NBR Transcripts-January 2, 2009
Friday, January 02, 20092009 Begins With The Dow Above 9000
SUSIE GHARIB: Wall Street rang in the New Year with a bang. The Dow surged 258 points, closing above the 9,000 level for the first time since November. The NASDAQ jumped 55 and the S&P 500 rose 28 1/2 points. Investors snapped up stocks on optimism about a new year and a new administration. As Suzanne Pratt reports, how stocks perform this month could be critical for setting the tone for the rest of the year.
SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: There is a saying on Wall Street: as January goes, so goes the year. But, the so- called January barometer is more than Wall Street lore. It also works. According to the "Stock Traders Almanac," since 1950, the seasonal indicator has been accurate 91 percent of the time. An up January suggests a good year for the market, while a down beginning leads to a disappointing year. So, what about this January? Market strategist Carmine Grigoli says the first month of 2009 will be a good one.
CARMINE GRIGOLI, CHIEF INVESTMENT STRATEGIST, MIZUHO SECURITIES USA: I think we're in the process of recovering. I think we've seen the lows. Since November 20th the market is up about between 15 and 20 percent. It's likely to continue that momentum into January and probably through most of the year.
PRATT: Grigoli expects major averages to rally as much as 40 percent this year, thanks to extremely attractive valuations. He says the market will recover well in advance of the economy.
GRIGOLI: Once a recovery is in sight, the market is up dramatically. You take the last two severe recessions in the post-war period, you'll find that by the time the economy recovered, the stock market was up 35 percent.
PRATT: But, others are less certain stocks will begin on a positive note. Market strategist Manny Weintraub says one man holds the key to how stocks will start 2009.
MANNY WEINTRAUB, MARKET STRATEGIST, INTEGRE ADVISORS: January is going to be determined by news coming out of the incoming Obama administration. I mean that's everything, it's the only thing that matters.
PRATT: Weintraub says a hefty stimulus package will mean a bullish beginning for the market. He sees a more timid plan leading to early losses. While Weintraub is uncertain of how stocks will begin the year, he predicts they'll end 2009 up thanks to an improving credit market.
WEINTRAUB: I'm optimistic because high quality corporates have been rallying since October. And you're starting to get some move of junk bonds beyond that. And then once the junk bonds move, then that could get the all clear sign for the equity market to move as well.
PRATT It looks like Santa has also given an all clear sign for stocks in 2009. History shows that when the market rallies between Christmas and the first few trading days of the year, known as the Santa Claus rally, it also does well for the full year. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.
A Look at the New Congress' New Agenda
SUSIE GHARIB: Next week will be busy in Washington, DC. President-Elect Barack Obama is returning to the nation's capital just two weeks before his inauguration. On Tuesday, the 111th Congress will be sworn in. And as Dana Bate reports, lawmakers will hit the ground running.
DANA BATE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Congress' first priority will be to tackle the $700 billion gorilla: a stimulus package lawmakers hope to have on President Barack Obama's desk by January 20. But tax expert Anne Mathias thinks completing a package that big in two weeks is unlikely. Instead, she and other analysts think the stimulus will come in installments.
ANNE MATHIAS, DIRECTOR OF POLICY RESEARCH, THE STANFORD GROUP: The first one at this point will focus mostly on improving aid to individual homeowners with their mortgages and creating jobs through some sort of infrastructure, at least the beginning of infrastructure spending.
BATE: An economic recovery package will deal with the immediate concerns of job losses and a slowing economy. But political economist Tom Gallagher says there are even bigger issues looming on the horizon.
TOM GALLAGHER, POLITICAL ECONOMIST, INTERNATIONAL STRATEGY AND INVESTMENT: The short-term agenda is to deal with the economic drag caused by the financial crisis. Then the medium term agenda, just a little ways out, is to re-regulate the financial sector. First you put out the fire, then you rebuild a fire-proof house.
BATE: Rebuilding that fireproof house will require re-writing massive amounts of legislation. Could this be the most active Congress we've seen since the great depression? The Cato Institute's Chris Edwards isn't so sure.
CHRIS EDWARDS, TAX DIRECTOR, CATO INSTITUTE: I think Congress has fundamentally changed since the 1930s, when President Roosevelt was able to get massive pieces of legislation through Congress pretty quickly. Congress will descend, I think, into its usual gridlock, which is not necessarily a bad thing.
BATE: The stimulus bill could face opposition from Republicans and conservative Democrats who see the plan as fertile ground for pork barrel projects. And Mathias says the package may not turn the economy around overnight. The country already employs about two and a half million people in infrastructure jobs. And the Obama team has talked about doubling that number.
MATHIAS: Do we have those people? Where are they? We're going to need to find them and train them. Do they live in the right places? This is a lot more complicated than just moving money to the states.
BATE: Obama is scheduled to meet with Democratic and Republican leaders Monday to discuss details and timing of a stimulus package. Democrats say they need to see Obama's plan before they move forward with legislation. Dana Bate, NIGHTLY BUSINESS REPORT, Washington.
The Work World Goes Multigenerational
SUSIE GHARIB: When people talk about workplace diversity, they're usually referring to gender and race. But in today's workforce, there is great diversity in age. For the first time in history, there are four distinct generations in the U.S. labor market. One company where you'll find that is inVentiv Healthcare in Somerset, New Jersey. Erika Miller profiles the firm, looking at what it's like to work in a multi- generational setting.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: To get a feel for the culture at inVentiv Healthcare, walk the halls with President Terry Herring. You'll see how he changes communication style and body language, depending on who he's talking to. Sometimes he's chatty. Sometimes he's all business. The goal is to create an environment where people of different ages feel comfortable working together. Age diversity is so important here, it's considered a business advantage.
TERRELL HERRING, PRESIDENT & COO, INVENTIV HEALTH: The best solutions come from the widest group of people thinking about that solution and challenging an issue. If you are going to move into the future, the only way you are going to be successful in bringing the best issues is bringing every great mind you have to the table.
MILLER: The multigenerational workplace is becoming more common across America. Because people are living longer, they're also working longer. That now means up to four generations working side by side. Inventiv for example has 4,000 workers worldwide, ranging in age from 18 to 78. And it's not necessarily the most experienced ones in charge. Project manager Sandra Russo is a member of generation "Y," workers 30 and under. She says her attitude toward work and life is much different than older workers she manages.
SANDRA RUSSO, PROJECT MANAGER, INVENTIV HEALTH: Work for us is not just a job. It's more of a self-fulfillment. We want to be happy while we are working, which is very different from generations before. It was more about supporting a family, rather than being happy with what you are doing.
MILLER: At the opposite end of the age spectrum is accountant Henry Marcoux. He's a member of the so-called traditional generation, workers 63 and older. Though the least tech savvy, they're usually the most experienced.
HENRY MARCOUX, STAFF ACCOUNTANT, INVENTIV HEALTH: The experience you have is when you have to start digging into things that you know: records, old invoices, things like that, when you are doing research on something, where the computer really isn't going to help you much.
MILLER: Many employees here, including baby boomer Ron Jordan, say a multigenerational workplace has its challenges at times. His group ranges from age 44 to 62 and likes to stay in touch differently than younger workers.
RON JORDAN, TRAINING MANAGER, INVENTIV HEALTH: How people communicate, you see a big difference. And maybe where the baby boomers, we're more into interpersonal skills. Now everybody has a facebook. They text. Texting is definitely different, so, I guess the communication and technology is different.
MILLER: But workers like Patrick Peters say different approaches have also helped open his mind. He is a member of generation "X," people in their early '30s to early '40s who are known for wanting more coaching than previous generations.
PATRICK PETERS, RECONCILIATION ANALYST, INVENTIV HEALTH: You do not know everything and it took me a while to understand that and when you are speaking to somebody who has been around the block and you are just about to go on the block, it's always helpful to you in a business and a personal, professional manner, I believe.
MILLER: The desire for a multi-generational workplace has forced inVentiv to expand its recruiting strategy. Human resources head Tristen Herrstrom says attracting younger workers requires more than just posting jobs on a website.
TRISTEN HERRSTROM, CHIEF RESOURCE OFFICER, INVENTIV HEALTH: We're now looking to social networks to be able to identify individuals that may be more passive candidates which has really helped dramatically in the quality of candidates that we've had as well as the number of candidates that come into our organization.
MILLER: Employment expert Doug Arms expects demographic changes will make more workplaces multigenerational in coming years.
DOUG ARMS, CHIEF TALENT OFFICER, AJILON: Right now a majority of our leadership roles are held by the baby boomer demographic. As they will be leaving the workforce in the future, for every two that leave, there's only one within the gen "X" population that's qualified to take their spot. That in turn accelerates the need to develop leaders not only among the gen "X" population but gen "Y."
MILLER: Four generations in a workplace may seem like a lot. But it won't be long until there's a fifth. The next generation of workers, sometimes called generation "Z," will start to enter the labor market in a few years with their own work style and perspective. Erika Miller, NIGHTLY BUSINESS REPORT, Somerset, New Jersey.
"Market Monitor"-Richard Steinberg, President of Steinberg Global Asset Management
SUSIE GHARIB: My "Market Monitor" guest tonight says 2009 will be another tough year for the stock market. Joining us now with his forecast, Richard Steinberg, president of Steinberg Global Asset Management. Hi, Rich, happy New Year to you.
RICHARD STEINBERG, PRES., STEINBERG GLOBAL ASSET MANAGEMENT: You too, Susie.
GHARIB: So nice rally today. Is this as good as it gets for 2009?
STEINBERG: I don't know. I think there's so many challenges that we're going to have to get through, unemployment is quite bad. It's going to get worse. The economy is still going to show negative GDP growth but stocks are cheap. If estimates are still too high at $81 and you take 20 percent off, you could see the S&P at 1,000 to 1050, but it's going to be up and down all year long. It's going to be a little bit of a trader's market, at least for the first half.
GHARIB: Investors were really shell shocked in 2008. What advice can you give them for the New Year?
STEINBERG: The key is to really understand what risk is. I think last year was a defining moment for investors with risk and they need to realize how much volatility they can take because the volatility isn't going to go away.
GHARIB: Rich, lot of the stock recommendations that you gave us in January of 2008, almost exactly a year ago, were - were -- suffered quite a bit. Let's go down the list and you tell you where you stand with them now. Bucyrus (BUCY) and Sterlite (SLT). Do you still own them?
STEINBERG: No, we sold them down about 10 percent. Bucyrus we stopped ourselves under the 80s and about 18 on Sterlite. We missed the rally back up, but we're out of those names.
GHARIB: What about Western Union (WU)?
STEINBERG: We still own it. The stock's very cheap. It throws off great cash flow. If you're an investor for a couple of years, it's a cheap name.
GHARIB: And then you told us about an ETF called preferred shares (PFF). It was heavily invested into financials and it got hit hard. What's your view on PFF?
STEINBERG: We still own it. We were really wrong on the whole credit crunch, especially after the Lehman debacle. But I think if you need cash flow and you can ride out the storm in the credit crunch, you will continue to get good dividend yield there.
GHARIB: Let's go down your new list of recommendations for 2009. At the top of your list is Transocean, the offshore driller, ticker symbol RIG, R-I-G. What's the attraction there.
STEINBERG: We think that with the Obama administration that we are going to have offshore drilling. The key to this is we think oil is too cheap down here. Anything above $60, earnings start to get better and money will flow back to the drillers.
GHARIB: This stock was as high as $160 before the financial crisis hit this summer. What's your target on something like this?
STEINBERG: I think you could see probably 40 to 50 percent upside over the next 18 months but it's going to be driven by oil, Susie, so it depends what happens in the global economy.
GHARIB: Your next recommendation CRH is an Irish cement company with a ticker symbol CRH. What's the attraction there?
STEINBERG: The Irish call CRH and we met with people from Ireland recently. It is one of the top aggregate cement names and I think it's a great long-term and short-term Obama infrastructure play. They have a great global distribution so it's not just a U.S. story.
GHARIB: And Teva Pharmaceuticals (TEVA) on the NASDAQ, a big generic drug maker. Why are you recommending this company?
STEINBERG: Another Obama theme that you're going to have to continue to have price pressure from the large pharma names. They (INAUDIBLE) stock is very cheap, fantastic management, and it really doesn't have the distraction because it's mostly U.S. in terms of worrying about what's going on short term in Israel.
GHARIB: You have another ETF that you're recommending, its short 20-year Treasuries, ProShares Ultrashort Lehman 20-year Treasury index-- that's a mouthful. Ticker symbol TBT. What's the story here?
STEINBERG: Investors have to use this with caution. Really it's a hedge against their bond portfolio. The Fed is printing money. They're going to continue to keep it in ease mode and we don't think over the next two years that Treasury can stay in the 2 plus percent range on the 20-year level. It says the opposite of what happens to bond prices. If bond prices start to fall, you'll make money there. It's a good way to hedge your bond portfolio. It should not be used as a speculative vehicle.
GHARIB: So it's a long-term investment. Now do you own any of these stocks or do you have any other disclosures you have to report?
STEINBERG: We own them all but I don't own any of them personally.
GHARIB: Real quickly, let's talk about General Electric because it is one of your core holdings and it got hit very hard in 2008. For investors who own it, should they hold on to it?
STEINBERG: I do think so. It's been a disastrous name, one of the largest names in the index. Jeff Immelt said he's going to keep the dividends steady so you get paid a huge dividend for next year. The key is what happened in GE finance. I think if you're patient, you'll be good.
GHARIB: All right, we're going to have to leave it there. Richard, happy New Year, thanks so much for coming on the program.
STEINBERG: Take care, Susie.
GHARIB: My guest tonight, Richard Steinberg, president of Steinberg Global Asset Management.
"Last Word"-Bugatti Bequest
JEFF YASTINE: Finally tonight, in the you never know what you'll find in the garage department. When Harold Carr died last year in England, his relatives were stunned to discover just what was behind his garage doors. It was a 1937 Bugatti type 57-S Atalante, one of only 17 ever made. And it was in mint condition, not driven since 1960, with just 26,000 miles on the odometer. This particular Bugatti made history in its time, the first car to go 130 miles an hour when others topped out at about 50. And Susie, the car will be cleaned and auctioned in Paris next month and could sell for as much as $8 million. If only I had held on to that Dodge Dart I had in high school 25 years ago, maybe I could get $4 million for that.
GHARIB: You won't find things like that in my garage. I'll tell you that right now.
Paul Kangas' Stocks in the News
JEFF YASTINE: Today's rally marked the highest closing price for the Dow in about two months. The Dow ran up 150 points in the first half of the session. Investors ignored the latest report on factory orders, which fell for the fifth consecutive month to the lowest reading in 28 years. Energy stocks and big cap technology shares helped both indexes advance through the remainder of the session. The Dow settled up 258.3 to close at 9,034.69 and the Index rose in three of the last four trading sessions for a week overall gain of 519.14 and the NASDAQ Composite rising 55.18 to end at 1632.21. Like the Dow, the Index marched higher from Tuesday on (INAUDIBLE) a gain of 101.97 points for the week. And the S&P 500 jumping 28.55 to 931.80 and for the week, it picked up 59 points. And bond prices fell sharply, investors redeploying their safe- haven cash for New Year buys in the stock market. The 10-year note gaining, excuse me, falling 1 9/32 to 112 7/32 and the yield now up to 2.35 percent.
Citigroup (C) rising $0.43. Bottom fishing in some of the laggards of 2008.
Bank of America (BAC) ending up $0.25. The banking giant swallowing Merrill Lynch yesterday. Today's "Journal" noting the challenges ahead for integrating the cultures of a commercial bank and an investment bank in the face of this recession.
General Electric (GE) up $0.87. Volume though, pretty light, about 60 million shares are so.
ExxonMobil (XOM) gaining $1.81 with oil prices rising somewhat today.
And then Pfizer (PFE) gaining $0.56.
Wells Fargo (WFC) tacking on $0.52. Financials generally lagging today's advance and of course they also swallowed Wachovia yesterday, closing that deal.
JPMmorgan Chase (JPM) up $0.20.
AT&T (T) rising $0.92.
And then Ford Motor Co (F) up $0.17. The auto maker expecting 2008 industry-wide sales to drop by three billion units and that would douse hopes for a recovery certainly in the first quarter.
Compania Vale (RIO) jumping $1.08 thanks to a strong mining group today.
And then General Motors (GM) revving up $0.45. Its GMAC unit will no longer be the auto maker's primary choice for financing GM vehicles at the dealerships. Under the Federal bailout, GM will have to open up to outside lenders for low-interest loans and incentives and this ends their exclusive deal between GM and GMAC about seven years ahead of schedule.
And a look now (ph) at other blue chips getting cherry picked as the new year gets underway, Alcoa (AA), Boeing (BA), Chevron (CVX), Home Depot (HD), Wal-Mart Stores (WMT), all coming in for a nice round of buying.
Starwood Hotels (HOT) charged higher by almost $3. The company signed a confidentiality agreement with its largest shareholder Sam Zell. Analysts believe Zell lost nearly half a billion dollars on his shares last year in the decline, but could be weighing options to double down, boost his faith in the company even higher.
And that news buoying other hotel and casino operators, Las Vegas Sands (LVS), MGM Mirage (MGM), Wyndham Worldwide (WYN) and Wynn Resorts (WYNN) all doing quite nicely today after being beaten down in that second half of the year.
And another mining concern, Freeport-McMoran Copper & Gold (FCX) rising more than $2. Analysts say the mining giant may be poised for a rebound as potential bankers primed (ph) their economies for a global rebound.
On the NASDAQ, Apple (AAPL) rising more than $5. The latest survey of browsing market share shows an 8 percent Internet users now surf with Apple Safari (ph) browser.
Google (GOOG) climbing more than $13. Their (INAUDIBLE) browser has about 1 percent of all Internet users.
Microsoft (MSFT) picking up $0.89. Internet Explorer continues to lose market share, about 8 percentage points over the past year and also rumors on the web that Microsoft may be considering its first ever layoffs in the history of the company, up to 15,000 people perhaps in the next few weeks if web rumors are to be believed.
Intel (INTC) rising $0.54.
Then Cisco Systems (CSCO) advancing $0.66.
First Solar (FSLR) up more than $13.50. Piper Jaffray lowering its first quarter estimate on the range of solar power, solar panel companies.
And then Qualcomm (QCOM) jumped $1.22.
Oracle (ORCL) up $0.68.
Research in Motion (RIMM) gaining $1.34.
CME Group (CME) up $4.47.
And finally, Amazon.com (AMZN) rising more than $3. The online retailer faring very well in sales behind Wal-Mart over the holidays and this is the highest close for that stock since November 4th.
Those are our stocks in the news tonight.
