Interview: Senior investment Strategist and Portfolio Manager with Deutsche Asset Management
>> crude oil, gasoline and heating oil fell for a fourth straight day on expectations u.s. inventories will jump as hurricane wilma heads away from the nation’s oil fields. crude oil at the close, here, checking the bloomberg. this is for the week, now, crude oil down 3% or $2, to $60.63. among the other energy movers, gasoline up over 1.5%, 1.6%. heating oil down almost .2% and natural gas futures down .8%. it looks like oil is likely to continue to head lower. of the 40 analysts surveyed by bloomberg, 60% -- 68% say prices will fall next week, the most bearish forecast since our survey began a year and a half ago. 8% say prices will rise and 1/4 of those surveyed forecast little change. on to earnings, one week down, yet still more to go. joining us now with this week’s corporate america scorecard and preview of what’s to come in the weeks ahead is arnim holzer, senior investment strategist and portfolio manager with deutsche asset management, helping to manage about $3.5 billion, joining us in our studio today. welcome, arnim. we had more than 2/3 of the 171 s&p 500 companies reporting third-quarter earnings. how is the market shaping up for earnings next week?
>> we’ve had a pretty good earnings season so far. there have been minor disappointments here and there but we think the season is shaping up pretty well. i think the expectations at the beginning of the year may have been a bit high, given what’s happening with energy prices, derrick―derek, i think we have to be more reasonable but generally despite compositional difference, certain sectors doing better than expected and certain doing worse, i think the general tone of the market from the earnings point of view is pretty good.
>> we had earnings yesterday and today. google was a notable yesterday. are you more positive in that sector given the positive report?
>> we think tech has come in fairly well. there was a little bit of a disappointment around intel although the numbers weren’t that bad, the market overreacted a bit. we think what the market is doing now with tech is look at an earnings perspective more realistic, annual growth rates more like 18% to 20% rather than the 30%-plus. given that change in investor expectation, we think tech companies are doing well and beginning to spend cash more intelligently, dividends and buybacks across the sector so we feel more comfortable about tech which is the first time in quite a while.
>> would you advise your clients in tech?
>> it’s time to start nibbling a bit there and take longer term positions particularly what’s happening in the cash side, moving towards dividends and m&a, there’s good activity there.
>> on monday, we have merck and schering-plough coming out on monday. i know you look at the healthcare sector. how do you feel about that?
>> healthcare for us has been a little bit of an underweight and actually quite a bit of an underweight last year and we’ve been reducing that underweight. we’re beginning to feel some of the bad news is out. we ihink the pipeline discussion is understood by the market . we think cost containment, rationalizing the size of sales staffs, the mergers and acquisitions, so getting that done correctly we think the biotech area is interesting and medical device area is interesting so all in all for healthcare, we think organic growth is good and that’s a place to start looking if you’re an investor.
>> any biotechs in particular?
>> we have an overweight for genentech, very good pipeline, executing well.
>> what’s your concerns? any concerns for any sectors?
>> well, on the consumer discretionary side, has been a difficult sector to really understand. it has got a lot of heaviness to it right now primarily because of autos. there’s over three million auto workers, related auto workers in the country and that’s going to impact consumption numbers. i think the auto sector has done very well over the last couple of years with low interest rates. clearly, interest rates moving up will have more of an impact there. the delphi bankruptcy. so it will take a while to see how that gets ferreted out but some of the retailer numbers on the other side of consumer discretionary have come in pretty well. the luxury side has been exceptional so our sense is you have to be careful there, don’t throw the baby out with the bath water. we would have a tendency to underweight consumer discretionary but be careful with the sub categories.
>> a hurricane brewing in the gulf likely to hit florida. do you expect volatility in the markets as a result?
>> this hurricane doesn’t seem to have the same danger in terms of the oil and gas infrastructure that the prior two did. i think the insurance company numbers are already taking into account a bigger-than-expected hurricane season so i don’t expect to see greater down drafts in some of the insurance names but we haven’t seen if it really is going to hit with the force that katrina hit so i don’t want to speculate too much but i think the insurance numbers seem to have that in there and the oil and gas complex seems safe for now.
>> arnim holzer, senior investment strategist at deutsche asset management. thank you for joining us. when we come back, google stock price jumped to a record today and investors say it will continue to climb. how much higher can it go? we’ll find out after the break. this is bloomberg “after the bell.”
点击播报
Listen Market briefing --- Derek (slow)
G.M. --- Brian (slow)
Nasdaq --- Robert (slow)
NYSE --- Deb (fast)
i’m derek davis, this is “after the bell.” shares of google soared today to a record after the company’s sales and profit beat the most optimistic of expectations. we’ll hear from robert gray at the nasdaq for the google story. settling in on the closing numbers, a reduced earnings projection from caterpillar weighed on the dow jones industrial average, which lost 65 points to 10,215 -- general motors chairman rick wagoner spoke out on the future of gmac, speaking with brian sullivan at g.m. headquarters in detroit earlier today. it was an exclusive interview. this is the first question to wagoner, has g.m. spoken with interested buyers for gmac?
>> we had a list of people that we thought would be the prime candidates. it’s a huge transaction and it’s also a transaction that, not being a purchase, but a strategic partner arrangement, needs to be someone who understands what our vision for gmam is and the relationships that are important and would be comfortable with that so on that basis we put together what we thought was a good list and have had a chance to talk to them and i think we’ll have interested parties but it’s a highly complex transaction, a massive potential transaction, so at this point, real early to speculate on the likelihood of success or timing.
>> how many of those potentially interested parties are private equity firms?
>> i don’t want to comment on who bhib on the list―might be on the list.
>> as i understand it, standard & poor’s would prefer to see gmac’s controlling stake, if sold, go to an auto finance company or big bank with an auto finance arm. do you think you need to stipulate to that or would you be open to any potential buyer?
>> we have a specific objection in the transaction, which is to improve the credit rating of gmac to improve the access to funds and cost of their funds which is critical for them to support the auto business and grow their other businesses so we’ll try to do a transaction which plishs that and -- accomplishes that and the people we see as primary partners will enable us to do that but time will tell.
>> do you have an end date as to when you would like to finalize the deal? do you have a date on your mind?
>> no, we’ll move as expeditiously as we can. realistically, it is a big deal and won’t happen from one day to the next.
>> what do you think of the credit rating agencies?
>> well, they’re independent agencies that make their calls. i think they’ve been tough on us.
>> too tough?
>> they’re going to make the calls they want. it doesn’t matter what i think. they make the calls they do and the result of the calls they’ve made have put us under significant pressure and led to the need to rethink our gmac strategy. we think we can come up with something good out of it but it puts pressure on that.
>> we will have part two of brian’s talk with rick wagoner at the bottom of the hour. google’s record earnings fueled a rally leading the nasdaq to its first weekly gain of the fourth quarter. bloomberg’s robert gray has details from the nasdaq marketsite in times square.
>> the nasdaq composite thinkhing the―finishing the week with a gain, the seventh consecutive friday we’ve seen a gain for the nasdaq composite, finishing higher for the week, as well. wednesday we saw 1.7% gain followed by a better than 1% decline on thursday before friday’s advance of .7%, putting it over the top as a gain for the week. internals on friday’s session, advancers outpacing decliners and volume at about average, 1.8 billion shares on the nasdaq. moving back above the 200-day moving average in friday’s session. google definitely inspiring the rally in the session after reporting a sevenfold increase in profits, sales doubling to a record above more than $1 billion in the third quarter, topping the most bullish analysts’ estimates for earnings and revenue. yahoo also posting a modest gain as well as baidu.com, referred to as the chinese google as google owns a 2.5% stake in baidu and ebay shares bouncing back from their declines on thursday. internet stocks the strongest group in friday’s trading, up nearly 3% on friday’s session, helped by the software, the philadelphia semiconductor index moving higher. the hardware index was weak in the session. research in motion, a large part of that. they lost an appeal for a stay in their patent case with n.t.p. they wanted to halt the proceedings while they appealed the case to the supreme court. the federal court of appeals rejected that request and faces a possible court order to halt blackberry email service in the u.s. sandisk helping the rally, third-quarter profit doubling for sandisk on increased consumer demand for storage of digital music, photos and information. a big week for earnings next week. earnings from the likes of microsoft, x.m. satellite radio. at the nasdaq, i’m robert gray.
>> today’s decline in the dow does not tell the entire story. for more on today’s trading action, here’s a report from deborah kostroun at the big board.
>> the numbers really do not tell the story today. mainly because here at the new york stock exchange, advancers outpaced decliners two to one so we had more stocks up than down and you might ask why was the dow jones industrial average lower? it was really caterpillar. take a look at the laggards in the dow jones industrial average. caterpillar, that chopped off 41 points in the dow. not only was it the worst performer in the dow but also in the s&p 500 after the company lowered its 2005 profit forecast, pfizer also down for a second day. it’s once again at an eight-year low, the stock declining after slashing their 2005 profit forecast yesterday and withdrew their 2006 and 2007 projections. looking at other areas in the market , forestry, weyerhaeuser up on the day. this is the world’s biggest lumber company, saying third-quarter profit fell 52% because of lower lumber prices. the company said they would close a pulp plant and lumber mill in washington to reduce costs. energy stocks a big story this week. oil and energy stocks down 5% this week. for the month, those were the worst performers this week in the s&p 500 and for the month, it has not been very nice to the energy stocks. exxon down 13%. chevron down 13% and conoco down 7%. you have to remember we had those two block trades over the past week selling exxon and chevron shares at $57 a piece. while we did see many of the energy stocks performing quite well in today’s session, we did see a rebound but even exxon, even chevron, still below the $57 mark where we saw the block trades. best performers in the s&p 500 on the day, the telecom group. at&t, they reported earnings, of course being bought by s.b.c. they had earnings beating expectations and also s.b.c., the biggest gainer in the dow jones industrial average. i’m deborah kostroun at the new york stock exchange for bloomberg news.
>> refco has filed more papers with bankruptcy court asking the judge to approve final sale of the company by november 11. the federal bankruptcy court has scheduled a hearing monday morning to address the company’s requests. allan dodds frank has been following the story and joins us with more.
>> refco says that given the fragility of its business, it needs to be sold quickly. the company outlined the procedures it wants for the auction of its assets by bankruptcy judge robert drain. the court documents refco proposed a november 4 deadline for the last bid to be received and asked the judge to select the winning bidder by november 11. that is the day j.c. flowers set as a pullout date if its deal is not accepted. on october 17, refco tentatively agreed to sell the regulated portion of its futures brokerage to flowers for $768 million. thursday, interactive brokers of greenwich, connecticut, filed a $790 million bid. both bids are tied to the value of regulated capital refco had on its books at the time of the sale and therefore could change as the company continues to examine its books. the units have not filed for bankruptcy but are subject to judge drain’s jurisdiction.
>> flowers’ bid is what’s known in our industry as a stalking horse bid and people play strategy games as to whether they come in early or late in the bidding but on the day of the hearing, there will be a requirement for a deposit ahead of time, qualification, and there’s a bidding war in the court back and forth.
>> refco asked the court to set minimum increases of $2 million between bids. as for phillip bennett, former c.e.o. of refco who faces criminal charges of securities fraud, the next court date is october 31. he is expected to appear before a u.s. magistrate.
>> thank you very much for that. still ahead, we will wrap up this week’s earnings and look ahead to next week with arnim holzer of deutsche asset management.
