NBR Complete Transcripts-March 3, 2008
Monday, March 03, 2008Gold & Oil Go Black While The Greenback Sees Red
SUSIE GHARIB: Oil and gold prices are approaching new milestones. In intra-day trading today, crude surged to almost $104 a barrel and gold traded close to $1,000 an ounce. Those rallies were triggered by another drop in the U.S. dollar, which has been under heavy pressure for months. The dollar is now at a new low against the euro. It takes $1.52 to buy one of them. Suzanne Pratt looks what's next for the sinking greenback.
SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: A weak U.S. dollar may be good news for retailers on New York's tony Fifth Avenue. After all, European and Asian tourists interested in taking advantage of their increased buying power have recently been flocking to the Big Apple. Today, the greenback fell to a new low against the euro and its lowest level in three years against the Japanese yen. Foreign exchange expert Tom Benfer blames declining U.S. interest rates.
THOMAS BENFER, DIRECTOR, BMO CAPITAL MARKETS: Our interest rate structure is moving lower, while the remainder of the world's interest rate structure is much higher. So that generally us the primary reason that drives currencies, interest rate differentials.
PRATT: As long as the outlook for the U.S. economy remains cloudy, U.S. interest rates are likely to fall even further. For that reason, some experts predict the dollar will remain under pressure.
BENFER: I wouldn't rule out levels of, let's say, 155 for the euro or maybe 101, 100 for the yen. The drumbeat of bad economic reports is going to continue from now all the way to the summer it looks like to me.
PRATT: U.S. multinationals that do big business overseas are likely to be big beneficiaries of the weak dollar, as it allows their products to carry cheaper price tags. But experts say there are no other major positive byproducts of a declining U.S. currency. The weak greenback has been driving up the price of oil, which is sold in dollars. Not only is that bad for U.S. consumer spending, but it's inflationary. The weak dollar also drives up the prices of imported goods, further fueling inflationary pressures. Bear Stearns economist David Malpass says the dollar's collapse is also scaring away foreign capital.
DAVID MALPASS, CHIEF INTERNATIONAL ECONOMIST, BEAR STEARNS: With the dollar weak, the money flows away from the U.S., so it hurts a lot of the U.S. corporate sector. It is benefiting, for example, European equities. They've outperformed U.S. equities substantially over these last five, six, seven years.
PRATT: Even the most bearish forecasters believe the dollar will hit bottom sometime this summer. That's assuming the U.S. economy starts to recover and the Federal Reserve stops cutting interest rates. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.
"Economic Choices 2008"-The Plight of the Single Working Woman
SUSIE GHARIB: Voters head to the polls tomorrow in Texas, Ohio, Vermont and Rhode Island for presidential primaries. Ohio's primary could decide the Democratic presidential nomination. If it does, political analysts say it will be because working women threw their support behind Barack Obama or Hillary Clinton. Tonight as we continue our "Economic Choices '08" coverage, Darren Gersh introduces us to two working women in Youngstown, Ohio and the issues driving their decision.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: We caught up with Jannetta White on a very rare day off, if you can call this a day off. In between two jobs and studying for a master's degree in English, White fits in everything a single mother has to do. Ask her about the election and she'll tell you she's looking for someone who will make life for the working poor a little more comfortable.
JANNETTA WHITE, GRADUATE STUDENT: And comfortable simply means that I can go to the grocery store and not have to worry about being $10 over because I'll be needing that for gas to get to class or to work.
GERSH: The economy and the environment are important issues for White, but as an African-American woman, her family is pushing her towards Obama, while her friends at school pull her to Clinton. White says her decision is not so simple.
WHITE: It's more personal than political with this one. And I think a lot of personal beliefs that people have about who should run and why. If they're feminist or not, if they're racist or not, because that still exists, I think that's really what's going to be what makes the difference on how people choose. Me, I don't care. I just want whoever is going to make my life easier to be the person in the chair.
GERSH: At the Center for Working Class Studies, Sherry Lee Linkon argues working women will be crucial in the Ohio primary, but she says the candidates should understand gender is often less important than where a woman works or where she lives.
SHERRY LEE LINKON, CO-DIRECTOR, CENTER FOR WORKING CLASS STUDIES: So while people might vote their identities, it's very hard to say which part of their identity is going to be the one that's going to come to the fore when they step into the voting booth.
GERSH: Linda Balogh is an auto worker, a college student and a mother. While she disagrees with Hillary Clinton on some issues, she sees real substance in the senator from New York, calling her the kind of woman who has the contacts and experience to help struggling communities like Youngstown turn around.
LINDA BALOGH, AUTO WORKER: I really support Hillary. I love for what she stands for. I think that she's a strong woman and in today's society, there are people that are afraid of a strong woman.
GERSH: For 30 years, presidential candidates from both parties have used Youngstown as little more than a backdrop. They've stood in front of abandoned factories like this one laying out their vision for a better economic future. Given all the history, it's understandable that working people here are skeptical, if not resentful, of all the political promises. Democrats lost here in 2004, largely because many working women sat out the last election, not seeing much real economic difference between Democrats and Republicans. But in 2008, Jannetta White believes Obama has a real plan to help the working poor.
WHITE: At this point in my life, I'm ready for a change, but I want it to be a change for the better.
GERSH: Linda Balogh also wants change. She thinks Clinton has learned from her mistaken support of trade deals like NAFTA and is now ready to lead the nation in a new direction.
BALOGH: There's poverty, there's lost jobs, there's no health care and we're supposed to live in one of the wealthiest, you know, nation's in the world and I think that we're losing focus on that.
GERSH: Tomorrow, we'll visit a machine shop near Cleveland to hear from the other crucial group in this election, working men. Darren Gersh, NIGHTLY BUSINESS REPORT, Youngstown, Ohio.
One on One with Roger Altman, Senior Economic Policy Advisor for Senator Clinton
SUSIE GHARIB: More now on the Texas and Ohio primaries tomorrow. The key issues for many voters, especially in Ohio, are the economy and jobs. Earlier today I talked with Roger Altman, the senior economic policy advisor for Senator Clinton and asked him how Clinton, if elected president, could help the hard-hit Ohio economy.
ROGER ALTMAN, SR. ECONOMIC ADVISOR, HILLARY CLINTON CAMPAIGN: Universal health care is number one. That would be an enormous change in this country, make it so much easier for Americans in Ohio and elsewhere when it comes to health care availability and health-care costs, making college more affordable and available. Universal pre-K, enforcing our trade agreements more aggressively which we have done a poor job on. I could go on and on, but there is a whole series of steps right there.
GHARIB: Senator Clinton's campaign ads in Ohio say that NAFTA was a mistake. Now Roger, you lobbied very hard for NAFTA when you worked in the White House for President Bill Clinton. Now are you advising Hillary Clinton. What about NAFTA was a mistake?
ALTMAN: It's been unbalanced. And so as she said, it has worked in parts of the country and it has not worked in other parts of the country. And she cited upstate New York and Ohio as places where it hasn't worked. So it is not a matter of saying it is a total failure or it a total success. It hasn't worked across-the-board. It hasn't worked as -- as major way as it was expected to and so it has to be fixed.
GHARIB: Senator Clinton has been talking tough on trade. Are you worried about the message that this is sending to the United States' trading partners all around the world?
ALTMAN: No. I'm not worried. Senator Clinton has a consistent voting record on trade. And I'm sure that our friends around the world will appreciate that in this country, there is tremendous anxiety about trade. It's well placed. It's understandable and we have to respond to it.
GHARIB: With oil prices at $100 a barrel, Senator Clinton is proposing a windfall profits tax on large oil companies. How is that playing out in the primaries, especially in rich oil state like Texas?
ALTMAN: We have to get going on a serious energy program. And we really haven't had one in a very long time. And with the price of oil where it is and with the threat of climate change as central as it is, this has to be one of the very, very highest priorities and one element of that has to be a big increase in energy research and an acceleration of the whole approach to alternative energy, getting away from fossil fuels.
GHARIB: On the housing situation Senator Clinton has called for a freeze on foreclosures for interest rate limitation. It seems that that might discourage lending at a time when that is exactly what the economy needs.
ALTMAN: She called for a voluntary freeze on -- a moratorium on foreclosures, 90 days and a voluntary five-year freeze on resets on adjustable rate sub-prime mortgages, voluntary. She's fundamentally saying it is in the interests of the lenders to go slow on foreclosures because the costs to those lenders of foreclosing are so high, that they are better off themselves by providing the distressed mortgagees or at least a lot of them, more time to try to work this out.
GHARIB: Fed Chairman Bernanke said last week that the housing slump has not hit bottom. Does Senator Clinton think that we are getting to a point where government intervention might be needed to stop this downward spiral?
ALTMAN: There have been a whole series of proposals already for Federal action. And some of them have already been enacted into law. So it is not a matter of no government help versus some government help. The question is whether we should do even more than has been talked about. She hasn't taken a position on that. But I'm sure she would be very seriously addressing that if she were sitting in the oval office right now.
GHARIB: Roger, Senator Clinton says that she is a candidate for working class Americans. She is also the senator of New York which means that she represents Wall Street and business interests. Is there a contradiction here? Can she be both?
ALTMAN: Well, yes, because most Americans are working class folks. And you know, a example a very, very small percentage, very smaller percentage of Americans are high earners, working in the financial centers around the country. That is a very tiny percentage. So -- so -- any president or at least Democratic president, has to be fundamentally about strengthening the middle class. And that is what she has committed herself to. So I don't think it is a question of choice, I think it is a question of necessity.
GHARIB: Roger, thank you so much for your time.
ALTMAN: Well, thanks for having me.
"Commentary"-How Best To Stop The Mortgage Mess
SUSIE GHARIB: Tonight's commentator says more needs to do be done to stop the current mortgage meltdown. He's Mark Zandi, chief economist at moodyseconomy.com.
MARK ZANDI, CHIEF ECONOMIST, MOODY'S ECONOMY.COM: The economy is in recession. The key reason: the evaporating housing market and surging mortgage foreclosures. House prices have plunged a stunning 10 percent from their peak and millions of homeowners now owe more on their mortgage than their house is worth. With prices sure to fall further, homeowners are literally walking away from their mortgages and investors who own them are suffering massive losses.
The financial system is in disarray, impairing credit to all borrowers, bad and good. The Treasury Department has been working aggressively to shore up the sliding housing and mortgage markets. Their efforts to date, while well-intentioned are set to fail. They have brokered various deals between mortgage investors, servicers and borrowers to try to keep people in their homes. But given the differing incentives of all involved, and that the deals are voluntary, few homeowners are getting much relief. The administration is loath to do much more, however. It is against legislation currently in Congress to allow homeowners to go into a bankruptcy workout to reduce their mortgage balance or interest rate. It is against any plan and there are many in Washington, that uses taxpayer money to purchase mortgage loans or securities.
This, Secretary Paulson says, would be a bailout. Yes, it would be a bailout, but not of investors and homeowners. They are suffering hundreds of billions in losses and millions are losing homes. The bailout would be of taxpayers themselves, as the recession won't be short and mild. It will be long and severe. This is Mark Zandi.
Paul Kangas' Stocks in the News
PAUL KANGAS: Wall Street extended last Friday's plunge in the early going today. Pressuring stocks, the drop in the dollar and the downturn in many foreign markets, especially Japan where the Nikkei index posted a 4.5 percent decline. Just before noon, the Dow posted a 63-point loss and the NASDAQ was off 11 points. Stocks improved in a stair-step pattern after a steep 1.7 percent decline in January construction spending was overshadowed by a smaller than expected drop in the ISM manufacturing index. The Dow Jones Industrial Average cut its closing loss to just 7.49 at 12,258.90. The NASDAQ Composite was down 12.88 at 2258.60. Standard & Poor's 500 Index managed to gain a fraction, .71 at 1331.34. In the bond market, the 10-year note lost 10/32 to 99 18/32, putting the yield at 3.55 percent.
Big board volume leader as it so often is, Citigroup (C) 29.1 million shares traded, down $0.62.
Then SprintNextel (S) down $0.13.
Bank of America (BAC) off $0.56. Bank of America securities cut first quarter earnings estimates on four of the big investment banks. Let's see how they fared under those conditions.
Bear Stearns (BSC), Goldman Sachs Group (GS), Lehman Brothers (LEH), substantial losses.
Morgan Stanley (MS) held up pretty well with just a $0.54 loss.
Thornburg Mortgage (TMA) major loser, down $4.51, that's 51 1/2 percent loss of value today. The company says it has another $270 million in margin calls, creating a liquidity problem and raising concerns the jumbo mortgage lender might have to file for bankruptcy.
Washington Mutual (WM) in that weak financial sector, down $1.15.
Ford Motor Co (F) $0.35 drop on that sales decline last month.
JPMorgan Chase (JPM) $0.83 loss there.
General Electric (GE) bucked the trend with a $0.26 gain.
Pfizer (PFE) a $0.03 loss.
And then Motorola (MOT) down $0.16.
Boeing (BA) stock down $2.12, disappointment over the Pentagon's decision to award Northrop Grumman and EADS, the big French firm, that huge $40 billion aerial tanker contract for the U.S. States Air Force. Northrop stock was up $3.96 incidentally.
Moving along, big movers, Diebold (DBD) $14.72 gain. As you heard, United Technologies made a $40 a share take over bid which Diebold says is inadequate and rejected it. United Tech stock was down $1.11 at $69.40.
HSBC Holdings (HBC), that's the big bank, 2007 net income up 21 percent. The company boosting its annual dividend 11 percent to $0.90 a share.
AMBAC Financial (ABK) down $1.20. The company's cutting its quarterly dividend from $0.07 all the way down to a penny a share and suspending all new structured finance operations for the next six months.
Very troubled financial sector, here we see Deerfield Capital (DFR) losing half of its value, down $3.25. The company reported a fourth quarter loss of $2.14 versus earnings last year. Revenues fell just over 1 percent.
And yet another weak financial, Irwin Financial (IFC) down $1.02. The board voted to suspend its quarterly dividend of $0.12.
Let's have a gainer here. There we have one. Supervalu (SVU) up $1.84. Standard & Poor's upgraded it from "hold" to a "buy."
In other trading, we see Genesco (GOO), the footwear maker, down $5.18. The company said it will accept $175 million in Finish Line stock, after finish Line Corp. failed to complete a buyout at $54.50 a share and Finish Line stock was up $1.14 at $3.97.
Orbital Sciences (ORB) up $1.20. It's going to be added to the Standard & Poor's small cap 600 index after the close Thursday, replacing Respironics, which is being acquired.
Apple (AAPL) topped the active list on NASDAQ, down $3.29.
Google (GOOG) was hit for over $14 loss.
Research in Motion (RIMM) off $3.65.
Microsoft (MSFT) down $0.21.
And Baidu.com (BIDU down $10.81.
Intel (INTC) bucked the trend, up $0.04.
Cisco Systems (CSCO) gained a penny.
Qualcomm (QCOM) down $1.27. It lost a patent lawsuit to its arch rival Nokia over in the United Kingdom.
Amazon.com (AMZN) down $2.04.
And then Oracle (ORCL) bucking the trend with a $0.15 gain.
Sten (STEN), which makes medical products, huge percentage gain, up $1.73. The company very upbeat on its forecast of second quarter revenues, says they'll double to $4.2 million.
And then on the downside we have a big loser in Stereotaxis (STXS) losing $1.77. Fourth quarter loss worse than expected, $0.34 in the red. The Street estimate was for only a $0.31 loss. And Johnson & Johnson has delayed marketing the company's catheter.
Those are the stocks in the news tonight.
