|
 |
LOU DOBBS MONEYLINE
Dow Advances 23.04 to 9982.75; Nasdaq Advances 38.03 to 1941.23
Aired November 26, 2001 - 18:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANNOUNCER: This is LOU DOBBS MONEYLINE for Monday, November 26.
Here now, Lou Dobbs.
LOU DOBBS, CNN ANCHOR: Good evening.
The war in Afghanistan enters a new phase as 500 U.S. Marines have hit the ground near Kandahar, the Taliban's last major center of power.
Former Defense Secretary, Caspar Weinberger, will be here tonight to offer his insight on the War against Terrorism.
President Bush says American should be prepared for a long struggle, as well as casualties in the battle against terrorism.
Long lines, delays, and heightened security on one of the busiest travel weekends of the year. We'll tell you how the nation's travel industry handled its biggest challenge since September 11.
And it is now official, the National Bureau of Economic Research says the economy entered a recession in March, ending the longest economic expansion in our country's history.
That had little effect, however, on Wall Street. The Dow and Nasdaq both finished the day higher, and Morgan Stanley has named its top stock strategist. We'll tell you who he is and where he says you should put your money.
Now for the very latest in the War against Terrorism, U.S. Marines in southern Afghanistan began their first military operation today. They used helicopter gun ships to attack a convoy of armored vehicles near Kandahar.
They will soon be joined by another 500 Marines who will then help track Osama bin Laden, al Qaeda, and Taliban forces. The location of bin Laden remains unknown. The Northern Alliance Foreign Minister says he believe bin Laden is in the Taliban-controlled city of Kandahar, and that he and his forces are surrounded.
The Pentagon showed video of an air strike against prisoners who tried to overthrow their captors in Mazar-e-Sharif yesterday. Hundreds of Taliban and Northern Alliance fighters were killed in the rebellion. Five U.S. Special Forces personnel were injured by friendly fire. A CNN crew reported sporadic fighting within the compound today.
Various Afghan groups began arriving in Bonn, Germany where talks on forming a broad-based Afghan government. Those talks are scheduled to begin tomorrow. They are expected to last up to two weeks.
Well, as we reported, 500 United States Marines have arrived south of Kandahar today intensifying the efforts to find Osama bin Laden and to cripple the al Qaeda network.
Christiane Amanpour is in Kabul and has the latest for us -- Christiane.
CHRISTIANE AMANPOUR, CNN CORRESPONDENT: Well, Lou, these 500 U.S. Marines, according to the Pentagon, are part of an even larger deployment, perhaps up to 1,000 Marines or more who are destined from their assault ship out there at sea, the Peleliu. They've been there for weeks now. They came in and they're destined for action around the Kandahar area, as the Pentagon has been reporting.
As you said, as soon as they landed, this first deployment, they went straight into action according to U.S. officials. They attacked a convoy of armored vehicles. Now Donald Rumsfeld said that "we're pursuing al Qaeda and the bin Laden network all over the country, and we will continue to do so.
CNN sources also say the British Special Forces and others are headed towards the Kandahar area, and that they could be preparing, along with U.S. Marines, for a decisive battle around Kandahar sometime soon.
Now in the other areas of development in terms of news, there is that situation in Mazar-e-Sharif, the issue of the prison uprising. The U.S. has still not confirmed whether, in fact, one U.S. personnel member has been killed there as was reported yesterday during the time of this prison uprising.
Television pictures caught a U.S. -- what looked like Special Forces or intelligence personnel -- calling in for help and afterwards reported at least one person may have been killed or injured.
The U.S. confirming that five servicemen were injured when the U.S. aircraft did respond and try to put down, in fact did put down that uprising. Those five U.S. personnel who were injured have been airlifted to neighboring Uzbekistan.
And in Konduz, which was the last Taliban stronghold in the north, there are now happy crowds in the streets after the Taliban surrendered and, in fact, was beaten back from there.
We have seen pictures of big crowds coming into the center of Konduz, welcoming in the Northern Alliance on their columns of armored personnel carriers, and generally celebrating the last stand, the fall of the last stand of the Taliban in northern Afghanistan -- Lou. DOBBS: Christiane in Kabul, the Northern Alliance, the forces, the opposition forces have been in control now for a week. What is, if you will, the demeanor there? What is the atmosphere now?
AMANPOUR: Well, the atmosphere is calm and secure and really has been for the last couple of weeks since they've taken control. There was one small incident that finally either surrendered or was beaten back. It's hard to tell here because often on these frontlines forces change sides, sometimes with the exchange of some money, sometimes with the exchange of promises of good treatment.
In any event, this pocket was pacified over the last couple of days. And the other thing the authorities have been doing in Kabul and around the country is searching for evidence of Osama bin Laden's whereabouts and indeed evidence of his terrorist activity by al Qaeda.
CNN has been shown all sorts of documents that point to activity in terms of recipes for poisons and things, and we've been told that they believe that Osama bin Laden is still hold up in the Kandahar region.
When asked why they believe that, they said that that is the only stronghold, the only possible place that he could be. We don't have any further information on that.
DOBBS: OK, Christiane, thank you very much. Christiane Amanpour from Kabul.
Well, joining me now to discuss about the war against terrorism, former Defense Secretary Caspar Weinberger. Caspar Weinberger dealt with terrorist acts, of course, while serving in the Reagan administration, including the Iranian hostage crisis and the bombing of the U.S. embassy in Beirut.
He is also the author of the new book "In the Arena" and joining us now, I'm delighted to say, is Cap Weinberger. Good to have you here.
CASPAR WEINBERGER, FORMER DEFENSE SECRETARY: Thank you very much, Lou, very nice to see you again.
DOBBS: Let me begin by asking you, as we are watching these talks begin in Bonn, Germany on a post-Taliban, post-Osama bin Laden, al Qaeda Afghanistan, what do you think is the appropriate outcome?
WEINBERGER: Well, I hope there's a stable government that includes most of the factions that are willing to live basically a democratic rule and civil rights and human rights, and all the rest.
I don't think that includes the Taliban, but there are a number of other organizations, tribes, militias all the rest, and I hope the coalition, the post-Taliban government could be a broadly-based as possible. But I think it will be doomed for trouble if it fails to take in some of the people who were part of the terrorist organizations of the past. DOBBS: President Bush has made it clear that he wants weapons inspectors in Iraq. He has also made it clear that the focus of the War against Terrorism will include groups that are now domiciled at least in the Philippines and Indonesia and Malaysia. What do you think is the proper prosecution of the War against Terrorism from here?
WEINBERGER: I'm sorry, I didn't hear the end. We're fiddling with my earpiece.
DOBBS: What do you think is the -- we apologize for that discomfort -- what do you think is the proper prosecution of the War against Terrorism now?
WEINBERGER: Well, I think it's going very well. I think we're doing exactly what we have to do and we're doing it very well with the troops that we have who are performing magnificently as always.
I wish we hadn't allowed the military to run down so badly during the eight years of Mr. Clinton's presidency which we are now something like 46, 47 percent of the effectiveness that we had at the end of the Gulf War, and we'll have to make a lot of that up.
But the troops that are there, especially the trained troops, the elite troops, the Marines, our Army, all the other are doing a wonderful job and I think we've learned a lot of lessons from Russia's experience in the sense that we aren't amassing large blocks of troops any particular place.
We're sending in small groups, gathering intelligence, identifying targets, reporting on the effectiveness of the bombing and then taking them out and moving them to another place.
I think there's a larger group now of Marines going in, in one of the areas fairly near Kandahar, and I think we could expect, personally I would hope, another surrender or a transfer of allegiance as they call it.
It's all based on a matter of a principle in Afghanistan. The principle is to be on the winning side, and I would hope we'd pick up quite a few as a result of our victory so far.
DOBBS: And those victories, do you think at this point that we're going to hear less, fewer complaints if you will, from Muslim countries because of the success of the operation against the Taliban and the al Qaeda in Afghanistan to this point?
WEINBERGER: Oh, I think so, yes. I think our fears of losing Muslim members of the coalition are somewhat misplaced. I think that we underestimate the hatred that a lot of these moderate Arab-Muslim governments have for people like Saddam Hussein and Osama bin Laden.
They don't want people like that for neighbors. They can't trust them. They're afraid of them. They're in constant fear that they're going to practice their terrorism in their countries, and I think they'd be delighted to see them both taken out. DOBBS: You mentioned with your Republican credentials in tact, Cap, that the Clinton Administration had reduced defense spending during the course of eight years. But I think in fairness, we should also point out there was some extraordinary defense spending reductions under the Bush Administration in 1988 as well.
WEINBERGER: We started to come down after the end of the Cold War, as indeed was fair enough. We didn't need quite that kind of an establishment at that time. For the Gulf War, however, demonstrated that you never know when you will need them, and it's very, very hard to acquire lost strength.
It isn't just a reduction in spending in the Clinton Administration. It's a reduction in effectiveness. We didn't spend anywhere near enough on research and development, which is what produced the weapons that won the Gulf War at such low cost, and unfortunately we cut way back on procurement.
We had procurement holidays. We did a lot of things because domestic politics always dictates that you don't spend very much on defense. You save it for more popular local programs.
DOBBS: All right, let me turn quickly just to the book. You're talking about the fact that Ronald Reagan had a very specific plan to bring the, then the Soviet Union to its knees.
That has been discussed widely by, as you know, academicians, historians saying frankly that the Reagan Administration was somewhat lucky. You put forward quite the opposite view in your book.
WEINBERGER: Yes. I think it wasn't a matter really of luck. It was a matter of persistence and political courage on the part of President Reagan and willingness to spend large amounts on defense, even though it was not politically popular, and to make the case as to how we needed it and why we needed it to regain and recover the morale in the Armed Forces which had been very low when he first took over as President.
And all of these things contributed, not only to our strength, but to the perception by the Soviets that we were gaining a great deal of strength. They were not going to win a war against us, particularly as we held NATO together and all the other alliances.
So, I don't think it was a matter of luck. I think it was a matter of good leadership and a willingness to take on the conventional wisdom. You'll recall the conventional wisdom of that time was always that we could live with the Soviets, that we could contain them. We could have morale equivalence.
DOBBS: Compatibility.
WEINBERGER: All of those things. All of that was very repugnant to President Reagan and he didn't believe it for a moment.
DOBBS: The view was a compatible, competitive, different ideologies but underlining compatible at the time. Here we are a decade later, Cap. The Russians now are joining with the American, the British and others in the War against Terrorism. You have to find that particularly gratifying, I would assume.
WEINBERGER: Well, it's gratifying if they have indeed changed, yes. They have certainly changed from the old Soviets that are gone, and we have Mr. Putin now who is their leader. He was - I think it's important to remember that he was a very accomplished and much praised spy by the Soviets. He did all the things they wanted him to do.
He was brought up in the whole Soviet system, and while he has changed on a number of things, particularly in the War against Afghanistan, because as you recall, the Russians were badly beaten in Afghanistan and virtually anybody who's against the Afghans, they're for. So we are picking up some support there.
On the other hand, I wish he would stop supplying weapons and nuclear components to countries like Iran and Iraq, and I wish he would have stopped opposing us at everything we want to do in international forum, like the United Nations.
So I think it's good that there's an improved relationship. I'd like to watch it a little longer before we embrace them fully.
DOBBS: And I suspect that, although you didn't mention it, you'd like to see some better progress on something called the Missile Defense Shield or...
WEINBERGER: I would indeed.
DOBBS: -- or SDI as it was known in an earlier administration.
WEINBERGER: That's right. Missile defense we need, we don't have any. A lot of countries, a few countries have a great many of these very terrible weapons, and by our own choice, we have no defense against them whatever.
And as long as we continue to adhere to the ABM Treaty and it's apparently our worry about upsetting Russia that has prevented us thus far from stepping right out of the treaty, as President Bush says he wants to do, and as I hope we will do very shortly so we can get on with developing and deploying a missile defense shield, which in this kind of world is pretty essential.
DOBBS: Caspar Weinberger, author of the new book "In the Arena", still in the arena and we're delighted you are. Thanks for being with us.
WEINBERGER: Thank you, sir. Very nice interview, thank you.
DOBBS: Coming up next here, major snowstorms are moving across the Great Plains, shutting down schools, closing highways. We'll take a look at that area's first storm of the season.
A hurricane is also forming. We'll also tell you about that. We'll take a look at how retailer's fared during the first major holiday shopping weekend.
And Amtrak has long suffered under tremendous financial strain. We'll take a look tonight at how the recent over airline safety may or perhaps may not help the troubled rail system.
(COMMERCIAL BREAK)
DOBBS: Today, Pier One imports raised its forecast. For the second time in a month, the stock is trading near its 52-week high. That comes after a health beginning to the holiday season.
Consumers went shopping this weekend, but they shopped mostly for big bargains. Susan Lisovicz has the story.
(BEGIN VIDEOTAPE)
SUSAN LISOVICZ, CNN CORRESPONDENT (voice over): They are an ubiquitous as the big man in the red suit, sale signs, promotions, deep discounts. Amid the festive holiday decor, they are the critical factor in determining whether the holiday season will truly be merry for the nation's retailers.
Hardcore bargain hunters lined up in the pre-dawn hours in Detroit on Black Friday. That same mentality in Phoenix helped give Wal-Mart its busiest shopping day ever, ringing up one and a quarter billion dollars in sales.
And while Telechek said traffic was up 2.4 percent on Friday from a year ago, the RCT national retail traffic index said mall traffic was down eight percent the same day and declined by nearly the same margins the following day.
ARNOLD KARR, SR. EDITOR, WWD: By the time all this discounting is done, we think it's going to have a severe effect on fourth quarter earnings. Profitability is, without a question, being affected and it's being affected negatively in all but a very few circumstances.
LISOVICZ: There is some merchandise immune to clearance, like Harry Potter memorabilia, Microsoft's X-Box and Nintendo's Game Cube.
Apparel on the other hand is vulnerable to further markdowns.
JEFF KLINEFELTER, US BANCORP, PIPER JAFFRAY: If you want to buy a few more pairs of denim jeans, if you want to buy a couple of sweaters, I think you're going to be able to get those very late in the season as the inventory has been built but has been very slow to sell through.
LISOVICZ: Shoppers are also looking for value on the Web, which saw a 22 percent increase in online shopping Friday, compared to the daily average.
SEAN KALDOR, NETRATINGS: In '99, it was the invasion of the dot- coms. In 2000, it was revenge of the brick and mortars. This year it's all about the economy, whether you're online or offline, it's about getting customers to open their pocketbooks.
(END VIDEOTAPE)
LISOVICZ (on camera): Retailers have learned not to read too much into the first few days of the holiday sales because consumers are increasingly holding off their purchases in hopes of scoring better bargains. That may especially be the case this year with the economy now official declared to be in recession -- Lou.
DOBBS: What recession? All of those people in the shopping malls, shopping away. It looks pretty good to me.
LISOVICZ: They are shopping, but they are shopping at steep discounts and that's going to hurt the margins going forward.
DOBBS: It may hurt the margins, but at least they're sort of in the spirit.
LISOVICZ: And that is encouraging.
DOBBS: All right, Susan thanks a lot. I can't wait to get started myself.
Powerful snowstorms in the Great Plains today, closing schools in parts of Nebraska, South Dakota, and Minnesota. The National Weather Service predicts at least a foot of snow, a foot of snow could fall. The storm dumped as much as three feet on Rocky Mountain ski resorts on Thanksgiving Day before moving on to the plains.
It also triggered huge thunderstorms across the Midwest and throughout the south. Residents in the southeast are cleaning up now after several tornadoes ripped through the area over the weekend. Eleven people dead, dozens injured after fierce thunderstorms in Mississippi spawned tornadoes. Five people killed in Mississippi before the storm spread to Alabama and then Arkansas.
With long delays and security concerns at many of the countries airports, Americans are turning to the nation's railroad system in record numbers. But Amtrak has its own problems, with rising costs and what many see as deteriorating service, the railway system may be in for an overhaul.
Tim O'Brien has the report.
(BEGIN VIDEOTAPE)
TIM O'BRIEN, CNN CORRESPONDENT (voice over): Thousands of Amtrak passengers between New York and Washington were delayed more than two hours Sunday after a CSX freight train derailed north of New York City.
But to many other passengers and members of Congress, Amtrak itself has not been on the right track since its inception 30 years ago. The Federal Government has pumped more than $25 billion into Amtrak with the goal of eventually making it profitable, yet it has never operated in the black.
Four years ago, Congress set up a reform council to determine if Amtrak could ever be self-sustaining. The council concluded taxpayers are throwing good money after bad.
THOMAS TILL, AMTRAK REFORM COUNCIL: Because of the structure, because of the nature of the overall institution, it can't use this money effectively. They have been moving away from self-sufficiency, not toward self-sufficiency.
O'BRIEN: Under the law, that finding requires Amtrak to submit to Congress a plan for its own liquidation within 90 days, but the decision will be up to Congress, which does not seem receptive to liquidating Amtrak and starting over.
TILL: The wrong action at the wrong time is out of step with the American public and with the state of transportation today.
O'BRIEN: Is Amtrak a scapegoat for mistakes made by others? The President of the Railroad has no doubts.
GEORGE WARRINGTON, AMTRAK PRESIDENT: Of course we're a scapegoat, of course. Amtrak has always been a scapegoat for bad policy, bad business model, gross under-capitalization for decades, and for being forced to be all things to all people.
O'BRIEN: The Federal Government spends about $30 billion a year on highways, $15 billion on airports, but last year only around $521 million on Amtrak.
(END VIDEOTAPE)
O'BRIEN (on camera): The biggest casualty of an overhaul might be Amtrak's long distance routes, which have been unable to compete with the airlines.
Shorter inner-city routes could get a boost, and even Amtrak's biggest critics agree that given the economy, not to mention September 11, the need to keep the trains running has never been greater. Nobody in Congress or anyplace else is about to put on the brakes. Lou.
DOBBS: Tim, thank you very much. Tim O'Brien, from an appropriately decorated nation's capitol tonight -- thanks, Tim.
Coming up next, hundreds of Marines beginning the first military operation on the ground in Afghanistan for the Marine Corps.
We'll be updating you with the latest phase in the War against Terrorism. And it was a decent beginning to the holiday shopping season, despite the official word that the economy is in recession. We'll have that story and some expert opinion next. Stay with us.
ANNOUNCER: Next, Lou speaks with Lakshman Achuthan of the Economic Cycle Research Institute.
(COMMERCIAL BREAK)
DOBBS: The latest developments tonight in the war against terrorism: Marines on the ground in southern Afghanistan have carried out their first operation, the first known Marine-led offensive.
The attacked a convoy of armored vehicles using helicopter gun ships. About 500 Marines are expected to arrive in Afghanistan. They will be arriving to help keep pressure on the fleeing al Qaeda and Taliban forces, as well as search out Osama bin Laden.
(BEGIN VIDEO CLIP)
DONALD RUMSFELD, DEFENSE SECRETARY: Across the country, from north to south and east to west, and intend to continue following them wherever they go.
(END VIDEO CLIP)
DOBBS: Hundreds of Taliban and Northern Alliance troops were killed at a prison uprising in the northern city of Mazar-e-Sharif, U.S. jets dropping smart bombs inside that complex to stop the uprising which began yesterday. Sporadic fighting reported today as well.
Attorney General John Ashcroft has named Washington attorney Kenneth Feinberg to handle a fund to compensate relatives of the victims of the September 11 attacks. That fund will also be used to assist people who suffered injuries.
The oil and gas industry putting itself on heightened security alert today, that following an FBI warning of a possible retaliatory strike by followers of Osama bin Laden.
Attorney General John Ashcroft confirmed that threat, but provided very few details. Separately, oil prices today began sliding again. Prices extended last week's decline after Russia announced it would not meet OPEC's calls for cuts in production.
Over the weekend, Saudis expressed disappointment with the muted response of the Russians. Light sweet crude oil dropped another twenty-nine cents, settled at $18.67 a barrel. The price of oil falling 34 percent since September 11.
It is official, at least according to the National Bureau of Economic Research. The United States is in recession. It is a recession that began in March. The recession follows a decade of tremendous growth, affecting the lives and improving the lives of millions of us.
Peter Viles now on how the greatest boom in history has changed the fabric of American life.
(BEGIN VIDEO TAPE)
PETER VILES, CNN CORRESPONDENT (voice over): It was a time when millionaires were a dime a dozen. One best seller said the millionaire lived next door. Forbes counted 298 billionaires, including these two.
The stock market was a national obsession, so trendy Martha Stewart sold stock, so seductive many of us thought we could beat the market.
For a time, there was so much money floating around, it became a national joke.
One of the heroes of the boom was a former jazz musician who warned us once and only once that stocks are risky.
UNIDENTIFIED MALE: How do we know when irrational exuberance has unduly escalated acid values?
VILES: We bought cell phones and palm pilots, surfed the Web and learned new words, like multi-tasking and e-mail.
Impatience was a virtue. We talked about fast companies that moved at Internet speed, 20-something dot com millionaires. For a time, it seemed like young people had all the answers.
It wasn't just the stock market, the economy was a juggernaut, 24 million new jobs, a miracle the old-timers called a four-by-four economy, four percent growth, four percent unemployment, times so good many of us forgave the President for lying about a sex scandal, maybe because it felt like he got the economy rolling in the first place.
Okay, but the truth is the expansion started under the first President Bush in March of 1991. Rising tide balanced the Federal Budget and lifted a lot of boats, five and a half million people got off of welfare, crime rates dropped. There was new life in inner- cities, a real renaissance in Harlem.
We built bigger houses, bought bigger and bigger SUVs. Cigars made a comeback. Starbucks opened 3,000 coffee shops. The numbers said that inflation was at bay, but everywhere you looked, there were extra zeros, $500 for dinner for two, ten million for a book that hasn't been written, $252 million for a baseball player.
Bankers dressed like golfers and nobody seemed to care. Money wasn't just an object. Money was cool.
(END VIDEO TAPE)
VILES (on camera): It seemed like we got a little carried away about money we had reason to. At ten years, this was by far the longest economic expansion in modern American history for this nation and an unrivaled period of peace and prosperity -- Lou.
DOBBS: And we're ready to start it all over again, right.
VILES: We sure are.
DOBBS: OK, terrific report. Thanks for the look back on what was an amazing, amazing decade, Peter Viles. Well, now to the official declaration that our economy is indeed in recession. The National Bureau of Economic Research which makes such things official says the economic downturn began back in March.
Kathleen Hays will tonight make official that official declaration.
KATHLEEN HAYS, CNN CORRESPONDENT: You remember just a couple of weeks ago, we reported on the fact that they put up a note at long last on their web site, November 9, saying they were starting to look at the peak of the economic activity being in March. And that was the signal for today that they were going to make their official pronouncement.
And you're probably wondering, you know, isn't it two quarters of negative gross domestic product? We haven't had that? And who is this NEBR any way?
Well, let's start by taking a look at that. The National Bureau of Economic Research is the referee. They are the authority on business cycles. Since the 1920s, they've had prominent economists looking at the nature of business cycles, how long they run, why they're important.
In 1961, the Bureau of Economic Analysis asked the NEBR if it would start dating the recessions, turning over their data on recessions to them. So that's kind of what made it official. Currently, there are six academic economists on the panel from the likes of Harvard, Princeton, Stanford, just little colleges like that.
And so what is it that they look at? Well, they define a recession as a significant decline in economic activity, spread across the entire economy, that lasts for more than a few months. And they look at four things. Not GDP, the data. Industrial production, employment, real income, and manufacturing wholesale and retail sales.
Now for months, NBER was saying, "Look, industrial production was clearly in recession." We saw a big downturn really starting at the end of the last year. The thing that was hanging them up was employment. They said employment just doesn't look as weak as you usually see it in recession, until the last couple of months. Until the September 11 attacks, of course, made things look even worse.
But you know, a recession is sort of like getting a cold or a virus. At some point, it's got to run its course. So what can we expect? What's the average recession look like?
The average length is 11.2 months. That's another reason why people say, OK, by February, March, you know, by the time the snow melts, we should be out of a recession. The average drop in GDP is 2.4 percentage points. Probably have more contraction to go, if we're going to hit sort of the average. We haven't seen much of that yet.
Unemployment goes up on average two percentage points. We bottomed at 3.9. What are we? 5.4, 5.5 now.
DOBBS: Right.
HAYS: So again, people looking for some more bad news on layoffs, jobless claims, that kind of thing before it gets better. And there are some risks to getting out of it quickly, but that's kind of the hope. I think that's the consensus on Wall Street so far.
DOBBS: You know, Kathleen, those risks I think I'm willing to take. I'm ready for recovery. I'm tired of this recession. It's been in effect since March.
HAYS: Well, get out to the mall then. You know, buy all the big presents.
DOBBS: Don't worry. We'll all headed...
HAYS: Big presents for the MONEYLINE crew, right?
DOBBS: It's guaranteed.
HAYS: OK, great.
DOBBS: Kathleen, thank you.
Well, actually the first person to declare recession was not associated with the NBER. It was actually Lakshman Achuthan, who joins us now.
Lakshman, you now have corroboration of your view, which of course, expressed here months and months ago.
LAKSHMAN ACHUTHAN, ECONOMIC CYCLE RESEARCH INSTITUTE: Yes, we do.
DOBBS: Are you feeling comfortable now?
ACHUTHAN: Well, no, because we're in a recession. So not yet. I'd love to get out of this as well. But I do think that it's this recognition process that we are in recession...
DOBBS: Right.
ACHUTHAN: ... that sets the stage for recovery. We begin removing the excesses. And then, we can go forward again.
DOBBS: You know, as Kathleen was pointing out, I mean, one of the aspects of this industrial production and employment, we really didn't see the runoff in employment until the last of couple months here. What happened to that classic definition? Two quarters...
ACHUTHAN: Classic sequence. Of the two quarters? Well, I think, you know, you will get that. I think either you're going to see some rather significant revisions.
DOBBS: Right.
ACHUTHAN: Or we... DOBBS: The government would revise these numbers?
ACHUTHAN: Yes, it happens.
DOBBS: Oh, my goodness!.
ACHUTHAN: Yes, and we could still have a little bit in front of us, too because we don't have definitive signs of that recovery just yet.
DOBBS: Well, just how bad is it? I mean, with Susan Lisovicz reporting on the malls here and the number of shoppers out there, Wal-mart having its biggest day ever, admittedly people are shopping for bargains, but good Lord, why not? This doesn't look that bad right now.
ACHUTHAN: The one piece -- there's a big piece that's just missing, that's not buying anything. And that's businesses. And they've been on strike for the better -- almost a year. So the consumer is carrying more than the normal load that they would carry.
Typically, the consumers pull back first in a recession and then businesses follow. This time, the sequence has been reversed. So everything does look a bit strange.
DOBBS: Would -- can we reasonably expect to see business demand, business investment come back in a reasonable amount of time, whatever that may be -- define what is reasonable?
ACHUTHAN: Yes, I think that's the challenge. We have excess some capacity from businesses. And either the capacity has to be reduced by taking it offline or maybe it's obsolete, or consumption has to rise. And the two of those things together may get us to a position where we can have a healthy recovery.
DOBBS: Give your best your best idea as to when that recovery would begin and what it would -- what would it look like?
ACHUTHAN: Well, I think...
DOBBS: A healthy recovery?
ACHUTHAN: A healthy recovery, you need to see some of that capacity being worked off.
DOBBS: Right.
ACHUTHAN: Because then businesses are back in the game.
DOBBS: Well, you know, as I look at some of these numbers, one of the things that a number of people have been talking about business inventories declining. And they have, but we're really not that far off January levels of last year in terms of inventories.
ACHUTHAN: Yes, the inventories are one thing. And those -- there has been corrections. And there may be a bounce in some production there, but the capacity to produce is still very large. Not only here, but abroad. And that has to come more into balance for that sustained 1990s type...
DOBBS: How about job security? The people are going to lose their jobs here. Do you have a sense of what the unemployment rate is going to look like, the number of people who are going to lose their jobs here?
ACHUTHAN: You've got minimally a few more months, at least a quarter more of rising unemployment in front of you. So that's not good news. And we do...
DOBBS: What about interest rates? People depending upon those CDs, those interest rates, they're on fixed incomes.
ACHUTHAN: Those are likely to remain low. Interest rates are likely to remain low, because I think that the recovery has some challenges to it. And it hurts not only individuals. It hurts companies, as they try to get profits.
DOBBS: And should we look to the equities markets to give us a driver here within this economy, to start seeing the wealth effect, at least some percentage of what we got...
ACHUTHAN: If they can hold what they've done here, that would be good. Then you'd have a positive wealth effect.
DOBBS: What do mean expert? You're the expert. Tell me, are we going...
ACHUTHAN: Well, I tell you, you've got to see the non-equity related leading indicators corroborate what the investors confidence is telling us.
DOBBS: Such as?
ACHUTHAN: Jobless claims, you need to see them go down.
DOBBS: Right.
ACHUTHAN: You need to see building permits stop sliding.
DOBBS: Well, we haven't seen those jobless claims decline here, not off the four-week average, but we've seen...
ACHUTHAN: Exactly. We have had a few weeks. I need more than that. We need more than a few weeks. We need to see permits stabilize. We need to see new orders, as simple as new orders go up.
DOBBS: Why don't you up and get those things for you?
ACHUTHAN: Let's do that.
DOBBS: All right. As always, good to have you here.
ACHUTHAN: Thank you. DOBBS: Thanks.
Well, still ahead here, investors start the week buying. We'll have a live report for you on what is driving the market higher. Also, while stocks are moving higher, shares of Enron continue to plunge. Now it's employees are taking the company to court, alleging Enron to blame for their devastatingly small 401Ks. I'll be talking with the attorney representing Enron employees next.
ANNOUNCER: After the break, Lou speaks with Steve Berman, attorney for Enron employees.
(COMMERCIAL BREAK)
DOBBS: Chairs of Enron losing again today. Investors concerned the proposed acquisition of the company by Dynegy won't go through. That's just one of the problems Enron must grapple with. Two employees have filed suit against the company. They allege Enron encouraged them to put their retirement savings into Enron stock, while withholding vital and damaging information.
Joining me now, the attorney for those employees, Steve Berman of Hagens Berman from Seattle. Good to have you with us.
STEVE BERMAN, ATTORNEY FOR ENRON EMPLOYEES: Good to be here.
DOBBS: This lawsuit, the employees made a decision to invest in the stock of the company. What would be the grounds for the suit?
BERMAN: I think there's two grounds. Their investment decision was made in connection with their investment in the retirement fund, the Enron fund, which is run by Enron. Enron had a fiduciary duty it's called, a duty of the highest loyalty and care to those employees. And that required them to disclose the truth about the financial status of Enron.
DOBBS: Well, do you accuse Enron here of simply timing the release on the bad news to injure your clients and other employees?
BERMAN: Well, Enron hid the bad news from our employees, who were investing, just like they did from other people who purchased on the so-called open market. That's one basis of our suit.
DOBBS: But wouldn't it be the employees' fault if they decided to make a bad investment, whether it be in a 401K or the open market?
BERMAN: Well, there's a difference between making a bad investment and making an investment based on misrepresentations or omissions of fact, which Enron was perpetrating.
DOBBS: Well, where does that leave the company accountants?
BERMAN: Well, we're investigating the company's accountants. And if possible, like the other civil lawsuits that are out there, that have named them, we intend to name them as well.
DOBBS: Well, would you in the accountants are Anderson. Would you sue them as well?
BERMAN: We're looking into that. I know that they've been sued in the securities cases. The issue here is whether under ERISA, we can find a weapon to use against the accountants because I think they deserve to be sued here.
DOBBS: And what is the next juncture? What is next development?
BERMAN: Well, the next development will be that all of these cases will probably be consolidated. There are 30 or 40 securities class actions since we filed the case on behalf of Enron employees. Other lawyers are filing cases. That will be consolidated. And the court will have to figure out how the cases proceed. And that will be the next step.
DOBBS: There are similar cases, Steve, against particularly, Lucent. Can you prevail with -- if they fail?
BERMAN: I think we can. There was actually a successful case against First Union Bank, where the same kind of -- almost the same kind of fact situation happened.
DOBBS: You know, one of the things I keep thinking about is nearly all of the financial advisers I've heard talk about double jeopardy. That is, employees investing in their companies and 401Ks are -- you know, they really are running double jeopardy and should be extraordinarily cautious. Do you think that mitigates, in any way, the claim?
BERMAN: I don't think so. These people, the stories they tell are very sad stories. They're loyal in companies -- loyal employees. Many have been with the company for 20, 30 years. When the company was promoting the stock as a tool to invest in, they believed in management. And so, to some extent, these are the biggest victims of the scandal.
DOBBS: Well, there are plenty victims in the case of Enron, as people on Wall Street who do know how to do such things are still trying figure out precisely what happened there. Steve, good to have you with us. Steve Berman.
BERMAN: Thank you, Mr. Dobbs.
DOBBS: In Washington,
Well today, stocks moved higher on Wall Street. The markets finished the day near session highs, in fact. Technology doing well. The Dow up 23 points on the day. The Nasdaq gained 2 percent, up 38 points. And the broader S&P adding seven points.
For market coverage, Christine Romans at the New York Exchange, Greg Clarkin at the Nasdaq marketsite.
Christine, tell us all about it.
CHRISTINE ROMANS, CNN CORRESPONDENT: Well, Lou, the buyers prevailed here today, but just barely. And volume was pretty light as well. So some folks are wondering if there's any staying power into tomorrow.
What does one do when you learn that the U.S. economy is already in recession? Well, if you look at the dueling recommendations on Wall Street, it doesn't get any clearer. Take a look at what J.P. Morgan and Merrill Lynch were saying here today.
J.P. Morgan's Doug Cliggott coming out and saying sell stocks, buy bonds. He's putting 25 percent in cash. He says the S&P at the year-end of 2002 is going to be 950. That's 200 points less than where it is right now.
Meanwhile, Christine Collins over at Merrill Lynch puts a token one percent in cash, says the S&P is going to return 22 percent next year. So two completely different views on Wall Street here today, a little bit of confusion as well about what exactly to do.
Meanwhile, big board movers included Best Buy, up about $2.60. That's a rally to a new 52-week high. Lots of optimism that consumers are going to buy its high-tech gadgets and games. That stock up 140 percent this year.
Home Depot, meanwhile, down. There's an analysts' meeting Thursday and Friday. Some are questioning whether the company is going to be able to continue its earnings growth and wondering about the pace of store openings next year.
Providian Financial rallying here today. Look at it, that's only a $3.80 stock, getting a pop after the appointment of a new CEO after a six week search.
And Enron and Dynegy down again here. There is still concern on Wall Street that that takeover by Dynegy, the smaller rival of Enron, just might not get done. A lot of talk about revisiting the details of that merger -- Lou.
DOBBS: Or if it does get done at somewhat different terms?
ROMANS: Absolutely.
DOBBS: Christine, thanks. Christine Romans and take care of that cold.
Chipmakers leading the advance today in technology, the Nasdaq gaining 2 percent. Greg Clarkin is at the Nasdaq marketsite.
GREG CLARKIN, CNN CORRESPONDENT: Lou, the theme today, at least in technologyland, was optimism. Really, a lot of optimism around Internet stocks and those chip stocks. All that pushing the Nasdaq to its best closing levels since August 14. It now sits 1941.
Now I want to show you a chart of Yahoo! first. Merrill Lynch saying or Amazon.com rather first. Merrill Lynch today saying that items sold at Amazon are 20 to 30 percent higher than last year's levels. Early October, that stock was trading around $6 bucks a share. If you get the chart, you'll see that stock has soared in the last six weeks or so.
There are shares of Yahoo! -- they were posting a nice gain today, after the company said that sales over Thanksgiving weekend 75 percent better than they were for last year's period. So those two stocks really helping to send the Nasdaq higher today.
Let's take a sampling of what they did on the day, as well as what some of the chip stocks did. You'll see that shares of Amazon, Yahoo! gained very nicely today. Intel, well, the optimism around chip companies. There was a number of bits of news there. Intel saying they've developed a new way to develop transistors, build transistors eventually. That is going to make them be able to build faster, better chips. And the entire chip sector really rose along on that news.
Sun Microsystems, meanwhile, gaining almost half a buck at $13.30. So Lou, right now, the Nasdaq up about 36 percent since the September 21 closing level. And we're just seeing continuous run-up here. A lot of folks saying they expect to pull back. But each passing day, no real negative news out there to kind of trigger that. And so what we're seeing is just more buying, especially those big name technology shares -- Lou.
DOBBS: Have we seen this movie before, Greg?
CLARK: Oh, yes. Not too long ago, as a matter of fact.
DOBBS: Greg Clarkin, thank you.
Well, Morgan Stanley has ended a four year search. Today, Morgan Stanley named Steve Galbraith its chief investment officer, replacing the veteran legendary Byron Wien. Galbraith joined the firm last year. He was hand-picked by Wien as his successor.
Congratulations, Steve.
STEVE GALBRAITH, CIO, MORGAN STANLEY: Thanks, Lou. Appreciate it.
DOBBS: I asked Greg Clarkin if we've seen this movie before. Before we turn to some of the other salutary elements, how do you feel about these technology names?
GALBRAITH: Well, look, it does feel a little bit like the movie "Groundhog Day," where you see the repeating scene. And I do worry now. I mean, last time I was on the show, we were actually quite optimistic about the technology outlook, mainly because fear dominated. And what worries me a little bit.
DOBBS: You were talking about significant undervaluation.
GALBRAITH: Yes, we were. But 35 percent moves up tend to correct undervaluation. And so I'm sitting...
DOBBS: Quickly. GALBRAITH: Quickly. And that's the other point. It's been about six weeks, as Greg pointed out. And so, I'm sitting here today, having come on as recently as six weeks ago, saying we had undervaluation. You should be looking at things like Dell, AOL, Sun, and so forth.
And now, I think, you've got to take pause, because the move has been so fast. And let me give you one data point.
DOBBS: Sure.
GALBRAITH: The sector is actually trading at the same multiple it did at the height of the bubble. And to me...
DOBBS: You just said that to scare all of us.
GALBRAITH: Well, I did, but no. The difference is then earnings were at a peak. And now they may be at a trough, but it should give you pause. It is striking. And so, when we're sitting here in my new strategist role, it's something that I would highlight to our clients, saying OK, maybe you want to -- don't want to push this bet much further.
DOBBS: All right. We just saw J.P. Morgan, Merrill Lynch, their asset allocation. Where's yours?
GALBRAITH: Unfortunately, this is going to be classic strategy. I'm right in the middle, right. And that's how I genuinely feel. I mean, I think J.P. Morgan's view may be a little bit too bearish on the earnings front. And I think the Merrill folks may be a little bit too optimistic.
We do think there's going to be earnings growth next. I feel good about that, but it's going to be a muted recovery. And stocks have moved a lot, very quickly.
DOBBS: Indeed they have. Now the last time we talked, you were also looking at what you call cartoonish size losses, your metaphor working for me. Do you still hold to the view?
GALBRAITH: Yes, and we got them. I mean, Lou, this year, and this is why we are somewhat optimistic about next year, is earnings are going to be down by a greater extent this year than ever. And for the S&P 500. And again, I do believe in reversion to the means. So when you do poorly, you tend to get a snapback.
DOBBS: And when do we get the snapback?
GALBRAITH: My guess is, you know, despite my last name, I'm not economist. I do think you're going get it sometime Q2. That's what our guys are forecasting, our economists. And that's kind of what my data tells me when I look at the earnings data for the various sectors of the market.
DOBBS: You're not an economist. You're the chief investment officer at Morgan Stanley. How does it feel? GALBRAITH: It feels great. I mean, in all honesty, I had about 25 interviews to get my initial job. And they kept asking me, "What do you aspire to?" And the answer was this job. And you know, it's just a thrill to be succeeding Byron because the shoes are immense.
DOBBS: Immense shoes, a good guy you're following, and a bit of a bear. I'm sure that you're going to bring a sunny outlook to this market.
GALBRAITH: Well, you know, one client noted that we're replacing the grumpy old men are now the grumpy young men. And so, the only problem with that is Byron is younger at heart than I am, I think. So there's a little bit of a mix there.
But no, I think, well, what Byron is is intellectually honest. And people sometimes confuse honesty with bearishness. And so, I hope to bring that same attribute to the game.
DOBBS: Occasionally grumpiness.
GALBRAITH: Well, yes, that too.
DOBBS: Well, I don't think you're going to ever be accused of grumpiness, Steve. We congratulate you. Thanks for being here.
GALBRAITH: Appreciate it.
DOBBS: Have fun. Take care.
Well, coming up next, "Harry Potter" easily holds the number one spot this holiday weekend. But the blockbuster film, well, it just wasn't enough to beat last year's overall box office numbers, but it did really well on its own. We'll have the complete wrap-up for you next. Stay with us.
(COMMERCIAL BREAK)
DOBBS: Well another big weekend for "Harry Potter and the Sorcerer's Stone." It continues to set box office records. But despite Potter's success, fewer people headed to the movies over the Thanksgiving weekend.
Kitty Pilgrim has the report.
(BEGIN VIDEO TAPE)
KITTY PILGRIM, CNN CORRESPONDENT (voice-over): It's as traditional as the turkey. Spending the back half of Thanksgiving weekend with shopping and a movie. The top four this weekend, "Harry Potter," "Monsters, Inc.", "Spy Game," and "Black Knight."
Harry Potter put in the best performance ever with $83 million for the five-day Thanksgiving period, beating "Toy Story 2."
But analysts say one blockbuster like "Harry Potter" can't carry the whole weekend. The second and third movies fell short of last year. Ticket sales for the four day weekend, $211 million dollars, versus last year's $239 million box office receipts, which was an all- time record.
MARTIN GROVE, "HOLLYWOOD REPORTER": When we look at this year versus last year, you don't see that strong depth in marketplace that you did last year. The totals are just not as good as they were a year ago.
PILGRIM: Some analysts say there could have been the very slight dip in attendance this particular weekend because of the refocusing on family time.
PAUL DERGARABEDIAN, EXHIBITOR RELATIONS: Certainly in the wake of September 11, people are staying home. They're also going to the movies. And perhaps this year, they felt more compelled to stay home with their families.
PILGRIM: But that hasn't been the case over the last eight weeks. Attendance has been soaring since September 11 box office receipts have been on average at least 12 percent above last year's period. Most think the movie business will continue to boom. "Harry Potter" could gross $400 million this season. And more strong movies are on the way. "Oceans 11" due out December 7. "Lord of the Rings," the week before Christmas.
(END VIDEO TAPE)
(on camera): So this year has been a banner year for movies, in fact, running some 10 percent above last year's levels. And some analysts say it could even be the biggest box office year in history, topping $8 billion in ticket sales by the end of the holiday season -- Lou.
DOBBS: So a little dip over the weekend. Not to worry.
PILGRIM: People stay at home to have turkey, I guess.
DOBBS: Well, not a bad motivation. Kitty, thanks a lot.
Well in tonight's corporate news, after a seven year run, Bear Stearn's chief economist, Wayne Angell, is retiring from the firm. The 71-year-old Angell joined Bear Stearns back in 1994, after serving eight years on the Federal Reserve's board.
Management consulting firm McKinsey says it's cutting up to 7 percent of its workforce. Seeking to reduce operating costs, McKinsey will let go of 210 support workers in the United States and Canada.
Reversing the layoff trend, Bank One. It's hiring 600 computer specialists to revamp its electronic banking systems. The additional jobs represent less than one percent of the bank's workforce.
(PREVIEW "WOLF BLITZER REPORTS")
DOBBS: And coming up next here, we'll take a look at some of what could move the markets tomorrow. Stay with us. (COMMERCIAL BREAK)
DOBBS: Tomorrow, we'll have reports on the economy. And those reports include consumer confidence for the month of November. We'll also have existing home sales. That report for the month of October. And we'll have corporate earnings from K-Mart, amongst others. And the United Nations will talk to establish a new Afghan government. Those talks begin in Germany.
And for tonight, that's MONEYLINE. We thank you for being with us. I'm Lou Dobbs. Good night from New York City. "WOLF BLITZER REPORTS" begins right now.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
|
|
|
|
|
