NBR Complete Transcripts: 05-23-2007
Wednesday, May 23, 2007Rising Gas Prices May Cool the Summer Driving Season
SUSIE GHARIB: The bad news today for drivers, AAA said gasoline prices hit an all-time high, $3.22 a gallon. It comes just two days before the Memorial Day holiday weekend. Crude and gasoline prices also rose at the New York Mercantile Exchange, despite a new government report showing that supplies rose over the past week. July crude futures closed at $65.77 a barrel, up $0.26. Suzanne Pratt reports.
SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Today of all days, oil and gasoline futures should have traded lower. After all the government reported domestic energy supplies increased again in the past week. Closely watched stockpiles of gas added 1.5 million barrels, while inventories of crude and distillate fuels also rose. U.S. refineries ran at more than 91 percent of capacity, up from the previous week. But today the market fixated on increased tensions in the Middle East, particularly news that U.S. naval ships were moving closer to Iran following a report that country is ramping up its nuclear program. GRZ energy trader Tony Grisanti says geopolitical worries are still a big factor in the market.
ANTHONY GRISANTI, OIL TRADER, GRZ ENERGY: Right after these numbers came out, we had news that Iran is enriching uranium at a much greater pace than what they said before. So that kind of negated any bearishness in this market.
PRATT: Maintenance problems and accidents at U.S. refineries have been a catalyst for higher gas prices this spring. On top of that, U.S. consumption is at an all-time high. But Oppenheimer analyst Fadel Gheit says it's unfair to blame big oil companies for surging gas prices.
FADEL GHEIT, OIL AND GAS ANALYST, OPPENHEIMER & CO.: It's a commodity that's dictated by the marketplace, supply and demand. If we think that gasoline prices are high, we can shop around for cheaper gas. People are not doing that or you can drive less and people are not doing that.
PRATT: According to AAA, since May 4, the average price for a gallon of gas has been above $3. In the last month, it has jumped 13 percent. Many experts predict prices will climb higher during the busy summer driving season. But others do not expect a supply shortage and predict prices will soon stabilize.
GHEIT: Unless we have an unusual number of refineries taken offline, I do believe that we have seen or we are very close to the high for gasoline prices probably this year. Next year is another game.
PRATT: Even with gas at record levels, AAA is forecasting a record number of Americans will take to the road this holiday weekend. So much for high gas prices crimping consumption. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.
GHARIB: The run-up in gas prices has also caught the attention of U.S. lawmakers. The House of Representatives approved a bill today imposing stiff penalties on anyone overcharging for gasoline. It's called the Federal energy price gouging prevention act. It calls for criminal penalties of up to $150 million for corporations that price gouge. Individuals would face fines of as much as $2 million and jail time. The bill was passed just hours after the Federal Trade Commission said it found no evidence of price gouging by the major oil companies.
The U.S./China Trade Talks End in D.C.
SUSIE GHARIB: U.S. and Chinese leaders wrapped up two days of talks in Washington today with several economic agreements. But officials from the two countries failed to make progress on other prickly trade issues. As Stephanie Dhue reports, the U.S. continues to press the Chinese to do more.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Treasury Secretary Henry Paulson and Chinese Vice Premiere Wu Yi found some common ground, agreeing that China must continue to open its economy. To that end, China agreed to double the number of daily passenger flights from the U.S. to China over the next five years, let foreign banks expand brokerage trading and promote clean coal technologies. Treasury Secretary Paulson called the moves a positive step.
HENRY PAULSON, TREASURY SECRETARY: While we have much more work to do, we have tangible results for our efforts thus far. These results are like signposts on the long-term strategic road, building confidence and encouraging us to continue moving forward together.
DHUE: Chinese Vice Premiere Wu Yi hailed the strategic economic dialog as a complete success and the best way to handle trade tensions.
TRANSLATION OF: WU YI, VICE PREMIER, CHINA: It call for direct consultation and dialog between us instead of easy resort to threat or sanctions.
DHUE: But U.S. lawmakers, frustrated by the huge trade imbalance, are still pushing forward with legislation. There are now half a dozen bills aimed at China, including one sponsored by Senator Jim Bunning, to penalize the Asian nation for manipulating its currency.
SEN. JIM BUNNING (R) KENTUCKY: China's extraordinary level of intervention is not only a barrier to trade, it is a growing danger to the global economy and one that Congress is obliged to address.
DHUE: Members of Congress are meeting with Chinese leaders tonight and tomorrow. The message is clear. Lawmakers want action now on currency and market opening reform. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
"India's Promise"-Affirmative Action
PAUL KANGAS: India's caste system dates back thousands of years and rests on a social hierarchy tied to ancestry and traditional jobs. As India modernizes, some argue caste identity is becoming less important. But many of India's untouchables disagree. Tonight, in our series "India's Promise," Darren Gersh explains why some Indians say it's time for an aggressive dose of affirmative action to right old wrongs.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Raju Kumar is an MBA student about to launch a career in India's booming economy. All he has to do is finish a 200-plus-page case study on Adidas's marketing strategy. Raju is also a Paswan, one of India's caste of untouchables, the lowest caste in the ancient Hindu social hierarchy - dalits, as they are called here.
RAJU KUMAR: That is the name of my family for very long. It's going generation by generation.
GERSH: For centuries, dalits were forbidden to take up a trade or start a business. Dalit intellectuals say that discrimination persists. Not a single top Indian model, leading Bollywood actor or major newspaper editor is an untouchable. Raju has gone to the best schools in India, but even he says caste is a concern, especially for people who have not had the same opportunities he did.
KUMAR: Caste system, yeah, it is important, in the sense that people from the backward family who wanted to rise themselves need reservations. So that is what India is going all about, reservations, anti-reservation.
GERSH: What Indians call "reservations" Americans would call "quotas" and India has a lot of them. Almost half of all government jobs are set aside for untouchables and other victims of historical discrimination. It is the world's largest experiment in affirmative action. In a nation with more diverse religions, languages and cultures than all of Europe put together, India is struggling to find a way to bring opportunity to everyone. Government plans to establish reservations in university admissions are tied up in India's supreme court. Now the debate is shifting to the private sector. Commerce Minister Kamal Nath says Indian companies need to fight caste discrimination.
KAMAL NATH, INDIAN COMMERCE MINISTER: There has to be social justice as much as there's going to be all-inclusive growth, and if the private sector does not address this issue themselves, then government has to step in.
GERSH: JJ Irani is leading the industry effort to head off a reservations mandate. Instead, Indian industry is proposing a voluntary plan similar to affirmative action in the United States.
JAMSHED IRANI, CONFEDERATION OF INDIAN INDUSTRY: Indian industry has finally woken up and has, in fact, even hinted that there will be positive discrimination in favor of these people, which means that all things being equal, if there is one from these castes, we will give him the job.
GERSH: Industry is also pledging scholarships for dalit students and funding for dalit entrepreneurs. But Raju Kumar says voluntary action may not be enough to overcome the preference for hiring upper caste Indians.
KUMAR: They have advantage. (INAUDIBLE) The people from same caste meets and they will take him as compared to others.
GERSH: Irani says industry will fight any attempts by the government to impose mandatory reservations on the private sector.
IRANI: And the attention that we are paying now from the point of view of education, employability, entrepreneurship, all these things we are encouraging amongst these castes, that attention will be taken up from those programs to go to lawyers and fight it. It will become a legal issue.
GERSH: Even if reservations were imposed, industry argues there are not enough skilled dalits to fill the jobs set aside. But as Raju scans the want ads preparing to enter the job market, he says the only thing lower-caste people need is an opportunity.
KUMAR: I can say that backward class people are not bad. They are also talented. They can also give a good output. So I don't think there is an issue.
GERSH: The debate over reservations in the private sector is in its early stages. But in the caste-dominated politics of modern India, political scientist Pratap Bhanu Mehta says private sector reservations could drive a wedge between the haves and have nots in India.
PRATAP BHANU MEHTA, PRESIDENT, CENTRE FOR POLICY RESEARCH: I think the worry is that reservations are a cheap substitute for not doing the things that really empower people which is ultimately money and skills. And those are two things government is not willing to provide.
GERSH: Which may be why many lower caste Indians are beginning to demand a place in India's booming private sector. Darren Gersh, NIGHTLY BUSINESS REPORT, Delhi.
KANGAS: Tomorrow, as we continue our series "India's Promise," we'll look at India's education system and why it is not making the grade for either students or businesses.
"Street Critique"-Kevin Depew, Managing Editor, Minyanville.com
PAUL KANGAS: With the broad-based Standard & Poor's 500 now joining the Dow near record high levels, tonight's "street critique" guest is seeing a worrisome trend in one of its key indicators that he's watching. He's Kevin Depew, managing director of the financial education web site minyanville.com. Kevin, welcome back to NIGHTLY BUSINESS REPORT.
KEVIN DEPEW, MANAGING EDITOR, MINYANVILLE.COM: Thank you, Paul. Nice to be here.
KANGAS: I take it that you're feeling a bit contrary about stocks at these levels. Why is that? What are you seeing that others are most others aren't?
DEPEW: Maybe I'm not the only one. I noticed that this afternoon former Federal Reserve Chairman Alan Greenspan had some negative comments to make about Chinese stocks.
KANGAS: True.
DEPEW: What I'm seeing in the market is that there's an indicator called the Russell 2000 bullish percent index. That indicator just tracks the percent of stocks on the Russell 2000 that are on (INAUDIBLE) and were actually the lower level and negative on that indicator even as the Russell 2000 has made new highs lately and that's a worrisome trend. That's saying that fewer and fewer stocks are responsible for the index going down (ph).
KANGAS: And that's a very broad-based index, is it not?
DEPEW: Absolutely. On the other side of the coin, we are seeing positive movement in the S&P 500 indicator and for the NYSE so there's a large cap bias going on.
KANGAS: Are there any specific sectors you're avoiding and if so why?
DEPEW: Absolutely. I want to stay away from consumer discretionary. I think the consumer is running into some trouble as well health care. I think there are some political issues on the horizon that we need to be aware of and real estate investment trusts. I'm not concerned that the housing market is downtrend. Building stocks may have reached a low, but certainly real estate investment trusts have been supported pretty well over the past couple of months.
KANGAS: However, I understand that you do have a couple of picks on the long side for our viewers that you consider contrarian plays. What is your first pick?
DEPEW: The first one is Bank of America (BAC) and I know this is a large cap bank. It's the second largest in terms of assets. It's been an underperformer though in its peer group particularly against Citigroup and there are some positive technical patterns going on with Bank of America that I think makes it a buy.
KANGAS: Looks like it's building a nice base here just above 50. How about another?
DEPEW: Sure. The next one is - this is not a stock I would want to buy but it's one that I want to watch. Everybody needs a market tell and Beazer Homes (BZH) is an interesting stock because the company has been very aggressive about being very negative on the housing market saying that they're not seeing any signs of support, any signs of demand reentering. They're under investigation from the FBI for potential mortgage fraud. So there's not anything that can wrong with this stock has gone wrong again. I'm seeing positive technicals develop in this stock.
KANGAS: We have time for one final pick.
DEPEW: One final pick is going to be Wal-Mart (WMT). It's fashionable to hate Wal-Mart but I think this is an anti-consumer discretionary play. When the consumer starts taking heat, they go to Wal- Mart instead of Target, instead of some of the other retailers.
KANGAS: Do you personally own any of these issues, Kevin?
DEPEW: No, I do not.
KANGAS: OK, all right, well, I want to thank you for joining us and we'll see how your contrarian view works out. Thanks very much for being here. My guest Kevin Depew of minyanville.com.
GHARIB: Tomorrow, the daily paper goes high tech. We look at the latest technology hoping to change your morning routine.
"Money File"-Don't Take the E-mail Bait
SUSIE GHARIB: In the money file tonight, e-mail is just the latest vehicle for investment fraud. Here's Chuck Jaffe, columnist at "Marketwatch."
CHUCK JAFFE, SENIOR COLUMNIST, MARKETWATCH: I got an e-mail this week from the chief operating officer of a Colorado technology company looking to raise $4 million through the sale of some private stock. While he'd have been happy to take my money, what he said he really wanted was my help. In fact, he offered a 10 percent commission on any money I raised selling shares in the company, plus up to 2 percent of the corporate stock for getting the job done.
Someone is going to take that deal. And when that happens, this little company will have a lot of agents out there selling private equity to average investors and they'll be breaking the law because anyone who answers this blast e-mail who is not already in the securities business becomes an unregistered securities agent or unlicensed investment adviser. If they sell the stock that way, it's a felony. But the agent going to jail is small solace if you've lost money on a garbage private stock.
The North American Securities Administrators Association came out this past week with its top 10 investor traps. Private equity was just one of them. What all investor danger zones have in common is a sounds good story with enough support so that gullible and greedy investors walk right into the trap. In almost all cases, some common sense and a background check would have provided ample protection to avoid trouble. So no matter how great your next investment opportunity seems, go into the situation certain of just one thing. If it sounds too good to be true, it probably is. I'm Chuck Jaffe.
Paul Kangas' Stocks in the News
PAUL KANGAS: Driven by a continuing flow of strong corporate earnings and more merger activity, stocks on Wall Street moved higher at the opening today. At 11:00 a.m., the Dow rose above 13,600 for the first time ever with the NASDAQ up 10 points and the Standard & Poor's 500 Index at a record high. A warning from former Fed chief Alan Greenspan that the Chinese market was due for a sharp setback was widely blamed for a steep sell off this afternoon on Wall as the major indices ended lower. The Dow Industrial Average closed off 14.30 points at 13,525.65. The NASDAQ Composite lost 10.97 at 2577.05. Standard & Poor's 500 down 1.84 ending at 1522.28. In the bond market, the 10-year note fell 5/32 to 97 8/32, putting the yield up to 4.85 percent.
Once again topping the big board active list today on 16.6 million shares, General Electric (GE) moving up $0.26. Then Pfizer (PFE) with a $0.03 loss.
Sprint Nextel (S) gained $0.41.
Valero Energy (VLO) down $1.24.
And then Ford Motor Co (F) which was $0.08 per share.
EMC Corp (EMC) was up $0.23.
Time Warner (TWX) dropped $0.04.
RSC Holdings (RRR) this is a new issue. The company's a heavy equipment leasing firm, 20.8 million shares offered at $22, opened at $21.70, got as high as $71.75 and then took a belly flop during the late afternoon sell off.
Alcoa (AA) was up $1.42. Yesterday of course, Alcan rejected its buyout bid and Alcan is reportedly now in talks with BHP Billiton. Alcan stock today was up $4.86 at $85.89 a share.
ExxonMobil (XOM) was up $0.22 a share today.
Hewlett-Packard (HPQ) edged up a nickel. The company won a seven-year NASA technology and services contract which is worth up to $5.6 billion.
Analog Devices (ADI) plunging $4.03. Second quarter earnings lower, $0.37, versus $0.39 a year ago. The company's profit margins also were lower than expected and Credit Suisse downgraded the stock from "out perform" to just a "neutral" rating.
Medtronic (MDT) moved up $2.18. After the close yesterday, fourth quarter earnings excluding one-time items came in at $0.66, up from $0.59 a year ago, $0.04 better than the Street expected. Revenues up a respectable 7 percent.
DaimlerChrysler AG (DCX) up $3.11. Morgan Stanley repeated an "over weight" rating on that stock.
Target (TGT) moved up $0.56. First quarter earnings $0.75, well above $0.63 last year and $0.04 better than the Street consensus.
Dillard's (DDS) however, down $2.60. It had lower first quarter earnings, $0.53, down from $0.77 a year ago, $0.20 below the Street estimates.
Men's Wearhouse (MW) up $4.44, nicely higher earnings first quarter, $0.75 up from $0.53 a year ago and sales up a respectable 14 percent.
Stride-Rite (SRR) the shoe company, up $4.76. Payless Shoe will acquire this firm for $800 million in cash. That works out to about $20.50 a share. Payless stock was up $3.24 at $35.14.
And then CSS Industries (CSS) plunging $6.21. The company's into greeting cards and gift wrappings and things like that, had a fourth quarter loss of $0.52, not as big as the $0.73 loss a year ago, but $0.06 worse than expected.
NASDAQ's most active down $0.65 was Apple (AAPL).
Then Amazon.com (AMZN) with a gain of $0.12.
Google (GOOG) was down $1.89.
Intel (INTC) $0.32 loss.
And Cisco Systems (CSCO) fell $0.40.
Microsoft (MSFT) down $0.11. The company said today it doesn't need to buy Yahoo! because it already has all the pieces to build a successful ad business.
Research in Motion (RIMM) down nearly $3.50.
Qualcomm (QCOM) off $1.54.
Amgen (AMGN) moved up $0.78.
And Yahoo! (YHOO) itself down $0.31 a share.
Cypress Biosciences (CYPB), look at that gain, 93 3/4 percent, up nearly $8. After the close yesterday, Cypress and its partner Forest (ph) Laboratories said phase III trials of their Milnacipran drug showed significant therapeutic effects on patients suffering from fibromyalgia syndrome, big, big move there.
And finally, Mesa Labs (MLAB) rose over $4 after reporting strong fourth quarter earnings, $0.44 per share, up from $0.27 a year ago on a 54 percent jump in revenues.
