NBR Complete Transcripts-November 23, 2007
Friday, November 23, 2007Retailers Hope There Will Be Plenty of Green This Black Friday
JEFF YASTINE: It was a day for shopping on this black Friday as Americans packed stores across the country. Many retailers opened their doors well before dawn and attracted shoppers with early morning deals. Black Friday is traditionally the day that retailers' balance sheets move out of the red and into the black. As Suzanne Pratt reports, consumers were in a spending mood today despite forecasts of lackluster holiday sales.
SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: At Macy's in New York's Herald Square, it's beginning to look a lot like Christmas. But even with all the trimmings, retailers worry consumers are feeling "bah humbug" rather than joyous. Like many department stores, Macy's rang up disappointing fall sales and management expects only a flat performance in the holiday season. Still, its flagship store was jam-packed today, so Macy's Chairman Terry Lundgren is optimistic.
TERRY LUNDGREN, CHAIRMAN & CEO, MACY'S INC.: If this morning is any indication, we had to open the store early because there were so many consumers outside of our door. Now, they were here for value. So I'm counting on this being a good, solid fourth quarter. And when that happens, that's when you really see how the consumer is behaving and reacting.
PRATT: For most retailers, the day after Thanksgiving is not the busiest shopping day, despite all the fanfare and heavy store traffic. Still, experts say it is psychologically important because it marks the official start of the holiday shopping season, a period for most retailers which can mean up to 50 percent of annual sales. The National Retail Federation expects this year will be the worst for holiday sales since 2002, with a year-over-year gain of 4 percent. That compares to a 4.6 percent increase last year. Some experts are even more pessimistic, forecasting a gain of only 2 percent. Retail analyst Dana Telsey says consumers are facing many obstacles.
DANA TELSEY, CEO, TELSEY ADVISORY GROUP: We believe it's certainly more the environment of rising gas prices, the credit environment and weaker consumer confidence that's really created a Christmas season that's not expected to be as robust.
PRATT: Consumers across the country lined up early today for door- buster deals. And many stores cut prices even before Thanksgiving, an indication of just how worried retailers are about the tough conditions. Bear Stearns analyst Christine Augustine says the bad economic environment is likely to be good news for shoppers.
CHRISTINE AUGUSTINE, RETAIL ANALYST, BEAR STEARNS: Holiday sales will be very promotional and that the consumers will be able to take advantage of a lot of discounting. It will really be a buyers' market for the consumer.
PRATT: While there are few must-have items this year, jewelry and accessories are expected to grace many shopping bags. Once again, electronics stores are expected to be among the biggest winners. Best Buy store manager Larry Schmitt says customers are spending more this year than last year.
LARRY SCHMITT, STORE MANAGER, BEST BUY: We're seeing computers, computers, computers, along with flat-screen televisions, GPS systems and gaming systems. But computers seems to be the big ticket.
PRATT: This year there are 32 shopping days between Thanksgiving and Christmas, the maximum possible on the calendar. But experts say more time doesn't necessarily result in more spending. It means people will probably procrastinate, shopping even later in the season. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.
Business Is Unusual In Japan For Walmart & Toys R Us
JEFF YASTINE: Toys 'R' Us and Wal-Mart are among the retailers making a big push and expecting to do well this holiday selling season here in the U.S., but both firms are fighting head winds in Japan. Wal-Mart and Toys 'R' Us are finding it tough to compete in the lucrative and demanding, Japanese market these days. But as Lucy Craft reports from Tokyo, that wasn't always the case.
LUCY CRAFT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Toys 'R' Us used to be the poster child for how to get it right in Japan. It was among the first foreign store brands outside the luxury segment to take on the world's second largest economy. But 20 years and over 150 store openings later, it's now a company in search of a new business model. Once hailed as a rare American retail success story in Japan, Toys 'R' Us has tumbled into the red for the last two years and unless the firm can get a lift under the tree at Christmas, its slump could stretch into a third year. Toys 'R' Us' central dilemma is kids' play just ain't what it used to be. Especially for children eight and older, model airplanes, Monopoly and other traditional playthings have been forsaken for low-margin video games. Analyst Hiroshi Sasamata of AT Kearney says that's why Toys 'R' Us' nemesis isn't a rival toy store or Wal-Mart, but a purely local phenomenon: the mass-volume electronics discounter.
TRANSLATION OF: HIROSHI SASAMATA, PRINCIPAL, AT KEARNEY: The main sales channel for video games is the big electronics stores. For them, video games are just loss leaders. But for Toys 'R' Us, video games are about half their sales. So the big electronic chains have not only depressed retail prices for video games; they've taken customers away from Toys' R' Us.
CRAFT: The big discounters -- like Bic Camera, Yodobashi (ph) and Yamadadenki (ph) -- are the 800-pound gorillas of Japanese retailing. With prime real estate locations and popular loyalty rewards programs, their clout over distribution and merchandising is formidable. Unlike Toys 'R' Us, which has delegated authority to its Japanese managers, Wal-Mart has tried to run its Japan unit much like its U.S. operations. Five years after buying a stake in a nearly bankrupt supermarket chain, Seiyu, Wal- Mart is in the hole to the tune of $1 billion. Analyst Kazunori Tsuda of Daiwa Institute of Research is skeptical about Wal-Mart's prospects here.
TRANSLATION OF: KAZUNORI TSUDA, RETAIL ANALYST, DAIWA INSTITUTE OF RESEARCH: Wal-Mart has three problems. Its Japanese stores are cramped and outdated. Staff morale is low after hefty layoffs and the supermarket business itself is over-saturated, so competition is cutthroat right now.
CRAFT: Critics say the world's biggest retailer should write off Japan and concentrate on China. But Wal-Mart has said Japan, a retail market worth $1 trillion, is simply too big to walk away from and is key to its international strategy. The Bentonville, Arkansas-based firm has underscored its intention to stay the course in Japan by making a tender offer for the rest of Seiyu's shares, which runs until December 4. Retail expert Roy Larke says full ownership is crucial to turning around the 400- store chain.
ROY LARKE, EDITOR, JAPANCONSUMING MAGAZINE: At the moment, Wal-Mart is still in the hands of the Japanese distribution system; most of their product is coming from Japanese suppliers. And they're really stuck in the middle between the customer and the supplier. Wal-Mart really needs to take control of the complete supply chain. And they can only really do that if they have total control of Seiyu.
CRAFT: Both Wal-Mart and Toys 'R' Us are fighting for market share at a time of great consolidation in the Japanese retail industry. Both companies refused requests for interviews. But a source with Toys 'R' Us says the company is considering a number of strategies, including abandoning its traditional suburban stores to focus on upscale, urban outlets. Lucy Craft, NIGHTLY BUSINESS REPORT, Tokyo.
Charities Get Creative About Fundraising
JEFF YASTINE: Well, retailers aren't the only ones who count on consumers opening their wallets this time of year. Some charities receive as much as 75 percent of their contributions at the end of the year. Now, in the midst of the housing slump, some charity executives are expecting a major drop in donations. So, as Stephanie Dhue reports, non- profits are coming up with new approaches this holiday season.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Finding the right gift may be a challenge, but giving a charitable donation as a present can be especially tricky. It may seem presumptuous to give someone a gift to the charity of your choosing. So the non-profit group Network for Good created a gift card, called the good card, that can be redeemed online to any registered non-profit. Network for Good CEO Bill Strathmann says the card takes the guesswork out of giving.
BILL STRATHMANN, CEO, NETWORK FOR GOOD: What you get is a gift that has -- around the holidays that has an incredible return, makes the world a better place, instead of giving a gift that might get returned.
DHUE: Similar gift cards are offered by Just Give and charitygiftcertificates.org. Stacy palmer of the "Chronicle of Philanthropy" sees these types of cards as an extension of the gift catalogs and registries some non-profits have created. And she says e-mail solicitations by charities are proving effective.
STACY PALMER, EDITOR, CHRONICLE OF PHILANTHROPY: What's surprising a lot of non-profit groups, they always expected that might work well for $10 or $15 contributions, because that seems like the sort of thing you would just decide to do online, but some groups are raising as much as $25,000 from a single person online.
DHUE: Palmer says those big donations are from givers who are used to large online transactions. And those kinds of contributions are typically well researched. There are web sites, like Charity Navigator and Guidestar that gather and publish research about non-profits. Guidestar CEO Bob Ottenhoff advises donors to check out charities that are soliciting this time of year.
BOB OTTENHOFF, CEO, GUIDESTAR: One of the things you want to be careful about is, is this organization transparent and are they accountable? Transparency in this case means are they willing to share important documents with you, audited financial statements, annual reports, information about their programs.
DHUE: Charitable giving typically rises and falls with the stock market. Despite recent volatility, most non-profits are optimistic about the gifts they'll receive this holiday season. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
"Market Monitor"- Bernie Schaeffer, Chairman of Schaeffer's Investment Research
PAUL KANGAS: My guest "Market Monitor" this week is Bernie Schaeffer, chairman of Schaeffer's Investment Research based in Cincinnati, Ohio and welcome back to NIGHTLY BUSINESS REPORT Bernie.
BERNIE SCHAEFFER, CHAIRMAN, SCHAEFFER'S INVESTMENT RESEARCH: Great to be here, Paul.
KANGAS: As a professional stock option trader, you must love all the price volatility everyone else seems to be complaining about. Am I right?
SCHAEFFER: Volatility is great for trading options as long as it translates into enough directional movement.
KANGAS: You could buy a straddle (ph) on some of these Chinese stocks and exercise both the call option and the put option on the same day the way they're going.
SCHAEFFER: You have stocks, the Chinese Internet stocks, the solar power names, that are capable these days of making 50, 75, 100 percent moves in a matter of months. You superimpose options trading on them where you get all that leverage and you can get just huge gains trading options off of these volatile stocks.
KANGAS: But presently is all the gloom and doom we're witnessing about Wall Street justified?
SCHAEFFER: Well it's kind of interesting. If somebody would have said at the end of last year we're going to have $00 oil, we're going to have a severe -- a more severe housing slump than anybody would have ever anticipated, the financial names were going to implode and yet we would be at break even at the end of November and actually after today up a little bit on the year. People would have been really shocked. It would have been a recipe, supposedly, for a bear market. So I think the market's action itself, which we look at more than anything else, the technical aspect of the market, the sentiment backdrop of the market has been extremely encouraging in the light of events. And so from a technical perspective, there's some really interesting things going on right here and now.
KANGAS: But the market's future action a lot hinges on whether the Fed cuts rates or not in December. What do you think?
SCHAEFFER: I think the Fed absolutely has to cut rates in December and continue to cut -- market interest rates are already left the Fed behind so to speak. There's a lot of concern about the dollar weakening. I think the dollar is more concerned about U.S. economic growth getting back on track. The interest rate market is already reflected in the price of the dollar. And we've got to get the rates down for those mortgage resets. I think that's extremely important.
KANGAS: In an interview with Susie Gharib last December, you predicted the Dow would reach 14,400 by the end of 2007 and that was not a popular view at the time but it came within about 200 points of it. Congratulations, that was a great call.
SCHAEFFER: Thank you.
KANGAS: Do you have a prediction for the Dow for 2008?
SCHAEFFER: We missed by 200 points for 2007. I think we could put on 10, 15, 20 percent in 2008 which would take us at least to that 14.5 level or more. And from a technical standpoint, we've held at a support level and we've bounced off of it today on the day after Thanksgiving. The 80- week moving average on the S&P contained all pullbacks in this bear - in this bull market excuse me.
KANGAS: OK, almost slipped there.
SCHAEFFER: In 2004, 2005, 2006, August 2007 we might have just touched an extremely significant support level from which we could rally sharply.
KANGAS: Bernie, give our viewers some call or put option recommendations if you will, please.
SCHAEFFER: I've got a couple call options, both on momentum names. Both stocks have done extremely well this year, Priceline.com, PCLN.
KANGAS: There it is.
SCHAEFFER: I'm looking at five month call options on priceline for a premium of about 15 percent.
KANGAS: OK.
SCHAEFFER: Southern Peru Copper, PCU.
KANGAS: Let's have a chart of that one up too. Priceline is in the right direction for a call option ownership. That's for sure.
SCHAEFFER: But it's down a lot from its $990 high. So Peru Southern Copper is - has pulled back sharply along with copper. It is still up about 100 percent for the year. I think the bull market in commodities is going to continue. I'm looking at four month call options on that.
KANGAS: Premium?
SCHAEFFER: About 15 percent and I own both PCE and priceline.
KANGAS: How about a put option? You mentioned you may have one of those.
SCHAEFFER: If the Fed blows it, if you're nervous about the market, I would continue to look at the financial names. We're looking at XLF, the spider fund financial. This is kind of a protective put maybe to protect the portfolio against further weakness in the financial sector. I'm looking at a four-month put option. Now, a put option allows you to profit when a security goes down. I'm looking at a four month put option on that with a premium of about 8 percent.
KANGAS: Do you personally own any of the call or put options you mentioned here or have other disclosure to make?
SCHAEFFER: The calls I do own, the priceline.
KANGAS: But not the puts?
SCHAEFFER: I do not own the puts.
KANGAS: Bernie, I want to thank you for being us once again. It's always a pleasure.
SCHAEFFER: Thank you Paul.
KANGAS: My guest, Bernie Schaeffer, chairman of Schaeffer's Investment Research.
"Last Word"-Cyber Monday
JEFF YASTINE: And finally tonight, after black Friday comes cyber Monday. A recent survey shows that 46 percent of working Americans expect to shop online this Monday, while they are at work. In fact, 11 percent plan to spend nearly an hour of their work time shopping online this Monday. A different poll by careerbuilder.com found that employees expect to spend two or more hours hunting for bargains. But a word to the wise, that same career builder survey finds that half of all employers report they monitor employees' Internet usage. So Paul, if you must shop online while you're at work, shop online during your lunch hour or during your break time.
KANGAS: Or you may find yourself shopping for a new job.
YASTINE: That's right and not being able to afford all the holiday goodies as the year comes to a close.
Paul Kangas' Stocks in the News
PAUL KANGAS: Wall Street staged a broad opening rally as bargain hunters took command after Wednesday's nose dive. In a steady advance, the Dow rose 120 points by noontime while the NASDAQ was up 23. Strength in the financial sector kept the upturn alive and retail stocks were firm on indications that black Friday sales were quite good. At its early 1:00 p.m. closing, the market was at its best level of the day. The Dow Industrial Average ended up 181.84 points at 12,980.88. This week it rose twice and fell twice for a net loss of 195.91 points. The NASDAQ was up 34.45 ending at 2596.60 today. It also rose twice and fell twice in this four-day week and lost 40.64 points overall. Standard & Poor's 500 Index closed up 23.93 at 1440.70 today and it fell 18.04 points for the week. Over in the bond market, the 10-year note gained 4/32 to 102 2/32, putting the yield at a flat 4 percent.
Big board volume leader on a rather 11.6 million shares was Citigroup (C) up $0.97, but signs of bottom fishing in the weak financial group.
GE (GE) $0.50 gainer.
Pfizer (PFE) up $0.63.
Fannie Mae (FNM) did well, up nearly $3 a share.
Ford Motor (F) a $0.24 gain there.
Bank of America (BAC) did all right, up $1.01.
And Target (TGT) up $3.07 on indications that black Friday shoppers are pretty aggressive.
JPMorgan Chase (JPM) up $1.27.
Amer Intl Group (AIG) rose $1.70.
And Wells Fargo (WFC) rounding out the top 10 actives, $0.92 gain.
Boeing (BA) up $2.13. Air France-KLM has ordered three new 737s and two new 777s from Boeing.
Then Air France-KLM (AKH) itself moving up $4.88. The company reported a second quarter profit almost doubled from last year on a 5.8 percent rise in sales.
Rio Tinto (RTP) up $30.32. Reuters reported that BHP Billiton may boost its all-stock buyout bid with a cash sweetener. BHP up $2.97.
Arcelormittal (MT), the big steel company, up $1.71. The firm confirmed it's in talks with controlling shareholders of China Oriental Group about future cooperation and Mittal may boost its stake, which presently stands at 28 percent.
Cnooc Ltd (CEO) up $14.70. Citigroup upgraded it from "hold" to a "buy."
And then Massey Energy (MEE) up $1.32. A higher court overturned a $76 million judgment against the company.
And then Transocean (RIG), these are the news shares, up $4.50. These shares represent the new rate, which includes the acquisition of Global Santa Fe and they will replace shares of the old Transocean in the Standard & Poor's 500 Index after the close next Monday.
Apple (AAPL) topped the NASDAQ actives, up $3.08.
Then Google (GOOG) with a nice $16.18 gain.
Research in Motion (RIMM) up $2.83. The company says it now lets its executives draw up plans that automatically sells stock regardless of any inside information they may later receive.
Microsoft (MSFT) down $0.12.
Baidu.com (BIDU) $0.94 advance there.
Intel (INTC) $0.44 gain.
The same story for Cisco Systems (CSCO).
E*trade Financial (ETFC) moved up $1.07. Rumors of a takeover, suitors rumored to be Schwab or TD Ameritrade.
First Solar (FSLR) down $2.37.
And Qualcomm (QCOM) a $0.07 gain. A Federal judge affirmed a jury verdict that Qualcomm infringed on three Broadcom patents.
Broadcom (BRCM) itself moved up $0.69.
And then UAL Corp (UAUA) moving up $1.23. "BusinessWeek" magazine says United is still interested in a merger with Delta.
And those are the stocks in the news tonight.
