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Lou Dobbs Moneyline

Dow Climbs 71.11 to 11,061.52; Nasdaq Rises 6.49 to 2,155.93; President Touts His Tax Plan

Aired June 04, 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, the president takes a victory lap before the Democrats take over the Senate.

OPEC ministers to meet in Vienna as violence erupts again between Israelis and Palestinians.

On Wall Street, stocks prices push higher for the third-straight day: the Dow back above 11,000.

And from Sony pictures, critical success from a nonexistent critic.

ANNOUNCER: From the heart of New York City, this is LOU DOBBS MONEYLINE. Here now, Lou Dobbs.

DOBBS: Good evening. Our top story tonight: the president's agenda.

As the Senate undergoes a political change, it is transition week in Washington, with Senator Tom Daschle set to become the Democratic majority leader Wednesday morning. Ahead of that, President Bush is focusing national attention on his largest legislative accomplishment: the most dramatic tax relief in a generation.

Mr. Bush discussed the $1.35 trillion plan just moments ago in Tampa, Florida. Mr. Bush plans to sign the tax bill into law Thursday.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: A year ago, tax relief was supposed to be a political impossibility. Six months ago, it was supposed to be a political liability. Today, folks, tax relief is reality.

(END VIDEO CLIP)

DOBBS: And while President Bush savors victory on taxes, his other priorities may now face significant hurdles in Congress, especially his energy policy proposals. The Bush strategy sparked a bitter response from Democrats well before they took control of the Senate. One of their criticisms: that the White House isn't pressuring OPEC sufficiently to raise production. OPEC ministers meet tomorrow in Vienna, where they're expected to leave current output targets as is.

And while the Bush administration says America is facing an energy crisis, officials argue that OPEC is not to blame. Kitty Pilgrim reports.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): Iraqi supply threats cause a flurry in the oil pit, but OPEC heavyweight Saudi Arabia pledged to make up the difference for any cutback. OPEC meets in Vienna Tuesday to discuss production quotas at a time when U.S. consumers are worrying about high gas prices.

Fed Chairman Alan Greenspan addressed this on Monday.

ALAN GREENSPAN, CHAIRMAN, FEDERAL RESERVE: We cannot be certain that the recent spike in gasoline prices in the United States is behind this, especially when crude oil supplies, as we learned this weekend, are never fully secure.

PILGRIM: OPEC is still a key player, producing 40 percent of world oil supplies and half of U.S. imports. Some analysts suggest that we're in much better shape than last spring when a presidential campaign and spiking gas prices put the Clinton administration publicly at odds with OPEC. Since then, the cartel has boosted production and crude prices have come down and refining is going full tilt.

RONALD GOLD, PETROLEUM INDUSTRY RESEARCH FOUNDATION: Since the beginning of April refinery production been going all-out to maximize gasoline, imports have been rising, stocks have been rising, and basically, it looks now that if you didn't have a monkey wrench from Iraq that the situation for U.S. consumers is stabilizing and could conceivably get easier as the summer goes on.

PILGRIM: Even though the refining crunch is still a problem, analysts are cautiously optimistic that we have seen a peak in gas prices, which have plateaued in the last three weeks.

JOHN FELMY, AMERICAN PETROLEUM INSTITUTE: We've had strong increases in gasoline production and we've had what appears to be a slowdown in gasoline consumption. But going forward, it depends on what happens with OPEC, it depends on how we're able to keep the refinery system and the entire supply chain operating.

(END VIDEOTAPE)

PILGRIM: Most analysts expect no major shift from this OPEC meeting, and the Bush administration seems to be taking a less combative stance in terms of OPEC, and domestic solutions are at the top of the list -- Lou.

DOBBS: Kitty, thank you.

Well, ahead of that OPEC meeting, Iraq threw some uncertainty into oil markets by halting oil exports of more than 2 million barrels a day. Baghdad followed through on a decision made over the weekend to retaliate over U.N. sanctions policy.

Other OPEC members, most notably Saudi Arabia, vowed to make up any difference, and that seemed to restrain prices today. Light sweet crude rising almost 20 cents, settling at $28.13 barrel.

While oil prices have been generally stable through the year, gasoline prices have risen 10 percent, but there is some hope that prices at the pump are stabilizing. The Energy Department today reported that the average price for regular unleaded gasoline stands at $1.67 a gallon. That's down more than 2 cents from a week ago.

In California, surging electricity prices have forced one utility there to file for bankruptcy, and they've caused a budget crisis for the state and its governor, Gray Davis. Governor Davis has repeatedly asked the White House to impose price controls to stabilize the market. The president has refused. He says price controls hamper investment and development.

My first guest tonight, an unlikely supporter perhaps of price caps and controls, Alfred Kahn, the economist who led the push to deregulate the airline industry in the 1970s. He joins us now from Ithaca, New York, where he is a professor emeritus at Cornell.

Good to see you again.

ALFRED KAHN, CORNELL UNIVERSITY: Thank you.

DOBBS: Let me ask you this. As an economist of great note and a man who deregulated the airline industry, why now favor price controls? They haven't worked anywhere else.

KAHN: Well, the situations are so totally different. But I think the first thing to say is that it isn't true that price controls have never worked. We've regulated the price of electric power in this country for the last 75 years, and we've had no basic problems with shortages of capacity.

I think it's very important that any controls that go on be temporary and not interfere with capacity. But it's just -- it's just a myth that you can't regulate public utility rates, particularly in times of crisis such as these, and still not have adequate expansion of supply.

DOBBS: In point of fact, professor, the idea of price controls is anathema to this administration, to the companies that are providing energy. We have heard a number of companies say that they're not going to invest in California right now because the environment is hostile to business.

Aren't you concerned that price controls would simply push back any development of plants, any investment there that they might be planning, unless the state wants to go into the business?

KAHN: No, I don't favor that. There are two parts of the answer. There are applications pending by people who are eager to build plants. There's no question that one of the reasons why deregulation made sense was that there are all sorts of individual generators who want to build their own plants, and it's just a question of a couple years before those plants can actually come online.

The second part of the answer is that just as under regulation in the past we've permitted companies, of course, when they build additional capacity to get a return on their investment -- in this case, I would be much, much more liberal. I would say controls do not apply to new capacity, and these controls will go on only for, say, two years and automatically terminate when we know that the capacity can expand.

Meanwhile, with capacity absolutely constrained and demand totally inelastic, the bill for California power has gone up from 7 billion to 25 billion. This year it will be over 50 billion. And think what that does for the -- to the economy at large, what the macro consequences are of extracting such a -- a thousand, two thousand dollars a year out of the pocket of every family in California.

DOBBS: And as we know, the Energy Department has reported that there is the possibility of rolling blackouts through several regions of the country this summer. California with high demand -- even in this crisis, there's been no back off whatsoever in consumption in California with price controls. How would you govern demand there?

KAHN: Well, exactly. The price now would have to increase many, many fold, even over its present ridiculous levels, before it would have any significant effect on demand. You've got very inelastic supply and very inelastic demand.

Moreover, there's good reason to believe, a lot of economists have found, that given the present tight situation, companies don't have to have monopolies in order to withhold some of their supplies -- and they claim they haven't done so -- in order to get an enormous leverage effect on prices.

All I'm saying is, is this situation where the market is working so badly and is so depressing to the economy, temporary controls clearly scheduled to sunset -- and maybe not even exempting output from new plants -- should get us through this transition with much less pain.

DOBBS: Governor Davis released under your signature and that of other -- nine other economists this letter calling for price controls. Who asked you to write such a letter and to endorse such a proposal?

KAHN: Well, I received a letter -- a draft letter from some of the economists who had already signed, most of whom know a hell of a lot more about this business than I do.

(LAUGHTER)

But in any case, one is a former student of mine, so he can't possibly be wrong.

(LAUGHTER)

I'm not an idealogue on price controls. I'm very much opposed to them. But there are circumstances in which it's absurd just to say, supply and demand, supply and demand, supply and demand.

DOBBS: In this case, supply seems to be inadequate and demand limitless in California, and as you suggest, a solution does have to be found. Alfred Kahn, always good to talk with you and have you with us here.

KAHN: Nice to talk to you. Thank you.

DOBBS: Still ahead, Mideast tensions rise after a suicide bombing, threatening to disrupt a fragile cease-fire and add further tensions to a fragile region.

Stock prices edge higher in New York trading. The Dow has regained 11,000.

Also, a record night for the Broadway version of a comedy classic. A play, a movie, a play again: how "The Producers" turned box-office gold into a shelf full of Tonys. Stay with us.

(COMMERCIAL BREAK)

DOBBS: A report out today on corporate layoffs for the month of May. That report confirms the findings of the Labor Department released Friday: the worst may be over for the job market. Challenger, Gray & Christmas reported that companies announced more than 80,000 layoffs last month. That figure down 50 percent from April, when layoffs totaled more than 165,000.

On Wall Street today, stocks advanced for a third straight session. One factor helping the sentiment today: comforting words on inflation from Federal Reserve Chairman Alan Greenspan. But the gains modest, trading extremely light. Jan Hopkins has the story from the New York Exchange.

(BEGIN VIDEOTAPE)

JAN HOPKINS, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): Investors grew cautious ahead of the all-important confessional season. It's the last chance for U.S. companies to signal any surprises in their quarterly earnings results. Most market watchers expect choppy trading for the next three weeks, until the profit picture is clearer.

LARRY WACHTEL, PRUDENTIAL SECURITIES: The confessional is a pretty important period, and when you think back to the first quarter, the March confessionals really were very hurtful. And now we're going to come to the June confessionals. This will be kind of a test, a challenge for the market. Here's some more bad news on the confessionals, because they're going to be bad.

HOPKINS: The Dow industrials gained 71 points, closing above the key 11,000 mark for the first time since last Tuesday. Volume on the Big Board was very light. Oil stocks were big winners, especially refining firms. The sector surged after Sunoco and Valero Energy both said second-quarter profits would come in much higher than expected. Higher oil prices helped boost oil services firms, such as Halliburton, Schlumberger and Global Industries.

The Nasdaq composite hardly budged, eking out only a 6-point gain to 2,155. Chipmaker Cypress Semiconductor warned profits and revenues for the upcoming quarter would not meet targets. Investors had already priced in the bad news, and sent Cypress shares higher. But other chip makers slumped. Losers included Advanced Micro Devices, Lattice Semiconductor, Teradyne and Intel.

MARC KLEE, JOHN HANCOCK TECHNOLOGY FUND: I think now we're going to be in a trading range during the month of June, as we go through this back-and-forth of lousy fundamentals. And then I think as we get through the summer, and we start to see signs that maybe the worst is over, I think we then break out to the upside.

(END VIDEOTAPE)

HOPKINS: But with little economic news to feed on this week, investors will be turning to Amazon.com's annual analyst meeting tomorrow and Intel's pre-scheduled mid-quarter conference call on Thursday for any signs of recovery in technology -- Lou.

DOBBS: Those may not, Jan, be the best two sources for a sign of recovery?

HOPKINS: That's exactly right. That's what Marc Klee was pointing out, actually. Especially Intel, he's concerned about Intel.

DOBBS: Jan, thanks. Jan Hopkins from the New York Exchange.

A federal jury today found several tobacco companies liable for deceptive business practices. The jury ordered Philip Morris, R.J. Reynolds, Brown & Williamson, Lorillard and the Liggett Group to pay up to $17 million in damages to New York's largest insurer. Empire Blue Cross Blue Shield had been seeking 800 million in damage for alleged smoking-related medical care costs that were incurred by health care plans.

This was the first case in which an insurer successfully sued the tobacco industry. The jury also found Empire failed to prove allegations of fraud and conspiracy by the industry.

Still ahead: protests rock Nepal, demonstrators demanding more information about last week's massacre of the royal family. Violence flares in the Mideast, threatening a tenuous cease-fire. We'll be going live to the State Department.

And an aviation experiment has gone up in smoke, a search for answers now at hypersonic speed. (COMMERCIAL BREAK)

DOBBS: A dramatic change in Peru. Alejandro Toledo, who led last year's protests against disgraced President Alberto Fujimori, has won the presidency of Peru. Toledo is a one-time shoeshine boy who rose from poverty to earn an economics doctorate at Stanford and work at the World Bank.

Toledo captured a narrow victory in a bitterly contested race. but Toledo's biggest challenges: to create jobs, jump-start the troubled economy and end the corruption of Fujimori's decade of authoritarian rule.

Nepal has a new king. The crown prince today named as the new monarch. This after Friday's massacre when Crown Prince Dipendra opened fire on the royal family, killing his parents, the king and queen, and turning the gun on himself.

Many in Nepal not satisfied with the official version of events. Thousands of angry mourners protested outside the palace, demanding to hear the facts. They burned tires, raised banners, before police dispersed those protests with tear gas. Hospital officials said two people were killed, 19 others injured in the demonstrations.

Rising tensions in the Middle East tonight threaten a fragile cease-fire. President Yasser Arafat ordered a cease-fire over the weekend following a suicide bombing in a Tel Aviv nightclub, a bombing that killed 20 Israelis. But gun battles today erupted between Palestinians and Israeli soldiers in Gaza, injuring more than 20 people.

The violence has forced the Bush administration to reconsider its initial hands-off policy in the Mideast. David Ensor is at the State Department and has the latest for us -- David.

DAVID ENSOR, CNN CORRESPONDENT: Well, Lou, Secretary of State Powell and others members of President Bush's national security team held meetings at the White House today to discuss the situation. They're holding their breath, quite frankly. They've called on Chairman Arafat to urge restraint, to publicly urge restraint and try to keep violence from occurring, but they're not sure entirely that he'll be able to prevent the kind of violence that so tragically occurred in Tel Aviv on Friday.

They want to try and keep a lid on it. Secretary Powell spoke to Chairman Arafat again today, urging him to do. Powell also spoke to Prime Minister Sharon, urging him to show continued restraint, as Israel has been doing for the time being. And the goal is to try to have a few days of peace and quiet, then they would like to get back to security talks between the Israelis and the Palestinians.

And to that end, there is some discussion of sending CIA Director George Tenet back to the region. He hasn't been there since the Bush administration took over, feeling that he shouldn't have such a hands- on role in the region. But now, they feel if they want to get the two security chiefs together, the Israeli and the Palestinian, it may take Tenet's presence to occur that, and they think to have that meeting, and they think that meeting is crucial.

They also have Assistant Secretary of State-designate Burns, who is the ambassador to Jordan. He's in the region still. He could also be called in to go in short notice, if necessary. But Secretary Powell, while saying he will eventually go to the region, is keeping his powder dry, at least for the moment, Lou.

DOBBS: Are there any indications from the administration that Sharon has given a commitment to continue the forbearance on the part of Israel?

ENSOR: The understanding from the Israelis is that if nothing major happens, there will be forbearance, at least for the time being. But Israelis have said they are preparing attacks, which they will carry out if anything big happens. So, it's a very tense time right now, Lou.

DOBBS: David, thank you very much. David Ensor from the State Department.

Another -- an anniversary today of another bloody event. It was June 4, 1989 that Chinese authorities ordered the crackdown on a democracy protesters in Tiananmen Square. The democracy movement gained worldwide renown with images of students standing in the face of tanks and guns.

Today, 40,000 people gathered in Hong Kong for the annual vigil to commemorate the demonstration and massacre, in which hundreds, possibly thousands, were killed.

Meanwhile, Defense Secretary Donald Rumsfeld, traveling in Europe today, denied a "New York Times" report that he has cut virtually all military ties with China. Secretary Rumsfeld says he is approving contacts as they are presented to him.

In tonight's "Tech Watch," NASA officials are trying to figure out what went wrong with an experimental hypersonic test flight over the weekend. The X-43a, seen here being carried by a B-52 bomber, is an unmanned plane with an air-breathing engine. NASA had hoped the plane would set a new speed record of Mach 7, topping the current record of 6.7, set back in 1967.

But after a successful drop from the B-52 over the Pacific Ocean, the Pegasus rocket, carrying the X-43a, spiraled out of control, and officials were forced to destroy both the booster and the plane. NASA has assembled a team that will investigate the incident. There are two more test flights planned in the six-year, $185 million hyper-X program, as it's called.

Coming up next here, Alan Greenspan weighs in on a constant concern of the Fed and Wall Street, inflation.

The new face of e-mail, courtesy of a communication pioneer, AT&T, and AIDS marking an anniversary. We'll have a progress report on the epidemic from CDC's top gun on prevention. Stay with us.

(COMMERCIAL BREAK)

DOBBS: An ominous anniversary observed this week: 20 years since AIDS was first diagnosed. AIDS has claimed 400,000 lives in this country, millions more around the world. Infection rates have dropped dramatically within this country, down to 40,000 new cases a year from a peak of 150,000 in the 1980s. However, recent reports suggesting that another spike is occurring.

Joining us now, Dr. Helene Gayle. She heads up AIDS prevention efforts at the Centers for Disease Control. Doctor, good to have you with us.

HELENE GAYLE, CENTERS FOR DISEASE CONTROL: Hi. Thanks, Lou.

DOBBS: The disease -- these reports of the recent spikes, how alarmed should we be?

GAYLE: Well, I think we should be very alarmed. The rates that we described in our recent report are as high as some of the rates that we see in some of the poorer countries, where HIV is having such a devastating impact. So, we know that there are segments of our population that are incredibly high risk. And I think this is a real cause for concern, even though we are continuing to make progress with this epidemic.

DOBBS: Dr. Gayle, those high-risk groups have not changed over the course of the last 20 years, though, have they?

GAYLE: Well, yes and no. This epidemic is still an epidemic that is hitting hardest among gay and bisexual men, injection drug users and their partners.

However, in the beginning of this epidemic, it really affected primarily white gay men. Now, the group that is highest risk are young African-American and Hispanic gay and bisexual men. So, the population has shifted. It has diversified. And women now, also increasingly make up a larger percentage, 30 percent of new infections in this country are occurring among women.

DOBBS: And what are we doing in terms of educating that group of people to their responsibilities and preventing the spread of the disease?

GAYLE: We really are -- have moved from providing general education only to the public -- that's still important -- but we have really moved to target our not only information, but also services to the groups at highest risk: youth, young gay and bisexual men, women, injection drug users and their partners.

So, we really want to make sure that we do get services to the groups that are currently at greatest risk. And it really is hitting hard in communities of color, particularly African-American and Latino communities.

DOBBS: And Dr. Gayle, your efforts, let's all hope that all of the progress of the last 20 years is not in any way mitigated here now. Dr. Gayle, thanks for being with us.

GAYLE: Thank you.

DOBBS: Coming up on next: stocks finish today in positive territory for the third straight session, and helping push the markets higher, soothing from Fed Chairman Greenspan. Inflation? Mr. Greenspan says, no problem.

And as the Fed tries to jump-start the economy, are commercial banks getting in the way? Stay with us.

(COMMERCIAL BREAK)

DOBBS: In tonight's headlines, Washington bracing for transition. Jim Jeffords will officially leave the Republican Party tomorrow afternoon, setting about a dramatic shift to Democratic majority in the Senate.

Also tomorrow, Senator Jeffords visits the White House. He joins senators from both parties to speak with the president on education.

And OPEC gears up for a meeting in Vienna tomorrow with little expectation for oil producers to increase production.

And Wall Street manages modest gains, the Dow pushing back above 11,000.

The markets today sent the reassuring signals: a higher Dow, a higher S&P, and a perceptible move up for the Nasdaq, barely. All that reassurance came in light trading volume and included some interesting stocks on the upside, namely Cisco, Nortel, and even Lucent Technologies, all stocks of companies that have offered no suggestion of changed circumstance or condition.

All of which suggests that, particularly in the technology sector, there remains some light speculative interest that is hanging on despite still historically high multiples, troubling earnings prospects, and the lessons of overbought and overwrought markets of the past year or so. There's more reassurance in the form of stable energy prices, even with the prospect of OPEC's meeting tomorrow, and there are forecasts of lower gasoline prices soon, and lower commodity prices as well, despite what, to some economists seem too high labor costs.

And layoffs falling last month to half the rate of April. These are good signs of a slowing slowdown and brightens the prospect of a second-half real recovery. And, most reassuring of all, Alan Greenspan's comments that inflation is not a concern.

Chairman Greenspan today made those comments to delegates at the International Monetary Conference in Singapore. He said there's a very extraordinary lack in pricing power in the American economy. But he also pledged vigilance should prices flare up.

(BEGIN VIDEO CLIP) GREENSPAN: My own impression is that inflation is not a significant problem at this moment. But should we fail to consistently endeavor to watch that process, we are inviting trouble and that is not what we would like to see.

(END VIDEO CLIP)

DOBBS: There were encouraging comments as well today from one of Greenspan's colleagues as well. Dallas Fed President Robert McTeer in a speech said:

"We probably will not tip over into recession, although it is still a possibility."

A longtime member of the Federal Reserve Board said he has had enough. Edward Kelley said he will step down from the Fed's board of governors, on which he has served for 14 years. His formal resignation will be submitted after a new governor has been nominated and confirmed. There are already two vacancies on the board of governors.

Staffing, of course, isn't the only challenge facing the Fed. Commercial banks are continuing to tighten their lending standards, even as Fed policy makers are cutting interest rates. That seems to be frustrating the Fed's bid to jump-start the economy. Tim O'Brien has our report from Washington.

(BEGIN VIDEOTAPE)

TIM O'BRIEN, CNN CORRESPONDENT (voice-over): Brian Schindler's elevator company in Manhattan may seem to be a loan officer's dream. Revenues were 2 million dollars last year, four times what they were in 1997 when he bought the company. Six months ago he pushed all the usual buttons to get $250,000 loan, but his applications never rose above the ground floor.

BRIAN SCHINDLER, OWNER, PACE ELEVATOR CO.: I thought it would be a lot easier. My sales have doubled every year for the past four years.

O'BRIEN: He appears to be a growing number of small business entrepreneurs to learn that banks are raising their standards and credit is getting tight.

ROBIN SCHATZ, "BUSINESSWEEK": We're in an economic downturn. Banks are concerned about their default rates rising and there is some concern that small businesses won't be able to pay them back.

O'BRIEN: That could be particularly frustrating in light of recent rate cuts by the Fed, which have brought small business lending rates down from more than 10 percent last summer to under 9 1/2 percent for the first quarter. A great rate, but for loans that many cannot get.

UNIDENTIFIED MALE: Many loans that were underwritten in 1997-98 time frame were liberal lending practices, were encountered. Started before the economy slowed. And now what we're seeing is other loans starting to slow in a slowing economy.

O'BRIEN: A survey by the Federal Reserve underscores the growing caution. Nearly half the country's domestic banks imposed tighter lending standards between last January and March. The National Federation of Independent Business says its members, mostly smaller but well established companies, have yet to feel the pinch.

(END VIDEOTAPE)

O'BRIEN: They still might. Economists say there's a six quarter lag time that any credit crunch that were to start today, may not be fully felt until the end of next year -- Lou.

DOBBS: Tim, thank you very much. Tim O'Brien from Washington.

Despite five rate cuts by the Federal Reserve this year, my next guest says not to expect a turnaround in the economy until early next year. Joining me now, Vince Farrell, chairman of Victory SBSF Capital.

Good to have you with us.

VINCE FARRELL, CHAIRMAN, VICTORY SBSF CAPITAL: Thanks, Lou.

DOBBS: Well, not until next year? We were kind of counting on the second half of this year. The rest of us.

FARRELL: It always takes a year. Takes 12 months. You know, the Fed stopped tightening rates last May and we are still feeling the effects of that. That's just one term, but that's typically what happens. I would say ordinarily it would take longer because of the incredible excess capacity we have in technology we have right now.

But we have five very aggressive rate cuts by the Fed. So, I think that normal patterns will hold and we will see a turnaround in the economy beginning next year, but stocks will discount that and start to do better in the second half of this year.

DOBBS: How much better?

FARRELL: I think by the end of the year, you will be up a little, down a little, as far as the S&P goes.

DOBBS: That high?

FARRELL: Yes. How's that? Plug anything you want in, Lou. I think that you'll probably be at best up 5, 10 percent by the end of the year. Remember, you're off about 5 on the S&P right now. So, that implies a pretty good second half. I do think the Nasdaq at the end of the year will prove to show a double-digit loss for the year because the multiples are still very high. We are still getting warnings on those stocks.

DOBBS: Do we still see further ring out in the technology sector in particular?

FARRELL: As a category. But there are gems out there. And I think now is the time to be...

DOBBS: In technology?

FARRELL: In technology. Not just doing your homework. Now is the time to be buying some stuff. You have to buy a broad cross section, don't buy full positions. Buy maybe a third to a half of what you eventually want to own. I don't know where the bottom will be.

I have a feeling the bottom is a little bit away from us yet. I do think we set the bottom, I think we'll test it a little bit. Because the second quarter report will be bad.

DOBBS: Now, you said the bottom is still a little bit away from us. In terms of time. But in terms of level, you think we're near it?

FARRELL: Yeah. I do think that April, May lows will prove to be the lows. I think we might have to approach them again in the next few weeks, couple of months. And that will prove to be the double bottom off of which we should have a very good 2002. We still have to get from here to there. And getting there is going to be some pain. Because the reports will be bad.

DOBBS: The reports will be bad, you have stayed away from technology, now you just said there are some stocks to buy within technology?

FARRELL: Absolutely. Last year, we averaged 6 percent in technology during the year. And right now, we're more like 16 percent. We're probably a little bit early. And in no particular order, ADC Telecom, Tellabs, IBM, EDS, NCR are among those we're buying partial positions in, figuring that we might have to buy more later on if they go down.

DOBBS: Based on traditional value?

FARRELL: Traditional valuations. If you take, say, the three that are perhaps unknown -- ADC, (UNINTELLIGIBLE) and Tellabs, those three together have no debt, a ton of cash and they are trading at below a market multiple. And I think that's the time to be buying these things. On greatly reduced earnings expectations.

DOBBS: All right, Vince, good to see you.

FARRELL: Thank you, Lou. Good to see you.

DOBBS: Coming up next: an exclusive technology breakthrough from AT&T that could change how we all communicate.

And, a new twist in the alliance talks between AOL Time Warner and Microsoft.

And later, "The Producers" take Broadway by storm, breaking records all along the great white way.

(COMMERCIAL BREAK)

DOBBS: Now, a MONEYLINE exclusive.

AT&T is set to unveil a new technology that could revolutionize the way we communicate. The company says it has created a fast and easy way to combine e-mail with video. Fred Katayama has the exclusive story.

(BEGIN VIDEOTAPE)

FRED KATAYAMA, CNN CORRESPONDENT (voice-over): E-mail is taking a big leap, going from text to multimedia.

AT&T Worldnet will announce Tuesday a new service that allows users to easily send video e-mail using regular phone lines.

EDWARD PLASKON, AT&T WORLDNET SERVICE: The next step with video e-mail is really unlimited. People are going to use video e-mail in ways that we haven't imagined.

KATAYAMA: Video e-mail never took root because it was cumbersome. Messages recorded on a camcorder had to be tied to a PC. Once sent, a one-minute message would take 15 minutes to download, and gobble at least 1,000 times more space on the recipient's hard drive than a text message.

AT&T avoids all this by streaming the video, so the message sits on its network, not the user's hard drive. And downloads take seconds.

(on camera): What sets AT&T's service apart is its ease of use. All you have to do is park yourself in front of this Web camera, hit the record button, wait for the countdown, and start recording. "Hi, it's Fred, here at AT&T testing out its new video e-mail service. What do you think?"

Then hit stop and the send button. Back at the office, I can pick up my message. "Hi, it's Fred..."

ROB LANCASTER, YANKEE GROUP: The likes of AOL and MSN are not going to be far behind. If they see value in this service, it won't take them long to pick up a partner.

KATAYAMA: AT&T hasn't decided whether to charge a fee. But analysts say struggling Internet service firms are under pressure to create new sources of revenues.

Fred Katayama, CNN financial news, Basking Ridge, New Jersey.

(END VIDEOTAPE)

DOBBS: Investors hope this new technology will give a boost to AT&T stock.

Shares of AT&T finished the session off 23 cents. Over the past 52 weeks, at AT&T, shares have dropped by 40 percent. In other corporate news, USG may soon file for chapter 11 bankruptcy protection. The biggest U.S. maker of wallboard blames ongoing asbestos litigation for its financial difficulties. The company is currently dropped by 87 percent.

Older Boeing 737 airplanes may soon require additional safety inspections. The Federal Aviation Administration says more than 1,000 737s should be checked for possible damage resulting from excess vibration. It could take several months before the inspection proposal becomes mandatory. Shares are up more than a dollar today.

Alliance negotiations continue between Microsoft and CNN's parent AOL Time Warner, but talks are said to be slow, stalled in part by a request from Microsoft. The company wants a guarantee from AOL that it won't sue on anti-trust grounds. Steve Young has the story.

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STEVE YOUNG, CNN CORRESPONDENT (voice-over): AOL wants to be bundled in Windows XP from Microsoft, the software giant. Microsoft, in turn, wants its Internet Explorer to continue as the only Web browser used by AOL, the online colossus. But sources close to both companies say first Microsoft is asking not to be sued by AOL over Windows XP, or other antitrust issues.

Microsoft may have reason for concern. An AOL Time Warner deputy general counsel has been telling state and federal officials Microsoft's plans for Windows XP cross to the legal line.

PAUL NOGLOWS, J.P. MORGAN CHASE: I don't think even if AOL wanted to -- and I don't think they do, but even if they wanted to agree to that stipulation, I don't think Microsoft could get away with that.

YOUNG: Given the Windows XP production schedule, time for negotiations is running out.

CHARLENE LI, FORRESTER RESEARCH: I believe that Microsoft probably needs the deal more because AOL really has a lot of other distribution deals available other than just the desktop. They have distribution deals with retailers, directly with consumers, and also computer manufacturers.

YOUNG: If the first issues can be resolved, allowing Microsoft's instant message service to work compatibly with AOL's would be tackled in the next phase.

AOL has been saying Windows XP is rigged to use Microsoft's operating system Monopoly to create another one in messaging. Microsoft lawyers say anything is allowed in windows as long as there's a consumer benefit -- a theme even echoed by a product manager.

CHRIS JONES, MICROSOFT: We talked to windows customers. They really wanted the personal computer to enrich their lives, communicate and collaborate, and that's what Windows Messenger is all about. (END VIDEOTAPE)

YOUNG: Analysts are still betting that there'll be some sort of broad alliance because both companies would win -- Lou.

DOBBS: OK, Steve, thanks.

On the day, shares of Microsoft finished up 44 cents. Shares of AOL Time Warner, parent of CNN, closed down on the session, off 80 cents.

Coming up next, profits keep gushing from the oil giants. We'll take a closer look at make believe movie critics, and some of those rave reviews of those folks who don't exist. Stay with us.

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DOBBS: In tonight's sectors report, oil refiners Valero Energy today saying it expects to top current earnings estimates by about 20 percent. It's crediting higher profit margins as higher gasoline stocks remain tight, and demand rises.

Higher refining margins also leading Sunoco to raise its earnings guidance today. Sunoco saying it could top consensus estimates by as much as 38 percent. Both companies also predict a record second half as well. Those stocks rising today along with the rest of the group.

Straight ahead: a blockbuster musical, "The Producers" breaks every record.

And Sony's dark secret. Who's writing those rave reviews? Stay with us.

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DOBBS: It was already a record-setter at the box office. Now, "The Producers" is a record-setter in the annals of Tony history. The musical last night swept the Tonys, winning an unprecedented 12 awards. "The Producers," based on the 1968 Mel Brooks film classic about two producers who launch a musical called "Springtime for Hitler."

(BEGIN VIDEO CLIP, "TONY AWARDS")

MEL BROOKS, WRITER/DIRECTOR: I want to thank Hitler.

(LAUGHTER)

For being such a funny guy on stage. These are the current producers of "The Producers." There's lot of them.

(END VIDEO CLIP)

DOBBS: The producers of "The Producers" include Bob and Harvey Weinstein of Miramax fame. Today, they ran ads saying that tickets were now on sale through Christmas 2002. The show sold $3 million worth of tickets the day after it opened.

The big winner on the big screen this weekend, once again, "Pearl Harbor." The Disney film pulled in $30 million, grossing almost 120 million in just two weeks. "Shrek," from Dreamworks, close behind. The animated hit grossed more than 28 million its third week out. Its total so far, nearly $150 million.

Moviegoers often ignore movie reviews. How else do you explain the recent box-office success of "Pearl Harbor"? And now there may be even more reason to tune out the critics, as Casey Wian reports from Los Angeles.

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CASEY WIAN, CNN CORRESPONDENT (voice-over): David Manning of the "Ridgefield Connecticut Press" loved Heath Ledger's performance in "A Knight's Tale," calling Ledger "this year's hottest new star." He heaped similar praise on another recent Columbia Pictures release, "The Animal." Those raves are now causing Columbia and its parent company, Sony, to blush -- not from modesty, but because film critic David Manning is as fictional as either movie.

Columbia Pictures admits someone in its marketing department made up not only the quotes, but also the critic.

MARTY GROVE, HOLLYWOODREPORTER.COM: Like so many things in Hollywood, it's incredible. It just can't possibly be that anybody would feel the need to create a movie reviewer. There are so many of them who would be so happy to say just about anything that a movie studio wanted, just to get their name in the movie ads, so it was unnecessary.

KEVIN THOMAS, FILM CRITIC, "L.A. TIMES": It's lamentable that Sony, being a prestige major studio, would feel that they would have to stoop to this. That worried about the quality of their product? My goodness, you know.

WIAN: The story was uncovered by "Newsweek Online" over the weekend. As it turns out, the "Ridgefield Press" is a very real paper, a 125-year-old small-town weekly that buys its movie reviews from a syndicated service. Publisher Thomas Nash tells CNN he's seen ads quoting David Manning from the "Ridgefield Press" for nearly a year, but he thought it was a mixup by the syndicate.

THOMAS NASH, PUBLISHER, "RIDGEFIELD PRESS": We're not mad at Sony. We're taking -- we're in the business, so we understand how mistakes could happen.

WIAN: Sony says it's a case of very bad judgment, for which there was no justification, and put an end to it immediately.

(END VIDEOTAPE)

WIAN: Sony adds that it's investigating the series of incidents and promises to take appropriate action against whomever is found to be responsible -- Lou. DOBBS: I bet there's just quaking in Hollywood tonight -- Casey.

WIAN: Absolutely. Heads will roll, as they say.

DOBBS: OK. Casey Wian, reporting from Los Angeles.

Up next: "Ahead of the Curve." Stay with us.

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DOBBS: OPEC ministers meet in Vienna tomorrow, talking about third-quarter oil production. It is widely expected that they will not boost output. And the Federal Aviation Administration is scheduled to present a plan to reduce flight delays.

Also, Amazon.com will hold its annual analysts meeting in Seattle, Washington. And factory orders for April and revised first quarter productivity and costs reports will be out tomorrow.

Finally, a multimillionaire rock star selling used cars. Elton John putting 20 of his luxury automobiles on the block at Christie's in London tomorrow. The auction is expected to raise more than $1 million. He could use it. But Sir Elton denies it's the result of a cash crunch. He's facing millions of dollars in legal bills, the result of his failed lawsuit against his former business partner.

Among the collection of Bentley's, Aston Martins and Ferrari's, is one of Sir Elton's favorites, a 1973 Rolls-Royce Phantom Six. It's expected to fetch around $250,000. It's fitted with a $50,000, 36- speaker sound system that once, it is said, blew out the back window because is was so loud. A rock & roll indeed.

Well, that's MONEYLINE for this Monday evening. We thank you for joining. I'm Lou Dobbs. Good night from New York. "CROSSFIRE" is coming up next.

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