NBR Complete Transcript: 05-04-2006
Thursday, May 04, 2006Crude Prices Dip & Congress Digs
SUSIE GHARIB: The price of oil got a little bit cheaper today. In New York trading, June crude futures closed at $69.94 a barrel, down $2.34 or more than 3 percent. Meanwhile, in Washington today, lawmakers focused on what`s fueling high oil and gasoline prices: supply shortages or market speculators. Stephanie Dhue reports.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: How much of how much of what`s happening here is driving up the price here? The chairman of the House Energy and Commerce Committee is worried there may be too many speculators trying to cash in on high oil prices.
REP. JOE BARTON, CHAIRMAN, ENERGY & COMMERCE COMMITTEE: If those participants in the market are a larger percentage than normal, I think it`s a legitimate government function to consider raising the margin requirement to make it more difficult to just purely be speculative in the market.
DHUE: There`s no question investors are playing a larger role in oil markets. Hedge funds, pension funds and other investors have moved aggressively into oil in the past five years. Currently, fewer than 1 percent of futures contracts results in a physical purchase of oil. But the Nymex warns requiring more money up front for futures contracts could be risky.
ROBERT LEVIN, VP RESEARCH, NEW YORK MERCANTILE EXCHANGE: That could lead to a lack of trading and a lack of us able to perform our role. The market would thus suffer and be a lot less transparent.
DHUE: Experts say there`s a $10-to-$15 per barrel risk premium built into the price of crude. Some of that may be driven by speculators. But the experts say the real driver is geo-political risk in oil producing countries.
DANIEL YERGIN, CHAIRMAN, CAMBRIDGE ENERGY RESEARCH ASSOCIATES YERGIN: In this market the threat of, the risk of escalation is enough to send crude oil prices up, and sometimes I think the chief speculator in the oil market today is the president of Iran.
DHUE: With supplies tight, the futures market has been generally heading higher. So much so, that the futures price of oil is higher than the current price in the physical market.
GUY CARUSO, ADMINISTRATOR, ENERGY INFORMATION ADMINISTRATION: This puts another incentive before companies to add to inventories, and the desire to increase inventories adds to current demand, putting additional pressure on prices.
DHUE: Lawmakers are under pressure from constituents to ease their pain at the pump. With mid-term elections looming, energy bills have gained support. But if energy prices head lower, those proposals are likely to be sidelined. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
Consumers Sprang Into Shopping In April
PAUL KANGAS: Those high gasoline prices did not keep Americans from splurging on spending last month. U.S. retailers rang up robust sales in April, with the biggest monthly gains in two years. As Suzanne Pratt reports, chain stores from Wal-Mart to Limited Brands benefited from warmer weather and Easter-related purchases.
SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Thanks to beautiful spring weather in much of the country and Easter coming in April, Americans went shopping in a big way last month. They bought clothing and accessories. They bought Easter candy and they bought toys and video games. Retail experts say Americans are feeling flush.
BOB BUCHANAN, RETAIL ANALYST, A.G. EDWARDS: I think the housing market is still very strong, despite anecdotal evidence to the contrary. And I think that we continue to see quarter after quarter increase in home equity values and also household net worth. And, I think that`s really powering the consumer.
PRATT: Wal-Mart and Target lead the way with a nearly 7 percent increase and a more than 10 percent gain. Nordstrom posted a jump of more than 7 percent. Federated was one of few weak spots with a drop of just under 1 percent. Gap slipped again, while Abercrombie & Fitch rang up a stunning 17 percent increase. Experts say children`s and teen retailers benefited most from Easter coming in April this year.
KIMBERLY GREENBERGER, RETAIL ANALYST, CITIGROUP: For them it was really that high school and college students saw their spring breaks shift out of March and into April. They were buying product either while on vacation or in preparation for vacation. And, when the weather perked up, they went out and started buying stuff in anticipation of summer.
PRATT: The one major surprise about last month`s numbers was that consumers did not appear to be much deterred by higher gas prices. Experts say even though prices at the pump are nearing record levels, they just aren`t high enough to take a really big bit out of consumption.
GREENBERGER: What gas prices are doing so far and this is what we expect them to continue to do for the rest of the year is haircut the ability for consumer spending to grow year over year.
PRATT: Most retail experts predict the good sales numbers will continue in May. So-so weather on both coasts somewhat reduced spending in those areas last month. As a result, experts say there`s a lot of pent up demand that could mean shopping trips this month. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.
One On One With David Stout, President of Pharmaceuticals Operations at GlaxoSmithKline
GHARIB: The Federal government signed contracts today worth more than $1 billion to help produce vaccines in the event of a flu pandemic. The Department of Health and Human Services said that right now, the U.S. can`t produce enough vaccine fast enough to reach everyone who would need it. The five companies receiving the five-year contracts are: Medimmune, Novartis, Dyn-Port, Solvay Pharmaceutical, and GlaxoSmithKline. And joining us now is Glaxo`s president of pharmaceuticals operations, David Stout. Hi, David.
DAVID STOUT, PRESIDENT, PHARMACEUTICAL OPERATIONS, GLAXOSMITHKLINE: Good afternoon, Susie.
GHARIB: So how long would it take the United States to get prepared, and I`m talking about in terms of getting vaccines and drugs to all the people who would need it?
STOUT: Well, what we`re doing right now, today`s award was dealing with a specific way to manufacture flu vaccines, and that`s called tissue cell culture. The way to manufacture using this technology is probably three to five years away. So if the pandemic flu is to come in the three to five-year timeframe, we`ll probably have to rely on some of the more traditional tried and true methods, such as the egg-based technology that we`re currently using. Of course, the government is also preparing in other ways. They`re stockpiling, also drug treatments so that if people contract the flu, they`ll have ways to treat it. GlaxoSmithKline is uniquely positioned in the fact that we make one of the two preparations that is believed to be useful in treating the flu, as well as working very diligently on a vaccine for a pandemic.
GHARIB: So what is your sense in terms of governments -- the United States government in particular, businesses and hospitals, their level of stockpiles? How would you rate the status of those stockpiles?
STOUT: I think if you talk to virtually any governments around the world today, they would all say that they wish they were further along. I think the U.S. government has to be applauded because they`ve been moving very quickly. In fact, today`s announcement is the first time that any government has really put out major incentives and major help to accelerate the development of a vaccine for a pandemic flu.
GHARIB: Now, we know that viruses shift, and you mentioned that you have one of the -- one of the vaccines that would be helpful, I guess, for the h5 influenza virus, but how quickly could you respond to a viral mutation?
STOUT: Well, let me talk about first what we call our pre-pandemic vaccine that we`re developing. We use novel ashbin technology and I know that`s a very technical term, but we believe the use of this technology will help us to develop a pre-pandemic vaccine specific to h5n1 that hopefully confers some range of protection against a mutated version. Now once, of course, h5n1 mutates and becomes transmittable from human to human, we would then have -- it would take us about two to three months before we could begin to see production coming out of the traditional methods that we see today. It takes a couple of weeks for the World Health Organization to get together to get strain that is circulating provided to the manufacturers, and then there is about a six week cycle to start producing vaccine.
GHARIB: How confident are you that your company and other drug companies - you produce all these vaccines -- how confident are you that the execution plan will be effective in terms of getting these vaccines to all the people who will need protection.
STOUT: I guess a lot of it will depend on timing. Right now if something was to happen, it would not be as good a response as if it was in two to three years from now. We will begin actually making an h5n1 vaccine at the beginning of this - at the end of this year. We have in clinical trials right now in fact two different formulations that we think can help reduce the amount of antigen that is required which means that basically we should be able to get more doses out of our current production capacity. Of course the more time we have, the better prepared we`ll be.
GHARIB: Let`s hope we don`t even have to ever deal with this down the road. But thank you very much for coming on our program to explain what Glaxo is doing.
STOUT: Thank you very much, Susie.
GHARIB: We`ve been speaking with David Stout, president of pharmaceuticals operations at GlaxoSmithKline.
Money & Marriage
SUSIE GHARIB:They say love and marriage go hand in hand. But add money to that equation and entire relationships can, and almost always do, entirely change. Tonight, NBR`s home economist Brett Graff talks to money and marriage experts to find out how best to deal with your joint financial future, before the issue becomes explosive.
BRETT GRAFF, NIGHTLY BUSINESS REPORT CORRESPONDENT: Sharon Harvey Rosenberg and her husband Avi are totally in sync when it comes to money issues. They both forget to pay the phone bill.
SHARON HARVEY ROSENBERG: It does create like an undercurrent of, like how could we do this again, you know what I mean? And you`re as angry at your self as you are at the other person so it doesn`t always create the most -- we always got along -- but it doesn`t always create the most, you know genteel you know, hospitable relationship. It puts a little edge on things.
GRAFF: Love and money: the combination is private, complicated and sometimes explosive.
COURTNEY KNOWLES, EQUALITY IN MARRIAGE INSTITUTE: You`d be amazed how many times we hear from couples that are five, 10 years into a marriage and have suddenly discovered they have totally different views for their financial future.
GRAFF: Even couples blissfully in love have money issues. It`s an area where opposites often attract.
OLIVIA MELLAN, PSYCHOTHERAPIST: Couple relationships, it`s a polarizing dance of opposites, so even if two spenders meet and marry or get intimate, they`ll fight each other for the super spender role and the other one will learn to save or set limits by comparison or they`d be bankrupt in four minutes.
GRAFF: According to Mellan, hoarders marry spenders; money avoiders marry worriers; money monks marry amassers; risk takers marry risk avoiders; planners marry dreamers; mergers marry separatists. Or, couples will polarize around different priorities. I might be less convinced if my husband and I didn`t fit into four of those six categories. Incidentally, I can justify every purchase and tend to prefer the word visionary over dreamer. Nevertheless, us opposites could one day be facing financial consequences. Hoarders married to spenders could work well into their golden years. If a worrier dies, the avoider will find themselves in financial hell. And even a couple happily putting away money could have different views on how to use it. So asked separately, how would in-sync Sharon or Avi use an extra thousand dollars?
AVI ROSENBERG: I`d probably spend part of it on the house, and part of it on a vacation.
SHARON ROSENBERG: I`d take the kids out for dinner. I`d buy us season tickets for the heat (ph).
GRAFF: Talking about and understanding each others financial values is key to building a lasting financial relationship.
ELLEN SIEGEL, CERTIFIED FINANCIAL PLANNER: When you compromise, when I compromise I feel like I`m giving up something. What I want to do is collaborate. How do we both get that which is important to both of us? How do we work that one out? And how we work that one out is when we understand where each other is coming from.
GRAFF: And that`s priceless. Brett Graff, NIGHTLY BUSINESS REPORT, home economist.
Commentary: The Spanish Guide to Understanding Brokerage Account Statements
SUSIE GHARIB: Tonight`s commentator says amid all the furor over immigration and this week`s Hispanic boycott, one important factor is being overlooked. Here`s Myron Kandel, president of the New Hampshire Initiative for Corporate Responsibility and Investor Protection.
MYRON KANDEL, NEW HAMPSHIRE INITIATIVE FOR CORPORATE RESPONSIBILITY: Amidst all the attention being focused on immigration, I`d like to talk about a related matter: the economic importance of the Hispanic community and the Hispanic investor market in particular. What brings this to mind is the publication in Spanish of a guide to understanding brokerage account statements. The Securities Industry Association and the North American Securities Administrators Association jointly published the guide some years ago. Now they`ve done it in Spanish.
We can all argue over whether the national anthem should be sung in Spanish, but there can be no denying that Spanish-speaking investors, many of them relatively new, deserve all the protection and information they can get. That`s why I applaud this publication. The guide can be an important step toward promoting investor education among this fast-growing segment of American society. Twelve percent of the nation speak Spanish. There are some two million Hispanic-owned businesses, and one estimate says Hispanic households with more than $100,000 in annual earnings are growing at twice the rate of the general population. Hispanic buying power is projected to reach $1 trillion by the end of this decade. That means a lot of investable income and as more and more Hispanics become investors, they need to know how to understand their brokerage statements. I`m Myron Kandel.
Last Word: Mom Pay
SUSIE GHARIB: And finally tonight, here`s the job description. You need to be a teacher, chef, van driver, psychologist, facilities manager, chief executive, and computer operator. That`s all for one job, by the way. Here`s the salary: $134,121. Of course, that`s if the employee were paid a salary. That`s what a full time stay at home mother would earn in a year, if she were paid for all her work. A new study by salary.com crunched the numbers and found a mom is worth pretty much what a top U.S. advertising executive would make. But Paul, those stay at home moms have more than a full time job. The survey showed they work more than 91 hours a week. I can vouch for that too.
KANGAS: Just another reason why we should be extra nice to mom on May 14th, Mother`s Day.
GHARIB: I would say every day.
KANGAS: OK.
Paul Kangas' Stocks In The News
PAUL KANGAS: Stocks moved broadly higher this morning on those good retail sales and that drop in oil prices. At noon the Dow was sporting a 52-point gain. NASDAQ was up 19 points. Some mild profit taking in the blue chips trimmed their gains this afternoon, but the NASDAQ market held its own amid solid buying in some of the tech stocks. Dow Industrial Average closed up 38 1/2 points at 11,438.86. That`s a fresh six-year high incidentally. The NASDAQ Composite gained 19.93 to 2323.90. Standard & Poor`s 500 Index rose 4.40 to 1312.25. Over in the bond market, the 10-year note fell 2/32 to 95 even, putting the yield at 5.16 percent.
Big board volume leader, a familiar name, Pfizer (PFE) traded 19 1/2 million shares moved up a nickel.
Then Liberty Media (L) up $0.13, no specific news, very active though. The company is in the process of completing a major restructuring. I think that`s leading to some of the activity in the stock.
SprintNextel (S) was up $0.11.
Time Warner (TWX) dropped $0.09 today. Of course yesterday was off $0.20 when it reported first quarter earnings, $0.20 per share and that was just in line with estimates, down another $0.09 today.
Nortel Networks (NT) rose $0.06. That was fifth in big board volume.
ExxonMobil (XOM) on the lower oil prices, dropping $0.46.
Chico`s Fas (CHS), the women`s clothing retailer tumbling $7.10. Its April same store sales were up 5.4 percent, but even the company said it was disappointed with that and Wall Street was looking for a gain of 7.7 percent, so a disappointment all the way around.
General Electric (GE) $0.40 gain.
Tyco Intl (TYC) was up $0.98. Second quarter earnings, $0.47, a nickel ahead of the Wall Street estimate, way up from $0.10 a year ago, but the company did cut its 2006 earnings estimate from a high of $1.92 to a high of $1.85, but it`s also planning to buy back up to $2 billion worth of stock.
Citigroup (C) was tenth in volume and dropped $0.47.
Eastman Kodak (EK) a $0.59 drop, traded as low as $24.99 today. Eastman Kodak reported a sixth consecutive quarterly loss which included a lot of heavy restructuring costs as it tried to go to digital photography. A first quarter loss reported today of $1.04, more than twice as much as a $0.51 loss last year. The company did retain Goldman Sachs to explore the possible sales of its health group unit.
Archer-Daniels Midland (ADM), which has been riding high on good earnings recently, down $3.32 today. Prudential Securities downgraded it from "over weight" to just a "neutral" rating.
Then McDermott Intl (MDR) up $4.90. First quarter earnings $0.72, $0.40 more than last year and $0.22 above the Street estimate. The company`s three for two split stock incidentally start trading May 17th.
Then Startek (SRT) down $5.91. This is a management services firm. First quarter earnings came in at $0.14, $0.08 below the Street estimate, way down from $0.23 last year and it cut its quarterly dividend from $0.36 down to $0.25 a share.
NASDAQ`s most active, Microsoft (MSFT) with a $0.27 gain.
Followed by Apple Computer (AAPL) which dropped a penny.
Google (GOOG) $0.58 rise there.
Electronic Arts (ERTS) tumbling $5.95. After the close yesterday, the company reported a fourth quarter loss of $0.05 per share, versus earnings of $0.02 the year before. Today, Standard & Poor`s downgraded the stock from "strong buy" to just a "hold."
Cisco Systems (CSCO) was up $0.37 a share. That was fifth in dollar volume.
Qualcomm (QCOM) rose $0.59.
Intel (INTC) an $0.18 rise there.
Ebay (EBAY) down $0.06.
And then a big gain for Whole Foods Market (WFMI) up $8.27 today. Second quarter earnings came in at $0.36, up from $0.30 last year. Same store sales were up 12 percent. The earnings a penny above the Street estimate and the company boosted its 2006 same store sales guidance from plus 8 to 10 percent, all the way up to 10 to 12 percent.
And then Starbucks (SBUX) up $1.44. Second quarter earnings, $0.16, $0.02 above the Street consensus and up from $0.12 last year. Same store sales rose 10 percent.
Expeditors (EXPD), the global logistics firm, first quarter earnings $0.47, $0.08 better than the Street estimate. Two for one stock split announced and it`s boosting its annual dividend from $0.15 to $0.22 a share.
And those are the stocks in the news tonight.
