NBR Transcripts-April 30, 2008
Wednesday, April 30, 2008The Federal Reserve Makes The 7th Interest Rate Cut
SUSIE GHARIB: The Federal Reserve today cut interest rates for the seventh time since September. The central bank lowered its key Federal funds rate by a quarter percentage point to 2 percent. That’s the lowest level since December 2004. The vote was 8-to-2. The Fed bank presidents of Dallas and Philadelphia voted to hold interest rates steady. As Erika Miller reports, most economists now believe the Fed is done lowering rates.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Wall Street hopes today's rate cut will be lucky number seven, the last one needed to shore up the economy and investor confidence. Doug Roberts, the chief investment strategist at Channel Capital Research, says policy makers also made the move to avoid disappointing the stock market.
DOUG ROBERTS, CHIEF INVESTMENT STRATEGIST, CHANNEL CAPITAL RESEARCH: The market was expecting 25 basis points. If they didn’t get that, they stood the danger that the market would react negatively. In the current leverage situation, you get into a free fall. That could trigger a problem and then they end up having to cut anyways.
MILLER: Traders spent much of the afternoon dissecting the statement accompanying the Fed's decision. Larry Kantor, the head of research at Barclay's Capital, said the Fed made an important shift in its outlook for rates.
LARRY KANTOR, CHIEF ECONOMIST, BARCLAYS CAPITAL: The big message from the statement today is the Fed has really moved from an easing bias to neutral. They took out a key statement which said that downside risks to growth remain. They took that out.
MILLER: Goldman Sachs economist Jan Hatzius also noted that policy makers ratcheted up their concern about energy and commodity price gains.
JAN HATZIUS, CHIEF U.S. ECONOMIST, GOLDMAN SACHS: While the inflation data has been a bit more mixed recently, they are more concerned about inflation. They are somewhat concerned about expectations of higher inflation becoming imbedded.
MILLER: Economists say the Fed was careful to give itself flexibility to cut rates again down the road, saying it will quote, act as needed to promote economic growth and price stability, end quote. The Fed may have been comforted to some degree by fresh data on the economy. Today, the government's first estimate of first quarter gross domestic product showed the economy grew at an annual rate of 0.6 of a percent. That's the same reading as the prior quarter. Many Wall Street pros were fearing a contraction. Now, experts say the central bank is waiting to see the impact of fiscal and monetary stimulus and its new credit mending efforts.
HATSIUS: They recognize that they've provided a lot of stimulus and that the markets really shouldn't count on necessarily getting further rate cuts from here.
MILLER: One thing most economist agree on is that the Fed is not likely to raise interest rates this year. They say the central bank will want to see evidence the economy is back on solid footing before reversing course. Erika Miller, NIGHTLY BUSINESS REPORT, New York.
Treasury Secretary Henry Paulson Remains Optimistic About The Economy
SUSIE GHARIB: Treasury Secretary Henry Paulson told NIGHTLY BUSINESS REPORT today he has great confidence in the Federal Reserve. Paulson also said he is growing more confident that the credit markets are stabilizing. Washington bureau chief Darren Gersh spoke with Paulson this afternoon and began by asking him about today's GDP report and whether rising inventories coupled with falling sales is a sign that the economy is weakening.
HENRY PAULSON, TREASURY SECRETARY: I’m not making predictions on further weakening. I’m pretty clear that the economy has slowed down and there's no doubt about that and we're focused on the economy right now. We'd like to see it stronger. We don't like to see 0.6 of a percent growth two quarters in a row. Last quarter was a tough quarter. I think this quarter in many ways is going to be a tough quarter. But the report also reminds us that we have a diverse economy. We have a diverse economy. We're facing strong headwinds in terms of the price of oil, health care costs. Food costs are edging up. We've got housing issues, but there are some bright spots and you know, there was progress. There is some growth. And this quarter we've got the stimulus checks going out. We had the deposits going out this week, direct deposits, roughly eight million people will get direct deposits by the end of May. We'll have $50 billion out. By the end of June it will be upwards of $100 billion.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Will that keep the economy growing you think? Is that enough to keep the economy growing?
PAULSON: No, I would say this. It's going to make a difference. It's going to over the course of this year add 500,000 plus jobs. It is, I think, a very, very tangible, real sign that this president, this administration very early on at the first signs of slowing down worked with Congress to get something that will make a difference.
GERSH: You mentioned the headwinds. We're getting a lot of passionate emails from people who are complaining about the impact inflation is having on their life. And one of the things that some people say is driving inflation is a weak dollar. I’m wondering how much is that contributing to inflation and do you think it's time we had a stronger dollar?
PAULSON: Well, let me make a couple of points. First of all, as you saw from the Fed news today, the inflation news is – from the Fed report, the inflation news is more good than bad. Core inflation has been relatively contained and that's been some good news here. In terms of the dollar, I think you've heard me state the case which is a strong dollar is very much in our nation's interest. We have a strong dollar policy. Our economy is going to have ups and downs like anyone else. We're going through a tough patch right now with our economy. The long-term fundamentals though in this country are solid and I think they compare very favorably around the world and I think they're going to be reflected in the value of our currency.
GERSH: Well, let me follow up on that because I’ve heard some people say that with Europe looking like it's starting to slow in Italy and France are starting to slow that -- and what the Fed did today with signaling that maybe we're not going to get a lot more interest rate cuts, that maybe now we've reached a bottom in the dollar against the euro certainly and that the dollar is ready to buck up.
PAULSON: I am -- it's not my job to sit here and call price movements, but what I can tell you is that, you know, I wouldn't bet against our economy over any kind of reasonable period of time. And I like our fundamentals over the immediate to the long term and we're making progress as we work our way through this -- through these issues, making progress in the capital markets and you know, I’m cautiously optimistic that we're going to move through this period.
GERSH: Well, let me ask you about the cautiously optimistic. I mean is the worst time in our credit markets, does it look like it's over?
PAULSON: Darren, you’re right that it does -- things have calmed down. I think we're closer to the end of this period, the turmoil in the capital markets than we are to the beginning. It certainly feels better than it did a month or so ago. But I need to remind you that a reasonable number of our markets aren't yet functioning as normal. There's still a big tendency towards risk adversity. I think we're making progress. I think we're going to continue to make progress. I wouldn't be surprised if we see a few more bumps in the road and if it takes a little bit longer or more than a little bit longer to re-price risk here and to de-leverage. But I am feeling better.
GERSH: Secretary Paulson, thank you for your time.
PAULSON: Thank you.
"Meet the Buffetts"- Susie Buffett
SUSIE GHARIB: This weekend Warren Buffett presides over the Berkshire Hathaway annual shareholders meeting in Omaha. I’ll be there, covering the event known as Woodstock for capitalists. Ahead of that, we're taking a closer and more personal look at the "Oracle of Omaha." In a series of rare interviews with Warren Buffett's kids, I talked with Susie, Howard and Peter Buffett, asking them what they have learned from their father about money, business and charity.
Tonight, as we continue our series "Meet the Buffetts," we get some answers from Susie Buffett, the eldest of Warren's three children.
Susie Buffett works in the same building in Omaha where Berkshire Hathaway has been headquartered for the past 43 years and her house is just a few blocks from where her father lives. Of the three Buffett children, Susie is the closest physically and emotionally to her father. That close connection comes through in the movie she produces every year with her father for the Berkshire shareholders' meeting. Father and daughter have fun coming up with cartoons and hokey skits featuring Warren Buffett.
The hour-long satire is a big hit with Berkshire shareholders. Susie puts in long hours at her foundation. She named it Sherwood after the fictional forest where Robin Hood lived. She's dedicated to improving education in public schools across the country, especially in Nebraska where she has donated millions of dollars to students and teachers. What was it like growing up as the daughter of Warren Buffett?
SUSIE BUFFETT, CHAIRMAN, THE SHERWOOD FOUNDATION: Even though I was technically the daughter of Warren Buffett growing up, Warren Buffett wasn’t Warren Buffett. He wasn't rich. He wasn’t famous. We lived in a (INAUDIBLE) , went to school, public school. The neighborhood is what I would describe as sort of a regular, nice neighborhood. But, you know, not the rich neighborhood. So it was normal.
GHARIB: I understand you once asked your father for a loan to renovate your kitchen and he turned you down.
BUFFETT: A story that will not die.
GHARIB: Obviously he could afford it. Why not?
BUFFETT: He turned it down because he felt that, you know, I should go out and do it like everybody else. But honestly looking back on it, I can't argue with anything he did. I think he did the right thing.
GHARIB: Your father seems very proud of his frugal ways.
BUFFETT: Oh, yes.
GHARIB: Many people might wonder with all the money that he has, why not indulge a little bit?
BUFFETT: Because that's not what he's interested in doing. If he wanted to have 20 houses or six yachts or, you know, fly to Paris every other week, he would do it. He doesn't like to do that. He likes to sit in his house, play bridge on his computer, hang out with my son and my dad and I go to the movies almost every Sunday. You know, it's what he likes to do. He's doing what he likes to do.
GHARIB: Did you and your brothers ever challenge your father or was it a case of whatever he said goes?
BUFFETT: If we didn't agree with him, we certainly could say it and he would listen. But when he gave us his side of it, it usually made sense.
GHARIB: Are you raising your daughter and son the same way your father raised you?
BUFFETT: Mostly.
GHARIB: Do you have the same kind of frugal habits and philosophy?
BUFFETT: No. I’ve tried to raise them to understand that I think the best things about their grandfather, the famous part of their grandfather, are his values, his integrity, how he runs things, how he treats people, those kinds of things which I think matter enormously. I have to say when we're talking about this, my mother deserves a huge amount of the credit. My dad-- and I know if he were sitting here, my dad would say she did most of it. With his support -- and they were consistent about everything, but yeah, I think I’d raise them pretty much the same way.
GHARIB: Susie, how did you feel about your father giving most of his wealth to the Bill and Melinda Gates Foundation and a modest amount to your foundation by comparison?
BUFFETT: Well, first of all the modest amount isn't bad. I think what he did made a huge amount of sense. Now we talked about it for a long time before he did it. It wasn't like we found out 24 hours before. We all sort of had some input in the decision and what happened and all that. So I think that for any of us to have gotten, you know, that amount dumped on us overnight when he died which is what was going to happen, you know, is a bit overwhelming to say the least.
GHARIB: It's interesting because your brother Howard virtually told me the same thing.
BUFFETT: Oh, really?
GHARIB: When I talked to him. What is it about the Buffett family that you're all so laid back about money?
BUFFETT: Look who we grew up with. I don't know, it's how we grew up. Honestly I look at people with, you know, tons of money and the way some of them live. I think it almost becomes kind of a lot of work.
GHARIB: Your father's office is in the same building. You’re very, very close to him. Does he ever give you or do you ask him for input about how to run your foundation or other business questions?
BUFFETT: He is not one to interfere. He's not one -- I mean, when he lets go, he lets go. And I appreciate him listening, but he's not one to sit and advise us or get involved unless we ask for it.
GHARIB: Your father is called the "Oracle of Omaha." To many investors he's a cult figure.
BUFFETT: Oh, yes.
GHARIB: How does he feel about that?
BUFFETT: I think he finds it sort of amusing and sweet and he appreciates that people feel that way. Although I’m not sure he would even now say he thinks it's deserved or you know, that it really actually makes any sense that people think that much of him. I do.
GHARIB: Tomorrow, as we wrap our series, "Meet the Buffetts," we introduce you to Peter Buffett, a musician and the youngest of Warren's three children.
"Last Word"-The Icahn Blog
SUSIE GHARIB: And finally tonight, Carl Icahn has a new job. The activist shareholder will soon be an Internet blogger. "The Icahn Report" is expected to go live within the next two weeks. The blog will contain general commentary about corporate governance and focus on some specific companies. Icahn hasn't named any of his intended targets of yet. But, as you know Paul, the billionaire investor is not shy about sharing his strong opinions, so you can bet icahnreport.com will generate a lot of buzz.
KANGAS: And soon Carl can become a desktop icon on your computer screen.
GHARIB: Another type of icon.
Paul Kangas' Stocks in the News
PAUL KANGAS: Wall Street headed higher this morning on that stronger than expected 0.6 percent rise in first quarter GDP and a smaller than expected first quarter loss at General Motors. Also helping support stocks was over a $2 per barrel drop in oil futures on a bigger than expected jump in crude stockpiles. At noon the Dow was up 117 points. NASDAQ gained 21. That's about where the market was when the Fed's cut rate came at 2:15 this afternoon. The aggressive selling followed however and that resulted in a lower close. The Dow Industrial Average ended off 11.81 at 12,820.13. The NASDAQ Composite lost 13.30 ending at 2412.80, while the Standard & Poor’s 500 Index fell 5.35 to 1385.59. Over in the bond market, the Treasury said today it will bring back the 52-week T-bill. Meanwhile, the 10-year note climbed 24/32 to 98 3/32, putting the yield at 3.73 percent.
Big board volume leader on 37 million shares, Citigroup (C) down $1.05. The company priced 178 million shares of its common stock at $25.27 in a big offering and that’s exactly where it closed. Standard & Poor’s repeated a "hold" on the stock. Oppenheimer still made negative comments.
Ford Motor Co (F) up $0.14.
Followed by Pfizer (PFE) $0.13 drop.
Same story with National City (NCC).
And there you see General Motors (GM) with a nice $2 gain, as you heard, posted a much smaller than expected first quarter loss of $0.62 a share.
General Electric (GE) moving down $0.12.
$0.32 loss in Bank of America (BAC).
JPMorgan Chase (JPM) $0.57 gain.
Wachovia (WB) down $0.25.
And ExxonMobil (XOM) gained $1.28. Exxon’s earnings due out tomorrow.
Procter & Gamble (PG) up $1.15. Third quarter earnings rose to $0.82 from $0.74 a year ago, a penny above the Street estimate. Standard & Poor’s repeated a "strong buy" on PG stock.
Intl Paper (IP) losing $1.14. First quarter earnings, $0.41 and that was well below the $0.50 Wall Street consensus. Sales were up 8.6 percent however.
Then Colgate-Palmolive (CL) losing $5.08. First quarter earnings, $0.86. That’s down from $0.89 a year ago and $0.03 below the Street consensus but the company sees 2008 earnings up double digits nonetheless.
Cummins (CMI), the big engine maker, up $5.16. First quarter earnings, $0.97, $0.08 above the Street and well above last year’s $0.71 per share earnings.
Timken Co (TKR) rolling right along with a gain of $2.72. First quarter earnings, $0.82, up from $0.66 last year. Revenues up a respectable 12 percent.
Commscope (CTV) up $5.94. The coaxial cable maker had first quarter earnings excluding items, $0.59 a share, $0.16 better than the Street was expecting. Nice move in the stock as a result.
Plantronics (PLT) which makes headsets, up $3.63. Its fourth quarter earnings rose to $0.36 from $0.21 a year ago. Revenues up 7.2 percent.
Then offshore oil driller Gulfmark (GLF) up $6.02. First quarter earnings jumped to $1.40, $0.30 above the Street estimate and way up from $1.06 a year ago. Standard & Poor’s repeated a "buy" on Gulfmark stock.
Headwaters (HW) losing $2.83. The construction products firm had a second quarter loss of $0.22 versus earnings of $6.59 last year. Revenues tumbled 37 percent. That’s the housing industry problem.
Chicago Bridge & Iron (CBI) down $8.47. First quarter earnings, $0.43 up from last year’s $0.38 but that was $0.11 below the Wall Street consensus.
Apple (AAPL) topped the NASDAQ actives, moving down $1.10.
Then Google (GOOG) a nice gain of $15.82.
First Solar (FSLR) was up $7.07. First quarter earnings out today, $0.57, way up from $0.07 a year ago, $0.09 better than the Street was expecting.
Research in Motion (RIMM) fell $4.66.
And Microsoft (MSFT) a $0.12 loss there.
Baidu.com (BIDU) down $8.21 after some recent big gains.
And then Cisco Systems (CSCO) a $0.13 advance.
Intel (INTC) $0.36 closing loss and the news is after the close, Dow Jones said the company’s scrambling to meet early strong demand for a new low- end chip for low-cost lap top computers.
Oracle (ORCL) down $0.91.
And Garmin Ltd (GRMN) which makes navigational devices, tumbling $5.54. First quarter earnings a bit higher, $0.67 versus $0.64 a year ago. Revenues up 35 percent, but those earnings were $0.07 below the Wall Street consensus.
Then Double-Take Software (DBTK) up $2.66. First quarter earnings out today, $0.13 a share, $0.02 above the Street estimate and the company did give an upbeat forecast, helped the stock.
And those are the stocks in the news tonight.
