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Lou Dobbs Moneyline

America's New War: Dow Advances 56.11 to 8,659.97; Nasdaq Rises 2.24 to 1,501.64

Aired September 25, 2001 - 18:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LOU DOBBS, CNN ANCHOR: Good evening, everyone. Two weeks to the day after the terrorist attacks against United States, money is the primary public focus of the administration's response to those attacks. The money that the terrorists used to finance those attacks, where it came from and how we can cut off that money, the focus of our reports this evening.

We will be reporting to you on the money that consumers are now spending. With their confidence plunging in the wake of those terrorist attacks, will consumers hold back on their spending?

And the money the airlines are losing now. The industry, waiting for those checks to arrive from Washington. Meanwhile, the airlines are still facing painful choices just to stay in operation.

And the money that is flowing back into Wall Street. Modest gains on Wall Street today, but a welcome lack of volatility, and perhaps a hopeful sign after last week's record losses.

But first, here are the latest developments in America's new war. G-7 finance ministers agreeing to block assets of terrorists and their associates and organizations. Attorney General John Ashcroft says several individuals who may have terrorist links tried to obtain licenses to transport hazardous materials. Pakistan says the Taliban has only about 12- to 15,000 troops, not the 300,000 men claimed by the Taliban. And Saudi Arabia has severed ties with the Taliban, leaving Pakistan as the only nation with diplomatic relations with the Taliban.

President Bush meeting with Japan's prime minister to talk about cooperation in the global fight against terrorism. Afterwards, the president said the battle lines are now clearly defined.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: This is good versus evil. These are evildoers. They have no justification for their actions. There's no religious justification. There's no political justification. The only motivation is evil.

(END VIDEO CLIP)

DOBBS: Defense Secretary Donald Rumsfeld announced the new name for the allied mission. It is "Operation Enduring Freedom." And the defense secretary warned the campaign could take years.

Meanwhile, the number of people now missing in the World Trade Center attacks has been revised downward to 6,398, after city officials found duplicate names on the lists.

Law enforcement continues to closely track the money trail of Osama bin Laden. Tonight's report takes us to the fields of Afghanistan. Afghanistan, a country that until recently was the world's largest producer of opium and heroin. The drug traffic generates millions of dollars in cash, making it difficult to track. Allan Dodds Frank uncovers the links between drugs and terrorism.

(BEGIN VIDEOTAPE)

ALLAN DODDS FRANK, CNN CORRESPONDENT (voice-over): From the opium poppy fields of Afghanistan to Lebanon's Bekaa Valley and the narcotics areas of Colombia and Peru, drugs arm terrorists with guns and cash.

ASA HUTCHINSON, DRUG ENFORCEMENT ADMINISTRATION: In a number of regions around the globe, you can see that correlation between drug trafficking, because it is a ready source of money. It is something they don't mind engaging in.

FRANK: U.S. authorities, for instance, believe one of the Taliban's biggest sources of revenue comes from opium that is refined into heroin. The State Department says last year Afghanistan accounted for 72 percent of the world's opium production, more than 3,600 metric tons. After the Taliban took control in 1996, Afghanistan overtook Burma as the biggest producer of opium, and helped create a worldwide heroin glut that drove prices down.

The State Department says the Taliban, who control 96 percent of the production areas, get at least a 10 percent tax on drug production.

MATHEA FALCO, INTERNATIONAL NARCOTICS: The money from the Afghan heroin trails really go to purchase weapons and military equipment. It can also be used to finance terrorists who are operating in place in other countries, even the people whom we know about now in the United States.

FRANK: In July 2000, in an apparent bid to win diplomatic recognition, the Taliban announced a ban on opium poppy planting. The decree coincided with a severe drought that made planting impossible. With as much as 60 percent of last year's production estimated to be still in storage, the Taliban decree has driven up Afghan opium prices nearly tenfold.

(on camera): Authorities say the global narcotics business complicates the problem of tracking down terrorists, because money laundering and smuggling routes are so well-protected, often by corrupt overseas government officials.

Allan Dodds Frank, CNN Financial News, New York.

(END VIDEOTAPE)

DOBBS: Now, for more on the U.S. and coalition efforts to track down terrorist money, as well as military options against the Taliban, I'm joined by William Cohen, former defense secretary in the Clinton administration.

Bill, good to have you with us.

WILLIAM COHEN, FORMER DEFENSE SECRETARY: Great to be here.

DOBBS: The coalition building going apace, is it moving quickly enough, in your judgment?

COHEN: I think it is. There's a systematic effort under way on the part of the secretary of state and the entire administration to build this coalition, so that when action is finally taken -- and we're seeing action being at least conceptualized from the economic, the diplomatic and now also the military options, to try and basically squeeze the Taliban in a was that will make it easier to facilitate that military option when it comes.

DOBBS: The White House has to be keenly aware of the country's thirst for justice, if I may put it that way. How patient do you think the American people can be here, and how patient do you think the Bush administration will be?

COHEN: I think the American people, as long as they see progress being made each day: the G-7 coming out and saying they're now going to take action against the money supplies that have been going to the terrorists, individual actions being taken by countries -- Japan announcing that it is prepared to help out, Russia saying that it will cooperate by sharing intelligence. Each day that goes by, the mounting coalition members and their contributions will give the American people a sense that a great deal is going to be done, is being done. Patience coupled with resolve, that's what they want to see.

DOBBS: And apparently, troops being deployed. The Defense Department, the White House obviously being very careful in what it does release to the public through the news media. We're watching what appears to be an unparalleled amount of secrecy here, on the part of the government.

COHEN: Nothing is so intimidating to a group or a country that sees an Armada heading its way in total silence. I think it's a very good policy to say little, to send the forces there, to have them poised to act, and then, to act at a time and place of our choosing, with the forces and the size of those forces of our choosing.

DOBBS: And to act successfully and decisively.

COHEN: We have to act very decisively, resolutely, be very cold and calculating, in terms of the group that we're going after, making sure that we don't set out the harm innocent people. Innocent people may get harmed and die in this, but this is an effort aimed at the enemy, and the enemy are the people who are trying to kill us. DOBBS: And in terms of the activity that we're watching unfold, here. Pakistan, not severing ties yet. Saudi Arabia, severing those ties. Why isn't Pakistan, obviously supporting and cooperating with the United States, hasn't it severed ties with the Taliban?

COHEN: I'll name you two reasons. No. 1, President Musharraf, who deserves a good deal of praise for his courage in supporting the United States, may want to at least keep that option open of holding down the resistance within his own population.

And No. 2, saying that this may be the only outlet you'll have, in terms of communicating with the Taliban, if they decide to exercise any kind of cooperation with the United States. So it serves two purposes for him: keeping the boiling effort on the part of those dissidents and supporters of the Taliban, Osama bin Laden, at bay somewhat, and keeping a line of communication open, should it be necessary to talk to the Taliban.

DOBBS: This, perhaps, is not a fair question to ask you, but nonetheless, I shall. How soon would you expect to see action here?

COHEN: I really wouldn't want to put a time frame on it, then there would be a countdown. I think that it will come reasonably soon, but it's up to the president to decide, once all the forces are in place. It depends upon the quality of the intelligence, the support for the Northern Alliance, having them provide intelligence so that you have a quick, forceful strike at those forces that are trying to kill Americans wherever they can find them.

So I think we need patience. Let the president make a decision based upon the -- what we call actionable intelligence. Once you have the actionable intelligence, then you act, and I'm sure that's exactly what the administration is planning to do.

DOBBS: Bill, thank you very much. Bill Cohen.

Still ahead here on MONEYLINE, money flowing back into the stock market today. Investors shrugged off plunging consumer confidence. We'll be telling you about that.

And will they shrug off a prolonged war against terrorism? We'll have the report for you on that as well. We'll also take a look at technology companies, in trouble before the attacks two weeks ago. Now what is their condition?

The airline industry, fighting for its very survival. We'll have the latest on the moves they're making just to stay in business.

All of that and a lot more, next on MONEYLINE.

(COMMERCIAL BREAK)

DOBBS: Wall Street today receiving just what it needed, a quiet day, a modest gain of 56 points on the Dow.

Christine Romans from the New York Stock Exchange with the story -- Christine.

CHRISTINE ROMANS, CNN CORRESPONDENT: Lou, a wobbly session, but in the end it was a green arrow for the books. Take a look at the Dow Jones Industrial average on the day. Traveling on both sides is unchanged, but closing up 56 points, 8,659.

Take a look at the big board movers. Chipmaker Advance Micro Devices, down 9 percent on the session. It said it's going to cut 2,300 jobs and close two plants. Merck, also down on the day. The FDA warned the company for improper marketing of its blockbuster drug, Vioxx.

Meanwhile, Boeing helping the Dow stay in the green, up almost 5 percent. The company said it could benefit from more military spending. It should be able to maintain profitability. Wal-Mart, also up strongly on the day, more than a point. UBS Warburg raising Wal- Mart to a strong buy from a hold, saying the company has a strong and diversified sales mix.

Meanwhile, after hours, Micron Technology is down 99 cents. It came out and reported a much bigger than expected loss in its fourth- quarter sales, down 79 percent -- Lou?

DOBBS: Well, concerns about the economy keeping the Nasdaq's gains today to just two points, but they were very important points. Greg Clarkin has more from the Nasdaq marketsite, where the Nasdaq did finish above 1,500.

GREG CLARKIN, CNN CORRESPONDENT: Exactly, Lou, and the big debate on Wall Street now is was yesterday's big run-up really just a reflex or technical reaction to last week's sell-off, or have the markets turned a corner? As you can see by this chart, today's action did little to decide that issue. The Nasdaq was higher in the morning, lower in the afternoon. No follow-through in either direction.

Here are some of the movers on the day. The most actively-traded issue, Exodus Communications, 175 million shares traded, when that stock normally trades 32 million. This is a stock that was $62 one year ago today. It is now 17 cents a share. The "Wall Street Journal" reporting that the Web-hosting company is preparing a bankruptcy filing as early as this week, possibly -- the company calling that speculation.

Charter Communications, the cable company that lost its president and CEO yesterday, still remains weak today, down 59 cents. And then communications chip stocks were lower. Altera and Xilinx giving back some on the day. And, Lou, right now Wall Street is heading right into that profit, or that preannouncement of warning season, confessional season, as it's called. So that's another hurdle that folks are going to have to have get through in the next couple of weeks.

DOBBS: That diminished profit season, right?

(LAUGHTER) CLARKIN: Exactly.

DOBBS: Greg, thanks. Greg Clarkin.

Well, playing in the background, the subtext of the market today, consumer confidence fell sharply in September. In fact, the biggest one-month decline in more than a decade.

But even more troubling: consumers quickly losing faith in the economy before the devastating terrorist attacks on September 11th. Kathleen Hays is here and has the report for us -- Kathleen.

KATHLEEN HAYS, CNN CORRESPONDENT: It's quite a story, isn't it? Not a surprise, Lou, but certainly one that we were thinking we would see soon, and we saw it today.

(BEGIN VIDEOTAPE)

HAYS (voice-over): Even before the attacks that terrorized Wall Street, consumer confidence was under siege. Confidence suffered its biggest one-month drop since the Gulf War, according to the latest survey of 5,000 households by New York's Conference Board, conducted right before the attacks took place. A special follow-up survey showed that confidence continued to decline in the days following the tragedy.

The big question now: How long will it take to rebuild the consumer's post-attack psyche?

DELOS SMITH, THE CONFERENCE BOARD: When you're in trauma, all the old formulas just don't work. You have a healing process. This is psychological. It really doesn't have to do with recessions or economics, because you have stopped a whole society.

HAYS: A deteriorating job market is the No. 1 factor eroding confidence, economists say, along with a steady drop in the stock market that has erased trillions of dollars as well.

A seemingly unquenchable U.S. consumer was until recently the economy's No. 1 defense against recession. If shoppers lose their appetite, experts fear the economy will lose it's footing.

MIKE NIEMIRA, BANK OF TOKYO MITSUBISHI: Certainly, we've seen the big hit now on the willingness to spend. And it remain to be seen how it plays out on the ability to spend.

HAYS: Policy-makers are hoping tax cuts, government relief dollars and aggressive Fed rate cuts will reassure the consumer and revive the ailing economy.

WAYNE ANGELL, BEAR STEARNS: I think the people would worry if the Fed were asleep or the Fed nonresponsive. So I think it's a very encouraging thing to see the Federal Reserve continue to back on that course of the most rapid decline in interest rates that we've seen.

(END VIDEOTAPE) HAYS: With sales at department stores sagging, and plans to buy new autos at their lowest levels since 1998, according to the Conference Board, economists say the Fed is sure to cut its key short- term rate on October 2nd. And that is the hopeful element in this report.

DOBBS: Certain to cut those rates.

HAYS: Absolutely. That's what people are saying.

DOBBS: Well, we couldn't get it from a better authority, Kathleen. Thank you, Kathleen Hays.

Well, Congress wants to pump more money into the economy to get it moving again. Fed Chairman Greenspan wants them to go slow, however. The Fed chairman and former Treasury Secretary Robert Rubin in Washington today, warning that whatever the government does, the cost could be enormous.

Tim O'Brien has the report.

(BEGIN VIDEOTAPE)

TIM O'BRIEN, CNN CORRESPONDENT (voice-over): Former Treasury Secretary Robert Rubin and Fed Chairman Alan Greenspan are two of the most respected economists in the country.

Senators had two main questions: What to do about the economy, and when should they do it?

SEN. MAX BAUCUS (D-MT), FINANCE CHAIRMAN: The general response was, we don't know now. There was a feeling in the room that any stimulus should probably be short term.

O'BRIEN: Those attending the closed-door session say Greenspan adhered to his earlier pronouncements that doing too much, too soon, could hurt the economy more than help it. But he also told senators, if the data ends up showing the economy won't quickly recover on its own, it could take up to $100 billion to get it going again.

SEN. CHARLES GRASSLEY (R), IOWA: We heard much higher numbers today of the stimulus package from our two experts than I anticipated we would hear. In other words, if you're going to do something, it better be something significant enough to get the job done.

O'BRIEN: Grassley, the ranking Republican on the committee, says there was no consensus over whether an economic stimulus package will even be needed. Some sources say a cut in capital gains taxes, which Republicans love and Democrats hate, is all but off the table.

There appears to be broader support for a cut in payroll taxes, expanding the president's tax rebate plan, extending unemployment benefits and possibly increasing the minimum wage.

(END VIDEO CLIP) O'BRIEN: Current Treasury Secretary Paul O'Neill did not attend today's meeting, but he did met Friday with Senators Baucus and Grassley. And, Lou, he's set to testify before the Senate Finance Committee next week.

DOBBS: OK, Tim. Again, Treasury Secretary O'Brien not there -- the best reason? I'm sorry, Paul O'Neill.

O'BRIEN: We get confused from time to time. We are told that he had other meetings. But he's also been seen around the White House this week and last week. He has the president's ear, so you can't read into this any suggestion that he's not on the team. He's probably leading it.

DOBBS: Leading it and working on other less public matters.

O'BRIEN: Correct.

DOBBS: Tim O'Brien, thanks for straightening me out again on the Treasury Secretary Paul O'Neill. Thank you.

The airline industry is still waiting for those checks to arrive from Washington. Until then, many of those carriers are facing painful choices just to stay in operation.

Kitty Pilgrim is here now and has the story for us -- Kitty.

KITTY PILGRIM, CNN CORRESPONDENT: Lou, the hint of layoffs is still in the air. Delta, the only major carrier not to cut workers, is planning to announce job cuts tomorrow morning. American Airlines CEO Donald Carty announced he is giving up his pay for the rest of the year.

Meanwhile on Capitol Hill, House democratic leader Richard Gephardt said he wanted legislation to help airline workers who are laid off.

(BEGIN VIDEO CLIP)

REP. RICHARD GEPHARDT (D-MO), MINORITY LEADER: Senator Carnahan and I have introduced the bill to help these decent, hard-working Americans in these extraordinary times. The bill extends unemployment insurance to people who don't have insurance, and prolongs it for people who do have it.

(END VIDEO CLIP)

PILGRIM: Security measures are also being talked about. The U.S. Pilot's Union proposed to Congress that commercial pilots carry guns. Boeing CEO Phil Condit side-stepped around that question at a press conference, but says that the company is looking into many measures to design safer aircraft.

(BEGIN VIDEO CLIP)

PHIL CONDIT, CEO, BOEING: There is no business unless people feel secure -- period. Therefore, it is in our interest and their interest to find those things and make the changes.

(END VIDEO CLIP)

PILGRIM: Now, Boeing is among the companies laying off workers, up to 30,000 by the year 2002, in anticipation of slowing demand for new planes. And Boeing said, looking back at the Gulf War, the slump in new aircraft orders took longer to bounce back than airline travel.

But on the flip side, Boeing said it could see more gains in its defense business -- Lou.

DOBBS: In terms of airline safety and the proposal by the Airline Pilot's Association, I'm certain carrying weapons would make the pilots feel both more secure, and the passengers as well.

Larry Bossidy, the CEO of Honeywell, here last night, even came up with a -- Honeywell is working on a technology that would actually, at the control of the pilot, flip control of the aircraft over to the ground controllers from the aircraft.

PILGRIM: There are many things being proposed and, in fact, the simplest one, a deadbolt on the cockpit door is also being considered. So all levels of technology are in the discussions.

DOBBS: Terrific. Kitty, thank you very much. Kitty Pilgrim.

Coming up next, as America prepares for war, a look at the possible impact on the technology industry, and I'll be talking with one market strategist who says now may be -- maybe -- the time to buy.

(COMMERCIAL BREAK)

DOBBS: Well, with the nation now on a war footing, Steve Young takes a look at how that could well affect the technology industry.

(BEGIN VIDEOTAPE)

STEVE YOUNG, CNN CORRESPONDENT (voice-over): Dell Computer rushed to manufacturer and ship 20,000 PC's to New York City last week, to temporary locations for workers whose offices and gear were demolished by the terrorist devastation.

But the New York City recovery will hardly offset falling corporate and consumer demand. Tech spending budgets, already chopped because of the listless economy, are being further tightened on the wings of war. And rising spending by the military isn't expected to brighten the overall tech picture anytime soon.

MARC KLEE, JOHN HANCOCK TECHNOLOGY FUND: As recently as three or four years ago, military for many companies was 25 percent or more of their business. Today that's not the case. Today, commercial has become so much more important

YOUNG: Analysts say hardware makers were hurt first by the economic slowdown, and it's now spreading to software companies DAN NILES, LEHMAN BROTHERS: I don't expect to see demand for my companies really bottom until really Q1 of next year. I think that's when you'll hit the low point in revenues for my semiconductor manufacturers and PC manufacturers.

YOUNG: One high-profile high tech CEO counsels: Patience.

SCOTT MCNEALY, CEO, SUN MICROSYSTEMS: There's definitely going to be an uptick in the need for analysis and data mining and big servers and work stations in the Defense Department and in the intelligence agencies and law enforcement. And I think longer-term, there is going to be, unfortunately, a lot more equipment targeted at safety, security and law enforcement, and defense.

(END VIDEOTAPE)

YOUNG: Sun's Scott McNealy says the September 11th attack on America was catastrophic to the victims and their families, and will leave many tech companies reeling for months to reestablish their sales momentum -- Lou?

DOBBS: Steve, thank you very much. Steve Young.

Well, Ned Riley says we have gone from what Alan Greenspan once called "irrational exuberance," to what he calls "irrational despair." Calling himself an opportunistic bull, now telling investors to buy. Ned Riley joins us from Boston.

Ned, what makes you think this is such a good time, with all of this uncertainty, for investors to be buying?

NED RILEY, STATE STREET GLOBAL ADVISORS: Well, Lou, I do think the opportunity is here. The Federal Reserve is providing us the interest rate environment we need. Clearly, interest rates have come down on money market funds. I think investors are going to look for a longer-term asset investing. I think the liquidity is there, for the stock market. The only thing we need is the fundamental profit recovery, and I'm looking for the second quarter next year for that to be evolving. And so the -- if you add all the ingredients up: low interest rates, low inflation, excess liquidity and clearly, a turn of profits by the second quarter, I think people are underestimating this recovery, once it comes.

DOBBS: And what sector should they be looking at in this market?

RILEY: Well, it was interesting. You profiled technology and I liked that, Lou, because there's not only a replacement of the whole technology cycle. But I do think that if Congress looks at the right tax stimulation, an investment tax credit, accelerated depreciation, these are two things that I think would stimulate demand short term. Longer term, we think the secular trend is still there. Stock prices have come down. Everything looks reasonable to us right now in that technology sector.

DOBBS: And in the general market, what do you expect it to do between now and the end of the year? RILEY: Well, Lou, I look for an upward bias. I think the pessimism has been overdone. Clearly, September 11th has left scars in all of our memories, but the problem is that life will go on eventually. And the fact is, I do see the economy looking better next year, and I like the market right now because I think it's cheap.

DOBBS: OK. Ned Riley, thanks for being with us.

RILEY: My pleasure, Lou. Thank you.

DOBBS: That is MONEYLINE for this Tuesday evening, and we thank you for joining us. I'm Lou Dobbs. Good night from New York.

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