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Lou Dobbs Moneyline
America's New War: Bush Encourages People to Fly; Advertising Takes a Big Hit; Dow Makes Gains
Aired September 27, 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, HOST: Good evening, everyone. President Bush today asking Americans to fly again. The president calling for tough measures to stop hijackers. He's asking for National Guard troops to guard airports and armed guards in the planes.
Meanwhile, who's hauling hazardous material around this country? Eighteen drivers in two days have been arrested. They all had phony licenses. We'll have a disturbing report for you and we are still following the trail.
Tonight, we will take a look at the progress on freezing terrorist assets. For the third time this week, investors buying stocks. After last week's record losses there are plenty of bargains. Mario Gabelli joins us later in the program. We'll also be joined by former Secretary of State George Shultz.
First, here are the latest developments in America's New War: President Bush today giving two Air Force generals authority to shoot down unauthorized civilian aircraft if necessary. And Defense Secretary Donald Rumsfeld saying that the new rules of engagement would be used under only extraordinary circumstances. Secretary Rumsfeld also announced that members of the armed forces killed in the attacks of September 11 will receive Purple Hearts. Civilians will receive a new honor: that medal called the Defense of Freedom Medal.
Reverend Jesse Jackson considering an invitation by the Taliban to travel to Afghanistan to negotiate a peace deal. Despite the fact that the president of the United States said that there's no room for negotiation or even discussion. The White House said a trip by Jackson would not be helpful. The Justice Department releasing photographs and names of 19 men identified as the hijackers in the September 11 terrorist attacks.
FBI Director Robert Mueller admits there could be errors in the names because some of the hijackers used stolen identifications. Mueller also saying he hopes releasing these pictures will lead to further advances in the investigation.
President Bush urging Americans to return to the skies, vowing to tighten security. John King joins us now from the White House -- John.
JOHN KING, CNN CORRESPONDENT: Lou, the specifics of the president's proposal important. but so too, the psychology. Mr. Bush traveling to Chicago to make this announcement today surrounded by airline workers.
Mr. Bush urging the American people to put aside their fear and get on the planes whether it be for business travel or a vacation. To not do so, the president said, would be a victory for the terrorists.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: ... atmosphere of fear and one of the great goals of this nation's war is to restore public confidence in the airline industry, is to tell the traveling public, get on board.
(END VIDEO CLIP)
KING: Now the Bush proposal goes to Congress. It will take some time to implement, so priority number one, the president said in his plan, have the governors deploy National Guard troops at the airports in the short term. Mr. Bush said the federal government would pay for that. He also wants a $500 million cockpit security fund, that money to be used for things like fortified doors to keep hijackers, if they get on a plane, away from the pilots.
Also, federal management of airport security and screening. Just federal oversight, not a federal takeover. That will be a debating point when this debate shifts to the Congress. The president also promising to dramatically expand the federal air marshal program. Armed federal marshals on almost every U.S. commercial flight in the very near future.
Again, the president said the federal government will pay for that. And as they announced new rules on the ground, Lou, new rules in the air as well. Much more U.S. airspace being put off limits. Pilots warned, if they roam into it they will likely be intercepted by the military -- Lou.
DOBBS: John, in terms of asking for National Guard troops to guard the nation's airports, any sense from the administration as to when they expect that to take place?
KING: Almost immediately. The governor of Massachusetts is working to do so already. We know the governor of South Dakota has already done so. They expect this to happen within days if not already. Again that is a short term gesture until they can get more federal oversight, beef up security at those check points. They believe the uniformed presence will help calm passenger jitters.
DOBBS: All right. John King from the White House.
The noose is tightening on Osama bin Laden's financial assets. Treasury Secretary Paul O'CONNOR: said today a lot of progress has been made in finding and freezing terrorist's money around the world.
(BEGIN VIDEO CLIP)
PAUL O'NEILL, TREASURY SECRETARY: Serious money is being blocked now, and we've taken off the wraps. We're going to go after the financial flows that these people have had access to and we will shut down everything we can find.
(END VIDEO CLIP)
DOBBS: In addition, Monday, President Bush ordered the U.S. assets of 27 groups frozen, saying he wanted to cut off their "financial life blood." Federal agents today arresting eight Middle Eastern men who had falsely obtained trucking licenses that allowed the transport of hazardous materials in this country. Ten others were arrested last night. Kitty Pilgrim takes a look at the business of hazardous materials and just how easy it is to obtain a license -- Kitty.
KITTY PILGRIM, CNN CORRESPONDENT: That is right. There is currently a federal review of any companies which truck hazardous materials. They are looking into procedures.
Trucks that carry more than a thousand pounds of hazardous waste must have a placard on the outside stating what kind they are carrying. But this involves a variety of common substances.
(BEGIN VIDEO CLIP)
DONALD BROUGHTON, A.G. EDWARDS: The hazardous materials include everything from car batteries to swimming pool chemicals to charcoal lighting fluid, to even things such as household paints and soft drink concentrate flavoring.
(END VIDEO CLIP)
PILGRIM: To get a license to drive hazardous waste it's not that difficult; 80,000 companies truck some kind of hazardous waste, 1.2 million shipments a day. Drivers need a commercial driver's license, 9 million were issued in the last decade and they also need an additional hazardous materials endorsement, 2.5 million have that. Which comes down to doing an extra page on a written drivers test, and paying a fee of 50 to $100.
There is no background check other than for driving infractions. Now, many companies often put their own drivers through their own safety training and tests. And that is what is being looked into now, along with what kind of screening is being done. But Lou, trucking hazardous materials is an ordinary part of daily commerce in this country.
DOBBS: 1.2 million shipments.
PILGRIM: That is right.
DOBBS: And each of these 18 having phony licenses, obviously they are not obtaining them, is the administration, is the White House, is anyone looking at this to make certain that new approaches apply?
PILGRIM: Everyone from the American Truckers Association to the Department of Transportation are examining the procedures at this point and there are procedures in place but they are all being reexamined.
DOBBS: And each one of these new ways of dealing with it are adding safe guards, just as it does in the airline industry just adds further obstacles to that normal day-to-day life that you are talking about as well.
PILGRIM: Businesses are changing the way they operate.
DOBBS: Thank you very much. Kitty Pilgrim.
Former Secretary of State George Shultz joins, who is one of the most respected public servants to ever serve this nation joins us from San Francisco. Good to have you with us.
GEORGE SHULTZ, FORMER SECRETARY OF STATE: Thank you.
DOBBS: As Kitty Pilgrim just reported, we're looking at almost every aspect of our economy and our daily life, the president ordering new security measures. As your best judgment, the administration taking its time in terms of a military response, how are they doing? Do you think it's the appropriate course?
SHULTZ: What they're doing is understanding, well, the situation that has developed and they see that it is different from what we have confronted before and therefore we have to have a multifaceted approach to it. We have to use our diplomacy, we have to be ready to use force, we use our financial capabilities, we have to have a lot of emphasis on intelligence, and many other things so we'll form alliances with people, coalitions with people and there will be different coalitions for different purposes. And they are working at that very hard and impressively.
DOBBS: And as we see these coalitions being formed, as you say for various missions, in terms of a military mission, it now appears pretty clear that the administration has is determined that it will be the United States and Britain primarily, certainly, in any military engagement.
Do you think that will be sufficient to deal with what could be as many as half a dozen, perhaps more, countries that might involve military engagement?
SHULTZ: My guess is that what -- the kind of military action that's going to take place is surgical rather than massive. The key is intelligence to know where it is that what you're after is located, and then be able to act quickly to take that out. And quickness will be essential because targets come and then they evaporate. So you have to have a decision-making process that looks at evidence, decides, acts. And therefore you can't have a big debating society around something like that. DOBBS: Today it's really very unclear as to whether or not Reverend Jesse Jackson offered his services to the Taliban or the Taliban requested his services to negotiate. What do you think the appropriate response by the administration should be to the possibility of Jackson going to Afghanistan?
SHULTZ: It's a mistake for him to go to Afghanistan. And everybody, I think, recognizes that, except perhaps Jesse Jackson. He is an American, we have freedom. He can go if he wants to. But it's a mistake and he should be discouraged from going.
DOBBS: George Shultz, it is great to talk with you. Thanks for being with us. Good to see you.
SHULTZ: Thank you.
DOBBS: Coming up next we will take a look at the fallout from the September 11 terrorist attacks and the advertising industry. We will also examine that hard-pressed industry which stands to lose billions of dollars. We will also focus on the slumping economy which is putting more Americans out of work.
And we will look at the stock markets, where volatility has left many investors unsure of what to do next. Mario Gabelli, a legendary investor will join us next with his insights. Stay with us.
(COMMERCIAL BREAK)
DOBBS: The Dow Jones Industrial Average picking up 114 points today. That's a gain of about 400 so far this week. Christine Romans is at the New York Stock Exchange -- Christine.
CHRISTINE ROMANS, CNN CORRESPONDENT: Maybe it was end of the quarter guying by portfolio managers, maybe it was bargain-hunting. Whatever it was it sparked a nice rally on Wall Street after a somber morning. The Dow up 114 points on the day. Take a look at some of the Dow movers. We gad IBM shaving many of its losses and closing down just a bit. Philip Morris, Merck and ExxonMobil among the big Blue Chip names that gained ground.
Also look at AT&T closing higher. Reports out there again of a possible combination of Comcast and AT&T Broadband. The latest a news report of a confidentially agreement between the two expected to be signed as early as tomorrow. Meanwhile, CNNfn.com citing a sources close to the situation saying that AT&T is open to discussions about consolidation with other business. Speculation there continues to grow -- Lou.
DOBBS: Thank you. The Nasdaq having a not certainly as an impressive performance as the Dow Jones Industrials, but recovering from what was a 45-point slide. Greg Clarkin joins us now from the Nasdaq -- Greg.
GREG CLARKIN, CNN CORRESPONDENT: Lou, contributing to that comeback in the mid afternoon hours really was the roll if the semiconductor stocks. They have been sharply lower throughout the day, then there was a wire report out of RF Microdevices. This is a company that supplies chips for wireless phones saying that their quarter was on track.
That is a rarity for technology companies and that helped lift the semiconductor index and also gave a nice boast to the overall tech sector and hence the overall markets. Now take a look at some of the big names here. Microsoft, Oracle, Sun Microsystems, Dell Computer, all finishing lower but they were sharply off their session lows and that has certainly built a nice head of steam, for tomorrow's opening bell.
Now take a look at some of the losers again: Intel, the chips stocks remained weak, there's RF Microdevices, that stock was trading at about 13.80 or so and that wire story hit, it ends the day at 15.73. A big comeback. Sonus Networks, a networking company with a profit warning lost about 55 percent today. Cisco Systems was dragged lower as well.
So chips and networkers weak, Lou, but they did come back strongly in the afternoon.
DOBBS: Thanks, Greg. Gregg Clarkin. The Congressional Budget Office today cutting this year's projected budget surplus. That against the backdrop of rising unemployment, a slowing economy, jobless claims jumping last week to the highest level in nearly 10 years. Kathleen Hays joins us now to do a closer look at the numbers.
KATHLEEN HAYS, CNN CORRESPONDENT: And kind of weave it all together. Interesting how these things fit like a puzzle, Lou. Let's look at some of the vital signs of the economy. For starters, that rise in new claims in unemployment benefits up 58.000 to 450,000. Just another sign the labor market is deteriorating in a recession- bound economy.
Orders for big-ticket items, durable goods fell for the third month in a row, shows that manufacturers are still struggling to get back on their feet. New home sales barely rose in the month of August. They are at a high level, but maybe it one more sign the housing sector is cooling off a bit. A casualty: the federal budget surplus. It's shrinking. The Congressional Budget Office confirming what everyone thought: the fiscal year 2001 surplus now they say will be 121 billion, $32 billion less than they thought.
Here's why. If you have a weakening labor market, rising unemployment, you don't get as many income and payroll tax receipts. In a weak business climate, firms don't sell as much, so now they say corporate tax payments are going to be lower too. In the end you get falling tax receipts, less revenues, a shrinking surplus.
Now why should we worry about this? Well one thing, we are already seeing this shrinking surplus reflected in rising Treasury Bond yields. The 30-year bonds since the terrorist attacks has seen its yield rise sharply. Traders were counting on debt reducing with this rising big surplus. Smaller surplus, more debt, more pressure on the bond market.
That leads to the corporate bond market mortgages et cetera. DOBBS: We'll keep watching.
HAYS: We sure will.
DOBBS: Because more stimulus is sure to follow.
HAYS: I think so.
DOBBS: Thank you.
As Kathleen pointed out, the economic news continues to worsen. Both sides of the political aisle now have stimulus plans that they say will turn things around. Tim O'Brien takes a look at the offerings.
(BEGIN VIDEOTAPE)
TIM O'BRIEN, CNN CORRESPONDENT (voice-over): The administration's vision of an economic stimulus package includes tax incentives for business, such as lowering corporate income taxes, reducing or eliminating the alternative minimum tax for business, enhancing depreciation deductions and reviving the investment tax credit. How will the debate shape up?
THOMAS MANN, BROOKINGS INSTITUTION: The real question is, does the package make sense? Does it really provide some short-term stimulus without doing great damage to our long-term fiscal condition?
O'BRIEN: Consumer spending, which accounts for two-thirds of the country's economic growth, began to skid in late August and early September and, in the immediate aftermath of the attacks, began to plummet. Given the disastrous consequences that could have for the economy, it's not surprising the Bush Administration is also acting to restore confidence.
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Fly and enjoy America's great destination spots. Go down to Disneyworld in Florida. Take your families and enjoy life.
O'BRIEN: Democrats are pushing measures to make that easier by quickly putting cash in the pockets of most consumers. Measures such as expanding the president's tax rebate program to include those who didn't make enough money to benefit the first time around, cutting payroll taxes, extending unemployment compensation and raising the minimum wage.
Many of the proposals are controversial, but rarely has the atmosphere been so right for compromise.
CHARLES GABRIEL, PRUDENTIAL SECURITIES: We think we've moved from a paradigm that was very Wall Street, bond market friendly, "save Social Security first" was the four-word paradigm in Washington. The new paradigm is "we are all Americans."
(END VIDEOTAPE) O'BRIEN: In the interests of unity, a capital gains tax is off the table at least for now. Not only was it seen as too long term, it has also become a partisan issue. Democrats oppose it, believing it helps only the wealthy. One thing is clear, Lou, for any economic stimulus package to get through Congress, it will need bipartisan support.
DOBBS: And as you point out the climate has never been better. Thanks very much. Tim O'Brien
The question is whether the government's stimulus package is enough to drive the economy into recovery and encourage investors to buy stocks. Joining me now is fund manager Mario Gabelli. Mario, good to have you with us.
MARIO GABELLI, GABELLI FUNDS: Terrific to be here.
DOBBS: Tough market and tough environment. Your best council to investors here.
GABELLI: I think short-term is pretty ugly. It is going to stay ugly in terms of the economy. But as you look into 2002, lots of dynamics that are going to help earnings, help the economy and you are going to get a booster shot selectively for a lot of industries.
DOBBS: As Tim O'Brien just reported on the number of economic stimulus plans being offered plus what we already have in the works, that's sure to have some impact. We have also this incredible number of interest rate cuts.
GABELLI: It's to where I came in 35 years ago. How bad is bad? How long will it last? Will the company do well and survive? And how good is good? And then you buy these companies based on those metrics. Normalized earnings, Graham and Dodd 101, 1934, it's back.
The fundamentals are back, to basics, Lou.
DOBBS: And profits and returns: should we expect some considerable adjustment there?
GABELLI: I think corporations are throwing the kitchen sink in, they are learning how to cut cost, they are doing everything right to position themselves for a very sharp recovery in earnings in 2002. On a long term basis, profits will grow 6-7 percent. So investors should not expect the Halcyon days of the 90's but very good solid returns after we get through the next 90 days.
DOBBS: And what should an investor do here? Should you be buying?
GABELLI: You look at your portfolio, you look at yourself and you look at how to earn a better return than the 2 percent or 3 percent you get treasury bills and owning companies that are going to do well either dividend (UNINTELLIGIBLE) like a gas company that is going to be taken over like Southwest Gas or One Oak or so on, or companies that are going to benefit from productivity enhancers, companies that also have been beat up in the marketplace. Substantially that have good assets that are in wireless, and even a company like Cablevision.
DOBBS: Terrific, Mario Gabelli, as always good to see you.
GABELLI: Always a pleasure to be here.
DOBBS: Just ahead here in MONEYLINE we will take a look at the crumbling conditions of the advertising industry. That story is next. Stay with us.
(COMMERCIAL BREAK)
DOBBS: One of the hardest hit industries in the wake of the terrorist attacks: Advertising. The advertising industry already in recession before September 11. Now, the outlook has worsened considerably. Susan Lisovicz has the story.
(BEGIN VIDEOTAPE)
SUSAN LISOVICZ, CNN CORRESPONDENT (voice-over): First there was the disappearance of dot com spending. Then, there was the overall economic slowdown. And then there was the horror of September 11. TV networks covered the worst terrorist attack in U.S. history for days without commercial interruption.
And when they returned to normal programming, advertisers were loathe to sell their wares.
SCOTT DONATON, EDITOR, "ADVERTISINGAGE": Advertising is one of those things that in a good year it is seen as an investment, but in a bad year it's just seen as an expense. And if you cut the ad revenue, you cut your ad spending, you can use that to immediately help the bottom line.
LISOVICZ: And by all accounts advertising was already in a recession before September 11, with estimated spending declines of up to 7 percent, the worst year over year drop since the depression.
TOM WOLZIEN SANFORD C. BERNSTEIN: At Disney and Viacom they both indicated that earnings will be lower, but they haven't provided any real guidance about how much lower they think they are. And that just represents the uncertainty that's really facing the whole country.
LISOVICZ: On Madison Avenue, that translates into a near standstill. By one estimate, $1 billion lost between September 11, and the end of the year.
JACK MYERS, CEO, MYERS REPORT: New car launches are being delayed, movies are being delayed, the travel industry, certainly very difficult for them to do anything at this point. Even messages of good will or positive messages because they are uncertain of what possible news will be coming.
(END VIDEOTAPE) LISOVICZ: experts say the reluctance to advertise right now is significant to the overall health of the economy. Early fall is typically one of the flush seasons for advertising, with new TV schedules, new product launches, and the buildup to a holiday season that for Madison Avenue, could be very bleak indeed.
DOBBS: Advertising is the voice of business. So it's time to hear from them.
LISOVICZ: You are, but you are hearing a completely different tone but we'll tell you about that tomorrow.
DOBBS: You have a deal. Susan, thanks. Susan Lisovicz.
And that is MONEYLINE for this Thursday evening. Thanks for joining us. I'm LOU DOBBS. Goodnight from New York. "CROSSFIRE" is up next.
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