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Lou Dobbs Moneyline
Target Terrorism: Dow Up 58.89 to 9,119.77; Nasdaq Gains 7.999, Finishes at 1,605.30
Aired October 05, 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. President Bush today tackling the two biggest challenges facing his administration and this country: The economy and the war against terrorism. President Bush calling on Congress today to cut taxes in order to stimulate the economy, and not simply to spend more federal money. That call lifted spirits and stock prices on Wall Street, and the president today sending 1,000 soldiers to Uzbekistan.
We'll be talking with former NATO supreme allied commander, retired General Wesley Clark, on the president's options in this America's New War. We'll also be talking with one of the world's foremost energy experts, Daniel Yergin. He'll be talking about what effect a U.S. military actions might have on production and supply lines and what all of it could mean for energy prices in this country.
But first, here are the latest developments in America's new war. A senior intelligence official telling the Senate Intelligence Committee that there is a 100 percent chance of another terrorist attack against the United States if U.S. forces take military action in Afghanistan.
Defense Secretary Donald Rumsfeld today in Turkey, a last-minute addition to his trip that included stops in Egypt, Oman and Saudi Arabia. Earlier, he was in Uzbekistan. The Uzbek president saying he will allow the use of air bases for humanitarian purposes.
And the White House firing back at Israel today, after Prime Minister Ariel Sharon warned the Bush administration not to appease Arabs at Israel's expense.
(BEGIN VIDEO CLIP)
ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: The president believes that these remarks are unacceptable. Israel can have no better or stronger friend than the United States and better friend than President Bush. President Bush is an especially close ally of Israel. The United States has been and will continue to work hard to secure peace in the Middle East.
(END VIDEO CLIP)
DOBBS: Prime Minister Sharon compared current events to Western acquiescence in 1938 to Nazi Germany's invasion of Czechoslovakia. The U.S. Capitol building is receiving an $86 million security overhaul. Every window in the Capitol building and surrounding offices being fitted with blast-resistant protection. Other precautions include improving communications systems and securing air ducts in the buildings.
President Bush today calling on Congress to cut taxes. The president saying that would be the best way to stimulate the economy. Tim O'Brien with a report from Washington.
(BEGIN VIDEOTAPE)
TIM O'BRIEN, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): President Bush had been getting high marks from Democrats for his support of government spending to get the economy rolling. Today, he dropped the other shoe.
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I propose that the United States Congress as quickly as possible pass tax relief equal to or a little bit greater than the monies that we have already appropriated.
O'BRIEN: Congress has already appropriated some $60 billion in emergency relief and aid to the airlines. The matching tax relief the president wants includes accelerating the tax cuts Congress passed last June, but which weren't scheduled to take effect until 2004, and tax relief for low and moderate-income workers. The president was not specific, but that could mean a payroll tax cut or a new round of tax rebates favored by many Democrats.
To stimulate business investment, Mr. Bush wants new tax breaks for capital expenditures and eliminating the alternative minimum tax for business, which could be particularly controversial with Democrats.
GREG VALLIERE, SCHWAB WASHINGTON RESEARCH: Even though Congress is in a bipartisanship mood on the surface, you have to conclude that just beneath the surface there are deep, deep divisions between both parties, and I think those divisions prompted the president to come out in favor of a more Republican version today.
O'BRIEN: And Mr. Bush's announced preference for tax cuts may have brought those divisions closer to the surface. One top Democrat, Ted Kennedy, in a statement says: "We need an economic recovery program that provides more help for workers and not tax breaks for corporations and wealthy Americans."
Reaction was generally muted today, in large measure because many lawmakers have left town for the Columbus Day weekend.
(END VIDEOTAPE)
O'BRIEN: But the stage is now set; and the spirit of bipartisanship, so pronounced since September 11, will now be tested, if an economic stimulus package is to be completed by early November, as both Democrats and Republicans say they want -- Lou. DOBBS: Tim, thank you very much. Tim O'Brien from Washington.
And more bad news to report to you on the state of the economy. Nearly 200,000 jobs were lost in September. That number pointing to a labor market already struggling before the terrorist attacks against the United States. Kathleen Hays is here and she has the story for us -- Kathleen.
KATHLEEN HAYS, CNN FINANCIAL NEWS CORRESPONDENT: Thanks, Lou. In fact, it's very significant that the Labor Department pointed out that its survey of businesses and people at home was not affected by the terrorist attack, underscoring that whatever weakness we saw showed just how weak the economy was going into all the events of September 11.
Non-farm payrolls fell 199,000, twice the August decline. Unemployment rate held steady, at 4.9 percent.
However, the Labor Department also reported that 860,000 workers were forced to take part-time work. Experts say that's another sign of a deteriorating economy.
(BEGIN VIDEO CLIP)
JOHN CHALLENGER, CHALLENGER, GRAY & CHRISTMAS: I thought it was extraordinary, the 800,000 plus loss in terms of people who decided to take a lesser job. That's almost like losing a job in some cases. Many of the hotel retail workers who were working six days a week to make ends meet right now are getting two or three days worth of work, and that's almost like being unemployed.
(END VIDEO CLIP)
HAYS: And of course, those people with part-time work were lucky compared to those getting laid off. Many experts say now the unemployment rate could easily get to 6 percent or higher in the next few months.
Job losses spreading across key sectors. Construction lost 4,000 workers. Manufacturing lost 93,000 -- that's the 14th consecutive month of job loss. The services sector, which almost always grows, except when we're in a recession, lost more than 100,000 jobs. Many economists concluding that it may no longer be a question if we are in a recession, but that we are, and the only question now is how quickly we come out.
But of course, the stimulus package is the big hope people have for by this time next year we'll be out of recession.
DOBBS: That and more than a few interest rate cuts by the Fed.
HAYS: I guess so.
DOBBS: Kathleen, thanks. Kathleen Hays.
Well, in the latest month reported, Americans went on a spending binge, $1 billion in the most recent month reported. Kitty Pilgrim now takes a look at how that spending may be affected in the context of a new economic reality.
(BEGIN VIDEOTAPE)
KITTY PILGRIM, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): A new car, or a trip to Hawaii, both in the budget and paid by credit card. A late summer spending binge pushed up consumer credit by $2.3 billion in August.
RONALD HILL, BROWN BROTHERS HARRIMAN: Consumer credit tells you that actually consumers still have enough courage to go back out and buy, because you don't take on new debts if you are afraid that you are not going to be able to pay them off.
PILGRIM: But economists think that was the last of the good times. Consumption patterns appear to have changed radically after the September 11 attack. With the Fed cutting rates, it may not seem like a problem to buy on credit, but not all interest rates react the same to the Fed lowering rates. A lot of consumer debt has been the addition of mortgage debt, as consumers refinanced their homes.
Mortgage rates have come down to the lowest levels in three years, dropping sharply after September 11, as the outlook for the economy became uncertain. A 30-year fixed rate averages 6.58 percent, while it was above 7 percent in the beginning of the year. Credit card rates have not followed suit, however, only notching down from 15.5 percent to 14.5 percent on average.
Some economists raise an alarm about not only the amount but the quality of the outstanding credit card debt.
MAUREEN ALLYN, ZURICH SCUDDEN INVESTMENT: The people who have taken out most of this debt tend to be on the lower -- lower income people, who didn't used to have access to this.
(END VIDEOTAPE)
PILGRIM: Now in the next few months, economists predict that Americans may lock up their credit cards in the desk drawer. With the slowdown in the economy and the signs of layoffs, they may just curb their spending binge -- Lou.
DOBBS: Kitty, thank you very much.
We've been reporting to you on the government's efforts to build an international coalition against terrorism. Joining us now to discuss this is retired General Wesley Clark. General Clark, supreme allied commander of NATO forces, beginning in 1997, leading military negotiations in the Bosnian peace accords and directing, of course, the campaign in Kosovo. General, good to have you with us.
GEN. WESLEY CLARK (RET.), FORMER NATO ALLIED SUPREME COMMANDER: Nice to be here, Lou.
DOBBS: The news today that on the way to Uzbekistan about 1,000 members of the 10th Mountain Division, four carriers in the region now. Is it your judgment that President Bush now has the assets in the region with which to conduct a military campaign at his choice?
CLARK: Well, he does have good military assets in the region, and we've had enough assets for some time to be able to conduct air strikes, depending on whether we had suitable targets and what the overall political conditions were.
But I think we should look at this as a three-legged stool. You have to have the assets in the region, you have to have the diplomatic support and set overarching political, strategic conditions, and then you have to have the actionable intelligence. And I think all three legs are coming together now.
DOBBS: Going to the second, you have some considerable experience in working with coalitions, if you will. Is it your sense of things here that a coalition is intact that would -- let's put it in the least offensive terms, I guess -- would not be a problem for military action to proceed?
CLARK: Well, I think that there is a coalition, but it's a very flexible coalition, in which some nations are doing certain things, but won't do other things. And some of the things they do can't be acknowledged publicly.
And so, it will always look shaky and creaky, and it will always be a trade-off in the minds of the president and the secretary of state and secretary of defense. When it's time to take military action, what the political impact would be -- and there would always be some adverse repercussions, especially in the initial stages. And so, they will have to weigh carefully the benefits and risks of moving ahead.
DOBBS: Air power, obviously, concentrated in the region now, by all reports. Is it your judgment that the air power here can be determinate of the outcome in the moves against Osama bin Laden and the al Qaeda and of course the Taliban?
CLARK: Probably not in the near term. The Taliban forces are considerably stronger than the Northern Alliance forces that we know about, at least publicly. Additional assistance is flowing into the Northern Alliance, it will take some time for that assistance to make an impact. In the meantime, the air power if it were used could be significant against the Taliban.
But whether it's going to be decisive or not is what our military planners and our commander-in-chief have to weigh. And so, I'm sure they are going to be looking at that and anxiously looking at the targets that are available, the vulnerabilities of the Taliban, the strengths of the Northern Alliance and what the timeline is for the improvements in the Northern Alliance as they weigh their minds up on when to strike.
Now, if there's actionable intelligence to go against the network directly, Osama bin Laden and his team, then I would think we would be prepared to strike very quickly on that. DOBBS: Actionable intelligence, obviously problematic, critical to any commander obviously in every case. A lot has been made of failures of intelligence here, and now building confidence about intelligence in the region. Is it your assessment that we do have adequate intelligence to carry out military -- effective, successful military action?
CLARK: Well, we will never be satisfied with our intelligence. It is just in the nature of the business that you never have enough and it's never timely enough, and you never get the feedback on your actions sharply enough. But we do have a very good visibility, I would suspect, over Afghanistan. I'm sure we know where the Taliban's assets are. How much we know about the network, of course, that's the key question. And if I knew the answer, I couldn't reveal it anyway.
But I think that that will be the focus of a lot of attention by a lot of countries, and I think that Osama bin Laden and his friends can't sleep easy at night. There is a lot of pressure on, and when there's that kind of pressure information will start to flow.
DOBBS: You tangentially touched on it, let me get directly to it. Americans suffering the deaths of fellow citizens are obviously eager for retaliation. What would you counsel in terms of when that action might begin and those who would like to see retaliation as soon as possible?
CLARK: Well, I think we have to be very patient about this. As you look at the strategy for this war, obviously we are focused on Afghanistan. That's the home of the head of the network. But what's unfolding is a little bit different strategy than what's obviously visible. Actually, this is a battle that's being fought from the outside in and the bottom up, and slower is better.
The real place where the battle is taking place right now is in the United States. And we can be proud of the work, I think, that our FBI and our local intelligence and police activities are performing for us. They've definitely got people on the move, and this is a battle where, with all the disadvantages of Afghanistan, they're all reversed here. We know the terrain. We know the people, they're our people, we can communicate with them, and we have the big advantage here.
We're going to work from the outside in. The bottom up, taking apart the terrorist organizations, getting information, and it leads to the interconnections. And finally, let's give it time. The more patient we are, the stronger the coalition can be, the more likely we'll get accurate intelligence to make our strikes more precise.
So, unless there's some key reason why we have to strike quickly, we should be very deliberate and patient here.
DOBBS: General Clark, good to have you with us. Thank you.
CLARK: Thanks, Lou.
DOBBS: Still ahead here on MONEYLINE: Will military action disrupt oil flow in the Middle East? Does the United States have a strategy should it occur? We'll be talking with one of the world's foremost experts, Daniel Yergin.
We'll also hear from the man who runs Alamo Rental Cars in Nashville. You won't believe what CEO Mike Egan is dealing with, and seeking from Congress. All of that straight ahead here on MONEYLINE. Stay with us.
(COMMERCIAL BREAK)
DOBBS: Well, any doubt that the economy is in recession was wiped out by today's labor market news, according to Bruce Steinberg. He's the chief economist of the nation's largest brokerage, Merrill Lynch. He's also, well, one of the best economists. Good to have you with us.
The -- absolutely you think now there's no question whatsoever, recession?
BRUCE STEINBERG, CHIEF ECONOMIST, MERRILL LYNCH: There's no question. We had very substantial job loss in September, that was even before the effects of September 11 were felt. Since then, unemployment claims have skyrocketed, the economy is contracting right now.
DOBBS: And in the unemployment report for the month of September, the full impact of the September 11 attacks not weighed in yet to the rate?
STEINBERG: That report had none of the effects of the September 11 attacks. In October, we will begin to get those effects, and job losses likely to be a lot more substantial that the already big job losses in September.
DOBBS: What's your best judgment about where the unemployment rate will be by the end of this year?
STEINBERG: Unemployment is headed toward 6 percent, probably get there in January or February. Whether that's it or it keeps rising we'll have to wait and see, but it's certainly headed higher fairly rapidly right now.
DOBBS: Consumer confidence, investor confidence? Here, we saw a remarkable drop following those September 11 attacks. It is it seems to me some suggestion that we've also seen a remarkable rebound. What's your take?
STEINBERG: Confidence initially reacted to the horror of the event. But what we are going to start to see in the next couple months is the reaction to the actual economic situation, the fact that jobs are being lost at a very rapid rate right now. So, consumer confidence is probably going to stay down even as the shock of these events kind of wears off a little bit.
DOBBS: Do you expect to see, should the United States take visible, that is public, action, military action, that will be reported on our television sets, in newspaper and magazines, do you expect to see some rebound of confidence just as we did in the Gulf War, once action is taken?
STEINBERG: I think you very well could have that kind of Gulf War effect, where confidence does come back once action gets to be taken. The difference between now and then, though, is that at the time of the Gulf War, most of the recession had already run its course, and oil prices actually came down very sharply as soon as that action began.
And now, the downturn is really getting rolling.
DOBBS: People may not realize, but that recession actually ended at almost the same date as the coalition action against Saddam Hussein at the end of February.
STEINBERG: Just a month later.
DOBBS: Right, OK. Well, Bruce, what do you think the GDP growth rate will be in the fourth quarter?
STEINBERG: Economy is probably contracting around 1.5 percent. It could actually even be worse than that. One thing that's very important to keep in mind, though, is that we are pumping into this economy probably more stimulus than it's ever received in any other prior downturn. The amount of budgetary stimulus, on top of all the monetary stimulus we've already had, is just huge. And it should lead the economy to turn starting toward the middle of next year.
DOBBS: A strong -- it sounds like you're suggesting the prospect of a strong recovery.
STEINBERG: I think we will have a very strong recovery coming out of this, a very V kind of recovery coming out of this, yes.
DOBBS: Bruce, thanks very much for being with us.
Well, on Wall Street today, a late session recovery for both the Dow and the Nasdaq, markets gaining confidence after the president called for that $60 billion in further tax cuts. We turn now to Christine Romans at New York Exchange and Greg Clarkin over at the Nasdaq marketsite for their views on today's activity -- Christine.
CHRISTINE ROMANS, CNN FINANCIAL NEWS CORRESPONDENT: You know, Lou, it was a week that was not bad after all, even with those earning warnings rolling in and all these jitters around here, the Dow faring pretty well. When you look at the week for the Dow, you can see that it held on to its advance pretty well, and today added 58 points, up 272 points on the week.
Take a look at the weekly winners. Computer networks up about 15 percent, airlines up almost 10 percent -- bargain hunting there. The group is still down 40 percent over the last month. Department stores up almost 10 percent. The losers on the week: Fiber-optics, regional banks and drug stores, still having earnings warnings coming through in those sectors. Now, a group that has been doing very well, the defense stocks. And some drama there -- late today, hearing from Newport News ship builder that it's going to open acquisition talks with Northrop Grumman. Newport has been sought by General Dynamics. There is a cash bid on the table worth $67.50 a share, but Northrop is the rival bidder, and looks as though Newport News is going to see if they can come up with another offer -- Lou.
DOBBS: Christine, thank you very much.
The Nasdaq closing above 1,600. Greg Clarkin has the story from the Nasdaq marketsite -- Greg.
GREG CLARKIN, CNN FINANCIAL NEWS CORRESPONDENT: And Lou, this was the best week for the Nasdaq since April. The composite gaining better than a 100 points, equal to about a 7 percent gain, so a solid week. On the today, we saw the Nasdaq drifting lower this morning, then turning things around at about 11:00 or so. It was on a session low, was off about 48 points, and then began to come back when President Bush spoke of possible tax cuts. We saw the Nasdaq turn positive at that point and then chop around before finishing with about an 8 point gain.
Now, as for those big caps today -- well, Sun Microsystems, a real good case in point of what we saw in technology stock this week, that is the ability to shake off bad news. Sun saying that they will have a wider loss than expected. The stock was down about 4 percent in the morning, it was up 6 percent by the close, gaining 58 cents.
Microsoft gained nicely on the week -- on the day, rather. Intel is up 41 cents on the day. Some other big name technology shares also posting gains today. Cisco, Dell and Oracle -- we should point out that Cisco and Dell were up about 22 percent on the week. So, at this point, Lou, traders are saying the market is really operating in a very comfortable little pocket. A lot of tech stocks shook off bad news this week. On top of that, we had technology stocks, technology companies with some good news, namely Cisco and Dell, reaffirming their guidance for the quarter.
Just how long this comfortable pocket can last for the markets is another question, though -- Lou.
DOBBS: Well, they can take comfort at least for this week and the Nasdaq gained almost 7 percent and the Dow just about 3 percent. Greg, thank you very much.
Coming up next, the government has given aid to the airlines. Car rental companies that depend on the very same travelers are now asking the government for help as well. The chairman and CEO of ANC Rental joins me next.
Will America's new war threaten the supply of oil from the Middle East should a disruption occur? Does the United States have a strategy with which to deal with the disruption? We'll be joined by one of the world's foremost energy experts, Daniel Yergin. And is now the time to be politically incorrect? We'll tell you why more than a few advertisers say, absolutely not. All of that and more coming right up here on MONEYLINE.
(COMMERCIAL BREAK)
DOBBS: Mike Egan wants a new amount of help from the government. He runs the Alamo National Rental Car business, and in a bill introduced in Congress today he says the car rental business needs help, just like the airlines. Mike Egan joins us now from Fort Lauderdale. Good to have you with us, Mike.
MICHAEL EGAN, CHAIRMAN AND CEO, ANC RENTAL: Hi, Lou.
DOBBS: The idea of support may surprise some people, this idea of support for car rental companies, but in point of fact, Alamo, National two of the companies that you own, about 90 percent of their business comes from air travelers, is that right?
EGAN: That's right, Lou, and when the airplane bombs hit the World Trade Center and the Pentagon, our business got a direct hit, just like the airlines did. And we've been suffering the same kind of problems in revenue and everything else.
DOBBS: What kind of a response are you getting in Congress to your request and the request of others in the business, other companies, to help from the government?
EGAN: After they passed the airline bill, the main concern of most of the members of Congress was where do we draw the line. I think in the last week or two, there's been a real big change, and they've been both focused on the fact that the economy as a whole really needs stimulus, and there are some businesses that were also very much hurt by the terrorist war, and they have to step up and do something about those. And today, the good news is that Representative Clay Shaw introduced a bill to help the rental car industry.
DOBBS: Now, Hertz and Avis have said they don't want help. You've got some formidable competitors there in a split approach. Why is it?
EGAN: Well, Hertz is owned by the Ford Motor Company, and it's kind of inexplicable that they would want to not see the other rental car companies succeed through this period of time. But of course, if they don't succeed, if we don't succeed and stay in business, then Hertz just picks up more of the business and becomes more of a monopoly.
In the case of Avis, they are owned by Cendant, another company with billions of dollars of network, and they don't have the same kind of financial problems to suffer through this huge loss. But they took a write-off of $40 million or $50 million already for selling -- for down fleeting in this period of time.
DOBBS: What you're really saying... EGAN: But I think both companies are being a little bit dishonest with everybody else, saying this is for the good of the country, they shouldn't help out other companies.
DOBBS: Perhaps opportunistic, thinking that perhaps companies like yours, National, Alamo, perhaps Budget, Thrifty, might be picked up at a lower price should they wanted to acquire them? Would that be a prospect?
EGAN: Well, Avis was dealing with our company to acquire an asset, and as soon as the situation of September 11 hit, they pulled back and they had their bankers call us up and say, well, we'll see what happens a bit later, and at a much lower price than we were talking about. And so, the answer is absolutely yes, and that's why we don't have unanimity in the rental car industry.
DOBBS: And the type of help you need from the federal government, Mike, and the other companies -- loan guaranties or outright cash?
EGAN: Well, we're not looking for an outright grant, we're looking for loan guarantees. But what happened here is that with the loss of between 40 and 20 percent of our revenue and the equitable profit loss, the covenants that we need to meet to meet our debt givers are not being met. And the debt people, or the people who loan to us, are looking at this and saying, you know, you're also in a business where the chances of something happens are pretty great in the future.
So, we need a little confidence, and that's what we're asking the federal government to do with loan guarantees.
DOBBS: OK. Mike Egan, thanks for being with us here on MONEYLINE.
EGAN: Thank you, Lou.
DOBBS: Just ahead on MONEYLINE, our regular Friday roundtable. Stocks making a comeback this week, the economy apparently not doing so. Also coming up, we'll tell you about the nation's political and cultural mindset, and why it's no longer politically correct to be politically incorrect. And we'll tell you how military activity in Central Asia could disrupt Middle Eastern oil supplies and prices at home. Daniel Yergin of the Cambridge Energy Research Group will be here, and we hope you'll be as well. Stay with us.
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DOBBS: Stock prices today closing higher, fueled by President Bush's latest economic proposals. The president calling for more tax cuts, less spending. The Dow up 58 points. For the week, up 272 points, gaining 3 percent on the week.
On the Big Board, advancing and declining stocks just about even. Volume today 1.2 billion shares. Among the most actives, EMC gaining more than 5 percent today. Citigroup falling 52 cents a share, part of a broad selloff in financials.
The Nasdaq closing up 8 points, above 1,600. For the week, the Nasdaq gaining 7 percent. Winning stocks beating losers by a four to three margin on the Nasdaq. Volume 1.8 billion. Topping the actives, Sun Microsystems, Sun and Cisco Systems. Sun warning of dismal results. And Cisco continuing to gain after saying Thursday it will meet earnings targets.
Gold prices up for the third straight day, jumping back above $290 an ounce, lifting gold and silver as well. That sector among the top performers today. Also up on the day, computer networking and fiber optics. On the downside, regional banks. U.S. Bancorp warning and saying that it will miss its profit estimates.
Retail drugstores, nursing homes also lower on the day.
Here are the latest developments now in America's new war. The General Accounting Office saying the airline industry will lose at least $5 billion as a result of the terrorist attacks. Congress and the White House have approved a cash bailout of $5 billion, in addition to $10 billion in loan guarantees.
The Federal Aviation Administration will ease flight restrictions around New York City and Washington, D.C. beginning at midnight tonight. Private aircraft will be allowed to travel within 18 nautical miles of those cities. Right now, private aircraft are forbidden to fly closer than 25 miles.
The head of security at the FAA has resigned today after just 10 months the job, the second high level resignation since the September 11 attacks.
British Prime Minister Tony Blair today, meeting with Pakistan's president in Islamabad. Blair praised Pakistan for its commitment in fighting terrorism and talked about a possible post-Taliban government.
(BEGIN VIDEO CLIP)
TONY BLAIR, PRIME MINISTER, ENGLAND: President Nusharraf and have had detailed and very worthwhile discussions. We've agreed that if the current Taliban regime fails to yield up bin Laden, and it falls, then its successor must be broad based with every key ethnic grouping represented, including the Pashtun, and that Pakistan has a valid interest in close involvement with how such a successor regime might be established.
(END VIDEO CLIP)
DOBBS: The prime minister also pledged to restart United Kingdom-Pakistan defense cooperation.
Crude oil prices fell again today, extending a three week decline in those prices. And tonight, OPEC's export price hovering just above its $22 minimum. OPEC had wanted to meet in Madrid Sunday, but it appears that that may not happen. Mexico has already announced it will not be able to attend. And my next guest now says United States and British military, should there be action, it could disrupt supplies and prices in the Middle East.
Daniel Yergin joins me now from the Cambridge Energy Research Group. Good to have you with us, Dan.
DANIEL YERGIN, CAMBRIDGE ENERGY RESEARCH GROUP: Thank you.
DOBBS: Let's talk about the -- first the three week decline. We -- that is obviously a testament to slowing economic activity. How much lower do you think this can go?
YERGIN: Well, I think there's lot of weakness in the oil price. We're looking in the fourth quarter and first quarter of next year for oil demand to actually be lower, as much as one percent lower than it was at the beginning of this year. What that means is that we're going to have a first decline in oil consumption since the Gulf crisis. And that reflects what's happening and what you've described in the economy.
DOBBS: And what that impugn for oil prices themselves?
YERGIN: Obviously, it depends upon what -- how OPEC behaves and how weak it is. But if we look at the current oil price, there's probably even some war fear that's keeping the oil price where it is. Without it, it was just reflecting the economy, they would even be lower than they are currently.
DOBBS: Obviously, central to the minds of the military planners and in those in Washington, everyone in public policy and all of us as consumers, is what is the likely impact of military action in Central Asia on Middle Eastern oil supplies and the flow of those supplies to this country. What's your best judgment?
YERGIN: Obviously, it comes down to what kind of terrorist response. The Attorney General has said we should be prepared for it. And there is a long complex supply system that brings oil to our country. And therefore, that system is really on a high alert right now.
But Lou, I should say that, you know, since the first oil crisis, there's been a lot of thought about what to do in terms of disruptions. And even in President Bush's national energy plan, people didn't focus on it. There was a section about what to do. And we have some strong tools at hand to deal with the disruption if it comes.
DOBBS: Specifically what?
YERGIN: Number one is the strategic petroleum reserve. We have enough oil in the reserve. If we lost all the Persian Gulf imports until next June, we could make it up. The second thing is we have sharing arrangements in cooperation with other countries, other industrial countries to the international energy agency to cooperate.
So we do have the tools. And with this weak economy, ironically, one of the consequences is it does gives us more in inventories, which is also a form of protection. And there's a lot of cooperation now going on between the government and the private sector, to make sure that that security alert throughout the energy industry is at a high and appropriate level.
DOBBS: So you're relatively comfortable that all of this is manageable?
YERGIN: Well, it's manageable. We don't know what's going to happen, but we do have some real strong mechanisms in place and everybody's very aware of the risks and dangers.
DOBBS: Let's quickly if I may, Dan, focus on the region itself. We are talking about the prospect of action against countries that are -- or country or countries that could be Muslim. There could be destabilizing influences within the Middle East itself, but how destabilizing are these lower oil prices themselves to countries that would -- obviously in the Middle East, but also would include Russia?
YERGIN: Well, Russia plans on a $23 price. They have -- they've set up a cushion to fund, so that they can deal with an $18 price. But if the price went much lower than that, that would hurt Russia, who's had a really stunning economic performance over the last couple of years, compared to where they are -- to where they were.
In terms of the Middle East countries, you're right. I mean, they have restive populations, lots of young people who don't have jobs, some of whom are drawn into this world of -- netherworld of terrorism. And it's not in their interest to see oil prices go too low because of the problems that it would accentuate the social tensions in those countries.
DOBBS: OK. Daniel Yergin, as always, good to have you with us.
YERGIN: Thanks.
DOBBS: Coming up next here on MONEYLINE, Amtrak changing its ticketing policies in the wake of the September 11 attacks. We'll have that report for you. And we'll reporting to you on what was a solid performance on Wall Street, as we take a look ahead in our regular Friday roundtable. Please join us for that as MONEYLINE continues.
(COMMERCIAL BREAK)
DOBBS: In tonight's MONEYLINE movers, several quarterly warnings. Shares of Advanced Micro Devices finishing lower, nearly 5 percent down on the day. The chipmaker warning revenues will fall more than 20 percent in the third quarter, because of price wars with Intel.
Cablevision, its shares plunging 10 percent after warning its earnings for this year will fall short of Wall Street expectations. Cablevision blaming a cut in advertising following the September 11 attacks. Well, markets finishing higher on the day and the week. Joining me now for some perspective on the markets, Jan Hopkins, Kitty Pilgrim, Christine Romans and Greg Clarkin. There they are. And I want to start, if I may with you Greg.
What do you think we should expect in the next week?
CLARKIN: Well, next week, Lou, we really get the kind of the tip of the iceberg in terms of earnings reports. You have a number big technology companies will be out with numbers. Yahoo! will be among them in the middle of the week.
But we'll be looking for really is kind of a sense of is there any continuation to run up we saw this week? And I've got to say, in speaking with traders, this is the first time that I can recall in a number of months that you can sense a little optimism.
Now these folks know that this little rally this week, this mini rally really, can be derailed at anytime by world events or corporate events. But still, you can sense a little optimism that possibly in terms of corporate news, maybe we've hit a bottom there in just how bad the earnings will get.
DOBBS: Jan Hopkins?
JAN HOPKINS, CNN FINANCIAL NEWS CORRESPONDENT: I'm nodding.
DOBBS: Jan Hopkins over here nodding in agreement with you, Greg.
HOPKINS: Exactly.
DOBBS: We don't see that every week.
CLARKIN: It's always good to have.
DOBBS: Let's find out what's going on?
HOPKINS: I mean, I'm hearing it from everyone. Even people by Gail Dudack, who has been very bearish in the market, says we hit a bottom. And lot of people say, you know, the economy won't turn right away. Things will get worse, but stocks always anticipate usually by six months. So we're starting to get there. Really, people are getting to be quite optimistic.
DOBBS: Gail Dudack, optimist in this environment.
HOPKINS: Yes. You have Sun bad news and the stock is up.
DOBBS: Wait a minute. The fact that you have bad news in Sun and the stock is up may not be good news though.
HOPKINS: Well, but it may mean all the bad news is priced into the stocks. And so you'll hear bad things from companies because we expect to hear bad things short term. But investors are looking long- term.
DOBBS: This is my night, I guess, to be somewhat skeptical. Not cynical but skeptical. Christine, do you want to add a breath of...
ROMANS: Skepticism?
DOBBS: Cold water here, whatever, mixing metaphors as we go.
ROMANS: I can give you some cold water. People are talking about the fourth quarter as well. They're saying that stocks are doing better on third quarter warnings, because everyone knows the third quarter might be big problem. They want to know what's happening in Q4 and next year.
As long as companies can keep holding their 2002 estimates in line, then we're going to be OK. But if people start cutting next year's estimate or pushing back the recovery to past 2002, then the stock market's in trouble and that bottom might be in jeopardy.
DOBBS: Well, you know, before I move to Kitty to talk about some further, perhaps reason for some skepticism in all this, Chris Wolfe last night talking about a very important point. Before September 10 -- we're back to basically the September 10 levels. But as everyone knows, this world has changed.
Corporate earnings, there weren't going to be robust, are going to be even lower. The environment is different and frankly, far more negative than before then. So how can this be -- Kitty?
PILGRIM: Well, Lou, I was just looking through the consumer debt numbers today. And they're astronomical. And it's very worrisome because the quality of debt out there is very high. And the underpinnings of some of this recovery may be undermined by some of the givens that we have. Consumer debt is one of them.
DOBBS: How does it play into the market, the fact that corporate earnings are going to be somewhat bleaker than most people expect, I believe, here in this quarter and next. And secondly, how does it play into the unemployment numbers, which look pretty good on the surface? We're looking at 4.9 percent. It holds steady for the month of September, but we haven't even seen the impact for most of September?
Greg, let's start with you.
CLARKIN: Sure, Lou. To answer that, I'd have to go back to a point that Jan made, which is that most economists at this point are talking about middle next year pick up in the economy. So what I'm hearing from traders is that listen, you know, this is the time you want to be in some of these stocks that have been hammered down so much six months in advance of that.
Now if, you know, the recovery economically generally speaking is pushed further than, then you know, we may have a deeper problem than anybody at this point realizes basically.
DOBBS: Greg, congratulations. You get the last word. Thanks a lot. Thank you, everybody. Well, just ahead here on MONEYLINE, how is Hollywood reacting to America's new war? Is there a cultural shift? Peter Bart of "Variety" joins us next. Stay with us.
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DOBBS: Amtrak will stop onboard ticket purchasing within the Northeast corridor beginning Monday. That, part of Amtrak's efforts to beef up security. All passengers will have to buy their tickets at station booths or automated terminals. Amtrak will continue to check the IDs of credit card users against the FBI's watch list. Since the terrorist attacks, by the way, Amtrak's nationwide ridership risen 16 percent.
Well, the attacks against the United States have sent the entertainment world into a tailspin. Television executives, backing away from violent programming. And no one knows what will be considered funny in this environment. Add sensitive advertisers to the mix, and politically correctness of a different sort may be here.
Susan Lisovicz has the report.
(BEGIN VIDEOTAPE)
(BEGIN VIDEO CLIP, "POLITICALLY INCORRECT")
BILL MAHER, HOST: Because he said dead or alive?
JESSE JACKSON, RAINBOW/PUSH COALITION: Because he said dead or alive.
MAHER: See, I don't agree with that. I only want him dead. I'm to the right of George Bush on this.
(APPLAUSE)
MAHER: I think George Bush -- I think George Bush should lose some sponsors.
(END VIDEO CLIP)
SUSAN LISOVICZ, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): Beleaguered talk show host Bill Maher knows all too well the pain of losing sponsors.
In the new cultural mindset known as post-attack America, it is no longer OK to be "politically incorrect," even on a show by the same name. Fedex, Sears, and General Motors quickly pulled out of the irreverent late night program after the comedian made this comment.
MAHER: We have been the cowards, lobbing cruise missiles from 2,000 miles away. That's cowardly. Staying in the airplane when it hits the building, say what you want about it, not cowardly.
LISOVICZ: Longtime media buyer Bill Koenigsberg says three of his clients, Geico Insurance, Boston Market, and International House of Pancakes, also bailed out of "politically incorrect." He says it's all part of a new attitude on Madison Avenue dictated by politics and economics.
BILL KOENIGSBERG, CEO, HORIZON MEDIA: The heightened sensitivity about clients and advertisers being extremely careful as to the environment that they're going to put their shows in has given the advertiser a lot more leverage in the marketplace in terms of how their dollars are allocated, where their dollars are allocated and in many, many cases even getting involved with content discussions with the networks.
LISOVICZ: And the stations that make up those networks are also more sensitive. More than a dozen ABC affiliates dropped "politically incorrect" in the last two weeks. That further hurts ABC's cash flow.
CHUCK ROSS, EDITOR, "ELECTRONIC MEDIA": They're not getting the revenue. And then if the show stays on for a long period of time and the affiliates don't carry it, and you have more affiliates that bail out of the show, they're going to lose that time slot.
(END VIDEOTAPE)
LISOVICZ: Even big media companies have demonstrated recently they don't have the stomach to carry losing properties in this deteriorating economy. "Politically Incorrect" ratings have held up, but it's almost a moot point if ABC can't sell the program to advertisers. One plus for the show, cancellation now in a country that celebrates free speech might be almost offensive as the talk shows remarks -- Lou.
DOBBS: OK, well I'll let the market sort that one out. Thanks a lot, Susan.
Well, people are beginning to return to the movies as well, and not just to see the light-hearted fare, as a lot of industry experts have predicted.
Joining me now is the editor in chief of "Variety" Magazine, Peter Bart.
Peter, good to have you with us.
PETER BART, EDITOR-IN-CHIEF, "VARIETY": Thank you.
DOBBS: Well, a week has made quite a bit of difference here. Suddenly, we're seeing some suggestion that Hollywood may be back on track with a very traditional approach?
BART: Well this is true. And it's provided some mixed signals for the multinational corporations that own the studios, because they traditionally complained about being in the movie business. You know to them, the movie business was a business of high risks and low margins.
And of course now, they realize that the film business is a counter recessionary business, as is videos and DVDs. So this is suddenly, you know, an anchor for them. And it's TV and the other sides of their business that providing the volatility.
DOBBS: Well, have we, in just a matter of week or so, seen all of that talk about a more innocent age in Hollywood, a more wholesome approach to entertainment? Has that all been vaporized here with some surveys showing that people are ready for the traditional approach?
BART: You know, it's a good question. I think the confusion in the business is shown by the fact that "Variety" has rechristened the Emmys as the semi-Emmys, because it's supposed to be a non-ceremonial ceremony.
But no, I think it's very ambiguous out there, because the surveys and the test screenings are showing that people want normalcy. They want to go back to what they traditionally have seen. It runs the gamut, entertainment, including violent entertainment.
But the movie companies still are very sensitive to these mixed signals. And they want to play it safe. They do not want to be politically incorrect.
DOBBS: All right, they do not want to be politically incorrect. And how is this all affecting their production schedules? Are we seeing that change, because I know they've been held back. A number of productions held back, as well as the schedules for production held. Are we seeing that break now?
BART: Well, what was once a very busy pre-Oscar season has become a very fatigued one, because a number of the important pictures are being pushed back. There's a discussion about -- at Miramax, about what do with "Gangs in New York," which is a Martin Scorsese picture that cost way north of $100 million and shows Americans shooting other Americans in the draft riots in the middle of the 19th century in downtown New York City.
So there's a real question of, this is an estimable picture. But is the public, are New Yorkers ready to see this sort of action taking place in this environment?
DOBBS: Well, I'll give you one reporter's guess. Probably not yet. Peter thanks a lot. Peter Bart.
BART: You bet.
DOBBS: "WOLF BLITZER REPORTS" begins in just a few minutes. For a preview, let's go to Wolf in Washington -- Wolf.
WOLF BLITZER, HOST, "WOLF BLITZER REPORTS": Lou, U.S. intelligence official says there's 100 percent chance of another terrorist attack if the U.S. attacks Afghanistan. We'll have details. Also, should the U.S. consider using nuclear weapons in this new war against terrorism? I'll ask former Clinton National Security Adviser Samuel Berger. All that, plus the day's other major developments, coming up next -- Lou.
DOBBS: Thank you very much, Wolf, looking forward to it. Your thoughts on giving and on buying, as we take at our viewer e-mail next. Stay with us.
(COMMERCIAL BREAK)
DOBBS: Tomorrow, G-7 leaders wrap up their two-day meeting on the world economy and the fight against terrorism. Monday, the bond market will be closed, that in observance of Columbus Day. All other markets will be open for business.
Reports on the economy next week include: the producer price index, import-export prices, retail sales and the University of Michigan consumer sentiment report. And we'll have quarterly earnings from 190 S&P companies. Watch for in particular, General Electric, Yahoo!, Motorola, Pepsico and of course, Harley Davidson.
Time now to take a look at some of your thoughts. Suzanne Lauer wonders if tepid retail sales have anything to do with the increase in charitable giving since September 11. For her part she says, "I know our household is buying less so we can give more." And good for you.
After a steep drop in the week of the attacks, retail sales have actually rebounded to levels comparable to earlier months. This return we're giving, the Red Cross says Americans are always responding generously in times of crisis, but the response recently is unprecedented.
So far, more than $290 million has been raised just by the Red Cross since the attacks on September 11. That's more than double the amount raised in the wake of, for example, Hurricane Andrew, nearly 30 times more than the amount raised for victims of the Oklahoma City bombing.
Florencio Contreras wants retailers to do their part to get this economy going. He writes, "Why do consumers have to carry all the burden in this economic crisis? Lower your prices and we will buy. Have them do their part. We'll do ours."
Well, the National Retail Federation says they are doing their part. And there are a lot of bargains right now. And they say you won't be surprised at this, they say go out there and shop. They say it's great to be a consumer.
And as always, send us your comments, moneyline@cnn.com. And for tonight, that is MONEYLINE. Thanks for being with us. I'm Lou Dobbs. Have a great weekend. Good night from New York. "WOLF BLITZER REPORTS" begins right now.
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