Market briefing---Lane (medium)
Government's case against top executives---Su (fast)
>> welcome back to “world financial report”. the final half hour for the day. i’m lane bajardi, and we take another look at how wall street finished up the day. a rise at the end of the session very clearly on that intraday chart there. the dow jones industrial average up 1%, 92 points at 9,310. s&p 500 same story, after that fed decision things moved higher by 9 3/4. nasdaq composite up to 1,687. sideways trading before the decision, moving higher after. the most actives on the new york stock exchange, reliant resources and pfizer moving lorks e.m.c. corp better by 10 cents. and a check on u.s. treasuries with if 10 and five-year notes moving on that fed rate decision keeping things in check for the time being. the 10-year note yielding 4.3%. all right. the three-year note now at 2.3%, up 3/32. on the short end we saw movement higher barely. and on the long end things moved lower. in the meantime a quick look at currency trading on the dampt things have been changeable throughout the afternoon. they were essentially unchanged against the euro/dollar and yen just a few minutes ago. now movement once again. bonds are in the “fair value zone for where the fed is, and where the economy is. so says pacific investment management company fund manager paul mcculley. he also expects the rise in bond yields will hit consumer spending.
>> i think good growth here in the rest of 2003 is more or less baked in the cake as the refinancing cycle that really got turbocharged in the spring will be playing out here in the second half of the year as americans turn their houses into a.t.m. machines. you also have the physical stim lups coming through right now, so i think you are fine for the second half of this year. but once you get into 2004, i think the backup in interest rates really will shut down the a.t.m. on the home and consumers will not be able to effectively take seconds on their house to support their spending.
>> now, mcculley expkts economic growth between 3% to 4% in the second half, but says it will slow next year. even so he says fiscal policy will put money in people’s pockets. plus he says there are signs of a return in communicate spending so bond investors will need to be cautious.
>> looking out over the next three, four years, i think you will have a bear for the simple season, a bear market in bonds over the next three years is a sign that the fed has succeeded in reflating our economy, that print moyng has gotten traction, and i think that would be good for overall in our economy, even though it means that bond investors have to be circumspect reduce their durations and fall in love, as we have, with those things called tips.
>> tips are treasury inflation protected securities. as mcculley points out tips are the only asset class where the government guaranteed real return. the price of crude oil in mork was little changed before a u.s. energy department report coming out tomorrow. close to $32.a barrel. there is the chart of the past year for crude oil. gold futures closed higher for the first time in seven darks $358 per order. it’s been more than a year since the two biggest frauds in corporate history. worldcom and enron wiped owl billions in assets and worker pensions. su keenan joins us with a closer look at the government’s case against the top executives there bernie ebbers, ken lay and jeff skully.
>> some securities lawyers and former federal prosecutors now question whether the worldcom and enron chief executives will ever face trial. former assistant u.s. attorney robert mince says he thinks there is a definite sense that the people most responsible will nerve charged. robert litt, a former associate u.s. deputy attorney general says the reason they haven’t been indicted is the government doesn’t have the evidence at this point. let’s review. there is bernie ebbers, the former c.e.o. who transformed a small discount phone company into worldcom, the second biggest u.s. phone service before it went bankrupt. he has yet to face criminal charges, but is the subject of a class action civil suit for securities fraud. there is also ken lay, the former enron chairman. he is the most likely of the three to escape prosecution. according to defense attorney thomas moore, yet moore says he believes both ebbers and jeffrey skilling face indictments. you are looking at skilling, the former enron c.e.o. investigators hope to prove helped cause the company’s collapse under $67 billion of debt. moore says the government is likely teeing its time compiling all the paper, in this complex case. he also thinks prosecutors can place enormous pressure on former associates. the chief financial officers of enron and worldcom along with a dozen other executives have been charged with fraud. enron’s andrew fastow was charged with multiple kounds kounts. both fastow and scott sullivan of worldcom pled not guilty.
>> there is no such thing as a country club prison for the likes of a fastow or sullivan. any prison to them is hard time. they have a big incentive to cut a deal. that’s what i’d be worried about if i were representing those men.
>> still many in the legal community say without the help of sullivan and fas tau, the prosecutors will have a tough time proving fraud. marcel ka hone, a securities professor at new york university school of law says the question is if the financial statements are fraudulent, who is responsible? in other words, what did the c.e.o.’s know and when did they know it? he says it’s entirely plausible in both cases that the prosecutors don’t have the evidence to prove fraud beyond a reasonable doubt. stay tuned. this is a story bloomberg will continue to follow. lane.
>> indeed we will. su keenan. our next guest expects the economy to grow 4% in the second half of the year. jim glass marngs senior economist at j.p. morgan securities is going to be here to tell us why.
