NBR Transcripts-January 14, 2008
Monday, January 14, 2008Gold Shines To A Record High
SUSIE GHARIB: A milestone for gold today: it closed above $900 an ounce for the first time ever. Gold prices rose for the fifth straight session as investors sought the safety of the precious metal in anticipation of more interest rate cuts, worries about inflation, global tensions and further weakening of the American dollar. In New York trading, February gold rose $5.70 to close at $903.40. It traded as high as $914 earlier in the day.
Techs Are Poised To Be Great in 2008
PAUL KANGAS: Also moving higher today, shares of IBM. They jumped more than 5 percent to $102.93. Big blue surprised Wall Street with a better than expected preview of quarterly earnings, a sign that businesses are still spending money on technology. IBM posted preliminary fiscal fourth quarter earnings of $2.80 a share. That's up 24 percent from the year ago period and $0.20 ahead of analyst estimates. IBM's revenues jumped 10 percent to nearly $29 billion during the quarter. The tech giant also noted its cash balance as of the end of 2007 was just over $16 billion. More details on the quarterly and full year results are expected Thursday, when IBM holds its regularly scheduled earnings web cast.
SUSIE GHARIB: That rally in IBM today lifted the entire tech sector, which has been struggling in 2008. But as Erika Miller reports, there's still optimism about the outlook for tech's performance this year.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Today's jump in tech stocks is a ray of hope for the worst performing sector so far this year. The question is will the rally have staying power? The NASDAQ is still down 6.5 percent since January 1, far more than the losses in the Dow and the S&P 500. Some analysts say part of the tech sell-off is simply profit taking after a stellar 2007. But Cowen's technology strategist Arnie Berman blames worries about the U.S. economy.
ARNIE BERMAN, CHIEF TECHNOLOGY STRATEGIST, COWEN & CO.: I think that as we've gotten to this year, a little bit of reality has started to set in, where investors have started to appreciate the fact that technology stocks are also always cyclical. There is nothing about a slowing economy that you can ever say is good for technology companies.
MILLER: Investors are also increasingly questioning Wall Street's bullish earnings forecasts for the group. According to Thomson Financial, analysts are predicting 18 percent profit growth for techs this year, on par with 2007's expected results. Part of that optimism is due to the fact that technology companies get much of their sales overseas, where growth remains strong. Tony Dwyer of FTN Midwest Securities thinks tech earnings will actually surprise to the upside.
ANTHONY DWYER, EQUITY STRATEGIST, FTN MIDWEST SECURITIES: The overall economic environment, which has been driven by interest rates, has created a fear among investors that technology companies are going to report disappointing earnings. We're finding that technology companies are doing just fine and that was reinforced by IBM's positive pre-announcement earlier today.
MILLER: He says now is a good time to load up on tech stocks, even those which rely on discretionary consumer spending.
DWYER: Common sense would tell you, you don't want to buy a tech company that is directly exposed to the consumer. The problem with that thinking, though, is that those stocks are already down so much it may not necessarily be true. This may be the time to start buying some of those consumer-related tech companies.
MILLER: Much of the outlook for tech depends on the outlook for the economy. Assuming there isn't recession, some analysts say tech could outperform the broader market again this year. Erika Miller, NIGHTLY BUSINESS REPORT, New York.
The North American International Auto Show Could Drive Up Ailing Auto Sales
SUSIE GHARIB: Detroit is in the spotlight this week, as the North American international auto show rolls into town. With this expected to be one of the toughest years in over a decade for car and truck sales, Diane Eastabrook looks at the new models that makers and dealers hope will ignite sales. DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: At the North American international auto show, it's the year of the pickup truck. Ford set off fireworks to launch its redesigned F-150, while Chrysler turned Detroit streets into the wild west to roll out its latest Dodge Ram. With gasoline prices rising and the nation's economy slowing, this might not seem like the ideal time to launch new pickups. But Chrysler President and Vice Chairman Jim Press disagrees.
JIM PRESS, PRESIDENT & VICE CHAIRMAN, CHRYSLER: The full size truck market is the biggest single market in the United States auto industry. So wouldn't you rather be going into a tough market with the best product, the newest product than with somebody that was trying to sell something that was from last year?
EASTABROOK: The Detroit auto show is the coming out party for the automotive world's newest products. But JD Power and Associates' economist Jeffrey Schuster complains that this show has been short on green vehicles like hybrids and long on gas guzzlers.
JEFFREY SCHUSTER, ECONOMIST, J.D. POWER & ASSOCIATES: When you boil it all down, we've had sports cars, pick-up trucks and technology that is not out, so not a lot really for the marketplace in 2008 yet.
EASTABROOK: But analysts say some products like crossovers look promising. Toyota hopes its new Venza will appeal to baby boomers and young families. Toyota marketing Vice President Randy Pflughaupt says the Venza will be more fuel efficient than a sport utility.
RANDY PFLUGHAUPT, MARKETING V.P., TOYOTA MOTORS: Both a six-cylinder and a four-cylinder engine will be available, so MPG will be a prominent feature for this vehicle going forward.
EASTABROOK: The head of one of the nation's largest car and truck retailers thinks Ford has a hit crossover. Autonation Chairman and CEO Mike Jackson likes the wagon-like Flex.
MIKE JACKSON, CHAIRMAN & CEO, AUTONATION: It's again another whole iteration on how to do crossover vehicles. It's very innovative, very different and it's going to be very interesting to see how that does in the marketplace. I think it'll do well.
EASTABROOK: Analysts think luxury vehicles will also sell well and this year a new entrant joins the segment. Hyundai's Genesis is taking on European and Japanese luxury sedans. Hyundai's product planning director Wayne Killen thinks the company's reputation for affordability will be a selling point.
WAYNE KILLEN, PRODUCT PLANNING DIR., HYUNDAI: I think in times like these, people are evaluating their choices. They are looking at what can they get for their dollar, the performance, the technology and that's really where Genesis steps in well.
EASTABROOK: General Motors is adding more heft to its luxury Cadillac division. The new CTSV will sport a V-8 550 horsepower engine. GM Chairman and CEO Richard Wagoner admits the sedan's launch doesn't come at the best time, but he's confident it will sell.
RICHARD WAGONER, CHAIRMAN & CEO, GM: Even today if you read the news, the politicians from both sides talking about the importance of stimulus package, the Fed talking about hey, we really do have to watch what is going on and make sure we keep rates at a level which reflects the difficulties in the economy. I think that is good news.
EASTABROOK: Most of the products rolled out at this show won't actually roll into dealer showrooms until late summer or early fall. Experts say how well these vehicles sell will depend largely on how well the U.S. economy is performing and how manufacturers price them. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Detroit.
GHARIB: We'll have more from Diane Eastabrook at the North American international auto show in Detroit. Tomorrow, she brings us the industry's vision of the future.
The U.S.A.F. Contract Air Wars
PAUL KANGAS: Europe's Airbus and Northrop Grumman today upped the political ante in their efforts to land a multi-billion dollar U.S. Air Force contract, saying a win would mean thousands of new jobs for U.S. workers. As Stephanie Dhue reports, the firms are battling Boeing for the contract to build huge aircraft refueling planes known as tankers.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Airbus and its partner, Northrop Grumman, dangled the prospect of creating new jobs in Alabama if it wins the $40 billion Air Force contract. Airbus CEO Thomas Enders says possibly moving manufacturing to Alabama flies with his company's expansion plans.
THOMAS ENDERS, PRESIDENT & CEO, AIRBUS: To bring commercial aircraft production, final assembly into the United States, to put that into a place where we hopefully will produce the KC-30 with our partner Northrop Grumman is an important decision. It's an important market. It's only the second final assembly, commercial final assembly that we've let outside Europe.
DHUE: The proposal raises the political stakes in an already bitter battle for the contract. Boeing today shot back that the quote 11th hour Airbus move, simply highlights the inherent inefficiencies of their production relative approach relative to ours, end quote.
In 2003, the Air Force selected Boeing for a tanker leasing contract, but the Pentagon canceled the award after a senior Air Force official was convicted of violating conflict of interest rules for steering contracts to Boeing. Many analysts say U.S-based Boeing still has a built in political advantage, making it the odds on favorite to win the contract. But defense consultant Brett Lambert says this time the political calculation isn't as clear.
BRETT LAMBERT, DEFENSE CONSULTANT, DENSMORE GROUP: The Air Force is being very careful with this procurement, given its history of past performance. They are judging this tanker deal solely on the attributes of the tanker itself.
DHUE: The weak dollar is also a driver behind moving jobs from Europe to the U.S., but Airbus says those jobs will only move with a contract.
ENDERS: Never say never, but at this time, at this juncture, we obviously base our decision to bring a commercial aircraft for finally assembly into the U.S. on the opportunity that the tanker contract or a tanker contract would present.
DHUE: The Air Force is expected to announce the winner in the next few weeks, after already delaying the decision for months. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
"Economic Choices 2008"-Mitt Romney's Economic Advisor Glenn Hubbard
SUSIE GHARIB: As we continue our "Economic Choices '08" coverage, we focus on tomorrow's Michigan Republican primary. The number one issue for voters is the economy and jobs. Michigan has the highest unemployment rate in the country and its economy is in recession. Mitt Romney, the Michigan- born former governor of Massachusetts, says he will fight quote for every single job in the state. Well, how would he do that? Earlier today I posed that question to Romney's senior economic advisor, Glenn Hubbard.
GLENN HUBBARD, SR. ECONOMIC ADVISOR, MITT ROMNEY CAMPAIGN: It's not that the president by himself creates jobs. It's what kinds of policies enable an economy to be a job-creating machine and what Governor Romney has emphasized in Michigan is the powerful role that research can play in new technologies and on trying to take the burden off the back of America's manufacturing sector -- tax reform, regulatory reform, all things that he has championed across the board in the country.
GHARIB: Glenn, many Middle American families feel very threatened by globalization and outsourcing. How would Governor Romney's free trade policies help a hard-hit state like Michigan?
HUBBARD: I think in two ways. One, free trade has really helped the United States in terms of both job creation and incomes. But it's done so unevenly. And Governor Romney realizes that. He will propose and has proposed ways to help people who have lost their jobs because of trade or any other aspect of competition and again, to promote the kind of research that would create new manufacturing technologies that our country can succeed with.
GHARIB: Governor Romney has said that priority number one to head off a recession is to quote, stop the housing crisis. How would he propose to do that?
HUBBARD: The way to quote stop the housing crisis is to really blunt its effects. And to do that, one would make sure that people who are in a home in which they're actually living but who could afford that home but for resets could simply be moving to a new mortgage. I think that requires strengthening the FHA. There are programs like Neighbor Works America that need additional Federal support and Governor Romney certainly supports that and finally, taking a hard look at tax policy and do we need a fiscal stimulus? And I think Governor Romney's open to that discussion.
GHARIB: There's a lot of momentum in Washington now for a fiscal stimulus plan and there are a lot of proposals that are being bandied about. Where does Romney stand on fiscal stimulus?
HUBBARD: Perhaps the most important thing Governor Romney has said and actually other Republican candidates have said, most of them -- is that we have to make the Bush tax cuts permanent. Failing to do that, the economic implications of anticipating very large tax increases would dwarf anything we're talking about in terms of stimulus. So that's job one and Governor Romney has been very clear.
Second would be to focus on the real problem. We are seeing a slowdown in business investment and I think Governor Romney believes and particularly important in Michigan that we could take tax action to help on that front. The third would be to take additional action that would strengthen the incomes of moderate-income Americans. I think all those are part of a stimulus package.
GHARIB: Mike Huckabee has said that Romney hasn't addressed the concerns of working American families, concerns like job security, high gasoline prices, low home prices. What is Romney proposing to do to improve the economic situation of middle income Americans?
HUBBARD: Governor Romney has focused on this. Indeed, in his campaign the specific parts of his tax package have focused on the needs of middle and lower-income Americans, not the most affluent. He's been very concerned to make the gains from international trade shared more broadly. And his emphasis on economic growth really benefits all Americans. I guess I would put the burden back on Governor Huckabee. As an economist, I've heard nothing coherent as a policy proposal from Governor Huckabee.
GHARIB: Glenn, everyone thought that Governor Romney would be the pro- business free market standard bearer in this presidential race, but he hasn't been really doing that well. What does this say, then, about where the Republican Party is headed?
HUBBARD: Well, first, he is actually the pro-business free market standard bearer. That's pretty clear and I think he has very broad support from the business community. He of course, isn't running for business person in chief; he's running for commander in chief. And I think his message is resonating with voters. The Republican Party, like the Democratic Party, has different interest groups within it. But I think Governor Romney will prevail with a very solid message focused on the economy and families and values.
GHARIB: Glenn, thank you so much for your time.
HUBBARD: My pleasure.
"Last Word"- The Value of High Prices
SUSIE GHARIB: And finally tonight, if you want people to think you're selling a superior product, charge them a lot of money. A new study finds people associate higher quality with higher prices. Researchers at the California Institute of Technology scanned the brains of 20 people as they sampled wine. They found the part of the brain that indicates pleasure increased for more expensive vintages. That was the case even when the test subjects were sipping a wine they liked less when it had a lower price tag. So Paul, experts say this helps explain why many people enjoy luxury products.
KANGAS: But the pleasure is somewhat diminished when you get the check.
GHARIB: That is absolutely true.
Paul Kangas' Stocks in the News
PAUL KANGAS: Wall Street began the week on a strong note thanks to that better than expected preliminary earnings estimate from IBM and word from General Motors that its auto loan problems were not nearly as bad as the real estate sector. At 11:00 a.m., the Dow was up 135 points; NASDAQ gained 32. After a mild mid-day pullback, stocks came on strong again on reports that Credit Suisse moved the U.S. stock market to an "overweight" rating. That helped stocks surge to the day's best levels at the final bell. The Dow Industrial Average closed up 171.85 points at 12,778.15. NASDAQ Composite jumped 38.36 ending at 2478.30. Standard & Poor's 500 Index up 15.23 to close at 1416.25. Over in the bond market, the 10-year note rose 7/32 to 103 30/32, putting the yield at 3.77 percent.
Most active big board issue, familiar name, Citigroup (C) up $0.50 today, traded 22.6 million shares. Tomorrow, results are due out and CEO will address employees and he could announce reportedly up to 24,000 layoffs. Also a dividend cut could be in the offing and meanwhile, Dow Jones news service reported China Development Bank has rejected a plan to take a $2 billion stake in Citigroup.
Bank of America (BAC) second in volume, up $0.72.
General Electric (GE) $0.29 rise.
Countrywide Financial (CFC) losing $0.24.
And EMC Corp (EMC) up $0.80 a share, fifth in volume.
Then Pfizer (PFE) down a nickel.
Schering-Plough (SGP) fell $2.21 or 8 percent. The company and Merck announced their cholesterol drug Vitorin showed no better results than Merck's Zocor drug and Merrill Lynch downgraded Schering from "buy" to "neutral." Merck stock fell only $0.77.
Ford Motor Co (F) a $0.12 gain.
Micron Tech (MU) up $0.16.
And then AT&T (T) with a $0.31 advance.
Boeing (BA) up $1.15. The company received orders for 16 787 Dreamliner aircraft from Gulf Air Bahrain. That's worth about $4 billion worth of business.
Nokia (NOK) up $1.52. Fourth quarter earnings are due out next week, January 24th. They're expected to rise 47 percent and that would be about .44 euro. Of course demand for the company's products from China and India largely responsible for that.
Harman Intl Industries (HAR) plunging almost $26 a share. The audio equipment manufacturer cut its fiscal 2008 guidance which was $4.14 a share all the way down to $3 to $3.10 a year and that's due to pricing pressures on personal navigation devices. Standard & Poor's lowered its price target on Harmon from $109 a share all the way down to $55 and it's already fallen below that.
FTD Group (FTD), it was all flowers for this stock today, up $1.67. Second quarter earnings came in at $0.30, up from $0.21 last year and $0.06 better than the Street was expecting.
Wellcare Health Group (WCG) up $9.44. The company received a number of contract renewals from Medicare and Medicaid and several states and it'll add some 11,000 members to its rolls.
Arvinmeritor (ARM) up $1.35. Keybanc Capital upgraded it from "hold" to a "buy."
And then the Steak N Shake (SNS) down $1.68. The company sees a first quarter loss of $0.04 to $0.05 a share on a 9 1/2 percent drop in same store sales of co-owned restaurants.
Downey Financial (DSL) losing $3.63. The company said it reclassified some $99 million of its loans, its non-performing.
NASDAQ's most active, Apple (AAPL) a $6.09 gain. RBC Capital said data suggest the company had massive Mac computer holiday sales. It has a target on the stock of $215 a share.
Google (GOOG) did well today, up $15.57. The company announced some new features for Apple's iPhone and late today, SEC approved Google's participation in the wireless spectrum auction.
Baidu.com (BIDU) up $11.15.
Research in Motion (RIMM) up $2.65.
And Intel (INTC) gained $1.09, pretty good looking group of stocks right there.
Microsoft (MSFT) up $0.48.
$0.42 rise in Cisco Systems (CSCO).
Qualcomm (QCOM) gained $1.37.
Oracle (ORCL) a $0.96 advance.
And then First Solar (FSLR) up $3.76 a share.
Sears Holdings (SHLD) plunging $4.79. The company warned its fourth quarter earnings could be down as much as 51 percent from a year ago because of poor holiday sales both at Sears and its K-mart divisions.
ASV Inc (ASVI) had a rather good day, up $5.50 even. Terex Corporation will acquire it for $18 a share.
And another good gain here in Bright Horizons Family Solutions (BFAM). It's in child care and early education business and Bain Capital Partners will acquire this stock for $48.25 a share in cash.
And those are the stocks in the news tonight.
