NBR Complete Transcripts: 12-06-2006
Wednesday, December 06, 2006Oil Futures Leave Investors A Bit Cold
SUSIE GHARIB: Get ready for higher oil and gasoline prices. Over the past two weeks, crude prices have surged 11.5 percent, although oil prices retreated slightly today, down $0.24 to $62.19. Experts are warning that several factors could push prices back up to their summer highs. Erika Miller reports.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: If you think $70 a barrel oil is a thing of the past, come to the New York Mercantile Exchange. Here, many floor traders are betting prices will soon rebound to record levels.
RAYMOND CARBONE, OIL TRADER, PARAMOUNT OPTIONS: I have to think that crude oil is probably going to creep its way back up, if not make new highs. I am not a bear.
MILLER: Experts say concerns about tight energy supplies this winter could help push up prices. Today, the government reported a surprising drop in gasoline and crude oil supplies. Both fell by 1.1 million barrels last week, instead of increasing as many analysts expected. The supply of distillate fuels also declined, by 400,000 barrels. The data comes at a time when the northeast is experiencing one of its first cold snaps of the season.
JOHN KILDUFF, ENERGY ANALYST, FIMAT USA: We did see an early blast of cold winter weather and the prices are very reactive to that early in the season. Actually, we're not even in winter yet. So to the extent you get an early bite, an early call on available supplies, prices get pushed up.
MILLER: The bulls see other factors that could help drive up prices, including geopolitical tensions in many parts of the world.
CARBONE: Internationally, we're still hearing Iran sanctions coming up. There's still political volatility in the oil-producing region of Nigeria. Certain Middle East politics -- definitely the Iraq situation -- all of those are conspiring to give some sort of support to the oil market.
MILLER: In addition, OPEC is expected to vote to cut oil output when it meets in Nigeria next week. It would be the second reduction in as many months.
KILDUFF: OPEC is becoming a factor because the Saudis, who dominate OPEC, are -- appear to be intent on reining in production and lowering global inventories of crude oil.
MILLER: All of this would be bad news for consumers. Typically, higher wholesale energy costs are quickly passed to the retail level. Already some analysts are predicting the return of $3 a gallon gasoline in the next few months. Erika Miller, NIGHTLY BUSINESS REPORT, New York.
Medical Records May Be Coming To The Workplace
SUSIE GHARIB: Some of the nation's biggest employers want to make it easier for their workers to keep track of personal health records. Those employers are now developing an Internet-based system to do just that. The companies including Intel, Wal-Mart and Pitney-Bowes say it will save money and keep workers healthier. But as Stephanie Dhue reports, there are other considerations besides cash and care.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Most medical records are still kept like this, but some employers who pay a large portion of health care bills want to change that. So they're building a web-based system that lets employees maintain their own medical records. Intel chairman Craig Barrett says the program will reduce costs.
CRAIG BARRETT, CHAIRMAN, INTEL: There's hundreds of millions, billions of dollars of excess administrative cost. There's issues with 100,000 prescriptions each year which are wrong, cause death or serious problems. There's all sorts of issues of medical errors. If you automate the industry, you're going to get rid of those. That has to bring the cost down.
DHUE: the program is called Dossia. The founding firms Intel, Wal- Mart, Pitney Bowes, Applied Materials and BP provide health care coverage for about 2.5 million people. Employees will have the choice to participate beginning in February. A nonprofit company called Omnimedix will administer the program.
J.D. KLEINKE, CEO, OMNIMEDIX: Our goal is to build the equivalent of a hyper-secure, highly specialized medical Internet.
DHUE: Doctors have been skeptical and slow to adopt new information technology, but some say projects like this could change that.
DR. DOUGLAS HENLEY, EXEC. VP, ACADEMY OF FAMILY PHYSICIANS: Having a standardized portable and interoperable patient health record that interacts and connects with the electronic health record is good for patients and physicians.
DHUE: A key concern is privacy. The firms in the Dossia program say records will be kept by individuals and released only with their consent. Health experts say consolidated medical information can be useful, but employees will have to trust the information is secure.
JOY PRITTS, GEORGETOWN HEALTH POLICY INSTITUTE: Some of the people who would most benefit from a personal health record are people with chronic medical conditions. They are also the people who cost the employer the most money. It boils down to: do you really think it's going to stay private and it won't be used against you?
DHUE: The companies hope to show that information technology applied to health care records will be convenient for employees and good for their bottom line. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
"Street Critique" with Kevin Depew, Managing Editor of Minyanville.com
PAUL KANGAS: Tonight's street critique guest is increasingly bearish on stocks overall, but he says there are still a few select issues worth buying. Joining me now, Kevin Depew, managing editor at minionville.com, a website focused on investor education. Kevin, welcome back to NBR. Good to see you.
KEVIN DEPEW, MANAGING EDITOR, MINYANVILLE.COM: Thank you, Paul.
KANGAS: Why have you become a bear?
DEPEW: Well I've become increasingly bearish because first of all, I'm a technician and I do look at some fundamental input. The fundamental input is beginning to match up with some technicals that are showing warning signs for the market.
KANGAS: Such as.
DEPEW: We saw in November a record insider sales, the highest since 1987 so it's the highest in almost 20 years. Meanwhile you have corporate buy-backs that are at a record pace in 2006, so it appears the insiders are selling to the corporations who really can't find anything better to invest their balance sheet or their cash in than their own stock.
KANGAS: So the corporate insiders are selling out because they think their stock is too high and the corporation itself buying it back because they think it's too low. So who is right? I mean is it perfectly priced then?
DEPEW: Well I wrote this morning that I thought it was overvalued. So when I look at technical measures as well, the stock market just seems very dangerous right now. It doesn't matter if you look at the advance/decline line rati or if you look at say investors' intelligence sentiment data that came out this morning showing the lowest percentage of those who expect a correction at 16 percent in two years. Before that you have to go back to I believe May of 2002.
KANGAS: OK. Now you've brought our viewers three issues that you say are worth buying now. What is your first pick?
DEPEW: The first one is called Petrohawk Energy (HAWK) and it's a little bit of a fundamental play as well as a technical play. By a value measure it's trading at about 1 1/2 times book. It's also in a sector that I like. It's the oil and gas sector which I believe is still in a secular bull market and technically things are looking bright longer term for the stock.
KANGAS: The chart looks like it's got a bottoming pattern. Wouldn't you agree?
DEPEW: I do and I think it is vulnerable short term, but certainly I would want to be a buyer if it came under $12 a share.
KANGAS: How about choice number two?
DEPEW: Applied Materials, a semiconductor stock. You know, it's funny because people used to not be able to get them to talk about anything but technology stocks. Now you can't get them to even bring them up. This is a stock that looks good technically. The sector is out of favor. And longer term I think it's something that I would want to own.
KANGAS: OK and pick number three.
DEPEW: This one is little more of a trading play. It's Deere & Company which broke out today.
KANGAS: Deere had some news. Chairman Robert Lane met with analysts and acknowledged the firm has been approached by a private equity group but dismissed the possibility of a buyout, so why do you like it?
DEPEW: As I said I think it's more of a trading play. Private equities, those groups seem to be snapping up any company that they can find. There certainly is a lot of liquidity out there, but this in my view is more of a trade than an investment.
KANGAS: OK Kevin. Do you own any of these stocks or have any other disclosure to make?
DEPEW: I do. I own shares of Petrohawk and Applied Materials but not Deere.
KANGAS: OK. We have a few seconds for some parting views to our viewers if you'd like.
DEPEW: Sure. The only thing I would say is that you want to become increasingly bearish as stocks look the best. And right now, if you look at a chart, they look pretty darned good.
KANGAS: All right. Great to see you again. Thanks for being with us.
DEPEW: Thank you, Paul.
KANGAS: My guest Kevin Depew of minionville.com.
"Kevin McCormally's Tax Tips"-Getting Kids Into Investing
SUSIE GHARIB: We wrap up our series of year-end tax tips tonight with a suggestion that could help you and your kids. Here's our tax expert Kevin McCormally, editorial director of "Kiplinger's Personal Finance."
KEVIN MCCORMALLY, EDITORIAL DIR., "KIPLINGER'S PERSONAL FINANCE": If you have teenagers in the room, please shoo them away for a minute. I want to give you a suggestion for a great holiday gift surprise. How would you like to give your son or daughter or grandchild a gift worth over $100,000? Too extravagant for you? What if I told you you could do it for only $1,000? Now, I don't have a hot stock tip. I've got a sure thing.
Why don't you fund an IRA for your child? For this to work, the child must have had a job this year, because only people with earned income can contribute to an IRA. If your teen made money delivering papers or working retail or designing web sites, he or she qualifies. And there's nothing in the rules that says the child's own money has to go into the tax shelter. It's fine with the IRS if you give your son or daughter the cash, as long as no more goes into the account than the child earned.
Let's assume you give your 15-year-old daughter $1,000 to fund an IRA. If the money grows at an annual average rate of 10 percent -- and that's less than the long-term average return for stocks -- that $1,000 will grow to $117,000 by the time today's teen turns 65. Even with 3 percent inflation, that will still be worth about $27,000 of today's dollars, all from that $1,000 seed. And if you choose a Roth IRA -- which I think you should -- the full amount will be tax free. Now some IRA sponsors will tell you a minor can't have an IRA. Don't believe it. Plenty of banks, mutual funds and brokers are happy to open IRAs for youngsters. In addition to setting your kids on the road to retirement security, the gift of an IRA can also help pique their interest in investing and in tax planning. That's a great gift. I'm Kevin McCormally.
"Last Word"-Big Trees Cost Big Green
SUSIE GHARIB: And finally tonight, there's always a lot of talk this time of year about how much people will be spending on their Christmas presents. Well, how about how much they'll be spending on their Christmas tree? Here in New York City, for example, live trees cost a bundle, like the $400 price tag on a 12-foot Canadian balsam or the $100 cost of a mere seven footer. But tree sellers defend those prices, saying if you do the math, they don't make much money. Figure in the tree itself, transportation costs, fuel for generators and security to be sure the trees get bought and not stolen. And then there's the other factor, Paul. Since it is New York your tree can be delivered right to your home and just like everything else, there's a price tag that goes with that.
KANGAS: Sounds like you're needling the big apple a bit there.
Paul Kangas' Stocks In The News
KANGAS: Wall Street opened lower on some profit taking after two days of gains, with the Dow dipping 26 points at the outset of trading, while the NASDAQ fell 12 points. Stocks showed a little improvement during midday, but buyers were cautious ahead of Friday's employment report for November. At 1:00 p.m., the Dow was down 7 points; NASDAQ off 2. That tepid recovery and lower bond prices led to renewed weakness this afternoon, so the Dow Industrial Average closed off 22.35 points at 12309.25. The NASDAQ Composite down 6.52, ending at 2445.86. Standard & Poor's 500 Index fell 1.86, ending at 1412.90. Over in the bond market, the 10-year note fell 12/32 to 101 2/32, lifting the yield to 4.49 percent.
Topping the active list on the big board on a hefty 83.1 million shares, Ford Motor Co (F) down another $0.32. The company plans to boost its borrowing plan now from $18 billion to $22 to $23 billion and it's boosting its senior convertible note offering it announced yesterday from $3 billion to $4.5 billion. More earnings dilution potential there.
Pfizer (PFE) down $0.02.
Then ExxonMobil (XOM) losing $1.75, some pretty good profit taking there.
Motorola (MOT) $0.04 loss.
And General Electric (GE) fifth in volume, was down $0.16.
$0.13 loss in EMC Corp (EMC).
AT&T (T) moved up a dime. UBS financial believes the FCC is likely to approve the company's acquisition of BellSouth at its next meeting on December 20th.
Boston Scientific (BSX) up $0.43.
Qwest Comm (Q) $0.23 loss.
Tenth in volume, Home Depot (HD) moving up $0.55. The company said results from its own probe into stock option practices discovered $200 million in unrecorded expenses over the past 26 years. The retailer doesn't expect the errors to have a material impact on financial results however. Then we see Fannie Mae (FNM) a $0.57 closing gain. After the market closed, Fannie announced plans to restate results for 2001 through 2004, June of 2004 by $6.3 billion and that's about $4 billion less than originally thought. Deere & Co (DE) up $2.69. The CEO acknowledged the company has been approached by a private equity group about a buyout, but he dismissed it as unrealistic.
Book seller Barnes & Noble (BKS) up $1.83. Credit Suisse upgraded it from "under perform" to "out perform," citing the possibility of a leveraged buyout for that one.
And interestingly, Credit Suisse downgraded another book seller, Borders Group (BGP) which lost $0.48. The company downgraded it from "out perform" to "neutral" on caution about the success of its turnaround plan.
Then Gallaher Group (GLH) up $13.89. The British tobacco firm says it has a potential suitor, but did not mention who it might be.
Biovail (BVF) up $1.82. The company's boosting its annual dividend to $1.50 a share from the current $0.50 and it's also going to pay a $0.50 per share special dividend.
Korn/Ferry Intl (KFY), the staffing firm, down $1.14. Second quarter earnings were higher, $0.31 versus $0.25 a year ago and revenues up a very respectable 24 percent. But UBS financial is cautious about the company's outlook for the third quarter.
And then Blyth (BTH) down $2.86. Third quarter earnings dropped to only $0.13 from $0.27 a year ago and revenues fell 9 percent.
Google (GOOG) topped the NASDAQ active list with a gain of $1.71.
Followed by Apple Computer (AAPL) down $1.44.
$0.98 drop in Oracle (ORCL) and incidentally, Lehman Brothers issued a "sell" on Oracle, citing concern that the company may not meet its sales targets when it reports on December 18th.
Microsoft (MSFT) $0.14 loss.
Intel (INTC) $0.22 drop there.
Then Baidu.com (BIDU) up another $3.85 on the company's expansion plans into Japan.
Yahoo! (YHOO) $0.57 loss.
Cisco Systems (CSCO) gained a nickel.
Qualcomm (QCOM) $0.44 rise.
And Amgen (AMGN), tenth in volume, up $0.83.
Goamerica (GOAM) up $2.13, a gain of over 37 percent. The company's in the communications services business for the deaf and it launched a promising new video service for the hard of hearing, very positive reaction there.
And Docucorp Intl (DOCC) up $2.26, that's a 30 percent gain. A company called Skywire Software will acquire Docucorp for a price of $10 per share.
And over on the American, finally we see Halozyme Therapeutics (HTI) jumping $1.60 on news the company received a $20 million upfront payment to apply its enhanze (ph) technology to Roche's biological therapeutic compounds. The deal could bring up to $580 million in payments long term.
