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Lou Dobbs Moneyline

America's New War: Dow Advances 166.14 to 8,847.56; Nasdaq Climbs 38.09 to 1,498.80

Aired September 28, 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. While quietly preparing for military action in America's new war, the Bush administration remains publicly focused on terrorist funding.

Tonight, we'll continue to track the money and tell you how it may lead right back to Osama bin Laden's family. We'll also tonight look at money pouring into corporate security, which has been soaring since the September 11th terrorist attacks.

Money is also moving back into the stock markets today and this week, as investors shake off at least some of their concerns. The advertising industry has been losing lots of money. Now, as it struggles to return to normal, we'll tell you how those advertising messages are changing.

Also tonight, Peter Bart, the editor-in-chief of "Variety," joins us, on the far-reaching effects of this new word, on Hollywood.

First, here are the latest developments in America's new war. Attorney General John Ashcroft says three letters found at different locations link three of the four hijackings. Ashcroft also says the documents show the men were working off the same set of instructions, and they offer a disturbing look into the mind-set of the terrorists.

CNN has learned investigators now believe the September 11th attacks were planned and funded in England, Germany and the United Arab Emirates. Investigators are also closing in on a small group with links to the Al Qaeda network headed by Osama bin Laden. And a senior U.S. official tells CNN that U.S. and British forces have been conducting operations inside the borders of Afghanistan over the past several days.

A Pakistani delegation failed to persuade the Taliban to hand over suspected terrorists and free eight international aid workers. The United Nations voted to lift sanctions against the Sudan. The United States abstained in that vote. Sudan recently apprehended extremists within the African nation and offered condolences to the United States after the September attacks.

King Abdullah of Jordan told President Bush today that most Arabs and Muslims stand with the United States in the fight against evil.

Many of the world's banks are successfully freezing Osama bin Laden's assets. But cutting off the real source of his funding may be considerably more difficult.

Alan Dodds Frank reports.

(BEGIN VIDEOTAPE)

ALAN DODDS FRANK, CNN CORRESPONDENT (voice-over): Mecca and Medina, the most important holy sites in Saudi Arabia. Pilgrimage sites expanded and remodeled by the Saudi bin Laden group, the largest construction company in Saudi Arabia. For nearly seven decades now, the bin Laden group has been the right hand of the Saudi royal family, building their palaces and nurturing royal family business interests in investment partnerships.

In this picture, the current chairman, Bakar (ph) bin Laden, is showing Saudi King Fahd improvements at a recontracted mosque.

PROF. ADIL NAJAM, BOSTON UNIVERSITY: The Saudi bin Laden's are to Saudi Arabia what the Rockefellers might be to the U.S., in that they are an extremely rich family. But more than rich, the name bin Laden would have spelled, certainly, to the early 1990s, influence and power and money and wealth and immense prestige in Saudi Arabia.

FRANK: The relationship started between the first king from the House of Saud, Abdul Aziz, and Mohammed bin Laden, the father of Osama bin Laden and more than 50 other children. Now an empire, the bin Laden group does business throughout the Middle East. At the airport in Kuala Lumpur, Malaysia, the bin Laden group is a major subcontractor, and it is building a luxury hotel in Jordan.

Besides construction, the bin Laden group also has interests in engineering, telecommunications and import-export businesses. Motorola, General Electric, Nortel and Tellabs all have ongoing sales deals or joint ventures with the bin Laden group. The current chairman, Baker bin Laden, took over in 1988.

NAJAM: Since then, the family holding remains a family holding, but a number of the siblings -- there are suppose to be somewhere between 54 and 57 of them -- also went out and set up their own companies, which are only loosely connected to the bin Laden corporate group.

FRANK: Osama bin Laden is believed to have inherited more than $60 million, part of which is a stake in the company. A stake the Saudi government claims is now extinguished.

(END VIDEOTAPE)

FRANK: Osama bin Laden worked several time with the company before his Saudi citizenship was revoked in 1996. The family tried to lure him back with offers of another job, trying to silence his criticism of the Saudi government and its allies. He rejected the offer -- Lou.

DOBBS: Alan, thank you very much. Alan Dodds Frank.

Well, security, of course, has become issue No. 1 for many businesses in this country. And for many security firms, the terrorist attacks have translated into more business.

Kitty Pilgrim joins us now and has the report for us.

KITTY PILGRIM, CNN CORRESPONDENT: Lou, security firms tell us business is absolutely booming since September 11th. Now, companies who never even thought of security are rethinking their entire operation. We talked to Kroll, one of the best-known names in corporate security.

(BEGIN VIDEO CLIP)

JEFF SCHLANGER, KROLL INC.: The toughest situation we're facing is the overwhelming demand for our services. There are literally hundreds and hundreds of companies that have called looking for our services, and our first priority is to serve our current clients and then we move on to new clients.

(END VIDEO CLIP)

PILGRIM: Now, the entire security business has now changed. First of all, physical security is more important. That is a more labor-intensive operation, requiring hiring security guards and putting checkpoints at security desks and doors. Wackenhut is the biggest U.S.-based provider of security guards in this country, 35,000 guards, and they say they could use 5,000 more but can't fill demand. It takes two to three weeks to train someone to fill a slot. They also say their background check business is absolutely off the charts. Employers are calling to check new hires.

Now, previously, such things as protecting proprietary information and databases were more a focus, but not now. Now businesses are worried about such simple things as the evacuation of buildings.

(BEGIN VIDEO CLIP)

WILLIAM DALY, CONTROL RISKS GROUP: There are clients looking for us to come in and reevaluate their decision-making strategy, how do they handle a crisis, who makes the decision, how they get people out of building. And how, then, they can continue to recover business afterwards.

(END VIDEO CLIP)

PILGRIM: Technology is not completely out of the picture. Technology has had to move very quickly. Also, bomb-scanning technology for airports, security cardings, background checks and software for databases.

Lou, the whole industry is working overtime.

DOBBS: And likely to do so for a while. Thank you very much. Kitty Pilgrim.

Major gains to tell you about on Wall Street today. But it was a dismal quarter, thanks to the weakened economy and the terrorist attacks. The Dow falling 16 percent over the past three months. The Nasdaq, in the same period, fell 31 percent. The S&P 500 losing 15 percent.

Christine Romans is at the New York Stock Exchange, where there was good news today -- Christine.

CHRISTINE ROMANS, CNN CORRESPONDENT: Let's start with the good news, Lou. With a triple-digit rally to end out the best week for the Dow since 1984. The bad news is the quarter was really lousy. Let's run down the numbers, take a look at the worst sectors. Airlines, energy, media, down sharply on the quarter. Within the Dow Jones Industrial average, Hewlett-Packard down more than 40 percent. Boeing and United Technologies also down sharply.

Where did investors make money? The best sector: gold and silver, defense, drugs -- isn't that as defensive as it gets? The winners within the Dow, SBC communications, AT&T, Procter & Gamble. Now, Reuters reporting, just to update you on something we talked about yesterday, Reuters reporting tonight that AT&T and Comcast have signed a confidentiality agreement, so we'll continue to watch AT&T and those developments into next week.

For the most part, technicians saying this looked like a classic bear market rally, although a lot of traders down here saying it felt like money was coming off the sidelines, Lou, and people were snapping up bargains.

DOBBS: OK, well, we have quite a few more weeks in this year in which to test their theory. Christine, thank you. Christine Romans.

The Nasdaq, adding 38 points today, but logging its second-worst quarter ever. Greg Clarkin is at the Nasdaq marketsite with the story -- Greg.

GREG CLARKIN, CNN CORRESPONDENT: And, Lou, I'll tell you, three winning sessions this week. We haven't been able to say that on the Nasdaq in quite some time. But it was indeed a lousy quarter. Take a look at the sector losers for the quarter. You can see some severe losses for the software companies, Internet stocks were battered, semiconductor issues are down sharply, as were networking stocks.

As far as those big caps, how they fared on the quarter. Sun Microsystems, down 47 percent. Oracle, off 33 percent, Cisco Systems down about an equal amount. And then the losses go on and on. Dell Computer was off sharply, down about 31 percent. Intel, a 30-percent loser, and Microsoft actually down 30 percent, about 17 of that percent drop on Microsoft came over the last 10 days or so.

So, Lou, again, the Nasdaq finishing on a strong note, but all in all, just a lousy quarter.

DOBBS: Up 37 points today, right, Greg?

CLARKIN: Exactly.

DOBBS: Let's finish on a positive note. Thanks, Greg Clarkin. Kathleen Hays is here now. She has a closer look at the day's economic reports and what we should be looking for, in the week ahead -- Kathleen.

KATHLEEN HAYS, CNN CORRESPONDENT: Yes, and in the aftermath of the attacks and talk of recession, these numbers are more closely scrutinized than ever, I think. Gross domestic product in the second quarter, the final number, final revision, Wall Street said that was good news because guess what -- it was at 0.3 percent instead of only 0.2. Why were they thankful? It wasn't negative. But you can see from this chart that GDP hasn't gone anywhere for a while.

Consumer sentiment from the University of Michigan -- a report that maybe erased some of the satisfaction in that GDP report -- it fell sharply to 81.8 in September to from 95.1 in August. And I think the operative point is, for the past few months, it has simply fallen off a cliff. And the survey from the University of Michigan suggested that in the second week after the attacks, it fell more.

Now, we also got a report from Chicago Purchasing Managers. They look at manufacturing in this auto-intensive region and found production doing a little better, new orders right before the attacks -- all the more reason the look at Monday, when we get auto sale and the national survey from the Purchasing Managers, which covers manufacturing across the entire country.

Here's a big day, I think. The Federal Reserve meets on Tuesday. Another rate cut widely expected. It will be the ninth of the year. The only question on most people's minds: How much do they cut?

On Thursday, weekly jobless claims. Remember, just yesterday we saw Idea a big, big jump. It will be interesting to see if that reverses or continues to move higher. We get the minutes from Fed's last meeting. We'll get inside their heads a little bit more.

And then on Friday, another interesting thing: the employment report. As you may recall, in August we saw a drop in payrolls and unemployment, a very large jump, Lou, and I think that's what will be the key thing to focus on. Does that level off, does it move higher, so...

DOBBS: Now I'm really excited about next week.

HAYS: Oh, good.

DOBBS: I can hardly wait for those reports.

(LAUGHTER)

DOBBS: May we see that chart of GDP again? Kathleen, I want to ask you about the -- I'm told it's coming right up, here -- that second quarter of 2002, where there's a sharp spike. We've heard a number of economists talking about the -- there it is. The second quarter of last year, that sharp spike. People talking about the negative implications of if we did see the GDP number go negative for the second quarter of this year, how that could be a recession, whether it did or it didn't.

If we look back to the second quarter of 2000, if you take that quarter out, we have been in a straight slide for some time.

HAYS: Yes, and if you do a trend line, wouldn't it be pointing down? And I guess that's, you know, people saying the third and fourth quarter may actually turn negative.

DOBBS: OK. All right. Kathleen, thanks a lot.

Still ahead here on MONEYLINE, we'll take a look at the changing face of advertising. We still have commercials, but after the terrorist attacks, the messages may be just a -- quite a bit different, actually. Investing after the attacks will also be different. Our next guest says it's risky business, but there are some sectors that could be worth taking a look at.

(COMMERCIAL BREAK)

DOBBS: The new judge in the Microsoft antitrust case isn't wasting time. Two words for the Justice Department and Microsoft, saying, Hurry up. Steve Young joins us now and has the story for us -- Steve.

STEVE YOUNG, CNN CORRESPONDENT: Lou, that's right. Judge Colleen Kollar-Kotelly has said in light of the terrorist attacks against America, she wants Microsoft and prosecutors to make a maximum effort to settle the landmark antitrust case. She ordered round-the- clock talks for next five weeks. The parties were told to start talks on their own, and later they'll be joined by a mediator if they get bogged down.

If there's no settlement by November 2nd, Kollar-Kotelly says she'll move on a much faster track that Microsoft wants. There would be a hearing in March, then she would impose possibly broad constraints on how the company will be allowed the operate.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: We're certainly very pleased with the schedule that's been proposed, and we're looking forward to moving forward with these discussions. And we hope they'll be successful.

EDWARD BLACK, COMPUTER INDUSTRY ASSOCIATION: Microsoft had attempted to try to get the judge to make an early ruling limiting the scope of remedies which might be before the court, and that was rejected.

(END VIDEO CLIP)

YOUNG: Eighteen states are suing Microsoft jointly with the Justice Department, and six more states in the last week said they are also concerned about what they view as Microsoft's continuing anti- competitive tactics.

To beef up its forces, Microsoft has added Chicago lawyer Dan Webb. He defended the tobacco industry against liability suits. Nobody from the Microsoft team would comment as they left court. One of Judge Kollar-Kotelly most repeated refrains: "This four-year old case has dragged on far too long" -- Lou.

DOBBS: And I imagine there's considerable agreement from both sides on that, and a lot of other orders, as well.

YOUNG: Absolutely, and the talks go on.

DOBBS: OK, Steve, thank you. Steve Young.

As we've reported, the markets having a very bad quarter. Jeffrey Applegate says investors should look at stocks they might not ordinarily consider now, such as financial and cyclical stocks.

Good to have you with us.

JEFFREY APPLEGATE, LEHMAN BROTHERS: Good to be here with you.

DOBBS: A disastrous quarter, by any measure.

APPLEGATE: Yes.

DOBBS: With all of the uncertainty that surrounds this market, economy and indeed, the world situation, what should investors be doing here?

APPLEGATE: I think you really need to focus in on where we are, as compared to the long-term. And as you said, the stock market has been having a horrible time. If you go back and look at the history, there are two times when the stock market has done worse than this: was the Depression and the start of World War II. And if you had sold at the bottom then, 1932, or 1942, that was not a good time the sell.

We're at comparable levels, relative to bonds. So we would argue this is not the time the sell. Certainly, the risk premium is higher, but it's time to hold onto your stocks.

DOBBS: Jeffrey, just using World War II and the Great Depression as your analogues, here, for the current situation, it is sobering in and of itself.

APPLEGATE: Absolutely.

DOBBS: How does one protect their money? How does one, if it is possible in this environment, gain appreciation?

APPLEGATE: Well, if you go back to September 10th, probably the decisions you made around your portfolio then were highly rational decisions, for the long term. And you should probably stick with those decisions, versus being panicked about how volatile the market has been on the short-term. But it's a measure of how extreme things are, that we can make market comparisons to those very extreme periods.

DOBBS: And what would you recommend an investor do, in terms of a particular sector? What looks the most interesting to you?

APPLEGATE: Well, part of the sector that should do exceeding well are financials. And if you look at not only is the Fed easing pretty aggressively, but so are a lot of other central banks. And you also have the prospect of falling inflation, going forward. That's generally a very good groove for financial stocks.

DOBBS: And your judgment as to what the market will do here, over the next six to 12 months?

APPLEGATE: We think the market can be about 20 percent higher about a year from now. And that assumes that the equity risk premium is going to stay fairly high, because unfortunately, we do live in a riskier world than we did 2 1/2 weeks ago.

DOBBS: Indeed. All right. Jeffrey Applegate, good to have you with us.

APPLEGATE: Good to be here.

DOBBS: Thank you.

Coming up next on MONEYLINE, we'll take a look at how advertisers have changed their messages in the wake of the September 11th terrorist attacks. We'll also take a look at changes in Hollywood. Peter Bart, the editor-in-chief of "Variety" joins me. Stay with us.

(COMMERCIAL BREAK)

DOBBS: Advertising agencies out with new campaigns following the September 11th terrorist attacks. The new theme: patriotic.

Susan Lisovicz reports.

(BEGIN VIDEOTAPE)

SUSAN LISOVICZ, CNN CORRESPONDENT (voice-over): Americans, grief-stricken and outraged at the events of September 11th, expressed themselves by buying and flying the flag. Kmart ran out within a few of days, which gave its New York ad agency an idea.

CARL JOHNSON, CEO, TBWA WORLDWIDE: We phoned them up to actually suggest to them, why don't we take a full-page ad in some of the national papers and put a flag in the hands of the American people? And that was a thing we could do which made us feel better, it was appropriate for Kmart to do, and was giving something to the American public.

(BEGIN VIDEO CLIP, COMMERCIAL)

UNIDENTIFIED MALE: I want to be like Buddy Lee.

(END VIDEO CLIP)

LISOVICZ: Giving is a major theme for many advertisers. Lee jeans uses its mascot, Buddy Lee, to encourage Americans to give blood. Anheuser Busch is collecting donations for the Red Cross. And General Motors says its giving something to consumers: zero financing as part of a new "keep America rolling" campaign to shore up the economy.

ALISON FAHEY, EDITOR, ADWEEK: There's a new sensitivity in advertising, where marketers are paying more attention to the question: How appropriate is my message, and how tasteful is the tone?

(BEGIN VIDEO CLIP, COMMERCIAL)

UNIDENTIFIED MALE: We pledge out allegiance to the flag...

(END VIDEO CLIP)

LISOVICZ: Southwest Airlines, like many big advertisers, adopted a patriotic tone and shelved its humorous ads for the rest of the year.

JOYCE ROGGE, SOUTHWEST AIRLINES: I would read e-mails that were coming directly to me from customers and from employees out on the front lines that I know. There was this overwhelming sense of patriotism and pride -- pride in our country and pride in our company. That really is where the ads came from.

(END VIDEOTAPE)

LISOVICZ: Patriotism, compassion, unity. These are the messages coming from Madison Avenue now. What tone they will take in the months to come as advertisers try to be sensitive, even as they pitch their products, is a day-to-day affair, hinging on developments from Afghanistan, Wall Street and the American people -- Lou.

DOBBS: OK, Susan, thanks a lot. Susan Lisovicz.

The advertising industry is certainly not the only one hit by the effects of the terrorist attacks. Hollywood is postponing, it is reediting, it is even canceling some movies. Production has been halted on a number of films, as networks across the board preempted programming for breaking news. Our regular contributor, Peter Bart, the editor-in-chief of "Variety" magazine joins us now from Los Angeles to talk about the economics and a bit of the sociology of Hollywood.

Peter, good to have you with us.

PETER BART, EDITOR IN CHIEF, "VARIETY": Hi, Lou.

DOBBS: The effect on producers, studios, to this point, what would you gauge it to be?

BART: Well, everyone is frustrated because film production is stalled. TV is in a bit of chaos, and no one can quite figure out how to get a grip on it. There's a real ambiguity about what pictures to make, when the make them and how the pay for them. DOBBS: Well, we know that a couple of pictures, at least, their openings have been delayed and at least one shelved because they were not considered -- their content not considered suitable, given the environment in which we all now live. What will be the effect on Hollywood?

BART: Well, first place, it's not only content, but also, because of the apocalyptic events, there was a real problem building up an ad campaign to support these pictures. As you know, a big blockbuster usually goes out there with a fuselage of about $50 million in advertising. If you can't build up that campaign, there's no sense going out with a picture, irrespective of what it's about.

DOBBS: After a pretty good summer, Peter, at the box office, September was starting out pretty weak to begin with an then, of course, after the terrorist attacks, the box office has just fallen dramatically over the last several weeks, the last two weekends in particular. What should be our expectation?

BART: Well, the companies are hurting, but I think there are a lot of very strong films coming out late in the year, November and December --almost a glut of films. You know, paradoxically, a year from now, there's going to be a significant shortage of films, because production has simply stopped. There are going to be some megaplexes around the country that are going to be begging for product.

DOBBS: Will the content, the themes, if you will, of these screenplays change dramatically? Will they be more patriotic? Will they be somewhat more innocent, do you think, as a result of these events?

BART: Well, that's a good question. You know, I think if you take the idealistic point of view, you can say that certainly the filmmakers and the studio executives and so forth have been very affected by all this, and want to make pictures that are socially responsible.

But you know, the market dictates all matters when it comes to pop culture, and if a picture that is an action picture and is a violent picture goes out there in the next six months and does tremendous business, this is going to influence what everyone makes and how they make it.

DOBBS: So I shouldn't look forward to the return immediately of "Hopalong Cassidy" and "Charlie Chan"? Is that what you're saying, Peter?

BART: I don't think so. I mean, my guess is that the nature of film product and TV isn't going to change that much, but that you're going to see much more of an effort to make pictures that deal with real people and real lives. And I think there's going to be a backing away from the arch terrorist pictures that have really been too prevalent over the last year.

DOBBS: Well, that's not altogether bad news. Peter, thank you very much. Peter Bart, have a good weekend. And for tonight, that is MONEYLINE. We thank you for being with us. I'm Lou Dobbs. Have a very pleasant weekend. Good night from New York. "CROSSFIRE" coming up next.

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