NBR Complete Transcripts: 11-03-2006
Friday, November 03, 2006The Jobless Rate Drops But Concerns Still Rise
SUSIE GHARIB: The nation's unemployment rate is at a 5 1/2 year low tonight, 4.4 percent. The Labor Department today reported strong job growth over the past three months. Experts say that suggests that the economy may not be slowing as much as previously thought and the Federal Reserve will not cut interest rates anytime soon. Scott Gurvey reports.
SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Fewer jobs were created in October than most forecasters expected, but there were large upward revisions to the employment number for August and September, a big surprise to many. In all, 92,000 jobs were created in October with teachers, restaurant and healthcare workers leading the way. The unemployment rate fell to 4.4 percent. The immediate reaction in the bond market was sharp with a significant decline in prices. Traders fearing competition for workers will put pressure on wages. Average earnings rose a bigger than expected $0.06 an hour in October. That could prompt the Federal Reserve to raise interest rates to further slow the economy and control inflation.
IAN MORRIS, CHIEF U.S. ECONOMIST, HSBC: The tight labor market is a concern for the Fed. Right now hourly earnings are running at around four percent on a year over year basis. So it's fairly benign. It's not out of control. But the Fed will be worried that it might creep higher given how tight the labor market is.
GURVEY: The Fed has kept interest rates steady at 5 1/4 percent at each of its last three meetings. It is still expected to do the same at its final meeting for the year on December 12. But predictions it would begin cutting rates early in 2007 are being dropped in reaction to today's report. There is also some grumbling on Wall Street over the recent string of revisions to the employment data with some wondering if there is a problem with the surveys, which may not be keeping up with the changing economy.
NEAL SOSS, CHIEF ECONOMIST, CREDIT SUISSE: We've been seeing repeatedly some upward revisions which suggests something about the structural change in the economy. It's just hard to measure the economy because it is a different economy from what we used to know many years ago.
GURVEY: With the mid-term election just days away, the employment report is having an impact and most agree it will be positive for incumbents, if economic issues drive voters' decisions on Tuesday. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.
"Capitol Impact 2006"-The Economic Role
SUSIE GHARIB: The conventional wisdom in Washington is that next week's mid-term election will be a referendum on Iraq. That may be true, but some analysts think both parties missed a real opportunity to lay out a new economic vision for the future. As we continue our series "Capitol Impact 2006," Washington bureau chief Darren Gersh says some people think this election could have been a mandate for change.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Virginia Senator George Allen sounds like many other Republican candidates on the economy. He hits a long list of bullet points on energy independence, education and health care for small businesses. But then he hammers away at what he calls a defining issue in the campaign: tax cuts on capital gains, dividends, tax cuts for businesses, tax cuts for married couples.
SEN. GEORGE ALLEN (R) VIRGINIA: All of this has spurred economic growth. People are better off because of it. You're deciding how you want to spend that money. And it's helping the economy.
GERSH: With 4.4 percent unemployment and a booming stock market, that message should be working, but polls show it's not. Most Americans now think Democrats would handle the economy better and Republicans like economist Kevin Hassett think that's because his party missed its chance to change the subject from Iraq. In 1994 Republicans won control of the House offering ten points called the contract with America. Twelve years later, Hassett says Republicans should have rolled out an economic version of that contract.
KEVIN HASSETT. ECONOMIST, AMERICAN ENTERPRISE INSTITUTE: There has been a policy void really for the last couple of years and a contract would probably create quite a bit of momentum for Republicans and change the debate. But they haven't done that. I think, even as a Washington insider, that I have no idea what the Republican's agenda would be if they were elected, if they actually win.
GERSH: Because the Bush tax cuts don't expire until 2010, Hassett says it was a mistake to make that the key economic issue of the campaign.
HASSETT: What they should have done is they said, look, here's what we are going to do next year. And it's going to affect you next year. Next year we're going to fix Social Security. If they had done that, then I think they probably would have excited voters a lot more than they did.
GERSH: As for Democrats, many of them sound like Jim Webb on the economy. When he campaigns to take Allen's job representing Virginia, Webb strikes a populist note.
JIM WEBB, SENATORIAL CANDIDATE, VA (D):When you have a situation where corporate profits are at an all-time high and it's not trickling down to the workers, it needs to be addressed. And it's not anti-business to say that. It's just fairness to say it.
GERSH: By highlighting fairness, Democratic strategist Ruy Teixeira says his party has scored points with voters. But that isn't the same as offering a compelling new point of view on the economy. Teixeira says the public has rejected President Bush's ownership society, but Democrats haven't filled the void. He says democrats should have connected economic security with opportunity.
RUY TEIXEIRA, FELLOW, CENTER FOR AMERICAN PROGRESS: People think of themselves as the hero in their own economic drama, and you don't want to tell a hero that they're a loser. And that's too often what they hear from the Democrats.
GERSH: Polls now show this election is likely to shift control of the House of Representatives, perhaps even the Senate. But on the economy, analysts say neither party has laid the foundation for a major change in policy in the coming congress. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.
Hurricane Insurance Premiums Are Causing A Storm of Trouble
SUSIE GHARIB: December 1st will mark the end of the 2006 hurricane season, a season which so far, has been surprisingly calm. But that calm has done little to help business owners in coastal areas, many of whom are now facing extraordinary increases in their insurance costs. As Jeff Yastine reports, the high price of insurance is forcing some businesses to pick up and leave.
JEFF YASTINE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Each year, hundreds of dentists pay up to $3,000 each for three day-long sessions at this facility, the Pankey Institute, where they learn about new advances in dental techniques and technology. But the institute will soon be moving its molars, packing up its dental simulators and lab gear, and heading out of the region. It's even selling its building, specially designed to withstand hurricane-force winds and storm surge. The reason? A huge, sudden jump in the cost of buying insurance for such storms.
CHRISTIAN SAGER, CEO, PANKEY INSTITUTE: We sit here and you're a $3.5 million or $4 million a year organization and you've established all of your policies and your procedures and your pricing structure for tuition with that kind of understanding. And then there was no advance notice. So all of a sudden, we're going to go, we actually went from $240 or $250,000 a year in insurance, to $575,000 a year in insurance.
YASTINE: It's a change that thousands of owners of commercial property in hurricane-prone coastal areas are facing these days. Property insurers are re- assessing the costs of writing policies covering wind damage for business structures like warehouses, retail stores, and office buildings. A survey by the Florida Chamber of Commerce showed that 25 percent of business owners had their insurance policies cancelled this year and more than half saw higher policy costs or made do with less coverage and higher deductibles. Insurers say it's the new reality of insuring for hurricane risks.
ROBERT HARTWIG, EXEC. VP & CHIEF ECONOMIST, INSURANCE INFORMATION INSTITUTE: Insurers expect that we are in an extended period of tropical cyclone activity that is going to be more frequent and more intense than what we've experienced in the recent past. The best minds in meteorology, whether they're in the private sector or academia or in government all expect that we're looking at the next 10 to 20 years where elevated activity is going to be expected and is going to be the norm.
YASTINE: But consumer advocates say cycles of increased hurricane activity are by now well-known and should already be reflected in the insurance industry's risk models. And that consumer advocates say, is part of the problem.
J. ROBERT HUNTER, DIR. OF INSURANCE, CONSUMER FEDERATION OF AMERICA: Its very hard to figure out what they're doing because its in a black box called a model and they suddenly, the numbers, which they assured us a few years ago would bring stability and we would never see big rate increases, are suddenly changed by magnitudes of multiple times and without any explanation of what they changed in the model.
YASTINE: Florida lawmakers activated a statewide insurance pool earlier this year for commercial property owners. There are also proposals for region-wide catastrophe funds for the hurricane-prone southeast. But such efforts are no help for commercial property owners facing big insurance bills now which means that more job providers, like the Pankey Institute, with a highly-paid staff of 30, are likely to pick up and leave for cheaper places to do business. Jeff Yastine, NIGHTLY BUSINESS REPORT, Key Biscayne, Florida.
"Market Monitor"-James Dines of the "Dines Letter"
PAUL KANGAS: My guest "market monitor" this week is James Dines, editor and publisher of the "Dines Letter" based in Bellvedere, California. Welcome back to NIGHTLY BUSINESS REPORT, Jim. Good to see you.
JAMES DINES, EDITOR, "THE DINES LETTER": Hi, Paul.
KANGAS: Wall Street's blue chip surged above the Dow 12,000 level to record highs just recently, but have fallen this week. Do you feel this market has topped out and could go through an extended correction? If so, why?
DINES: This market looks lower. Whether it's going to go into '07 we'll decide with our annual forecast issue coming up. But I think the reason is the real estate bubble has burst and I've been negative on real estate as you know for the recent years and I'm very bearish on it.
KANGAS: OK. As a market analyst, you have predicted major up trends for certain stock sectors and commodities. Gold prices and Internet stocks were two things you saw heading higher before they did and you were the gold bug, the original one. Now you're the uranium one. That's your new favorite. Why uranium?
DINES: I think that the whole world is going to have to move from burning things for energy, including ethanol, towards a mineral and that's nuclear. The whole world is going nuclear and that's what will keep us going for the next few centuries. And it could be cut off by geopolitical things or we could run out of it, but global warming is the big reason. We are going nuclear and that's the bottom line.
KANGAS: We have a chart of the Dines uranium average, which consists of about 30 stocks in understand and it's in a sharp up trend. Aren't you afraid that it's had too big a run?
DINES: No. It's the only uranium average that I know about in the world. And that's why most people have missed this uranium bull market. But it's in what a call a streaming uptrend and as long as that uptrend is intact, we're going to stay bullish.
KANGAS: Now on your last visit in October of last year, you recommended several stocks. Let's see how they've done since then. First we have up on the board, let's see, Cameco, the world's largest uranium miner, up a mere 42 percent. I know you got out higher than hat because of the flooding of a major line they own, Cigar Lake.
DINES: Yes, we sold that, luckily at the top and we took a profit of 553 percent out of it because we had that the last six years.
KANGAS: OK, Laramide Resources has done well, up over 30 percent and let's move right along in some of the others you recommended in October. Mega, that's only up about 200 percent. That's almost unbelievable. And Whole Foods Markets, the only one down here, but I understand you sold it long before today.
DINES: Yes, we got out at the top, fortunately.
KANGAS: OK and there was one other on the American Exchange that you liked, Apex Silver. It's up about 8 percent or so. Are you still with it?
DINES: It's a great deposit, but they'd elected a Leon Trotsky to run Bolivia, so I don't know. It's a political decision, not a stock market decision.
KANGAS: OK, do you have any new recommendations, Jim?
DINES: I do. I can't give you my whole list, obviously, but I'll share a few. I like Pine Tree very much. It's the only fund of uranium stocks. And it's a closed end venture fund. I think that's going to do very well. It's already been a tremendous winner for --.
KANGAS: We can see that by the chart up here, unbelievable.
DINES: Right.
KANGAS: OK, number two.
DINES: Number two, I like Mega Uranium.
KANGAS: Even now after that huge run-up?
DINES: I think you ain't seen nothing yet. They've been acquiring properties around the world, and that's going to be one of my biggest winners ever, I believe.
KANGAS: OK and then, we have time for about one or two more, Frontier Development.
DINES: Well, Frontier is another very good one. They're opening up new areas in Canada, particularly Labrador and the Yukon.
KANGAS: All of these are traded on the Toronto exchange except for frontier which is on the American exchange, correct?
DINES: All the uranium companies are basically Canada and Australia.
KANGAS: OK, Laramide is your fourth choice and you liked that before and it's still.
DINES: I like that again.
KANGAS: A little choppy. Do you own any of these securities, Jim?
DINES: Absolutely. I own all of them and have owned them all the way up, and so have my subscribers.
KANGAS: We have about 20 seconds for any parting thoughts for our viewers. Go right ahead.
DINES: If loneliness can be defined as two people alone with a roast turkey, then experience can be defined as something you really need just before you get it.
KANGAS: OK, our resident philosopher, Jim, thanks very much for sharing your time with us.
DINES: It's always my pleasure, Paul.
KANGAS: My guest, James Dines, editor of the "Dines Letter."
"Last Word"-Sweet n'Low 's Sweet Achievement
GHARIB: And finally tonight, the next time you put a Sweet `n Low in your coffee, remember this: the company that makes it, Cumberland Packing, this week churned out its 500 billionth packet of the stuff. The ubiquitous pink packets have been around for almost 50 years and are now found everywhere on the globe. Five hundred bill Sweet `n Lows would cover the total area of New York City, wrap around the world 792 times and weigh more than 91,000 elephants. But here`s the most important statistic about all those packets, Paul, using them saved dieters about 5 1/2 trillion calories.
KANGAS: I wonder if you`re aware, Susie, that one packet of Sweet `n Low has the sweetness equivalent of two teaspoons of sugar.
GHARIB: That`s a lot of sugar. That`s pretty sweet.
KANGAS: So use a half a packet.
GHARIB: Half a packet.
Paul Kangas' Stocks In The News
PAUL KANGAS: Wall Street opened a bit higher on bargain hunting after five straight losses with the Dow rising 22 points at the outset of trading, while the NASDAQ gained four points. That decline in unemployment and news of a bigger than expected rise in service sector activity revived concerns that the Fed may tighten rates again, sending the Dow off 46 points at 1:00 p.m. Then the surge in oil prices kept stocks in moderately lower ground for the rest of day. Dow Industrial Average closed off 32 1/2 points exactly at 11,986.04. It fell every day this week, had a net loss of 104.22 points. The NASDAQ Composite was off 3.23, ending at 2330.79 today. This week, it fell twice, it rose twice and fell three times, had an overall decline of 19.83. Standard & Poor's 500 Index dropped 3.04 today, ending at 1364.30. In the bond market, the 10-year note slid 30/32 to 101 7/32, boosting the yield to 4.72 percent.
Big board volume leader on 16.2 million shares, ExxonMobil (XOM) moving up $0.96 on that surge in oil prices.
Pfizer (PFE) dropped $0.14.
AT&T (T) a $0.30 loss for the third time. The FCC has postponed its meeting to decide about AT&T's takeover of Bell South.
There you see Wal-Mart Stores (WMT) down $0.76 a share.
Time Warner (TWX) was fifth in volume, down $0.14 a share.
Then General Electric (GE) a $0.06 gainer.
CVS Corp (CVS) $0.07 loss. It's of course going to take over Caremark and we'll see that at the bottom of the list.
NRG Energy (NRG) up $4.82. This is a power generation company and it generated some pretty good third quarter earnings, $2.34 a share versus a loss of $0.51 a year ago.
Motorola (MOT) was down $0.14.
And then Caremark Rx (CMX) an $0.11 loss, tenth in volume.
CA Inc (CA) used to be called Computer Associates, down $2.37. Second quarter earnings $0.09, a penny above last year, but new bookings in the period were down 10 percent and the company sees 2007 earnings less than $0.44 a share. On top of that, it delayed a $1 billion stock buyback.
Computer Sciences (CSC) off $3.57. Preliminary second quarter results, earnings of $0.53, same as last year and revenues were flat as well.
International Rectifier (IRF) up $3.85. First quarter earnings rose to $0.47 from $0.36 a year ago. Revenues up a very respectable 26 percent.
Western Digital (WDC) moved up nearly $1, $0.94 gain. First quarter earnings, $0.46, up from $0.31. Revenues up 25 percent. Raymond James financial brokerage upgraded it from "market perform" to "out perform."
Then McDermott Intl (MDR), the oil service company, up $3.76. Third quarter earnings, $0.89, well above $0.53 last year, doing very nicely on the stock too.
Leapfrog Enterprises (LF) tripped up for a loss of $1.53. The company in with third quarter loss of $0.79, versus earnings of $0.52 a year ago and sales plummeted 24 percent during the period.
Perini (PCR), this is a big building contractor, up $4.16. Third quarter earnings up 60 percent over last year, $0.36 versus $0.22 then and that was $0.06 better than Wall Street was expecting, a nice move in the stock.
Goodrich Petroleum (GDP) gained nearly $4 a share. The company's increasing its oil drilling activity in northwestern Louisiana.
Google (GOOG) topped NASDAQ's most active list, up $1.89.
Then the big loser of the day, Whole Foods Market (WFMI) tumbling $13.86. After the close yesterday, as we reported, higher earnings for the fourth quarter, $0.28 versus $0.06 but the company sees slowing sales growth in 2007. Today, a number of brokerages downgraded the stock, including Bank of America downgraded it from "buy" to "neutral," 23 percent loss in the stock.
Qualcomm (QCOM) moved up $0.11.
Apple Computer (AAPL) a $0.69 drop.
Microsoft (MSFT) lost $0.04 a share, fifth in volume.
Intel (INTC) a $0.07 drop.
Then Electronic Arts (ERTS) nice move, up $6.24. Second quarter earnings higher, $0.21 versus $0.15 a year ago. Revenues rose 16 percent and the company boosted its full year earnings guidance.
Cisco Systems (CSCO) $0.28 loss there.
Celgene (CGLD) up $0.57 and very active today because the stock was added after the close to the Standard & Poor's 500 Index.
Oracle (ORCL) $0.49 loss and that was tenth in volume.
Then Red Robin Gourmet Burgers (RRGB) burned for a $12 per share loss, 26 percent on the downside after the company warned fourth quarter earnings will be around $0.33 to $0.38 a share, well below the $0.49 Wall Street estimate. Also the company said full year earnings will be lower than expected.
Those are the stocks in the news tonight.
