NBR Transcripts - August 28, 2008
Thursday, August 28, 2008Spring Gives The Economy a Much Needed Bounce
SUSIE GHARIB: Stocks soared on Wall Street today on two big surprises: a sharp drop in oil prices and a sharp rise in economic growth. The Dow jumped 212 points and the NASDAQ rose 29. The rally came after the Commerce Department reported the nation's gross domestic product grew at an annual pace of 3.3 percent in the second quarter. That was much stronger than the initial estimate of 1.9 percent. But as Erika Miller reports, that strong performance doesn't mean the economy is out of the woods.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Despite all the talk of doom and gloom, the U.S. economy roared back with gusto in the second quarter. The economy grew at a 3.3 percent annual rate after two dismal quarters. But that does not mean the U.S. has avoided recession. Like most economists, Lakshman Achuthan thinks we are in one now.
LAKSHMAN ACHUTHAN, MANAGING DIRECTOR, ECONOMIC CYCLE RESEARCH: I think the second quarter is the proverbial flash in the pan. It is not the beginning of a cyclical recovery.
MILLER: He points out that much of the growth in the second quarter came from strong demand for U.S. products overseas. But he does not think the trend will continue, due to a rising dollar and slowing growth in many countries.
ACHUTHAN: You have Europe going into recession. Southern Europe is already in recession, Japan, going into recession. Mexico and Canada, where we trade quite a bit, in clear downturns. This is going to weigh without a doubt on exports.
MILLER: In addition, the second quarter was helped by government tax rebate checks, which encouraged spending by U.S. consumers. But Merrill Lynch economist Drew Matus says that effect is only temporary.
DREW MATUS, ECONOMIST, MERRILL LYNCH: The analogy I'd like to use is, if you give your kid $100 and you tell him to spend it and then you don't give your kid $100 the next week, what happens to the spending pattern there? And that's exactly what we're going to see with the tax rebates.
MILLER: However, a small group of economists thinks the U.S. will able to eke out modest growth in coming quarters. They say the dollar's appreciation is not as worrisome as it seems because there's often a long lag time between changes in currency values and trade activity. In addition, they believe the dollar rally will help push down commodities prices and boost global economic activity. But others aren't buying it.
MATUS: Our forecast is for the second half of 2009 to post GDP prints above 2 percent. I think by that point, you are talking about being - I guess being out of the woods is the right way of putting it.
MILLER: That helps explain why many economists support another round of stimulus from the government. They argue the economy needs all the help it can get, until the labor markets improve and housing prices stabilize. Erika Miller, NIGHTLY BUSINESS REPORT, New York.
Economic Choices 2008 - Discussion & Debate About Barack Obama's Tax Plan
SUSIE GHARIB: In Denver tonight, Senator Barack Obama will be in the spotlight, delivering his acceptance speech as the Democrats' nominee for president and his plan for change for the nation. There has been considerable debate about his tax plan. Washington bureau chief Darren Gersh spoke with some experts about what they know and don't know about Obama's tax proposals for business and investment.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: At many of his campaign stops, Barack Obama praises the spirit of small business in America. And then he makes this promise.
SEN. BARACK OBAMA, (D) PRESIDENTIAL NOMINEE: So if you've got a start up business, if you've got a new business, I don't want you paying taxes like capital gains because you need to go ahead and get started on your business.
GERSH: But like so many things in this presidential campaign, the details are hard to pin down. The Obama campaign also says small businesses won't pay capital gains, but tax expert Len Burman says Obama has never defined what he considers a small business to be. Burman says the lack of specifics is a problem with many Obama proposals.
LEN BURMAN, DIRECTOR, TAX POLICY CENTER: Many, if not most of the details, haven't been specified. It is more of a vision of where he would get his revenues from.
GERSH: Here are the tax increases Obama has laid out: close corporate loopholes worth $76 billion a year; slap a windfall profits tax on oil companies; raise taxes on so-called carried interest earned by hedge fund managers; force employers who do not offer health insurance to pay into a national fund to provide coverage for their workers. On the tax cut side, Obama offers a refundable health tax credit to small business. There's also that zero capital gains rate for small business. And Obama would make the research and development tax credit permanent. Add it all up and Burman reaches this conclusion.
BURMAN: What appears to be the case is that he wants to increase taxes on businesses overall as a way to pay for other priorities or to reduce the budget deficit.
GERSH: On the investment side, Obama has proposed raising the capital gains and dividend tax rates from 15 percent to 20 percent for those making more than a quarter of a million dollars a year. That's just about where the rate was five years ago. When he looks at that and all the other Obama proposals, economist Martin Sullivan concludes the impact will be small potatoes.
MARTIN SULLIVAN, ECONOMIST, TAX ANALYSTS: We're going to noodle around on the sides, give a few tax breaks here and close some loopholes there, but the overall complexion of business taxation is not going to change.
GERSH: So while Obama is running as the candidate of change, his business and investment tax policy could be fairly described as a re-run of the Clinton years. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.
GHARIB: Tomorrow, Darren will give us a preview what to expect from the Republican National Convention that kicks off on Monday in St. Paul. And then next Thursday, he'll look at Senator John McCain's tax and business plans.
"Bill of Health"-Scrutinizing CT's
SUSIE GHARIB: These days doctors are using new high-tech systems to get a really detailed look at what's going on inside a patient's body. They're the latest in CT scan technology. That's short for computed tomography. But are these new systems powerful tools for preventive medicine or powerful profit centers or both? In tonight's "Bill of Health," Jeff Yastine looks at the promise and the controversy.
JEFF YASTINE, NIGHTLY BUSINESS REPORT CORRESPONDENT: It's a high-tech marvel of modern medicine: a Philips 64-slice CT scanning system. The slice refers to the level of detail that can be seen in the processed images of the body. Patricia Michel came here for a heart scan after being referred by her physician. But she welcomes the chance to see how her heart's doing.
PATRICIA MICHEL, PATIENT: It gives me an idea of what my heart -- what condition it's in, what's going on. I don't have high cholesterol or anything, but you want to know the amount of blockage that has occurred in your heart and so yeah, it does make you feel much more comfortable.
YASTINE: This center, south Florida Medical Imaging Cardiovascular Institute, was started five years ago by Doctor Claudio Smuclovisky and his partners. Smuclovisky is a radiologist who specializes in studying images of the heart. He says the ability to clearly see the plaque in arteries makes scans an ideal tool for preventive medicine, especially for those with a higher risk of heart attack.
DR. CLAUDIO SMUCLOVISKY, SO. FLORIDA MEDICAL IMAGING CARDIOVASCULAR INST.: The key is to have a technology that's non invasive which is the cardiac CT that can actually detect disease, the type of disease that they have and treat it effectively at a much earlier age. And that in downstream costs, the savings would be enormous for the society and taxpayer.
YASTINE: But such opinions aren't without controversy. Medicare recently threatened to halt reimbursements of heart scans, citing a lack of clinical studies on their effectiveness. Medicare backed off that stance after complaints from advocates of heart scans. But critics also are concerned about radiation exposure, although new software and scan techniques are said to significantly lower radiation exposure to patients. Still, critics like Jean Mitchell, an economist at the Georgetown Public Policy Institute say many scans are unnecessary and contribute to higher healthcare costs.
JEAN MITCHELL, ECONOMIST, GEORGETOWN PUBLIC POLICY INST.: These scans if they're not absolutely medically necessary, all this is doing is leading to increased utilization and the increased utilization as I said is one of the major drivers of rising healthcare expenditures.
YASTINE: That hasn't dented the flow of people into facilities like this. Gary Grandovic, director of the West Boca Diagnostic Imaging Center says clients often pay up to $600 out of their own pockets for scans of the colon, called a virtual colonoscopy, as well as images of the heart and lungs.
GARY GRANDOVIC, DIR., WEST BOCA DIAGNOSTIC IMAGING CENTER: The scanner's here. The tech is here. You've got personnel that can run that machine all day long. So if you have a patient that's coming in for an exam, whether that is medically-reimbursed revenue or whether it's self pay revenue, facilities are looking at it as revenue.
YASTINE: Despite the reservations raised by critics, radiologists like Smuclovisky believe heart CT scans will eventually become a standard of care.
SMUCLOVISKY: The accuracy is over 95 percent in determining people that have significant impairment of blood flow to the heart. It's just a time that it takes which is natural for acceptance period in healthcare and that usually takes five to 10 years. But this test will in my opinion, replace diagnostic coronary angiogram where somebody needs to go into the hospital to determine whether they do or not have disease.
YASTINE: And the technology of CT scanning continues to evolve. So- called 64-slice scanners are now the high-tech standard for most imaging centers. But a few U.S. hospitals are now buying 320 slice scanners, offering images that are five times more detailed. Jeff Yastine, NIGHTLY BUSINESS REPORT, Bill of Health.
"Commentary"-Plugging Into The Energy Issue
SUSIE GHARIB: Tonight's commentator says there are plenty of reasons why energy independence should be a priority for the next president of the United States. He's Irving R. Levine, dean emeritus of international studies at Lynn University and former NBC news chief economics correspondent.
IRVING R. LEVINE, DEAN EMERITUS, INT'L. STUDIES, LYNN UNIVERSITY: The good news is that the price of oil is well off its peak of almost $150 a barrel earlier this year. The bad news is that it may be deja vu all over again. I remember back in 1973, when I had begun covering the economy for NBC News, Saudi Arabia and other oil-producing countries slapped an embargo on exports to the U.S. The price of oil climbed from what now seems like a ludicrous $3-a-barrel to $11. President Nixon responded by announcing project independence to make the U.S. energy independent by 1980. The oil embargo soon ended and so did project independence. During the past 40 years under successive presidents, energy crises have struck time and again. Each time the crisis passed and so did any sense of urgency. What is different this time is that a growing number of nations, particularly China and India, have begun competing with the United States for limited supplies of oil. That means that this crisis may be permanent, not fleeting. And moving toward a measure of energy independence becomes a top priority for the next president. I am Irving R. Levine.
"Tech Talk"-Tuning Into Digital TV
SUSIE GHARIB: And finally tonight, an update on the conversion to digital television, a new version of a popular computer program and a surprise from Microsoft. Scott Gurvey has that and more in tonight's "Tech Talk."
SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Microsoft just released the second test version of its upcoming Internet browser, Internet Explorer eight. The program shows a surprising new feature named in- private- browsing which lets you limit the amount of information collected about your web surfing. It is surprising because advertisers covet that kind of information and Microsoft is among the sellers of Internet ads. The action is being applauded by privacy advocates. Google is another seller of Internet advertising and a collector of browsing data. It is said to be near a deal to become the primary search supplier for Verizon. The hold-up, sources say, is not about the privacy of customers' data, but about which company will own the lucrative information. Stay-tuned. And speaking of staying tuned, several of you wrote in with questions following my recent report on the digital television conversion, now just six months away. The FCC reported today that 96 percent of the nation's full power TV stations will switch to digital by the deadline, February 17. But most of the questions we received come from viewers in rural areas who watch signals from low-powered booster transmitters, sometimes called translators or repeaters. The FCC currently has no requirement that they be converted. If that affects you, be sure you buy a converter box which has what is called analog pass-through. That will let you watch both types of channels after the conversion. Or you can add a splitter or a/b switch to get both signals. You should check local information sources and your local stations for more information because circumstances vary in different communities. Frankly, the government doesn't have much information on these rural markets either. Check out its web site at dtv2009.gov. Every few years Nuance Communications updates its Dragon naturally speaking dictation product and I rave. The just released Dragon 10 continues the tradition. Nuance VP Peter Mahoney says new technology improves out-of-the-box speech recognition accuracy by 20 percent.
PETER MAHONEY, VP, DESKTOP DICTATION UNIT, NUANCE COMMUNICATIONS: We actually for the first time support something we call automatic regional accent selection. So, we've got eight different accents that Dragon understands in the U.S. including Hispanic accented English, Indian accented English, UK English, southern English, you-all and what we do is we automatically detect the accent model that's going to work best for you.
GURVEY: The new version also has simplified commands which make editing much easier. There are also new commands to control your desktop and even to search the web. Now, if only it could read my mind and type what I'm thinking. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.
GHARIB: Wish you could read his mind.
Paul Kangas' Stocks in the News
PAUL KANGAS: Wall Street cheered at much stronger than expected upward GDP revision and a 10,000 drop in new weekly jobless benefit claims. At 11 a.m. the Dow had surged 141 points with the NASDAQ up 20 points. The market continued its rally this afternoon as bargain hunters bolstered the financial stocks while oil prices fell sharply as you heard. As a result, stocks went on to end the session at their best levels of the day. The Dow Industrial Average closed up 212.67 at 11,715.18. The NASDAQ Composite was up 29.18 at 2411.67. Standard & Poor's 500 Index rose 19.02 ending at 1300.68. Over in the bond market, the 10-year note fell 6/32 to 101 24/32, putting the yield at 3.79 percent.
New York exchange volume leader on 14 1/2 million shares, Citigroup (C)moving up $0.96 in a very firm financial sector.
Bank of America (BAC) did even better, up $1.78.
Fannie Mae (FNM) up $1.47 there. That's the sixth consecutive closing gain for that stock and of course it's a positive reaction to management changes announced after the close yesterday.
Cousin Freddie Mac (FRE) did well, up $0.53.0
Ford Motor Co (F) $0.17 rise there, fifth in volume.
General Electric (GE) was up $0.61.
And $1.74 advance for JPMorgan Chase (JPM).
Pfizer (PFE) up $0.19.
American Intl Group (AIG) finally with a decent gain, up $1.51.
And Wells Fargo (WFC) up $1.52.
Caterpillar (CAT) rose $2.12. The company's chief exec says sales in China for the company will remain strong doubling to the $4 billion mark by 2010, up from $2 billion this year and that helped a lot of the major machinery stocks post gains today.
Let's have a look at a few of those, Cummins (CMI), Deere & co (DE), Parker Hannifin (ph) and Terex (TEX) all did nicely thanks to Caterpillar.
MBIA (MBI) a huge percentage gain, 35 percent, up $4.17. After the close yesterday as we reported, the company took over the reinsurance of $184 billion in municipal bonds from FGIC Corp. and as a result will receive $714 million in premiums.
Tiffany & Co (TIF) sparkling today, up $4.24. Second quarter earnings jumped to $0.63, more than double $0.29 last year and $0.08 above the Wall Street consensus. Revenues up 11 percent.
Another jewelry doing well, Zale (ZLC) up $4.77, even though it had a fourth quarter loss of $0.15 a share, but the Street was expecting a loss of $0.57 a share. Same store sales were up just over 6 percent. Standard & Poor's upgraded Zale stock from "sell" to a "hold" recommendation.
Jo-Ann Stores (JAS) up $2.27. The company sells crafts and fabrics and things like that. Second quarter loss of $0.47. That's much better than the loss of $0.76 last year. Same store sales up 3 1/4 percent. The company boosted its fiscal 2009 earnings estimate from a high of $0.85 a share to as much as $1.05 a share.
Williams Sonoma (WSM), the house wares company, down $1.43. Second quarter earnings fell to only $0.08 from $0.23 last year. Same store sales tumbled 12 percent and the company says third quarter same store sales will fall by as much as 15 1/2 percent.
Brown Forman "B" (BF.B), the distillery which makes Jack Daniel bourbon and Southern Comfort, down $2.85. Third quarter came in at $0.73, down from $0.77 a year ago and Goldman Sachs today repeated a "sell" recommendation on Brown Forman.
Gerber Scientific (GRB) closed down only $0.88, but it traded as low a flat $8 a share this morning after reporting first quarter earnings of only $0.03, well down from $0.12 last year despite a 3 1/2 percent rise in revenue.
And Greif (GEF), this is a company that makes packaging products, has nicely higher quarterly earnings, $1.10, up from $0.82 last year, 18 rise in revenues.
Apple (AAPL) topped the active list, down $0.93.
Research in Motion (RIMM) $1.57 loss.
Google (GOOG) up $5.20.
Microsoft (MSFT) $0.38 advance there.
Dell (DELL) as you heard, a shortfall on earnings, down $0.42 on the close, but I saw it as low as $22.55 after the market closed.
Intel (INTC) $0.18 gain.
Cisco Systems (CSCO) $0.29 advance there.
Amazon.com (AMZN) up $1.69.
Amgen (AMGN) rose $0.37.
Energy Conversion Devices (ENER) down $1.79. Analysts are worried about the company's falling profit margins. That's what hurt the stock. They did have higher earnings out today.
And finally Sears Holdings (SHLD) up $3.64. Second quarter earnings came in at $0.21, but that was $0.11 below the Street estimate. The stock apparently higher on optimism on the second half in oil prices stay low.
Those are the stocks in the news tonight.
