NBR Complete Transcripts: 12-27-2006
Wednesday, December 27, 2006Remembering President Gerald Ford's Economic Legacy
SUSIE GHARIB: A somber day for Americans as they mourned the death of President Gerald Ford. American flags at the White House and across the country are flying tonight at half staff as preparations are under way for a state funeral for the 38th president. He took over the presidency at a difficult time in the aftermath of Watergate and President Nixon's resignation and with the economy in turmoil. Washington bureau chief Darren Gersh takes a closer look at President Ford's economic legacy.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: As if Watergate were not bad enough, when Gerald Ford took office, the economy had just been slugged by the Arab oil embargo. The oil squeeze sent inflation to 11 percent. Carla Hills was Gerald Ford's secretary of Housing and Urban Development.
CARLA HILLS, FORD HUD SECRETARY: His feeling was, we've got to get inflation under control. That's the cruelest tax on the poorest people. So he really sat on pork and he just vetoed bill after bill to stop that from happening.
GERSH: Ford declared inflation public enemy number one. But the president's "whip inflation now" buttons were ridiculed as his calls for voluntary price controls were ignored. Still, the Ford administration laid the groundwork for what would become a decades-long deregulatory push in transportation and communications. Hills says Ford believed more economic flexibility would bring down prices.
HILLS: I think that President Ford understood that regulation hog ties the economy.
GERSH: Ford was a classic middle-of-the-road conservative when it came to Federal spending, but a sharp and steep recession made it impossible to balance the budget on his watch. Still, Ford's Office of Management and Budget Director James Lynn calls his former boss a budget director's dream. He was willing to make tough choices and smart investments, like the Hubble telescope.
JAMES LYNN, FORD OMB DIRECTOR: And he looked at me, he said, "you've got real guts." he says. "You're in here having me cut this bill over here, which would cost me votes and terrible things like that, and now you want me to put in millions of dollars for a telescope." I said, "yes, sir, I am." And he paused and, well, he said, "we have to do it, don't we."
GERSH: Ford surrounded himself with a stellar cast of economic talent, including Alan Greenspan. In a statement today, Greenspan said, "Jerry Ford was the most decent man I ever encountered in public life. His reputation has risen year by year since he left office. I expect that to continue. It was a great privilege to work for him. I will miss him." Stephen Hess worked for Ford and says the former president's greatest contribution to the nation and the economy was his ability to restore confidence.
STEPHEN HESS, POLITICAL ANALYST, BROOKINGS INSTITUTION: It took some doing and a special sort of person who was so ordinary, who was so simple and was so decent. And that to me, was a time when that was exactly the quality that we needed, decency.
GERSH: Gerald Ford will lie in state in the Capitol building this weekend before his funeral next week. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.
Optimism Remains High For The Global Markets
SUSIE GHARIB: Investors were in a good mood around the world today as stock markets in many countries moved higher. Japan's Nikkei closed at a seven- month high Hong Kong's Hang Seng index reached a new record and stocks in Europe also gained 1 percent. Today's trading activity caps off a fantastic year for international equities. And as Suzanne Pratt reports, experts say investors should continue to look abroad in 2007.
SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: It looks like 2006 was a banner year for U.S. stock markets. But as good as it has been in the U.S., it's been even better for investors venturing overseas. With only a few exceptions, stock markets around the globe rallied strongly this year. The Morgan Stanley international world index is up more than 17 percent, outperforming the Dow and S&P 500 and on the way to its fourth straight annual gain. Many experts predict 2007 will be another good year for international stocks. Citigroup global strategist Clark Winter says part of the reason is that lower global interest rates mean companies can actually put money to work.
CLARK WINTER, CHIEF GLOBAL STRATEGIST, CITIGROUP PRIVATE BANK: It matters not who the politics are. Lower interest rates for a prolonged period of time means a lot of money can go back to work around the world. It means that borrowing, infrastructure, capital development, real estate around the world all of a sudden becomes not only attractive, but financable (ph).
PRATT: Experts say the prospect of an extended boom in mergers and acquisitions also may lift share prices next year. According to Thomson Financial, announced global takeover activity of nearly $4 trillion was a new record this year, beating the previous record set in 2000. Four of the six biggest announced deals in 2006 involved European companies. Forecasts of sustained weakness in the U.S. dollar also causing stock market pros to look overseas, especially as U.S. investors have the added benefit of currency translations. HSBC currency expert Bob Lynch believes the dollar will remain under pressure.
ROBERT LYNCH, CURRENCY STRATEGIST, HSBC: We expect the Fed to begin cutting rates in the second quarter of 2007 and to continue to lower rates through the remainder of the year. We think the economy is going to slow to below 2 percent growth for 2007. And that dynamic, lower interest rates, lower growth, should result in a weaker dollar over time.
PRATT: Global strategists predict stock markets all over the world will do well in 2007. Some, however, see the best opportunities in countries with highly educated workforces.
CLARK: Look for those countries and/or companies that are doing the best job of allowing people to go back to work. So UK and Ireland within Europe have done the best job. We're all very intrigued what might happen in France.
PRATT: Clark also likes India and China, equity markets that also did extremely well this year. Most international experts are not predicting the same high returns in 2007 that investors experienced this year. The biggest problem, they say, is valuations, which are already stretched in many foreign markets. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.
Hybrid Hype Shifts Into High Gear
JEFF YASTINE: Another area expected to do well next year: alternative and hybrid fuel vehicles and it's not just consumers who are using them. Some utilities are trying to curb energy consumption, as well. They're using diesel electric hybrid trucks that not only save fuel on the road, but on the job, as well. Midwest bureau chief Diane Eastabrook went for a test drive with one of these energy-saving vehicles.
DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Comed supervisor Art Becker heads out to inspect electric power lines in a suburban Chicago neighborhood. On this day, electricity will power his trip.
ART BECKER, SUPERVISOR, COMED: Right now, we are in hybrid drive. As you can tell, the diesel is idling. RPMs are not increasing as I step on the gas.
EASTABROOK: Comed, a division of Exelon Corporation, is one of about a dozen utilities now testing diesel-electric hybrid trucks. Like hybrid cars, these hybrid trucks generate energy through braking and store it as electricity. The electricity propels the vehicle just as it does in hybrid cars, but in these trucks, the power has another purpose. It also runs the bucket and lets the diesel engine to rest.
BECKER: As you'll notice in hybrid power, the noise reduction is quite dramatic over the engine noise. It's great in residential areas.
EASTABROOK: Since utilities do a lot of stopping and starting to make repairs, they're ideal users of hybrids. Comed says this truck over the road is about 20 percent more fuel efficient than a conventional one. The company says the fuel savings is even more dramatic when the operation of the bucket is considered. But despite their efficiency, the price tags on these vehicles remain an obstacle. International Truck and Engine Corporation manufacturers the hybrids, which currently cost up to 60 percent more than a conventional truck. International President DT Kapur says the company is working to make the trucks more cost effective for buyers.
D.T. KAPUR, PRESIDENT, INTERNATIONAL TRUCK & ENGINE CORP.: I think the ones that keep their trucks longer will get the most benefit because they will be able to pay it back in four or five years and then keep the truck and gain the benefits for another four or five years. So, the economics will really work for them.
EASTABROOK: And Patrick Pineau, fleet services administrator for Exelon, says International still needs to fix some minor glitches.
PATRICK PINEAU, FLEET SERVICES ADMINISTRATOR, EXELON CORPORATION: So we expected some bugs with wiring and harnesses and programming on the microprocessors and they've been very good at working those out.
EASTABROOK: International hopes to have 100 more hybrid trucks on the road next year and plans to start full production of the vehicles in 2008. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Lombard, Illinois.
"Street Critique"-Hilary Kramer, Personal Finance Editor at aol.com
JEFF YASTINE: Chinese stocks top Hilary Kramer's list of best bets for 2007. She's the personal finance editor at aol.com and my "street critique" guest tonight. Hilary, welcome back to NIGHTLY BUSINESS REPORT.
HILARY KRAMER, PERSONAL FINANCE EDITOR, AOL.COM: Jeff, thank you.
YASTINE: So tell us some about these Chinese stocks. Why do you like them so much as we head here into 2007?
KRAMER: There's great expectation that many of these Chinese companies that have been listed outside of China are now going to go on to the Shanghai exchange. We've seen some of that but companies like Petro China, PTR, there's expectation that they're going to come around and list as well. And China in general has a 9.5 percent growth projection for 2007, only 2 percent inflation. And there will be so much strength and demand when it comes to fuel, energy, infrastructure, transportation.
YASTINE: Speaking of fuel, the oil services field is another of your favorite sectors. Tell us a little bit about that.
KRAMER: I believe that we will have strength when it comes to 2007. Oil prices will probably go up before they're going to go down. And therefore the oil service providers and companies like Ipsco, IPS that go out there and help with the efficient extraction, make the steel tubing. They're also in other areas such as transportation, infrastructure. They are going to be very strong players as we go into 2007 and we see oil on the upswing.
YASTINE: Now one area that has lagged pretty much throughout the past year or so has been the general technology sector. Part of that is the hangover from the, you know, the 2000-2001 dot com bust. But you believe that that sector may be finally getting some move behind it.
KRAMER: Wall Street has forgotten about 2000 and the Internet bust and technology and now the money is moving back into technology. There's real cash flow there. There's opportunities. I love Cypress Semiconductor, $16 and change stock, could go to $25 in the (INAUDIBLE) whether it be a take out or just simply because they're part of the new cycle of upgraded technology. They make the brains that goes into computers and hand-held devices and all sorts of technology.
YASTINE: And there's another area you like that's called specialty chemical and engineering, the companies in that sector. Exactly what is it that those companies do in that group there?
KRAMER: Well, particularly it's the pollution control chemical companies like ADA-ES. These are the companies that go in and they have chemicals to reduce whether it be mercury emissions, the other emissions that the states are now regulating and forcing companies to control. On the national level it's not going to be until 2012, 2018 we're going to see emissions standards, but right now companies like ADA-ES Fuel Tech are going to be very, very strong in 2007 because there's tremendous demand for the products and the services they provide.
YASTINE: Hilary, do you have any of these stocks that you mention here, do you have any disclosures to make about them?
KRAMER: Yes. I own Cypress Semiconductor
YASTINE: All right. That's good enough for now. Hilary, thanks for being with us and we'll see you again in a couple of weeks.
KRAMER: Thank you Jeff.
YASTINE: Our guest, Hilary Kramer, personal finance editor at aol.com.
"Money File"-Investing At Your Best in 2007
SUSIE GHARIB: From the "money file" tonight, how you can make the best of your investments in 2007. Here's Harriet Johnson Brackey, personal finance columnist for the South Florida "Sun-Sentinel."
HARRIET BRACKEY, PERSONAL FINANCE REPORTER, SO. FLORIDA SUN SENTINEL: I looked at the stock market the other day and really, it is surprising. All the major indexes are up, each one by double-digits. The economy, too, has done much better than expected. We're jumping into 2007 from a very solid base. I say investors should keep this in mind as you take your tax losses and make plans for the New Year.
Here's the big picture. We've had four and a half years in which quarterly profits have grown by double digits. Interest rates are stable. And yes, autos and housing are worrisome, but at least housing's decline is expected to end in a year or 18 months. Despite that and despite higher oil prices, the consumer was spending like crazy in November. The economy grew. Inflation was tame. So how can you make the most of this?
First, it's a great time to sell high-flying stocks and spread those gains to other parts of your portfolio. You'll lower your risk by diversifying. And since interest rates are no longer going up, it might be time to lock in a longer-term certificate of deposit. On the spending side, here's an idea. Can you improve your credit score? A good score would help you refinance a high-rate auto loan or get a better deal on a credit card, again, because rates are stable. These ideas are basic, but New Year's is a great time to get your personal finance basics in order. I'm Harriet Johnson Brackey.
Paul Kangas Stocks In The News
JEFF YASTINE: The housing data helped investors keep up the holiday spirit as the year-end rally rolled on. The Dow spiked higher by nearly 80 points in the first hour of trading. Citigroup was the high flyer for the blue chips and 29 out of the Dow's 30 components were in the plus column. The NASDAQ was also helped by a rebound in shares of Google. So the Dow ending up 102.94 points at a new record high of 12,510.57. The NASDAQ gained 17.71 points to close at 2431.22. And the S&P 500 Index closing up 9.94 points to 1426.84. And in the bond market, the 10-year note losing 13/32 to 99 12/32, the yield at 4.65 percent.
Starting things off, Ford Motor (F) once again topping the actives with a gain of $0.09 and 14, nearly 14 million shares changing hands. Ford confirming last week's meeting between CEO Alan Mulally (ph) and Toyota's chairman. Investors optimistic that that meeting will lead to some sort of technology sharing agreement.
Citigroup (C) rising $1.29 on a strong financial sector today.
Pfizer (PFE) ending $0.22.
EMC Corp (EMC) up a fraction.
And Motorola (MOT) gaining $0.07. The Federal Trade Commission giving a thumb's up to Motorola's planned $208 million takeover of Netopia (ph). That's a home network equipment maker.
Then GE (GE) gaining just a fraction.
But Time Warner (TWX) losing $0.12.
ExxonMobil (XOM) up nearly $1.
AT&T (T) gaining $0.41.
And Texas Instruments (TXN) gaining $0.35.
Let's look at the IBM (IBM) shares, rising $1.44, really helping to power the Dow higher today. But ThinkEquity brokerage firm upgrading big blue from "sell" to "buy" and upping its price target on the stock from $70 to $110 a share, the firm believing IBM's services business has turned a corner and will help in strong performance.
Toyota Motor (TM) gaining more than $2, $2.65. The company saying that Ford and Toyota did not talk about partnerships in their meeting last week, but the shares of both auto makers being bid up just the same.
Merck (MRK) adding $0.58, a Merck-funded study showing some elderly women may continue to benefit from the company's osteoporosis treatment Fosemax (ph), even after its use is discontinued. That helped the stock today.
And then Burger King (BKC) falling a penny. A British ban on children's advertising some think may cut sales there by 10 to 15 percent a year.
McClatchy (MN) also down a penny. The company is selling its flagship paper, the "Minneapolis Star-Tribune" to a private equity firm for about $530 million. That's less than half of what McClatchy paid for that paper eight years ago.
Guess Inc (GES) shares rising more than $5. The Piper Jaffray brokerage said December sales looked solid at the retailer and the firm has boosted Guess' fourth quarter same store sales estimate, up to 8 percent sales growth.
China Netcom (CN) adding more than $9. Market rumors are that China Netcom may buy assets from its rival China Unicom but both companies said there were no negotiations related to acquisitions.
Intercontinental Hotel Group (IHG) falling $0.84, some profit taking after a run up last week on takeover speculation.
Onto the NASDAQ, there's a look at Apple Computer (AAPL). You heard the news. It got below $77 before rebounding.
Then Google (GOOG) rising more than $10 on a strong Internet sector today.
Microsoft (MSFT) up a fraction.
Research in Motion (RIMM) gaining as well.
Cisco Systems (CSCO) up $0.11.
Then on to Intel (INTC) which was up a quarter.
EBay (EBAY) gaining nearly a quarter.
Qualcomm (QCOM) down a nickel.
Yahoo (YHOO) up $0.30.
Amgen (AMGN) losing $0.23.
Cadmus Communications (CDMS) adding nearly $3.50. It's going to be acquired by Cenveo for $24.75 a share. Cenveo stock up nearly $2 on that news as well.
Then Infosonics Corp (IFON) shares rising $1.69 or almost 40 percent, 44 percent. It inked a deal to distribute LG cell phones in the Caribbean and Latin America.
And finally, Gorman Rupp (GRC) rising $5.75. The maker of industrial pumps says its Patterson pumps subsidiary has received a $15 million order for pumps to be used in the New Orleans flood control problem.
