Archive Page 3 of 36
August 13, 2008 3:42PM
By Alexis Glick
As you’ve seen in my past blogs, I have a long standing relationship and occasional love affair with David Darst, the chief investment strategist at Morgan Stanley. We have known each other for 15 years. Wow…..that hurts saying that. Prior to David’s position at Morgan Stanley, he worked at Goldman Sachs. When I started working at Goldman Sachs in 1994 he was one of my mentors. Today he is taking the world by storm and publishing yet another terrific book. His latest book is called, The Little Book that Saves Your Assets. Very well timed!
This morning he joined me on The Opening Bell to discuss the decline in oil prices and what that means for inflation, the stronger dollar, overseas investments and why he likes Walgreens. He is a great guest. He has a way with words. I assure you, you won’t want to miss this!
August 13, 2008 12:35PM
By Alexis Glick
This morning as you may have noticed I wrote a blog called “Good Prognosis for Health Care” about why I think health care could be the next hot sector. At about 9:30 this morning Genentech, who I talked about earlier, rejected the $89 bid from Roche. Roche currently owns 55.9% of Genentech and has hoped to purchased the remaining amount. Some analysts have speculated as high as $115 for Genentech is reasonable given the current climate and revenue from cancer drugs, including their blockbuster drug Avastin.
Given my new fascination with healthcare, this morning members of both presidential camps joined me to explain how McCain versus Obama’s plans work. First up Dr. David Blumenthal from the Obama camp, then Nancy Pfotenhauer from the McCain camp.
I don’t know about you but these health care plans are confusing. It’s hard to sift through the noise and get to the point. It’s hard to know what figures to believe in and whether either of the proposed plans with help rising costs for individuals, corporations and small business owners. They do, in my estimation, the best job thus far explaining how each plan works. How they fund it, still not sure I fully believe or are comfortable with those answers but I’m sure I’m not in the minority.
Immediately following my interview with the advisers for both campaigns, Jonathan Bush, the Chairman and CEO of Athenahealth, a company that provides technology to healthcare providers and greater technological efficiencies across the board, joined me in studio to analyze the plans, the current state of the healthcare industry, the reason for the increased amount of deals and how his company can help solve the mess that is healthcare in this Country. He was FANTASTIC! He let it all out and held nothing back. I was really impressed! And oh by the way, he’s the President’s cousin and Billy Bush of Access Hollywood’s brother. What a family? Talk about genes????? 
August 13, 2008 12:32PM
By Alexis Glick
OK. I cannot resist. Today was one of my favorite days. The lineup of guests and topics that we had on Money for Breakfast and The Opening Bell, which I host, were excellent. This is the part of my job that I love the most. Today we talked about everything from Goldman Sachs and why they are reinvesting in overseas markets and personnel, to the Presidential candidates Healthcare plans, to the CEO of Athenahealth, who happens to be a cousin to President Bush and the brother of Billy Bush of Access Hollywood, the dollar value of the gold medal, which will surprise you, and then the back to school season for retailers. Not to mention the two all stars who appeared on The Opening Bell. David Darst, Morgan Stanley’s Chief Investment Strategist for the Global Wealth Management Division and then, Wilbur Ross, billionaire investor, known for buying distressed companies on the verge of bankruptcy and turning them around. Is that an unbelievable day or what?
So I’m warning you or preparing you for A LOT of blogs today with video from some of these interviews. For those of you who watch the shows, I apologize for the redundancy. I choose to post some of the interviews I do each day on this blog because I know No. 1 that you can’t watch the whole show and No. 2 that you probably don’t want to and No. 3 that many of you don’t see it in your hometown. In some small way, this is my way of spreading the FOX Business Network programming and I hope from time to time that something catches your eye. I also want to give a shout out to everyone who has taken the time to comment on the blogs. I want you to know that I do read the comments and I am thrilled when we get record numbers. I welcome comments and hope that everyone feels they have a say in what works and doesn’t work. I want your feedback and hope that this is a forum to talk about ideas. I also want to remind you that you can find us by calling your local cable company or by going to the channel finder on our website. We are on DirecTV and that is available across the country in addition to many more cable operators.
So let’s get to the first story on Goldman. This morning we talked about Goldman’s analyst ratings and earning cuts over the past couple of days, concerns about where it will make money or if it will be able to maintain stellar earnings in a lousy environment, why they are sending top notch talent overseas, what that costs the company and if that tells us something about the future of Goldman’s business and the financial industry. Up at bat, Dick Bove of Ladenburg Thalmann, David Buick of BCG Partners and Randy Wilson of NEI Global Relocation.
As you’ll see despite the cuts and Dick’s initial call, which lead the way on those rating cuts, Dick and David still like the company and think they have great growth opportunities overseas. This news on the heels this morning of Goldman’s decision to make a huge private equity investment in a portfolio of companies largely in Europe divested by Dutch bank ABN Amro. The deal comprises 32 European companies and roughly $450 million in capital to invest in future deals. What does this tell you? If only we knew about this when we talked at 7am? This tells you that Goldman is making an investment in overseas markets and the European economy because they feel that there is money to be made, market share to be taken away from some of the larger European institutions that are failing and because they need to look for growth opportunities while they deleverage their balance sheet here in the U.S.
August 13, 2008 6:13AM
By Alexis Glick
Yesterday I talked about some of the reasons why I am becoming slightly more optimistic. One thing that I neglected to talk about is leadership. In past bull markets, the average bubble corrects 75%, this according to my colleague Keenan Hauke at Samex Capital. He joined me last week on The Opening Bell. He did some research and looked at past bubbles and busts. Here’s what he found:
The average bubble corrects 75%. Examples include:
- Dow Jones Industrials in 1932 fell 76% from the 1929 peak
- Nifty fifty stocks in the early 1970’s fell 71%
- Gold fell 73% from 1980-1999
- Japan’s Nikkei fell 78% from 1990-2003
- Tech fell 76% from its peak until October of 2002
So where will the next bubble develop? As Keenan points out, bubbles rarely, if ever, come from the sector that burst — in this case, homebuilders and financials. So where should we look, or is too soon? Some might argue that we have been in a commodity bull rally. While gold has pulled back from $1037 at its peak on March 17 to as low as 802.34 yesterday, or a 22% correction, it is still up 48% in two years, assuming the July average of $939 versus the July average in 2006 of $633.71. Not bad!
My pick for the next bull market is health care and biotech. In the past couple of weeks we have seen at least three deals or partnerships announced. Bristol-Myers announced its intent to purchase the remaining percentage of ImClone that it doesn’t own. Eli Lilly announced a research and development deal with Covance, a drug-development service company, worth $1.6 billion dollars, that offsets some of Eli Lilly’s burden to develop and test new drugs. Note that the cost to get a drug FDA approved and on the market on average costs a drug maker $1 billion dollars and years to develop and distribute. In some cases a decade!
A company like Covance in the research business can cut the costs dramatically for a drug maker like Eli Lilly and improve their efficiencies. On early-stage development and testing, it can cut the process down by 20-30% or approximately 2 to 4 months and can speed up clinical trials by as much as six months. Usually it takes three clinical trials to get a drug approved. The outsourcing arrangement that Eli Lilly made is one that many other drug makers are considering as costs are ballooning.
Not too long ago Swiss drugmaker Roche made an $89 bid for the remaining portion of Genentech that it does not own. Analysts are in agreement that Roche will have to raise their bid, this as shares of Genentech keep hitting new highs.
Now, this morning, word of a deal between CVS and Longs Drug Stores for $2.6 billion dollars, or a 32% premium to where the company was trading yesterday. The deal was announced after the bell. This is a story about drug-store chains, not drug makers, but it just goes to show you that this segment is hot and my guess is it will get a lot hotter. Think about some of these statistics: 47 million Americans do not have insurance, the cost of prescription drugs has increased 16% over the past five years, 15.8% of Americans had no health insurance plans and employers will spend about 10% more in 2009 on health-benefit packages (down from the mid teen’s in the early 2001-2002 period). This morning I will be talking to members of both McCain and Obama’s economic team about each candidate’s health-care plan. Stay tuned.
Look at the DRG and BTK. The Drug Index and the Biotech Index. The DRG is down 5.7% over the past 12 months, but the BTK is up 14%.
Food for thought!
August 12, 2008 2:51PM
By Alexis Glick
It’s been hard but I have remained tight lipped enough. OK I admit it, the Olympics have exceeded my expectations. To be very blunt, I thought they were going to be a grave disappointment given all of the human rights issues surrounding China and the truth is I have been pleasantly surprised. In no way do I or am I willing to dismiss their human rights record and their affiliations to governments who take part in genocide each and every day. On the other hand, the more I learn about the country and the progress they have made in a short time frame, the more impressed I become.
The opening ceremonies took my breath away. I cannot remember watching a spectacle like the one the Chinese put on with pure amazement in my eyes. Even my three little boys who we let stay up to watch the ceremonies were in awe. I enjoyed watching them watch the ceremony and their persistent questions about the Chinese and when we’re going there. My middle son Kyle keeps asking me when we are going to China for a couple days. He can’t quite grasp the sheer magnitude of the trip from the east coast. The fact that he along with many kids across the globe feel this way is one small and continuous step toward a global economy.
The games themselves have been pure magic. NBC is loving Michael Phelps and why not? He is the heart and soul of this Olympic games. What he has done in the past three days is exceptional? I only hope and pray that he can live up to the enormous pressure and expectations. I can’t imagine how his mom feels. When I see her in the stands I feel her sacrifices and her pure love for her son and it feels great.
This morning Helen McClusky, the president of Warnaco joined me to discuss the biggest topic surrounding Michael Phelps performance in the pool, the suit that he is wearing. It’s called the LZR (Laser) racer swimsuit. It was created by Speedo in conjunction with NASA over a four- year period. The amount of medals won with that suit on during this Olympic games is staggering. It’s not cheap and it has created a fair amount of controversy but whether you like it or not, it has changed the nature of the sport and the future for Warnaco, the parent of Speedo.
See what Helen had to say about the swimsuit being called the “world’s fastest swimsuit” and why she is having the time of her life at the games. Do you blamer her?
August 12, 2008 6:29AM
By Alexis Glick
I’m starting to think that the market is making me schizophrenic. Just over a month ago, I wrote a blog entitled “Scary Times”. Now I’m feeling slightly more optimistic. As you’ll recall, the Fox 50 Index hit a record closing low on that same day of 867 and is now up 7.6% since July 15th. Good contra-indicator? It seems that way!
The other day Tony Crescenzi from Miller Tabak joined me as our weekly Market Maven on The Opening Bell. He talked about the reasons why he thinks we are poised for a rally this fall. He pointed to a change in consumer sentiment brought on by the Democratic National Convention and the Republican National Convention. He believes consumer confidence will improve the closer we get to Election Day. Tony cited the impact on oil, the dollar and diplomacy. Think about the following:
1. Oil is down 22%, trading at $114 and all signs point to oil going lower.
2. The dollar, which trades at a 0.9 correlation to oil (meaning they trade in sympathy with one another although in opposite directions) is at a six-week high, or up 6% since the March lows when Bear Stearns failed. It traded below the 1.49 level versus the Euro, sitting at a key level on its 200-day moving average.
3. AAA just announced weekly gasoline prices have declined to $3.81 from a high of $4.11.
4. Retail sales have not all been doom and gloom, despite the fact that most rebate checks were used for every day goods. We will know a lot more this week when the monthly retail sales figures are released. Thus far, though, it has not been a disaster.
5. The post-Olympic impact on commodity prices may surprise everyone to the downside. Commodities — including gold, silver, steel, you name it — rallied at the beginning of the year on the global demand story in large measure due to China. At the time, it made sense. After all, China had to put on an Olympic games and was willing to spend whatever was necessary to prove to the world that they were an industrialized nation. So what happens after the Olympics? Will demand for raw commodities decline, particularly given the crashing halt in homebuilding across the U.S. and Europe? Probably. Will China and India consider lifting subsidies after inflation figures fail to decline enough to offset growth? Probably. Will the decline in spending brought on by the Olympics cut spending? We’ll see. Don’t forget that China forced many manufacturing plants to shut down in the wake of the Olympics to curb pollution. Might the decline in energy demand be temporary? Sure. According to a report in the Financial Times yesterday, China is set to take over the U.S. next year as the world’s largest producer of manufactured goods. No surprise, given the population (approximately 1.3 billion people live in China). The shocker is that China is four years ahead of schedule. According to this study by Global Insight, China will account for 17% of manufactured goods next year as opposed to 16% in the U.S. We MUST keep a very close eye on China’s inflation figures.
6. GDP. The preliminary revision to Q2 GDP (the advanced # was 1.9%) is August 28th and the final revision is September 26th but the Q3 GDP is October 30th, 5 days before Election Day. Most economists agree that Q4 GDP will be very weak with another negative reading like we just saw in Q4 of ‘07 but, most agree that Q3 will still see some of the effects of the stimulus checks and the decline in oil prices over the past four to five weeks. We still have another six weeks to go before the quarter ends so it’s much too early to call but it looks like the early inflation fears have subsided somewhat.
Finally, note two risks to my more optimistic call this morning. One, the Fed’s recent July survey of 50 commercial banks revealed some disturbing statistics about the willingness by these banks to lend money. Across the board, banks tightened their lending standards for home mortgages, consumer, business and home equity loans. Not good. Two, we don’t want the dollar to appreciate too quickly. Remember exports, net exports, have been the largest contributor to U.S. growth in the last five quarters. Be careful what we wish for. A solid improvement, good. A massive rally, not so good.
August 11, 2008 4:32PM
By Alexis Glick
This morning, Governor Jon Corzine of New Jersey joined me to discuss his frustration with the Environmental Protection Agency’s refusal to lower the production of nine billion gallons of ethanol and bio-diesel this year.
Corzine feels the EPA’s food-to-fuel mandate is a dangerous one. He’s not entirely opposed to the use of corn crops for some ethanol consumption, but he is opposed to the increased mandates year over year and the potential implications for the food we eat everyday.
As you probably have noticed, everything at the grocery store has been getting more expensive. A large reason for the rise in prices is the passage of a farm bill with mandatory minimum ethanol requirements and subsidies that require a certain percentage of corn crops be used for alternative energy. That mandate has wreaked havoc on corn crops and corn prices, although they have eased slightly after the recent devastating floods in the Midwest. Corn is used for just about everything we eat. Allocating a big percentage of it for ethanol use leaves less crops for food, and in turn, higher prices. Not pretty!
Governor Corzine also talked about his energy plans, his concerns about offshore drilling and, more specifically, whether he would consider it in New Jersey . He also discussed whether he would consider taking over for Treasury Secretary Paulson when Paulson’s tenure ends in January. He also talks about the “tough decisions” that he has had to make in New Jersey, given the difficult climate for municipalities. No surprise there! Take a look at how he’s handling these difficult situations.
August 11, 2008 4:24PM
By Alexis Glick
The Georgia-Russia conflict could have serious implications for oil prices and the United States. This morning Chuck Nash, Fox News military analyst, and Phil Flynn, an oil expert and Fox Business contributor, joined me to discuss the ramifications for the oil markets, the European Union (as it is the main recipient of the pipeline), and the risks to the United States’ support of Georgia.
Despite the Russia-Georgia tension, oil prices continued to move lower today. Had it been one month ago, this engagement would have had ripple effects on the markets. This just goes to show you that the commodity bull trade has seen some of the bubble burst. It may only be a short-term move, but to date, oil prices have declined 22% off their early July peak. According to the Lundberg survey, the average price of regular gasoline in the U.S. is now $3.85; the effects of falling oil prices take several weeks to show up at the pump. Crude oil accounts for 74% of what you pay at the pump. Lundberg also said that U.S. demand for gasoline is at the lowest level since 1981. Who says we don’t how to conserve and that the U.S. cannot have a material impact on oil prices?
Even AAA is forecasting a national average of $3.81 down from $4.11. Not bad, given the fears we had just five weeks ago. The issue now is twofold: one, will the conflicts in Russia and Iran escalate, and two, when will refiners switch from gasoline to make heating oil and other fuels which will likely prove to be much more profitable? Once they do the latter, will we see a pinch and don’t forget the risk to pipeline and rig disruptions if hurricane season heats up?
In the meantime, enjoy this moment. Oil does feel like it’s going lower. We can thank the dollar and declining demand for that!
