Interview: Alcoa
>> merrill lynch is giving more responsibility to five of its 11 regional sales directors and has offered less senior jobs to the other six, all according to an internal memo. merrill named the five to new roles as divisional directors, according it a memo sent to employees this week by senior vice president dan sontag. merrill did employ more than 14,000 brokers as of july 1 and robert mccann replaced james gorman as head of the business in june. gorman was hired by morgan stanley in august to revamp its brokerage business and the firm plans to expand its number of regions to 30 from 11. merrill, note, is a passive minority owner of bloomberg l.p., parent of bloomberg news. the securities and exchange commission investigating senator majority leader bill frist’s order to sell all of his shares of h.c.a. frist’s office confirmed the probe is underway. frist instructed trustees managing his assets to sell shares of h.c.a. in june and a month later, the company missed earnings estimates and the share price tumbled 15%. h.c.a. says the u.s. attorney’s office in manhattan has subpoenaed documents the company says are related to the frist stock sale. h.c.a. is the biggest u.s. hospital chain, founded in 1968 by thomas frist, the senator’s father, along with the senator’s brother. alcoa says third-quarter earnings will fall below analysts’ estimates because of lower prices and higher energy costs, joining other companies that in the past week or so have named the same reasons as they reduce profit forecasts. for more on the story, we bring in june grasso.
>> ellen, alcoa has meanty of company―plenty of company, avon products, u.s. steel and estee lauder. the world’s biggest aluminum maker is one of the companies blaming higher energy costs and hurricane katrina for eroding earnings. alcoa says profit from continuing operations may fall as low as 27 cents a share, far below the 44-cent analysts’ estimates due to significantly higher energy prices. natural gas rose to a record this week as hurricane rita headed toward production rigs in the gulf of mexico.
>> natural gas started up in june and you could see it coming. these companies use a lot of energy. we’ve had three steel companies preannounce, same reason. there’s going to be a few more.
>> joining alcoa, u.s. steel said third-quarter profits will fall below analysts’ estimates because the cost of natural gas and scrap prices are both increasing. leggett and platt, maker of mattress springs and furniture parts blamed higher raw materials and energy costs. brunswick, world’s largest builder of recreational boats said falling confidence, high fuel prices and hurricanes may hurt sales. estee lauder cut its profit forecast. on tuesday, avon products, world’s largest director seller of cosmetics, said profits this year will miss its earlier forecasts because of hurricane katrina, higher fuel costs and weaker-than-expected sales outside the u.s. some analysts say higher prices at the gas pump and for winter heating fuel may further limit consumer spending. bartowf america cut earnings estimates on dozens of consumer companies because of the likelihood higher energy prices will hurt the amount of money for discretionary purchases.
>> thanks so much. time for a world and national news update. three million people have been evacuated in texas and louisiana as hurricane rita approaches. mark crumpton joins us with details.
>> with rita forecast to come ashore near beaumont and port arthur, texas, saturday, residents in the path heeded warnings from emergency management officials. in houston, many were stuck for hours in bumper-to-bumper traffic. some cars ran out of gas. houston mayor bill white had this advice for people stranded.
>> if a person is on the side of the road, all of our emergency response capabilities and metro is mobilized to get people off the roads to a safe place.
>> although the storm did lose strength on friday afternoon, officials in galveston are concerned that a storm surge could penetrate the city’s 17-foot high sea wall built in
点击播报
Listen Market briefing -- Ellen (slow)
Rita --- Allan (slow)
Bankers & traders --- Adrian (slow)
“after the bell.” i’m ellen braitman, 30 after the hour. let’s recap the day on wall street where stocks ended little changed, erasing earlier declines as hurricane katrina was downgraded to category three and oil prices ended lower. the dow losing two ponents, s&p―two points, s&p essentially unchanged -- ank as we continue our coverage of rita moving toward the gulf coast, there are new estimates of the potential insured damages. insurance stocks rallied as the storm lost strength and veered from the direct hit earlier anticipated on galveston and houston. allan dodds frank joins us with this part of the story.
>> even as normal tides from hurricane rita caused levee breaching in new orleans, insurance stocks gained on the notion that rita may not be as bad as katrina was. the s&p property and casualty index rose almost 3% on the day although falling 1% for the week. the initial estimate from eqecat for potential damage from hurricane rita is from $9 to $18 billion, representing totals for just potential wind damage from which the hurricane, some forecasters will say, will hit as a category three storm with waves surging 15 feet or more. by comparison, eqecat estimates hurricane katrina did $15 to $24 billion in wind damage when it came ashore august 29.
>> if rita takes its worst track, it is likely to cause very high insured damages but probably not as high total economic losses as katrina because you’re not likely to see the amount of flooding, certainly, that we saw from katrina.
>> still, the potential of a rita-katrina double whammy underscores the difficulties in understanding storm damage losses and understanding how the industry will handle them.
>> as we look forward and look at the cash available to make the claim payments over the next 12 to 18 months, if you have a rise in interest rates, there’s a like load hood a number of these insurance companies would have to sell assets into a rising interest rate environment and the impact to assets could be greater from the losses from hurricane katrina and could be exacerbated by hurricane rita.
>> insurance offices inc. estimates combined claims of as much as $78 billion from the storms will deplete 19% of the $402 billion in surplus or cushion that u.s. property and casualty insurers have for unexpectedly high claims.
>> thanks so much. as we switch gears, record profits on wall street mean more jobs. merrill lynch, goldman sachs, bear stearns hiring the most bankers and traders in at least five years. let’s get more on the story right now, joined by bloomberg news reporter adrian cox. let’s start off with why are they looking to hire so many people?
>> the reason is because they’ve been having very good profits this year and much better profits than they were expecting. one of the big reasons for this has been that the third quarter which tends to be a generally slow time during august actually turned out really rather well and a lot of bankers found they weren’t going on vacations as they expected but instead were in the office or troubling their families by tapping away on blackberries the whole time so as a result you saw third-quarter earnings at bear, the best third quarter it had ever had and lehman and goldman sachs had the best quarter they’d ever had which is upbelievable―unbelievable for a quarter that tends to be the slowest for the year so going forward it looks as though it will be a record year for all the brokers, as well.
>> let’s talk about the areas of strength that the companies had that boosted sales and profits to records and where specifically recruiting is happening.
>> recruiting is happening in the lower levels, in the associates, analysts, people straight out of business school so we’re expecting to see something like a 5% gain in hiring on those big brokers in those kind of areas but when you actually look at business areas that the hiring is occurring, principally it will be in those areas where the increase in the economic activity is helping out things like banking and then also because of the great rise of oil prices over the last couple of years and things like commodity trading, as well.
>> so, reflecting essentially when you―what you see in profit and earnings reports?
>> absolutely. it will be a time when people who can be in the areas where there are particularly quantitative areas like equity derivatives and credit default swaps and so on, people with ph.d.’s in path or―math or economics or engineering, those people are very much in demand and headhunters are seeing a 10% gain in the recruiting they’ve been doing this year and that has an impact on compensation.
>> let’s talk about that compensation. i saw in the story that common coming―someone coming out of columbia with an mba making $95,000 as a starting salary.
>> we were speaking with the head of recruiting at one of the business schools in paris who was saying that this has been within of the first times they’ve seen a lot of the wall street firms recruiting there because they are desperate to get new people in and as any business school graduate knows, if the demand is increasing and the supply is about the same, then the price will go up.
>> thanks so much, adrian. adrian cox from bloomberg news who covers the financial sector for us here. rita, as we’ve been talking about, coming less than a month after hurricane katrina struck the gulf coast. when we return, we’ll look at how the world’s largest home improvement retailer is preparing. carl liebert joins us straight ahead.
