Brookings Institution---Frenzel, Bill---Scholar
>> the acting secretary general estimates that capacity will triple by 2010. he said that the cartel’s 11 members are spending $11 million on exploration and production. he says spare capacity is about two million barrels a day coming to the united arab emirates and nigeria.
>> according to the programs of expansions in a number of member countries, this spare capacity is due to increase substantially by the end of the year and this will continue in the medium term to between now and 12010 to the region of almost five to six million barrels a day.
>> he also says the oil market is pretty well supplied right now and the price escalation according to him has to do with factors other than the supply and demand. and watch for gold to rally this week. that is the outlook of about half of the 30 traders and investors and analysts we spoke, to prices fell a percent last week. but seven of those people that we surveyed advised selling gold. eight were neutral. investment demand for gold has sent prices surging 25% just this year alone and much of the demand has been driven by the dollar’s weekness against the euro and the yen. investors quo do say, though, that continued pressure on the dollar could keep gold going higher. one of the top story this is morning is the treasury secretary john snow who is stepping aside so president bush can make another change. he has nominated hank paulson to be treasury secretary.
>> hank will also be an important representative of the united states on the international scene. as an investment banker, he understands the importance of opening new markets for american exports. he will insist on fair treatment for american businesses, worker, and farmers. he will help ensure that the trading partners play by the rules. respect intellectual property rights and maintain flexible market -based exchange rates for their currencies.
>> and hank paulson, the chief executive officer at goldman sachs was picked, as we just heard there, by president bush to proceed john snow, and on that we have a member of the brookings institution and bush’s tax advisory panel and a former u.s. congressman who joins us from washington, d.c. this morning. bill, welcome to the program.
>> thank you, suzy.
>> what are your thoughts on having paulson replacing mr. snow?
>> mr. paulson comes highly recommended and obviously as a first rate executive, experienced men from his firm in the treasury as good omen, i think, and i hope it will be a very successful run for secretary designate paulson.
>> nonetheless, though, what we have seen with secretary snow over the last several years is that treasury became really a salesman, a marketing for president bush’s policies which pretty much were conceived and were done at the white house and not necessarily at the treasury department. do you expect that that is likely to continue under a hank paulson?
>> i hope not. this administration isolated secretary o’neill and then secretary snow from sort of the insider’s determination of economic policy. i think that’s a mistake. the secretary of the treasury ought to be involved and all of those men had the capacity to be involved. so i hope that the secretary paulson with a fresh start will be able to become more of a white house insider than his two predecessors were. both of them good men, but i don’t think well used.
>> what about the idea, again, that the treasury secretary at least under john snow, i would think the counterpoint of time was traveling the country and talking about the economic policies and talking about the bush plan and really marketing and doing a sell job for what’s going on in the u.s. economy. it is said that hank paulson is not such a good orator and not such a comfortable public speaker. how vital is that going to be for this role and for this juncture right now? especially for the bush administration coming on an election year.
>> well, i don’t think the people of the united states expect the secretary of the treasury to be a brilliant orator. i think they would like him to speak with authority ton president’s policies, and i believe that traditionally we have thought that the secretary of the treasury would have something to say about the construction of those policies. and i think mr. paulson has all the equipment necessary to do that. john snow was a good salesman. he was a good executive. he was a good secretary of the treasury. but it is quite obvious that he was, while not a stranger in the white house, he was not allowed to participate in much of the important economic decision making.
>> and why will paulson have more parties patory role than snow?
>> well, i say that in the spirit of optimism that the people who are in the white house now will understand that they need the secretary’s experience and expertise to help them form economic policy. and they will understand that our country has been used to the secretary performing this vital role over the years and will want him to do so again.
>> well, how much change would we expect? the economy according to most people is actually doing relatively well. and there was some surprise that you had this change in the economic team and really with not much time left for this president.
>> i think that is true, but if it is also true that mr. snow was never fully accepted as a member of the team, the economic team, at the white house. then maybe it will be an important improvement to have a man who would be accepted. remember, there are other new players and the white house and probably some who have changed their opinions as the president’s popularity has declined, so i think a fresh face and a fresh intellect will be healthful to the administration.
>> it is said the job was offered to several people on wall street, any of them who have declined mitt, i think, for possibly for one reason because of that situation with john snow. what do you think the administration had to do where paulson who is a wealthy man in his own right with a lot of power on the streets as it is. what could they do to lure him to d.c. to give all that up?
>> awe traditionally the treasury stair is after sate and most important defense. that is a wonderful thing to offer to any person. but if you take sew figs kated persons to whom it is offered, they will insist on having part of the policy determination and i suspect that’s what had to be done to get mr. paulson to come down this late in the second term of the bush administration.
>> all right, bill. thank you very much. we appreciate your insights today.
>> thank you.
>> our thanks to bill frenzel, a visiting scholar at the brookings institution. topping the world and national news, kimberly dozier is injured in a iraq car bombing and is in critical but stable condition this morning. michelle makori has the details from the news desk.
>> good morning. doctors say dozzier is responsive. she is moving her toes and doing as well as can be expected after two surgeries today. she was hit by a car bomb and flown. the cbs war reporter is being treated at a landstuhl medical center, the u.s. military’s largest overseas hospital. doctors have removed shrapnel from her head, but they say that the most serious injuries are to her lower body. the blast in iraq killed cbs cameraman paul douglas and soundman james brolan. iraq’s new government may demand the extradition of u.s. marines who allegedly killed 24 civilians in the city of hadaifa and reportedly covered it up by blaming insurgents. the u.s. military is investigating the incident. u.s. officials say they are preparing for the possibility that iraq may demand that the marines be tried there setting off a confrontation with the u.s. iran is pressing ahead with its nuclear development. the country’s foreign ministry spokesman says that halting or stopping uranium enrichment is not on the agenda. but at the same time, a.p. reports that iran has signaled that it will study your european proposals to tend crisis. hopes are fading of finding more survivors from indonesia’s earthquake. over 5,400 people were killed in saturday’s quake. nearly 200,000 are homeless. and thousands of survivors are believed to be in need of medical care. energy aid has been trickling in. ok, suzy. that is an update. back to you.
>> thank you, michelle. still ahead, we will find out what strategists make of the nomination of hank paulson for treasury secretary.
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Listen On the market---Suzy (fast)
NYSE --- Julie (slow)
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Week's key stock movers --- Bob (fast)
>> the u.s. confidence report drop this is month the most we have seen since hurricane katrina hit last september. the consumer board index fell 6% as americans felt the higher borrowing cost impacts. and goldman sachs c.e.o. hank paulson is the president bush’s pick for treasury secretary. warning flags are up for some economist who is say that strong global growth is building inflation pressures and raising the risk that tightening by central bank wills lead to a hard landing. as for the stock averages, they are digesting this information and as a result, we are seeing the dow joneses off nearly 100 points. the s&p 500 is now down about 10 point. the nasdaq is off 20 points, so you are looking at about ¾ of a percent decline almost across the board. we’ve got connell mcshane at the nasdaq for us. and we got julie hyman at the new york stock exchange. het’s go to them to find out what they are watching this morning. julie?
>> thank, suzy. i am watching in particular one group that is bucking the down trend today. and it is a source that you don’t normally look to for rising in a down market . i am talking about newspaper publishers in particular today watching the tribune that publishes the “l.a. times” and “chicago tribune” and owns 26 local television station. it is authorizing a stock buyback program of up to $2 billion and says they plan to sell some assets in order to prop the shares up. shares are higher today. however, they are down by about 18% for the past 12 months. the c.e.o. of the company, by the way, says they could see asset sales in the next few weeks or months. however, the cubs, they own the chicago cubs, are not up for sell and assets in the top three markets are not up for sale. the company also seeing some job cuts. other publishers and not getting merely as wutch of a bump up for tribune, knight ridder, new york time, and other newspaper watchers that we are watching. and they have performed similarly poorly down about 8%. we have seen a lot of migration away from the stocks over the past 12 months as well as the past couple of years on the perception that internet advertising is taking precedence, although many of the newspapers have substantial internet advertising themselves. however, they have seen some declines for the particular stocks. the declines have brought the price to earnings ratios considerably lower for the various companies. tribune trading at 15 times forward earnings. ga net about 11 and the new york times 15 ½. the s&p 500, by comparison s trading almost 15 times, so about on par with that, but some considerably less. the profit margin, in the meantime r relatively high. the tribune about 20% of the pretax margin. mcclatchy and new york times all pretty much on par. and again to give you a little bit of a comparison there, je is about 16 -- general electric is about 16%, so some of those seeing a higher pretax profit margin. kind of an interesting move that we are seeing especially given the historical performance over the past year or so. we have seen the continuing trend that the nasdaq is the underperformer and we have connell mcshane taking a look at that and individual underperformers as well.
>> that is right, julie. with a couple of days to go and trading in the month of may is the time to illustrate how much the nasdaq has been underperforming. if you look at a chart of the composite over the past month, you get an idea how much it has pulled back relative to what the s&p 500 has done and relative to what the dow jones industrial average has done. the nasdaq composite index is down 5-plus percent in the month of may already. last check was about 5.6% factoring in the decline we have seen today and there it is 5.68 decline of .9%. if i run through some of the individual stocks that are leading to the decline, i have been talking to traders and money managers and in a market that is more risk averse, it does not bode well for many technology stock. x.m. satellite radio is down 28%. funny that lehman brothers upgraded the rival sirius and says sirius should not have fallen as much as it has in sympathy with x.m. and the last one, electronic arts, the video game maker i wanted to take a look at in that it’s interesting because it missed the first quarter sales estimates because of the delay of key video game consoles such as playstation iii. and one trader was saying playstation iii and even going further to the vista operating system from microsoft, those delays are hurting nasdaq stocks. later in the year when we get closer to the launch date, maybe we’ll see a turn around.
>> all right. thank you very much. and oil back over $72 a barrel after iran is pressing ahead with the nuclear program. for more on today’s session, we send it to su keenan at the new york mercantile exchange.
>> we have been a dollar higher in crude this holiday-shortened week. the three themes appear to be iran, opec, and the hurricane season. let’s take a look at the one week chart for crude and a week ago we were at $69 and under $69, so we have about a $4 move. fimat’s john kilduff calling the latest word from iran that they are likely to meet in a meeting with no brief commissioners who call this breathless rhetoric and a reminder that iran can either move frieses higher with any kind of headlines that come out of this supposed meeting. also, take a look at gasoline. the gasoline contract set to expire as the month ends. gasoline some 13 cents higher than we were seven days ago. of course, analysts are limited by the fact that we have gained 4% in u.s. stockpiles over the last few weeks and imports from 12%. take a look at natural gas quickly. we are moving off the 15-month lows that we have seen. we are back above the $6 mark after dipping below the psychological mark last week and the week before. a big theme this week as we look for thursday, opec meeting in venezuela. will they maintain the current output? of course, raising it could lower prices and many analysts believe they will hold steady and we also have the beginning of hurricane season on thursday. that’s when a lot of traders on floor put on their meteorology hats and start guesstimating how the stoms could come at us.
>> let’s take a break. when we return, reaction to president bush’s new choice for treasury secretary.
