Economic recovery---Su (fast)
Natural gas
Interview: McDonald Investments---Aydin, Jack---Managing Director / Partner
>> the good news is the u.s. economic recovery is still growing. but not as fast as the second half of last year according to the latest data. december was the ninth straight month of growth for companies in the services industry. sue keen be has this report.
>> most economists echo the view of the citicorp chief economists which shows a robust economy overall, just not as robust as the last quarter. the institute for supply management survey indicates more expansion as you can see by all of the green. it was the ninth consecutive month of growth but the pace was slower than in november. any reading above 50 signals growth. the commerce department said november factory orders fell for the first time in three months as you can see by the red box. the drop was expected though given the drop in bookings for computers and electronics products. together the reports reflect a slowdown in economic growth in the final three months of 2003. that is when compared to the previous quarter. as you may recall third quarter growth represented the most robust expansion in almost 20 years. a senior economist at r.b.c. in chicago estimates fourth quarter growth at roughly 4%. that is still faster than the average quarterly growth in that record decade of expansion that ended in 2001.
>> the overall message is that the economy has very good momentum coming into 2004. it looks like the third quarter of last year was a little higher than what we should expect going forward. but there are very few things we see on the horizon that could derail the economy at this point.
>> he continues to believe that federal reserve will hold interest rates steady for the near term for the better part of the year, he says. traders say the latest economic data reinforces that notion and helps accelerate a rally already under way in the treasure are market. the tone-year note with its biggest gain in a month. the currency markets the dollar fell in the eighth day in nine. season englander says it will likely continue the slide and indications from the fed that u.s. interest rates will stay show a supporting factor.
>> i think the fed is trying very hard to communicate in realtime to the market and avoid the problems they experienced in the middle of last year when they seemed to be saying one thing and did another. they are trying to calm the markets and say we are getting good growth numbers but at this point the numbers haven’t been strong enough for us to begin to think about raising rates.
>> back to you, matt.
>> moving on, energy prices soaring and the next guest says he is bullish on energy stocks , particularly the natural gas stocks in early 2004. he is more cautious later in the year because he expects energy prices to come down from their current levels. jack aydin oil industry analyst at mcdonald investment joining us now in the studio. why natural gas? and put together a 10-year chart of natural gas, but why that and why only in the beginning part of 2004? that is a 10-year chart by the way.
>> first, the weather has a lot to do with it. and also crude prices are up, they are providing lots of support to natural gas prices. and economic growth fueling demand. so a combination of all of these is helping natural gas proo prices to rise during the first quarter.
>> so longer term you would make your money in the early part of the year and get out?
>> well, i think you have to look in the long term. prices will be on average for the hire than the 10 year average and higher than the past two or three years average. so we are looking for 465. that is not bad for natural gas.
>> which is well below where if is now.
>> definitely, because it is high due to the weather conditions. it not sustainable. you will see demand destruction if prices say low.
>> why do you like b.p.? what is the reason you like them? it is up 25% over the past 12 months, pays about a 3 1/2% dividend.
>> it cheaper on enterprise value, production growing much faster than peers and benefiting from high crude prices, natural gas prices and from geographic mix of product distribution.
>> do you think they have bitten off more than they can chew in russia?
>> no, i don’t think so. i think they did a nice move in russia, smart move and i think it will prove to be one of the pest moves they made because that’s the only area that is going to see a lot of growth in production.
>> so you think oil, changing gears, you think oil should be at $25 to $26 a barrel, not $32?
>> the fundamentals don’t justify $32 a barrel. there is extra supply in the market and at some point things will gravitate to the mean and we are --
>> opec will allow the price to go back it $25?
>> i’m not sure opec can manage supply if will is excess supply in the market. they try anyway.
>> unfortunately, we are tight on time. i would like to try to keep you on. that is jack aydin oil analyst at mcdonald investments. car makers unveil all types of new cars at the north american auto show. toyota introduced a new fuel efficient model for the u.s. we will look at that and a lot more coming up.
