Market briefing --- Matt (slow)
Microsoft --- John Bernum --- Chairman of Burnham Securities (slow)
FED --- June (slow)
NYSE --- Deb (fast)
>> microsoft planning to return some of the $56 billion in cash it has been sitting on, returning that money to investors. shares up over $1, just about 4% in extended haws trade. the software maker says it will buy back as much as $30 billion of its own shares over four years. it’s also set to pay a one-time cash dividend of $3 a share. microsoft will also switch from a yearly dividend of 16 cents a share to a quarterly dividend of eight cents a share, thereby doubling its regular quarterly dividend de facto. microsoft has said that sales growth may be the slowest ever next year, led to renewed calls for returning cash to investors.
>> a surprise that the growth rate will slow. but that doesn’t really mean that they’re not going to continue to be able to generate lots and lots of cash and in fact increase the amount of cash that they generate.
>> to give you an idea of how much cash microsoft has, last year it generated more free cash than intel, exxon-mobil, wal-mart, all combined. on the phone right now, for reaction, is john bernum, chairman of burnham securities in new york, owner of 25,000 shares of microsoft. the market clearly pleased in extended hours with the microsoft moves. your thoughts and insight on this decision?
>> first of all, it’s 125,000 shoirs owned in the fund which i manage. i don’t own it personally.
>> correct.
>> i do own it personally, but not that much. i was pleased with about what microsoft did and i was really expecting it to happen. rick sherwin of goldman sachs has been right on this story since i would say early june, something like that. and we have had microsoft, have added to it substantially for all of our accounts. they have so much cash there at microsoft, they couldn’t really continue to sit on it forever. in a sense it belongs to the shareholders. and they haven’t been doing anything with the cash so now they’re doing something to it and buying $30 billion worth of stock over the next four years, puts a floor under the company.
>> some would ask you, japanese -- japanese, this means microsoft doesn’t know how to invest money and they’re handing it back to investors.
>> $55 billion is an awful lot of money and the financial industry is full of companies that have tried to spend their cash by making acquisitions and so on and so forth and a huge number of those acquisitions have turned out to be ill-advised and i think microsoft is sticking to what they know best, which is their business. and i think their business is very good, this is a huge, mature company. it’s difficult to grow their sales.
>> our thanks to you, jon, appreciate your coming on and joining us with instant reaction, jon burnham. checking on the bond market here today, we saw continued declines as the fed chairman signaled. that the federal reserve is on track to continue to raise rates rates. yield up, 4.44 on the 10-year note. jon burnham alan greenspan, of course, just finishing his testimony to the senate banky committee and june grasso is here with a summation of what was said.
>> thank you, matt. those well known words or now well known, at least, measured pace, once again the heart of what greenspan said. the federal reserve chairman spoke of a growing economy and a slowdown in consumer spending that’s only temporary.
>> inflation also seems to have been boosted by transitory factors such as the currently in energy prices. those higher prices, by eroding households’ disposable income, have accounted for at least some of the observed softness in consumer spending of late, a softness which should prove short lived.
>> other signs of slowdown in june was just a blip, greenspan says job growth is looking stronger this month versus june where a disappointing 112,000 jobs were created. he says there is no evidence of a slowdown in home sales with the economic expansion headed toward growth this year of 4% to 4.75%, greenspan says he can raise rates at a “measured pace.”
>> if economic developments are such that monetary policy neutrality can be restored at a measured pace as the fomc expects, a relatively smooth adjustment of businesses and households to a more typical level of interest rates seems likely.
>> next year, the federal reserve expects a slowdown in g.d.p. growth to a range of 3.5% to 4%. the economy and jobs are top issues in the presidential campaign and greenspan joined other fed officials in predicting that june’s disappointing data would be an aberration. he sees the unemployment rate dropping to 5% to 5.5% by the end of next year.
>> busy afternoon, thank you, june. deb kostroun, of course, as she always is, down at the big board tracking what was moving markets there today. it was the largest gain in a month. deb?
>> corning, that helped lead gains among technology companies. in fact, corning, the biggest gainer on the s&p 500. that after saying second-quarter profit beat analysts’ estimates. on the losing end in the s&p 500, the auto stocks. auto stocks like ford, general motors lower. ford said second-quarter profit almost tripled because of record earnings from vehicle loans and investors saying really, hey, we’d like to see you make more earnings from selling cars. general motors, their earnings released before the opening bell tomorrow. auto parts, interesting, when we’re talking about automakers, 10eco automotive, biggest maker of vehicle shock absorbers, saying their second-quarter profit rose and revenue climbing to a record $1.1 billion. and housing starts fell in june to their lowest level in a year and the bloomberg home building index, tenuous yesterday, falling again today. we did see homebuilders as the yield on the 10-year note actually was easing but over the last couple of days, much concern about the slowdown we could see in housing because of rising interest rates. also, insurance stocks really moving today. convarium holding, a swiss reinsurer, reported an unexpected second-quarter loss and said they may have to ask shareholders for more money to boost capital eroded by u.s. casualty claims and after that statement, moody’s investors services placing the company on review for possible downgrade so insurance stocks on the losing end today. computer services like ceridian, they were suppose to release earnings today. this is the provider of payroll and benefits administration. they postponed the release of second-quarter earnings because they are reviewing costs in human resources businesses.
>> thank you very much. we’ve been talking a lot about charles schwab today, led by the founder and namesake of that company. once again, it is so. the c.e.o. has been asked to leave.
