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Interview: Wilmington Trust---Farr, Dorsey---Portfolio Manager

>> welcome back to “after the bell.” money manager mario gabelli says u.s. stocks will gain 5% or more next year, driven in part by mergers and acquisitions. he predicts m&a activity among utilities, industrial parts makers and financial companies.

>> i like some themes, simple themes, for the next 10 months, 12 months, dividends and deals. higher payout ratios and from the point of view of deals, corporate love making is alive and well and every day you come in, you’ll see another match made in heaven.

>> he recommended shares of nstar, the largest utility in massachusetts. and maker of jet engine parts in new york, sequa. gabelli is chairman, chief executive and chief investment officer of gameco investors. stocks closed mixed today as fresh economic reports painted a rosy picture of the u.s. economy. our next guest says he’s cautious about the market and sees major headwinds for stocks in the year ahead. dorsey farr, director of asset allocation and portfolio strategy is our guest, overseeing more than $26 billion, coming to us from our atlanta newsroom. welcome. we had three better-than-expected economic reports released today along with a decline in oil prices. why didn’t the stock market respond better?

>> we’re in one of those funny periods where the market seems to react negatively to good economic news because they’re more concerned about what that means about future interest rates and obviously the interpretation today is that the fed is likely to continue raising rates in response to the strong economic data. >> that would account for the bond market ‘s decline?

>> i think so.

>> you think this is the case where the stock market is perhaps priced in all of this strong economic news?

>> well, they may have but probably what is more the case is that recently we had the minutes from the most recent fed meeting released. and the market , both the stock and bond markets jumped on the notion that the interest rate hikes were coming to a close maybe sooner than expected. that was because of language in the minutes, indicating some members were concerned about taking the rate increase says too far. but that seems like the market may have set themselves up for a negative surprise here because now we’ve got strong economic data suggesting that the fed will likely raise rates at both the december meeting as well as the january meeting and take the fed funds rate to 4.5% and clearly that was not a welcome piece of news.

>> if those rates do come in, what do you expect―what could a catalyst be to get the rally back on track?

>> we’re actually―we’re fairly cautious, as you mentioned, right now. so things that could make the market rally, i suppose, are if, indeed, the fed did slow down their rate hike or stop sooner than expected, if we had some very strong fourth-quarter earnings data, but our expectation is that the market may have some trouble in 2006 and that’s going to be due to a number of things. you have earnings growth that we think will slow down substantially next year, we’re at very high profit margins today and we think margins will come down a little bit. we’re going to see, we believe, interest rates go higher. that typically is not good for price-to-earnings ratios and think about the fact that if the fed does go to 4.5% by the end of january, the federal funds rate will be more than 2.5 times the dividend yield on the s&p 500. that’s not a recipe for going more heavily into stocks so we’re trying to advise our clients to be more cautious with regard to their investments, particularly the equity markets .

>> were you at all encouraged by today’s consumer confidence for october report showing a huge rebound there? any chance this might offset concerns?

>> i think that’s encouraging to see. it was widely expected, according to our outlook, because we think the recent fall-off in confidence was largely due to hurricanes katrina and rita. and this was likely to be a temporary fall-off and confidence usually comes back quickly. we’ve had rising stock prices and falling gasoline prices. those two alone are enough to cause a rebound in consumer confidence. so i don’t think that’s much of a surprise. it is nice to see it and it probably suggests that the christmas holiday season may be good for retail sales and for consumer spending, but we don’t think that’s powerful enough to overcome the cyclical tendencies of earnings growth which we believe will slow down over the course of the next 12 to 18 months.

>> dorsey, we know it’s your company policy not to comment on specific stocks but you told us you’re overweight on international holdings versus the u.s. why?

>> that’s correct. we see two things about international we like. number one, the valuations. if you look at the developed international markets or the emerging markets relative to the united states, you see more attractive valuations from a relative point of view there. whether you’re looking at the price-to-earnings ratios or price-to-cash flow, all sorts of metrics suggest that international markets are more attractively valued than domestic markets . second, we see strong momentum in certain international markets rather than the domestic market so the wind is at your back if you’re an international investor right now.

>> we appreciate it, thanks for joining us today.

>> thank you.

>> again, our thanks to dorsey farr of wilmington trust. when “after the bell” continues, as gold approaches $500 an ounce, the demand for natural gas is damaged by climbing prices. we’ll investigate coming up.
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Listen Market briefing ---Lori (slow)
Economy preview -- Peter (slow)
NYSE --- Deb (fast)

economy and a butiant picture in the u.s. consumer confidence, new home sales, durable goods orders all surpassed forecasts. first, a check of the closing numbers -- investors concerned the fed might continue raising interest rates more than earlier expected. tomorrow could produce more evidence the u.s. economy is resilient. the government released the second reading on third-quarter gross domestic product. economists surveyed by bloomberg say it will likely show the economy grew at a faster pace than first reported. peter cook is in our washington bureau with a preview.

>> economists say tomorrow’s g.d.p. report should show the economy took the shocks from hurricanes katrina and rita largely in stride, likely growing at the fastest pace in a year, providing momentum for the current quarter and next year. the gulf coast hurricanes and high energy prices that followed slowed the u.s. economy from july soseptember but business at the cheesecake factory did not take the long-term hit first feared.

>> when katrina happened and gas prices peaked, things did slow down and i think for everyone and they’ve been slowly coming back so we see them improving right now. certainly, our numbers are showing that.

>> economists say the government’s latest reading on third-quarter gross domestic product should show the overall u.s. economy weathered the gulf coast storms better than first reported. the median forecast in our latest bloomberg survey indicates the economy probably grew at a 4% pace, up from the original 3.8% and 3.3% rate in the second quarter. while the storm was very damaging to new orleans and the southern gulf coast, the bottom line is, it did not knock the economy off course and in fact we will continue to see strong growth for many quarters into the future.

>> adding to growth in the quarter, stronger spending on construction, retail goods and business inventories, outweighing a wider trade gap in the period. some economists doubt the economy can maintain a 4% growth rate into next year.

>> i think the economy is moving into a more advanced stage of the business cycle with growth in the 3% to 3.5% range than the 3.5% to 4% range. not a substantial range but enough to move us into the lower end of the economy’s underlying potential range.

>> based on the initial g.d.p. report, the third quarter marked the 10th straight quarter growth has exceeded 3%. you have to go back to 1986 to find a longer string. tomorrow’s report will be released at 8:30 washington time.

>> more, now, on the consumer confidence report released earlier today. confidence rose in november by the most in more than two years due, in part, to falling gas prices. bloomberg’s june grasso is here with details.

>> those lower gas prices increased confidence and consumer spending and came after the record prices seen following hurricanes katrina and rita. the conference board’s consumer confidence index rose to 98.9, from a revised 85.2 in october. that’s far above economists’ average estimate of 90.2 in a bloomberg survey.

>> consumers are more optimistic than they were when the hurricane news was all over the place but right now i think people are getting more comfortable with the notion that the economy is not going to be thrown seriously off track by the effects of high energy prices and the aftermath of the hurricane.

>> consumers splurged over the thanksgiving weekend at discount retailers such as wal-mart. leading the national retail federation to say this will be the second biggest holiday selling season since 1999 and the component of the index that tracks consumer expectations for the next six months increased to 88.8 in november from 70.1 in october, the biggest gain since april 2003. still, the latest average retail price for a gallon of gas is 11% higher than a year ago. and the gauge of consumer confidence is well below the 105.5 mark in august. before the effects of the recent hurricanes were measured.

>> we have rising interest rates, you still have those winter bills that have yet to meet the christmas bills. income growth is not expected to be that great. so while we should be able to sustain levels of spending, there’s not much pointing towards a pickup.

>> auto sales fell last month after soaring during the summer months due to discounts. and lynn franco of the conference board says much depends on what happens with the auto industry, a major piece of consumer spending. november car and truck sales come our way on thursday so we should learn more. back to you.

>> thank you. in addition to the confidence report, we also had better-than-expected readings on new home sales as well as durable goods orders. new home sales unexpectedly rose in a record in october, suggesting people bought homes in anticipation of even higher mortgage rates in coming months. purchases increased 13%, the biggest rise since april 1993 to a 1.424 million annual rate. september’s number was revised to a 1.26 million pace. checking the bond market , treasuries fell the most in almost three weeks today. the 10-year down 19/32, with the yield pushing up to 4.48%. shorter end of the curve, the two-year yield pushing up to 4.39%, the price down 4/32. talking about durable goods orders, nice rebound in october, rising more than double what economists estimated. excluding the volatile segment of transportation equipment, orders also climbed. in the currency market today, the dollar was stronger versus all three major currencies. the dow got off to a good start but slowly the gains withered away throughout the session. deborah kostroun filed this report from the new york stock exchange.

>> we did have a lot of really good economic reports, the consumer confidence rising by the most in two years. those new home sales were up. but the idea for many traders is that we probably can’t sustain, say, a 13% increase in new home sales that we saw last month. and even though confidence was up, it really didn’t translate into better retail sales over the thanksgiving shopping weekend and so that was one of the big concerns, even though we did have good economic report, the market couldn’t sustain the big gains earlier in the session. is there more trouble ahead for general motors? b.n.p. paribas saying that the probability of g.m. filing for bankruptcy protection in the next two years rose to 50%, citing low vehicle sales and poor mixture of products. standard & poor’s, saying ford’s debt, already rebow investment grade, has be further lowered by one level because of their north american operations. worst performer in the s&p 500 on the day, calpine, lower after the c.e.o. and c.f.o. stepped down. the board of directors seeking a new direction. the company struggling to repay $17 billion in debt. calpine stocks and bonds dropped to all-time lows. merck saying that the company may win its first federal trial over vioxx. merck fended off a state court challenge earlier this month as the man that took vioxx twice as long as the man in this case. u.s. steel, one of the biggest gainers on the s&p 500 today, added to j.p. morgan’s focus list by analysts there, predicting the stock may reach $77 within 18 months as pension costs drop and investors recognize higher value for the flat-roll business. i’m deborah kostroun at the new york stock exchange.

>> a little more on merck. the third trial over damages for vioxx opened in a houston federal courtroom today with plaintiff’s lawyers claiming merck hid risks known before the drug hit the market . the plaintiff is a 53-year-old florida seafood salesman who died of a heart attack in 2001 after taking vioxx for only 23 days for lower back pain. merck’s attorneys said irvin suffered from clogged artery, overweight and a sedentary lifestyle that triggered the heart attack. the family says that merck failed to disclose the side effects that could lead to heart attack. merck has one victory, one loss under its belt with some 6,500 vioxx cases filed so far. fresh reports showed stronger growth for the u.s. economy but our next guest says investors should be cautious. stay with us.

Interview: University of Maryland---Byrne, Patrick---Chief Executive Officer

>> earlier the u.s. treasury released a report on whether china’s government manipulated the value of its currency. joining me from washington with his take on the report and why he believes the administration should label china a currency manipulator is peter morici from the university of maryland. welcome to the program.

>> nice to be here.

>> i gather from the notes you thought the administration, as i indicated, should have labeled china a currency manipulator, but tell me what that exactly means. don’t every country control its money supply, which could be a form of manipulation? don’t lots of countries buy and sell their own currency to affect foreign exchange?

>> we all have to issue new money each year, but china goes onto foreign exchange markets and sells its currency to keep its value low. last year china purchased about 12% of its g.d.p. in u.s. government securities. it spent about $205 billion on government securities to keep its currency low. this constituted 33% on its subs sydney from exports. this is major manipulation. it’s been going on with increasing force year after year for the last 10 years and is causing major distortions in global trading. as the report says it does. however what the report falls short of doing is calling it what it is, currency manipulation.

>> i wanted to show a six-month chart of how china’s yuan has performed compared with the dollar along with other currencies like the euro, japanese yen and british pound. what it shows is over six months, china is the only-on it chinese yuan is the only to have appreciated against the dollar, suggesting some of us to say maybe we should consider a trade war against japan or england or europe instead of china. those currencies have fallen.

>> it’s perfectly reasonable that their currency fall at value in times and rise in value at times. if you drew a chart the last 10 years, you find the val uste chinese currency has not moved much at all, where other currencies move up and move down. china has a rapidly growing current account surplus, about 6% of its g.d.p. in order to sustain this it buy as lot of foreign currencies which means it gets the exports and no one else does.

>> are you saying manipulation of the currency by money supply is ok and foreign exchange trade is not ok? what if they dumped a lot of yuan on the market and increased money supply than sted of this trading, would that be better?

>> no what i am advocatesing they do is let the market determine the price of their currency. as the europeans do, as we do.

>> republican senator lindsey graham and democratic senator chuck schumer are considering a bill to put a tariff on chinese imports. i want to know from your perspective how much u.s. inflation would that trigger? are you for that?

>> i don’t think it would trigger a great deal of inflation. if you go back to the 1980’s we had run-ups in the currency, rundowns in the currency. currency values can move quite a bit without causing domestic inflation. if you look at the oil economy because they sell their oil in terms of dollars, fluctuations in the price of oil have the aquiffle lent effect. we had a dramatic increase in oil prices in the last year. now they have fallen back a bit. we haven’t had much change in u.s. inflation. other market adjustments will absorb this. i don’t think we have anything to fear by letting markets determine the price of the chinese currency. we let markets determine the price of so many other things. are you advocating or supporting the notion we shouldn’t have markets determine the price of currency? government should set them and manipulate their money supply to accomplish that end?

>> what you acknowledged is all companies manipulate their supply. >> you said that and tried to paint me into a corner. let me be clear with you, if you would let me, please. all countries have to expand their money supply each year to accommodate their needs of trade because their economies grow inside so you need more money to accommodate that. that is not manipulating currency. if you are advocating governments don’t print money, then --

>> that’s ok. i am just asking questions. the u.s. has been claim for years a weak yuan presents risks to the chinese exi, but the chinese don’t seem to be buying into that idea. if you were a chinese policy maker, would you believe―why don’t they see the risk to their economy we claim exist wts a weak yuan?

>> you are asking me to support or justify another person’s words, which i don’t care to do. the chinese leaders are motivated by the desire to create lots of exports and lots of employment in coastal areas to deal with unemployment on the farm, so to speak. by maintaining an undervalued currency, they can accomplish this objective. also if they unhinge the currency and let it find its market value, this will cause adjustments within the chinese economy and will allow it to be more market driven and cause the communist party to have less control. one thing to remember is that paramount in the mind of chinese leaders is maintaining control.

>> we’re almost out of town tfment i appreciate the spirited debate, our thanks to peter morici of the university of maryland. when we come back after the quick commercial break, the third largest drug maker has plans to cut 7,000 jobs. we’re talking merck.
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Listen Market briefing --- Bob (fast)
Semiannual foreign exchange report -- Peter (slow)
NYSE --- Deb (fast)
Nasdaq --- Robert (slow)
Home sales --- Suzanne (slow)

report whether china’s government manipulates the value of its currency. we are standing by for the treasury international affairs undersecretary tim adams to hold a news briefing on the semiannual foreign exchange report. headlines are crossing. let’s go right to the treasury department where peter cook is standing by.

>> thank you, bob bowdon. i have the report in my hand. the report concludes for the 11th year in a row, no u.s. major trading partner has been designated as a currency manipulator and that includes china that. will disappoint some members of congress and u.s. manufacturing community who say china is clearly manipulating its currency to the detriment of u.s. workers and businesses. part of this report cites progress china made with regard to its currency. specifically the decision to drop the almost decade-long peg to the u.s. dollar saying that was an initial step for china. u.s. will be watching carefully to see how much further china is willing to go with regard toiths currency. i want to read from a statement accompanying the report from treasury secretary john snow. he says kine’s adoption of a new exchange rate mechanism was an important step. while china has taken additional steps to further open capital markets . its progress is limited and so far slow to be sufficient. the system is highly restricted. distortion and risks still persists. further more, the exchange rate ridgedity continues to dampen flexibility in the entire region. it is imperative china moves toward greater flexibility as quickly as possible. the treasury will focus on china’s progress implementing the exchange rate flexibility its leaders repeatedly introduced. we expect much more here at the treasury department news conference and to take question abouts this latest assessment from the u.s. treasure rifment

>> thank you, peter cook. just quickly to get reaction in currencies. checking our currencies to show you where they are moving in response to this report on the china’s currency. this is an intraday moving cart right now of the chinese yuan. what it shows is this currency has not moved much in six months. 8.0825 yuan to the dollar. if you look at a six-month chart, this is the day in july when they had the revaluation. we had some―by the way, as this chart moves lower, that is the yuan gaining value against the dollar. there has been some appreciation of the yuan against the dollar. not significant compared to that reval that took place in july. we’ll get more reaction from peter maricci at the university of maryland later in this half-hour of the program. the initial euphoria over the holiday shopping season evaporated, knock the stock market from a four-year high. dow down over .3% on the day. the s&p 500 down almost .9%. you see in particular the intraday chart where almost at the lows of the session on the s&p. similar with the nasdaq. pretty much a movement downward throughout the session. that is the worst of the three indexes, finishing down more than 1% on the day. lots of disappointment in the market today from lackluster retail sales over the weekend to also news from merck. deborah kostroun joins me from the floor of the new york stock exchange.

>> thank you, bob. what we’ve been seeing over the past 1 1/2 months is a drop in gasoline prices. many people, as we were getting ready for this holiday shopping weekend, people thought we might see better retail sales. while we did see some scounlters performing well, it was disappointing when you get to some of the mall-based traffic. that led to a little bit of inflation here in the market . remember, we’ve been going very strong for the past five weeks. also it was merck, the biggest drag in the dow jones industrial average on the day. this was―they lost about 5% on the day. largest loss since august. revenue will be fall buying $2 billion. their patent expires next year on zocor, their best-selling drug. merck going to be eliminating 7,000 jobs, closing five plants. you saw the drug stocks all lower in today’s session. also the first of four federal trials concerning merck’s vioxx painkiller. that begins in houston. also as we are talking about the retailers, remember the retailers have been some of the best performers over the past five weeks with this rally has been going on. however, we saw retail stocks some of the worst performers in today’s session. not only did you see some of the discount retailers like wal-mart, they had some good traffic, but it was the mall-based traffic where we saw a little bit of disappointment. a little bit of concern that some of the luxury retailers may not live up to their expectations. that always leads onto earnings as well. a little bit of disappointment there. bigger than expected drop in home sales that led to home builders lower. now we’ll check in with robert gray at the nasdaq.

>> nasdaq falling an even 1% on the session. it was below average volume. decliners outpacing advancers by a better than 2-1 margin. nasdaq has seen six consecutive week of advances. falling lower in this monday session. retailers leading the way lower here on nasdaq as well. take a look. you see american eagle outfitters and specially retailers falling. particularly large amount today. a.e. down 4.1%. we saw the online retailers, etailers and ebay falling today. ebay down 3% today. ebay had risen earlier. cibc saying they see their earnings trading above the firm trend forecast, but eventually falling lower with other names. google shares down 1.2% in today’s session. yahoo falling 2.5% today. yahoo shares downgraded to hold on valuation concerns. we see those shares falling today. apple computer rising to another record in today’s session. the shares closing up .5%. we are above $70 per share in the early trading today. piper jaffray raising their target for emup to $79 per share. you see that’s just about $9 and change where they stand at the moment. also reports electronics leading the way on some of the sales over the weekend. ipod one of the hot commodities with the christmas and holiday wish list. intel shares of smith barney out with a note expecting intel to raise the forecast to the higher end of their previous outlook in their mid quarter update coming on december 8. that helped intel shares in today’s session. one of the big decliners today in the biotech group. we saw american pharmaceutical partners shares plunging some 17.5% today. they make generic injectible medicine. the company is agreing to acquire its largest shareholder. the price tag $4.1 billion that. deal should close the first half of next year. the company says the combined company will be called abraxis bioscience. now back to bob bowdon.

>> thank you, robert gray. sales of previously-owned homes fell more than expected in october. suzanne o’halloran joins me with more on the numbers and what they may mean for tomorrow’s report.

>> october may have been the slowest month since march for sales of previously-owned homes. economists say it’s still the seventh highest reading ever. existing home sales fell nearly 3% to an annual rate of seven million as mortgage rates and prices rose. even so, economist scott anderson at wells fargo says the numbers are still pretty decent.

>> some moderation in the housing market aa peers inevitable. it’s important to note existing home sales are down in the months of october, they are still above where they were last year. they’ve been hot since april.

>> economist ian shepardson agrees and points out prices remain strong. median price of an existing home rose more than 16% to $218,000. that’s the biggest jump since july 1979. although prices are rising, so are supplies. there are now 14% more homes for sale than a year ago. that could be problemic if the market continues to slow. more data on housing tomorrow when sales of new homes are expected to show a slight decline to a 1.2 million annual rate. rising mortgage rates may mean the entire market is softening after a five-year boom. average rate object a 30-year mortgage was 6.28% last week, up more than .5% from a year ago. economists at mortgage company freddie mac says housing may be slowing, but it is still growing.

>> let me be very careful here. when i say it’s peaked, it’s the growth rate in the housing market peaked. we will continue to see growth in housing strong home sales throughout next year and probably through 2007. house price increases will continue to be very, very strong, but strong being in the 7% 208% range not the 10% to 12% range.

>> back to you.

>> thank you for that, suzanne. coming up after the commercial break, we’ll get reaction to the currency manipulation report with university of maryland’s peter morici.

Interview: Overstock.com---Byrne, Patrick---Chief Executive Officer

>> we continue our coverage of holiday retail, now focusing on the outlook for online retailers this holiday season. will high gas prices encourage consumers to do their shopping from home and how could increasing shipping costs affect margins? joining us with insight is patrick byrne, president of overstock.com, an online shopping site, joining us from salt lake city. thanks so much, patrick. let’s talk about this term “cyber monday” which i hadn’t heard about until today. what are you expecting for sales on cyber monday?

>> typically, the last two or three years, the monday after thanksgiving is the biggest or second biggest day of the shopping season. the biggest comes around june 13 -- i mean december 13 to 15. another interesting dimension of it is it’s typically men―what we’ve discovered is women are skewing earlier and earlier. they go online starting in early november and start doing their shopping. men are the guys who start really shopping cyber monday and on.

>> it’s still pretty early in the season, they can still get relatively cheap shipping rates. as it gets closer to christmas, do you find that your online retailing goes off a little bit because of shipping rates increasing?

>> not for us. what we do, is we start giving free expedited shipping on specially marked products. we usually surge around the 15th, 16th, 17th of december because we’ve always focused on picking clean, which means somebody can come in and order late in the season and we can still get it to them by christmas and we expedite for free a lot of the more expensive products, it makes economic sense for us.

>> we have been hearing about the gimmicks and gadgets and things offered including wake-up calls by kermit the sfrog for regular retailers. what are online retailers doing to attract customers?

>> most of them today are doing different shipping promotions. we have a dollar shipping promotion. most days, shipping is $2.95 for your whole order on our site. it doesn’t matter what you order, big screen tv, bed, whatever. today, it’s $1 for no matter how much you order. my research shows that amazon may be discounting books more aggressively than expected.

>> you mentioned amazon and books. i know that’s one of the things that does well with online shopping. what other products sell best online?

>> for us, we’re having―we have a lot of fine leather luggage that’s doing very well. a lot of fashion and accessories, meaning, very high-end clothing, armani and so forth. mulholland brothers luggage. we also have a diamond business that’s moving and all month we’ve been having corporate gifts, especially fruit baskets doing very well. and yesterday we announced something, the first of its kind, we have chrysler crossfires. you can go to our site, print off a coupon and it saves you from $7,000 to $9,000 with the coupon so you go to the dealer, no haggle and purchase the $30,000 car for $23,000.

>> better than a wake up call from kermit. what are the gas prices really doing to affect consumer shopping online? do you think they’re having an effect?

>> i do. i do. i’m fairly well insulated because i don’t drive very much but i’m amazed how much -- people are really cog cognizant of how much they’re spending to go to the mall. plus, i think that going to the mall is a hassle. i’ve done it maybe once in the last year and i just can’t believe, in my view, how low quality a shopping experience it is versus going online and buying something. we’ve had a surcharge―all of the carriers are adding a fuel surcharge to the etailers but we’ve decided not to pass it on to consumers. there’s no fuel charge baked into our pricing. but i think last year and especially this year, looking back people will say that’s the red letter daydate when online shopping stopped being a novelty but the first approach for many to the holiday.

>> how’s your auction site doing?

>> it’s actually―well, we will have done about $30 million this year, a little bit less than i hoped. but it seems to be picking up in the last couple of weeks, in particular because we’ve merged the search results with shopping so if you search for platters, you’ll find all of our discounted platters, our c.d.’s and dfted on the platters and the platters from the auction site merged into one result. that helps the demand for auction.

>> thank you very much, patrick byrne, president of overstock.com. when “after the bell” continues, the international olympic committee is promising zero tolerance and increasing drug test requirements for the 2006 olympic games in italy after a record number of dopg offenses.
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Listen Market briefing --- June (slow)
NYSE --- Deb (fast)
Bull market --- Daniel (slow)

“after the bell,” i am june grasso. let’s recap the shortened day on wall street. we start with the dow jones industrial average which closed up 16 points to 10,932. going along to the s&p 500, up three points to 1268. and finally, the nasdaq, up three points, as well, to 2263. it was a shortened trading week with the holiday, but that didn’t stop the major averages from posting some nice gains. deborah kostroun has more from the new york stock exchange. deb?

>> thanks a lot, june. of course, this week, it was a shortened trading week. we already closed in the dow jones industrial average here at the new york stock exchange, all the stocks closed at 1:00. looking at the dow for the week, up 1.5% for the week and that is now five weeks in a row that we’ve been seeing gains so that’s our best streak since september 2004 in the dow. the s&p 500 up 1.6% for the week, five weeks in a row, as well, on the gains there. so it’s our best streak since july. and the nasdaq was up 1.6% for the week and that was the longest streak since january of 2004. and as we’re talking about how we did for the week, take a look at how we’ve been doing so far this month in the major averages. the dow up 4.8% for the month, the s&p up 5.1% and the nasdaq posting a really good gain, up 6.8%. the s&p up over 5%, what we’re looking at, our best month in about two years. looking at what has been gaining this month, you have semiconductors, they’re up 13% for the month. those, some of the biggest gainers. one of the things we’re hearing about from semiconductor companies is they’re seeing a lot of growth in chip sales driven by demand for portable music players, mobile handsets and other electronic gadgets. consumer durables performing well. mattel this week saying it will increase its share buyback by $250 million and they left lift of lifted their annual dividend by 5 cents and transports hitting a record as jet fuel and oil prices have been falling. laggards so far this month, all of the auto-related stocks among the biggest laggards. also, food, tobacco and retail up just slightly. also, utility stocks up just slightly. you about the gainers this week pretty much mimics what we’ve been seeing all month and that was really semiconductors performing well, energy stocks performing well and also auto stocks. this was actually for the week although the auto stocks were the worst performers in today’s session.

>> thanks so much, deb. the bull market for u.s. stocks had its third anniversary last month and some strategists are saying the end is near for the rally, citing historical rally on the past bull market cycle showing this one is on borrowed time. daniel houck has been reviewing the data and he’s joining us to share what he’s learned. what suggests that the bull market is running out of time? is it just history or some other things?

>> just from a historical perspective, for investors that like to take their cue from history, from three different perspectives, the length of the stock market rally itself, the length of the economic expansion and length of the profit expansion, we’re looking a bit stretched. the current stock market rally is now over 1,140 days which means it’s almost a year longer than the average since world war ii. and a lot of what’s spurring the rally is a strong economy. right now we’re in the 48th month of economic expansion which is nine months short of what average economic expansions have been since world war ii. the stock market tends to anticipate economic downturns about six to eight months ahead of time so we could be running up against that barrier at the end of the year and finally, the expansion in corporate profits. for this quarter, analysts expect corporate profits to rise 12% to 13%, the 10th straight quarter above 10%, the second longest streak since 1950. so if you look at all those factors, you have some investors and strategists wondering how long it could continue.

>> suppose you were going to be an optimist, what is the case for the bull market continuing?

>> the case has gotten stronger in the past month. we talked today, with the advance we’ve had this week, much has been spurred by the pullback in oil prices and signs the fed may be close to ending its series of rate increases and these are factors that have really weighed on the market in the first part of the year and kept it from advancing further. you also have to remember that stocks tend to rally at end of the year. the s&p 500 has rallied eight of the past 10 decembers. and it’s not unprecedented for a rally to continue much longer. the rally we saw in the 1990’s lasted over 2,800 days so there are examples in the past where we have continued longer than the current rally. >> the latest leg of the rally, what’s the most interesting thing?

>> there’s a couple of things, one thing that could make investors more optimistic, this leg of the rally, especially since the end of october, has been spurred in part by retailers coming back, given the decline in oil prices and a little better outlook for consumer spending. also, financials have been doing quite well and that would make sense because of the anticipation that the fed might be ending its series of rate increases. the negative is that the breadth of the rally hasn’t been as good as we saw last week. there’s more stocks hitting 52-week lows than 52-week highs and that’s a reason for concern among some investors. >> thank you for joining us. still ahead, shoppers may be in stores today but many will be on line after the weekend. we’ll tell you what retailers expect from cyber monday. the president of overstock.com up next.

Nomura Asset Management---Jhaveri, Sanjiv---Vice President

>> the holiday shopping season unofficially kicked off today and retail stocks gained on momentum. the s&p and dow averages posted a fifth weekly gain. joining us to wrap up this week’s trading and look ahead to the rest of the year is sanjiv jhaveri, head of north american equities for nomura asset management, joining us from our boston bureau. thanks so much for joining us, sanjiv. will this rally last until the end of the year?

>> we believe that, yes, going into the holiday shopping season and into the year, and we expect the rally to continue for the next few weeks.

>> and what do you expect to be driving the rally? what industry groups?

>> the industry groups that we are looking at to drive the rally would continue to be some of the internet stocks and some of the technology stocks and we do expect the energy stocks to continue to be quite strong.

>> as far as things such as oil prices declining and interest rate speculation as far as the fed ending interest rates, consumer confidence increasing. how do you view those as part of the rally? if any of those drop out, do you see the rally dropping?

>> well, the expectation right now is that the fed will continue raising rates for at least the next three to four meetings or maybe three to four quarter percent so we are looking at anywhere from 4.5% to 5% rate before the rate raising cycle ends so in that case, rates will not be dropping out as a kind of a boost to the rally but if it continues to be―the expectations continue to be around half percent or a quarter of a percent more, then the rally will definitely continue. oil prices, if they go up from here, that may be a damper on consumer confidence. but as i understand it now, as things look now, it seems that will rally will continue and none of these things are likely to be negative going forward at least for the next few weeks.

>> what’s the biggest change that you’ve made in your portfolio recently?

>> under our policy, we would not discuss portfolio changes publicly.

>> what industry groups in particular do you think that investors should be avoiding at this time?

>> the investors, i think, should be avoiding at least the auto industry group and to some extent, utilities and materials groups for now. but going into the new year or maybe in the middle of next year, we should restart looking at some of the financials. the financials have already started outperforming the market and i understand, the rate raising cycle is expected to end some time in the first quarter to second quarter of next year, then financials should start outperforming quite strongly.

>> financials have been rallying as investors are looking at the flat yield curve. do you think their optimism is misplaced at this point in the rally?

>> well, i don’t think so. because in the past, like in the past six to nine months, before this financials rally started in, i believe, middle to late august, the market was extremely negative on financials and the financials had underperformed the market till then so the perception that the rates may stop rising, maybe after 3 quarters of a percent or one full percent, the rally in the financials doesn’t seem to be misplaced.

>> as far as next year, what do you see as some of the issues that investors will be facing next year?

>> some of the issues that investors would face would be if the oil prices continue to rise substantially from here, maybe 30% to 40%, then that would be a big negative for the investor and consumer spending. if interest rates continue to rise, particularly the long end of the curve, then we may see housing slow down considerably more than it has. and the market equity withdrawals may start going down substantially more than they have and those things will definitely be an impact on the equity markets .

>> as far as now until the end of the year, double there is anything that could―do you believe there is anything that could seriously stop the rally?

>> between now and the end of the year, i don’t think there are events that could derail the rally unless we have some kind of geopolitical event sore something like that.

>> you would say investors should invest in what groups, briefly, again, just before the holidays, into the end of the year?

>> well, we believe that internet advertising has been very strong and will continue to be strong so because there has been a lot of shift from the traditional publiclishing media to internet advertising and this season is no different than what it was last year and we believe that the stocks that capitalize on internet advertising should do quite well.

>> thank you very much, sanjiv jhaveri, head of north american equities for nomura asset management. coming up, gold approaches $500 an ounce. is it just traditional inflation fears or is there more to the advance in price? we’ll find out in our “chart of the day,” next.
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Listen Market briefing --- June (slow)
NYSE --- Deb (fast)
Holiday story --- Suzanne (slow)

speculation that holiday sales. will exceed earlier estimates boosted shares of retailers. the market ‘s rally has completed its fifth straight weekly advance, spurred by signs the federal reserve may stop raising interest rates, improving consumer sentiment and oil prices under $60 a barrel. the closing numbers -- the dow and the s&p closed higher today and many traders were waiting to see if the dow could close at a 4 1/2 year high. but it came up short. deborah kostroun has more on today’s trading from the new york stock exchange. deb?

>> thanks a lot, june. yes, the dow jones industrial average, the level we’re looking at, that 4 1/2 year high, 10,940, we are just nine points away from it. in today’s session, we did see that 4 1/2 year high, didn’t close on that but we’ll be looking on that as we return to trading next week. also for the s&p 500, five straight weeks of gains on the s&p 500, the longest streak since late july. it was an up week for the s&p, up 1.6% and the nasdaq up 1.5% and the dow up 1.5%, as well. it has been a great month. the s&p 500 up 5% during november, headed for our best month in almost two years, helped by the decline in energy prices and many of the economic reports signaling tame inflation. retail stocks on the day were lower. however, over the past month, actually closing up just a little bit higher. best buy helping out. over the past month, what we’ve been seeing, the retail names, they have been performing well. many of the other retail names like sears, federated, those were lower in today’s session. over the past month, those retailers up 6.2%, outpacing the broader market , which is actually up 4.9%. in today’s session, one of the things you did see, electronic retailers like best buy helping out that index so you saw best buy, circuit city, all performing well. u.b.s. talking about best buy and circuit city, saying they are positioned best for the holiday shopping season especially among retailers of treasuryics―electronics and they’re seeing more traffic in the stores from indications. microsoft down today, minor problems with the xbox 360. exel capital on the day, expecting to lose $800 million in the fourth quarter because of a dispute from a purchase with credit suisse group concerning reserves at insurance operations that exel purchased from credit suisse. merrill lynch downgrading exel in today’s session. that’s it from here.

>> thank you very much for that report. let’s check the closing numbers for the nasdaq. the nasdaq closed up three points to 2,263. and the volume on the nasdaq this friday was rather light, with advancers leading decliners there. black friday in the u.s. and gimics and give-aways were a big part of the season. suzanne o’halloran has more.

>> today was the day that started the season when retailers say they go from in the red to in the black. hence, the term, black friday. i was at macy’s herald square in new york city most of the day. the store opened at 6:00 a.m. and shoppers were greeted with heavy discounts and coupons. one shopper got a $10 coupon from the “new york post.” the c.e.o. of federated, which owns macy’s, says the season is off to a slow start.

>> the customer has said she is being more cautious than she has in the past. i think early november was indicative of that trend. but what’s happened for us over the past several years is that christmas and hanukkah period, always shopping later and later.

>> total sales this season are expected to rise 6%. that’s less than last year’s rise of nearly 7%. wal-mart told us, about two million shoppers entered their stores today. the world’s largest retailer started its holiday campaign november 1, earliest ever, hoping it will help lift sales well into 2006. optimism about this holiday season has been improving. the s&p 500 department index is up nearly 14% this year. , still, many industry experts say some retailers will do better than others this season.

>> i think that the discount stores are going to do well. i think also electronics stores like best buy will have a fairly solid christmas. the real question is will the middle priced department stores be able to drive shoppers in the front door?

>> today was the start of the holiday shopping season but there are still a number of risks for the retailers. one being heating bills. they will start to arrive soon and the cold weather is just settling in here on the east coast. if you heat your house with oil, expect to pay 32% more, natural gas, 48% more. another risk that could keep consumers from spending, the job market . next friday, we’ll get the employment report for november. economists say companies added about 215,000 workers compared with just 56,000 the previous month. should we see weakness in the job market , consumers may think twice about how much they actually spend this year. june, back to you.

>> thanks so much for that report. we’ve been talking about black friday, of course, shopping the day after thanksgiving. now, the monday after thanksgiving is referred to as cyber monday. the idea is that some shoppers will do comparison shopping over the weekend once they’ve been in the stores and seen the prices. on monday, they’ll go online to get the best bearing ans. shopping online will rise 24% this month and next to $19 billion, according to internet research company, comscore networks. but online retail analyst says online shopping is only 5% of total retail, perhaps 6% at holiday time. though amazon is the leader, there’s plenty of room for others.

>> but there is great opportunity out there for many more retailers. wal-mart’s doing very well online. many of the big multichannel retailers are doing very well. there’s also room for niche players like ebags, for example.

>> regular retailers are using online sites to draw shoppers, as well. wal-mart, the world’s largest retailer, was number three in online traffic last holiday season.

>> any time wal-mart’s doing anything, you ought to think about them, right? and they are selling higher priced items than they normally do in the stores online.

>> she says thursday was the heaviest day for online shoppers so far, not for buying, but for researching prices before they went into stores today. monday is expected to be the online retailers’ black friday and what are the busiest shopping hours for online shoppers? from noon to 2:00 p.m. during the week. stay with us as we speak more about online shopping with patrick byrne of overstock.com. oil prices may stay at about $59 a barrel next week as stockpiles keep up with rising demand for heating oil. analysts we surveyed, 37% say there will be little change in prices. consumers in the u.s., japan and germany buy fuel to heat their homes. u.s. heating oil supplies have risen for the past two weeks, easing concern about supply. crude oil did not trade on friday. it’s currently sitting at $58.71 a barrel. no economic reports today. we’ll get the existing home sales number for october on monday. the bloomberg news survey of economists indicates the number will be 7.20 million. it was 7.28 million in september. let’s take a look at the treasuries. the 10-year treasury up 10/32, yield at 4.43%. and the five-year treasury note up 5/32, the yield 4.35%. on the shorter end of the yield curve, the two-year treasury note was unchanged with the yield at 4.33%. and looking at currencies, the dollar was ahead across the board. and still ahead, we’ll wrap up today’s trading and look ahead to next week and beyond with the head of north america equities, at nomura asset management. stay with us.

University of Michigan---Curtin, Richard---Director of Consumer Survey

>> >> the university of michigan released its monthly sentiment index, showing consumers are feeling better, and much of it likely has to do with fuel prices. let’s take an inside look at the survey. richard curtin from the university of michigan joins us from ann arbor, michigan, where we know the dismo has begun to fall―the snow has begun to fall. a lot of speculation that declining energy prices coming off record highs has been boosting confidence. how much of a part of the story are the energy prices?

>> consumers think they declined forecaster than they ever expected and they’re down to where they were in june. so this was an important part of improving their sense of financial progress and confidence in their own financial situation.

>> can you put that in the context for us of what we could potentially see in the thick of the winter heating bills? a lot of the concern has been that even though prices have come down from the record highs, those winter heating bills will be up significantly from a year ago.

>> it’s confidence is certainly much lower than it was in july and recently we’ve only reversed about a third of the losses so consumers are well aware of the higher home heating bills this winter and are preparing for it by lowering the amount that they intend to spend over the holidays.

>> by how much?

>> well, actually, we have upped the forecast. now, i think, retails over the holidays will be―retail sales over the holidays will be about 5.5%, down from 6.7% a year ago and more or less equal with the prior year.

>> we’ve been looking all day in our programming at that outlook for the holiday season. ome are feeling more optimistic because energy prices have come down and there is more foot traffic in some stores. what is your sense, based on the survey? you talk about the 5.5% level. what else can you tell us about the holiday outlook?

>> well, the overall outlook is still quite lower. if you include durables and food and clothing and all of the full range of consumer goods, i expect real spending to only be up by 2% or 2.5% in the fourth quarter but on the holiday side, especially nondurables, we should expect some greater improvement. consumers do not think the worst is behind them. they’re still viewing the future with trepidation and frankly, their record indebtedness, negative savings and reliance on cash-out refinancing has them worried and they intend to rebuild their savings in the months ahead.

>> is that something different than you’ve seen in the past? because as we know, the savings numbers in the u.s. are typically very minimal. so, in terms of building their savings, is that something new?
>> no, i boont say―wouldn’t say it was something new but they haven’t been in the negative range that we’ve recently seen. the savings rate is the lowest it’s been since the 1930’s. so, the idea that they would increase their savings, maybe they’ll bring it up to zero. or maybe half a percent. out of their current disposable income so we’re not talking about a large change in savings but we are talking about a consumer who reached a tipping point in august when they suddenly decided the outlook was much more uncertain than they had anticipated and now they view the same things they did before then with greater trepidation and they’re more concerned about how things will turn out this winter and especially on gas and home heating prices.

>> richard, what can you tell us about how consumer confidence is tracking with business confidence?

>> i think business confidence is about in the same spot. it’s improved recently. but it’s still at a lower level than we’ve seen in mid 2005 or in early 2005. i think everyone is sort of a little more cautious about their own financial situation, whether they’re a business or household.

>> we will leave it there, richard. thank you for joining us.

>> you’re welcome.

>> richard curtin from the university of michigan. as consumers gear up for the holiday season, many retailers expecting to sell more than originally planned but how much are shoppers willing to spend on a custom-made, personalized baby doll? we’ll get some answers.

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Listen Market briefing --- Lori (slow)
NYSE --- Deb (fast)
Holiday story --- Suzanne (slow)

street, stocks gained across the board. oil prices lower, consumer confidence coming in stronger than expected. the dow, very interesting trade there, the dow jones industrial average coming within 25 points of the highest close in more than four years, however, ending the day off the highs of the day, up 45 points to 10,916. in terms of industry groups, steelmakers among the best performers. let’s bring in deborah kostroun from the big board for a closer look.

>> thank you, ellen. shares of steelmakers really gaining today. that after arcellor, world’s second biggest producer of metal, making a hostile bid for canada’s defasko, helping out many of the other steel stocks traded at the new york stock exchange. also maybe giving ideas of more consolidation taking place but you saw steel stocks performing well in today’s session. a lot of people talking about what’s happening on friday, black friday, with many of the retail names in the spotlight. shares of best buy rallying today after u.b.s. analyst not only saying that best buy, but also rival circuit city, are best positioned for the holiday shopping season. among the retailers of electronics, appliances and other so-called hard-line goods so you did see best buy and circuit city performing quite well. u.b.s. saying that the number of customers at company stores over the past few weeks has been higher than last year. that, according to discussion with employees, so helping out at least those two stocks. aeropostale upgraded by bank of america, and rising on the day. one of the things that bank of america said, they have a compelling turnaround story based on valuation, new strategy and product catalysts. also, just a lot of positioning with margin recovery potential, as well. bank of america expects shares to reach $27 within 12 months, so many of the other retail names not performing well. if you look at today’s session, you saw the s&p 500 rising for a sixth straight day and one of the things helping out was the fact that we got the minutes yesterday from the fed saying they may soon be ending their interest rate increases and that helping out many of the banking and financial stocks. crude oil dropping for the first day in three. those stockpiles rose, helping out crude oil. so the banking and financial stocks climbing. we’ve been seeing that all months in the―all month in the s&p 500 but the fact that the fed minutes clearly spelled out that interest rate increases may be winding down, that helping out the financials.

>> thanks so much. deb talking about best buy and retailers, there are more indicators pointing to a better-than-expected holiday shopping season. people are talking about this may be true for both retailers as well as the consumer. suzanne o’halloran has more on the holiday story.

>> the 2005 holiday shopping season may turn out to be pretty good. just a couple of weeks ago, forecasters were saying it could be the worst since 2002. since then, a combination of positive economic data coupled with price declines in gasoline and home heating oil, are renewing optimism about the season.

>> first of october, when i talked to consumers, they were going to give gifts in the price range of $20 to $25 or $26 to $35. a month later, november 1, consumers are giving gifts now from $35 to $50. that may not seem like a lot but when you’re buying gifts for nine, 10 people, that extra $10 a person is the difference between retailers have a positive retail sales christmas versus negative.

>> the key point is that consumer spending will be in line with last year, not necessarily better. it could be a little less, according to the national retail federation. sales are expected to rise about 6%. this figure was revised higher on tuesday and compares to nearly 7% in 2004. 2005 is already being touted as a big discount year and unlike last year, many of the stores are already offering those discounts. wal-mart, sears and others have heavy promotions in progress. wal-mart even saying it will match competitors’ prices on anything just so you shop in their stores. although the retail outlook is improving, analysts say some retailers will have a better season than others. apple is one name that continues to come up as analysts say demand is hot for the ipods.

>> ipod has a virtual monopoly on hard-drive based mp-3 players and flash memory drive mp-3 players, as well, with the nanoand shuffle. there are other competitors out there, lower price points, but anybody who’s everyone wants an ipod.

>> other likely hot sellers, microsoft’s new xbox 360 game console. it was released yesterday. it goes on sale in europe and japan in december. and, ellen, britt beemer told you there is no one hot gift item but analysts say sales of electronics should help retailers such as best buy and circuit city and luxury retailers, coach and tiffanys, are expected to have a good season.

>> thank you very much. in the meantime, let’s tell you about another story we’re following today. hormel foods having its worst day in six months, those shares tumbling 6.5%. the meat processor said 2006 earnings may come in at the low end of estimates. some analysts say hormel is being conservative, protecting earnings of $1.86 to $1.96 a share. the news overshadowed some of the positives in the company’s recent quarter. fourth-quarter profit jumped 17%, turkey prices rose and costs fell. hormel earned 59 cents a share, two cents more than what analysts were looking for and sales were up 10% to almost $1.5 billion. consumers, suzanne was talking about them, they are feeling better these days. much has do with energy, the drop in gas prices. consumer spending rose more than expected, according to the university of michigan. we’ll speak with one of the insiders behind the survey coming up.

Interview: Wilmington Trust---Farr, Dorsey---Portfolio Manager

>> and we’re heading into the final full weekend of the holiday shopping season. more than three quarters of the retailer also offer some form of free shipping for online purchases, up 64% from a year ago according to consulting form forrester research. l.l. bean, selling boots and jackets for 93 years, is providing free delivery on all items for the first time. amazon.com is offering free shipping on purchases above $25 and unlimited shipping for $79 a year. retailers are anticipating that sale also outweigh costs. and darden restaurants raised its forecast thursday night. the outlook came as the company reported net income up 28% in the november quarter. the chief executive says it was a combination of sales growth and cost control.

>> when you look at our two big companies, red lobster and olive garden, they had terrific momentum. they’re also adding new restaurants and red lobster at almost 3%. in this environment, when you look at the competitors, that’s very strong. but at the same time we are doing a good job on the cost management side despite some head wind in some obvious places like utilities.

>> and darden restaurants says per share earnings will grow 15% to 20% through may. that compares with the previous forecast of low double digit growth. let’s check the stock at the close, up $4.01. looking for a happy investor? try someone who hones humana, stock up 61% this year. the chief executive said that performance is the result of a couple of things.

>> our business is doing very, very well. so that’s the single largest driver and people are getting excited about the medicare rollout that we’re in the middle of as we speak. and we’ve been a real early mover and benefitted from it, some in 2005, but we’re guiding to some significant upside for us with medicare in 2006.

>> this is the second largest manager of medicare coverage. shares down 62 cents at the close. let’s check in with our special segment, “outlook 2006.” dorothy farr is the director of asset allocation at wilmington trust. he says he’s pleased with the way equity markets performed in select international regions and domestically. he is on the telephone, so thank you for being with us.

>> thanks for having me. i think the holiday shopping season is so robust in atlanta that everyone is out shopping and it kept me from getting to the studios.

>> retail sales, what are you projecting?

>> we think the economy is strong and a lot stronger than a lot of people have thought. the economy was said to be a house of cards that was built on housing and i think the reports that we’ve seen recently have proved that that is incorrect. we have a strong and robust economy producing jobs and we’re pleased with how it looks.

>> so do you think splause is going to come to wall street this year?

>> to some degree we think he already has. we were expecting a more difficult year than it looks like we we are going to get. and stocks will finish up 6% to 8%. and if you’re investing overseas, you’ll do much better than that. we just think that the markets have been a little more generous than we anticipated.

>> how are you weighting your port folio in 2006?

>> well, one of the things we’re empathizing next year is caution. we think with interest rates headed higher and profit growth will slow down next year. so we think that could produce a difficult period for equities. we’re trying to find the areas of the equity market that look favorable. for us we think it’s international markets relative to the domestic equity markets . and we’ve been favoring those this year. and that’s worked out quite well and we think it will continue into 2006.

>> you do put a lot of emphasis on emerging markets . why do you see continuing value?

>> when we look at valuation spreads, things like the price earnings and yields across different regions and we still see relative value, we believe, in the international developed markets as well as the emerging markets , compared to the domestic markets . so the valuations we favor those markets . we see a lot of investors beginning to chase returns of the recent path. that tends to add another leg to this run. so we think 2006 will be a repeat in terms of good performance from international emerging and developing countries.

>> our thanks to dorsey farr. the latest performance enhapsing treatment for athletes has little to do with energy drinks. you might be surprised what olympic experts are suggesting to give athletes a leg up in 2006. we’ll check in for this week’s segment “money and sports.”
点击播报
Listen Market briefing --- Lori (slow)
NYSE --- Deb (fast)
Bonus --- Brett (slow)

bloomberg “after the bell.” i’m lori rothman. let’s look at the day that was on wall street. all three averages close lower, but the dow and s&p post gains for the week. so the dow closes down six points below 10,00 -- 10,900. the s&p loses 3 ½ to close at 1267 and the nasdaq at 2252 after a decline of eight points today. let’s check in with more on the stock trading today. deborah coss tranjoins us from new york with a inside look at the week’s biggest stories.

>> of course, the s&p and the dow jones average seeing their first weekly gain in three. one of the biggest stories is burlington resources, the bigger gainer in the s&p 500 this week. it was up 12%. and remember, conoco phillips agreeing to buy burlington resources, that a natural gas producer, for $35.6 billion. which is the energy industry’s biggest takeover since 2001. now, as we closed out today, you saw conoco and burlington down a little bit but it was a big week for burlington. conoco is using that acquisition to catch up with chevron, that is oil and gas fields become harder to find and more expensive to tap and those record prices have helped out in the acquisition area. edgar peters saying that in the energy area, certainly seeing a lot more merger acquisition activity going on and that encourages people too, because it’s a signal to them that things are undervalued. laggers in the s&p 500 for the week, you saw tech hardware and energy stocks, those were some of the worst performers this week, along with commercial services, crude oil falling for a third day in a row on friday, settling at the lowest price since november 30. this was a week where we saw crude oil going from $61 a barrel to closing out in friday’s session at $58.03. of course, it wasn’t just crude oil, it was heating oil and natural gas. and that on forecasts we are going to be seeing warmer weather across the u.s. now, that drop in energy that we saw this week helping out the transports. in fact, if you take a look in today’s session, transports a little bit lower. but within the transports, the airlines were among the biggest gainers. the airlines were trying to help out the transports but with that drop in energy prices helping out many of the airlines. pfizer, altria and u.t.x. all gainers this week. back to you, lori.

>> thanks a lot for that. goldman sachs stock was cut today and the move was made on concern fixed income revenue may fall next year. the stock was cut to market perform from outperform. goldman sachs outperformed. now, speaking of goldman, it is bonus time and some wall street managers are getting millions. c.e.o. hank paulson is getting a $37 million bonus after the company posted a second straight year of record earnings. bloomberg’s brett goehring is more with the story.

>> it certainly pays to be at the top on wall street. chief executives are wreeping the awards in a boom on trading, mergers and underwriting. and hank paulson is reaping more than most. his $37 million bonus in shares and stock options is more than double what lehman brothers is giving its c.e.o. and three times the amount that morgan stanley is giving its chief executive. one money manager calls that egregious.

>> i think that kind of pay scale is a little out of line. if you’re working in the trenches and you look at that, i’m sure that those guys are thinking, wait a minute, this is way too much.

>> so this is how paulson’s bonus breaks down. paulson gets almost $250,000 goldman shares and gets options valued at more than $7 million, according to an s.e.c. filing. his pay has jumped more than 25% in the past couple of years. this news comes after the company said fourth quarter profit jumped 37%, lifting its annual proficient it to a record. goldman’s shares are up 22% this year. c bert says it’s hrd to say if the success is the market or the c.e.o.’s.

>> i think the problem is that you run into, most people will look at that and say, ok, the company has done well, is he the one responsible for that or just the environment that he’s in?

>> but christian holland, who manages $6700 million says, if goldman and the others don’t pay up, other banks would offer them more attractive packages.

>> martha stewart living on the media says their c.e.o. plans to resign. fallo plans to leave after the company files the 2005 annual report with regulators. the company said that it’s disapointed he’s moving on. he helped martha stewart media return to profit and rebuild an advertising base after the founder was impressonned. he will -- well, the move combines the broadcaster with its french pay tv business canal plus and creating a company valued at $9 billion. la vendy will own 85% of the combined companies. sorry for the bad french accent, folks. anyway, we’ll wrap up with week in markets with our next guest, dorothy far. our special segment “outlook 2006” is next. “after the bell” continues after a short one.

Money & Sports

>> welcome back. national football league teams have been known to tap banks, car manufacturers, airlines, all to help defray the multi-million dollar costs of building new stadiums. now high school football teams are following their lead as millions in donations flow in from wealthy booster clubs and local businesses. what ever happened to the good old bake sale? for this week’s “money & sports,” we are joined by mike buteau out of our atlanta newsroom. how much money do you need to field a high school football team?

>> apparently it depends on how good you want to be and what field you want to play on and what score board you want. some teams throughout the the hot places in the country for high school football, schools are raising millions of dollars. one school in arkansas raised $2.7 million, put in a new artificial field, a score board with instant replay. as you suggested, this money isn’t coming from bake sales and cookie sales.
>> instant replay in high school football? wow.

>> yes.

>> any opposition to the amount of spending that goes on here?

>> a lot of these schools and parents that give up the money and they go to the local businesses and the local businesses are happy to support it, these are winning programs. these are programs that have won 10, 15, sometimes as many as 20 state championships so the people are looking at it as a good cause of the a lot of high school games are getting on espn and other cable networks so if you have a good program, that raises your exposure, gets you a chance to get on espn or national tv, might get your kid a chance to get a free college education so parents look at it as money well spent.

>> switching gears, here, new zealand named the host of the 2011 rugby world cub. cup. what other countries were in the running?

>> japan and south africa were the two countries they beat out. japan was favored, but new zealand, a strong area for rugby, won out for 2011. many years down the road but the people in new zealand very happy about being selected.

>> can you tell me about the economic impact new zealand is expected to have from this?

>> it’s a little early to tell but they say by 2007 and 2008 they’ll start to see new roads being built. they’ll be putting money into the stadium. but when you look at the 2003 world cup in australia, that brought in about $280 million towards the economy. new zealand officials are expecting about 60,000 visitors for this so it’s a a big deal. the world cup of rugby is the third most watched sport or championship when you look at the tv audience.

>> in cycling, lance armstrong has retired but his popularity has helped create a new race in california. can you give us the details on that?

>> the tour of california is essentially what it’s called, not the tour de california, like the tour de france. this race will start in february. lance armstrong will not be racing in it. his team will most likely be involved in it, the discovery channel team. but there will be a german team, t-mobile, another german team, big-time cycling team, expecting 130 racers and california is a very big area in the country for cycling.

>> from what we understand, there have been other cycling races in the u.s. there that have failed. why should any other race be different?

>> the tour dupont was another race that didn’t take off very well but that was pre-lance armstrong and statistics since lance armstrong started winning the tour de france, interest has gone up 20%. california is a big market for cycling.

>> why isn’t lance going to show up?

>> he’s retired. he’s happy. he says, i’ve had enough. he’s going to stay retired. he might show up.

>> i expected you to say he was hanging out with sheryl crow, mike.

>> well, that, too.

>> we’ll leave it there.

>> thank you, mike. bloomberg’s mike buteau from our atlanta bureau. we’ll check world and national news after a quick break. and if diamonds are a girl’s best friend, what does that make a diamond made for russia’s catherine the great? learn what happened, next.

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Listen Interview: AMF Mutual Funds---Petrosinelli, David---Fund Manager

>> welcome back to “after the bell.” we had comments from federal reserve bank of chicago president michael moscow today. he said further removal of policy acome dation is needed and that interest rate rises may be needed after neutral is reached. he also expects long-run inflation expectations to stay contained. meanwhile, the conference board says its index of leading indicators rose for the first time in four months thanks to a stronger job market and the reconstruction efforts in the gulf of mexico. l.e.i. came in above forecasts, climbing .9% in october. september’s numbers were revised lower to a drop of .8%. the l.e.i. numbers try to gauge economic conditions in the next three to six mos, and today’s data suggests growth remains strong especially with the drop in jobless claims and a pickup in manufacturing activity. taking a look at prices were higher today, yoldsthe treasuries in response to this day tay ta coming down. traders say it’s also because of the expectation the sfed keeping prices under control. as far as currencies, the dollar was lower against the yen, stronger versus the euro and british pound. european central bank president jean-claude trichet says he does not expect to embark on a series of rate increases, so that dampened speculation the e.c.b. will raise rates at its next meeting in december. the weak euro did not prevent gold from moving even closer to $500 an ounce. gold futures for december delivery settling at $489 and 50 cents an ounce. that is a gain of just over a half a percent, and the biggest, highest closing price in almost 18 years. joining us now to look at the outlook for the fixed-income market ahead of tomorrow’s release of the november fomc minutes is david petrosinelli. he is vice president and portfolio manager at a.m.f. mutual funds. david helps manage about $4 billion, and he joins us from our studio in chicago. hi, david.

>> good afternoon, laurie. how are you?

>> fine, thank you. treasuries rose today coming off back-to-back weekly gains.

>> sure.

>> investors seem satisfied inflation is in check. any chance of a surprise with tomorrow’s minutes?

>> i don’t think so. a couple things to keep an eye on. a lot’s been made in the past two texts of the fed meeting about what are the effects of katrina, the dislocation of 2005 economically and how does this translate or matriculate into the 2006 numbers? so, i pay attention to that. i would also look for any indication the fed makes an inference that interest rates are having some effect on the economy. but in equity markets of surprise, i don’t think so. i think the sfed right on course.

>> what do you make of michael moscow’s recent comments that the fed might have to raise rates beyond the point of neutrality?

>> stenlt. i think consistent with a fed that really has to keep up credibility to fight on the inflation front. remember, katrina, if nothing else, is also inflationary because there will be a lot of dollars chasing those goods, those core input goods―oil, lumber, and materials that will help rebuild the area. so, the fed has to be very, very careful not to let that become an inflationary environment.

>> interest rate futures suggest the fed will boost rates two more times. do you think 4.7% is the right place to pause?

>> i think that’s doable. i would not be surprised to see it go a bit higher. again, i think that is maybe nor the moscow camp of having more of a credibility to keep up with the investor community and also trying to ford off whatever inflationary threat there will be from katrina.

>> and let me get your outlook on the fixed-income market , first by way of the treasury yield curve. do you see a continued flattenening? will we invert?

>> it’s tough. you’re constructively inverted now about 10 basis points across the curve. it wouldn’t surprise me. twos to 10’s, a classic bench with the curve, has averaged about 95 basis points over the past 25 years. i think what will likely happen, the fed will raise the rates two to three more times. i think the whole curve including short term and the body in longer-term rates will probably follow a fed funds lead, if you wil

Interview: Fitch Inc---Oline, Mark---Analyst

>> welcome back to “after the bell.” sprint nextel makes a purchase buying alamosa holdings for $3.4 billion, $18.75 a share, so alamosa shareholders are getting a 16% premium based on friday’s closing price. with the purchase, sprint nextel ends a legal dispute with an affiliate. secondly and perhaps most important of all, sprint nextel is gaining almost 1.5 million customers. airgate p.c.s., a subsidiary of alamosa, had sued sprint nextel claiming their $36 billion merger violated the terms of an existing contract. airgate is the largest reseller of sprint and because of the deal it was forced to compete for business in its coverage area. now airgate and sprint nextel are looking to put that behind them. shares of sprin were up 23 cents today to close at $25.17 a share. the world’s largest automaker will close 12 north american sites and cut more than 30,000 jobs as it struggles to return to profitability. g.m. bonds rose on the news. the question is, though, was that just a relief rally? mark o’lane is a credit market analyst at fitch. they’ve cut it to four levels below investment grade. welcome, mark.

>> thank you.

>> first let me ask you, to what extent to do today’s announcements help g.m. in terms of challenges in both costs and production?

>> well, the $7 billion in costs reductions outlined by jim were not significantly different than the $6 billion they outlined before. it does specify clarity. in termes of the head count reductions of 30,000, it’s not too much from the 25,000 previously announced. so, there are a lot of uncertainties left, first and foremost, the response of the u.a.w.

>> and what do you think you need to hear from them or what kind of agreement do g.m. and u.a.w. need to achieve?

>> certainly the expectation is employee buyout programs will be a large part of the restructuring program. and the u.a.w., as in the past, will certainly have a voice in the pace and extent of the cutbacks.

>> given that, what is your outlook for g.m.’s credit? are they taking the right steps, at least?

>> well, we still have the company on a negative watch and we’re very focused short-term in the resolution of the delphi situation. we certainly would hope to see no production interruption there.

>> so, what will it take, then, again to see the credit rating get upgraded?

>> well, certainly, the $7 billion in cost reductions they’ve outlined, achievement of those, which will be no easy feat, would certainly be a step forwards stable sapings of the negative cash flows we expect through 2006. but it’s also important they hit on the revenue line as well. and that’s still going to be a difficult challenge given the pricing environment and the product pipeline going forward for g.m.

>> earlier today, deutsche bank said investors should purchase g.m. bonds because declines in the debt oversate the likelihood the automaker will miss interest payments. so, do you believe g.m.’s debt is oversold?

>> we don’t get into buy and sell recommendations at fitch. we simply interpret the risks for investors. g.m. has a good level of liquidity but certainly we do expect operating losses as i mentioned through the end of 2006. and liquidity could be further chip aid way by a number of issues, including the restructuring cash outflows, the debt resolution of the delphi situation, which g.m. could be forced to step in to some degree, several other factors, primarily supplier issues.
>> analysts recently said bonds were pricing in a chance of bankruptcy for g.m. what is the likelihood given today’s announcement?

>> well, certainly, as i mentioned, the restructuring, if they are able to realize the extent of the reductions that were outlined, would go a long way towards stabilizing the a cash flows. but, again, there’s a lot of work still left to go.

>> and we have a little bit of time left. i’m just curious from your reaction on the equity market reaction, not specifically your area, but g.m. did close down almost 2%, which was―why was that?

>> well, again, we don’t comment on equity prices, but certainly investors could be reacting to the fact they do have additional clarity ti in terms of what g.m. was trying to accomplish for cost reductions.

>> thank you very much. what do you think is the next step for g.m.?

>> certainly, it will be realized in the cost saverings that were outlined. the first steps we’ll be looking for is resolutions of the delphi situation and u.a.w.’s reaction to the cost-reduction plan.

>> ok, mark. we’ll leave it there.

>> ok. thank you.

>> mark oline, credit analyst at fitch. computer sciences had a rough day today. shares closed down some 12% on news that lockheed martin and three other buyout firms ended talks with a computer services provider. over the past month, computer sciences has risen more than 12% on speculation the company would be purchased. buyout firms were interested in computer sciences because it’s carved a niche in the i.t. world managing systems for the u.s. government. and sunguard data systems was bought by silver lake partners and other private investors for more than $11 billion. tomorrow investors get to see what the fed was really thinking minutes from the last meeting. and we’ll find out what the bond market ‘s looking for. we’ll talk about ways to make money and fixed income given the flat yield curve. pet pet helps manage $4 billion in assets.

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Listen Market briefing --- Lori (medium)
NYSE --- Deb (fast)
Nasdaq --- June (slow)
Nymex --- Su (fast)

“after the bell.” to tell us more, we are joined by deborah kostroun from the floor of the new york stock exchange. deb.

>> thanks, laurie. of course we did see this late-day rally helping out the dow jones industrial average to be higher for the year. up about a half a percent so far. in fact, todd clark of nolanberger capital saying the late-day rally is really no specific news coming out today but really just kind of a continuation, especially of the breakout we saw last thursday. but you also have to remember how we’ve been doing for the month of november, the market doing quite well. gainers in today’s session helping out the dow. you saw boeing, $17 billion in new orders. that was the biggest gainer in the dow. american express got an upgrade from u.b.s. crude oil was higher on the day. right behind these was 3, many, which has been performing well recently. we saw records in today’s session, the s&p financial index, the broker/dealer index and the transport index. remember that over the past week, we’ve been hitting and breaking our own records with many of these indexes. recently for the financials and transports doing well. gold the commodity rising to its highest level in about 18 years as the hedge against inflapings. something we’ve been seing with gold recently, helping out the gold stocks, as well, and u.b.s. saying gold may reach $500 an ounce in the next three months. we close out today at $491 an ounce. h.m.o. stocks over the past month have been gaining and gaining once again today. that new medicare bill for seniors going into effect, likely going to bring a lot of new customers for many of these h.m.o. provireds, and that has been helping out the h.m.o. stocks. back to you in the studio.

>> thanks so much. let’s check in at nasdaq. financials taste the gains, google closed at another record high, and june grasso is standing by with more. june.

>> thanks so much, laurie. well, the nasdaq reached a 4 1/2-year high today. financials, as you said, have been leading the gains at the nasdaq. if you look at the finance index, it climbed 06 pints today from the very start. we have ameritrade up 2.9% and t. rowe price up. the banking index also turned around about midday, and it, too, started leading, fifth third bank, the largest bank on the nasdaq, up 2%. even the computer index. the computers were dragging the nasdaq down erl gambler the day, but even that ended up higher. and let’s look at google, up 2.3%. google after u.b.s. said that it is undervalued. and it now has it at a price of $500. and this is based on what is currently happening at google. not what may be happening in the future, but what is happening right now. some of the other things that we saw were insight, which is being -- 22.1%, having to deal with a huge company, which is going to give it some money in order for it to develop new drugs. back to you.

>> june, thanks for that. crude oil and heating oil prices moved higher on concern the drop in temperatures could boost fuel use. nymex crude oil futures ended the session at $57.70 a barrel, rebounding from the lowest price pryce in four mos. heating oil futures ended the session almost 1% higher. bloomberg’s su keenan spent the day at nymex and joins us now with what is driving prices.

>> the first wave of cold temperatures and new forecasts for unseasonably cold weather from december to february helped spark today’s rally in prices. many investors share the view of citigroup’s kyle cooper that this shift to new and colder weather patterns could lift heating demand next month. mike fitzpatrick does not see prices moving up higher unless there’s a sustained cold-weather pattern or a supply distribution. the president of o’connor brokerage expects choppy trading on a holiday-shortened week.

>> overall, the crude oil is turning back down to $55 last week, a good sign. crude oil stocks built again last week, higher than a year ago. and a slight correction phase from last week’s selloff, probably hovering right around $58. really waiting for more direction from the department of energy and american petroleum institute’s report on stocks this wednesday.

>> and that report out wednesday at 10:30 expected to give the market new direction. back to where you.

>> su, thank you so much. we’ll have much more on the news from g.m., the restructuring capacity decline, and how it’s impacting the market . also, we’ll talk to an analyst about the story behind that discount-driven push to boost sales and how g.m. stocks will perform in the market now. all of this when “after the bell” continues. captioned by the national captioning institute --www.ncicap.org--

Interview: Westwood Holdings---Spika, David---VP/Investment Strategist

>> stocks finished the week on a high note. the s&p, in fact, headed for its best weekly winning streak since july, fueling hopes about a year-end market rally. the s&p closed at a 4 1/2 year high today. joining us to wrap up the week and look ahead to 2006, david spika, investment strategist with westwood holdings group, helping to manage $4 billion for his firm, joining us from dallas, texas. welcome, david. we are coming off a four-week rally here for stocks. how do you see the remaining weeks of the year playing out?

>> i think a lot of it depends on the market ‘s perception of what the fed will do. what we’ve seen over the past 30 days is a feel-goodrally, the market bouncing off oversold levels mid october with good economic data and good earnings out of the third quarter, lower oil prices and tame inflation. but at this point, the market wants to see an end to the fed rate hike cycle and that will be the next catalyst.

>> how does that set us up for next year?

>> i think it sets us up pretty well because our expectations is that the fed will end the rate hike cycle around midyear at about 5%. we also think that corporate earnings growth will remain solid at around 10% so when the market looks at the current valuation of the market , when investors look at valuation of 15, 16 ford earnings―forward earnings and they see the fed will end the rate hike cycle without killing economic growth, i think you’ll see the market advance.

>> we had four deals in the news today. what is behind all of this m&a activity?

>> i think the key here is that earnings growth has slowed. now, i said earnings growth will still be 10% next year but that’s coming down from about 14% this year and 20% last year so corporations are a little bit under the gun to continue to drive earnings growth. and the way they’re going do that is by acquiring earnings growth as opposed to generating it organically and there’s a lot of cash on balance sheets and companies have strong currency in terms of their stock prices so they’re looking for deals to go ahead and grate additional earnings growth going into 2006.

>> do you expect any other headline deals before the year’s out?

>> i’m not going to predict any deals before the end of the year but it wouldn’t surprise me to see hear energy transactions. energy firms are particularly hard pressed to find good growth, particularly in production, because there’s very little in the way of big finds left in terms of oil and gas fields so they have a lot of cash, good currency. they’re going to look for acquisitions to drive earnings higher.

>> i want to bring you back to the earnings outlook. you mentioned the fed as a catalyst there. are there any other drivers for profit growth in the fourth quarter and beyond?

>> there are going to be things that will sway the market ‘s opinion back and forth. today, the market is very much focused on good news. they’re ignoring bad news and centering in on bad news as opposed to october where they focused on the bad news. clearly, there can be economic data, there can be employment data or other economic data that can sway the market ‘s opinion but until the market gets some comfort that the fed is done, you’re not going to see us move significantly out of this trading range.

>> how much of a risk is a softening housing market ?

>> i think it is a risk although i think it’s been priced in. we’ve seen housing stocks, building stocks sell off significantly this year. you’ve seen lenders that have significant mortgage exposure perform poorly so i think the market ‘s already pricing that in. the real key is what’s the impact on the consumer. we’ve started to see that as mortgage payments have gone up, a lot of mortgages are financed using short-term rates and the effect on the consumer could have a greater impact on the economy next year than we expect.

>> i’d like to switch gears a little bit here and get you to tell me which industries you like in this climate.

>> we continue to like the industries that we’ve done well with so far this year and last year and that would be energy, commodities, industrial-type industries. these are ones that are very much leveraged to the growth and foreign markets like china and india, they are producing very strong cash flow, trading at good valuations. and we really think the economic environment will favor the industrial part of the economy over the service part of the economy going forward. so that’s still where we’re focused.

>> how do you factor in volatile energy prices?

>> we factor it in to the extent that we’re going to own companies that benefit from higher energy prices, whether that be integrated oil companies, coal companies, exploration and production companies. and we’re also looking for companies that have pricing power that can pass through higher energy and raw material costs and maintain profit margins.

>> can you tell me what industries you’re not impressed with these days? you told us you were concerned about the consumer here?

>> absolutely. we’re anticipating an inverted yield curve next year which means short-term rates are higher than longer term rates and that’s negative for the consumer and also negative for the lenders. so regional banks, mortgage lenders, housing stocks. they’re the ones we think will be hurt significantly by the inverted yield curve so consumer and lending-type entities we would be negative on.

>> thank you very much, we’ll leave it there, david.

>> thanks for having me.

>> our thanks to david spika, president and investment strategist with westwood holdings group. still a lot ahead today when “after the bell” returns. the tour de france attracted record audiences and attention to the sport of cycling. can a bike race do the same for california and will lance armstrong be along for the ride? that’s coming up on “money & sports.”
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Listen Market briefing --- Lori (medium)
Equity market's performance --- Margaret (slow)
Taking stock --- Ari (slow)

that the economy would keep growing. margaret popper is here with a wrap-up of the equity market ‘s performance.

>>hi, lori. a late rally in oil stocks made them the top group. the next three leading groups were closely tied to the idea of an expanding economy -- transportation, capital goods and material stocks were those groups. georgia-pacific soared on news it’s going private. copper company freeport-mcmoran reached another record this week and shares of industrial gas company, air products and chemicals, went up for the fourth time in the last five weeks. some investors say the commodity play is far from over.

>> these commodity runs tend to go on long, long cycles. i know investors think they may have missed something. we’re only in the fourth or fifth year and these things tend to go for 15, 20 years and i think the build-up of the infrastructure in europe and the rest of the world is one of the biggest investment theels out there.

>> gold rallied to an 18-year high while copper set a record. industrial companies such as caterpillar, g.e. and tyco, which turn metal and energy into farm equipment, turbines and other products, rallied. g.e. raised its forecast and tyco talked about a breakup to boost shareholder value. transportation companies reached another record this week. they’re at the center of the economy with railroads hauling coal and metal, u.p.s. managing the supply chain and truckers delivering finished products to customers. the technology side of wall street is where the biggest gains were found. the philadelphia semiconductor index powered ahead for a third week, rising nearly 4%. the nasdaq composite is the best performer among the three major indexes, adding over 1% to reach a four-year high. the nasdaq has soared over 9% in less than a month and some investors say the biggest gains are in the past, especially with so many questions hanging over the economy.

>> there’s a lot of skepticism out there that the fundamentals are good enough, the economy’s ok, but the consumer seems to be slowing. earnings growth is ok, but it’s decelerating, also. so you have a lot of these, on the one hand this, and on the one hand, that.

>> on the losing side of the ledger this week, stocks that typically underperform when the economy is strong―food, beverage and tobacco stocks sank. tyson foods dropped after cutting its forecast. it failed to show a profit in its beef unit. and a goldman sachs analyst said altria’s breakup may be delayed two years due to another cigarette lawsuit. altria was the dow jones industrial average’s worst stock this week. g.m. staged a recovery. three days of declines left it down 13% by wednesday, near an 18-year low on fears it might be getting closer to filing for bankruptcy but comments from c.e.o. rick wagoner blunted those fears, limiting this week’s losses to about 2%.

>> thanks. a rally in technology shares pushed the nasdaq 100 to its highest level since 2002. it might be ending. the glimpse into next year shows the slowest profit growth for computer-related companies in more than three years. that’s the subject of today’s “taking stock.” bloomberg news reporter ari levy joins us in school to tell us more. ari, welcome. what fundamentals will lead to a tech slowdown?

>> analysts don’t see a lot of products they consider innovative and innovation is the driving factor for technology. you have from microsoft the xbox 360 coming out next week and the vista operating system coming out next year, so there are some things in the pipeline but broadly speaking in finding what the new thing is, investors are struggling to find it so you’re basically buying companies you think are sound companies with decent growth but that’s not what’s been the catalyst for techmology in the past.

>> is it a problem with tech spending or research and development spending?

>> part of it this year has been with higher energy prices and higher interest rates, there’s concern there will be less pending on technology so you have spend inventory buildup throughout the year and part of it is also where do we go from here and it seems companies are struggling with that. you look outside of apple on the consumer side, obviously, they’ve had success with the ipod, but, again, that’s a consumer item.

>> what kind of products really would catch the eyes of analysts in your opinion?

>> it’s tough to say. they’re looking for anything on the telecom space as we see a lot of the mergers and acquisitions on that side. new, inventive products from companies like cisco and such. cisco has been struggling.

>> any tech industries that may outperform next year that go counter to the trend you’re talking about?

>> people who have been following google and internet stocks still really like them. google continues to have the momentum. there’s really no sign of a slowdown in advertising spending. the question, is can those stocks continue to outperform? as far as apple goes, again, a lot of it is how strong will the consumer be. microsoft is one that i’ve actually talked to a number of people that do like, now. they’ve started to buy it for the first time in a number of years because they do have products coming out and if you look at the valuation, several of these tech stocks are trading at the lowest valuations in a number of years.

>> how would the ripple impact some of the semiconductor companies? >> a number of the semis, particularly intel, if companies are upgrading because of new products from microsoft, you know, if they’re updating their entire systems, they’ll need new semiconductors so intel is largely dependent upon products from other companies in order for that upgrade cycle to work.

>> thank you for coming in, ari levy, bloomberg news. still ahead, this hour, markets finished the week higher across the board, but, is the recent upswing just a feel-good rally and what’s the next real catalyst for stocks? we’ll get some answers from david spika as “after the bell” continues.

Interview: Janney Montgomery Scott---Fishbein, Joel---Analyst

>> welcome back. cisco systems announced plans to buy scientific-atlanta for $6.9 billion, adding the second largest u.s. maker of set-top boxes for cable television and tapping into the growing market for internet tv. what does this mean for the future growth of the company? joining us to help answer that question is joel fishbein, analyst with janney montgomery scott, joining us from philadelphia this afternoon. hi, joel.

>> hello, lori.

>> well, c.e.o. john chambers called the deal medium sized after saying larger ones rarely work but at $6.9 billion, do you think scientific-atlanta is a mid-sized acquisition?

>> no, frankly, this is a large sized acquisition, a good one, from our perspective, but definitely a large acquisition. it propels them into the consumer video market and helps them with their strategy into the consumer i.p. telephony market .

>> do you believe cisco is paying the right price?

>> i think they paid a fair price. there’s been speculation in the market that scientific-atlanta will be one of those properties that will be acquired so the stock had a decent run and i think cisco paid a fair price. somewhere around 25 times earnings.

>> when do you expect us to see the benefit for cisco of this acquisition in its stock price? shares were down over 2% today.

>> obviously, there’s been -- cisco’s been under pressure here the last couple of months here on, really, i think, a disconnect in the marketplace between what its real growth rate is and what people expect. obviously, this company will never grow as fast as it did in the 1990’s but this is a 12% to 15% grower in our opinion, although they haven’t grown that fast in the last couple of quarters. bookings have grown solidly and we think they can grow from 12% to 15%. scientific-atlanta will help them in the near term with that growth and what this really does is, lori, from our perspective, cisco’s now in a position to own the home in a similar way they own the enterprise and this is a great way for them to own the home gateway where they can provision services for all the providers in the markets so we should see immediate benefits as soon as the deal closes.

>> cisco’s routers and switches business has slowed to less than 8%. to what extent will the scientific-atlanta businesses, both the set-top boxes and equipment for internet tv products, offset that?

>> basically, cisco’s breaking out their business into emerging growth markets and this now becomes one of those emerging growth markets . though emerging growth markets have grown in excess of 20% and what’s been offset, as you said, the router and switch business, 80% of their business has been slowing, we suspect that cisco will continue to add emerging technologies to their portfolio to accelerate the growth. this is one of those strategies so i think 12% to 15% is the right overall growth rate for the company as we move into 2006 and beyond.

>> let me ask you, what is the outlook for this internet tv? how quickly is it catching on?

>> if you think about it, now, it’s really accelerated. if you―certain visionaries had a vision of asynchronous tv and right now you can basically get any programming you want at any time you want and i think the time is now and i think with this acquisition, it’s time to market and scaleability for cisco and this allows them to get in there and offer these services that both the cable providers and service providers are trying to compete with. basically, i live in a neighborhood where, it’s seven years old, they’re ripping up my streets. verizon is ripping up my streets to compete with cable providers and i think with this acquisition, cisco is uniquely positioned to help the cable service routers but also the telephony service providers to be able to deliver some of the advanced technology services.

>> so scientific-atlanta has the deal with s.b.c. with cisco, now, as the parent company, will it help scientific-atlanta gain more customers for this internet phone service and tv products?

>> absolutely. and you mentioned, i’m from philadelphia, and one of cisco’s largest customers and also a customer of scientific-atlanta is comcast based in philadelphia. i had the opportunity to speak to them today and they’re really the true test of whether or not this is a good deal or not and they empfatically said this is a good deal for them because this lets them buy more technology although from fewer vendors and solves a lot of their problems so to answer the question of whether or not it’s good for the end customer, it absolutely is according to one of their biggest customers.

>> i want to ask you about the set-top box business, how will cisco benefit from acquiring that, as well, with scientific-atlanta?

>> here’s where it will be interesting down the road. obviously, you said scientific-atlanta is the number two position in the set-top box, motorola, g.i., is the number one position there. scientific-atlanta has certain functionality in there but remember, a year and a half ago, cisco bought a company called linksys with the strategy of getting into the home via router market and adding voice ports to their routers and when these two technologies converge, i think cisco will be in a unique position of offering voice, video, data and mobility convergence.

>> we’ll leave it there, joel. thanks for joining us. joel fishbein, analyst with janney montgomery scott. still much more ahead on “after the bell.”
点击播报
Listen Market briefing --- Lori (medium)
Former Refco Chief Executive --- Allan (slow)
Cisco --- Bob (fast)
GE --- Su (fast)

signaling economic growth and a drop in oil prices to the lowest in five months. the standard & poor’s 500 index was little changed today as a drop in energy stocks offset general electric raising its profit forecast. more on that in a moment. first, the settling numbers -- topping our news, former refco chief executive phillip bennett was arraigned in a new york city courtroom today, accused of playing a major role in refco’s bankruptcy by hiding $430 million in debt. allan dodds frank is on the case and joins us from federal court in manhattan. allan?

>> it did not take long for phillip bennett, the 57-year-old former c.e.o. of refco, to say to the judge, i plead not guilty , your honor. he said it in a clipped british accent, since he’s a citizen of the united kingdom, an important fact as the hearing went on. it lasted about half an hour and most of the discussions, after his plea, was whether the judge would allow him to get rid of the electronic ankle bracelet he’s been wearing for six weeks as part of his bail package. he is out on $5 million bail, $50 million bond guaranteed by his wife, son and daughter. and his two residences, a park avenue apartment and an estate in new jersey. but that only is worth about $20 million, according to the prosecutor, who argued the electronic bracelet should remain, especially since mr. bennett is a citizen of the united kingdom. the prosecutor said that mr. bennett’s daughter has an $18 million jet and the government is concerned that bennett could flee since, according to the prosecutor, he faces what amounts to, under the sentencing guidelines, given the large amount of money in the case and the eight counts he faces, of potential life sentence in prison and therefore he would have every motive to flee. the defense lawyer for phillip bennett argued to the contrary, saying that bennett has lived in this country continuously for 27 years and he would never subject his wife and his son and his daughter to the sanctions of the court that would result if he fled the country. however, the prosecutor is concerned that bennett could take his whole family and leave so the judge said he wanted to think about this. in the meantime, they had a hearing set for january 18 where they will discuss the evidence in a regular pretrial hearing.

>> thank you very much. another refco note, a judge has halted customer account lawsuits until december 8. these are lawsuits by customers seeking to recover $1.8 billion in accounts. refco claims the accounts are debt, not customer property, meaning customers might not get all of their money back. customers argue the money is theirs and was only being held by refco. cisco agrees to buy scientific-atlanta, the maker of cable tv set-top boxes for a price tag of $6.9 billion. bob bowden has all the details.

>> cisco systems equipment directs 2/3 of all the data on the internet and scientific-atlanta is the second biggest maker of cable boxes with customers that include the biggest of cable tv companies like time warner cable, comcast and cablevision. cisco agreed to pay $6.9 billion for scientific-atlanta, which works out to $43 a share. while it’s just a 3.7% premium over thursday’s closing price of $41.45, scientific-atlanta stock has been rallying the last month as investors have been anticipating an acquisition. look at the right side of this six-months chart and you see that one-month rally. if you look at the last 30 days in particular, a 23% gain for scientific-atlanta shares. this stock has fallen only twice in the last 17 sessions. by buying scientific-atlanta, cisco chief executive officer is targeting consumers’ growing use of television and cable modems with softness in business spending on routers. revenues grew 9.7% last quarter and earlier this month the company forecast 8% to 9% growth for the current quarter. chambers described the synergies of a combined company.

>> if you look at the market you’ll see a convergence of data, voice, mobility. cisco is a clear leader in data, voice and mobility and scientific-atlanta is a leader in video and so by putting them together, you’re going where the market is going to be in the future.

>> investors perhaps a bit skeptical, cisco shares down 2%, not unusual for the acquirer shares to fall after such an announcement. the cisco, the seventh worst nasdaq 100 stock today. you see the stock has been down over 11%, 11.5% in six months.

>> thanks so much for that. the other major deal of the day involves general electric, selling its reinsurance unit. g.e. shares rose 3% after the company agreed to sell its reinsurance business to swiss reinsurance company for $6.8 billion in cash and stock. also, g.e. boosted its profit forecast. su keenan is here with more on the story.

>> general electric’s sale of its insurance business for close to $7 billion marks the next phase in c.e.o. jeff immelt’s plan to reinvigorate growth by focusing on the fastest growing areas. the company is not getting rid of all financial services. g.e. still has its profitable consumer finance division, g.e. credit. according to merger insight’s tom burnett, the move is designed to diversify g.e. away from the cyclicality of the insurance industry and is consistent with the company’s focus on manufacturing and industrial businesses of the burnett says the market likes the price and the deal. for swiss re, the purchase of g.e. insurance solutions, it’s the company’s biggest acquisition yet. swiss re will assume $1.7 billion of debt and plans to sell as much as $7.5 billion of securities in order to fund the purchase. shares of the company rose as much as 3% in zurich and the incoming c.e.o. says the purchase should contribute to earnings growth by 2007.

>> at least $300 million of synergies will accrue to our shareholders by 2008 and thus will be implemented during the first 18 months after the acquisition closes.

>> g.e.’s immelt released a statement saying the sale allows his company to enter next year with the fastest growing, high return set of businesses in years. the company boosted its profit forecast as much as 17%, increased the stock buyback plan by 25 billion through 2008 and raised its quarterly dividend by almost 14%.

>> thank you very much for that. moving on, as “after the bell” continues, crude oil closed little changed today. at the close, it was below $57 a barrel, falling to a five-month low on speculation fuel stockpiles are adequate to meet global demand. for the week, crude oil down $1.39 to close at $56.14 a barrel. heating oil and gasoline futures fell for the seventh straight week and gold fell from its highest point in almost 18 years. speculation some traders sold bullion for profit after prices rallied 6.2% in the past two weeks. gold climbed 3.6% this week, the most since august 2004, as investors sought alternatives to u.s. and european currencies, stocks and bonds. delphi c.e.o. steve miller said all of the company’s u.s. plants will have to close unless unions agree to wage cuts to help the largest u.s. auto parts maker exit bankruptcy. he said he’s not received a union counter offer on his proposal to cut worker wages to as low as $12.50 an hour. in an interview earlier today on bloomberg television, miller said delphi needs to cut wages in order to be competitive. miller took delphi into bankruptcy back on october 8. he offered a second proposal to the company’s unions this week, seeking to cut the u.s. hourly work force to about 10,000, while reducing wages. united auto workers president, ron gettelfinger, called the offer an insult and said the union has a right to strike if miller is given permission by a bankruptcy court to nullify labor contracts.

>> we are certainly willing to discuss the individual elements as between the wage package, the structure of the benefit package and so on. but the one thing we can’t do is collect more money from our customers than what our competitors are charging them for comparable work done in the u.s. by the unionized work forces.

>> and miller has said that he will ask the bankruptcy court to let delphi impose terms if unions don’t agree to pay and benefit reductions by december 16. “after the bell” continues with more on the big deals of the day as cisco acquires scientific-atlanta.