a dramatic
and dreadful mistake.
GERSH: Senate Democrats succeeded in making technical changes to
the bill which could force the House of Representatives to return from
vacation to pass the measure into law. For all the fuss, budget analysts
say the deficit package cuts less than one half of one percent from Federal
spending over the next five years.
STUART SWEET, PRESIDENT, CAPITOL ANALYSTS NETWORK: You`re talking
about a $40 billion deficit package. When you divide it by five, it is $8
billion a year in a budget deficit that`s $300 billion a year. This is
nothing to get excited about; the rhetoric is overblown.
GERSH: And the budget news is likely to get worse, not better.
After a year of unexpected improvement in the deficit, most analysts see a
$30 to $50 billion increase in the red ink for 2006. And Goldman Sachs
sees a $400 billion deficit for the 2007 budget the White House is
preparing to unveil early next year. 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.
12/21/05: Baby Boomers & Reverse Mortgages
SUSIE GHARIB: With health care costs on the rise, many
senior citizens are finding it tougher to pay their bills. So, many are
turning to their largest asset -- their homes -- and generating cash
through reverse mortgages. The market for those types of mortgages has
been growing about 40 percent a year over the past few years. And Diane
Eastabrook reports, as baby boomers age, that trend could continue for
decades.
DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: How many
years have they been married?
JOEL BROWN, CONSUMER: They`ve been married 70 and it will be 71 in
April.
EASTABROOK: Joel Brown says illness and home health care have
drained his elderly parents` savings. So, as the couple`s financial
guardian, Brown recently got a reverse mortgage on his parent`s home. He
now gets about $900 a month to pay for his parents` home health care, and a
line of credit to cover other costs.
BROWN: I basically had been using their savings since 1999, so I
had spent down all but except about $50,000, so that was about my only
choice. Otherwise, they would have had to move in with one of the
children.
EASTABROOK: Senior citizens who are living longer and facing rising
medical costs are increasingly using reverse mortgages as a way to tap one
of their biggest assets -- their homes -- for cash. As the name implies, a
reverse mortgage works like a traditional one, only the lender pays the
borrower instead of the other way around. Borrowers must be 62 or older.
They can get a lump sum of cash, monthly payments, a line of credit, or a
combination of the three. The borrower never has to leave his or her
home.
And the loan is paid back only after the borrower leaves the home or dies.
Wells Fargo services about a third of the reverse mortgages in the U.S.
Program manager Jeffrey Taylor says the Brown`s situation is typical of
many customers.
JEFFREY TAYLOR, NATIONAL PROGRAM MGR., WELLS FARGO HOME MORTGAGE:
If we need money for in-home care today as opposed to going to a
nursing home and that is what the adult children and the seniors would
prefer, this would be one of the ways that I would definitely look at.
EASTABROOK: The Federal government insures about 90 percent of the
reverse mortgages written in the U.S. and requires financial counseling for
borrowers. Closing costs, origination and service fees can cost some
borrowers several thousand dollars. Financial planner Michael Whitty says
those fees and the reason for the loan must be considered before taking out
a reverse mortgage.
MICHAEL WHITTY, PARTNER, WINSTON & STRAWN: If they wanted to pay a
large, one-time long-term health care insurance premium, for example, or if
they wanted to go ahead and pay off a lot of credit card debt, there we
might use a home equity loan or a home equity line of credit rather than a
reverse mortgage.
EASTABROOK: Reverse mortgages could become even more popular as the
nation`s 75 million baby boomers start becoming eligible for them over the
next few years. Experts say that could attract more lenders into the
market, possibly lowering origination and service fees. Diane Eastabrook,
NIGHTLY BUSINESS REPORT, Chicago.
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.
12/21/05: "Money File"-Saving Saving Resolutions
SUSIE GHARIB: Well, just 11 more shopping days until the New Year. And if you`re
like many Americans, once the holidays are over, you need to start thinking
about saving rather than spending your cash. In the "money file" tonight,
here`s Eric Schurenberg, managing editor of "Money Magazine."
ERIC SCHURENBERG, MANAGING EDITOR, MONEY MAGAZINE: In how many
Decembers have you promised yourself that in the new year, you will finally
save money? You`ll take control, sock some bucks away and get ahead for a
change? And then by mid-January, you`re back on the same old cash-flow
treadmill. In a "Money Magazine" poll, 33 percent of Americans said their
main financial goal for next year was to save more money. But experience
suggests most won`t. Trying to save by cutting out things you like
requires too much will power for too long.
But this does suggest a solution. If you really want to save more,
take your will power or lack thereof out of the equation -- make saving
automatic. Have cash deducted from your paycheck or your bank account
every month, without your intervention and invested. That way, it doesn`t
feel like a sacrifice. One of the best ways to do this is through a
retirement plan where you work. There, your employer takes money from
every paycheck and invests as you direct. Many also have auto-escalation
programs, in which you make one decision to increase your savings by a
percentage point or two every year in the future. So you can start saving
a little and build.
Of course, you don`t need to be part of an employer program to
auto-escalate or even to save automatically. Just open a brokerage or
mutual fund account and instruct your bank to transfer money into it from
your checking account every month. Any bank will do this. It doesn`t
matter whether you`re saving for retirement or a splurge next summer, the
philosophy is the same -- decide to save, then get out of the way. It`s
not high finance; it`s just good psychology. And it`s a way to make sure
that this New Year`s resolution sticks. I`m Eric Schurenberg.
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.
12/21/05: "Paul Kangas' Stocks In The News"
PAUL KANGAS: Shares of FedEx closed at an all time high today, up $5.21 to
$103.70 a share after posting soaring quarterly profits. The company
earned $1.53 a share in its second quarter, $0.13 more than analysts were
looking for. FedEx also raised its full year profit forecast on a bullish
outlook for the economy and on fee increases set to take effect in early
January.
Early strength in FedEx stock put Wall Street in a bullish mood, as
did just a slight downward revision in third quarter GDP and a flurry of
mergers. At noon, the Dow was up nearly 90 points, NASDAQ up 16. The
rally ran into year-end profit taking this afternoon and was also
undermined by a comeback in oil prices, so the closing gains were modest.
Dow Industrial Average ended up 28.18 points at 10,833.73; the NASDAQ
Composite was up 9 1/4 points at 2231.66, while the Standard & Poor`s 500
closed up 3.17 at 1262.79. Over in the bond market, the 10-year note fell
8/32 to par and 1/32, putting the yield at 4 1/2 percent exactly.
Most active big board issue today on 33.8 million shares was Maxtor
(MXD) with a big gain of $2.41. Seagate Technology will acquire the company
for .37 Seagate shares for each share of Maxtor today. That deal is worth
about $7.50 to Maxtor shareholders. Also the new company will be 84 percent
owned by Seagate and 16 percent by Maxtor.
General Motors (GM) hitting the lowest level in about two decades
today, off $0.80, traded as low as 19. As we reported yesterday, Kirk
Kerkorian`s Tracinda (ph) Corp. sold 12 million GM shares over the past
week for tax loss purposes.
Pfizer (PFE) for the first time in nine sessions, didn`t lead the
active list, but it was up $0.04.
Seagate Technology (STX) up $0.63, slightly positive reaction to its
acquisition of Maxtor.
And then Western Digital (WDC) up $2.89. That`s in sympathy with
Maxtor`s buyout because Western Digital is also a hard drive maker.
General Electric (GE) down $0.22.
Lucent Technology (LU) a $0.03 gainer.
Time Warner (TWX) down $0.16.
United Microelectronics (UMC) a $0.03 gain.
And then tenth in volume ExxonMobil (XOM) losing $0.33 a share.
Ford Motor Co (F) down $0.03, even though the company completed the
sale of its Hertz Rent-a-Car unit and it made a profit of $1.1 billion over
the years on that investment.
Nike Inc (NKE) down $2.73. Now, even though we reported after the
close yesterday, second quarter earnings nicely higher, $1.14 versus a year
ago, $0.97, but analysts were disappointed by a drop in profit margins and
also an order backlog which was below their expectations.
Southwestern Energy (SWN) moving up $2.02. The stock was added to the
Standard & Poor`s midcap 400 index after the close today, replacing Pacific
Care health system which of course is being acquired.
Family Dollar Stores (FDO) up $1.29. First quarter earnings $0.32,
same as last year, but a penny above the Street estimate and then Standard
& Poor`s boosted its target on the stock by $2 to $26 a share.
Total System Services (TSS) plunging $3.05. Bank of America notified
the company of its intent pending its acquisition of rival MBNA to shift
its credit card processing operations in house. That could cause an 11
percent annual revenue decline in total system and Sonoma (ph) stock -
Sonoma owns 80 percent of Total System - Sonoma dropped $1.27 today.
Google (GOOG) topped the active list on NASDAQ, down $3.41. After the
close yesterday as we reported, company confirmed it will buy 5 percent of
AOL for $1 billion. Some analysts think that`s a bit rich.
Microsoft (MSFT) $0.13 down.
A $0.10 loss in Cisco Systems (CSCO).
Apple Computer (AAPL) moving up $1.39 after Goldman Sachs boosted its
2006 earnings target from $1.73 a share to $1.92 a share.
Intel (INTC) $0.07 gain there.
Then Electronic Arts (ERTS) up $0.35.
Marvell Technology (MRVL) down $3.54. The company plans to acquire UT
Starcom semiconductor design business for $24 million in cash.
Dell (DELL) down $0.32.
Sandisk (SNDK) $0.89 gain.
Nextel Partners (NXTP) dropped a penny a share.
And there you see Micromuse Inc (MUSE) up $2.71 on that IBM
acquisition for $10 a share. IBM itself was up $0.64.
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.
12/21/05:
Market Stats
NET PERCENT
CLOSE CHANGE CHANGE
DOW CLOSE 10833.73 +28.18 + .3
HIGH 10900.89
LOW 10805.63
NASDAQ COMP. 2231.66 +9.24 +.4
HIGH 2241.94
LOW 2225.19
VOLUME 1,516.9
PREVIOUS 1,469.4
UP VOLUME 990.9
DOWN VOLUME 507.4
DOW TRANSPORTS 4198.69 +95.57 + 2.3
DOW UTILITIES 408.24 -4.98 - 1.2
CLOSING TICK +291
S&P 500 1262.79 +3.17 + .3
S&P 100 577.01 +.82 + .1
MIDCAP 400 741.24 +5.10 + .7
REUTERS/CRB 326.53 +.72 + .2
NYSE COMPOSITE 7806.75 +29.48 + .4
VALUE LINE 414.73 +2.70 + .7
RUSSELL 2000 679.74 +6.96 + 1.0
DJW 5000 12642.33 +43.96 + .4
U.S. TREASURIES
5-YEAR NOTE 4.375%
Dec. 15,2010 99 24/32 -5/32 4.44
10-YEAR NOTE 4.50%
Nov. 15,2015 100 1/32 -8/32 4.50
30-YEAR NOTE 5.375%
Feb. 15, 2031 110 8/32 -11/32 4.68
LEHMAN BROS.
LONG BOND INDEX N/A N/A
DOW CLOSE 10833.73 +28.18 + .3
ADVANCES 2140
DECLINES 1218
NEW HIGHS 102
NEW LOWS 99
NET PERCENT
NYSE MOST ACTIVES 4PM CLOSE CHANGE CHANGE
MXO Maxtor 6.93 +2.41 +53.3
GM General Motors 19.05 -.80 -4.0
PFE Pfizer 24.04 +.04 +.2
STX Seagate Tech 20.23 +.63 +3.2
WDC Western Digital 18.45 +2.89 +18.6
GE General Electric 35.32 -.22 -.6
LU Lucent Tech 2.79 +.03 +1.1
TWX Time Warner 17.58 -.16 -.9
UMC United Microelec 3.14 +.03 +1.0
XOM Exxon Mobil 57.60 -.33 -.6
NASDAQ CLOSE 2231.66 + 9.24 + .4
VOLUME 1,698.1
PREVIOUS 1,761.8
ADVANCES 1841
DECLINES 1177
NASDAQ ACTIVES
GOOG Google 426.33 -3.41 -.8
MSFT Microsoft 26.73 -.13 -.5
CSCO Cisco Systems 17.21 -.10 -.6
AAPL Apple Computer 73.50 +1.39 +1.9
INTC Intel 25.88 +.07 +.3
ERTS Electronic Arts 53.46 +.35 +.7
MRVL Marvell Tech 55.42 -3.54 -6.0
DELL Dell 30.93 -.32 -1.0
SNDK SanDisk 59.48 +.89 +1.5
NXTP Nextel Partners 27.83 -.01 -.0
AMEX CLOSE 1753.09 + 2.01 + .1
INDEX SHARES
DIA DIAMONDS TRUST 108.15 +.27 +.3
QQQ NASDAQ 100 41.13 +.18 +.4
SPY S&P DEP.RECEIPTS 126.03 +.20 +.2
STOCKS IN THE NEWS
F Ford Motor Co 8.02 -.03 -.4
NKE Nike 85.75 -2.73 -3.1
SWN Southwestern Egy 36.91 +2.02 +5.8
FDO Family Dollar 24.37 +1.29 +5.6
TSS Total System Svcs 18.91 -3.05 -13.9
MUSE Micromuse 9.92 +2.71 +37.6
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