NBR Complete Transcripts: 01-03-2007
Wednesday, January 03, 2007Home Depot CEO Robert Nardelli Resigns
SUZANNE PRATT: Home Depot stunned Wall Street today with a major renovation of its top management. Robert Nardelli abruptly resigned as chairman and CEO of the home improvement giant, sending Home Depot shares closing more than 2 percent higher. Scott Gurvey takes a look at what Nardelli's departure could mean for the future of Home Depot.
SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Since he was hired to run the nation's second largest retail chain six years ago, Robert Nardelli has been paid more than $240 million in salary, bonus and stock. But Home Depot's stock has been flat at about $40 a share throughout his tenure, much to the displeasure of shareholders and Wall Street analysts. They responded to today's news that Nardelli is out with positive forecasts and a 4 percent jump in the share price when trading opened this morning. Budd Bugatch of Raymond James sees more of the same.
BUDD BUGATCH, FURNISHINGS RESEARCH DIR., RAYMOND JAMES: Next year I think the stock will do well. I think the valuation of the stock should be in the 50s, so we see about a 20 to 25 percent upside from here in the relatively near term.
GURVEY: Home Depot will need to see higher valuations if it is to head off the shareholder revolt which triggered Nardelli's departure. The CEO was the only board member to attend the company's annual meeting last May, where he refused to answer questions about performance or his compensation. Those questions are certain to continue. Nardelli leaves Home Depot with a severance package worth $210 million; about half of that is deferred compensation. Incoming House Financial Services Committee Chairman Barney Frank, a critic of high executive pay, was quick to comment.
REP. BARNEY FRANK, CHMN-ELECT, HOUSE FINANCIAL SERVICES COMMITTEE: The board of directors of Home Depot finally decided that Mr. Nardelli had to go and they put their foot down and gave him $210 million and asked him to please leave. At which point, he apparently succeeded for the first time in raising the stock price, by leaving.
GURVEY: Governance issues aside, analyst Michael Cox of Piper Jaffrey says the housing slump had a great impact on Home Depot's bottom line last year.
MICHAEL COX, SR. RESEARCH INDUSTRIAL ANALYST, PIPER JAFFRAY: We continue to expect a challenging 2007. The company continues to derive most of its business from the do-it-yourself retail marketplace which, given the softness in the housing market, is going to continue to put pressure on fundamental results.
GURVEY: Home Depot's new CEO is Frank Blake, a Nardelli protege who was Home Depot's vice chairman. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.
Democrats Meet To Prepare for the 110th Session of Congress
PAUL KANGAS: The incoming Democratic chairman of the House Financial Services Committee is talking with business and labor groups about what he calls a grand bargain. Congressman Barney Frank today said he will support business agenda items like trade and immigration in exchange for business support in closing the wage income gap. And then Frank wants trade bills to address workplace conditions. He wants to make it easier for unions to organize and for employers to support universal healthcare. He says all Americans should have a stake in economic growth, a concept he likens to staying afloat financially.
REP. BARNEY FRANK, CHMN-ELECT, HOUSE FINANCIAL SERVICES COMMITTEE: The rising tide lift all boats has always been a problem. If you think about that analogy, the rising tide is a very good idea if you have a boat, but if you are too poor to afford a boat and you are standing tiptoe in the water, the rising tide goes up your nose.
KANGAS: Frank and the other members of the House and Senate report for work tomorrow and the 110th session of Congress will get down to business. One of the first orders of business will be to reform the ethics guidelines used by the lawmakers themselves. Washington bureau chief Darren Gersh reports.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: One day before they take control in the 110th Congress, Democrats met behind closed doors, trying to turn their campaign promises into reality. Representative Louise Slaughter put at the top of the list ending those infamous corporate- sponsored junkets.
REP. LOUISE SLAUGHTER, CHAIR, HOUSE RULES COMMITTEE: The idea of a member of Congress flying on a corporate jet, being a captive of that corporation for hours on end is really repulsive to most of us. We should not allow that.
GERSH: The House will vote on new Democratic ethics rules banning travel paid for by companies or trade associations that employ lobbyists. Trips funded by universities or foundations would have to be approved in advance by the House Ethics Committee. The new rules would double the so- called revolving door limit, making lawmakers and senior staff wait two years before taking a job lobbying their former colleagues. Common Cause's Mary Boyle calls the proposed new rules a good first step, but adds they should be applied by an independent panel.
MARY BOYLE, PRESS SECRETARY, COMMON CAUSE: But without the enforcement to kind of back this up, it is not really credible in our eyes because we have just seen the rules not followed too many times before.
GERSH: Paul Miller represents corporate and trade association lobbyists. He says the new guidelines would make it harder for members to travel overseas and learn about trade issues affecting jobs back home.
PAUL MILLER, SPOKESMAN, AMERICAN LEAGUE OF LOBBYISTS: My concern is that the trips will go away and they're not going to be able to visit plants. They're not going to see new technology. They're not going to be able to visit with workers who may be losing their jobs or impacted by something that may be happening overseas.
GERSH: House Democrats also pledge to limit member pet projects. Committees will now have to list those earmarks when they pass bills. But President Bush wants earmarks identified in law, not just the committee reports used to explain legislation.
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Here's my own view to end the dead of the night process. Congress needs to adopt real reform that requires full disclosure of the sponsors, the costs, the recipients and the justifications for every earmark.
GERSH: There may also be an important loophole to the travel ban. Members of Congress might still be able to use corporate jets to attend fundraisers which are covered under Federal election laws. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.
"Street Critique"-Todd Harrison, Founder & CEO, Minyanville.com
PAUL KANGAS: Tonight's "street critique" guest says he thinks the bullish momentum that propelled the stock market higher in the second half of 2006 will continue over the near term. He's Todd Harrison, founder and CEO of the financial education website minyanville.com. And Todd, welcome to NIGHTLY BUSINESS REPORT.
TODD HARRISON, FOUNDER & CEO, MINYANVILLE.COM: Happy New Year.
KANGAS: And the same to you. Now let me ask you first if the abrupt downside reversal after the Fed released the December minutes of its FOMC meeting today, was that sell-off overdone?
HARRISON: I think we have to be careful not to read too much into one day's action. We had nice momentum into the end of the year. There was a lot of euphoria floating around the market this morning. I think it was an excuse to take some profits.
KANGAS: You do see the markets, nevertheless, moving higher over the short term. How short is the term and then what happens?
HARRISON: Well, I think that depends on the dollar. I'm watching the dollar really as the valve that's controlling most all asset classes. And as long as the dollar stays relatively stable or lower, I think the momentum can continue, but I think there's some longer term issues with the greenback.
KANGAS: So you're concerned. You think the dollar could go lower. The chances are probable it will?
HARRISON: Eventually it will. (INAUDIBLE) a little bit negative in the short term and there's a lot of debt out there that's being serviced, that's maybe driving the dollar back higher structurally, but I think the broader trends, the secular trends are the support of the lower dollar.
KANGAS: Lower dollar is good for gold, is it not?
HARRISON: It is good for gold. Gold and energy are actually two sectors that I think are relative winners, versus tech and financials, and I'll stress "relative" because you can't really spend relative performance. But if you could pare off some energy and metal holdings versus some tech and financials, I think you'll do quite well.
KANGAS: I also understand you expect an up tick in market volatility this year. Why do you believe that?
HARRISON: Absolutely. I think volatility has been compressed, and I think that the proliferation of a lot of income funds that are selling volatility, are selling options, has exploded, so that's actually created a compression marketplace and I'm not sure what the catalyst is, but I expect market volatility to up tick nicely in the next year.
KANGAS: We have been reporting about the expected reset of $2 trillion in adjustable rate mortgages this year. Give me your take on that. Do you see that reset as a defining force in the economy this year?
HARRISON: I think it has to be. I live in New York City and I rent rather than own, but a lot of consumers out there in the heartland have used their home equity, you know, as a vehicle to support their -- you know, their spending habits. The savings rate in our country is just absent. So I think the Fed is in a bit of a box. I think they want to raise rates to appease the foreign holders of our debt, but I think they need to lower rates to combat potentially slower global growth and this adjustable rate mortgage reset.
KANGAS: OK, so that could be a rather tumultuous occurrence, correct?
HARRISON: It's a tight rope.
KANGAS: OK. Todd, I want to thank you for joining us. It was great to have you on our air.
HARRISON: Paul, thank you. You have a good New Year.
KANGAS: And the same to you, my guest, Todd Harrison, of minyanville.com.
"Money File"-Secrets To Defeating Debt
SUZANNE PRATT: In the "money file" tonight, if your New Year's resolution is to get a better handle on your cash, you may want to try a new approach to the problem. Here's Eric Schurenberg, managing editor of "Money" magazine.
ERIC SCHURENBERG, MANAGING EDITOR, MONEY MAGAZINE: Does this sound familiar? You earn good money and yet it seems most of your disposable income goes to pay interest on your debts. Well, if it's any consolation, you've got plenty of company, and there are a lot of schemes that claim to help you, from zero interest balance transfers to debt consolidation loans.
But the fact is, they'll only make the problem worse, unless you change the behavior that got you in hock in the first place. Don't count on will power alone. You've got to play tricks on yourself. First, take the credit cards out of your wallet and put them in a drawer. That creates a physical distance between the impulse and the means to buy. In the time it takes you to fetch the credit card, you might just reconsider. '
For extra psychological advantage, make a credit-card-sized cardboard card and put it in your wallet so that you can't grab plastic without seeing it. On that card, write the following: do I really need this? Is there a cheaper way to get the same benefit? What will I give up to afford it? Again, the idea is to inject some reason between you and the animal urge to spend.
As for getting out of the debt you're in, financially, the smartest thing to do is to pay off your highest-interest loans first. But psychologically, maybe you want to start with the smallest ones. Totally wiping out a debt from one or two creditors might give you the mental momentum to finish the whole job. Think of it this way-- living below your means is the new sign of success. Keeping up with the Jones' is so out of date. After all, do you have any idea how deeply in debt the Joneses are? I'm Eric Schurenberg.
"Last Word"-Organizational Ideas
SUZANNE PRATT: Finally tonight, it's the beginning of the New Year in your office and a great chance to get organized. Office Depot has some suggestions on how to make things more productive. Slim down the piles. Get rid of that huge stack of paper on your desk and shred what you don't need. Tone up your to-do list. Break down large projects into manageable parts, increase your file finding flexibility, file your paperwork as you go. It can prevent clutter and make files easier to locate.
Train for a less taxing tax season. Don't stuff receipts into a shoebox. Instead, use tax software to help you keep and track everything. These suggestions come, Paul, after a new survey showed 53 percent of people function in an office that they described as controlled chaos and I would be in that 53 percent.
KANGAS: I would have uncontrolled chaos in mine. That's the way it is.
Paul Kangas' Stocks In The News
PAUL KANGAS: The Federal Reserve is growing concerned about balancing inflation and growth. This afternoon, the Fed released the minutes of its December 12 open market committee meeting, saying inflation is its number one concern. But the panel also believed the subdued tone of some recent readings on the economy could mean risks to growth are increasing. At that meeting last month, you'll recall the FOMC decided to leave interest rates unchanged at 5 1/4 percent. Analysts say today's minutes show no real indication the Fed will cut rates anytime soon.
So that news knocked the wind out of what could have been another record close on Wall Street. The stock market took off like a rocket at the outset in the first trading session of the year, fueled by a sharp drop in oil prices and heavy buying in semiconductor, telecom and healthcare stocks. At noon, the Dow was sporting a 110-point gain, while the NASDAQ Composite was up 35 points. Just after 2:00 p.m., when those Fed minutes came out, the blue chips tumbled to a 50-point loss and then made a late comeback. So the Dow Industrial Average managed to close up 11.37 at 12,474.52. The NASDAQ Composite gained 7.87 at 2,423.16. Standard & Poor's 500 fell 1.70 ending at 1,416.60. Over in the bond market, the 10- year note rose 6/32 to 99 23/32, putting the yield at 4.66 percent. New York exchange volume leader on 24.8 million shares, Ford Motor (F) no change on the day. It traded as low as $7.44 after the company said December sales fell 13 percent, mainly due to weak demand for its trucks.
GE (GE) managed to gain $0.76 on the day.
And then AT&T (T) down $0.80. This is the first day of trading for the company, which now includes BellSouth.
Then came ExxonMobil (XOM) down $2.52 on the very, very weak oil market today.
Let's have a look at some other major oils in the sector. Chevron (CVX), ConocoPhillips (COP) and Marathon Oil (MRO), all down significantly.
And the oil service stocks also hurt, Halliburton (HAL) and Schlumberger ltd (SLB), well on the downside.
Getting back to the active list, we see Home Depot (HD), fifth in volume, up $0.91. As you heard, Robert Nardelli is out as CEO, but today, Standard & Poor's repeated a "strong buy" recommendation on HD stock.
Pfizer (PFE) a $0.39 gainer.
EMC Corp (EMC) showed no change on the day.
Wal-Mart Stores (WMT) up $1.37. The company estimates its December same store sales were a better than expected 1.6 percent on the upside. And Standard & Poor's today repeated a "buy" recommendation on Wal-Mart stock.
Ensco Intl (ESV) down $1.61, even though it is replacing BellSouth in the Standard & Poor's 500 index.
Tenth in volume was Alcatel-Lucent (ALU) with a $0.97 gain.
General Motors (GM) had a rough day, down $1.27 after Bank America downgraded it from "neutral" to "sell" and also cut its price target on GM stock from $30 down to $25 a share.
Then came the airlines, reacting very positively to the sharp drop in oil, up $2.63 on American AMR Corp (AMR).
Let's have a look at some of the other major carriers, Continental Airlines (CAL) up $2.72.
$2.36 gain in UAL Corp (UAUA).
And US Airways Group (LCC) rising $2.45, very strong group.
Brilliance China (CBA) auto limited up $4.44 on rumors that BMW wants to take a significant stake, perhaps about 20 percent. However, BMW spokesman denied that.
Then we see Freeport McMoran Copper & Gold (FCX) down $5.24 and that's because of a continuing drop in the price of copper today.
Terex Corp (TEX) off $5.52. Citigroup downgraded it from "buy" to a "sell" recommendation.
Goodyear Tire and Rubber (GT) doing well, up $1.81. That's a positive reaction to the company's new labor pact and of course the end of the strike. Deutsche Bank securities upgraded the stock today from "hold" to a "buy."
Then Unifirst Corp (UNF) doing well, up $4.34. This is a company that's in the workplace uniform business and it had good first quarter earnings, $0.71, up from $0.59 last year and that was $0.06 better than the Street was expecting.
Intercontinental Exchange (ICE) up $7.82. The company said its December average daily volume was up 128 percent over last year. Average daily OTC commissions up 78 percent from a year ago.
Apple Computer (APPL) topped the NASDAQ active list down $1.04.
But Google (GOOG) up $7.11. Piper Jaffray brokerage boosted its price target for Google stock from $600 to $630 a share.
Microsoft (MSFT) showed no change.
And Cisco Systems (CSCO) $0.40 rise.
Research in Motion (RIMM) up $0.77. That was fifth in dollar volume.
Intel (INTC) gained a dime.
Qualcomm (QCOM) $0.33 loss there.
Oracle (ORCL) was up $0.37.
Followed by Amgen (AMGN) with a $0.09 gain.
Nvidia (NVDA), tenth in NASDAQ dollar volume, was down $0.93.
Baidu.com (BIDU) up $9.72. CIBC World Markets made bullish comments about the upswing in Internet advertising in China.
And finally, shares of Egl (EAGL) soared nearly $8 after receiving a $36 per share cash buyout bid from a team including its CEO and a private equity firm.
