NBR Complete Transcripts: 08-10-2006
Thursday, August 10, 2006London's Foiled Terror Plot Does Scary Things To The Fragile Airline Industry
SUSIE GHARIB: The world is on alert tonight. From Washington to Wall Street to Main Street, people everywhere focused on terrorism issues once again and new stringent security measures at airports as a result of a major terrorist plot thwarted by British authorities today. News of the plot stirred up fresh terrorism worries in global financial markets and international airports, but stability and calm were restored by the end of the day. We have two reports this evening looking at the impact of the terror alert. We begin with Scott Gurvey in New York.
SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Long lines greeted travelers at major airports in the most visible sign that something was amiss. It was a result of America`s precautionary response to word that the British had arrested more than 20 people suspected in a plot to blow up as many as 10 jetliners headed from the UK to the United States. The plotters apparently planned to sneak liquid explosives on board. The Department of Homeland Security used its red alert designation for the first time at airports, confiscating most liquids from passengers at security checkpoints.
MICHAEL CHERTOFF, SECRETARY, DEPT. OF HOMELAND SECURITY: This plot appears to have been well-planned and well-advanced.
GURVEY: Stocks tumbled when New York markets opened, but recovered and ended the day in positive territory as investors analyzed the news.
JAMES AWAD, PORTFOLIO MANAGER, AWAD ASSET MANAGEMENT: It was classic that you had a knee-jerk reaction to go down in price because it`s an unsettling piece of news and then quickly the market refocused on its fundamentals and regained its balance.
GURVEY: Stocks for companies in the security and defense sectors rallied on the reports, especially for technology companies which make the types of explosive detection equipment used by airport security. The defense sector got another boost when President Bush made his first comments on the developments coming out of Britain.
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The recent arrests that our fellow citizens are now learning about are a stark reminder that this nation is at war with Islamic fascists, who will use any means to destroy those of us who love freedom.
GURVEY: On the energy markets, crude oil futures prices fell, traders believing a reduction in travel will cut into demand for jet fuel and gasoline. The bottom fell out of the travel and leisure industry following the 9/11 attacks five years ago and stocks in those sectors did fall on the open today. But for the most, they too recovered and analysts say right now, with the plot apparently foiled, a big sell-off in the sector is unlikely.
JEFFREY RANDALL, LODGING ANALYST, A.G. EDWARDS: I think a successful attack, all bets are off, but, you know, these threats are not going to change the business travel patterns. If people are concerned on the leisure side about flying, that will have a noticeable impact, but again those people are still going to travel. They`re still going to be going to perhaps hotels that are closer to home and so you`re still going to get demand that`s pretty resilient out there.
GURVEY: There are also signs today that some government leaders will be pointing to today`s events as they ask for increased intelligence capabilities. That should be bullish for companies in the data-mining and surveillance businesses. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: I`m Stephanie Dhue at Washington Dulles international airport. Passengers here, around the nation, in London and Europe faced cancellations, delays, long lines and the loss of anything liquid they tried to carry on. Analysts say the security delays increased hassles and terror fears may put off some travelers, but most people we spoke with today were taking it in stride.
CAROLYN STONE, PASSENGER: I`d rather have the security and knowing that they`re thoroughly checking everybody than quickly getting through.
STEVE TRAUTWEIN, PASSENGER: We got here a little early, three and a half hours early for a 4:30 flight and found that it was much easier than it usually is.
DHUE: Still, airline stocks lost ground today. The carriers will bear the costs of the delays and cancellations, and there are worries that longer-term bookings could suffer. Analysts say the industry is better equipped to weather this storm than they were just a year ago.
PHILIP BAGGALEY, TRANSPORTATION ANALYST, STANDARD & POOR`S: All of the large airlines have reported profits in the second quarter, if you set aside some of the bankruptcy charges and their cash positions are fairly healthy at this point.
DHUE: Also in better shape are airline operations. Since the 9/11 terrorist attacks, the airlines have been streamlining procedures and getting rid of inefficiencies in the system.
RANDY BABBITT, CEO, ECLAT CONSULTING: They have become more nimble. They certainly have learned better scheduling techniques. They can substitute equipment more efficiently and they`ve gotten, quite bluntly, they`ve cleaned up a lot of their inefficient airplane fleets.
DHUE: The increased security and heightened terror alert come as the airlines head into a slower travel season. The airlines will know in the next day or two how significant the impact will be. Much of it will depend on how quickly the Transportation Security Administration and passengers adapt to the security changes. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington Dulles International Airport.
One on One With Peter Zeihan, Senior Analyst with Stratfor.com
SUSIE GHARIB: Our guest tonight advises corporations on how to prepare and cope with geopolitical risks. Joining us now from Austin Texas, Peter Zeihan, senior analyst with stratfor.com. It`s a political, economic, and security consulting firm. Hello, Peter.
PETER ZEIHAN, SR. ANALYST, STRATFOR.COM: Hello.
GHARIB: President Bush said today the United States is safer today than it was before 9/11. Is that the case? Do you agree with that?
ZEIHAN: Well, it depends upon what your opinion of al Qaeda is, of course. Al Qaeda, before 9/11, was an organization that was looking to pick a fight. Nowadays, it`s looking for survival. Now it`s desperate. Then it was adventurous.
GHARIB: Well, do you believe that the counter-terrorism measures and apparatus that we have in place are the best possible? Is there more things that the United States should be doing?
ZEIHAN: It`s a question of balancing two interests. One, do you want air travel to be efficient and fast? And, two, do you want it to be safe? They`re two largely mutually exclusive concerns. For example, before the terrorists attacks in 2001, we had a system where it was very easy to go anywhere at any time. Security procedures that were in place were really more just a matter of making people look like there was something in place. As we get further away from that date, we`re looking at a much more robust system, but as a result, things slow down a great deal more. With some of the new systems that we`re seeing developed in the United Kingdom right now, there`s more in store.
GHARIB: The airlines are now banning travelers from taking laptops on board, cell phones, Blackberries. If these security measures stick, what impact do you think global terrorism is going to have on business and business travel?
ZEIHAN: Those are the measures that we`re seeing in the United Kingdom. It`s not yet clear whether or not those are going to become permanent features, much less on an international scale. But that is the direction that the trend is heading. Once that happens, companies that are dependent upon management, senior consultants and other folks who deal with various service industries are going to have a hard time. A lot of these people spend a considerable portion of their week traveling, and if you
have someone who is employed by you or contracted by you who loses 20 hours a week in travel time and can`t work at all during those 20 hours, then your labor costs have gone up dramatically. They`re going to be looking at companies needing to staff permanent positions in places where`s normally they`d only bring people in for a day or two.
GHARIB: So what were you telling your clients today on how to deal with these new terrorist threats?
ZEIHAN: It`s time to become much more flexible in the way people think of simply things like commuting and telecommuting. The technology exists today to have real-time conference set ups, trans-Pacific, trans-Atlantic, anywhere in the world where people in different rooms can real time conversations. We at stratfor have an excellent system like this that allows us to keep in touch with a number of people around the world. That`s going to have to become more popular, despite the cost. This is something that companies just can`t deal with. Because if you have somebody flying, for example, from London to Sydney, you lose them for an excess of a day right now if you don`t have a laptop.
GHARIB: Is there any one takeaway lesson out of today`s news and the terror plot?
ZEIHAN: Be flexible. Be nimble because one can guarantee that the militants that are behind this sort of operation are not done yet. We`ve seen a rapid evolution in tactics that target civilian industries like the airline industry and the airline industry is uniquely vulnerable because it`s only place where you can get a tightly contained group of civilians and literally give them no place to go. It will always be a prime target and so companies, investors, have to always be thinking one step ahead. How can they be faster?
GHARIB: An unfortunate truth. Thank you very much, Peter. We`ve been speaking with Peter Zeihan, senior analyst with stratfor.com.
"Bill of Health" -High End Hospital Rooms
SUSIE GHARIB: It sounds nice: high-quality linens on the bed, designer furniture, great meals. But this is not a new, high-end hotel we`re talking about. It`s a hospital room. In tonight`s "Bill of Health" report, Jeff Yastine looks at how hospitals are going upscale to try to treat the shortfalls on their bottom lines.
JEFF YASTINE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Big-city public hospitals provide quality medical care, especially for indigent patients who are otherwise unable to pay. But it often comes at the expense of poor customer service. Parking can be hard to find. Patient rooms are Spartan and it may take hours to be admitted to the hospital. Those sorts of hassles often drive private, insured patients to newer suburban hospitals. But as we`ll see in some cases, that`s starting to change.
Silvio Erenberg came all the way from his home in Montevideo, Uruguay, to be admitted to Jackson Memorial Hospital in Miami. Jackson is a large, busy, teaching hospital and one of the largest providers of indigent care in the southeast. Yet Erenberg chose to have his surgery at Jackson in part because of its six-month old concierge care program. Patients like Erenberg can stay in a premium room with faux hardwood floor, a fully tiled bathroom, a pullout couch so family members can stay overnight and a microwave kitchenette. Erenberg says those extras made a difference.
TRANSLATION OF: SILVIO ERENBERG, PATIENT: Four of us came from Uruguay. My wife, my two daughters and the four of us are in this home very comfortably. This type of habitation is very important as it gave me a sense of tranquility to help me recuperate.
YASTINE: Concierge service is something more hospitals around the country are offering in an attempt to generate additional revenue. In Jackson`s case, and that of other public hospitals, that money helps offset the growing cost of medical care for indigent patients.
ROLAND DAMIAN RODRIGUEZ, PRES. & CEO, JACKSON MEMORIAL FOUNDATION: This is like the classic, if you build it, they will come. The private patient wants the wonderful doctors and nurses that we can give them, but it was hard getting them in before. Now that we`re offering these services, the patients are thrilled. The doctors are thrilled.
YASTINE: Fast-track admittance to the hospital is another aspect of concierge service, something Janet Movilla appreciated when her son, Gioani, need surgeries to correct an intestinal problem.
JANET MOVILLA, PATIENT`S MOTHER: They`ve always been on top of me, making sure that my service is good, that I`m comfortable, if I need anything, parking. Whatever it is that I`ve needed, they`ve been here for me.
YASTINE: Hospitals say a patient can buy more amenities, but they cannot buy more doctors and nurses. And they say the quality of medical care remains the same for those who pay for concierge services and those who do not. Jeff Yastine, NIGHTLY BUSINESS REPORT, "Bill of Health."
Commentary: Stop Wasting Time on Govt. Waste In Iraq
SUSIE GHARIB: Tonight`s commentator takes a look at the role the news media plays in ferreting out the truth. Here`s Myron Kandel, president of the New Hampshire Initiative for Corporate Responsibility and Investor Protection.
MYRON KANDEL, PRESIDENT, NEW HAMPSHIRE INITIATIVE FOR CORPORATE RESPONSIBILITY: Six weeks ago, I told a group of financial journalists that one of the important subjects they should be watching was waste and fraud in Iraq. I believe that future Pulitzer Prizes and Dupont awards will go to the journalists who can uncover those stories. Some news is beginning to dribble out, but it`s coming more from an occasional government report than from investigative news people. And Congress is missing the boat as well. Remember when Harry Truman`s investigation of World War II profiteering thrust him into national prominence and eventually into the White House?
Reconstruction corruption is estimated to cost Iraq at least $4 billion a year and as we plan to hand over billions in rebuilding projects to the Iraqis, our hands are far from clean. Hundreds of planned projects have not even been started and others have been taken away from American contractors for fraud or failure to perform. True, security concerns are a big factor, and there are a number of successes, but rebuilding Iraq`s oil infrastructure isn`t one of them. Remember when oil revenues were going to pay for war damage and a lot more? It isn`t happening. The overall performance of the Americans in charge has been marred by poor planning, mismanagement, waste and fraud. It`s time we learned the full story. I`m Myron Kandel.
Paul Kangas' Stocks In The News
PAUL KANGAS: Stocks opened with mostly minor weakness in reaction to that terrorist airline plot, presumably because it was foiled. At the outset of trading, the Dow and the NASDAQ lost only about five points. That resilience boosted the market by noon time, when the Dow was up 22 points, NASDAQ up six points. A steep drop in oil prices added to bullish confidence this afternoon. So the Dow Industrial Average closed with a gain of 48.19 at 11,124.37. The NASDAQ Composite was up 11.46 ending at 2071.74. Standard & Poor`s 500 rose 5.86 points to 1271.80. The Treasury auctioned off $10 million worth of 30-year bonds today, getting a lackluster reception and a yield of 5.08 percent. In the regular trading session, the 10-year note gained 4/32 to 99 17/32 and that put the yield at 4.94 percent.
Most active New York exchange issue on 13.4 million shares, ExxonMobil (XOM) moving up $0.40 despite the plunge in oil prices.
SprintNextel (S) $0.13 loss.
EMC Corp (EMC) was up $0.29.
General Electric (GE), $0.39 gain. Pfizer (PFE) fifth in volume fell $0.18 a share.
Ford Motor Co (F) edged up $0.06.
Time Warner (TWX) a $0.20 gain.
Bristol Myers Squibb (BMY) down $0.29.
Disney (DIS) up $0.75. As we reported yesterday, Disney`s third quarter earnings jumped 40 percent to $0.53 a share.
Then tenth in volume was AT&T (T) with a $0.02 loss.
American Intl Group (AIG), which is a member of the Dow Industrial average, up $1.83. Second quarter earnings excluding one time items, $1.58 a share. That was $0.19 above the Street consensus and the Credit Suisse brokerage said it believes most of the turmoil in the company had been experiencing is now over.
Then we see a good loss or a bad loss I should say in World Fuel Services (INT) off $6.60, traded as low as $37.96. The company did report higher second quarter earnings of $0.50, up from $0.40 a year ago, but it`s in the aviation fueling business and the terrorist threat to airlines could hurt that business. Airline stocks were surprisingly firm today however.
Unitedhealth Group (UNH) off $1.58. The company is going to delay its second quarter results to review the stock option grants. AIG Edwards brokerage downgraded the stock from "buy" to just a "hold" recommendation.
Target Corp (TGT) up $2.44. Second quarter earnings were much higher, $0.70, up from $0.61 a year ago, a penny above the Street estimate and revenues up a very respectable 11 percent during that period.
JC Penney Co (JCP), another strong retailing stock, up $1.58. JCP second quarter earnings on an operating basis, $0.75, up from $0.46 a year ago, $0.04 above the Street estimate. The stock did well.
Viacom "B" (VIAb) up $3.27. Second quarter earnings excluding one time items, $0.48 a share, $0.04 above the Street estimate and revenues up 24 percent.
One of the big percentage losers, 4kids entertainment (KDE) dropping $1.97. The company had a second quarter operating loss of $0.05 a share and the Street was looking for earnings of $0.06. Revenues actually fell 9 percent during that period. Brinker Intl (EAT), the restaurant chain, owns Chili`s and Macaroni Grill, up $2.92. Fourth quarter earnings $0.75, up from $0.69 a year ago. Revenues up 7 1/2 percent. Those earnings incidentally 10 percent above the Street estimate.
Best percentage gainer on the big board, Tenet Healthcare (THC) up $0.78. Second quarter operating earnings were out, $0.03 a share on the plus column versus a loss of $0.02 last year, a lot better than the Street was expecting.
Apple Computer (AAPL) topped the NASDAQ actives, up $0.48.
Followed by Google (GOOG) down $2.74.
Cisco Systems (CSCO) fell $0.22.
But Intel (INTC) rose $0.35.
Research in Motion (RIMM) up $5.54 on optimism over the company`s new Blackberry pearl device to be introduced by TMobile next month. That was fifth in volume.
Cephalon (CEPH) plunging $8.05. The biotech firm had a rejection by the FDA for its drug for attention deficit disorder, going to discontinue production.
Microsoft (MSFT) $0.02 gain.
Oracle (ORCL) up $0.18.
Qualcomm (QCOM) $0.37 rise.
Filenet (FILE) up $1.52. IBM will buy it for $35 a share.
Imclone Systems (IMCL) down $4.32. The company says it`s going to remain independent after a fruitless six month search for a buyer.
And then another big loser was Imax Corp (IMAX). It couldn`t find a buyer either in recent times, so it gave up apparently on that idea.
And those are the stocks in the news tonight.
