NBR Transcripts-April 17, 2009
Friday, April 17, 2009Which Way Will Stocks Head Next?
SUSIE GHARIB: Wall Street is on a roll. The major averages finished higher for the sixth straight week. Investors focused today on another better than expected earnings report from a leading financial firm -- this time, Citigroup. Citi posted a loss that was much smaller than analysts predicted. Also beating forecasts, General Electric, which reported a profit $0.05 above expectations. So now the big question is, will stocks continue their steady rise? Erika Miller takes a look.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Investors are no doubt delighting in the stock market's recovery the past few weeks. The S&P 500 has rocketed 27 percent since early March, the biggest gain since the market downturn started in October 2007. However, many Wall Street strategists, including Mike Ryan, are not sure the recovery will stick.
MIKE RYAN, CHIEF INVESTMENT STRATEGIST, UBS WEALTH MANAGEMENT: I really think it's too early to christen this the beginning of a bull market. I think we're still in a discovery phase. You know, we have really, these incredible headwinds that we're still dealing with from a cyclical side. Think about it -- the unemployment rate continues to rise. We still have stress in the financial system. And then we're seeing a broad-based economic slowdown globally.
MILLER: That said, Ryan and others do think things are moving in a positive direction. They believe the earnings outlook is improving. Today, Citigroup joined rivals Goldman Sachs, Wells Fargo and JPMorgan in reporting better than expected earnings. Citi finished the first quarter with a loss of $0.18 a share, a big improvement from last year. Jeff Arricale, manager of the T. Rowe Price financial services fund, is optimistic about the industry.
JEFFREY ARRICALE, PORTFOLIO MANAGER, T.ROWE PRICE FINANCIAL SERVICES FUND: In relation to the banking system, it's pretty clear the system has found its footing. Companies are able to issue commercial paper. Financial institutions are able to issue FDIC-backed debt and have very good access to liquidity. So, I think the sector is on decent footing.
MILLER: General Electric also beat expectations, reporting a profit of $0.26 a share in the first quarter, although that was down from $0.44 last year. The next two weeks could be a big test for the stock market's recovery as earnings season ramps up. Even the pros are braced for more volatility.
RYAN: I still think what we're going to see is periods where the equity markets will pull back. We'll see some retrenchment. But I don't think we'll see the type of wholesale selling or capitulation that we saw in the latter part of 2008.
MILLER: For now, investors can be cheered by another bullish sign - the stock market closed higher for the sixth straight week. That's the longest winning streak since May 2007. Erika Miller, NIGHTLY BUSINESS REPORT, New York.
The EPA's Climate Changing Pronouncement
PAUL KANGAS: The Environmental Protection Agency today formally declared greenhouse gas emissions a danger to public health. That move could have a dramatic impact on many U.S. industries, including auto makers, energy companies and chemical makers. As Stephanie Dhue reports, the EPA has set up the next step, regulating those climate changing emissions.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Coal-fired power plants and vehicles are the nation's largest sources of climate changing pollution. Today's ruling sets up a process under the Clean Air Act for the EPA to regulate those emissions. Joe Mendelson of the National Wildlife Federation says that should happen quickly.
JOE MENDELSON, NATIONAL WILDLIFE FEDERATION: What the EPA will do, hopefully, is say by a date certain, you've got to reduce your global warming pollution. It's not a question of waiting for technologies to appear. We know they exist.
DHUE: But business groups warn that regulating carbon emissions now would hurt the already fragile economy. William Kovacs of the U.S. Chamber of Commerce says until there are technologies for capturing greenhouse gas and creating cleaner engines, the EPA should delay action.
WILLIAM KOVACS, U.S. CHAMBER OF COMMERCE: If they do, that's going to make us a much more competitive world. We're going to have better auto industries and we are going to compete worldwide and that should be the goal of this as opposed to EPA being the big bad guy.
DHUE: But analyst Kevin Book says that big bad guy status could jolt lawmakers into passing climate change legislation.
KEVIN BOOK, MANAGING DIRECTOR, CLEARVIEW ENERGY PARTNERS: Every single time Congress goes home, the EPA is going to be leaning on the we're about to regulate you button and that's an extraordinarily powerful pressure, because the regulation that the EPA has very coarse tools at their disposal. It could cost lot of money if they go through with it.
DHUE: There are proposals already in Congress to regulate climate emissions by putting a price on them and setting up a cap and trade system. Under that system, Book expects coal to be the winner, getting the lion's share of carbon credits and oil and gas refiners, which generate 28 percent of carbon emissions, to draw only a small percentage of credits.
BOOK: The last three proposals to come out of Congress gave 0, 2 percent and 4 percent to refiners, so refiners are definitely going to be paying a net cost almost from day one.
DHUE: The debate will heat up next week when Congress returns. House lawmakers have set a July 4th deadline to pass climate change legislation, with the Senate expected to vote on the issue by the end of the year. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
"Reviving the Economy: Real Estate"-Renter's Limbo
SUSIE GHARIB: Talk of the housing crisis usually focuses on homeowners who lose their properties to foreclosure. But what happens when the people living in those homes don't own them and are renting from a landlord in default? As we continue our series, "Reviving the Economy: Real Estate," Dana Bate looks at the strain the housing crisis is placing on renters.
DANA BATE, NIGHTLY BUSINESS REPORT CORRESPONDENT: By all accounts, Comeka Evans is an ideal renter. She pays her rent on time, takes good care of the property and always does her own walk-through inspection before moving in. But last August, she was in for a surprise. After only six months in her rental townhouse, she received a letter from her landlord telling her she had a month to move out.
COMEKA EVANS, RENTER: I was upset and I mean I called him immediately to have a better explanation.
BATE: The landlord told her the house had gone into foreclosure. Evans was new to the area, working in a new job and now needed to find a new home.
EVANS: And I felt really bad because I had just really started that job, and I said I just have to take time off. I said, I really need a place for my family. We're not going to have anywhere to live.
BATE: Evans isn't alone. The National Low Income Housing Coalition estimates 40 percent of people who have lost their homes to foreclosure are renters. Yet most states don't require landlords to give any notice to their tenants when the property is taken over. That's why Congressman Keith Ellison has introduced a bill that would create a national standard, requiring landlords to give at least 90 days notice before evicting a renter due to foreclosure.
REP. KEITH ELLISON, (D) MINNESOTA: So, this 90-day period is a period, hopefully, in which someone can maybe buy the property and at least even if they don't, the tenant has three months to figure out what their next move is going to be.
BATE: Landlord-tenant laws vary by state, reflecting the unique nature of housing markets. But low income housing expert Sheila Crowley says, in today's environment, it makes sense to have a national safety net.
SHEILA CROWLEY, PRESIDENT, NATIONAL LOW INCOME HOUSING COALITION: Banks are now global. They're not just local banks or state banks. These lending institutions work in every state or many states and so having this patchwork that varies from place to place is very complicated.
BATE: Comeka Evans was able to find a new rental home by her landlord's deadline, but it's in a different neighborhood, so her 11-year- old daughter had to change schools only one month into the academic year. And Evans' old landlord still has her security deposit from the foreclosed property, leaving her scrambling to come up with a new one.
EVANS: I mean, it's so many things that you have to do. And your children are losing the friends that they had because they have to move. It's hard on a family; it's hard on any family.
BATE: As a long-time renter, she hopes it's an ordeal she won't have to go through again. Dana Bate, NIGHTLY BUSINESS REPORT, Centreville, Virginia.
"Market Monitor"-Daniel Seiver, Editor of "The PAD System Report"
PAUL KANGAS: My guest "Market Monitor" this week is Daniel Seiver, editor and publisher of the investment newsletter entitled "The PAD System Report" and Dan, welcome back to NIGHTLY BUSINESS REPORT.
DANIEL SEIVER, EDITOR & PUBLISHER, THE PAD SYSTEM REPORT: Great to be back, Paul.
KANGAS: It's been all too long since you were with us last. You have been in several different locations across the country, and now you're a lecturer in finance at San Diego State University. It's good to have you back.
SEIVER: It's great to be back.
KANGAS: How have you weathered this recent bear market?
SEIVER: Well, we were very negative on the market in 2007, holding lots of cash and that was a good call for us, but we did get back in, in 2008 and by the end of 2008 we saw cheap stocks and were fully invested.
KANGAS: You got in a little bit too early, though, right?
SEIVER: We were fully invested now. With hindsight we should have gotten fully invested in early March. We were already fully invested but we were happy to buy some even cheaper stocks and we want to hold them for three to five years.
KANGAS: Tell our viewers what the P-A-D acronym stands for.
SEIVER: Well it stands for patience is the P, Discipline is the D and those are the two main traits that an individual investor needs, I think, to really profit in the stock market.
KANGAS: That's a great name.
SEIVER: Yeah. You need the patience to hold on for years, which is where I think you make your money and you need the discipline to be able to stay long at times like this when the news is really terrible.
KANGAS: It sounds like you're turning a little bit bullish on stocks. What do you think about bonds?
SEIVER: We're actually very negative on Treasury bonds. I really think Treasury bond yields are going to go much higher in the next few years even if the Fed manages to withdraw some of that liquidity. The problem is when the economy recovers and bonds are no longer a safe haven, I think their yields have to go significantly higher.
KANGAS: Since you have turned rather bullish on stocks, what kind of stocks are you buying now?
SEIVER: Well, we like growth stocks. We like good growth at a reasonable price and I've got six stocks for you, three conservative growth stocks and three a little more aggressive and we like them all and I own shares in all these, so I'm backing this up with my own money. I can give you all six now.
KANGAS: All right, go right ahead, number one.
SEIVER: Number one is Johnson & Johnson (JNJ). That's a household name. Everybody knows them. They've got a good, long-term growth record. They are cheap. We picked them up in the high 40's. They're not much about that now. I think that's a good three to five year holding for conservative investors.
KANGAS: JNJ.
SEIVER: JNJ.
KANGAS: OK, number two.
SEIVER: Number two is Sigma-Aldrich, ticker is SIAL, not as well known but very conservatively managed, strong balance sheet, good growth record. They're in the life sciences supply. They have chemicals for everybody. If we do more science spending, they're going to do very, very well.
KANGAS: Number three conservative choice.
SEIVER: Number three conservative is CR Bard. That's BCR is the ticker symbol. They're in medical supplies and they've got a tremendous growth record. Again, very strong balance sheet and that's an excellent choice. You can sleep with that one easily.
KANGAS: Let's get into the more speculative crowd here now.
SEIVER: OK. We've got three that -- there is more volatility here, more risk but a lot of potential gain. First one is alternative energy. First Solar, FSLR. They're a leader in thin-film solar. I think alternative energy will be huge over the next five to 10 years. They will profit enormously.
KANGAS: Number two in this category.
SEIVER: Second is Ormat. You probably haven't heard of that one. Ticker symbol is ORA listed on the New York Stock Exchange. They're in geothermal, which is another great alternative energy play. Again they have tremendous prospects over the long run.
KANGAS: And your final choice.
SEIVER: Final choice is a special favorite of mine, robotic surgery. In particular, lots of us baby boomers are going to need more and more surgery as we get older. ISRG, Intuitive Surgical is a leader in robotic surgery. These guys have great upside potential.
KANGAS: Dan, you said you own all of these stocks. Do you have any other disclosure to make about them?
SEIVER: No. It's just that I love them all.
KANGAS: OK. Unfortunately, our time has run out but I want to thank you for coming back to see us. We'll do it again.
SEIVER: OK. Thank you, Paul.
KANGAS: My guest, Dan Seiver of the"PAD System Report."
"Last Word"-One Sweet Real Estate Deal
SUSIE GHARIB: And finally tonight, in these days of growing real estate problems, one landlord has come up with a pretty sweet deal. It's rent, plus a dozen cupcakes! The landlord of the space on New York's Third Avenue wrote a free cupcake rider into a lease for a bakery that rented the space. Now, each month, the Crumbs bakery sends a dozen sweet treats to the landlord's sales meeting. In exchange, the bakery got a better price per square foot and a months' free rent while the store was being fitted out. So Paul, despite the recession, the bakery says business is booming, because cupcakes are an affordable luxury.
KANGAS: That's not a half-baked idea is it?
GHARIB: And you know Paul, I can speak from experience. I've had those cupcakes from Crumbs and they are a very delicious piece of comfort food.
KANGAS: Are you going to send some of those down?
GHARIB: Do you want some? What's your favorite?
KANGAS: Blueberry.
Paul Kangas' Stocks in the News
PAUL KANGAS: Weak but better than expected results from Citi and General Electric couldn't keep Wall Street from a dull and mostly down morning. The Dow fell about 30 points at worst while the NASDAQ was down an average of 16 points. Then, buyers moved in, lifting the Dow to a 47-point gain at 2:00 p.m. However, normal pre-weekend investor caution turned the market just barely positive by the closing bell. So the Dow Industrial Average ended up only 5.90 points at 8,131.33. This week, it fell twice and rose three times, had a net gain of 47.95 points. The NASDAQ Composite rose 2.63 ending at 1,673.07. It fell only once this week and climbed 20.53 points overall. Standard & Poor's 500 rose 4.30 points to close at 869.60 today and for the week, it was up 13.04 points overall. In the bond market, the 10-year note fell 30/32 to 98 9/32, putting the yield up to 2.95 percent.
Big board volume leader, 150.7 million shares changing hands, Citigroup (C) down $0.36. As you heard, first quarter loss of $0.18 but that was $0.26 better than expected and a lot less than last year's loss of $1.03 a share. Earnings from the credit card business for the company incidentally fell 66 percent.
There you see Bank of America (BAC) down, up $0.26.
And then General Electric (GE) with a $0.12 gain. GE out with those earnings first quarter, $0.26, down from $0.43 but a nickel better than the Street was expecting.
Wells Fargo & Co (WFC) $0.81 advance there.
American International Group (AIG) lost $0.07, fifth in volume.
JPMorgan Chase (JPM) edged $0.02 higher.
Pfizer (PFE) a $0.26 advance.
Ford Motor Co (F) down $0.16.
AT&T (T) dropped $0.04.
Tenth in volume was ExxonMobil (XOM) with a $0.66 drop.
McGraw-Hill Companies (MHP) did well, up $1.72. JPMorgan upgraded it from "neutral" to "over weight" on the bright prospects for the company's Standard & Poor's unit.
And then CBS (CBS) good percentage gain there, almost 20 percent, up $1.11. Some analysts believe broadcast advertising may be nearing a bottom.
BB&T (BBT) a $2.35 advance. First quarter earnings dropped to only $0.48 from $0.78 last year, but that was $0.17 better than the Street was expecting.
Mattel (MAT), the toy company, up $1.98 despite a first quarter loss of $0.14, a penny worse than expected, but the company said it's first quarter U.S. Barbie doll sales were up 18 percent.
Tempur-Pedic International (TPX), the mattress company, up $1.59, $0.18 in first quarter earnings, same as last year, even though revenues jumped or fell 28 percent and those earnings were $0.06 better than expected incidentally and the Stiefel Nicholas brokerage repeated a "buy" on Tempur-Pedic.
Tyco Electronics Ltd (TEL) moving up $1.96. The company's in a deal to sell its wireless systems business to Aris (ph) Corporation for $675 million in cash.
And then specialty chemical maker Cytec Industries (CYT) plunging $2.75. First quarter earnings of only $0.06, down from $1.08 last year and sales dropped 37 percent. The company is cutting its quarterly dividend by 90 percent, so that makes that 2.4 percent yield no longer accurate.
And then Superior Energy Services (SPN) was up $1.64, nice percentage move. Citigroup started coverage with a "buy" on Superior.
NASDAQ's most active Google (GOOG) up $3.50. It traded just below $400 today at one stage. Standard & Poor's repeated a "strong buy" on the company's cost-cutting measures coming up.
Apple (AAPL) up $1.97. Its quarterly results are due out next week Wednesday.
Research in Motion (RIMM), $0.84 gain there.
Microsoft (MSFT) $0.56 drop. Its results are due out next Thursday.
And then Intel (INTC) in there with a $0.29 loss.
Cisco Systems (CSCO) $0.09 drop there.
Qualcomm (QCOM) fell $0.66.
Oracle (ORCL) $0.12 loss.
Dryships (DRYS) a huge gain percentage wise, up $1.62 after Oppenheimer upgraded it from "market perform" to "out perform."
And Amazon.com (AMZN) tenth in NASDAQ volume was up $0.80 a share.
And those are the stocks in the news tonight.
