NBR Complete Transcripts: 11-17-2006
Friday, November 17, 2006The Dow Continues Its Record Run Despite A Housing Slump
SUSIE GHARIB: The Dow rose today to its fourth record this week and its 18th new high since October 3. The blue chip average added 36 points to 12,342. The gains came even though new home construction fell to its lowest level in six years. Stephanie Dhue takes a look at whether the slowing housing market is close to bottoming out.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Washington, DC area homebuilder Basheer and Edgemore is still building new projects. The builder specializes in luxury homes and has weathered the market downturn by redesigning houses to lower their prices. Diane Cox Basheer predicts the real estate slowdown is near the bottom.
DIANE COX BASHEER, PRINCIPAL, BASHEER & EDGEMORE: I think we are going through the bottom, and we're hearing very good stories of people finally being excited about their housing opportunities.
DHUE: But there are signs nationwide that housing will continue to decline. Housing starts in October fell 14.6 percent from September's pace and are now 27 percent lower than a year ago. Building permits are also sliding. October permits dropped more than 6 percent to an annual rate of 1.5 million. That's the ninth straight decline and the lowest rate since December of 1997. Economists say the housing slowdown will continue to weaken economic growth.
CHRIS VARVARES, PRESIDENT, MACROECONOMIC ADVISORS: It's a drag right now. It's part of the process by which the economy is slowing from above-trend growth to slightly below-trend growth. It's what the Fed wanted. It's what the Fed seems to be getting and so far, so good, as long as the housing starts just don't remain in a freefall.
DHUE: Most economists don't expect a freefall in housing, but do expect more downside.
MARK ZANDI, CHIEF ECONOMIST, MOODY'S ECONOMY.COM: We're approaching the bottom, but I think we're a good three to six months away. In terms of sales, I think we're close, the next few months. In terms of construction, it won't be until the spring or summer.
DHUE: Once the market does bottom out, experts predict it will stabilize to a more normal pace, which won't feel anything like the last real estate frenzy. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Fairfax, Virginia.
Holiday Shopping May Bring More Concern Than Happy Returns
GHARIB: Sales of the season's hottest gift, Sony's Playstation 3, got off to a scorching start today. Would-be buyers who had waited in line for hours or, in some cases, days, swarmed stores at midnight and the video game consoles flew off shelves. With Sony promising just 400,000 systems for this nationwide launch, many retailers sold out quickly. Interestingly, analysts say these Playstations are selling for hundreds of dollars less than they cost Sony to build. The real profits will come from games, royalties, and peripheral products.
KANGAS: Those Playstations are just one of many electronic items that are expected to be hot sellers this holiday season. But while early forecasts suggest stores will ring up respectable sales this year, there are some concerns about the fortitude of the American consumer. Suzanne Pratt looks at the reasons why.
SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: In New York City, the Rockefeller Center Christmas tree is almost ready for its big debut and some stores along tony Fifth Avenue have gotten an early start in decking their halls. For the nation's retailers, that means only one thing. The do-or-die holiday season is here. Early forecasts suggest 2006 figures to be a fairly jolly holiday shopping season. After all, jobs are plentiful, the weather is mild, energy prices are down and the stock market is up.
DAVID RESLER, CHIEF ECONOMIST, NOMURA SECURITIES: There's no question, compared to last year, when we were facing higher energy costs and a cold winter, prospects of a cold winter, I think consumers are in a little better position for holiday spending this season than last season.
PRATT: The National Retail Federation expects a 5 percent increase in total holiday sales this year. While that's better than the annual average, it is below last year's result. Experts say the main problem this year is likely to be the low-end consumer. Even though energy costs have been falling, spending patterns among those shoppers are still suffering. The slumping housing market could also be a factor, leaving some consumers feeling less flush.
For retailers, it could mean another season of have and have-nots. Experts predict luxury stores will benefit from the strong stock market and department stores will draw more shoppers thanks to improved merchandise. Some discounters on the other hand, have been ringing up disappointing sales this fall, raising concerns about the holiday season. As a result, Wal-Mart has been aggressively cutting prices since mid-October, making it tough for competitors to stick with their pricing plans. Still, experts say all retailers are likely to benefit from the calendar.
KIM GREENBERGER, RETAIL ANALYST, CITIGROUP: This year, Christmas is on a Monday. We get a full Saturday and then Christmas Eve is Sunday, which is normally an abbreviated shopping day of the week anyway. So we think the calendar this year could add 1 to 2 percentage points to December sales.
PRATT: Another calendar fact likely to help retailers this holiday season is that there are 31 shopping days between Thanksgiving and Christmas. That's one more than last year. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.
Thailand Shows Off Its Capitalistic Side
SUSIE GHARIB: Two months ago, Thailand's controversial prime minister was ousted by a military coup. Its leaders quickly appointed a civilian cabinet, but still faced condemnation by the international community, including the U.S. State Department. Still, as Rian Maelzer reports from Bangkok, there are still some positive signs of change.
RIAN MAELZER, NIGHTLY BUSINESS REPORT CORRESPONDENT: With not a soldier on the streets, you wouldn't know this was a country under martial law. The current calm contrasts to a year of turmoil marked by allegations of corruption against Prime Minister Thaksin Shinawatra, mass protests and a disputed election.
THITINAN PONGSUDHIRAK, PROFESSOR, CHULALONGKORN UNIVERSITY: The coup itself is regrettable; no coup is a good coup. But at the same time, you look at Thaksin, how he abused power, how he was unchecked, how he was unaccountable.
MAELZER: Several of Thaksin's policies that actually won praise from economists and business people got shelved during the months of turmoil leading up to the coup. Among them was the privatization of major state enterprises, major infrastructure projects and negotiations on a free-trade deal between Thailand and the U.S. That policy limbo contributed to a stagnant stock market, lackluster economic growth and slumping consumer and business confidence. But already there are signs of a turnaround, with foreign capital flowing back into the country.
SAKKARIN NIYOMSILPA, SENIOR ANALYST, KASIKORN RESEARCH CENTER: I have a lot more confidence in the economy right now than a few months ago and Kasikorn (ph) as a center has adjusted the Thai GDP upward -- our forecast upward after the coup.
MAELZER: One reason for the optimism is the highly respected economic team the coup leaders put in place, led by the former head of the Central Bank.
PRIDIYATHORN DEVAKULA, MINISTER OF FINANCE & DEPUTY PRIME MINISTER: The thing which is done with ambiguity, which doesn't smell, that smells fishy, we should get rid of it, because you have to bring back good governance to the country first. The economy that grows without good governance is not a sound economy.
MAELZER: Still, the interim rulers don't intend to throw out Thaksin's entire economic agenda, but say they plan to do things in a cleaner and more efficient manner.
DEVAKULA: A lot of Thaksin's ideas accompanied with waste, because he's quick in his mind, and instead of testing it or instead of studying it, implemented it right away.
MAELZER: They're pushing ahead with expanding Bangkok's rapid transit system and modifying policies such as cheap health care and assistance for the rural poor. And in a move welcomed by U.S. business, they say they'll resume free trade talks, but unlike Thaksin, will seek public input first.
STEVE GREEN, PRESIDENT, AMERICAN CHAMBER OF COMMERCE THAILAND: Most of the American businesses in the chamber have not seen any effect on their business from the recent political activities and we still believe Thailand is a very attractive place to do business.
MAELZER: But the current calm may not last. Thaksin retains strong support among the urban and rural poor and that's not likely to change unless the authorities can prove he was corrupt. And the middle class who despised Thaksin will expect the interim rulers to return Thailand to democracy next year, as promised.
SOMCHAI JITSUCHON, THAILAND DEVELOPMENT RESEARCH INST.: If we lost one year to try to clean the house and then try to make politics more transparent and more freer of corruption, I think that's worthwhile.
MAELZER: And if they achieve all that, the coup leaders may win over even their harshest critics. Rian Maelzer, NIGHTLY BUSINESS REPORT, Bangkok.
"Market Monitor"-Stan Weinstein, of "Global Trend Alert."
PAUL KANGAS: My market monitor this week is Stan Weinstein, editor and publisher of "Global Trend Alert," an advisory service for institutional investors and Stan, welcome back to NIGHTLY BUSINESS REPORT.
STAN WEINSTEIN, EDITOR & PUBLISHER, "GLOBAL TREND ALERT": A pleasure to be back, Paul.
WEINSTEIN: We have to separate the short term from the long term. Short term, you summed up beautifully. I think we're going to pull back. The long term I think, we still move higher at least to the end of the year, but we have to be very careful and tiptoe through the minefield. It is not an easy rally.
KANGAS: So it's not the strongest of technical conditions?
WEINSTEIN: No, it's decent, but certainly you have to be careful. It's a very selective market. You see, the stocks that we've recommend, like Caterpillar, Red Hat, Sierra Healthcare, which has gone down while the Dow is hitting all-time highs. You've got to be very careful here.
KANGAS: What indicators are you watching closely?
WEINSTEIN: First of all, as long as the Dow stays above the 11,200 level, I think the market's OK. Last time, I remember, I gave you 10,600.
KANGAS: You got within 80 points of that.
WEINSTEIN: And now we're right above it. Now it's 11,200, so that's important. I want to see all the moving averages, all the averages stay above their respective 200-day moving averages. Those are the important things to watch for.
KANGAS: On your last visit with us eight months ago, eight months now -- too long -- but you were very positive on aerospace, pollution control and telecommunication stocks and they've all done very well. You still like those three groups?
WEINSTEIN: Yes. The first two are downgraded to a "hold." The telecommunication is still a "buy" on a pullback and technology I like very much. Technology is a "buy." In addition, I like some airline stocks look very interesting. Retail looks good and I think biotech is going to come on here. So I think we can get a bit more (INAUDIBLE) to the market.
KANGAS: On the last visit in May, you warned that the home builders looked very dangerous and they have taken a tumble. That was a great call. How about that sector now?
WEINSTEIN: Well, the charts really did their thing at that point. Now I think, even though the fundamentals are terrible, I see bases forming on the charts. So anybody who is short the home builders, I would be covering the homebuilders and they're a little early to buy but I do think bases are starting to form. I think the worst is behind us stock-wise, for the home builders.
KANGAS: What would you avoid here?
WEINSTEIN: I think it's very important to stay away from agricultural products like an Archer Daniels, a lot of the HMOs, like Wellpoint, there's a problem, the truckers are negatives. So those are places you don't want to be in.
KANGAS: OK, now your favorite groups again.
WEINSTEIN: The best ones I think are technology, technology, technology. Like location, location, location in real estate.
KANGAS: What about the bond market here Stan?
WEINSTEIN: I think bonds, we've seen the low for the cycle, last June, July I think we saw the low. And we're starting a moderate bull market in bonds, so it's not my number one place. But I think bonds are going to move higher, so interest rates are going to come down.
KANGAS: OK, fair enough. On your last visit, you said gold was in a long-term bull market, still?
WEINSTEIN: Gold had one heck of a move after that program. Now I downgraded to "neutral" and here's an important goal (ph) line. If gold ever breaks down and closes below $600 - right now it's about $622 - if we close below $600, we turn negative. Right now it's just a neutral "hold."
KANGAS: How about silver? It's had a good run.
WEINSTEIN: Silver is decent. I like it better than gold. Both of them are not A pluses. They're B pluses.
KANGAS: OK. How about uranium stocks?
WEINSTEIN: Uranium has been terrific. I think uranium looks very, very interesting.
KANGAS: Fair enough. OK, so, in other words this market has a little way to go, but start being very careful in the first quarter of next year.
WEINSTEIN: Right and I said last time we were in the ninth inning. Now we're in extra innings.
KANGAS: OK. Any parting thoughts you would like to convey to our viewers? We have almost a minute.
WEINSTEIN: I think that people should learn -- as I wrote in my book, "Secrets for Profiting in Bull and Bear Markets," to use stop losses. If you see the volatility, have things changed so quickly. So I think that if you learn to put stop losses below important support levels, if the stocks start to move against you, you could be working, doing other things and you'll automatically be taken out of position. Learn to use proper stop losses.
KANGAS: The best thing if you don't know what a stop loss is, have a little meeting with your broker and have him explain and earn his commission money.
WEINSTEIN: If he does know what they are.
KANGAS: oh, no! I think most brokers these days do.
WEINSTEIN: They don't all use them right.
KANGAS: OK. Very good, Stan. It's great to have you on the program.
WEINSTEIN: Always my pleasure.
KANGAS: We look forward to your next visit.
WEISTEIN: Thank you.
KANGAS: My guest, Stan Weinstein, of "Global Trend Alert."
"Money File"-Mutual Fund Math
In the "money file" tonight, when what you see isn't always what you get. Here's Eric Schurenberg, managing editor of "Money" magazine.
ERIC SCHURENBERG, MANAGING EDITOR, MONEY MAGAZINE: Here's a little exercise in fuzzy math -- the fuzzy math of mutual fund returns. Over the past 10 years, Janus Enterprise, a fund popular during the market bubble, returned an average of 6.8 percent a year. Funny thing is, when you figure out the return shareholders in the fund got, you arrive at a very different answer -- very different, minus 11.5 percent. The fund had a positive return, but shareholders lost money at a rapid clip.
How could this happen? Because of the investors' own self-defeating behavior. Look, when you see something like a fund's 10-year annual return of 6.8 percent, you're seeing a highly hypothetical reality. It tells you how fast your money would have grown if you'd invested it 10 years ago in this fund and held on through all its ups and downs. But real people don't do that. We put money in and take it out all the time and unfortunately, we have the bad habit of putting the most in when the fund is up and taking the most out when it's down.
This is called buying high and selling low, and when you do it, you make less than if you'd put all the money in at once and just held it. Buying high and selling low is how the shareholders of Janus Enterprise could end up losing money over 10 years when the fund had a positive record. Conclusion: don't try to time the market. If you do, you'll lose. Don't chase hot performers. If you do, the return you see published everywhere won't be the return you really got. I'm Eric Schurenberg
KANGAS: After five straight sessions of gains on Wall Street, that weak housing data gave investors an excuse to do some profit-taking this morning. So after an hour of trading, the Dow posted a 22-point loss and the NASDAQ was off 12 points. Helping cushion the sell-off was that hugely successful Nymex initial public offering and the blue chips got a boost from a major court victory for Altria. So it was a mixed close. The Dow Industrial Average gained 36.74 to another record high at 12,342.56 today. This week, it rose every single day, for a net advance of 234.13 points. But the NASDAQ Composite fell 3.20 ending at 2,445.86 today. It did however rise in four of the five sessions this week, gaining 56.14 overall. The Standard & Poor's 500 Index rose 1.44 closing at 1,401.20 today. In the bond market, the 10-year note gained 18/32 to par and 5/32, putting the yield at 4.61 percent.
Most active big board issue on 26.7 million shares, Pfizer (PFE) moving up $0.45.
Then Peabody Energy (BTU) up $1.07. That stock will replace HCA in the Standard & Poor's 500 Index on a date to be announced.
Time Warner (TWX) gained a dime. General Electric (GE) $0.29 rise.
And then ExxonMobil (XOM), fifth in volume, up $0.41 on the close, but it traded as low as $71.76 this morning after Sanford Bernstein brokerage downgraded it from "out perform" to "market perform" on a valuation basis.
Citigroup (C) up $0.14.
A penny rise in Lucent Tech (LU).
AT&T (T) up $0.80.
Hewlett-Packard (HPQ) down $0.39. After the close yesterday, better than expected earnings as we reported, but the SEC has now elevated its probe of the company's boardroom leaks to the media.
Qwest Comm (Q) was down $0.17, tenth in volume.
There you see Altria Group (MO) up $1.44. A U.S. appeals court has stopped the proceedings of a $200 billion class action suit regarding light cigarettes in order to review a lower court ruling, helped the stock quite a bit, very active.
Intercontinental Exchange (ICE) up $6.55, traded as high as $104.83 after the Nymex chairman said he wouldn't rule out a merger with the Intercontinental or even the Chicago Merc. Chicago Merc closed at $535, down $5.05, but traded as high as $546.75 on that news.
Allergan (AGN) up $1.76. Just after the close, the FDA said it's approving the return of silicone breast implants after a 14-year ban. In after hours trading, Allergan was as high as $118 a share and Mentor, the other silicone breast maker, jumped about $5 a share to $52.75 in after hours trading.
The steels were hot today as you heard. United States Steel (X) up $5.98. The Russian steel maker Severstal is considering a buyout bid. The whole group was strong.
AK Steel (AKS), Nucor (NUE), Oregon Steel (OS) and Steel Dynamics (STLD) all on the upside today.
Newfield Exploration (NFX) up $2.77. The company says recent horizontal oil drilling is showing significantly higher production rates in some of its wells.
Then HB Fuller Co (FUL) the specialty chemical firm, up $1.78. JPMorgan upgraded it from "neutral" to "over weight."
Then AnnTaylor stores (ANN) losing $3.11. Third quarter earnings were up 29 percent to $0.54, $0.02 above the Street estimate, but the company predicted sales for the fourth quarter or let's make it same store sales for the fourth quarter will be flat and that's what the hurt the stock.
Google (GOOG) up $2.89, led the active list on NASDAQ.
Microsoft (MSFT) $0.07 drop.
Apple Computer (AAPL) was up $0.24.
Intel (INTC) $0.23 loss.0
Similar drop in Cisco Systems (CSCO). That was fifth in dollar volume.
Starbucks (SBUX) down $2.01. Fourth quarter earnings just barely higher, $0.17 versus $0.16. Standard & Poor's says the earnings below most estimates. Sales were up only 5 percent.
Sears Holdings (SHLD) up $3.72.
And then Conor Medsystems (CONR) up $5.16. Johnson & Johnson will acquire Conor for $33.50 a share in cash.
Oracle (ORCL) was up $0.36.
And then tenth in dollar volume, Research in Motion (RIMM) with a $0.58 loss.
Initial public offering today, First Solar Incorporated (FSLR), 20 million shares offered to the public at 20, opened at $24.50, the high $25.18 and it backed off a little bit, still had a nice debut.
And those are the stocks in the news tonight. Susie.
