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Lou Dobbs Moneyline
Pre-Holiday Tumble on Wall Street
Aired May 25, 2001 - 18:30 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.
LOU DOBBS, CNN ANCHOR: Tonight: a pre-holiday tumble on Wall Street. Stocks sell off across the board. The catalyst: a surprisingly weak economic report, corporate America gripped in a profits recession.
I'll talk with venture capitalist John Doerr about life after the high-tech bust. And the bestselling author with an uproarious take on economics, P.J. O'Rourke.
ANNOUNCER: From the heart of New York City, this is Lou Dobbs' MONEYLINE. Here now, Lou Dobbs.
DOBBS: Good evening. Our top story tonight: a broad retreat on Wall Street. Stocks today tumbled across the board, and triggering the slide: a disturbing snapshot of the economy. Gross domestic product for the first three months of the year was revised sharply lower, and the government confirmed that corporate America is indeed facing a profit recession, corporate earnings falling in back-to-back quarters.
That news reinforced the warnings last night from Fed Chairman Alan Greenspan. Greenspan suggested in a speech that we still face several more quarters of weakness, and that wasn't what investors wanted to hear, leading into this long holiday weekend.
We have complete coverage of the markets, from the New York Stock Exchange to the Nasdaq, and we begin with Jan Hopkins at the Big Board -- Jan.
JAN HOPKINS, CNN FINANCIAL NEWS CORRESPONDENT: Thanks, Lou. This was the slowest trading day of the year, the session going into the Memorial Day weekend. Investors were focusing not only on that news that corporations were cutting back in spending, but also that consumers could be cutting back as well.
(BEGIN VIDEOTAPE)
HOPKINS (voice-over): Stocks sputtered as new data showed the consumer crutch may have been kicked out from under the economy last month. Weaker-than-expected reports on economic output and durable goods sales set the tone. But a marked dip in existing home sales indicated the slowdown may finally have spread to consumer spending.
JEFF DAVIS, STATE STREET GLOBAL ADVISERS: The consumer is the worrisome aspect of it. The savings rate indicates that he doesn't have a whole lot more to spend here, and gasoline prices are a big question mark right now. And so, we happen to think that you're probably looking at the worst news right now.
HOPKINS: Investors worried that if more consumers are sidelined, the expected rebound in corporate profit performance may be delayed. The Dow Jones Industrial average tumbled 117 points, but stopped 5 points short of falling through the psychologically important 11,000 level.
The sell-off was broad-based, with Wal-Mart, General Electric, Home Depot, Boeing and American Express, all suffering significant losses. The Nasdaq Composite index shed 30 points, led by weakness in networking stocks. The sell-off indicated the market may be having problems digesting huge gains from the past two months.
BILL MEEHAN, CANTOR FITZGERALD: I think it's definitely overextended. There's a lot of supply overhead. We've used up a lot of momentum. The Nasdaq went up about 40 percent from the April 4 low. I think we'll be in a trading range until the fourth quarter.
(END VIDEOTAPE)
HOPKINS: And as is characteristic of him, Alan Greenspan in that speech last night, which I attend along with about 2,000 other people, he had things to say for everyone, basically, but the markets largely ignored a hint from him that the central bank was poised to lower short-term interest rates further. Instead, the market tended to focus on his warning that there is more economic weakness ahead -- Lou.
DOBBS: Jan, thank you.
Well, the Nasdaq today actually fell more than the Dow in percentage terms. It's a pause in what's been an extraordinary rebound for that index. The Nasdaq is now up 37 percent, after hitting a two-and-a-half-year low just early last month.
Greg Clarkin joins us now from the Nasdaq market site with a look at what sent tech stocks lower today -- Greg.
GREG CLARKIN, CNN FINANCIAL NEWS CORRESPONDENT: Well, Lou, today, you know, investors really took note of a speed of profit warnings, and some forecasts too that things were going to be incredibly weak for some of these telecom companies.
Now, we did see a lot of weakness today in some of the networking stocks, and in part a lot of that can be traced right back to telecom equipment makers. Let's take a look at some of those stocks right now, I'll give an idea of what they did on the day.
And let's start, if we can, with Ditech Communications. Now, this company came out with a lousy earnings report. On top of that, they had a bleak forecast for the future, the company saying it was unclear as to when or if spending by telecom service providers would return to more robust levels. That drove that stock sharply lower. And ADC Telecom, a similar company, also out with a lousy profit report, and if earnings forecast as well. That stock was down sharply.
Now, among the other tech losers today: shares of Oracle losing ground. They lost about 4 1/2 percent. J.P. Morgan cut their earnings estimates, saying Oracle is in a midst of a very, very tough quarter. And Sun Microsystems also lost ground. We saw the hardware stocks weak.
Now, let's come back here if we can and take a look at some of the semiconductor issues. Want to talk to you about those for a moment. This is the Philadelphia Semiconductor Index. Back on April 4, trace this line right up here. It's gained about 45 percent, but this is this week's trading. It had a 4-day losing streak to close out the week.
But today, we did hear some very positive comments out of Prudential Securities on the semiconductor equipment makers. Now, the analysts there believe that they are possibly in the beginning stages of an up cycle. They upgraded a lot of those stocks. They all lost ground today despite that, so we did see investors just kind of getting out of some of these tech positions ahead of this long holiday weekend, and despite the sell-off today, Lou, the Nasdaq finishes the week with a better-than-2-percent gain -- Lou.
DOBBS: And a prospect of a three-day holiday. Greg, thanks.
Today, a disappointing end to what was a split week in the markets. The Dow finished lower for the week, down nearly 3 percent. The Nasdaq was mostly higher, up more than 2 percent. Those statistics, however, failed to convey the drama that Wall Street and Washington faced during the week. The defection of Senator Jim Jeffords put Senate Democrats back in the majority, a stinging blow to the president and his pro-business agenda. Allan Chernoff looks at the effect of that, and the other events that shaped the week on Wall Street.
(BEGIN VIDEOTAPE)
ALLAN CHERNOFF, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): It was a week when Washington shook Wall Street, politics sidetracked sectors of the market.
SEN. JAMES JEFFORDS (I), VERMONT: I will leave the Republican Party and become an independent.
CHERNOFF: Vermont Senator Jeffords' defection announcement triggered sell-offs on concerns that Democratic control of the Senate could mean a tougher environment for certain industries.
CHUCK HILL, FIRST CALL: Well, it is certainly going to have a negative impact on the health care area, and on the energy, and utility sector.
CHERNOFF: Oil exploration and production stocks fell, including Noble Drilling, Apache, Burlington Resources and Anadarko.
Democratic Senator Kennedy is now in line to become chair of the Senate Health, Education and Labor Committee. Investor concern that Kennedy could back legislation that might squeeze pharmaceutical company profit margins led to declines in Merck, Johnson & Johnson, Bristol-Myers Squibb and Pfizer.
After soaring more than 1,500 points during the prior six weeks, the Dow Industrial average pulled back 296 points this past week. The Nasdaq had climbed back 479 points in the previous six weeks. Thanks to a blockbuster gain on Monday, the composite closed the week with an additional 52 points.
Expectations of an economic recovery have been the prime mover behind the rebound, but there could be some obstacles in the coming weeks.
CHARLES KADLEC, J&W SELIGMAN: These are the competing forces in the market right now: the concerns over short-term earnings disappointments versus the optimism about a better economic growth ahead.
CHERNOFF: Earnings warning season is just ahead, which some analysts fear could focus the market's attention on those near-term profit concerns.
(END VIDEOTAPE)
CHERNOFF: Already, negative pre-announcements are running 15 percent ahead of what they were at this point last quarter. The market does expect that the second quarter will be the bottom of the earnings cycle. But in most industries, investors are still waiting for proof -- Lou.
DOBBS: Allan, thank you.
Well, the dominant news on Wall Street today: the economic slowdown. Gross domestic product during first quarter grew at an annual rate of 1.3 percent. At the previous reading, surprisingly solid 2 percent. Even more troubling in that report, word of the first corporate profit recession in years.
The Fed chairman last night described the pressure on corporate profits as unrelenting. He wasn't exaggerating. Peter Viles reports.
(BEGIN VIDEOTAPE)
PETER VILES, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): The White House had warned that first quarter economic growth may have been overstated, and today the government confirmed it, dropping its measurement of first-quarter growth to 1.3 percent. But that is still slightly better than fourth-quarter growth, and economists are sharply divided about the trend in the economy right now.
Diane Swonk believes the economy has already turned stronger. DIANE SWONK, BANK ONE: The first-quarter revision really largely due to a draw down in inventories, that actually is very good news going forward. It means the cupboard is bare. Inventories were drawn down at an exceedingly fast rate in the first quarter. It means that, frankly, there's nowhere to go but up from here, in terms of old-line industry production.
VILES: But the revised GDP report also showed a drop in consumption. Those who believe a recession is coming, such as Kathleen Camilli, say that confirms their gloomy outlook.
KATHLEEN CAMILLI, TUCKER ANTHONY: So, I expect to see a deceleration from the current level. And of course, the inventory correction will continue in the second quarter, and that will further drag down growth, as well as the capital spending deceleration.
VILES: The government confirmed what investors have sensed for months: corporate profits fell for the second quarter in a row, marking the fourth profit recession in 10 years. There were brief profit pullbacks in 1991 and 1992; a nine-month profit recession during the Asian economic crisis; and now the current profit squeeze, which Wall Street does expect to last at least into the second quarter.
(END VIDEOTAPE)
VILES: This debate over the direction of the economy is not unusual. Alan Greenspan has said it is the most difficult judgment for an economist to make, that is predicting whether an economy in a slowdown is going to slip into recession or resume its upward path -- Lou.
DOBBS: We will soon find out.
VILES: We sure will.
DOBBS: Thanks.
Well, other reports out today only further muddle the economic picture. Orders for big-ticket items last month tumbled 5 percent, that is far more than most economists had expected, the first decline since January.
And sales of already existed homes, down 4.2 percent in April after a near 5-percent gain in March. It's the second-weakest report from the industry in as many days. But the latest report on the mood of consumers is encouraging: Consumer sentiment so far this month is far stronger than it was in April as measured by the University of Michigan.
Coming up here on MONEYLINE, one strategist who says today was just a pause in a solid market recovery: Dick McCabe of Merrill Lynch. And one critic calls "Pearl Harbor" "one of the wimpiest wartime romances ever filmed." But Disney's expectations for the film are nothing short of heroic. And tonight, a special report on building a nuclear graveyard. The key issue holding up development: what to do with all that nuclear waste.
(COMMERCIAL BREAK)
DOBBS: Late news just in on the progress of tax cut legislation on Capitol Hill. We're going live to Kate Snow in Washington for the very latest on the -- on the negotiations -- Kate.
KATE SNOW, CNN CORRESPONDENT: Lou, negotiators say that they are making progress. They're holed up in a room down below me on the second floor in the Capitol Building: four of them in the room right now, three senators, one representative, I'm told. And they are talking about what the tax cut should look like.
A senior Republican aide telling me that they do have some of it laid out now, and here's what we know: The deal, he says, will include a -- what the White House wants, which is a rebate check to taxpayers. This would be the up-front stimulus, the way of doing an up-front stimulus. There had been several options talked about, maybe reducing withholding from people's paychecks. I'm told that that will not be the option. The option will be a check that comes to taxpayers in the mail.
Also the upper bracket, the upper-income tax bracket, would be reduced, the way it looks right now, from 39 percent down to 35 percent. That's been the subject of much negotiation, but there also might be some extra tax relief in there, I'm told, for upper-income taxpayers.
As for how many brackets there would be in the end, that is still in flux and what those brackets will exactly look like still being negotiated. I'm told there will be some form of refundable credit. They have been talking about the earned income tax credit or a child -- doubling the child credit, whether that might be applicable to lower-income Americans. I'm told, yes, they will have some sort of refundable tax credit that will apply to anyone, even those who don't pay taxes at all and even those who don't have a tax liability.
And one last item, Lou, on the estate tax, told that that will be phased out entirely. The question now that they're working on is how quickly or slowly the phase-out would occur.
The House trying to vote on this later tonight. The Senate expected maybe to take it up tomorrow. But all of this a bit unclear as they're still downstairs working on it as we speak -- Lou.
DOBBS: And hopes still there for the president to sign this legislation perhaps tomorrow?
SNOW: Well, the president has said don't -- don't leave town until you give me this legislation, and the Congress, of course, is supposed to go on a Memorial Day recess. They're putting that off for now. So certainly they expect the president to take it and sign it as soon as they give it to him. DOBBS: Kate, thank you very much, Kate Snow.
Well, the market rebounded since April, and of course, the rebound itself has been remarkable. Regardless of today's pullback, the Dow is still down 6 percent from its high hit back in January of 2000. The Nasdaq is down 55 percent. Trillions in market value wiped out since the spring of 2000.
My first guest tonight says the recent bounce-back will continue, but after that, watch out -- Dick McCabe of Merrill Lynch
Dick, good to have you with us.
DICK MCCABE, MERRILL LYNCH: Thank you, Lou.
DOBBS: This -- there's great discussion about whether this is a bear market rally or really the next leg up. You obviously think it's the next leg up.
MCCABE: I think in many respects it is. You have to make one distinction, though, for the majority of stocks -- that is the ex- technology stocks -- they've been in a bull market now for a year or more. And I think this is a resumption and extension of bull markets in things like energy and chemicals and papers and a lot of mundane groups.
For the technology groups that had the big blowoff in early 2000 and then collapsed about 70 percent from their highs, it may have to be considered, at least until evidence proves different, as a bear market rally. But I think if those...
DOBBS: Within that sector?
MCCABE: That's right, within the technology sector or the Nasdaq composite index. But I think if that index or those stocks come down again, as I believe they will, in late summer to fall, and hold around or above their early April lows, then we might say, we should be able to say, the bear market has bottomed and a better advance will happen next year.
DOBBS: And in terms of that sector, to focus on it for just a moment, we still see some very, very high multiples in technology. Can you give us some sort of judgment as to how much those multiples will have to come off before you're comfortable with the ring-out being completed?
MCCABE: I'd like to see it come down a lot more, the multiple case. I think also history shows that a lot of groups or sectors or markets that had a speculative blowoff, as technology did 14 months ago, had a big decline -- this case 70 percent -- had needed a year or two or more to bottom out. You get a lot of good rallies and pullbacks, but not a lot of net progress taking the big view.
DOBBS: And for the broader market itself, some of these old, as you put them "mundane sectors," what do you see this markets doing through the rest of the year in percentage terms? The S&P 500, the Dow?
MCCABE: I think the Dow could get up at least to the old high, which was 11,700, which it made in January of last year, maybe even to a moderate new high, let's say, like 12,000. I think the Nasdaq, though, may get to 2,600 to 2,800, a good further rally between now and August, but then settle back down, have to approach 2,000 by the fall and then bounce back at year-end. So it may not be much more gain for the Nasdaq from where we stand right now.
DOBBS: Well, my guess is a lot of investors would sign up if they could get that deal right now.
MCCABE: I think they could.
DOBBS: Dick, thanks very much. Dick McCabe.
MCCABE: Thank you, Lou.
DOBBS: Well, still ahead, we'll be telling you about the stampede to grab new tires as Ford tells its customers to get their Firestones off those Explorers. Stay with us.
(COMMERCIAL BREAK)
DOBBS: New problems for Ford: Ford, today facing new accusations about its Explorer SUV. The Consumer Protection Agency of Venezuela, recommending that Explorer sales be banned in that country. The agency says 37 people there have died in rollover accidents since August, and that, after Ford refitted most of the 30,000 Explorers in Venezuela with Goodyear tires.
Ford said it has requested statistical evidence of the accidents from Venezuelan authorities, but so far failed hasn't received any reliable information. A series of Explorer rollovers in this country have caused more than 100 deaths, but those were linked to SUV's using Firestone tires. Earlier this week, Firestone accused Ford of not coming clean on the situation and broke off its almost 100-year relationship with Ford. But Ford pinned the blame squarely on Firestone, announcing it would replace as many as 13 million Firestone tires.
Ford's replacement program has created a upsurge in demand for tires. Goodyear, Michelin, Cooper tires have all ramped up production to meet the anticipated need, but many are worried it's not enough.
Lisa Leiter has our story from Chicago.
(BEGIN VIDEOTAPE)
LISA LEITER, CNN CORRESPONDENT (voice-over): Bill Petersen has been on the phone nonstop since Ford said it would replace 13 million Firestone tires.
BILL PETERSEN, STORE MANAGER, GOODYEAR: I have received an order from the two Ford dealerships that I deal with, and between the two of them, they would like me to order 1,600 tires for them, which is the single largest order I've ever taken.
LEITER: Goodyear guaranteed Petersen that his order will be filled. But the question he and many other tire retailers have: How long before supplies run out?
A major worry for the nation's biggest tire retailer, Sears National Tire and Battery.
JIM BUNDICK, SEARS TIRE GROUP: It's a given that at some point there will be a shortage of some tires, or sizes, from time to time.
LEITER: Sears Auto Center's nationwide are scrambling to meet demand. This one in suburban Chicago is planning to keep 1,000 extra tires in stock.
AARON CARMACK, SEARS AUTO CENTER: What kind of vehicle do you have, sir?
LEITER: Aaron Carmack was shocked when he heard about Ford's program, Then the calls flooded in from his stores.
CARMACK: The concern was what are we going to do from an in- stock standpoint? We're talking about many times the size of the -- this replacement will be many times the size that the recall was.
LEITER: That recall affected 6.5 million Firestone tires. This woman's tires were not included, but she plans to replace them now, whether Ford pays for them or not.
UNIDENTIFIED FEMALE: I think it's really sad that they didn't get it right the first time, and that people have to be afraid to drive, and not know what's going to happen to their tires. You want to feel safe in your car.
LEITER: Lisa Leiter, CNN Financial News, Chicago.
DOBBS: And market reaction? Ford shares down nearly a dollar today. For the week, Ford off 7 percent.
Coming up next: The man running the hottest property in the satellite business is out. What does it mean for the sale of Hughes Electronics? And Wal-Mart is the target of a federal lawsuit, not for a product it makes, but for a product it sells. Stay with us.
(COMMERCIAL BREAK)
DOBBS: A major management shakeup at GM Hughes, as rivals vie to take over the No. 1 satellite broadcaster, DirecTV. CEO Michael Smith will retire after more than 15 years at General Motors Hughes. Smith's exit may remove a stumbling block in sealing a deal for Hughes. He's been a vocal opponent of Rupert Murdoch's bid to take over the company.
Earlier this week, GM told regulators that it's willing to discuss a deal with a Murdoch competitor, Echostar. And over the past year, shares of Hughes Electronics have fallen 35 percent of from it's 52-week high. Two insiders take over for Smith: Jack Shaw as CEO; Harry Pearce becomes chairman.
Wal-Mart under fire tonight -- the government suing the world's biggest retailer for failing to report injuries caused by exercise machines that it sold. This is the first time the government has sued a retailer for not reporting a defective item.
Fred Katayama has our report.
(BEGIN VIDEOTAPE)
FRED KATAYAMA, CNN CORRESPONDENT (voice-over): Stephanie Dantuono became one of dozens of customers injured when she tried out an exercise machine at a Sam's Club four years ago.
STEPHANIE DANTUONO, SAM'S CLUB CUSTOMER: I was still on the seat and I just fell with it, you know, just dropped right down. It was painful.
KATAYAMA: Today, the Justice Department and the Consumer Product Safety Commission took the unprecedented move of suing not just the maker of the machines, but the retailers, Sam's and its parent Wal- Mart stores. They're seeking a total of $9 million in penalties from Sam's and Wal-Mart, and the manufacturer, Icon Health and Fitness.
ANN BROWN, CONSUMER PRODUCT SAFETY COMM.: Both manufacturers and retailers are supposed to report to the government any complaints or injuries that they have. And Wal-Mart had 41 injuries with this exercise equipment and never reported to the Consumer Product Safety Commission.
KATAYAMA: And the commission says more than half of the incidents occurred at Wal-Mart stores, as customers tried out the Weider and Weslo brand exercise gliders.
The government says the seat on the machines would collapse, causing injuries like fractured vertebrae and herniated discs. Wal- Mart stopped selling the machines after the government recalled the products in April, 1999.
Wal-Mart said in a statement, it: "did not violate the Consumer Product Safety Act. Wal-Mart had no reasonable basis to conclude that a defect in the Icon could create a substantial risk of injury to the public or presented an unreasonable risk of serious injury or death."
(END VIDEOTAPE)
KATAYAMA: Wal-Mart says injury claims on exercise machines are common and that it could not detect a pattern to the injuries. The commission says Wal-Mart should focus on reporting defects, not detecting patterns. Product liability lawyers applauded the government's move. Putting retailers on notice, they say, will ultimately help reduce the number of injuries -- Lou?
DOBBS: Those attorneys kind of like that idea, huh?
KATAYAMA: I think they do. DOBBS: Forty-one injuries. How many of these were sold across the country?
KATAYAMA: We're talking about thousands of them, that have been sold. I believe 75,000 was the number.
DOBBS: That certainly doesn't seem like very many.
KATAYAMA: That's what Wal-Mart's saying, that these are very common when you're talking about exercise machines.
DOBBS: All right. One of the reasons I avoid them at nearly all costs.
(LAUGHTER)
DOBBS: Fred, thank you. Wal-Mart stock today, down $1.69 on the day.
Topping our "MONEYLINE Movers" tonight: General Electric losing $1.45 a share. GE capital, part of a $7 billion finance package for bankrupt loan provider Finova. Shares of the European on-line auctioneer QXL Ricardo soaring more than 80 percent on 400 times the normal volume. It posted a smaller-than-expected loss, announced a new partnership with Microsoft, and that got everybody excited.
Alliant Techsystems, the biggest point-gainer today on the New York Exchange, up nearly $5 a share. It makes aerospace and defense products, including rockets for NASA, and successfully test-fired a new, reusable booster rocket for the space shuttle. That stock getting a big boost over the past year as well. It's now up 100 percent, doubling in price over that time.
A high-tech powerhouse is taking an unusual approach to cutting costs in a slowing economy. Agilent is slashing its discretionary spending on IT by 90 percent. As part of those cutbacks, Agilent will put off bulk purchases of items such as PCs, printers, fax machines and copy machines. This is not the first time. Agilent announced last month that it was temporarily cutting all employee salaries by 10 percent in a bid to avoid layoffs. The stock jumped more than a point today, but it's still down 55 percent from its high.
Coming up: the deep pockets behind the digital revolution. The powerful man in venture capital is, my guess, next. Stay with us.
ANNOUNCER: Coming up, Lou talks with a venture capitalist who funded some of the biggest names in technology: Sun Microsystems, Compaq and Amazon.com. John Doerr is next.
(COMMERCIAL BREAK)
DOBBS: In tonight's "MONEYLINE Focus": a reversal of fortune for venture capital in this country, venture firms pulling in 40 percent less in the first quarter of this year compared to the end of last. That's the biggest decline ever, in dollar terms. Historically it's still a near-record high, suggesting investors still have some money, however.
My guest tonight capitalized on early investments in some names you might be familiar with, such as Sun Microsystems and Amazon.com, having funding them.
Joining me now from Palo Alto, California, a legend in the venture capital business, John Doerr of Kleiner Perkins.
JOHN DOERR, KLEINER PERKINS: How Lou, how are you?
DOBBS: I'm outstanding, and how are you?
DOERR: I'm just fine. I'm working hard.
DOBBS: Just fine, despite the technology revolution and recession?
DOERR: Well, we had the worst quarter last quarter in Nasdaq ever in history...
DOBBS: Right.
DOERR: ... and one of the worst quarters in the S&P 500. So this is well more than a healthy correction.
DOBBS: It's -- as you say, well more than a healthy correction. It has also created just a terrific log-jam in private equity and it's ability to move companies to the public markets. How serious is it? When will it break?
DOERR: Well, I think last year, Lou, the year 2000, we had too much venture capital. There were some $6,000 invested in venture capital in Silicon Valley for every man, woman and child. So it was a virtual flood. I think we're returning to, in venture investing, a period of normalcy. But first we have to work our way through, as an industry, some bad investments.
DOBBS: So how much responsibility should be placed squarely with the VCs for those bad investments and the bubble that was pierced last year?
DOERR: Well, I don't think the VCs are responsible for the bubble, but they're certainly responsible for the bad investments.
(LAUGHTER)
DOBBS: Well, separate the two for me, if you would then, John.
DOERR: Then none of the responsibility for the bubble and all of the responsibility for the bad investments.
(LAUGHTER)
DOBBS: Somehow I see them extricably intertwined.
DOERR: No, I think the bad companies, they should not go public. And they shouldn't get public support.
DOBBS: Right. Well, I have to ask you, John, who took them public there? I mean, it was -- that it's somewhat of a prized goal of VCs?
DOERR: Yes, but you know, America's capital markets are a wonderful and efficient thing, and investors wanted to buy these shares. So, those markets worked well and are the envy of the world.
DOBBS: I think we are moving quickly to blaming the public here, John.
DOERR: Your audience.
DOBBS: Well, not my audience, certainly. They're too discriminating and far too sophisticated. The fact of the matter is that technology now, within this recession, as you point out, tremendous oversupply, a recession. When do we work out of it all?
DOERR: We're in a tech recession and I, at least personally, haven't seen the bottom of it. I know technology is one of the most productive areas of the economy in terms of the returns that it produces. I think that there was an unfortunate series of unprecedented. We raised interest rates six times in five quarters last year. That's historic. And there was no sign of inflation that I could detect, and so now we are rapidly reversing that in the form of monetary policy.
Fiscal policy, it's I think too early to tell if the administration's policies and plans are going to help us as much as we need.
DOBBS: And in terms of one of the most ballyhooed and hyped but investments I can think of, it, also known as Ginger, you reportedly have put some $36 million into it then came and -- tell us about it. Where do you stand with it?
DOERR: Well -- I haven't confirmed how much we've invested. I am an investor in a project in New Hampshire. I was there yesterday. And we are working very hard on the project. And that's about all I can say.
DOBBS: You have been quoted as having said that this is big -- bigger than the Internet, and bigger than the PC.
DOERR: I don't remember that quote being attributed contributed to me.
DOBBS: Well, in -- give us some -- you're going to be difficult about this, aren't you, John.
DOERR: Yes, I really can't comment on it or Ginger.
DOBBS: It is totally beyond your comment, yet, how in the world are we hearing so much about this mysterious technology, described variously as a scooter, a solution to all that ails us in terms of transportation.
DOERR: Sort of a hydrogen-powered from Star Trek. No, some authors circulated a manuscript about a project and then, people let their imaginations run wild. And I think expectations were built way too high.
DOBBS: And give us at least, if you can't describe it, sort of the state of your expectation. Because, again, you've been variously described as very enthusiastic about this. Just give us a level of expectation for this mysterious product that some day will come forth apparently.
DOERR: I think that it will be a great product and it will make a contribution to the economy and to the world.
DOBBS: Well, John you have may made a lot of contributions to a lot of companies that have shaped the technical revolution and as always, it's very good to talk with you. Thanks for being with us.
DOERR: Great seeing you.
DOBBS: John Doerr.
Well, coming up next here, a MONEYLINE special report. With the White House calling for more nuclear plants, what happens to all that nuclear waste? The answer is somewhat problematic and may well surprise you. Stay with us.
(COMMERCIAL BREAK)
DOBBS: Questions tonight about nuclear waste disposal as the Bush administration presses for greater reliance on nuclear energy. Energy Secretary Spencer Abraham today toured the Calvert Cliffs nuclear power plant, located in Maryland. His visit comes as the White House calls for the building of similar facilities under the national energy policy that it is proposing.
But even existing nuclear plants still have no national repository for their spent fuel. And unless one is established, expansion seems unlikely. Steve Young reports.
(BEGIN VIDEOTAPE)
STEVE YOUNG, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): If it's built, a high-level nuclear waste repository would make burying an interstate highway beneath Boston look simple and cheap. It would make Hoover Dam look unambitious. It would require bigger boring machines than those used to dig under the English Channel to construct the Chunnel.
The nation's first high-level nuclear waste dump is all but certain to wind up here, Yucca Mountain, 90 miles outside Las Vegas. Because there is no such site yet operational, deadly atomic garbage is piling up at nuclear power plants around the nation. But state politicians warn if Nevada becomes America's nuclear graveyard, lethal waste could get into drinking water before the 10,000 years it would take to become safe.
GOV. KENNY GUINN (R), NEVADA: We just think that there hasn't been enough work done, and the easy way out is to pick a state like Nevada and say: "We're going to collect it from all over America and put it at Yucca Mountain."
YOUNG: The fight right now: whether tougher ground water standards from the Environmental Protection Agency or easier-to-meet standards from the Nuclear Regulatory Commission will determine if Yucca Mountain gets the final nod. On direction from Congress, no other site has been investigated as a possible high-level waste dump since 1986.
Citizens in dozens of states would be at risk, because the lethal waste would have been to be trucked across the country. Nevada says it should stay where it was produced, until future technology offers a better long-term storage solution.
Some nuclear experts agree there may be better technology in time, and the waste would be less hot, thermally and in terms of its radioactivity.
MICHAEL MARIOTTE, NUCLEAR INFORMATION & RESOURCE SERVICE: Waiting a few decades before shipping it actually makes the shipping easier and reduces public exposures from the shipment of the materials, even under routine circumstances.
YOUNG: But the Bush administration wants to bury the problem as soon as possible.
SPENCER ABRAHAM, ENERGY SECRETARY: If we can't find a repository for the waste, that it is very unlikely we would see new plants built. We have to move forward in terms of the repository, if we are going to expand the number of plants. If that doesn't happen, then I think investors probably won't invest in new nuclear facilities.
YOUNG: A final note on the one and only candidate site.
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YOUNG: About two years ago, radiation was found deep inside Yucca Mountain, which could have come from the above-ground Nevada nuclear test range. Scientists say if radiation could get into Yucca Mountain, it probably could get out -- Lou.
DOBBS: That makes a certain amount of sense, and I love this word "repository."
They used to be called dumps, frankly.
YOUNG: I think we called them that.
DOBBS: Steve, thanks.
Well, another black eye for the Energy Department. We learned today that Congressman David Wu, the only Chinese-American member of Congress, was denied entry at the Department of Energy Wednesday. Wu is a Democrat from Oregon. He said that security guards repeatedly asked him whether he was a U.S. citizen, then refused him access to the building, even after he showed his congressional ID.
Ironically, Wu had been invited to the DOE to address employees during Asian-Pacific-American heritage month. A DOE spokeswoman described the incident as a mix-up, and said that all visitors to the department are asked if they're U.S. citizens upon arrival. Energy Secretary Spencer Abraham today showed unexpectedly at Wu's congressional office to apologize.
Well, coming up next on MONEYLINE, a winning sector today in a losing market. And later, "Pearl Harbor" storming into theaters. Will it deliver for Disney, despite the critical pans?
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DOBBS: In tonight's "Sectors Report," offshore drillers, Marine Drilling receiving a boost after Credit Suisse First Boston issued an upgrade on the stock, to a "strong buy" from a "buy." Enthusiasm building there. SFSB upgrading the Marine after Pride International Thursday announced its plans to buy the company for 1.6 billion in stock. The merged company will become the third-largest offshore driller in the world.
Also making news in the industry, politics, the markets are still trying to figure out the implications of a Democratic Senate on energy policies. Shares of Marine Drilling and Transocean Sedco both up well over $1 a share. Pride International, Noble Drilling, Diamond Offshore, all up on the day as well.
Well, coming up, the lighter side of a week that shook up Washington. Stay with us.
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DOBBS: With a dramatic power shifts in Washington and economic uncertainty mounting, we thought we would bring in P.J. O'Rourke. He is the best-selling author of nine books. He has a few things to say about politics and economics. Among them, one of my favorites: "Democrats are the party that says government can make you richer, smarter, taller and get chickweed out of your lawn."
"Republicans are the party that says government doesn't work, then they get elected and prove it."
On Washington: "Giving money and power to government is like giving whiskey and car keys to teenage boys." And on Wall Street, another one of my favorites: "In order to understand the stock market, we have to realize that, like anything enormous and inert, it's fundamentally stable, and like anything emotion-driven, it's volatile as hell."
Well, that's from P.J. O'Rourke's latest book, "Eat the Rich: A Treatise on Economics."
No one better equipped to deal with our current environment. Good to see you, P.J.
P.J. O'ROURKE, AUTHOR, "EAT THE RICH": Thank you. Thank you for having me.
DOBBS: Give us -- first, your take on, if you will, Senator Jeffords' switch to the -- as an independent and giving power to the Democrats in the Senate, are they unnerving you?
O'ROURKE: No. Well, first place, I'm from New Hampshire, and we expect this kind of behavior from people from Vermont. You know, he'll get a nose ring and a face tattoo next. I'm also a Republican and, frankly, we didn't want him anyway. But it's important to remember what the basic, true purpose of the United States Senate is. And what it's true purpose is, is to keep 100 middle-aged blowhards out of the private sector where they could really do some damage. I mean, think about Jeffords. He could be managing your portfolio.
DOBBS: Now there is a thought that would give one pause.
O'ROURKE: Yes, that is a scary thought.
DOBBS: One of the things I've noticed, P.J., in your writings in both "Rolling Stone" and the new book, as a Republican, you have been relatively harsh on George W. Bush. Why is that?
O'ROURKE: Expansion of the role of government. I mean, the main reason I am a Republican is that I believe that the Republicans are marginally less in favor of expanding the role of government -- and I mean marginal. I mean, it's a thin margin we're talking about, here.
And practically everything -- every initiative that Bush has come up with has -- I mean, the faith-based initiative thing, the education programs, his budget is actually larger than the budget -- than the last budget that we had under a democratic president. We're not at war, we don't have a depression. I mean, why is the budget larger under this president? And even the tax cut. I love the tax cut, of course, but it's government spending that's the core issue, not government taxation.
DOBBS: Well, if you reduce the amount of money, so it goes, that the government has available, the less it will spend. That seems perfectly consistent and logical to me.
O'ROURKE: So Reagan thought when he reduced the amount of money the government -- it spent it anyway. Milton Friedman pointed out years ago that the government will figure out a way to fund its expenditures. It can tax you, it can inflate the currency, or it can just borrow a bunch. Or best of all, it can do all three. And, you know, I'm most worried about expenditure. They'll figure out a way to get the money.
DOBBS: And in terms of the economy itself, I know you've met with the very best minds in the country. How do you feel about our economic condition and direction?
O'ROURKE: Well, when Greenspan says he doesn't know, you know -- I mean, I would feel pretty arrogant. Oh, but I do. I was an English major, you know, I can figure this right out.
You know, I think it will probably -- the situation will probably change somewhat, after which it will probably change some more; and then it will stay the same for a while, and then change again.
DOBBS: Are you going to stick with that forecast?
O'ROURKE: I'm going to stick with that forecast.
DOBBS: All right, we're going to mark it down and we're going to hold you to it. P.J., it's always great to you have with you us. Good to talk with you.
O'ROURKE: Thank you, Lou.
DOBBS: P.J. O'Rourke.
Well, coming up next: as "Pearl Harbor" hits the theaters this weekend, is Disney turning loose a blockbuster or a bomb?
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DOBBS: Monday, of course, Memorial Day holiday, and in observance all markets, banks and post offices in this country will be closed. The rest of the week brings news on the economy, the unemployment report for May, consumer confidence, construction spending, personal income, the NAPM and auto sales. All of that -- it's going to be a fun week by any measure.
And finally tonight: the film "Pearl Harbor" today roaring in to theaters today, and Disney hoping Memorial Day weekend crowds will follow it. Many analysts expect the movie to boost Disney's bottom line, but some reviewers are skeptical. "The New York Times" among them. saying, "Not a terrible movie, but a defiantly, extravagantly average one."
And then there are these headlines: from "The Wall Street Journal": "Snore-a! Snore-a! Snora-a!" "The New York Daily News": "Bore-a! Bore-a! Bore-a!" Not to mention my particular favorite: "Hawaii Uh-Oh."
So will "Pearl Harbor" sink or soar?
Casey Wian tells us what to expect.
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CASEY WIAN, CNN CORRESPONDENT (voice-over): Expectations are so high for "Pearl Harbor," analysts estimate Walt Disney could book hundreds of millions of dollars in profit over the next several quarters from this film alone. This week, a Salomon Smith Barney analyst upgraded the stock and boosted her price target 14 percent, all because of "Pearl Harbor." That, despite the film's $140 million production cost and marketing expenses that could reach another $100 million. THOMAS STAGGS, CFO, WALT DISNEY: Every weekend I get a daily box office report in the morning, so it's something I look at as a matter of course. I'll be a more focused than usual, of course, this weekend.
WIAN (on camera): And why is that?
STAGGS: Well, a combination of things. First of all, given the size of the picture, in terms of what we've got in the picture and spending, certainly that has my attention. But also if you look at what's led up to this picture, the tracking has been really spectacular, the best I've ever seen, certainly.
WIAN (voice-over): But most reviews haven't lived up to the hype, and the buzz on "Pearl Harbor" is shifting. There are growing concerns about the film's ability to attract overseas audiences, given its American perspective.
JEFFREY LOGSDON, GERARD KLAUER MATTISON: Well, I think there's always the perceptual situation, where people are enthusiastic when you have such an event type of film coming out. After the film comes out, it almost doesn't matter how much money the film does, it won't be enough for somebody, so I think there's always that risk.
WIAN: Unlike many recent big-budget films, where studios have shared expenses to minimize risk, Disney's flying solo with "Pearl Harbor." It did, however, convince actors and suppliers to swap up- front costs for a percentage of the box office take.
(on camera): Some analysts expect "Pearl Harbor" to top the $100 million mark by the end of the weekend. That would surpass the $90 million holiday weekend record set by "The Lost World: Jurassic Park" in 1997.
Casey Wian, CNN Financial News, Los Angeles.
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DOBBS: And that's MONEYLINE for this Friday evening. We thank you for joining us. Have a terrific weekend. I'm Lou Dobbs. Good night from New York.
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