Interview: RiverSource Investments---Joy, David---Equity Strategist
Interview: U.S. Treasury Secretary---Snow, John---Politician / Govt Official
>> sign timbing atlanta report being second quarter results 44 cents a share if you exclude items z beat what analysts were looking for by a penny. however, the sales coming in short. $495 million. analysts were looking closer to 511 million. keep in mind real key when you consider scientific atlanta. it is being bought by cisco systems. again, the company coming in n. ahead of expecttations on the profit front but short on the sales front. also after the bell today, earnings out from ranl us about. as for rambus, the company reporting nine cents a share if you include a pretax gain of 5.4 million dollars. analysts were looking for eight cents. as for the sales coming in at 41.6 million, just ahead bhaff analysts were looking for. they’ve been looking closer to $40.5 million. rambus, keep in mind, surged 91% over the past year. the company involved in several legal disputes having to do with patents, for example, it sued companies including sam sung as well as micron. as for the overall markets , stocks recovered today from a two-day decline. lifted to day by positive earnings frorts companies including pfizer and merrill lynch. we want to analyze these interesting market days with david roy from river source investments joining us with his earnings scorecard as well as his outlook for stocks in the days and weeks ahead. and, david, it’s nice to talk you to. we haven’t seen each other.
>> pleasure to be here.
>> i want to start off by asking you about this early start to the earnings season. because certainly it’s been very interesting. very big companies that are considered bellwethers coming out with reports that missed expectations. how significant is that in terms of the overall earnings earnings season?
>> we got off to a sluggish start. you start with alcoa then fell ps dodge. a few of those types of materials companies and industrial companies disappointed. and so there was this paul cast over the earnings season. then intel dispinted. but if you look at the reports so far and the aggregate, they’re really not that bad. they’re actually coming in pretty good. and i think when we step back and look at knit the aggregate, we’ll find that―it will turn out to a decent season.
>> so then you are adjusting your estimates at all given the rally we’ve seen so far, given the fact that we’ve had pretty mixed results out there so far?
>> we have not made any adjustments to our earnings expectations. but we have made adjustments to our economic expectations. and, in fact, a fairly significant adjustment. when i last spoke with you, we were of the view in the first half is going to be fairly soft, not bad. trend like growth. but soft compared to where we’ve been. we now think that we’re going to see very robust growth in the first half, maybe three quarters of the year followed by a much harder landing than what is widely anticipated.
>> why?
>> well, we think the fed is going to be forced to go further than what the market expects right now. the fed is getting no help from the long end of the yield curve. as a rument, we think activity is going to be up around 3.75%, maybe 4% the first half of the year. forcing the fed to maybe go as high as 5%.
>> in terms of not getting the help here, we have the 10-year and 2-year showing the same yields at 4.37%.
>> exactly. the fed’s raised rates 13, 14 time by the end of the month. and, yet, long-term rates are lower than before the fed started. so they’re going to have to go a little further, we think.
>> in that environment then, what do you think the single best investment decision is for someone who’s got fresh money at the start of 2006?
>> i think as a general statement, you want to be in large predictable stocks, large cap, steady sustainable earnings growers and maybe towards the growth side of the style spectrum. as far as sectors go, i think energy is still at the top of our list. we generally like the back end of the economy better than we like the consumer. i think when the slowdown occurs, it will fall most heavily on the consumer.
>> david, thanks so much. and a perfect setup for the next guest. now we’re about to speak with the treasury secretary. we’ll get a lot more on the economy right now. appreciate your time. as we do talk about the economy, we want to point out that housing starts fell to a nine-month low in december. joining us to talk about the economy is john snow live from washington. mr. secretary, thank you for your time today.
>> hey, thank you. glad to be on with you.
>> i would like to start off by asking your thoughts about oil. climbing back above $67 a barrel. taking some people by surprise in terms of the levels that we’ve seen. what kind of drag you are anticipating this could have on the economy?
>> well, it all depends on how long it lasts. these prices aren’t welcomed. they’re most unwelcomed. they act like attacks. and higher taxes don’t help the economy and higher energy prices hurt the economy. the effect here depends very much on whether this is a short term phenomenon or a longer term phenomenon. i certainly hope that we’ll see moderation and energy prices will come back down. so people don’t build these prices into their long-term calculations.
>> you say you hope. but my question is how realistic is that? we’ve been speaking to a lot of investors and energy analysts. one person i spoke with just a day or so ago said that he thought at these levels the iran situation is not even priced in. that if it deteriorates, what kind of fallout do you think we could see on oil prices?
>> well, clearly uncertainty in the middle east is a negative for energy prices. and as i’ve said, energy prices, rising energy prices create headwinds for the economy. the fact of the matter is nobody really knows, do they? where energy prices are going. but higher energy prices always invite supply side adjustments that are beneficial. and they invite demand side conservation adjustments. so there is a self-correcting mechanism here at work when energy prices spike up. but it’s―it’s unwelcomed and it causes short-term―short term headwinds for the economy. no doubt about that.
>> let’s talk about some of that fallout on consumers as well as corporations. some of the inflation numbers seem to indicate a lot of companies out there do not have pricing power at a time that they have higher costs because of the energy situations. are you concerned corporations basically are going to have a hard time boosting earnings because they’re not able to boost the prices?
>> well, remember, we start from a position here where profit margins are pretty good. and where corporate cash flows are good and corporate profittability is strong, is good. and that’s leading to very substantial corporate spending, corporate investment has been up now for the last 10 quarters. so, no, i don’t―i don’t think this is going to have a dramatic effect on profittability or on margins or on capital spending outlook. but clearly some firms, fimples that are energy intensive in their cost structures will be -- will be hit. and get much more than the median firm.
>> let’s talk overseas a little bit. last month you said you expected to see some precious of the chinese currency by march 1. is that still your target date?
>> we don’t have a precise date in mind. what we want to see is continuous movement that takes currency to a situation where they’re really being determined by market forces, by demand and supply. and we’re going to continue to urge our counterparts in china to do just that, to continue to move to greater flexibility. but we don’t have a precise target in mind.
>> given that you’ve not yet seen the move that you had been hoping for, based on everything you’ve said, what will it take for the u.s. to, in fact, say that china manipulates the currency, something thain vestors have been closely watching to see if the u.s. will say?
>> the treasury department will be issuing a report here later in the spring on that subject. and that report is very much factual based. it’s a look at what’s hatching. and it is pretty clear that the chinese need to move to greater flexibility for their sake and for the sake of the global economy. and failure on their part to do so will, obviously, influence the determination we make in that report for the congress.
>> mr. secretary, thank you for joining us.
>> hey, thank you. always good to be on with you.
>> we appreciate it. treasury secretary john snow joining us from washington. want to continue the conversation in a we were having, having to do with energy. a key factor for investors, some very interesting moves today. in fact, we have crude now at the highest price in four months. crude futures ending at $66.83. a gain of more than $1. heating oil and natural gas futures rallying to 2.5%. let’s bring in sue keenan. she’s back from a day at the i’m in ex-. she’s got the latest on the trade today. hi, sue.
>> the latest inventory report from the energy department shows there’s plenty of crude oil and gas yet the focus of investors is elsewhere to potential disruptions to exports from iran now developing a nuclear program and they’re also concerned about nigeria and rush yafmentman financial’s jim steel says the market is “incredibly tense because of the gee yow political situation.” french president shack chirac made hawkish statement that’s increases pressure and ray cosh on says it makes for a bullish scenario when you consider january is one of the warmest months on record. hurting demand for fuel.
>> very few people can sell this market in a economical way and given the very, very cold winter happening in russia right now that is curtailed not only crude exports from that country but also natural gas exports once again which we saw on the beginning of the year with ukraine. so tight market due to weather in europe and gee yow politically some tensions in many important oil producing regions.
>> and as far as inventories go, that was a big story today, many analyst echo the view of john killeda that report is bearish. the energy department saying there was almost three million barrel gain in stockpiles last week, a time when an analyst expected a decline. even so, he says that if these global conflicts continue, we could revisit the record priceded 70 a barrel oil last seen immediately after hurricane katrina. as you noted, we’re already seeing $67 a bare knell after hours traiting. zin deed. thanks so much for that. turn our attention right now to world and national news. the c.i.a. confirms that voice on an audio tape released today is in fact that of osama bin laden. so let’s bring in mark crumpton and get more details. mark?
>> on that tape which aired today on ijaz, bin laden―on al-jazeera bin laden calls for a long-term truce. however, bin laden also warns of more al qaeda attacks against the u.s. saying, “you’ll see them sooner rather than later as iraq isn’t the only battleground as you have seen with other recent attacks in european territory.” despite the latest threats from bin laden, the associated press reports that the department of homeland security says it has no plans to raise the national terror alert. the kidnappers of journalist jill carroll said they want the release of iraqi women and u.s. custody and iraqi officials says six detained iraqi women are scheduled for release bit u.s. military though they say it’s not connected to the kidnapping. vice president cheney says progress in iraq hasn’t come easy but he says it has been steady. the vice president told an audience here in new york that there is still hard work ahead because, in his words, “we’re dealing with enemies who have declared an intention to bring great harm to any nation that op
