NBR Complete Transcripts: 06-16-2006
Friday, June 16, 2006A Review of Wall Street's Wild Week
LINDA O'BRYON:You could almost hear a sigh of relief from investors on Wall Street today as one of the most volatile trading weeks in years came to a quiet close. The Dow fell just a fraction and the NASDAQ lost 14 points. The number one concern of investors this week has been inflation. And as Erika Miller reports, that was the driver behind this week`s wild trading swings.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: For many investors, the small move in stocks today was a big relief after a highly volatile week. After trading in a more than 300-point range, the Dow managed to eke out a gain for the week. But the S&P 500 and the NASDAQ ended fractionally lower. Some market technicians say this week was a turning point.
GAIL DUDACK, CHIEF INVESTMENT STRATEGIST, SUNGARD CAPITAL: I`m bullish on the market. I don`t think this correction was an economic event. I think this correction was wringing risk out of portfolios that were way over weighted in commodities, emerging markets and it really took all the markets down with it.
MILLER: Stocks plunged Monday and Tuesday as investors became certain the Federal Reserve will raise short-term interest rates at its meeting June 28 and June 29. The odds also increased for another rate hike in August. But the big surprise this week was a powerful rally that gripped the market Wednesday and Thursday as investors became convinced the
inflation fears were overblown. Some analysts say it`s possible there could still be a summer rally.
CLARK WINTER, CHIEF GLOBAL INVESTMENT STRATEGIST, CITIGROUP: If we find that inflation is not the demon and money goes back to work, by all means. If it is the demon or any other uncertainty breakout -- whether it be Iran or some other source of geopolitical uncertainty -- then you really do want to hold cash and accumulate and wait it out.
MILLER: Winter recommends using current weakness to buy value stocks, solid companies trading at cheap prices. He advises against buying stock index mutual funds or exchange-traded funds like spiders.
WINTER: The other thing we`re recommending is that people ignore benchmarking because benchmarking is a behavior pattern that is highly rewarded in buoyant markets. Benchmarking is not rewarded when the tide goes down. MILLER: There isn`t much economic data to move the market next week. Some analysts say they`ll be watching the price of oil to see if it dips below $68 a barrel. That would help reassure investors that inflation pressures are retreating. Erika Miller, NIGHTLY BUSINESS REPORT, New York.
Where Will Bill Gates The Full Time Philanthropist Begin?
O`BRYON: The philanthropic world is buzzing today at the news that Microsoft founder Bill Gates transition out of his company and into full time work with his foundation. It has been almost a century since a business titan made that kind of move. Now as Darren Gersh reports, the question is just how Gates will decide to spend the foundation`s millions.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Bill Gates made his mark on the high-tech world. Now it`s clear he intends to do the same for the entire world through the work of his foundation.
BILL GATES, CHAIRMAN, MICROSOFT: With early successes comes the challenge of scaling up and delivering these new approaches to everyone who can benefit.
GERSH: It has happened before. Andrew Carnegie built a thousand libraries, creating the Internet of his time. John D. Rockefeller`s foundation revolutionized medical education. Gates and his wife Melinda hope to follow in those footsteps with programs to remake American schools into small learning communities. They are also backing research into a vaccine for malaria. But while promising, both are still unproven, and philanthropy expert Leslie Lenkowsky says it`s still not clear the Gates Foundation has found its big idea.
LESLIE LENKOWSKY, PROFESSOR OF PHILANTHROPIC STUDIES, INDIANA UNIVERSITY: Will it come up with ideas for dealing with world health or international poverty or education in the United States that will work? And if they work, I have no doubt at all that other philanthropists will emulate Mr. Gates.
GERSH: Some wonder whether it makes sense to risk millions researching a malaria vaccine when there are low-cost solutions like mosquito netting. But the Center for Global Development, which receives policy research funding from the Gates Foundation, says this is an area where a long-term approach can make a big difference.
NANCY BIRDSALL, PRESIDENT, CENTER FOR GLOBAL DEVELOPMENT: If you make necessary investments now in vaccines, you might have to wait a while before you see the results.
GERSH: And keep in mind, Bill Gates is still a businessman who made his fortune delivering results.
DOUGLAS BESHAROV, SOCIAL RESPONSIBILITY PROJECT, AMERICAN ENTERPRISE INSTITUTE: If a typical foundation is trying to just spend the money, I think Gates and the other entrepreneurs who will follow him are much more interested in leaving a mark, being a success in philanthropy as they were a success in business. GERSH: Success in philanthropy also comes down to finding the right people to fund. Bill Gates has lots of expertise doing that with high- technology. Soon he will be working full time to find people to help him realize his goal of making the world a better, healthier place to live. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.
Chartering Change In The Phililppines
O`BRYON: What a week it was Paul. Well, in the Philippines these days, the airwaves, newspapers, business and political circles are filled with talk of cha-cha. We`re not talking about the dance. That`s the nickname for charter change, a plan to radically rewrite the country`s constitution. But as Rian Maelzer reports from Manila, business leaders and others worry that serious economic issues are being lost in the cha-cha shuffle.
RIAN MAELZER, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s President Gloria Macapagal-Aroyo`s hope that within months the Philippines will dump the presidential system it adopted from its former rulers, the Americans. The country`s Senate and Congress would merge into a single body, a parliament, led by a prime minister: her.
MIRIAM DEFENSOR, SANTIAGO/PHILIPPINES SENATOR: Our government and therefore, our economy would have more money and, secondly, it would cut legislative time by at least half. There is sheer utter needless wasteful duplication of the legislative process.
MAELZER: The administration argues a parliamentary system would also lead to a more stable government, in turn helping cure the economic ills that have seen the Philippines steadily slip behind its most of its neighbors, including even Indonesia. Over the past 20 years, two presidents have been driven from office by mass protests against their corrupt rule. And the current president has also faced big demonstrations calling for her head, attempted military coups and the threat of impeachment. Everyone agrees the system needs fixing, but many worry about the government`s rush to change and its motives.
PROF. BENJAMIN DIOKNO, FORMER FINANCE SECRETARY: It`s a major diversion You don`t change the constitution in order to prop up a regime. It has to be based on higher principles like opening up the economy so that you create more jobs here. GUILLERMO LUZ, MAKATI BUSINESS CLUB: They originally packaged the whole deal as this will be good for the economy, this will be good for business, this will be good for making the country more competitive, and so on and so forth. And yet if you take a look at the entire proposal, there is not a economic provision.
MAELZER: Business leaders want to see constitutional changes to remove bans on the foreign ownership of land, education, public utilities and natural resources. The government says that will all come with time.
IGNACIO BUNYE, PRESIDENTIAL PRESS SECRETARY: We do consider the economic shift as the one that will really open up new doors in terms of investments. Investors want stability, they want certainty, and we believe that charter change will improve these aspects.
MAELZER: Critics are unconvinced, disputing the whole premise for changing political systems.
LUZ: An economy will grow regardless of whether it`s under a parliamentary or a presidential form of government because of other issues, such as governance or economic policy or the state of infrastructure or the cost of doing business or your competitiveness.
MAELZER: In all of which the country scores extremely poorly. Opponents of charter change, though, see hope in a Philippines` custom they usually complain hinders economic progress. They expect lengthy court challenges to put the brakes on the government`s rush to overhaul the constitution. Rian Maelzer, NIGHTLY BUSINESS REPORT, Manila.
"Market Monitor"-Eugene Peroni, Senior Managing Director at Claymore Advisors
KANGAS: My guest market monitor this week is Eugene Peroni, senior managing director at Claymore Advisors and welcome back to NIGHTLY BUSINESS REPORT, Gene.
EUGENE PERONI, JR., SR. MANAGING DIRECTOR, CLAYMORE ADVISORS: Thanks, Paul it is nice to be back.
KANGAS: In your many years of experience on Wall Street can you recall a week as wild and woolly as the one that we`ve just completed?
PERONI: Well, I have seen some pretty dramatic rallies and some pretty
terrible declines but not all compressed into one week. So no, I can`t recall anything quite like this.
KANGAS: Well, the unrelenting sell-off in May and early June finally lead to the massive rally of the last two days. Which move do you think was overdone the most or were they overdone at all?
PERONI: I think the decline was the one that was most overdone. It was triggered in May by that April CPI number which really has the market reacting to a stale economic report, a thing that happened 30 days prior. So I`m always a little suspect of a market that is reacting to old news. I`m looking for indications of what the market sees going forward. And I think that the elasticity that we have seen this week is encouraging about the longer-term outlook.
KANGAS: What is at the core of the extreme volatility we are seeing? Is it derivatives, hedge funds, what is it?
PERONI: It is a confluence of things. Sure, it`s the hedge funds and derivatives and so on, but I think it is a market that perhaps was caught a little bit by surprise, seemingly by surprise, by this inflation data, worries about what the Fed might do, certainly the untried results of what the new Fed chairman might do. All these things, I think, played in and created more of an emotional swell. And so whenever you have uncertainty and confusion, you are apt to get this kind of volatility. So I think that it`s more or less of a transient thing, not saying it is going to be here to stay for a long time.
KANGAS: But you would agree that it makes it difficult for the individual investor to make well reasoned decisions?
PERONI: Well, I think in many cases, the individual investor might be best just staying put in good quality stocks, the stocks that have exhibited good leadership since the market bottom in 2002.
KANGAS: On your last visit with us in late January of this year, you recommended the purchase of four stocks. Let`s see how they have done since then. Cleveland cliffs went over one, it looked like, down 37 percent. Intuitive Surgical had a big rise just before you recommended it. Do you still like these two? Are you still with them?
PERONI: Yes, on Intuitive Surgical, I think if they are willing to understand it is a volatile stock, I believe the long-term upside in that is very attractive.
KANGAS: And Cliffs you are out of it, are you?
PERONI: We do hold that in a unit investment trust. In our actively managed portfolios we are out.
KANGAS: You had two others that you recommended. And unfortunately, they are both down. I can`t recall a time when you have had more losers and no winners. But you still like Nordstrom and Monsanto?
PERONI: Right, these were brought in the last appearance, really with the expectation that they are to be looked at as longer-term performers and I do believe that they will perform well over a long term. Nordstrom is a retail stock. I still like the retail. I think the consumer discretionary leadership is still intact in the market.
KANGAS: Let`s get on some new and fresh ideas right now on the buy side, I assume you seem to be bullish. There we see Alliance Data Systems (ADS). It has had a big ride already, but you still like it?
PERONI: I do. And again I think that this argues for the consumer discretionary opportunity going forward in the market.
KANGAS: Next one, let`s move on to something else. PERONI: Astra Zeneca, in the pharmaceutical group.
KANGAS: The big Swiss pharmaceutical. They`ve done well and they are pretty well-positioned, I`m told. PERONI: Yes, and I do like the health care group here. I like the pharmaceuticals, even the big pharmaceuticals I think longer-term will do well.
KANGAS: OK. I see your next choice is Boeing.
PERONI: Yes, Boeing certainly is attractive in itself. It does represent of course the blue chips. I still think this is a multi-cap market, so I don`t think this is a market that is going just to the large caps.
KANGAS: We just have 30 seconds, one quick suggestion, one more.
PERONI: Well, I also like Corrections Corp. of America. This is a company that has privatized prisons and so on. I think that this represents a good growth opportunity.
KANGAS: Do you personally own any of the securities you have been talking about here, Gene?
PERONI: I don`t but they are held in our summer growth portfolio.
KANGAS: All right. I am afraid our time is up. But Gene I want to thank you for being with us again.
PERONI: It is a pleasure, Paul, thank you.
KANGAS: My guest, Gene Peroni of Claymore Advisors.
Last Word: Starbucks Lands A Historic Venue
O`BRYON: And finally tonight, George Washington may have slept there, but chances are he didn`t have a vente non-fat latte before hitting the sack. Well, now he can. The historic Maryland Inn in Annapolis is getting a Starbucks. The building dates to 1780 and was a haunt of American patriots and revolutionaries, including Washington. Now it`s getting a new lease on life with renovations and commercial space. Besides being a tavern and an inn, at one point, the building also served as a jazz club, Paul.
KANGAS: I imagine that was a little after Washington, you saying around there.
O`BRYON: I think so, the lattes too.
Paul Kangas' Stocks In The News
PAUL KANGAS: Well, investors viewed stock prices as a bit high after two days of huge gains, so they did some profit-taking this morning. The Dow fell 30 points by noon when the NASDAQ was down 21 points. The mild setback kept traders optimistic and prevented a pickup in selling pressure this afternoon, so at the final bell, the market posted just modest losses across the board. Dow Industrial Average closed down a mere 2/3 of a point at 11,014.55 today.
This week it fell three times, rose twice, had a net gain of 122.63 points. The NASDAQ Composite ended off 14.20 at 2129.95 today. It also fell three times and rose twice this week, but lost 5.11 points overall. Standard & Poor`s 500 was down 4.62, ending at 1251.54 today. Over in the bond market, the 10-year note lost 9/32 to 99 30/32, putting the yield up at 5.14 percent.
Most active New York exchange issue on 33.7 million shares, Time Warner (TWX) down $0.15. Telecom Italia`s chairman said his company is interested in Time Warner`s AOL operations in Germany and France and Time Warner said previously it is considering the sale of those operations.
Hewlett-Packard (HPQ) up $1.16, had a nice move today.
GE (GE) down $0.18.
ExxonMobil (XOM) a $0.32 loss.
And Pfizer (PFE) tenth - fifth in volume, down a dime.
Lucent Tech (LU) gained $0.03.
Bank of America (BAC) off $0.49.
Motorola (MOT) $0.25 loss there.
Citigroup (C) down $0.32.
And AT&T (T), tenth in volume, edged up $0.06 a share.
Pepsico (PEP) up $0.62. UBS financial brokerage upgraded it from neutral to buy. The analyst there said there`s going to be an increasing demand for defensive type stocks like Pepsico. Then we see Boston Scientific (BSX) edging up $0.57. A Delaware court upheld a previous jury verdict that Johnson and Johnson violated a Boston Scientific patent for the drug coatings on stents, so that was a positive for Boston Scientific.
Carnival Corp (CCL) up $2.02. Second quarter earnings dropped 2 percent to $0.46 from $0.47 a year ago, but that was $0.02 above the Street estimate. The company`s also going to buy back another $1 billion worth of its stock and today Merrill Lynch upgraded it from neutral to buy.
Bairnco (BZ), the steel company, up $1.47. Steel Partners II, which is a hedge fund, plans to make an unsolicited tender offer for the 85 percent of the shares of Bairnco they don`t already own and the price will be at $12 per share on the tender.
Winnebago Industries (WGO), there you see it, nice move up, $2.21. You heard about the earnings and also the Baird brokerage noted that 26 percent of the stock float (ph) is in short positions in the market, but also helping is that big backlog of orders they have.
Todd Shipyards (TOD) on the other hand, down $2.95. The company had a fourth quarter loss of $0.03 versus earnings of $0.72 a year ago. Revenues dropped 26 percent. The company blamed lower business from the U.S. Navy.
And Verasun Energy (VSE), you recall this ethanol producer went public on Wednesday at a price of $23. Well, the chart looks a little funny because it`s only a week old, but you can see profit takers have been moving in steadily after Wednesday. It got as high as $30.75.
Polo Ralph Lauren (RL) a $2.30 gain there. The company reportedly is in talks to sell an exclusive line of its merchandise through JC Penney. Buckingham research brokerage upgraded the stock from buy to a strong buy.
Microsoft (MSFT) topped the active list rising $0.03. Microsoft said its developing a competing iPod type product just like Apple Computer.
Google (GOOG) in there with a $0.30 loss.
And Apple Computer (AAPL) on the Microsoft news, down $1.82.
Oracle (ORCL) a $0.49 gainer.
Intel (INTC) $0.18 rise there. That was fifth in dollar volume. Qualcomm (QCOM) fell $0.94.
Dell (DELL) $0.79 loss. Adobe Systems (ADBE) bucked the overall trend with a $0.16 gain.
Cisco Systems (CSCO) a $0.24 drop.
And tenth in volume was Amgen (AMGN) losing $0.62 a share.
California Micro Devices (CAMD) down $1.47. That`s 25 percent of its value. The company cut its first quarter revenue estimate by $2 million, down to about $15 to $16 million and the Unterberg brokerage downgraded the stock from buy to just a market perform rating.
And those are the stocks in the news tonight.
