NBR Transcripts-May 15, 2008
Thursday, May 15, 2008Lack of Money Is Weighing Down The Housing Rescue Plan
SUSIE GHARIB: Key members of the U.S. Senate reached a tentative deal on a housing rescue plan late today. It could keep 500,000 at-risk borrowers in their homes over the next five years. As part of the agreement, Fannie Mae and Freddie Mac would backstop a fund aimed at insuring troubled mortgages. As Stephanie Dhue reports, how to pay for that fund is holding up a final deal.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: More than two million Americans will face foreclosure this year. Many lawmakers want to help more homeowners avoid that fate. Senate Banking Committee Chairman Chris Dodd says the housing bill is not a bailout.
SEN. CHRIS DODD, CHAIRMAN, BANKING COMMITTEE: It excludes lenders and borrowers who would game the system, the speculators, those who were not living in their own homes. It is only for owner occupants, not speculators and it avoids using tax dollars to backstop the mortgage insurance that the initiative provides.
DHUE: Dodd's bill would create a $300 billion fund allowing the Federal Housing Administration to buy troubled mortgages. Lenders would have to agree to take a loss on the existing loans to participate in the program. There's concern the proposal leaves out a large portion of troubled loans. Eric Halperin of the Center for Responsible Lending says homeowners who have a second lien on their property, as in the case of once popular 80/20 loans, won't be helped.
ERIC HALPERIN, CENTER FOR RESPONSIBLE LENDING: A lot of homeowners have a second mortgage on their property in addition to their first and under the Frank/Dodd plan, that second mortgage holder needs to voluntarily agree to release their mortgage on the property to allow this to go forward and that's been a real stumbling block to date for modification.
DHUE: The bill's proponents say it will act to stabilize home prices. But analyst Andy Laperriere says even if lawmakers can reach an agreement quickly, home prices may have already reached a bottom.
ANDY LAPERRIERE, MANAGING DIRECTOR, ISI GROUP: If we're basically already through it by the end of the year, only if things are going to get really rough and home prices are going to fall a lot in 2009, only under that scenario would the bill help.
DHUE: Paying for the plan has been a key issue throughout today's debate. While Dodd's proposal calls for taxpayer monies, some senators want mortgage-backed Fannie Mae and Freddie Mac to foot the bill. Meanwhile President Bush has threatened to veto any bill that shifts the burden to taxpayers. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
"Green Options: Fuel"-Bacteria
SUSIE GHARIB: Those soaring gas prices are driving research into alternative energy sources. One alternative, corn-based ethanol, has been controversial because of its heavy use of food supplies. Now research is turning to ethanol from other resources. As we continue our series "Green Options: Fuel," Dana Greenspon looks at efforts to turn paper scraps and other waste into fuel.
DANA GREENSPON, NIGHTLY BUSINESS REPORT CORRESPONDENT: This woman may look like any other scientist growing bacteria in a lab. But she's working with a super bacterium that can turn materials like scrap paper and wood chips into ethanol. Steve Hutcheson runs biotech start-up Zymetis and hopes someday this ethanol will fuel your car.
STEVE HUTCHESON, CEO, ZYMETIS: We take this bacterium and we use it to prepare enzymes. Those enzymes are over here. We can apply that enzyme to material like this. The next step is to take the enzymes together with some of this material, together with some yeast and now we can come through and make a form of a beer that contains ethanol and that ethanol can then be distilled into fuel.
GREENSPON: Success in the lab doesn't always mean success in the marketplace. Right now, the biggest challenge for Zymetis is getting their product from the lab to your fuel tank. First, there is the issue of obtaining enough raw material to process into ethanol on a large scale and finding sources to supply it.
HUTCHESON: A five million gallon a year plant is going to consume 100- 125 tons of material a day. You go 10 times larger, you can run the math.
GREENSPON: And then there is the matter of transporting the ethanol from the factory to the gas pump. Janet Larsen of the Earth Policy Institute says current shipping methods negate many of ethanol's environmental gains.
JANET LARSEN, DIR. OF RESEARCH, EARTH POLICY INSTITUTE: We're moving a lot of ethanol right now in barges and trains and trucks, but not through the energy efficient pipeline infrastructure, so it takes a lot of energy to actually move that to get to the blenders and ultimately to the fuel stations.
GREENSPON: Larsen also says converting cellulosic materials into ethanol is still far too expensive.
LARSEN: Everybody had sort of hoped ethanol in general would be just this great environmental answer and so far it has been falling short on a number of fronts.
GREENSPON: But Bob Dinneen of the Renewable Fuels Association says the U.S. energy challenge is so great that we need all options at our disposal, including cellulosic ethanol.
BOB DINNEEN, PRESIDENT, RENEWABLE FUELS ASSOCIATION: Ethanol isn't the silver bullet, but it is perhaps part of the silver buckshot. We need to have wind, we need to have geothermal, we need to have solar. We need to have as many domestic energy resources as possible.
GREENSPON: Despite the challenges of commercialization, Hutcheson thinks Zymetis has an edge. His process is efficient. For every unit of energy used to make ethanol, eight units are produced. That notably outstrips the production efficiency of corn-based ethanol and the company has an economic advantage.
HUTCHESON: The bacterium is very inexpensive to grow and we can grow it to very high densities, so that we can produce a lot of enzymes with minimal amount of work and a minimal amount of materials.
GREENSPON: Plans are in the works at Zymetis to bring a small scale pilot facility on line by the end of the year. But Hutcheson doesn't expect his company to be a minor player for long.
HUTCHESON: The scale of these plants will be huge when they go into full production. A tiny plant will be five million gallons a year.
GREENSPON: If he's right, the world can expect big things from this small life form. Dana Greenspon, NIGHTLY BUSINESS REPORT, College Park, Maryland.
GHARIB: Tomorrow, we continue our series "Green Options: Fuel." While this looks like a chunk of ice, it's actually frozen gas and it could be a huge new energy resource for Japan.
"Tech Talk"-CBS Spins A New Cable/ Tech Web
SUSIE GHARIB: Shares of CNET Networks jumped almost 44 percent today after CBS agreed to buy it for $1.8 billion. The price tag, $11.50 a share, is a 45 percent premium over CNET's closing price on Wednesday. CNET was an early pioneer on the Internet and is now known for its technology reviews, news and advice. CBS says the deal makes it one of the 10 most popular Internet companies in the U.S. with about 200 million users worldwide. And Jeff, CBS also says that the combined company could generate annual revenues of $1 billion within the next two years.
Why CBS wants CNET. Why Icahn wants Yahoo! And why Steven Spielberg wants to play with blox and wants you to play with them too. Our tech guru Scott Gurvey has all that and more in tonight's tech talk.
SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: What do you get when old media combines with new? You might get a success story. At least that's what CBS hopes. As we reported earlier, the broadcast pioneer is buying Internet pioneer CNET for $1.8 billion. CNET has been around since 1993 when the worldwide web was young. It is the go-to destination for people looking for technical advice and product reviews. CNET owns two of the most valuable Internet addresses, news.com and shopper.com and most important to CBS, it delivers the young audience advertisers love. Analyst Leland Westerfield of BMO Capital Markets says CBS can make good use of CNET's eyeballs.
LELAND WESTERFIELD, MEDIA ANALYST, BMO CAPITAL MARKETS: CBS is a company with an underleveraged balance sheet, that is to say a lot of cash available to put to work. And with businesses that throw off a terrific amount of free cash flow and so I would suspect that this may not be the last time we hear about CBS making acquisitions in the Internet marketplace.
GURVEY: Meanwhile, investor Carl Icahn has his eyeballs on Yahoo! or does he? Icahn has been buying Yahoo! stock and he sent a letter today to Yahoo! threatening a proxy fight if the Internet company doesn't restart buyout talks with Microsoft. Since Yahoo! rejected Microsoft's bid, Microsoft has been saying it will grow its search advertising business itself. But industry insiders say Icahn would not be getting involved if he hadn't had some encouragement from Microsoft CEO Steve Ballmer. Analyst Jim Friedland of Cowan says Yahoo! shares are a trading buy.
JAMES FRIEDLAND, INTERNET ANALYST, COWEN & CO.: There is certainly some risk that the deal may not get done, but we do think there's near term upside here because we do think a deal's going to happen.
GURVEY: Movie mogul and director Steven Spielberg has teamed up with Electronic Arts to produce a video game for Nintendo's WII, the popular gaming system with the unique motion sensitive controller. It is called boom blox. I'll have to get an eight year old to really explain this game to me. But it seems you have to destroy things with the help of crazy characters like Marion McCluck, the bomb blox-laying chicken and Boots Beaverton, who likes to make the bomb blox explode. Spielberg says he created the game because he wanted something he could enjoy with his kids. Boom blox sells for $50.
You may recall in my last tech talk, I noted that Verizon had canceled two appointments to install its new fiber optic fios (ph) TV phone and Internet service at my New Jersey home. That triggered a call from Verizon executives and I am happy to report the installation has been made and everything is working well. It pays to have a big mouth. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.
"Commentary"-A Difficult Economy Requires Difficult Decisions
SUSIE GHARIB: In tonight's commentary, when times get tough, it's time to ask some tough questions. Here's Alfred Edmond Junior, senior vice president and editor in chief of "Black Enterprise."
ALFRED EDMOND JR., SR. VP, EDITOR-IN-CHIEF, BLACK ENTERPRISE: Perhaps Rev. Martin Luther King Jr. said it best. The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy. This rings as true in business as it does in any other arena of life, particularly today as we face rising food and fuel prices, the sub-prime mortgage crisis, shrinking profits and stagnant wages.
We can debate whether we are in a recession, but there is no doubt that we are all being challenged by these economic conditions. Those of us operating businesses are being tested professionally as well as personally. This is when we must face the tough questions. What is my true value in the market place? Is my company's core business obsolete? Am I? Have I allowed my skills to stagnate? Do I still have a sense of purpose and passion for my work?
Am I prepared to leave my comfort zones to stake out a new market, a new territory or a new industry in order to remain relevant and in order to survive and grow? The answers don't come easy. However, it's times like these that give us a gut check that can force us to redefine who we are and what we stand for, as professionals, as companies and as a nation. If the history of our country is any indication, we are bound to come out stronger and wiser for the experience. I'm Alfred Edmond Jr.
Tokyo's Temp Triumphs &Troubles
JEFF YASTINE: From U.S. corporate management practices to Japan where lifetime employment was once taken for granted. The prolonged recession of the 1990's sparked labor-law deregulation that let companies rely heavily on part-time workers. The temp revolution has helped Japanese companies weather global competition. But as Lucy Craft reports from Tokyo, many part-timers complain they can't make ends meet and the change have repercussions for the economy as a whole.
LUCY CRAFT, NIGHTLY BUSINESS REPORT CORRESPONDENT: In Japan, it's the heyday of the temp worker. Japan was once renowned for its paternalistic and static system of jobs for life. But in less than a decade, this nation of corporate warriors has wharfed into the land of part-timers. Today one out of every three workers is a temp, the highest ratio of non-regular workers in the industrialized world. Temp placement agencies like number two Pasona Group have seen sales explode.
UNIDENTIFIED FEMALE: 17.50 again per hour. It gives you what kind of job you are going to be doing, what kind of place it is, where it's at, how many people they are looking for.
CRAFT: A generation ago, Pasona stock and trade was finding clerical jobs for housewives. Pasona spokesman Keisuke Nemoto says the firm now brokers positions for practically any one of almost any job description.
KEISUKE NEMOTO (THROUGH TRANSLATOR): Aside from national security, police and medicine, all professions and principal are now open to temp workers. That is why the industry has been expanding 30 to 40 percent annually.
CRAFT: Morgan Stanley economist Robert Feldman says the temp torrent has streamlined costs at corporations and suits the temperament of a more independent generation of Japanese.
ROBERT FELDMAN, SR. ECONOMIST, MORGAN STANLEY: People who would otherwise given institutions otherwise not be able to get jobs are getting jobs. And that's a good thing. In addition, a lot of people don't want to work full-time. They don't want to work under the standard work rules. And for them, the flexible job market is a wonderful thing.
CRAFT: But the boom in part-timers has proved a mixed blessing. Part- timers earn on average only about two-thirds what regular employees make. (INAUDIBLE) part-timers it's dragging down growth in the world's second largest economy. With emptier pockets, Japan's temp heavy workforce has kept domestic demand week and that has prevented Japan from stepping up to the plate to serve as global demand engine in place of a wobbling American economy. Experts like International Christian Universities Naohira Yashiro say the part-time shift has gone too far.
NAOHIRA YASHIRO, ECONOMICS PROFESSOR: Obviously it's not a good thing. But it is inevitable.
CRAFT: He says Japan has ended up with a rigidly segregated labor force, part-timers stuck in the low paid ghetto while regular workers are virtually impossible to layoff, regardless of individual performance or the business cycle.
YASHIRO: In order to reduce the number of temporary workers, some change in employment practice of regular workers also needed. But people don't like that idea.
CRAFT: Analysts reckon full-timers will keep fending off attempts to reduce their unusual job protection and that the temp army will keep adding recruits, hampering personal consumption and growth in the larger economy. Lucy Craft, NIGHTLY BUSINESS REPORT, Tokyo.
Paul Kangas' Stocks in the News
JEFF YASTINE: Optimism over the congressional housing package helped keep the bulls in gear on Wall Street today. The Dow churned higher as crude oil prices in New York moved lower. June crude tumbled over $3 on technical selling, but ended the down just $0.10 at $124.21 a barrel. Both the Dow and NASDAQ continue to add to their gains as the Senate Banking Committee moved closer to a deal on the home rescue plan. So the Dow gained 94.28 to end at 12,992.66. The NASDAQ posted its highest closing price since January 3rd, rising 37.03 to 2533.73. The S&P 500 closing up 14.91 to 1423.57. In the bond market, the 10-year note gaining 26/32 to 100 15/32 and the yield down to 3.82 percent.
And starting off our list, EMC Corp (EMC) gaining $1.12 on large volume. No specific news, but some investors want the company to sell more of its majority holdings in VM Ware, symbol VMW, which makes virtual server management software. More than 9,000 people are expected for the big EMC world event in Las Vegas next week. Citigroup (C) gained $0.48.
And General Electric (GE) fell $0.14. Analysts generally applauding GE's move to sell its appliance division.
Bank of America (BAC) falling $0.09.
Ford Motor Co (F) up just a fraction.
Pfizer (PFE) saw small gains as well.
Hewlett-Packard (HPQ) advancing $1.09.
Wachovia (WB) down $0.04.
JPMorgan Chase (JPM) gaining $1.11. The firm will sell or spin off Bear Stearns asset management division as it takes control next month according to Reuters.
ExxonMobil (XOM) gained $1.39. Exxon CEO Rex Tillerson says he sees gasoline demand already slowing because of those record-high gasoline prices.
Agilent Technologies (A) shares climbed nearly $3. Second quarter earnings came to $0.46 a share. That was $0.03 above forecasts. Much of the growth came from expansion in the company's life sciences unit to Asia.
Turning to oil-related issues, Transocean (RIG) surged over $8. UBS says rental rates for drilling rigs are rising because of the need for deep water exploration and that news helped a lot of the other stocks in the peer group.
With Atwoods Oceanics (ATW), Diamond Offshore (DO), Ensco intl (ESV), Noble (NC), Rowan Co (ROC), all doing very nicely today.
Moving to the retailers, JCPenney Co (JCP) rising over $2. First quarter profits were $0.04 above estimates. Those estimates had been reduced by analysts. Same store sales fell 7 1/2 percent, but executives think second quarter results will show improvement.
And speaking of improvement, Tiffany & Co (TIF) sparkled with its gain of $3.03. The luxury retailer boosted its dividend. The CEO says first quarter results should be better than earlier forecasts.
On the downside, Verso Paper (VRS) sliced for a loss of $2. The initial public offering had 14 million shares priced at $12 each. Verso is owned by the private equity firm Apollo Management.
Then moving onto the NASDAQ, a pretty good day for most of the stocks. Apple (AAPL) rising nearly $3.50.
Research in Motion (RIMM) up more than $2.
Google (GOOG) advanced $4.70.
Yahoo! (YHOO) picked up $0.61. Carl Icahn reportedly nominating Mark Cuban as one of the nominees for a group of dissident board members he's trying to get elected. Cuban of course sold his company broadcast.com for billions to Yahoo! back in 1999.
Intel (INTC) gaining $1.13. It really helped move the NASDAQ and the Dow today. Analysts liked the growth prospects with the new atom chip, that's a-t-o-m chip aimed at low-end computers and it's a four and half month high for the stock.
Microsoft (MSFT) rose $0.52.
Cisco Systems (CSCO) gaining $0.75.
And there's CNET Networks (CNET) advancing $3.46 for a 43 percent gain. As you heard, CBS will buy the (INAUDIBLE) technology news service for $11.50 a share.
First Solar (FSLR) losing $1.16.
Baidu.com (BIDU) advanced $3.10.
Then Sina Corp (SINA), another web portal, Chinese firm, gaining more than $3. First quarter profits nearly doubled on a big rise in ad revenues.
Ctrip.com Intl (CTRP) tumbled almost $6. Another Chinese Internet and travel firm. Investor concerns focusing on a potential impact for the Chinese (INAUDIBLE) travel business.
And finally, salary.com (SLRY) falling $2.14. The firm had a wider than expected loss, also missed its revenue estimate and they've also replaced the chief financial officer.
And those are our stocks in the news tonight.
