Recap of Saturday, September 1
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The Informer
Bob Lenzner, national editor: The wealthiest people are going to need their tax rebates to pay off their electricity bills at their East Hampton mansions because profits are going to be down $130 billion according to Goldman Sachs. Also, there's going to be a reduction in bonuses which are tied to stock options and the stock market. That's going to be a real dent in the economy. That money that usually goes to spiking the economy at the beginning of the year isn't going to be there.
Quentin Hardy, senior editor: Well, it's a big amount of money but it doesn't effect that many guys. How big of a knock on does this have on the rest of the economy?
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Bob Lenzner: One and a half percent of pre-taxed personal income in the first quarter of 2002. Yes, it is the richest people but it's the people who are buying planes, buying mansions stimulating the economy.
Bruce Upbin, senior editor: Lower coffee will prices perk up coffee stocks. Depending on what exchange you're looking at, coffee is at a 36-year low or a 10-year low. It's good news for Starbucks (SBUX) and the producers of Folgers, Kraft (KFT).
Neil Cavuto, host: Why would it be good for them?
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Bruce Upbin: Well, people who get Starbucks are used to paying $4.00 for their Vente Triple Lattes. Starbucks is baking it into their margins.
Scott Woolley, associate editor: I'm a little concerned that these prices won't just get competed right out and go to the consumers, great for the consumers. But I question whether the value ends up with the Folgers of the world.
Bruce Upbin: Well, they buy lower grade, which will offset weakness in their other areas.
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Bob Lenzner: If the economy keeps going down, are people going to keep buying these $4.00 coffees?
Bruce Upbin: Absolutely!
Scott Woolley: Cellphone stocks have really taken a beating over the last year primarily because there's so much competition in this country. Now the FCC is set to relax some of the rules that restricted consolidation. When they do, there will be huge mergers and takeovers regarding companies like ATT&T Wireless (AWE), Verizon (VZ), and Sprint PCS (PCS). Verizon and Sprint would be a great pairing. They could be the mega-carrier of 2002.
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Quentin Hardy: Wall Street applauded when Gateway (GTW) cut 25% of its staff and pulled out of the international business. Some investors think the company is managing itself a little tighter or getting themselves ready to be a takeover candidate. But I say, who's gonna pay a premium for a company in this kind of market? The bad news isn't over for gateway. Dell will be the survivor in the PC wars.
Scott Woolley: But can Dell drive out everyone?
Quentin Hardy: They don't want to drive out everyone. They'd like two or three competitors.
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Makers & Breakers
Texas Instruments (TXN)
James Glickenhaus, Glickenhaus & Co.: Maker
It's a great company with great management and a very simple product that converts analog into digital. Its revenue this year were off 90%, but its earnings were only off 25% so when the world gets a little better, this company will do great.
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Jim Michaels, editorial vice president: Breaker
I don't like the stock at this point. It has a $50 billion market cap. It's too expensive for this market. I wouldn't touch it.
Bruce Upbin: Breaker
I agree. I think you'd be overpaying.
James Glickenhaus: It is a very expensive stock. This could be a good stock for the long-term. You can't make a lot of money in fifteen minutes of watching someone like me giving stock picks. Those days are over.
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Altera (ALTR)
James Glickenhaus: Maker
Another semi-conductor company. They're showing that the inventory mountain is going away. Their earnings are going to grow very strongly.
Bruce Upbin: Breaker
I'm a long term investor too but I believe in entry points. This stock has been treading water. I don't think there would be any harm in waiting six to eight months.
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Jim Michaels: Breaker
I don't think you can look at these companies and know what their earnings are. They'll show earnings in 1999 and then take big write-off in 2000 which is a way of saying: "Hey, we really didn't earn that." Altera has had that kind of write-off. I don't know what the earnings are. I don't know if technology will hold up in the long term. I don't want to pay for that.
Transocean Sedco Forex (RIG)
James Glickenhaus: Maker
Think the amount of money we ship to OPEC overseas is causing a big strain on the dollar. I think there will be tremendous pressure to find energy. This company has the best rigs in the deep water section which is where the giant finds are. I think this driller's earnings will grow from ninety cents this year to two dollars next year.
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Jim Michaels: Maker
I'm with you on this one. They can do something that nobody else can do. The world needs oil and they have the means to go into deep water and get it out of the toughest places.
Bruce Upbin: Maker
I agree. The shallower finds are being tapped out. I think oil is going to thirty. And I think these guys can go deep which is where we need to go.