NBR Transcripts-June 5, 2009
Friday, June 05, 2009The Good News Bad News Labor Report
SUZANNE PRATT: The nation's unemployment rate is now 9.4 percent, the highest level in more than 25 years. The half percentage point jump from April to May was much more than economists expected. But the news is not all bad. The Labor Department also reported the pace of layoffs is easing. Employers cut 345,000 jobs last month, the fewest since September and the fourth straight month of slowing layoffs. Scott Gurvey takes a look at whether the labor market is finally stabilizing.
SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: A big jump in the number of people looking for work in May brought the unemployment rate to its highest level since 1983. But ironically, that can be seen as positive, a sign once-discouraged job seekers have resumed their hunt. While it is difficult to take comfort from the news 345,000 people lost their jobs in the month, that number was far lower than expected. One economist told me today it's still getting worse, but at a slower rate. The last 10 months form a V-shaped pattern of collapse and recovery of the job market. But Brian Fabri of BNP Paribas says the rebound is likely to flatten into a sluggish pattern like we saw last year, the first year of the recession.
BRIAN FABBRI, CHIEF ECONOMIST, BNP PARIBAS: As business cycle history shows, we've always had a year or so of no growth in jobs after the recession ends. And so therefore, if we really are sure that this is the end of the recession this year, the end of this year, I would think there will be very, very little job growth created in 2010.
GURVEY: The employment report is a trailing indicator. Career builder, an online want ad site, looks ahead by posting jobs yet to be filled. CEO Matt Ferguson now sees some signs of increased activity.
MATT FERGUSON, CEO, CAREERBUILDER.COM: When we look at the economy, we still see some good movement in job creation and opportunity in sales, customer service. Certainly, the numbers today would be consistent with what we see in health care. Education also seems fairly strong. So those would be the areas where we are seeing some good, I would say, stability in the labor market today.
GURVEY: Vice President Joe Biden said today the administration plans to ramp up its economic recovery efforts. The first part of the stimulus package has already hit the economy in the form of rebate checks and lower withholding taxes. But other elements like payments to states and infrastructure projects will take years to arrive and economists say even then, the effects will be limited.
FABBRI: People wound up with a little bit more income, which on balance, they saved. We haven't seen any increases in employment as a result. It's very difficult to tell whether or not you'll ever have it as a result of a given program, but frankly, the employment gains from this fiscal stimulus package were never going to be very large.
GURVEY: The unemployment rate is usually the last indicator to change direction in a turnaround and many economists believe it will get well above 10 percent before it begins to come down. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.
"Reviving the Economy"-Health Insurance Exchange
PAUL KANGAS: Next week, lawmakers on Capitol Hill are expected to roll out proposals to overhaul the country's health care system. President Obama wants to hold down costs and provide health coverage for 50 million uninsured Americans. To help make that happen, one idea in the works is what's called a health insurance exchange. In tonight's installment of "Reviving the Economy," Dana Bate explains what that exchange might look like and how it would work.
DANA BATE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Whether it's shopping on eBay or searching for a phone plan, Americans love a good deal. But if you decided to shop around for a health care plan today, chances are it wouldn't be easy. Health economist Linda Blumberg says that's because the health insurance market is broken.
LINDA BLUMBERG, HEALTH ECONOMIST, URBAN INSTITUTE: It's kind of the wild, wild west out there, particularly in the non-group insurance market, but also in the small group market and people who are making purchasing decisions don't have the information they need to make good choices.
BATE: That's why she and many others in the health care community want to bring a sheriff to town in the form of a health insurance exchange. The idea is to create one-stop shopping for health insurance. Consumers could go to this insurance marketplace, compare local plans, find out what government aid is available and figure out which plans are best. Former Medicare director Mark McClellan says an exchange would spread risk across plans so that it's easier and cheaper to insure more people.
MARK MCCLELLAN, DIR., HEALTH CARE REFORM, BROOKINGS: So the idea is to try to set up a system in which people could have guaranteed access to coverage that they can afford, that doesn't necessarily charge them more just because they have existing health problems.
BATE: So who would be eligible to use this exchange? That's for Congress to decide. But to start, the exchange would probably focus on small businesses and individuals who can't get insurance through their employer. How much the government will regulate the exchange is also a question.
MCCLELLAN: On the one hand, you want to try to give people clear, comparable choices, so anything that you can do to simplify the range of choices and the number of choices can potentially help with that. On the other hand, the point of competition is to encourage people to be able to sign up for plans that do health care better.
BATE: Blumberg worries too little regulation could lump high risk people together, defeating the system's purpose.
BLUMBERG: The way that insurers behave is in their interest to have the lowest cost, lowest risk enrollees in their plans. The more that they can differentiate the plans that they're offering, the more they can attempt to attract individuals of different risk.
BATE: Lawmakers also need to decide who would run a health care exchange, whether there would be a single national marketplace or whether states would create their own. And, of course, there's the question of whether the government will offer its own health plan to compete with private insurers. Dana Bate, NIGHTLY BUSINESS REPORT, Washington.
"Market Monitor"-Ernie Ankrim, Senior Market Advisor for Russell Investments
PAUL KANGAS: My guest "Market Monitor" this week is Ernie Ankrim, the senior market advisor for Russell Investments and welcome back to the NIGHTLY BUSINESS REPORT, Ernie. Good to see you.
ERNEST ANKRIM, SR. MARKET ADVISOR, RUSSELL INVESTMENTS: Thank you, Paul. It's a pleasure to be here.
KANGAS: I'd like to hear your thoughts on the May employment report.
ANKRIM: Well, obviously, better than the market expected coming in. But I think we're getting to point now where just not as bad as we expected is not going to work for this market. And that's why I don't think the market -- although in the early time took off -- actually couldn't finish the day strong. So we've-- we've come a long way since March 6, 90 days ago. The Russell 2000 is up 50 percent. The Russell 1000 is up 40 percent. The emerging markets up 60 percent in those 90 days so I like this. I like that things are getting better but we need to see things actually getting good and not less bad for me to be a little more confident about this market going forward.
KANGAS: What is your outlook for the price of oil, Ernie?
ANKRIM: I think it's possible we could get up as high as 80, but I don't believe we're going to resume the sort of astronomical prices we saw in the summer of 2008. This is out of strength and a little bit of weakness in the dollar from financial liquidity in the system. But I don't think there's a sustainable level above 80 for oil for some time.
KANGAS: The housing industry seems to be a key to any economic recovery in the nation. How far away are we from a recovery?
ANKRIM: Defining recovery is a little tough, Paul. I think that we're not going to see home prices rise for some time, but I think it's conceivable, early this next half of the year, we'll see prices bottom and from that point on stabilize for the next couple of years and that will get the job done for us.
KANGAS: Given all of these factors you've just mentioned, what is your stock market outlook? Are you a cautious bull or a reluctant bear?
ANKRIM: I like cautious bull. Like I said, we've come a long way in a short period of time, and I'm suspicious about anybody that believes the market goes straight up. But I do believe good things are coming for us later in the year on the economic front and as the market comes to see those, I believe that the equities will appropriately compensate us for that.
KANGAS: So there you are, a cautious bull indeed. Now on your last visit, December 19, you gave our viewers three buy recommendations. Let's see how they've done since then, Wyeth (WYE) did very well, 18.8 percent gain. That was a takeover, was it not?
ANKRIM: It was, Pfizer.
KANGAS: That was a good recommendation. Wells Fargo (WFC) can't seem to get out of its own way, down 15.8 percent. Would you buy it here?
ANKRIM: We hold it now. We still like it as a financial but, admittedly, that early March was no time to be in financials.
KANGAS: And you had one other recommendation and that did extremely well, Qualcomm (QCOM), up nearly 30 percent. I congratulate you on that one. Are you still with it?
ANKRIM: Yeah, we hold that. We still have strong expectations for that stock.
KANGAS: And you would buy more of it here
ANKRIM: It's a little pricy now but it's still one of our bigger holdings and we certainly wouldn't want to sell any that we've held up to this point.
KANGAS: Let your profits run, that's old saying and a true one.
ANKRIM: That's right.
KANGAS: How about new recommendations, Ernie? ANKRIM: The risky one I have this time Paul is Nike (NKE). I'm suspicious about the U.S. consumer, but I believe the non-U.S. consumer part of their business is going to be strong and the stock has been penalized appropriately for the weakness in the U.S. economy.
KANGAS: Well, they have a huge global imprint and that's what you like about it apparently.
ANKRIM: I do and especially on the Asian side, I think that there's greater strength there than in the U.S. and they're well positioned in that market.
KANGAS: How about a second selection?
ANKRIM: Well, Lockheed Martin (LMT), they have a great dividend really, relative to five-year Treasuries and they've got a long book of business in place. Again it's not too consumer sensitive and I like that.
KANGAS: OK, quickly now, we have time for one more choice.
ANKRIM: Goldman Sachs (GS), I think financials are going to get better as we go forward and they find themselves as almost a monopoly on the lead in mergers and acquisitions that will be back in our life before 2010.
KANGAS: OK, three selections and interest and Ernie, do you own any of these securities personally?
ANKRIM: No, only in the form of mutual funds I hold in my retirement account.
KANGAS: And they in turn hold these stocks, so indirectly you do own them.
ANKRIM: That's right.
KANGAS: OK. Our time has run out unfortunately, but thanks for being with us once again. It's been a pleasure.
ANKRIM: It's always fun Paul. Thank you.
KANGAS: My guest, Ernie Ankrim of Russell Investment.
"Last Word"-Coke Goes Green
SUZANNE PRATT: And finally tonight, they say things go better with Coke, but green tea? On Monday, Coca-Cola is rolling out a tea-flavored Coke in Japan. The drink contains antioxidants, leaves a slight green tea after taste and is aimed at young health conscious women. Coca-Cola is by far the leader in the cola market in Japan, but non-carbonated bottled drinks like green tea are catching on. And catching up is Coke rival Pepsi. Early (ph) this month in Japan Paul, Pepsi is rolling out a new cola flavored with, get this, with basil. And I only have one thing to say and that is yuck.
KANGAS: As the old saying goes, what will they think of next?
PRATT: Absolutely. Whatever happened to lemon, a simple lemon?
Paul Kangas' Stocks in the News
PAUL KANGAS: Wall Street opened narrowly mixed as investors viewed the pros and cons of that employment report. But they gradually warmed to the idea the figures were consistent with a recession winding down. By noon then, the Dow posted a 60-point gain, with the NASDAQ up six points. The general market turned choppy this afternoon as the NASDAQ lagged the overall market, so the day ended the way it started -- narrowly mixed. The Dow Industrial Average closed up 12.89 at 8,763.13. For the week overall, the blue chip index rose four times, fell just once, had an overall gain of 262.80 points. That's 3.1 percent. The NASDAQ Composite lost .60 ending at 1,849.42 today. It was up just twice this week, down three times, but it still gained 75.09 points on the week. Standard & Poor's 500 Index fell 2.37 ending at 940.09 today and for the week overall, the S&P gained just about 21 points. Over in the bond market, the 10-year note fell a full point to 94 5/32, lifting the yield at 3.84 percent.
Most active big board issue on 46.8 million shares, Bank of America (BAC) down a penny. The company did confirm CEO Ken Lewis will appear before a House panel this coming Thursday to answer questions about Bank of America's acquisition of Merrill Lynch.
Citigroup (C) in there with an $0.11 loss. The "Wall Street Journal" reports the Federal Deposit Insurance Corporation is pushing for a shakeup in top management, including CEO Vikram Pandit.
GE (GE) $0.21 loss there.
The Travelers (TRV) managed a $0.13 gain.
Ford Motor (F) showed no change on the day.
AIG (AIG) a $0.07 gainer.
Wells Fargo (WFC) a $0.38 drop.
Regions Financial (RF) an $0.08 loss there.
Pfizer (PFE) down $0.13.
And JPMorgan Chase (JPM), tenth in volume, down $0.80, even though Credit Suisse brokerage upgraded its price target on JP from $35 to $42 a share.
Alcoa (AA) moving up $0.25. The recent surge in aluminum prices has been boosting the stock nicely in recent days.
Another Dow stock, Dupont (DD) off $1.71. Merrill Lynch downgraded it to "under perform" on concern over the stock's rather high valuation according to Merrill.
Merck (MRK) down $0.51. The company's experimental heart failure drug failed to meet the goals that it was set out to do in late stage trials.
Mastercard (MA) down $0.72. Yesterday, the company's president said the worst is yet to come for the credit card industry, but today, Standard & Poor's upgraded Mastercard from "hold" to a "strong buy" and boosted its price target by $40 a share all the way up to $225 a share.
Nike (NKE) up $0.75. The Robert Baird brokerage upgraded it from "neutral" to "out perform" because of the company's global reach.
Harley Davidson (HOG) losing $1.24. Citigroup downgraded it from "hold" to "sell" mainly because it sees an outlook of weak retail sales for Harley.
Jackson Hewitt (JTX), the tax preparation service, up $1.95. Positive reaction to the company's naming the former head of its rival H&R Block as its president and CEO. Oppenheimer upgraded Jackson stock from "market perform" to "out perform."
And Rio Tinto (RTP) up $11.08. The company is walking away from its $19 billion deal with Chinalco. That's the big Chinese aluminum company and instead, it's going to sell $15 billion of common stock and use the proceeds to slash debt and launch an iron ore venture with BHP Billiton.
NASDAQ's most active, Apple (AAPL) $0.93 gain. The "Wall Street Journal" reports Steve Jobs has apparently returned to the company after a leave -- a medical leave.
Then Google (GOOG) up $4.04.
Cisco Systems (CSCO) $0.20 gain.
Microsoft (MSFT) was up $0.31.
Research in Motion (RIMM) advanced $0.69. The Barclays bank boosted its price target on Research from $80 to $104 a share and rates the stock an "over weight."
Express Scripts (ESRX) up $1.05.
Intel (INTC) $0.21 loss.
Baidu (BIDU) up $10.67.
Qualcomm (QCOM) an $0.11 gain there.
And Amazon.com (AMZN) was up $2.04.
Elsewhere in NASDAQ trading, we had a big gainer, Palomar Medical Technologies (PMTI) up nearly 53 percent. The FDA approved the company's over the counter marketing for its laser device for treating wrinkles around the eye. Analysts see that product adding $12 to $40 million to the company's annual revenues. The company incidentally is partnering in this venture with Johnson & Johnson.
Those are the stocks in the news tonight.
