NBR Complete Transcripts:02-15-2007
Thursday, February 15, 2007Fed Chairman Bernanke & Caterpillar Blossom Into A Stock Surge
SUSIE GHARIB: Another day, another record for the Dow. The blue chip average rose 23 points on news of a stock buyback by Dow component Caterpillar and more reassuring comments from Ben Bernanke. The Federal Reserve chairman testified on Capitol Hill for a second day, repeating his view that while the economy is in good shape, the biggest risk is higher inflation. Speaking before the House Financial Services Committee, Bernanke said the Fed is prepared to respond if inflation picks up.
BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: We've seen some very strong consumer spending numbers. We've seen some strong income growth which suggests that the economy may be stronger than we think. It's possible. And in the sense that aggregate spending may exceed our capacity and put pressure in product markets, that would be a concern.
GHARIB: Bernanke again signaled that he is comfortable with current interest rate levels. But he cautioned that in order for the economy to grow in a sustainable way, inflation needs to be quote well controlled.
One on One with John Kilduff, Energy Analyst, at Fimat
SUSIE GHARIB: A volatile day of trading in the oil markets on forecasts of warmer weather in the eastern part of the country. By the close of trading in New York, March crude futures closed at $57.99 a barrel, off just a penny. They were down more than a dollar earlier in the day. Joining us now for more analysis of the energy markets, John Kilduff, energy analyst at Fimat USA. Hi, John.
JOHN KILDUFF, ENERGY ANALYST, FIMAT USA: Good evening, Susie.
GHARIB: You know, we've seen oil prices dropping this week. What's behind the drop?
KILDUFF: Basically it's the tug, the tug of demand that seems to be declining in the face of weather forecasts that are telling us that it's not going to remain this bitterly cold into March whatsoever. And basically a well supplied market that we continue to see really robust gasoline supplies, and even the demand that, for winter fuels was not as fearful to the market as the market -- as was considering.
GHARIB: What's your forecast on crude prices? Do you see them settling below $50 any time soon?
KILDUFF: Well, right now we're in a pretty well defined range between 50 and 60. To get up above 60 we're going to need some help on the geopolitical front in particular. But yes, we're heading into what's basically we call the slack demand season where we are not quite into the peak summer driving season and we are cycling out of winter. So as inventories build during this time period, as crude oil inventories are able to replenish, as refiners do their maintenance, I do expect crude oil prices to fall down towards the lower 50s rapidly over the coming weeks.
GHARIB: You mentioned geopolitical risks. What are the risks for crude prices to head right back up?
KILDUFF: Well, obviously the big one right now is the situation with Iran and their nuclear ambitions. Next week we have a report in front of the UN about the status there. And also certainly you can make the argument that the administration's talk right now is reflective of anti- bellum Iraq three years ago. Clearly that would be the trigger point, the first bomb or incident between the two countries would send oil prices flying higher, well above $80 a barrel, upwards of a hundred depending on the circumstances. That's the big worry and Iraq as well Susie.
GHARIB: Nobody wants to see $100 a barrel oil. OPEC meets on March 15th. Are you expecting any actions at that meeting that could impact prices?
KILDUFF: It would be completely price-driven, not necessarily policy driven. They won't necessarily care what global inventories look like even though they'll talk about that. The backdrop will be price. If we're down towards $50 a barrel or lower, there will be another production cut lead by Saudi Arabia. If not, if we're right around here, 58, 60, you will see the Saudis in particular lead the charge to keep the status quo in place.
GHARIB: We're running right out of time. So I just want to ask you a real quick question about gasoline prices. They've also been coming down. Can consumers expect a break in prices at the pump?
KILDUFF: They absolutely should, Susie. We're in our best position in a long time regarding the available supplies going into the spring season here. The slow winter gave refiners a chance to make extra gasoline, basically so we should be well supplied going into the peak summer driving season.
GHARIB: That's good news for consumers. Thank you so much, John, for coming on the program this evening. We've been speaking with John Kilduff, energy analyst at Fimat USA.
Realtors Are Worried There Are N ow Too Many Housing Vacancies
PAUL KANGAS: The National Association of Realtors said today there are signs the housing slowdown could be bottoming out. The NAR says sales of previously owned homes in the United States fell in the fourth quarter from year-ago levels, marking the worst point for housing in the current cycle. That raises hopes the real estate market could now begin to show solid signs of life again. But as Stephanie Dhue reports, the NAR and others are concerned there is still one major problem: the growing number of vacant units.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Kent Laraway bought a condo with hopes of flipping it three years ago when the real estate market was red hot. By the time the unit was completed this winter, the real estate market had cooled. Laraway says canceling the contract would have cost him a $30,000 deposit.
KENT LARAWAY, HOUSING INVESTOR: I considered backing out of the contract and just dealing with whatever repercussion, but then after talking to a few people, I thought I could sell it and at least, break -- make a little money.
DHUE: Laraway's empty condo is part of a growing problem in the housing market, vacant houses. The Census Bureau reports that there were 2.1 million vacant homes for sale at the end of last year, an all time high and a 34 percent increase over 2005. Economist David Seiders says those vacancies are an issue for builders.
DAVID SEIDERS, ECONOMIST, NATIONAL ASSOCIATION OF HOME BUILDERS: If you have existing homes that are occupied and for sale, it's no big deal really because the seller is either going to buy something else or rent a unit somewhere, so it's a sign of vitality, almost. But if the composition of that for sale inventory is more heavily toward vacant units, then it's a heavier issue for the housing market overall.
DHUE: Realtors are also concerned about vacant property. Realtor David Bediz of Coldwell Banker says it's not just investors who leave homes empty.
DAVID BEDIZ, REALTOR, COLDWELL BANKER: There are people that have already bought a new place and have to move into that new place for one reason or another, family reasons, perhaps and in doing so, leave their own properties vacant.
DHUE: Home builders say the demand for new homes has improved but the hidden inventory of cancellations and vacant for sale properties, like this one, could delay a housing recovery. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
"America's Changing Demographics"-Impact on the Ad Game
SUSIE GHARIB: Because different segments of the population have different tastes and buying patterns, marketers have long targeted their messages to specific demographic groups. So, as America becomes more diverse, it's not surprising that many companies are turning to demographic marketing. As we wrap up our series "America's Changing Demographics," Erika Miller reports on some of the latest ad campaigns.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: What does this Mexican rock group have to do with cell phones? For Sprint Nextel, the answer is everything. It's sponsoring Mana's U.S. tour in order to attract more Hispanic customers. Isaac Mizrahi, Sprint's director of multi- cultural marketing, says Hispanics are crucial to the company's growth.
ISAAC MIZRAHI, DIR., MULTICULTURAL MARKETING, SPRINT NEXTEL: They love their cell phones. They talk more minutes and they are also very open to adopt new usage habits like taking pictures on your cell phones, downloading music, watching videos.
MILLER: Hispanic-Americans are the nation's fastest growing ethnic group. Their disposable income has jumped 29 percent since 2001, more than double the pace of the rest of the population. But advertising expert Giovanni Pacheco says reaching this demographic takes more than just translating English campaigns into Spanish.
GIOVANNI PACHECO, DIR., STRATEGIC PLANNING, THE VIDAL PARTNERSHIP: The messaging is really -- has to be reflective of that particular consumer, rather than taking a general market message and assuming it automatically works in the Hispanic market.
MILLER: Print media are also embracing diversity. "Town and Country" magazine has revamped itself to go after affluent minority readers and editor-in-chief Pamela Fiori says that's already helped its bottom line.
PAMELA FIORI, EDITOR-IN-CHIEF, TOWN & COUNTRY: People have started looking at this magazine that was just etched in their mind as being for a white, east coast establishment as now a magazine that really has a much broader reach and is much more inclusive rather than exclusive.
MILLER: Other companies are looking beyond the youth market and are trying to tap older age groups. Recently Chevrolet announced plans to bring back its Camaro which baby boomers remember from the '60s and '70s. Matt Thornhill, founder of the boomer project, says that's because boomers have buying power.
MATT THORNHILL, FOUNDER, THE BOOMER PROJECT: Good golly, there are 78 million of them, and they spend $2.3 trillion a year on consumer goods and services. So, I think to ignore them would be the silliest thing a marketer could do. So I think that's why they should be coveted.
MILLER: Not surprisingly, many financial services firms are trying to woo older Americans, among them Lincoln Financial and Oppenheimer funds. Kathleen Beichert is that firm's head of strategic retirement programs.
KATHLEEN BEICHERT, DIR., STRATEGIC RETIREMENT PLANS, OPPENHEIMER FUNDS: We think that the baby boomer generation provides a real compelling opportunity because they do face a different set of risks than previous retirees.
MILLER: Another company appealing to aging boomers is eons.com, a social networking site for people over 50. It was started by the founder of monster.com, Jeff Taylor.
JEFF TAYLOR, FOUNDER, EONS.COM: What I decided is create a special site on the web and a brand that is about celebrating turning 50, going toward that reachable goal of living to 100.
MILLER: Not everyone is convinced eons will be a success. But some members like Jacqueline Wales tout the site's unique features.
JACQUELINE WALES, EONS.COM MEMBER: I liked the fresh approach that it seemed to be giving in that you put up your profile and you could create a life map which was actually a way of charting as a baby boomer, what have you been doing with your life.
MILLER: So what's the next frontier for marketers? Some experts bet it's Asian Americans, the second fastest growing minority group. Experts say the group remains largely untapped by most U.S. companies because it is the least understood. Erika Miller, NIGHTLY BUSINESS REPORT, New York.
GHARIB: We'll have more on "America's Changing Demographics" on Monday. We'll take an in-depth look in our holiday special program for President's Day.
"Commentary"-Upping Education
SUSIE GHARIB: We've spent this week focusing on America's changing demographics. Tonight's commentator says there's a key statistic that needs to change. Here's Robert Morison, director of research at the Concours Group and co- author "Workforce Crisis."
ROBERT MORISON, DIRECTOR OF RESEARCH, THE CONCOURS GROUP: This week's NIGHTLY BUSINESS REPORT series on "Changing Demographics" reminds me that one variable isn't changing fast enough: the educational attainment of the American workforce. Yes, we are among the most educated nations. But we also have a very high tech, information-based economy and education and training aren't keeping pace with the requirements of today's jobs. Aggregate demand for less skilled labor is almost flat.
The net additions to the job mix are almost all on the skilled side. About two-thirds of these new jobs call for a college degree, the rest for extensive, often technical, training. But only about 35 percent of Americans earn college degrees and only 30 percent earn them by age 30. In five years, the workforce is projected to be over 6 million degree holders short, with the biggest gaps in engineering disciplines. Meanwhile, many of these jobs are portable, and there are plenty of educated people around the world happy to fill them.
The shortfall isn't just in higher education. Virtually all jobs these days call for increasing analytical, technical, and communication skills, at levels that too many high school graduates lack. What to do? Invest seriously in public education, but that does employers little good in the short term. Employers who are unable or disinclined to outsource work elsewhere have to be in the education business themselves as never before, all the way from remedial skills training to big incentives for employees to pursue undergrad and graduate education. I'm Robert Morison.
"Tech Talk"-Opening A New Window & Making Music
SUSIE GHARIB: In our tech talk segment tonight, selling Windows, selling cell phones and selling songs to people who really can't name that tune. Here's our technology maven Scott Gurvey with the latest from the sell side.
SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Week one results are in, the market research firm NPD reporting sales of new PCs loaded with Microsoft's Windows Vista are up 67 percent over the first week of sales for Windows XP in 2001. But, sales of boxed copies of Windows Vista are down 32 percent compared to XP sales. This may be due to the fact the new Vista graphics system requires powerful hardware to work with all its features.
In tech law news tonight, today was the deadline Cisco set for Apple to answer its complaint over use of the trade name iPhone. No word yet from either company. And the Electronic Freedom Foundation is looking for youtube contributors who believe they were falsely accused of copyright violations by Viacom. A lawsuit may follow. Frustrated at having to carry multiple communications devices? Microsoft's mobile marketing VP Suzan Delbene, says the trend is to phones which operate on multiple networks.
SUZAN DELBENE, VP, MOBILE MARKETING, MICROSOFT: Many of our devices also have wi-fi incorporated in them so they have the ability to connect to wi-fi and to the Internet as well as using the cellular radio to do that.
GURVEY: Ever dream of turning a school project into a money maker? A team who met at Stanford have started a company they named Melodis and launched a web site named Midomi. Midomi plays a sort of electronic name that tune. CEO Kayvan Mohajer says you just sing, hum, or whistle a melody and it identifies the music.
KEYVAN MOHAJER, CEO, MELODIS CORPORATION: The problem is not every piece of music can be identified with the same feature. Sometimes it's the melodic information. Sometimes it's the tempo. Sometimes it's the combination of melody and tempo. Sometimes it's the lyrics because the melody is very monotonic.
GURVEY: Unlike some other sites that are similar which I've tried in the past, I found the results at Midomi impressive. All you do is press the start voice search button and sing... "yesterday, all my troubles seemed to so far away." Now while it's searching, you can make nasty comments about my lack of singing talent. There we go, several versions of yesterday by the Beatles. I didn't know Elvis had recorded it. Melodis makes money by offering downloads for sale of available recordings of the music.
MOHAJER: You can buy CDs of the same song. You can buy the concert ticket if the artist has a concert in your area. There will be targeted advertising. Eventually there will be music videos.
GURVEY: Melodis also plans to offer its system by cell phone, so if you hear a tune when you're out and about, you can search for its name right away. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.
GHARIB: You know Paul, I know that Scott loves opera, but I didn't know he sings as well.
KANGAS: I still don't think so.
"Tech Talk"-Opening A New Window & Making Music
PAUL KANGAS: Wall Street spent the morning modestly higher despite profit taking after two days of solid gains. Among the positives, Caterpillar's plan for a huge stock buyback and published reports Anheuser Busch had held merger talks. At 1:00 p.m. the Dow was up 23 points. NASDAQ posted a 4 point gain. That continuing favorable comment on the economy from Fed Chief Bernanke kept stocks higher this afternoon and the blue chips ended at record highs again. Dow Industrial Average closed up 23.15 at 12,765.01. That's its second straight record high. The NASDAQ Composite up 8.72 a 2497.10, while the Standard & Poor's 500 Index gained about 1.5 points to 1456.81. Over in the bond market, the 10-year note climbed 8/32 to 99 10/32, putting the yield at 4.71 percent.
Most active stock on the New York exchange, Motorola (MOT) trading 18.4 million shares edged up $0.03.
Followed by Baker Hughes (BH), the oil service company, plunging $6.75. Baker reported fourth quarter earnings sharply higher, $1.02 versus $0.75 last year, but that was $0.17 below the Wall Street estimate.
Pfizer (PFE) a nickel loss.
$0.23 drop in General Electric (GE).
ExxonMobil (XOM) fell $0.26, fifth in volume.
Then TimeWarner (TWX) moving up $0.17.
And a $0.09 gain for Ford Motor (F).
Texas Instruments (TXN) up $0.21.
AT&T (T) a $0.04 gain.
Tenth in volume, Qwest Communications (Q) rising $0.24.
There you see Caterpillar (CAT) with a nice gain of $1.46. The board has authorized the purchase of up to $7.5 billion of its own stock. That will be over the next five years, a nice reaction in the stock.
Then Archer-Daniels-Midland Co (ADM) up $0.80. The company will offer $1 billion in convertible senior notes and will use $400 million of the proceeds to buy back stock. Also the Gates Foundation disclosed that it's boosted its stake in Archer Daniels from 3.9 million shares up to 4.4 million.
Then Anheuser-Busch Cos (BUD) of Budweiser, up $1.52 and the company reportedly has held merger talks with InBev. That's a big Brazilian brewer. No comment from either company on that rumor today.
Molson Coors Brewing Co (TAP) another brewer active and up $4.56. Fourth quarter earnings excluding one time items, $1.24 well above $0.63 last year and $0.30 better than the Street consensus.
FTI Consulting (FCN) up $4.10. Fourth quarter earnings were lower, $0.42 versus $0.46 a year ago, but a nickel better than the Street thought and it sees 2000 earnings at $1.84. That's $0.10 above the Street estimate.
Guess? (GES) had a good day, jumping $9.05. Fourth quarter earnings jumped to $0.99 from $0.57 a year ago on a 25 percent boost in revenue. The company also declared a two for one stock split.
Armstrong World Industries (AWI) up $4.93. You can see by the chart they just came out of bankruptcy last October. The flooring products company has retained Lazard Freres to advise on strategic options. Sometimes that means the possible sale of the company.
And Granite Construction (GVA), the big construction contractor, had sharply lower fourth quarter earnings, $0.28, down from $0.86 a year ago, $0.19 below the Street estimate. The stock off over $5.
Google (GOOG) topped the active list on NASDAQ with a loss of $4.46.
Then a major loss in Baidu.com (BIDU) off $8.82. The company cut its first quarter revenue forecast. Citigroup made negative comments about Baidu, including a downgrade from "hold" to "sell."
Microsoft (MSFT) $0.06.
Qualcomm (QCOM) moved up $1.65. Oppenheimer and Company upgraded it from "hold" to "buy" on the belief the company will post better than expected earnings over the next few years.
Apple (AAPL) a $0.09 drop there, fifth in volume.
Cisco Systems (CSCO) was up a dime.
Intel (INTC) $0.17 gain.
Yahoo! (YHOO) up $0.59.
Amgen (AMGN) fell $0.52.
Research in Motion (RIMM) dropped $2.45.
NutriSystem (NTRI) up $5.91. Fourth quarter earnings soared to $0.53 from only $0.17 last year on a 92 percent jump in revenues and on top of that, the company plans to buy back up to $200 million of its own stock.
MedImmune (MEDI) up $1.91. Carl Icahn disclosed he owns 2.8 million MedImmune shares and in addition, late stage trials suggest the company's new FluMist is more effective than flu shots.
And those are the stocks in the news tonight.
