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Lou Dobbs Moneyline

Dow Falls 83.40 to 10,512.78; Nasdaq Declines 21.05 to 2,066.33; Unemployment for July Holds Steady

Aired August 03, 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: Good evening. In tonight's headlines, a modest retreat today on Wall Street. The Nasdaq ended lower for the first time since Monday on the lightest trading day of the year so far. The sell-off comes despite an encouraging report on the economy. Unemployment last month holding steady at 4.5 percent. And a dramatic conclusion to a bitter takeover fight in the banking business. Suntrust conceding defeat after Wachovia shareholders approved a $14 billion takeover from First Union.

Let's check in with our reporters for a look at what they will have for us tonight -- Christine.

CHRISTINE ROMANS, CNN CORRESPONDENT: : Lou, all but nine Dow stocks ending the session lower, closing out a less than stellar summer week on Wall Street.

GREG CLARKIN, CNN CORRESPONDENT: And the Nasdaq fell as well as chip stocks snapped a remarkable winning streak.

KITTY PILGRIM, CNN CORRESPONDENT: A multibillion dollar deal from one of the most acquisitive companies in corporate America: Tyco buying Sensormatic for more than $2 billion -- Lou.

DOBBS: Well, Kitty, I'll be talking with Energy Secretary Spencer Abraham about this week's victory in the House for the Bush energy plan.

We begin tonight with a show of resilience in the labor market. The government today reported that the unemployment rate last month held steady at 4.5 percent. Many economists expected the jobless rate to climb as high as 4.7 percent. Once again, they were wrong.

The report failed to ignite any enthusiasm in Wall Street. Stocks ended broadly lower. Some investors apparently concerned that the Federal Reserve may not continue cutting interest rates aggressively if there are signs of stabilization in the labor market. Christine Romans joins us now from the New York Exchange -- Christine.

ROMANS: Hi there, Lou. You're right, stocks sagged here on Wall Street today. Folks saying they were taking the chapter out of the trading manual called three steps forward, two steps back in terms of stock market trading. Take look at the Dow Jones Industrial Average, closing down about 38 points for the day. For the week closing slightly higher staying above 10,500 but traders saying don't read too much into it. was very light trading today.

Winners this week including computer makers, semiconductor stocks, tobacco issues.

The losers: Fiber Optic Networking companies, oil and gas drillers, and apparel retailers. Lou, in short people telling me they started this trading week hoping that they could get the second quarters earnings season behind them and they could start to focus on some of the data and hopefully signs of resilience, or at least stability in the U.S. economy.

They got a sign of stability in the economy today and that just was not enough. Folks telling me they're still very cautious overall. They say there's nothing they saw this week to prod any money off the sidelines at all.

DOBBS: Investors are so hard to please these days.

ROMANS: Especially in the summertime.

DOBBS: OK, Christine. Thanks. Christine Romans.

The Nasdaq closed down 21 points. Driving the index lower: chip stocks. Chip stocks have been soaring for the past week. Greg Clarkin at the Nasdaq marketsite -- Greg.

CLARKIN: Lou, in the last week and a half leading up to today's trading, the Philadelphia Semiconductor Index was up 20 percent. But today we saw Morgan Stanley downgrading Motorola. And that really served to give investors pause in that arena and they took out the chip stocks. And really when the chip stocks fell we saw tech kind of come to a stand-still as well.

Take a look at what the Nasdaq did. It was a real slow day of trading, actually the lightest full day in terms of volume on the Nasdaq this year. It lost 21 points or 1 percent. Where did things go from here? All eyes are going to turn to Cisco Systems, the company out with their earnings report Tuesday after the close of trading. Not so much the earnings per se is what is going to be examined. They are expected to post a profit of two cents a share, by the way.

But really, John Chambers, the CEO there, his comments about the business conditions, that's what folks want to look for. None of Cisco's peer group has offered any guidance. And at this point, Lou, analyst say any guidance would be good guidance from the networking companies.

DOBBS: Greg, thanks. Greg Clarkin,

A European Investment bank, warning it's clients that Wall Street could be rocked next week by economic numbers that could trigger a crash, the bank says, in the stock market. Dresdner Kleinwort Wasserstein is raising the alarm over the impeding release of revised productivity data which the bank said could come out sharply lower, calling into question the entire productivity miracle of the 1990s. Dresdner fears, apparently, that stock prices will sell off as a result. That revised productivity data is scheduled to be released next Tuesday.

July's employment report coming in better than estimates. Economists had it wrong again. Joining me now, Lakshman Achuthan, who is managing director of the Economic Cycle Research Institute. Lakshman, good to see you.

LAKSHMAN ACHUTHAN, ECONOMIC CYCLE RESEARCH INSTITUTE: Thank you for having me.

DOBBS: This is great news on unemployment, isn't it?

ACHUTHAN: Well, it's better than expected. That's about as far I can go, I'm sorry.

DOBBS: It's your interpretation we're looking for.

ACHUTHAN: The part that is of concern in this report, the payroll numbers are down again for the third month out of the last four. The unemployment rate held steady which is good. I think most people expect it to continue rising in the months ahead. What concerns us is the spreading pervasiveness of job loss within the report.

If you look at the jobs in private service sector activity they actually lost 26,000 jobs this month in July.

DOBBS: The joblessness rising -- rising within service moving well beyond manufacture arena.

ACHUTHAN: It started in manufacturing -- old news, we all know that. I.T. -- we see job losses there, we know that. Now it's infecting the broader economy, and that's the hallmark of a cyclical downturn.

DOBBS: OK, a cyclical downturn, I you know you believe this is a recession. And you have had some considerable evidence in support of that and also some contrary evidence that would refute it.

We're still on the cusp, it seems to me, of determining whether or not we're going to go to that marked of a slow down. We have a 4 1/2 percent unemployment rate. That's still great.

ACHUTHAN: It is still great. But many recession in the post-war period have started with 4 percent unemployment or better. In the 50s we had a recession start at 2 1/2 percent unemployment rate. This is not unheard of. We're looking at cycles and you see things a little bit differently when you take that longer perspective.

DOBBS: Right. And because you do take that longer perspective your analysis is very important to us. Tell us about the favorable positive elements you see here?

ACHUTHAN: Two. The one main favorable, positive element is inflation is dead. It is dead on arrival. The leading indicators of inflation at home here in the U.S. and abroad: in Germany, France, UK, Japan, all in cyclical downturns. So short-term interest rates everywhere should be coming down as they have been here in the U.S. and eventually that mitigates the downturn and sets us up for a cyclical recovery.

DOBBS: Is there any suggestion to you in today's data or otherwise,that we have bottomed, that we are stabilizing and that a period of growth is at hand?

ACHUTHAN: It is going to get a little bit worse before it gets better, however, some of the longer leading indicators of the economy would tentatively -- and I'd say very tentatively -- suggest...

DOBBS: You're a cautious man, Lakshman.

ACHUTHAN: No, I mean, I don't know. I really don't know, I have to watch the numbers. And they tentatively suggest that you could see a recovery begin at the beginning of next year. So we would have some more of these coincident indicators coming in as bad or worse in the interim.

DOBBS: OK, Lakshman, thanks very much. Appreciate it.

ACHUTHAN: OK.

DOBBS: A resolution today in a battle that shook the traditionally genteel banking business, or what used to be a genteel business. Wachovia shareholders approving a $14 billion take-over bid from First Union. Rival Suntrust conceded defeat today. It had offered to buy Wachovia for a little more, $15 billion. It's a disappointment for Suntrust leadership and maybe more than a few newspapers as well. Those banks had been putting out attack ads on one another for months.

First Union, Wachovia and Suntrust were little changed on the day. I'll talk with the CEO's of First Union and Wachovia later here on MONEYLINE.

A friendly deal today from a company that's spent tens of billions dollars on acquisitions in recent years: Tyco International. Tyco is buying Sensormatic, which makes security tags for retailers, paying $2.2 billion, a stock swap. It's a 60 percent premium over Sensormatic's closing price yesterday. Kitty Pilgrim has our report.

(BEGIN VIDEOTAPE)

PILGRIM (voice-over): You know those little security tags you find in clothing. Sensormatic is one of the companies that makes those among other things. It's a pretty good business, more than a billion dollars in sales. But compared to Tyco's $40 billion in sales and revenues next year, a relatively small acquisition, but a strategic one.

BARRY BANNISTER, LEGG MASON: They've stayed focused and They've bought companies that made sense for the businesses they were in. They've stayed within areas that are growing. They go for accretion, they go for unit growth and they like value-added.

PILGRIM: Tyco makes everything from electronics to health care to fire and security services, to underseas telecom equipment and a host of other products. Over the last several years the company has been on a $30 billion acquisition spree. Tyco has not always been flying this high. The company had rough patch back in October 1999 when short seller accused the company of cooking its books.

Regulators cleared the Tyco name, but the stock slumped badly, down 50 percent in the two months after the October allegations. It has made a substantial comeback since then, up 90 percent, closing Friday at $53.29, up 51 cents. And the past is history on Wall Street.

WALTER LIPTAK, MCDONALD INVESTMENTS: They are in great shape. Tyco is hitting on all cylinders in terms of their strategy and where they want to go going forward. This acquisition is another point where they can execute on a strategy that they've been working with for the last ten years. And that is adding value to manufacturing companies by doing acquisition.

(END VIDEOTAPE)

PILGRIM: Wall Street thinks Tyco is particularly well- positioned, while their electronics division is under some pressure because they're diversified into other areas such as medical devices, which are not cyclical, they can weather out the economy.

DOBBS: The old conglomerate model is back and winning, huh?

PILGRIM: It's really a winner this time, isn't it?

DOBBS: Absolutely; and winning today on Wall Street: Tyco shares up 51 cents. Sensormatic shares up more than $8 on the day and it was, as we should remember, a somewhat down day on the Street.

Earlier this week the House passed an energy bill that expanded drilling in the Arctic National Wildfire Refuge and lifted fuel efficiency standards. It was a victory for the president's energy plan, even though the bill faces a tough battle in the Senate.

For more now on the energy plan, the nation's energy policy, we are joined by the man who knows most about it: Energy Secretary Spencer Abraham.

Mr. Secretary, good to have you with us.

SPENCER ABRAHAM, U.S. SECRETARY OF ENERGY: Lou, thank you. Good to be here.

DOBBS: Congratulations on winning in the House -- the compromise the president worked out resulting in success. What happens in the Senate?

ABRAHAM: Well it's, first of all, been a great week for the president's plan. And I think in the Senate we're going to have great progress as well.

I've had a chance in the last couple of weeks to meet with Senate Democratic Leader, Majority Leader Tom Daschle. Jeff Bingaman, the Democrat who is the chairman of the Energy Committee. They want to move legislation. And there's a lot of common ground between our plan and what the Democrats in the Senate have offered. So I think in the fall we'll make progress.

DOBBS: In the plan passed by House, the ANWR drilling, the Senate -- the leadership has said no way.

ABRAHAM: Well, that's going to be a close vote. We've voted on that many times in the past, it's always tight. But it is now in conference because the House passed it. And so it becomes a key element in the final discussion about energy policy. The question is: Does America want to move forward with more domestic energy supply, or do we want to be dependent on foreign countries. If you want to be more dependent, vote against ANWR. If not, let's vote for more supply.

DOBBS: This country has been in a position of rising dependency over the course of the past 30 years, in point of fact. Without of a crisis, do you really think you can move the president's plan ahead?

ABRAHAM: We proved, I think, this week that we don't have to have an immediate crisis to recognize that we have a long-term challenge and crisis ahead. And I think the Senate will be responsible and act the way the House has to address the issues in the right direction, the way the president's outlined.

DOBBS: Part of the plan as well, nuclear power. A very tough sell. A plant hasn't been built in this country in 20-some odd years. Are you absolutely wedded to nuclear power?

ABRAHAM: Well, I think there's -- we are. And I think there's a growing recognition that we've come a long way in terms of safety in the last 20 years, especially around the world. And I think the question is, can we address the nuclear waste issue? We are going to do our best in this administration to do so, and I think that there's lot of interest in the investment community, in the existing companies who are out there right now operating facilities to expand or at least to extend the license of existing facilities potentially to build new ones if we can demonstrate that we can address the waste issue.

DOBBS: And in terms of gasoline prices and oil prices, your judgment on the future: Are we going to see these lower gasoline prices persist, or are we going to see a problem in terms of home heating oil this winter?

ABRAHAM: Well, this is a cyclical problem. And as you well know, when we come into the peak seasons, whether it's the beginning of the driving season in May or the winter -- in the later parts of the year we tend to see prices go up if there isn't sufficient refinery capacity.

One the issues in our plan that we address is to expand refinery capacity so we don't go through these shortages that have forced prices up. But it's a challenge, and we're doing our best to address it.

DOBBS: And so are the markets, apparently.

ABRAHAM: Yes, they are. They very much are. In fact, we predicted in May that we'd see gasoline prices come down as inventories were built up this summer, and sure enough they have.

DOBBS: OK, Mr. Secretary, good to have you with us.

ABRAHAM: Good to be with you, Lou. Thank you.

DOBBS: Well, there is perhaps no better case study of irrational exuberance from the late 1990s than the company Globe.com. Today the online media company said it would shut down and fire all but a few employees. Theglobe.com came to symbolize the Internet age, including its excesses. Young, telegenic founders -- they became multimillionaires overnight after a record-setting IPO. The largest IPO in history in 1998. But the business never matched the hype. And on its first day of trading, November 12, the stock soared as high as $48. Today it was trading at 13 cents.

Still ahead here on MONEYLINE: federal officials taking action over a sudden shift into reverse; we'll be telling you about that. Also, the tech bubble may have burst, but one tech company still has funds for an adventurous and valuable perk: money for a brand new Corvette. And, the anniversary of the little card that changed all our lives and revolutionized the concept of buy now, pay later. And the guest who says if we invest in Social Security in the markets, we won't have enough to pay for retirement.

ANNOUNCER: After the break, Lou speaks with the president of the National Center for Policy Analysis Dr. John Goodman.

(COMMERCIAL BREAK)

DOBBS: The financial district of New York City.

Louisiana tonight is bracing for Tropical Storm Barry, which is holding stationary now in the northern Gulf of Mexico. The National Hurricane Center has issued a storm watch and flood warnings all along the Louisiana coast. Hundreds of offshore workers were evacuated from oil and natural gas rigs in the gulf. That storm's center is forecast to hit the coast by Monday morning.

A different kind of natural disaster continues to threaten Italy, where the eruption of Sicily's Mount Etna forced the closure of a major airport. The lava has stopped flowing for at least now, but Mount Etna is still spewing fountains of fine gray ash a half-mile high. Officials are hoping to re-open that airport perhaps as early as Monday.

Federal safety officials are investigating consumer complaints that the Jeep Grand Cherokee can lurch into reverse on its own. Regulators have asked DaimlerChrysler for information about more than 1 million of those Grand Cherokees, which were built between 1995 and 1999. This, after more than 100 complaints that the Jeep can suddenly shift into reverse after idling in park, allegedly causing about 40 injuries and at least one death.

Word tonight that the International Monetary Fund is ready to speed up a $1.2 billion loan to Argentina, this as Argentina struggles to restore confidence in the face of a debt crisis. The IMF also announcing it's establishing a $15 billion line of emergency credit for Brazil, which has suffered for the instability in Argentina.

A pivotal issue facing this country is the future, of course, of Social Security. Debate has centered around a White House proposal to allow Americans to invest a portion of their Social Security in the markets to boost their returns upon retirement.

Last week MONEYLINE contributor Paul Krugman talked about the pitfalls of such a plan. John Goodman, the president of the National Center for Policy Analysis, makes the case for partial privatization, and joins us tonight.

John, good to have you here.

JOHN GOODMAN, PRESIDENT, NATIONAL CENTER FOR POLICY ANALYSIS: Glad to be with you.

DOBBS: The proposal to invest 2 percent of those moneys in the private markets, that sets off a -- just a cascade of fear among many. The lack of the security of the federal government behind it and people -- potential retirees squandering their money in the markets. What is your take?

GOODMAN: I think those fears are unwarranted. You know, under most proposals the government sets a limit on downside risk. And there were several proposals in Congress last year where the government would guarantee that no one would be worse off than under the current system. So every plan has some minimum guarantee that we will have a minimum pension.

DOBBS: A minimum pension, but that pension would be diminished if they lost money in the markets and would not -- as a matter of fact, if they lost money in the markets, they wouldn't have as much as if they had left it under the existing plan.

GOODMAN: No.

DOBBS: No?

GOODMAN: No, that's not right.

DOBBS: OK.

GOODMAN: There was a Gramm-Domenici plan last year, there was an Archer-Shaw plan. Under all these plans, there was a guarantee that you could not be worse off than under the current system.

DOBBS: And how do you -- how do you square that up with risking money in the private markets, if there's a guarantee that you can't lose money?

GOODMAN: Well, because over a period of a work life, over 35 or 45 years, markets pay a very good rate of return. And it relieves government of a lot of obligation. And so the government can't afford to say, look, in those years, when the market goes down, we'll make sure you don't lose anything. The government could afford that guarantee fee.

DOBBS: The government can afford that guarantee (UNINTELLIGIBLE) afforded so much. You've done a study, in point of fact, on 35-year periods of market performance and what an investor can reasonably expect. What is that return?

GOODMAN: Well, over the long term, the market pays about a 7 percent real rate of return. There is a fluctuation year to year and day to day.

DOBBS: Those darn markets.

GOODMAN: But over 35 years -- over 35 years...

DOBBS: I said those darn markets, John, because over a 35-year period, I mean, that's quite an opportunity for fluctuation.

GOODMAN: Yes, but it's much less over 35 years. We look at every 35-year period going back to the 19th century, and the variation was less than 7 percentage points between the worst period and the best period. So you could retire in the Depression or you could retire in a great year, less than 7 percentage points difference in the rate of return.

DOBBS: And so one would be looking at basically over time a 7 percent annualized return over that period of time. And for Social Security, the return would be?

GOODMAN: Less than 2 percent. If it keeps all its promises and it may not.

DOBBS: That's the other part of this issue. And I know you've examined this -- this issue in terms of privatizing, that 2 percent of Social Security. But isn't the real issue here, John, the fact that Social Security trust fund is not about real assets, but it's about really markers?

GOODMAN: That's the whole problem, that we have a pay-as-you-go system. We're not investing, we're not saving, and we're just riding IOUs to ourselves. And the only proper way to do this is to begin funding the these promises.

DOBBS: And so in some ways this privatization of Social Security obfuscates in many ways the real fundamental issue that has to be dealt with in Social Security, doesn't it?

GOODMAN: Oh, absolutely. We need to save and we need to invest. And you know, some people have proposed that the government do the investing. We think it's better for individuals to own the accounts. DOBBS: That seems to be more comforting, at least to me, John. I appreciate you being here, and it's going to be a fascinating issue to report on and to watch develop through the next several months, and I'm sure even longer. And I hope you'll be back with us to analyze this.

John Goodman, thank you.

In corporate news tonight, British Airlines and American making a second effort to strengthen their trans-Atlantic alliance, those carriers announcing plans to share flights and profits on nine international routes. The airlines, struck down by regulators nearly three years ago, seeking antitrust approval for the agreement.

And the deal is -- Dial is putting itself up for sale now. The consumer products maker saying there have been no suitors yet for the entire company. There is, of course, some interest for individual products and assets. Analysts say that Dial could bring as much as $2 billion.

A golden anniversary for another fixture of our financial system: The credit card has turned 50. What started as a novel idea has turned into an absolute necessity for millions. But there has also been a big downside to convenient credit in this country. Consumers have racked up $700 billion in credit card debt. That's up 180 percent over the past decade along. And the average interest rate for that debt, 15 percent.

Still ahead here on MONEYLINE, a merger is sealed to create the country's No. 4 bank. We'll hear from the heads of First Union and Wachovia. Also, the price of a key commodity collapses, but you may not notice a difference in your morning cup of coffee.

The novel approach to employee motivation, a company paying its employees for new Corvettes.

(COMMERCIAL BREAK)

DOBBS: In tonight's headlines, the Dow and Nasdaq both closing lower, but ending the week higher. Another month of job losses, though not as bad as many economists had predicted. July's unemployment rate, in fact, holding steady at 4 1/2 percent. And Sun Trust ends its bid for Wachovia, that as Wachovia shareholders approving an offer from First Union, valued at more than $14 billion.

Now, a quick look on what we're working on tonight. Christine Romans, she's at the New York Stock Exchange still.

Christine?

ROMANS: Lou, stocks finishing the day lower. I'll have a look at what's shaping up for next week.

DOBBS: Also, coffee prices plunging to new lows, but why aren't consumers seeing the benefits?

And how about a new Corvette as a job perk? That story is coming up next.

First, let's take a look at the markets: stocks finishing lower today, very light trading, in fact, the lowest trading of the year. The Nasdaq and Dow closing up for the week. The Dow, lower for much of the session. It had been off as much as 118 points. It pared those losses, obviously, to lose only almost 40 points, down 38. For the week, up, however, 1 percent.

The Nasdaq snapping its three-day winning streak, losing 21 points today. Still, managing to gain just about 2 percent on the week. Taking a look at widely-held Proctor & Gamble, one of the biggest losers to day on the big board. Market breadth, it was negative as well. Decliners beating advancers by a narrow margin. On the Nasdaq, decliners beating advancers by roughly a five-to-four margin.

Now taking a look at what traders and investors can expect next week on Wall Street, Christine Romans. Christine.

ROMANS: Hi, there, Lou. I'm hearing a lot of people talk about the internals of this market. They like the fact that today, on a day when the market ended lower, you really didn't have breadth all that negative, or as bad as it could have been. And so folks will be looking at the market internals next week.

Another plate of economic news as well. I mean, take a look at the lineup. It start early on Tuesday, when we get the second-quarter productivity numbers. A lot of folks talking about that, especially given the revisions that are likely to come along with it. On Wednesday, we get wholesale trade numbers and the Fed's Beige Book. That comes at 2:00 in the afternoon, and that's sort of an anecdotal look at the economic environment. On Thursday, jobless claims and chain store sales. Are those tax rebates finding their way into cash register? That's what folks want to know for the month of July and they might get a look at that, there.

And also, producer prices: the PPI report for July. This is a wholesale, of course, inflation report, and a lot of folks telling me they don't think it's going to have the importance that it had maybe six months or even a year ago because they don't feel like the Fed is really too concerned at this point, Lou, about inflation. So they're thinking maybe consumer numbers, they'll be closely watching. And there is a bond auction and a note auction next week. That could keep things a little bit sketchy over in the bond market. We'll watch for that.

And a couple of big names reporting earnings, both Tuesday: Cisco and Proctor & Gamble -- Lou.

DOBBS: Christine, you've referred again to those folks. Are these the same folks who are expecting the market to move based on the employment report, as you suggested last night?

ROMANS: You know, they really were, and they were awful surprised this morning.

(LAUGHTER)

ROMANS: And we'll be closely watching to see if maybe there might be some movement then, perhaps, on the PPI.

DOBBS: Perhaps even a delayed movement to the employment report.

ROMANS: Absolutely.

DOBBS: Christine, thank you.

Topping tonight's "MONEYLINE Movers": Noven Pharmaceuticals, plunging more than $14 a share. The maker of drug delivery products warning its full year results will be below -- sharply below -- Wall Street expectations because of a slowdown in product orders from abroad.

J.D. Edwards today, dropping nearly $2 a share. The management software maker warning that it will post a third quarter loss instead of a profit, citing the slowdown in spending for technology. Ethan Allen, losing more than $1 a share. That after reporting its fourth quarter profits fell by 1/3. The home furnishings retailer also warning that first quarter sales and earnings -- its fiscal first quarter sales and earnings -- will be lower than expected. Even with today's decline, shares of Ethan Allen have climbed more than 27 percent so far this year.

In tonight's "MONEYLINE Focus": coffee. Coffee prices collapsing worldwide on sluggish demand and rising supply. In London trading, coffee futures falling 5 percent to a 36-year low. In New York trading, coffee for September delivery dropping to the lowest level since 1992. More shipments from Asia, the principle reason, especially from Vietnam, which has eclipsed Colombia now as the No. 2 coffee grower after Brazil.

Those shipments are coming at a time when demand is low, because fewer people drink coffee during the summer. And that's created a glut in the market, though consumers, for the most part, may not be seeing any benefit. A spokesman for Starbucks says prices at the coffee retailer aren't coming down anytime soon, saying lots of other factors go into their pricing, such as labor and milk and other supplies.

Procter & Gamble says it's cut prices five times over the past 18 months on Folger's coffee, the last cut by 10 cents. $1.85 for a 13- ounce can of Folger's.

Coming up next here, a bitter banking battle in the Southeast is settled. I'll be talking with the two executives who brokered the deal, creating the fourth-largest bank in the country.

And later, a powerful job perk leaving employees with just one question: What color?

(COMMERCIAL BREAK)

DOBBS: First Union today winning its proxy battle for its chief rival in the South, Wachovia. Shareholders approving the $14.5 billion deal, That deal creates the largest bank in the South and the fourth-largest in the country. First Union's chairman and CEO, Ken Thompson, proclaimed today's outcome as a "tremendous victory" for shareholders.

Ken Thompson joins us now. Also joining us, Bud Baker, the chairman and CEO of Wachovia.

Gentlemen, congratulations on getting your deal done.

KEN THOMPSON, CHAIRMAN & CEO, FIRST UNION: Thank you, Lou.

BUD BAKER, CHAIRMAN & CEO, WACHOVIA: Thank you very much, Lou.

DOBBS: Let me start with you, if I may, Ken, because the job of running this combination will be yours. It is a huge company now. Are you going to be able to deliver the promised efficiencies that you've been talking about and some of the bankers have been talking about?

THOMPSON: Lou, we feel confident that we can. It's a conservatively structured deal. The cost efficiencies that you described are less than 8 percent of the total combined expense base of Wachovia and First Union, so we do think we can do that, yes.

DOBBS: And Bud, talk about conservative -- no premium in the deal. Why's do you it?

BAKER: We did it, Lou, because it's a great transaction. And if you can do it as a strategic merger, you can get it done in a reasonable amount of time and the shareholders actually come out better in the end.

DOBBS: Now, they may come out better but a number of the analysts here on Wall Street are kind of scratching their heads, because when they look at a deal they're used to seeing a premium. They're used to seeing a CEO taking on a new job. Where is this, the incentive here directly for Wachovia?

BAKER: I think you have to understand, Lou, that Wachovia was never for sale here. What we had a chance to was to do a strategic merger with a great partner. And out of that, in year '02 or '03 comes about 20 percent earnings accretion for our shareholders and tremendous opportunities for growth.

DOBBS: Ken, let me turn to you. In this deal, Sun Trust wanting to take a run at you, you had your deal with Bud working. And they came with a whopping 4 percent premium. Did that intimidate you at any point?

THOMPSON: Well, they actually came with a 17 percent premium on the day they announced it, but the market took all of the premium out of it. So we think the market very quickly was saying exactly what Bud said earlier, and that is, the combination of Wachovia and First Union is a tremendous thing. DOBBS: Now, this is a tough period in which you are combining these two banks to create, as I said, the fourth-largest bank in the country. There are, in nearly every banking institution in the country, credit quality issues, performance issues. Are you comfortable right now with the state of the bank, particularly in terms of credit quality?

THOMPSON: I am. Both Wachovia and First Union have been aggressively selling problem assets over the last year. We've been building reserves. We feel very confident, as we look at the environment going forward, that we're going to be in good shape from a credit quality standpoint.

DOBBS: Terrific. Well, gentlemen, congratulations on getting the deal done. And why did you choose, if I -- just at the end here, you're going to call the resulting bank, even though you're the acquirer, Ken. What are you going to call it?

THOMPSON: We're going to call it Wachovia.

DOBBS: Now, why is that?

THOMPSON: Well, we're -- Wachovia is the gold-plated name in the southeastern banking. It's got a wonderful reputation, corporately, across the country. And we think Wachovia will be a great brand for our company going forward.

DOBBS: Well, when you're the buyer, you can do what you want. That's going to be just one of the many nice things about the deal.

THOMPSON: This was a merger though, Lou.

DOBBS: OK, as you have instructed, Ken. And congratulations again, to both of you.

THOMPSON: Thank you.

BAKER: Thank you, Lou.

DOBBS: Still ahead here on MONEYLINE, our Friday roundtable: What investors need to know about the market over the weeks ahead. And a boss who says thank you by sharing with his employees a passion for an American icon.

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DOBBS: Coming up on MONEYLINE: a job perk packing a lot of punch. A generous boss spreading his passion for a legendary car. We'll be right back.

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DOBBS: For some perspective now on the week and the week ahead, Christine Romans, Greg Clarkin and Lakshman Achuthan and Jennifer Westhoven join me now. Jennifer, let's start with you. It was quite a week, with the Dow up 2 percent -- rather, the Nasdaq up 2 percent and the Dow up 1 percent. After it was all settled, not a bad week.

JENNIFER WESTHOVEN, CNN CORRESPONDENT: It wasn't a bad week. But it was kind of interesting in that last week, you know, you started on the downside, rolled to the upside; but this week there was (sic) a lot of conflicting signals. You know, one day you'd have the Dow up and the Nasdaq down; the next day it was the opposite.

And I'm hearing traders, like Christine was mentioning before, say they can't see what could possibly be coming around right now to get people excited about the market. You have these little piddly moves, but nothing really big.

DOBBS: And conversely, very little right now with the earnings season all but concluded to get them excited in the opposite direction.

Christine, your thoughts?

ROMANS: You know, it's a tough trading environment. And it's interesting, Lou, at the beginning of the century, like in 1900, you had August a great month, according to the Stock Trader's Almanac, because all these farmers put their harvest money into the stock market. Now 2 percent of the country farms and all of Europe goes on vacation, and August is the second-worst month of the year for the S&P and for the Dow.

So it's a tough trading environment. Look at how quiet it was here today: not even 39 million shares changing hands. A lot of folks saying they expect a lot of back and forth.

I've actually been asking portfolio managers: What do you do in a situation like this if you're expecting quiet trading and there's a lot of, you know, three steps forward, two steps back. They say they're taking a look at all of their names and they're doubling up on their -- really their best names, even if they're losing right now. And they're trying to figure out what they don't need in their portfolio, and they're doing it now while it's quiet. That's what they tell me.

DOBBS: Greg?

CLARKIN: And, Lou, I'll tell you, to pick up on that note, we're talking to traders who are really saying you're hitting a real dead period here. You have Cisco on Tuesday; that earnings report and the guidance, if any, is offered from the company may propel things for a day or two, or possibly having a sell-off for a day or two depending on what is said out of the company.

But, more than likely, that's really not going to have any kind of lasting impact. What they're looking at is the Cisco report Tuesday, the Fed meeting at the -- towards the end of August. And in between that, speaking with traders, there's a lot of kind of fear and nervousness about what August may bring. Again, the trading desks are lightly staffed. You could see the volume today really drying up. So a lot of folks are kind of looking towards that period for, you know, expect the unexpected.

As far as big moves go, well, they say you can expect this kind of range-bound Nasdaq or tech stocks to continue. We saw a lot of sideways moves this week, Lou. Basically kind of back to where it started, almost.

DOBBS: So much fear that many have, just simply left the city altogether and retreated for the month of August.

CLARKIN: You know, I spoke to one trader, Lou, who said that's exactly it. He said, basically, I'm going to come back after Labor Day, I'll pick it up here; and I have to believe that these tech stocks aren't going to be that much more expensive when I come back in a couple weeks.

Lakshman -- Christine, I thought you were taking the long view? Christine has just taken us back 100 years...

ACHUTHAN: I know.

DOBBS: ... and indulged in an analysis of an agrarian society at the turn of the 19th century into the 20th. What can you offer us in terms of the long view, here?

ACHUTHAN: In terms of the long view, well, I would agree with what Jennifer was saying earlier, that you have a lost of cross- currents.

I think that coincident indicators and probably going to still come in weak. The leading indicators don't have a lot of clear direction, although there's some tentative signs of a recovery. We really need to see a pervasive upturn in the leading indicators, and then I think things will start rolling.

DOBBS: Now everyone heard Lakshman talk about tentative signs of recovery right? This is the man who's been talking recession...

ACHUTHAN: Cycles turn; cycles turn.

DOBBS: I think this may be a headline.

ACHUTHAN: Well, look you have -- I think you have a growing recognition of the state of economy now. We're having recessionary type activity.

And that is the beginning of the recovery. I mean, you see companies taking steps to get profitable. You see interest rates coming down here and abroad. These are the things that recoveries are born of. And it will happen, I guarantee you. And hopefully it will become clearer that that will happen at the beginning of the year.

DOBBS: You know, I'm glad to see you emerge from the dark side.

ACHUTHAN: I'm not that dark of a guy, I'm not.

(LAUGHTER)

DOBBS: May the force be with this market and all of you. Thank you very much for taking time to join us on the roundtable; thanks.

Well, we all know some jobs come with more or better perks than others. But tonight, a story about the boss of a company that may have one of the most novel and generous perks of all: a new Corvette for every employee.

Tim O'Brien has the story from Dulles, Virginia.

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TIM O'BRIEN, CNN CORRESPONDENT (voice-over): The company, Technology Advancement Group, or TAG, is run by John McEwan, who's had a love affair with the Corvette ever since 1975 when he bought his first. To spread the enthusiasm, he's offering all 105 of his employees $500 a month toward the purchase or lease of a new Corvette along with a front row spot in the parking lot.

QUENTIN REYNOLDS, TECHNOLOGY ADVANCEMENT GROUP: And I am definitely psyched. I've never actually owned a two-seater, a brand new two-seater, so this is going to be an experience for me, sure.

O'BRIEN: McEwan insists he doesn't do it to attract new employees.

JOHN MCEWAN, CEO, TECHNOLOGY ADVANCEMENT GROUP: If I know that somebody's going to come work at TAG because of our car program, that's really not the type of person we want.

O'BRIEN: Or even to retain old employees, so why does he do it?

UNIDENTIFIED MALE: It's basically something to say to the people who are loyal TAG employees, the people who are actually doing the work day in and day out, thank you for being here, have a good time and this is just, enjoy it for what it is.

O'BRIEN (on camera): So that I can get a better handle on this story, OK, if I take one for a spin?

UNIDENTIFIED MALE: Yes, sir. You're always welcome to do that.

O'BRIEN (voice-over): Now, McEwan makes this offer to all his employees, regardless of their tenure or what they do. The employee still has to pay something, the lease on a new 'Vette is from around $600 to $900 a month. The only conditions: you have to drive the car to work, have TAG in your license plate, and keep it clean.

I could do that. Yeah, we ought to get Dobbs to pony up for one of these.

(on camera): Yeah, we're going to have to talk to Lou about this. MARCUS DESOUZA, V.P. TECHNOLOGY, ADVANCEMENT GROUP: No, you will not get a subsidy for BMW's, no sir.

O'BRIEN: But that's a nice car, the BMW's are nice, or a Jag?

DESOUZA: Well, we are an American company, and we do fly the flag quite a bit. Most of our business is with the Department of Defense, the government, and we do believe in supporting our country in that manner, yes sir!

O'BRIEN: So far, only a handful of employees have taken advantage. The cost to McEwan, who personally owns the company, around 30,000 a year. A small price to pay, he says, to help make employees feel good about themselves. Tim O'Brien, CNN Financial News, Dulles, Virginia.

(END VIDEOTAPE)

DOBBS: We'll be thinking of other ways in which to express our thanks and appreciation.

Up next, a look at your e-mail and "Ahead of the Curve."

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DOBBS: Several reports on the economy coming out next week: the Producer Price Index for July, the Fed's Beige Book, productivity, costs, same-store retail sales, and import-export prices all of those out next week.

Quarterly reports expected from Procter & Gamble, Cisco Systems, Aetna, Waste Management and Clorox. Also: Conseco, Clear Channel Communications, Web MD and Abercrombie & Fitch. And Merrill Lynch's chief market analyst Dick McCabe will be our guest here Monday evening.

And thank you as always for sending in your thoughts. We can't of course, answer all of your e-mail, but we do read every single message. And our coverage of Wall Street analysts lately prompting a big response.

Joe in Boulder, Colorado writes: "Wake up. Analysts are to Wall Street what bookies are to Las Vegas. You are supposed to lose money."

Well, Mame, who works for an investment bank in Paris, France, says: "All analysts agree that they disagree. So nobody is right or wrong, that is what makes the market enjoyable."

Lenny wants to see more lists of sells, not buys. He writes, "Come on, Lou, put these flaky analysts on the spot and ask the tough questions. No more dog and pony shows."

Jim in Halifax, Nova Scotia asks, "Have things really gotten that bad on Wall Street? I mean, you don't see people jumping out of windows, or could it be they just don't open anymore?" And the tax rebate another topic close to the hearts of our viewers. Jack in Brooklyn writing, that he is amazed by the whole deal. "You are discussing this rebate like it is really a lot of money to spend. Are you people kidding? We should take our rebate checks and chip in and investigate all of our crooked congressmen and their activities and let's start with..."

Well, Jack, we get the idea.

Please send us your comments. E-mail us anytime: moneyline@CNN.com.

That is MONEYLINE for this Friday evening and for this week. We thank you for joining us. I'm Lou Dobbs. Have a very pleasant weekend. Good night from New York. "CROSSFIRE" is next.

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