Archive for June, 2008
June 30, 2008 2:41PM
By Alexis Glick
As I mentioned in my last couple of blog posts while in Pittsburg at the Economic Summit on Competitiveness hosted by Sen. Obama, I had the opportunity to interview some leading thinkers on energy.
One of the people that I had a chance to sit down with was Federico Pena, the Honorable Pena, who was at one time secretary of transportation and energy under the Clinton Administration and who is currently a managing director at Vestar Capital Partners, a global private equity firm. Pena is also national co-chair of the Obama for America campaign.
We discussed everything from the past to the present. He talked about the lack of a national plan and that he would like to see the government and economic/energy policy treated as though it were a corporation. He believes the key to success in Washington, D.C. and for the next president is to set goals and see those goals attained.
Take a look.
June 30, 2008 10:50AM
By Alexis Glick
Governor Ed Rendell of Pennsylvania, an ardent Clinton supporter and more recently Obama supporter, joined me this morning on Money for Breakfast to discuss his plans for solving the short-term energy crisis and whether he would be interested in a Cabinet position were Obama to get elected this fall.
First, he says consumers need to change their habits and he’s instituting strategies to help get them there. Secondly, he soft pedals on a Cabinet post, and says he’ll remain on as governor until his term expires in 2011 — but when I pushed him, he agreed it would be hard to pass up. Finally, we talk about moving the Clinton voter to the Obama camp and how to pull the independents away from McCain. See what he had to say about that. It’s the key to victory for either candidate this fall.
June 30, 2008 10:40AM
By Alexis Glick
This morning on Money for Breakfast we ran a sit down interview that I had with Vinod Khosla, the co-founder of Sun Microsystems and its one-time chief executive officer, as well as one of the original investors in Google and currently the head of the #1 venture capital group as rated by Forbes called Khosla Ventures which funds “science experiments.”
I met up with Vinod at Carnegie Mellon University where he was participating in a summit on Economic Competitiveness with Senator Obama and many other public and private leaders. What he says about the future of alternative energy is game changing. He calls for oil to be at $35 dollars a barrel by 2030.
Take a look.
June 30, 2008 7:10AM
By Alexis Glick
As I mentioned in my last blog on Friday morning, I stopped over at Good Morning America again to talk about the economy with Chris Cuomo. We talked about Thursday’s selloff and what contributed to it, but we also talked about something that I think you should keep in mind today: WINDOW DRESSING or, as I like to paraphrase it, CHASING PERFORMANCE.
Today is the last day of the second quarter, and, as you can see, it’s been a bloody quarter. Take a look at the Dow vs. the price of crude oil. So far this quarter, the Dow is down 916.38 points, or 7.5% — down for the third straight quarter and down 18.3% over the last three quarters. The worst second quarter since the second quarter of 2002. Year-to-date, it is now down 14.5%. Oil on the other hand made a new record high last week and is up just under 40% on the quarter. Year-to-date, Nymex crude oil is up 46% and up 98% from 52 weeks ago. One other stat worth noting in regards to those who say the price of oil is closely tied to the dollar: it is but, of late, it is much more closely tied to oil. Look at this past month or month to date, Oil is up 10% while the DJIA is down 10.2%. That is the worst month on record since September of 2002 and the worst June month since 1930. Meanwhile the dollar vs. the euro is down 7.55% and the dollar vs. the yen is down 4.75% year to date.
Why give you all of these statistics? Because if you are a mutual fund or hedge fund, you chase performance. Where did you get the best performance this quarter? In oil, if you owned it. If not, you bought one of the oil names or any oil ETF and that is where you made money. Today you will protect some of those marks by keeping the commodity or the names that did well up. It’s called WINDOW DRESSING. You make yourself look good to shareholders.
One other group to note is the agriculture names, which got a nice lift this quarter, in part due to the floods in the midwest. Many of them got beaten up when Monsanto reported a disappointing number last week, not meeting the street’s estimates, but note that two USDA reports will be released today. One is titled the USDA Quarterly Grain Stocks and the other is the USDA Planted Acreage Report. The acreage report is likely to show that the U.S. will harvest 77 million acres, down 1.8 million. Shrinking acreage could push 2009 year-end corn inventories to as low as 300 million bushels, or down 80% from the previous year. This would be the lowest inventory since 1947. Note the U.S. is the world’s largest corn producer, accounting for nearly 40% of the world’s production. Corn futures this year are up nearly 70% and have recorded any all-time high. So, too, have soybean futures. Note names like Potash up 47.1% this quarter and peaked up 54.2%, Monsanto up 15.1%this quarter and peaked up 27.9% and Mosaic up 46.5% and peaked up 59.4%. Any fertilizer-related name this quarter has done well.
Finally this week is short and sweet but very meaningful, given this Thursday’s jobs report. We have had a lot of negative news in the past week or two. All eyes will be on the non-farm payroll number and on the Household Survey. Bernanke and team need a good one going into the long weekend. He’s feeling the pain. Also note the ECB will announce a rate decision Thursday. Trichet has signaled that he may raise rates a quarter of a point to fight inflation. Be on the lookout. That could continue to put downward pressure on the dollar and U.S. economy.
June 30, 2008 6:23AM
By Alexis Glick
What a week! Last week, that is.
I have so much to tell you. I am sorry that it has taken me this long to put it in writing. Let me start by saying this: I will never forget last week. I started writing this on Friday afternoon. I had been awake for 36 hours straight. Living on fumes - actually Diet Coke. Thank God for caffeine.
As you may have seen on my last blog entry, I interviewed Senator Barack Obama, the presumptive Presidential nominee for the Democratic Party, in Pittsburgh on Thursday. Several months ago I interviewed Republican Presidential hopeful Senator John McCain and, at the launch of this network, Senator Hillary Clinton.
Getting through to the Obama camp and making it onto his schedule for an interview has been tough. His schedule is beyond hectic and, at least in my case, on economic issues, he has only done a handful of interviews. The great news is that persistence paid off. My producers and bookers have been working on it for months, calling week after week. Finally, in a last-ditch effort, I wrote a personal note to one of the members of the Obama camp. I simply laid out the reasons why the campaign should consider an interview with me to discuss the number one issue at the polls: the economy. Luckily, the note made it into the right hands, and I got the call on Tuesday.
Frankly, I was speechless. It was late in the afternoon and I had just picked up my oldest son Logan from school. We were stepping into a Benjamin Moore paint store when I got the call. Naturally, I assumed it was a stop-pestering-us phone call. Instead, it was an invitation to sit down with the Senator in Pittsburgh, as he was about to complete his three-week tour on American Global Competitiveness. I jumped at the opportunity! Called my Executive Producer right away and within hours our schedule and days turned upside down.
In the middle of this, with 36 hours to prepare, get to Pittsburgh, locate crews and live trucks, accommodations and flights, I was also substituting for my colleague Neil Cavuto on his 4pm Fox News show called Your World. Talk about multi-tasking :).
So my Executive Producer Brian Donlon and I flew out Wednesday evening after Your World. Got about 6 hours of sleep and met up first thing the next morning. Two of the best members of our morning show crew, Pippa Bark, a senior producer, and Yvette Michael, our senior booker, had arrived that Wednesday and were already at Carnegie Mellon University that Thursday morning getting the trucks and multiple live shots set. When we arrived, the FBI was in full-inspection mode. It was everything you see and hear about in the movies. Security was tight and everyone around you was dressed head to toe in black or navy suits.
We checked in early, so that I could get dressed at the University and do two live hits on my shows Money for Breakfast and The Opening Bell. Then I prepared for what I knew would be a widely watched and highly scrutinized interview between the Senator and me. After we prepped, I went down to an auditorium where the Senator was hosting a private summit with some of the biggest and brightest names in the public and private sector. Eli Broad, founder of two Fortune 500 companies, SunAmerica and KB Home and now full-time philanthropist as founder of The Broad Foundations; Steve Case, former chair and CEO of America Online and eventual Chairman of AOL Time Warner and now chairman and CEO of Revolution; Federico Pena, former Secretary of Transportation and Energy under the Clinton Administration and now Managing Director of Vestar Capital Partners; John Surma, chairman and CEO of U.S. Steel; Harold Varmus, president of Memorial Sloan-Kettering Cancer Center; Richard Wagoner, chairman and CEO of GM, just to name a few. The list goes on. The members were situated on a podium with about a hundred people seated in front of them. They discussed everything from energy to climate change to education to health care to the economy to welfare…you name it. It was an open forum for each of the participants to share their thoughts and insights. It was excellent!
After the summit, several members of the summit came out to speak. I briefly had a chance to interview Rick Wagoner of GM about his stock, which at the time was down almost 11% on a negative call out of Goldman Sachs, which questioned GM’s need for a cash infusion and a cut to the dividend. He answered, as I would have suspected of him, saying that the company is sticking to their strategy given the difficult times.
I also had the opportunity to sit down for a one-on-one interview with Federico Pena. If I’m honest with you, I didn’t know much about him before I met him, and yet listening to him talk at the summit, I was most impressed by him. My one-on-one interview with him will run on this morning’s Money for Breakfast.
About five minutes after I completed that interview, the Senator walked in. All of our cameras and our crew in New York were on alert for the live interview. The minute they saw him walk into the shot, the producer yelled, “We’re going live.” It caught me slightly off guard. I usually like to talk to or warm up a guest by making them feel comfortable with me, but I didn’t have a chance. So the first 30 seconds felt rushed, but once we made it past the initial greeting and question, things were fine.
The Senator was on point, matter of fact and frankly pretty charming. Whether you plan to vote for him or not, my mailbox was flooded with questions after I met and interviewed him. He was not intimidating in the slightest. That surprised me. He walked into the room and shook everyone’s hand. He looked everyone in the eye, and was as calm as a cucumber. He was very comfortable in his shoes. At the end of my interview, I joked about getting on the court the next time. Part of my personal note to the Obama staff member was a request to do an interview on the court. When he called to say that I got the interview, I joked about still wanting to play ball. He said bring your sneaks. So when the interview ended I reiterated to the Senator that I still wanted to play ball. He was very kind and generous and said we’d make it happen. It probably won’t, but just the thought of it is pretty cool. Immediately after the interview ended, he sent in his personal aide Reggie Love to see me. If you don’t know Reggie’s story, you have to read the New York Times article from Ashley Parker on him. It’s a great story. Long story short, he is at Obama’s side all day and all night and regularly, daily, plays ball with him. Reggie played football and basketball at Duke and is a meager 6-foot-5. Reggie and I joked about a game and had a laugh or two about what position I played. Obama had asked if I was a point guard. I said no, a shooting guard. Still hoping for a best out of ten at the foul line.
Honest impressions of the interview? What were your’s? Did you get a chance to watch the video? If you didn’t, take a look. A ton of people emailed me their likes and dislikes. Most people really liked the word association game. It was any opportunity to see him think and pause. Some said that they wanted more specifics and that I should have pushed harder. They hear the Senator’s call for change and his Kennedy-like appeal, but they want more. I tried to get as much accomplished as I could in a finite period of time.
Two areas where I should have followed up more aggressively:
One, on Energy. Where does he truly stand on oil and gas? Not alternatives. Alternative energy plans and strategies will over time (a long time) reduce our independence on foreign oil ,but what do we do about oil and gas prices until we get there? Do we build or permit nuclear facilities? Short-term, how do we solve the Energy crisis?
The second point is when I asked him about the risk of history repeating itself when President Clinton in 1993 promised tax cuts and then had to pass the biggest tax hikes in history to balance the budget. His answer didn’t match up to comments made by Leon Panetta, former chairman of the House Budget Committee during the Clinton Administration, about the health of the Economy back then and in today’s terms.
The Washington Post’s Lori Montgomery wrote a brilliant article entitled “Big Promises Bump Into Budget Realities New President Won’t Have any Easy Time Paying for New Initiatives, Fiscal Experts Say” where Panetta said the following about balancing the budget: “As President Bill Clinton ’s first budget director said the financial situation is “much worse” than it was in 1993, when Clinton was forced to abandon promises of a middle-class tax cut before he took office. Instead, Clinton wound up devoting his first State of the Union address to a plan that aimed to tame rising deficits with one of the largest tax hikes in history.”
“It’s worse because there are a huge number of crises out there that are going to confront the new president,” Panetta said, citing costly wars in Iraq and Afghanistan alongside the rising cost of Social Security and Medicare. “We’re looking at a $400 billion deficit this year with the economy in recession or near recession. The likelihood is that it’s going to get worse. And the fundamental problem has been that there’s very little willpower by Republicans or Democrats to confront the issue.”
Panetta makes a great point. This is an issue he will have to deal with. The risk of a record high budget deficit could force him to do things he may not have otherwise wanted to do. Plans on paper and in speeches sound good, but oftentimes those plans have to be scrapped when you see what you are left with, both good and bad. Whether it’s Obama or McCain, they will have to address the legacy of the last Presidential term and adjust their plans and policies accordingly - not an easy task given where the economy currently is.
In any event, I was thrilled to get the chance to interview the Senator and I learned a lot in the process. The hardest part of this job is cramming in all the questions you want to ask in 6 or 7 minutes. Fortunately, I pushed this one out to about 11 minutes.
After the interview I did a bunch of interviews, live shots with Fox News and Fox Business until the O’Reilly show. When we drove back to the airport, we were wiped out. In a toast to my perfect tradition of nightmare travel and airport experiences, every flight to New York was cancelled. What a beauty! We had no choice but to drive ALL NIGHT LONG. We had to get back in time for me to appear on Fox and Friends and Good Morning America the next morning. We arrived in New York at 4am, I showered and went right to work. The joy of journalism!
June 25, 2008 11:02AM
By Alexis Glick
This morning I met the man behind the Maxim empire: Felix Dennis, chairman of Dennis Publishing. What a story! A college dropout who, decades later, becomes one of the 100 richest people in the U.K. At one time, he owned as many as 240 magazines. Today he owns 50 magazines and multiple websites after the sale of the magazine that put him on the map — Maxim — along with other well-known magazines including Blender and Stuff for reportedly $240 million to a private equity group.
So you wonder why did he create Maxim back in 1995 in the U.K. and then the U.S. in 1997? Simple he says. American magazines for men were basically split into three kinds: cars, boats and guns. Then you had service magazines like GQ and Esquire followed by porn magazines like Playboy and Hustler. If you put bikinis back on the girls two things would happen: A-list starlets would appear and advertisers like Coca Cola and Ford would run ads in your magazine. Pretty smart if you think about it.
Today, Dennis joined me on Money for Breakfast to talk about his new book How to Get Rich: One of the World’s Greatest Entrepreneurs Shares His Secrets. It’s a great story. Very inspirational. Everyone who saw him interviewed today or in studio was shocked by his demeanor and appearance. For some reason, they thought they were going to see Hugh Heffner. Instead they saw a charming, self-deprecating gentleman who clearly has enjoyed the journey as much as the success. He’s the true American Dream!
Here is a quote from his book.
“I went from being a pauper-a hippie dropout on welfare living in a crummy room without the proverbial pot to piss in, without even the money to pay the rent, without a clue as to what to do next-to being rich. And I am certainly no business genius, as my rivals will happily and swiftly confirm. Yet the odd thing is, I’ve ended up far richer than most of my rivals.”
Watch the interview.
June 24, 2008 1:07PM
By Alexis Glick
Today on Money for Breakfast we dissected the tax policies of both presidential candidates by looking at their individual IRS returns. It tells a fascinating story and gives you some insight into why they have very different tax policies. This was a great segment. Roni Deutch, the famous tax attorney joined me. She is full of life and energy and knows how to make tax talk fun.
Enjoy. I learned a lot. Hope you will too!!!
June 24, 2008 1:05PM
By Alexis Glick
You know all this talk about going solar? How solar power could be one of the resolutions to our dependence on foreign oil? Well this morning on The Opening Bell I talked to the CEO of Solarcity. They provide solar power, one of the “hottest” alternatives forms of energy right now.
For years they have been selling solar panels but now they’ve figure out any even smarter way to sell power, they’re leasing the panels. It’s a brilliant idea and is gaining steam. Today they announced their expansion into Arizona. Now you can lease a solar panel, just as you would lease a car. Solar panels cost up to $20,000. Here’s what you have to pay if you’re in any area where you can lease solar:
For $70 a month you’ll get a 2.4 kilowatt system (for a smaller home). The upfront costs right now depending on where you live is free until July 31. After that, upfront costs should be between $1,000 to $3,000. As Rive, the CEO of Solarcity says, ” We can essentially make it so everybody can now afford clean power.”
Take a look at my interview with Lyndon Rive.
June 24, 2008 6:13AM
By Alexis Glick
Another rough day on Wall Street yesterday, led by the financials. Just when you think the worst is behind you, rumblings of new writedowns and increased risk due to Collateralized Debt Obligations resurface. You have to wonder at this juncture, with many financial institutions hitting 1991 lows, how the private-equity guys who invested a fresh chunk of capital several months ago are feeling today. Yes, the Sovereign Wealth Funds have made big-time investments in these guys, but they have billions on their books and the percentage of these investments in their portfolio is much smaller — not necessarily the case for the big private equity guys. If they’re feeling the pain, where will fresh funding come from if the banks need to shore up the books even further?
Yesterday, we heard about layoffs from the likes of Goldman Sachs and Citigroup in their investment banking divisions, specifically mergers and acquisitions for Goldman. No surprise there. But in the past week we have also heard about possible continued deterioration in the credit markets and further writedowns. Gary Crittenden, Citigroup’s CFO, hinted about that on a call with Michael Mayo last week. Yesterday, Bank of America made a call on Merrill Lynch’s further exposure and talked about writedowns and a huge revision to their 2008 eps forecast. How much worse will it get? Unfortunately, nobody knows. This isn’t about transparency as much as it’s about the freezing up of liquid assets and the inability to mark those assets. The credit rating downgrades of MBIA and Ambac makes matters worse. Take a look at this snippet of an article from my colleague David Gaffen at the Wall Street Journal written last Thursday.
“Thursday, Moody’s cut shares of Ambac by three notches, to Aa3 from AAA, and MBIA by five notches, to A2, a greater move than expected, though MBIA pronounced itself “baffled” by the company’s analysis.
The downgrades are having a ripple effect in the markets, as the CDOs and various asset-backed securities that are held in the CDOs are going to be forced to be re-rated as a result of the downgrade of the monoline insurers. “Anything wrapped by these bond insurers can’t have a rating higher than the wrap,” says K. Daniel Libby, senior portfolio manager at Sands Brothers Select Access Management Fund. “At every marginal notch down, certain policies flare up that force [holders] to sell.”
That will only get worse if the insurers are downgraded further in the months to come, he notes. Equity shares of MBIA and Ambac are down 7.6% and 2% in trading today. The cost of the company’s insurance protection is ridiculously high, meanwhile, at about $3.65 million to protect $10 million in MBIA bonds against default over the next five years — along with a $500,000 annual payment. Markit’s index of high-grade credit-default swaps was traded at 124.5 basis points, or $124,500, costliest since April 16, says Tim Backshall, chief credit derivatives strategist at Credit Derivatives Research.
As for the brokerages, their CDS have also widened. It costs $220,000 to insure Merrill Lynch’s debt, compared with $195,000 prior to the news. Morgan Stanley’s CDS’s are at $260,000 from $249,000 before the news.
If that doesn’t seem like much movement, Mr. Libby says that a “lot of it may already be imputed into the spreads, but my expectation is that they’ll continue to widen more…together with expectations of further declines in home price appreciation, banks are making noises that other sectors besides mortgages are coming under distress. It just paints a picture of a worsening credit market.”
A lot has been said about the discount window. Without the Fed opening the discount window to the broker-dealers, things could be A LOT worse. Last week on Michael Mayo’s conference call, he talked about further consolidation. Perhaps JP Morgan going after Wachovia Bank? One colleague of mine called me immediately after and said bad trade. Why wouldn’t a Goldman Sachs consider buying a Wachovia Bank? They’re not that expensive and Goldman has the cash. More importantly, if Goldman were to purchase Wachovia or a smaller regional bank, they would continue to have access to that discount window. Keep in mind the discount window, where banks can borrow cash from the Fed, is usually only open to commercial banks. Several months ago the Fed opened it up to the broker dealers to help re-liquify the markets and shore up the balance sheets where needed. It was only opened as a temporary measure and word is the discount window will be closed to broker dealers this fall. Will that now change? Or will this environment force consolidation?
