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LOU DOBBS MONEYLINE
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Aired February 8, 2002 - 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.
ANNOUNCER: This is LOU DOBBS MONEYLINE for Friday, February 8. Here now, Lou Dobbs.
LOU DOBBS, CNN ANCHOR: Good evening everyone.
The president tonight is in Salt Lake City to open the Winter Olympic Games, games that are threatened by weather that may be too wintry. High winds and snow are expected.
The stock market warmed up today. The Dow Jones Industrials breaking a five-session losing streak with a triple-digit rally. We'll be joined by a portfolio manager who is beating this market handsomely, David Tice.
We'll also be joined by Henry Silverman, the CEO of Cendant Corporation, whose shares were battered by the Enron collapse and whose revenues have now more than doubled. And Enron tonight, not alone. Bankrupt Global Crossing is now under criminal investigation.
Tonight, we begin with security; security at our nation's nuclear power plants, where employees complain of inadequate training to stop terrorist attacks; security at the Olympics, where the military presence is unprecedented; and security at our nation's airports and in the skies, where a series of incidents this week have raised questions about just how much we're really improving security for air travelers.
In Atlanta this morning, a Delta Air Lines flight was grounded. It was searched after a bomb threat was received. No explosives were found. An unruly passenger forced a small Atlantic Coast airliner to be diverted to Cleveland Airport this morning. That passenger kept lighting cigarettes and acting strangely. And Pablo Moreira, who tried to kick in the cockpit door of a United Airlines flight yesterday, was arraigned in a Miami court today. Moreira was stopped by a co-pilot who hit him in the head with an ax.
(BEGIN VIDEO CLIP)
ALLAN SULLIVAN, ATTORNEY FOR PABLO MOREIRA: I think it's important for you to know that Pablo, our client, is not a terrorist. He has no affiliation or association to any terrorist organization.
GUY LEWIS, ACTING U.S. ATTORNEY, SO. DIST., FLORIDA: We in this district have averaged about one a month of these either air rage or assault on a flight crew cases since September and we're going to continue to until the message gets out that you're going to be prosecuted and you're going to jail.
(END VIDEO CLIP)
DOBBS: Moreira could face up to 20 years in prison.
New evidence tonight linking the suspected shoe bomber, Richard Reid, to the al Qaeda terrorist network. CNN has learned that a telephone card carried by Reid was used to place a call to a cell phone connected with a suspected al Qaeda terrorist in Belgium. Reid is charged with trying to blow up a U.S. airliner over the Atlantic by lighting explosives in his shoes.
Thousands of illegal Middle Eastern immigrants who have ignored U.S. deportation orders look as though they are going to be questioned by federal agents beginning next week. Officials in Washington say those agents will focus first on a group of fewer than 1,000 illegal immigrants, mostly from the Middle East and Pakistan. Officials say those people are the most dangerous because they are convicted felons.
President Bush opens the Winter Olympic Games tonight, and it is the tightest security ever that has been put in place to protect him and everyone else at the Olympics. The president saying the Games celebrate the American ideals of discipline and courage. White House correspondent Major Garrett, who is traveling with the president, is in Salt Lake City tonight -- Major.
MAJOR GARRETT, CNN WHITE HOUSE CORRESPONDENT: Welcome to Salt Lake City, Lou. And we talk about security. You know, you heard just a few minutes and you feel it all around you, 16,000 security personnel, federal, state, local, Black Hawk helicopters at the ready, F-16 jet fighter planes also at the ready. And you sort of begin to wonder, is security and the Winter Olympics an irony, a contradiction or simply emblematic of the new world we live in after 9/11?
My sense is it's a little of all three. I mean, the Olympics, after all, are a movement, peaceful cooperation and competition on the field of play by athletes all around the world, harmony, all of those are strong, powerful themes of the Winter Olympics. Yet, for the athletes who are participating and for the spectators who are watching, security everywhere around them, everywhere they go, everywhere they walk, everywhere they look: security, security, security.
The president has arrived here. He was asked upon his arrival how did he feel about the precautions. He said they were top notch. His mere presence here was proof of that. He stopped by see to see Gordon B. Hinckley, who is the president of the Church of Latter-Day Saints, Jesus Christ and Latter-Day Saints, also known as the Mormons. And he was asked there about not only the flag controversy, the World Trade Center flag that will be a part of the Opening Ceremonies, but the balance athletes and spectators should strike in being patriotic, but also understanding this is an international, a world event. Here's what he said. (BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I think the events are going to strike a proper balance between the patriotism that we all feel here and the international flavor of the Games. As I understand it, it meets what appears to be a reasonable compromise about the flag that flew over the World Trade Center.
(END VIDEO CLIP)
GARRETT: Seventy-seven nations will enter the Opening Ceremonies tonight, Lou. After they all take place, firefighters, police officers, a select number of athletes and an honor guard will bring that tattered flag that once flew over the World Trade Center into the Opening Ceremony arena and it will fly there as the Opening Ceremonies commence -- Lou.
DOBBS: Major, thank you very much. Major Garrett in Salt Lake City tonight with the president.
To provide the maximum protection possible for these Olympics, there are more U.S. troops on the ground in Utah tonight than there are in Afghanistan. Joining us from Chicago to assess Olympic security, military analyst General David Grange. David, good to have you here.
Let me, if I may turn to this. I mean, these are remarkable comparisons, more troops on the ground in Utah near Salt Lake City than in Afghanistan. What do you think?
RETIRED GENERAL DAVID GRANGE, CNN MILITARY ANALYST: Well, it's part of the challenge is the security of the venues. It's quite an elaborate system. I remember when we supported the Atlanta Olympics, it was almost 10,000 soldiers involved. A lot of them in support roles, but many in security roles as well. And because there is a shortage of law enforcement officers, it's required to have the National Guard support that.
Now in Afghanistan itself, you have around 4,000 troops involved in the fight in Afghanistan within the borders itself. But there's a lot of other military Marine, Air Force, Navy supporting from afar, Uzbekistan, the Arabian Sea, Pakistan, et cetera. So there are thousands and thousands of people involved in that theater, but only 4,000 on the ground.
DOBBS: Right. And we've had a remarkable shift during what is certainly remarkable times. But the idea of U.S. forces for domestic security, that is a sizable seismic shift in policy, and I think probably even in the values of Americans, the U.S. military on the ground here to provide security.
Do you think that's an appropriate for the U.S. military or should this administration and this Congress be thinking about other ways in which to establish homeland security that does not draw upon the U.S. military? GRANGE: Well, there's a lot of debate ongoing on this same subject right now, Lou, and many different studies, think tanks. You know, the National Guard does have a role. They've always had the role since the Revolutionary War. The military has to be involved somewhat. They're the only ones that have certain capabilities. For instance, on some of the more advanced chemical, biological, radiological response, Department of Energy and some of the others (AUDIO GAP) has the bulk of a lot of this capability.
So they have to be involved. But eventually, the law enforcement agencies, the border patrol, many of the other federal agencies as well as state and local that are involved in responding or protecting, detecting and deterring and responding to terrorist attacks, we have to build a force up from other agencies.
DOBBS: And I know that some of the concern expressed is really based on the idea that with the U.S. military -- and I'm not -- the U.S. regular military probably being involved is drawing resources and manpower away from other missions that may be perhaps more critical and also not bolstering the police forces and agencies as you suggest. Is that a concern for you?
GRANGE: I think it should be a concern for all Americans. You know, before the war on terror really got going, we talked about this a little bit before in the past, that the military is quite small, really, to take on all these tasks. And you just cannot continue to rotate the Armed Forces from one theater to another as well as deployed within the United States itself. It's just -- it's quite a -- what they call op-tempo deployment, operational tempo of the forces of the United States. And it effects readiness somewhat. So there has got to be a balance there. There's going to have to be some growth somewhere, either in the Armed Forces or in other agencies to take on a lot of these tasks, if we're going go into this war the long haul.
DOBBS: Your judgment, General, about the security, the adequacy of the security at the Games. you think it's pretty good?
GRANGE: I think it's just being involved in the Atlanta Olympics and Los Angeles Olympics when I was in the service, and what I've heard of the efforts for Salt Lake, I think it's very, very well done and it's obviously necessary for the air and the ground effort that is going on in order to thwart any attack that may happen. The key thing is, one, the deterrents as well as detecting and then reacting if, in fact, there's a breach.
DOBBS: General, as always, thank you very much. Have a great weekend. General David Grange.
GRANGE: Same to you, Lou.
DOBBS: Well, the first event of these Olympic Games has been postponed because of strong winds. The qualifying events for the 90- meter ski jump, scheduled for this morning, were canceled because of high winds and blowing snow. That combination has created a near white-out condition at the Utah Olympic Park. Well, with a budget of nearly $2 billion, these 19th Winter Olympics in Utah are the most expensive games ever. Sean Callebs has been looking into the costs, joins us now from Salt Lake City with the story -- Sean.
SEAN CALLEBS, CNN CORRESPONDENT: Well, Lou, you're exactly right. A lot of folks are focusing on the fact that George Bush is here, and a number of other world leaders, the 2,500 athletes, getting ready for the opening games.
Now, we've heard a great deal about the 300 million being spent on security measures in and around Salt Lake, but there's been a great deal of on other expenses. They spent more than $450 million on infrastructure in and around this area, improving the interstate system. And this has also been a three-decade long fight for Salt Lake City to draw the Olympic Games here. It spent close to $400 million on new venues as well. In fact, it spent so much money, a lot of it coming from federal authorities, that Senator McCain from Arizona has asked, where all this money indeed went.
Of course, that's not being talked about a great deal now as the games are getting ready to go under way. But certainly, Utah depends on tourism for a lion's share of the money that it brings into its state every year, and they're hoping to get a big bump out of these games. The ski industry has been flat for some time now, and they're hoping by additional publicity that events like snowboarding and downhill skiing are going to get, they hope to see that translate into some much-needed money for the state -- Lou.
DOBBS: Sean, as you say, some are ignoring those costs, and of course we will continue to keep our eyes on it very carefully, as we are want to do. The idea that there are a number of hotels there that are experiencing less than the response they would have liked, empty beds in rooms. Just how severe is it? Give us your best read on it.
CALLEBS: Well, I think it depends greatly on who you talk with. If you talk with authorities here in Salt Lake City, they'll tell you things are going well, that virtually all the hotels are sold out. But if you walk around -- I was here for the last few days -- until last night, we saw very, very few people gathered here for the games, and they're really only expecting about 80,000 people per day for all the venues. Now, if you figure that there's 16,000 security forces, that's about one for every eight people expected to attend the games.
Also, think about all the ticket brokers that stocked up on the tickets early on, before 9-11, and many of those are also being stuck with those exorbitant ticket prices as well. They're being sold for less than face value. I certainly think you could go down in basically almost any of these hotels right now and find a room. It's just how much you want to pay.
DOBBS: OK. Sean Callebs, thank you very much.
Coming up next here, bankrupt Global Crossing has joined Enron in the glare of official scrutiny. We'll be telling you about that as the FBI and the SEC are now investigating Global Crossing's accounting.
But the man who runs Cendant says his books are straight, and those books show a company that doubled revenues last quarter. We'll be hearing from him next.
ANNOUNCER: Next, Lou talks to Henry Silverman, chairman and CEO of Cendant.
(COMMERCIAL BREAK)
DOBBS: More developments on the Enron scandal to tell you about. Kenneth Lay, the man who ran Enron and who remains at the heart of that scandal, may testify when he appears before Congress next week.
(BEGIN VIDEO CLIP)
SEN. BYRON DORGAN (D), NORTH DAKOTA: Our attorneys indicated to them, on that basis we are going to prepare for this hearing with the expectation that Mr. Lay will be testifying. And they said we have no disagreement with that. Understanding, of course, that times change and he may very well decide that he has to appear but he does not have to testify.
(END VIDEO CLIP)
DOBBS: Lay has been subpoenaed by the Senate Commerce Committee to testify about the collapse of Enron. Lay backed out of an earlier appearance, because, his attorney said, of the prosecutorial comments of lawmakers.
In the meantime, Lay has sold his stake in a Houston expansion football team, the Texans. That stake, possibly worth $7 million, was sold to the team's chief executive, Robert McNair. A spokeswoman said money from the sale will be used to meet the family's financial obligations.
Some good news for Enron. The Central Intelligence Agency says it has found no record of any effort by the agency to intervene for Enron in either China or India. That information was requested by the Reuters News Agency, and the revelation follows news that last year Vice President Dick Cheney tried to salvage an energy deal with India.
Tonight, the bankrupt telecom company Global Crossing is the target of two federal investigations, one by the Securities and Exchange Commission, the other by the FBI. The government wants to know whether Global Crossing broke the law by defrauding investors. Bruce Francis has the report.
(BEGIN VIDEOTAPE)
BRUCE FRANCIS, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): The FBI is now investigating Global Crossing for its accounting practices. That's in addition to probes being conducted by Congress and the SEC. A former Global Crossing executive says he objected to certain company practices back in August, but his memo was not passed on to auditors until after the company filed for bankruptcy at the end of January.
NEIL GETNICK, BUSINESS FRAUD ATTORNEY: If that information was played with, now we are talking about potential mail fraud, we are talking about potential wire fraud, we are talking about potential criminal charges.
FRANCIS: Specifically, former Vice President of Finance Roy Olofson says that Global Crossing engaged in a practice called round- tripping. Here's how it works: Qwest buys telecom line capacity from Global Crossing, which treats the sale as revenue. Then, Global Crossing buys a similar amount of capacity from Qwest, but Global Crossing treats that purchase as a capital expenditure, an investment in its network, not as cost of doing business.
Olofson's attorney says the purpose was to deceive.
BRIAN LYSAGHT, SR. PARTNER, O'NEILL LYSAGHT & SUN: He told them in essence that if you simply round-trip cash with no economic justification for doing that and count that as either earnings or cash revenue, you're potentially misleading the public.
FRANCIS: That wasn't clear to many investors. And analyst Susan Kalla says that most of her peers didn't get it either.
SUSAN KALLA, FRIEDMAN, BILLINGS, RAMSEY & CO.: It wasn't very clear, and then nobody asked the right questions.
QUESTION: And now they're asking questions?
KALLA: Now they're asking a lot of questions.
FRANCIS: Global Crossing and Qwest say their practices were common in the industry, and legal. And Global Crossing says that Olofson, who was fired from the company, demanded a multi-million dollar payment in exchange for dropping a wrongful termination lawsuit. Global Crossing declined our request for an interview.
(END VIDEOTAPE)
FRANCIS: As in the case of Enron, investors may want to ask, where were the accountants? While it's not clear whether Global Crossing broke the law, it does share two things in common with Enron: It's one of the largest bankruptcies of all time, and Arthur Andersen served as auditor -- Lou.
DOBBS: And we're early in the process.
FRANCIS: Yes, we are, certainly.
DOBBS: Bruce, thanks a lot.
Well, Enron's fall has raised accounting questions for many companies, not least of which is Cendant. Over the years, Cendant has had to deal with its own complicated accounting history. Recent events have renewed some investor concern. Cendant's Chairman and CEO Henry Silverman joins us tonight. Henry, good to have you here. HENRY SILVERMAN, CHAIRMAN, CEO, CENDANT: Thank you.
DOBBS: Remarkable -- let me start, a remarkable performance last quarter to double revenues. That's...
SILVERMAN: And earnings were up as well in a very challenging quarter for someone with a large global travel platform.
DOBBS: And in watching your stock get hammered here, just as have so many in the midst of the Enron collapse, and all the questions coming up, rising again. How do you deal with it?
SILVERMAN: Lou, you and I are old enough to remember McCarthy and the McCarthyism of guilt by association. If you're a large company with diverse lines of business, as we are, as General Electric company is, as AOL Time Warner is, large companies now with diverse businesses are being, if you will, tarred with the same brush. It's obviously not fair, but Winston Churchill said "fair is for children." So we have put out all the disclosure that one can image. And I believe that our recent stock performance -- our stock was up again today -- indicates that investigators are getting very comfortable.
There have been no questions about our accounting, but you are correct, three years ago we found fraud at CUC, and clearly that's something that we had to deal with then.
DOBBS: In the issue -- you took the unusual step this week of also mapping out some balance sheet relationships as well. Will you continue that, the habit of publicizing them on a regular basis?
SILVERMAN: I think we're on the cutting edge of disclosure. We had already disclosed those relationships, we put them all in a very easy-to-understand English, in a format on our Web page that everybody could follow. We will update that as necessary every quarter. We published consolidated statements of free cash flow. We put all of our revenue drivers by business in every press release. We even publish sensitivity, so that if you don't agree with our assumption, on for example interest rates, what impact that will have on our cash flows and our earnings, so any analyst who wants to do the time and put in the effort can model us very simply.
DOBBS: And plain old just simple investors?
SILVERMAN: Yeah, we speak American.
DOBBS: How about that.
SILVERMAN: Yeah.
DOBBS: Who's your audit firm?
SILVERMAN: We use Deloitte & Touche.
DOBBS: And they're speaking English these days too?
SILVERMAN: I certainly hope so. DOBBS: The relationship between auditors and the companies, the independence -- do you believe it's right as obviously the Big 5 have decided that they're going to move away from consultancy. Do you think that's a step in the right direction?
SILVERMAN: I think it is, but the real problem, Lou, is you can't regulate human behavior. I think the problem at Enron probably was because that office of Andersen was just too big -- used an office -- Enron was too big a client for that office. And clearly, the problem of CUC was too big a client at the auditing firm that audited its books, which was not Deloitte, by the way. And I think independence get compromised when so large a percentage of the partners' compensation in a particular office is driven by one client.
DOBBS: One client. And what do you think the solution is? Harvey Pitt, chairman of the SEC, has said he is going to -- he pledged he's going to make real reforms here. We've heard a number of senators and congressmen make a number of recommendations. What do you think the solution is?
SILVERMAN: I think all of those are good suggestions. Once again, it's going to come back to the integrity of the management of the company. We had an audit committee meeting of our company this week, and our audit committee was assured by the auditors that everything was very much above board and was very appropriate. And my point to the audit committee was that, really, don't look at the auditors, look at the management, because it's all about human integrity. And if the management is not of the highest caliber in terms of honesty, then the whole system breaks down.
Having said that, there's 17,000 public companies, and all public companies should not create a crisis of confidence in investors because two or three or four cooked their books.
DOBBS: But as you know, as you very well know, that's the nature of markets, and this is the system of ours, until that confidence can be restored, through steps such as you and your company you're taking, though reform that's going to be introduced by the SEC and Congress here, that seems certain. But the idea of guilt by association that you raise, how long do you think it lasts? Some are calling it a crisis of confidence, some are calling it Enron-itis. How long do you think it's with us?
SILVERMAN: I think it lasts for a while. Until -- I think we've seen the headlines, fortunately, but I think it lasts for a while until companies like ours continue to make -- until all companies make the kind of disclosure we've made. If you're willing to do what we've done, and investors are willing to study your results, there's no mysteries. And once you've taken the mystery out, once there's nothing an investor doesn't know, then this too will pass.
DOBBS: It appears to me that the board of directors at Enron is looking at some rather sizable liability that will probably exceed anything in their DNO insurance. The issue of governance here, you raised the integrity of management, absolutely, and correctly I believe -- but the role of boards of directors and independent boards are absolutely critical here. And too many of those 17,000 companies you talked about certainly are not availing themselves of independent outside directors.
SILVERMAN: I think you're right. Certainly we have done that. We have a board of 14 people, of which 11 are truly independent. I think more companies are doing that. Certainly the SEC is pushing all audit companies to be fully independent, that is what the Blue Ribbon Panel has urged.
It's striking to me, Lou -- if you close your eyes, it sounds to me when you listen to the Enron management, the board, the audit committee, even the auditors, it sounds very similar to what we heard from CUC. "I didn't know, I didn't want to know, I'm not responsible, I'm not accountable, I'm not even sorry. I'm a victim." Everyone is a victim. There's got to be a perpetrator somewhere. Men from Mars didn't come down and do these transactions.
DOBBS: Well, Henry, I have been, as you pointed as we began our discussion, I've been around a long time covering business and Wall Street, and I have yet to recall a single incident in which management, an employee in a firm in a situation of Enron or approximating it, leapt to take responsibility or blame. So, human nature is still with us, as you also pointed out.
SILVERMAN: Well, we're a country of victims, unfortunately. That's part of the societal trend that we really need the reverse, and that will be one of the big steps that will help change the dynamic of what you and I are talking about.
DOBBS: The dynamic needs to be the bad guys are the victims, right?
SILVERMAN: That's right.
DOBBS: Henry, thanks a lot.
SILVERMAN: Thank you, Lou.
DOBBS: You're one of the good guys.
Coming up next here, more protests on the streets of Argentina, as the government appeals for international help. We'll have the details for you coming right up.
Also, skepticism in corporate America about the prospects for economic recovery. We'll tell you what the pessimists are saying, what the optimists are saying, and we'll even venture a guess as to who's right.
And the views of a top portfolio manager. We'll find out what he thinks about this market and the way in which to market money. Stay with us.
(COMMERCIAL BREAK)
DOBBS: Wall Street closing out the week with a rally, a triple- digit rally, in fact. Stock prices shooting higher in the final hour of trading, ending a five-session losing streak. The Dow today gained 118 points. The Nasdaq up almost 37 points, while the S&P 500 moved up 16 points.
Joining me now, one of Wall Street's most renowned bears, David Tice. His caution pays off for his investors, the Prudent Bear Fund greatly outpacing the broader market. You'll see a certain divergence there in direction. The S&P 500 down 5 percent so far this year; Tice's Prudent Bear Fund is up 14 percent. And David Tice joins us tonight from Dallas, Texas.
Good to have you with us, David.
DAVID TICE, DAVID TICE & ASSOCIATES: Glad to be here, Lou.
DOBBS: That's a pretty impressive performance. If we get a rally here, does it -- do we see that chart invert?
TICE: Well, we do have a negatively correlated fund, Lou. We set up our fund to make money in the declining market. We felt as if the little guy needed someone warning them about what we felt like was a historic bubble, both in stock prices and in the economy. So we make money as the market declines.
DOBBS: You make money as the market declines, and you've had a lot of opportunity here. Do you see the market continuing to struggle?
TICE: Yes, we do. We think we have had a bear market rally over the last four, five months. We think this is a secular bear market, meaning a longer term bear market. If you go over history, we started 17-year bear market in 1929. That was followed by an 18 -- a 20-year bull market, followed by a 17-year bear market, and an 18-year bull market. So it's unlikely this is just going to be a two-year bear market. This bear market is likely to last for a while.
DOBBS: As you point out, this has been a bear market for some time, going back to the beginning of 2000. We were rolling right along. I know you listen to -- I better not say I know, I suspect you listened to Henry Silverman as we were discussing...
TICE: Yes, I did.
DOBBS: ... the issues of what are some are calling Enron-itis. Frankly, I hate the term, but I'm hard-pressed to improve upon it. Do you believe that we have seen a few bad apples drop from the tree and that's about it?
TICE: Well, I do think there's a spirit of recklessness that's existed within corporate America, where some of the most reckless CEOs, the most reckless CFOs, the most reckless bankers have been promoted, in this effort for greed to make their earning per share estimates, and I think there's a lot of companies that have stretched to the limit in order to keep their earnings growing, in order to keep their stock prices up, in order to keep their stock options making money. And I think there's a risk there. DOBBS: Let's find out how good you are. Did you identify Enron as a problem and short going in?
TICE: We were short the stock. Yes, we were.
DOBBS: How about Tyco? You started -- you started getting aggressive -- very focused on Tyco and its aggressive accounting. And that was, what, two years ago -- better than two years ago?
TICE: Right, back in 1999, we originally identified it for our institutional investors. We've been short in the stock for about six months. We still think the stock has a ways to fall.
DOBBS: And why is that?
TICE: Well, we think that this company has been primarily the beneficiary of financial engineering. This is a combination of some very slow growth businesses. This is really the end of the Tyco dream, in that this company was able to show a faster growth rate from all its acquisitions, all the charge-offs, taken advantage of accounting latitude, and now they're going to have to break up, and that's going to be not so good for its financial engineering.
DOBBS: When you say that, David, as you look at the stock performance and a general character of companies that you would short, and you look out for a negative tract in the months and the years out, you heard Henry Silverman also talk about the commonality. AOL Time Warner, for example, the parent of this network, General Electric upon which Kozloski (ph) said he was modeling Tyco, you have Cendant, give us your best read on those commonalities.
TICE: Well, Henry's point was that the large companies with complex operations are being painted with the same brush. I do think in this environment, people are looking for simpler being better, and frankly there's so much at stake with these managements to be able to report good numbers, that when it is complicated, you have to doubt what's really going on behind the scenes.
And when you can't really trust the Big Five auditors in some cases, certainly in the case of Enron, it was very disturbing, people are going to pay more for simpler companies.
DOBBS: Where - I know you don't talk about individual stocks, but where do you look for other companies that would be carrying out what you would consider aggressive accounting practices that are tipping well on the side of risk, rather than purpose?
TICE: We worry a lot about the financial companies. We worry in the consumer lending area, in the sub prime lending area. There are so many assumptions that have to be made and estimates. Earnings being reported are not just 95 cents to the number. It's a result of a series of estimates, and assumption, and we're very concerned about some of the credit card lenders, some of the sub prime lenders, the auto lenders, et cetera.
DOBBS: David Tice, as always, good to have you with us. Thank you.
TICE: Good to be here.
DOBBS: Well, many large companies remain cautious in their outlooks for the economy, despite signs that a recovery may be around the corner. Several economic reports next week will certainly, we hope, do something to settle the debate, but those reports are unlikely to sway those in corporate America who are, many of them, simply gloomy about the prospect for recovery. Kitty Pilgrim has our story.
(BEGIN VIDEOTAPE)
KITTY PILGRIM, CNN CORRESPONDENT: Corporations used to be accused of being relentlessly upbeat, putting a good spin on everything. Not these days. Corporations are professionally pessimistic about the outlook for growth, preferring to lowball their projections.
Heads of large companies, such as Bill Gates of Microsoft, Boeing's Phil Condit, the Chairman of UNILEVER, the number one food and soap maker in the world, and the CEO of Proctor & Gamble, have publicly said they're worried about a near term improvement in the economy. Many on Wall Street agree.
KEITH STOCK, CAP GEMINI ERNST & YOUNG: Well, I believe from my perspective that we still have a long road to go before we return to economic prosperity, and that in fact, it's going to be a slower, more methodical recovery than a lot of analysts and American governmental officials believe it will be.
PILGRIM: Of S&P 500 companies who issued pre-announcements on earnings this quarter, the majority were negative, 60 percent have issued warnings, 19 percent on target and 28 percent positive.
In technology so far this quarter, more than half the companies issuing pre-announcements were negative, 31 percent were positive and 18 percent on target.
In contrast to official corporate estimates, most Wall Street analysts tend to project high growth at the beginning of each year, and adjust lower as the year progresses. Analysts at Thompson Financial also say projections are way too high.
JOSEPH KALINOWSKI, EQUITY STRATEGIST, THOMPSON FINANCIAL: Right now, analysts on Wall Street are projecting about 17 and a half percent growth for the S&P 500 for 2002. Given the natural trend of just cutting the forecast, I think this number will probably settle in somewhere around mid to high single digit growth when everything is said and done.
(END VIDEOTAPE)
PILGRIM (on camera): Now some of this lowballing by corporate America is pure strategy. In the current market climate, any unpleasant surprises are punished by sharp volatility in the stock. It's better to manage expectations than explain what went wrong -- Lou.
DOBBS: Under promised and over delivered, all right, thanks a lot Kitty. Joining me now to talk about the prospects for recovery, Donald Straszheim, President of Straszheim Global Advisors. Don, it's good to have you here.
DONALD STRASZHEIM, PRESIDENT OF STRASSHEIM GLOBAL ADVISORS: Lou, nice to be back.
DOBBS: Who's right, those folks running the companies or private economists who see far better things far sooner?
STRASZHEIM: Well, I think it's going to be a very weak, slow and sluggish recovery. I think the first point I would make is, we've all marveled at how strong the consumer has been.
DOBBS: Right.
STRASZHEIM: And how strong housing has been. That's the good news that kept the recession moderate. The bad news is, there's not going to be any bounce, no lift. Typically though, sectors go up a lot. This time I don't think they will.
DOBBS: Can they maintain? Because we have huge consumer debt here, we have an extraordinary level of debt. Can automobile sales continue at a strong pace through this year? Can housing sales?
STRASZHEIM: Auto sales clearly not in my view. What we had in the last quarter of last year was this incentive plan, the same thing the auto companies did in 1985, '86, and '87, and all those do is rob sales from the future. You'll see those sales weaken in the next couple months.
DOBBS: What are -- in your judgment, what are the brightest prospects here within the economy? Where do you look for strength, any drivers at all?
STRASZHEIM: Well, I think the energy sector will gradually begin to improve as the economy does. It's not going to be all that inspiring.
DOBBS: But that's not all bad.
STRASZHEIM: No, that's right. We'll see inventories begin to be -- companies will start to build inventories over the next several months, not at a rapid pace until they see the whites of their eyes.
DOBBS: Business investment simply has, well has all but disappeared. It is negative. It has been negative. We've got a business investment recession. When do you see that turn?
STRASZHEIM: I think the capital spending improvement probably will be a second half of 2002 phenomenon, not a first half phenomenon, and according, I think the numbers for the next six months are going to be very choppy, one good number, one bad number.
DOBBS: What are the greatest risks to recovery?
STRASZHEIM: Well, I think the greatest risks to recovery are overseas. Japan's economy is a nightmare, third recession in the last ten years. They don't get it. I see no reason to be optimistic there. Europe is only so-so. South East Asia, there's not a company from Manila to the Great Barrier Reef, it seems to me, that looks very good.
DOBBS: Then it's up to us?
STRASZHEIM: It's up to us, and our economy will recover, but it's going to take some time.
DOBBS: OK, Donald Straszheim thank you, and Don will be coming back to join us for the roundtable in which we can decide the precise direction of stocks and stock prices by sector and by individual company.
STRASZHEIM: You bet.
DOBBS: All right, thanks. Well turning to Argentina, Argentina called for urgent international help today. The Argentinian government prepared to float the peso freely in the global currency markets with sporadic street protests continuing all across the country. The government is desperate to avoid a peso meltdown. The currency will be allowed to trade freely beginning Monday. Tuesday, the Argentine Economic Minister will go to Washington to personally, to personally ask the International Monetary Fund for its help.
A late session rally, barely salvaged what was a dismal week for the markets, but investors loved that triple digit effort. Next, we'll take a look at whether investors can look forward to better days.
Also, worries over anti-terrorist security at nuclear power plants. The second of our two-part special report tonight. And as the Winter Games begin in Salt Lake City, a look at how some people think they've already struck Olympic Gold. Stay with us.
(COMMERCIAL BREAK)
ANNOUNCER: Lou Dobbs MONEYLINE continues. Here again, Lou Dobbs.
DOBBS: We're joined by economist Donald Straszheim, our own Christine Romans, Jan Hopkins here as well to give us some insight into both the direction of the economy and the markets, and we've got plenty of material to digest.
Christine, let me turn to you. This was a triple digit rally today on the Dow. Let me say that again, a triple digit rally, and strong at the end.
CHRISTINE ROMANS, CNN CORRESPONDENT: Very strong. It was very strong.
DOBBS: That's a remarkable place for a change of sentiment, the final hour on a Friday.
ROMANS: It really is, and the volume picked up on that last half an hour of that final hour of trading.
DOBBS: Why?
ROMANS: Well, traders said that after a week of trying to sell it and they couldn't really smack it down too hard, at the end of the week they decided that perhaps there were some bargains to be had. JP Morgan, a three-year low this week. AOL Time Warner, also hit a three-year low this week.
So there were some big names out there that were beaten down to levels we haven't seen in a few years, and they were buying in those names yesterday and today.
DOBBS: What do you think?
JAN HOPKINS, CNN CORRESPONDENT: Well there was news today that Steve Case, the Chairman of AOL was buying a million shares, and that came at about the time that the market started turning around.
DOBBS: For Steve Case, that's pocket change.
HOPKINS: But, it's the kind of thing that encourages investors, instead of people standing by. You know, the other thing was, no hearings on Enron today.
ROMANS: Right.
HOPKINS: And that, I think, has made a big difference. When you see Jeff Skilling on the screen, investors say, well do I really have to buy stocks right now? And, no hearing today, no hearing Monday, so that might be a good rally too.
DOBBS: Look for a Monday rally.
HOPKINS: Right.
DOBBS: Look for a Monday rally. Now what do you think of that, Jan talking about Steve Case pulling, you know, what would be $25, $26 million?
STRASZHEIM: Some change out of his pocket, right?
DOBBS: Out of his pocket, and people get excited about that. At the same time, others are looking at some of these companies are doing stock buy-backs and saying that's inflating their value. How do you see it?
STRASZHEIM: Well, I think you're starting to see some people looking for bargains. It's maybe a bad analogy, but there's a bunch of babies getting thrown out with the bath water here right now with people punishing any kind of uncertainty, the Enron effect. And there's some good companies, some bad companies are going to get punished, but some good ones too. People are looking for those. DOBBS: We heard Henry Silverman, again let me go back to that, talking about, he really made it clear, he didn't think that this was a large number of companies that would be affected by Enron-itis, the Enron effect, or if you will, aggressive accounting concerns. What's the sentiment that you hear?
STRASZHEIM: Well, my sense is it's a small number that are really the villains, but it's a larger number who are suspects, and those are the companies that investors are trying to find.
DOBBS: You think there are quite a few of those companies quickly trying to get themselves off the suspect list?
HOPKINS: Oh, I'm sure they are, and you know, we'll see what happens in the next few weeks. But I assume that there will even be more suspects. We has asbestos as a problem, you know, in the last few weeks. You know, any kind of...
DOBBS: Well, what are the traders saying down on the floor?
ROMANS: They're saying they think that this so-called Enron- itis, and I don't like it either, the term, they think that it's been played out. They said unless there's another blowup soon, they're going to start to see these come back. Look at Elan (ph) Pharmaceuticals came back nicely here today. AOL came back nicely. Other names that people have seen.
HOPKINS: Tyco.
ROMANS: Tyco. Tyco, three days in a row, Lou, and we haven't seen putting them three days in a row on the upside in some time. So the fact that Tyco came out this week and said they were going to be holding a weekly conference call to discuss their finances, an unprecedented kind of a move, but that helped on Wall Street.
DOBBS: An up week next? Let's take a long-term forecast here.
HOPKINS: Maybe the week after next.
DOBBS: All right.
HOPKINS: Would be an up week.
DOBBS: Tell us your view of these markets. We understand your economic foundation for it. What do you think the markets will do?
STRASZHEIM: No, I think the markets are going to be very choppy, just like the economy is. But this all Enron all the time is going to blow over pretty quickly I think.
DOBBS: And we're giving Donald Straszheim the final word. Christine Romans, thank you very much. Donald Straszheim, Jan Hopkins, as always, thank you.
Coming up next are more questions about security at our country's nuclear power plants. We'll ask whether the guards have enough training to keep terrorists from attacking those plants, in the second of a two-part special report.
And the industry, the advertising industry, goes for gold at the Winter Olympics. We'll be telling you whether Olympic fever can lift Madison Avenue from its gloom. That story is next.
(COMMERCIAL BREAK)
DOBBS: Now a follow-up to a troubling story we reported to you earlier this week here. A devastating terrorist attack against a U.S. nuclear power plant remains a distinct possibility. Employees at one nuclear power plant say most of its security guards are senior citizens, out of shape, and have minimal training.
Tonight, we take a look at the training security guards receive to protect our nuclear power plants. Steve Young has the report.
(BEGIN VIDEOTAPE)
STEVE YOUNG, CNN CORRESPONDENT (voice over): Terrorists wouldn't be stationary. That's the point of this drill at a nuclear power plant. What about training for so-called first responders at one of the Tennessee Valley Authority's three nuclear power plants? Do you have any training shooting live ammunition against moving target?
UNIDENTIFIED MALE: No, sir. We are trained from what little firearms training we have. It's firing from a stationary position to a stationary target.
YOUNG: In bold ads, the nuclear industry trade group says power plant guard forces are seasoned pros. The plants are guarded by highly trained paramilitary forces, true?
UNIDENTIFIED MALE: False. False.
YOUNG: The Nuclear Regulatory Commission declined our request to discuss anti-terrorist security at power plants, but here's what Chairman Richard Meserve told the National Press Club last month about the guard force.
RICHARD MESERVE, CHAIRMAN, NUCLEAR REGULATORY COMMISSION: They're comparatively well paid. There is high retention rate in the industry for these people. About two-third of them, as I understand it, have previously worked in law enforcement, in the military, security or industrial security.
YOUNG: But guards we spoke to estimate that most of the security force at the TVA Plant is hired with no prior military or law enforcement experience. One-third have been on the job less than six months, there's a 60 percent annual turnover rate. They're not hired by the TVA. To save money the government giant has outsourced the security force to Pinkerton, which offers minimal benefits.
That's a pattern followed by the operators of most nuclear power plants, according to Pinkerton. With the average pay less than $10 an hour at the TVA Plant, unsurprisingly there are labor-management conflicts. But in the age of domestic terrorism, you'd expect easy agreement over the need for main gate barricades like these.
The TVA Plant said yes to the guards' request for additional lighting, yes to night vision devices, but no to the barriers. The guards say sometimes they're required to work as much as 72 hours, to the point of exhaustion.
ED LYMAN, NUCLEAR CONTROL INSTITUTE: Since September 11th, the NRC has said that nuclear plants are running increased patrols, and unfortunately a good deal of that is by making the existing guards work overtime. And although the NRC claims that there are procedures for limiting fatigue are adequate, I have serious concerns about whether that really is the case.
YOUNG: The guards know terrorists might try to crash a hijacked airliner into the plant, and many airliners fly overhead. How do you feel when you're on the job?
UNIDENTIFIED MALE: I'm glad when the day is over and we get to go home alive. They're been so close at times, we could see the passenger windows in the planes, and that's no exaggeration whatsoever.
YOUNG: You don't get used to it?
UNIDENTIFIED MALE: No. Every time my hair stands up on the back of my neck, every time one of them fly over.
(END VIDEOTAPE)
YOUNG (on camera): Pinkerton defended its record saying it is unfortunate that a few employees would mislead the public on serious security issues. The TVA issued a statement saying: "We are disturbed at recent nuclear security allegations aired by unidentified sources on CNN, and the unbalanced manner in which the issue is being reported. TVA has a strong nuclear program. Our security is no exception."
The Nuclear Energy Institute, the trade group claims retention averages 90 percent, average salary is $35,000. But, Lou, since our first report earlier this week, two more guards from a second TVA plant approached us, same story, poor training they say, poor pay.
DOBBS: Well, the TVA is obviously welcome here at any time to discuss this critical issue, this very important issue. Their reaction?
YOUNG: We talked to them for a day and a half. Their reaction was a statement.
DOBBS: OK, well we want them to be here any time they want to be, because this is just too important not to give voice to these issues, and we would certainly like to have their full, full voice on this issue. Steve Young, thank you very much for an excellent report.
YOUNG: Thank you. DOBBS: Well, "WOLF BLITZER REPORTS" begins in just a few minutes. Let's go to Wolf and find out what lies ahead on CNN -- Wolf.
WOLF BLITZER, CNN ANCHOR: Thank you very much, Lou. We're standing by for the opening of the Winter Olympic Games in Salt Lake City. We'll go live to the events where President Bush is about to meet with U.S. athletes, and we'll also get the inside story of U.S. Special Forces.
I'll talk live with the best-selling writer, Tom Clancy, and retired General Carl Steiner, the former Chief of U.S. Special Operations. It's all ahead at the top of the hour. Lou, have a great weekend.
DOBBS: You too, Wolf, can't wait. Thank you very much. Can't wait for your program, not just the weekend. We'll be back with more MONEYLINE in just a moment.
(COMMERCIAL BREAK)
DOBBS: The Olympics begin tonight, and NBC may have an advertising success on its hands. Susan Lisovicz with the story.
(BEGIN VIDEOTAPE)
SUSAN LISOVICZ, CNN CORRESPONDENT (voice over): There's gold in them there hills. The Salt Lake City Winter Olympics will showcase the world's best athletes and its biggest advertisers.
The collapse of dot.com advertising and the overall economic slowdown have plunged Madison Avenue into its worst recession since the Great Depression. But Olympics broadcaster, NBC, says it has surpassed its sales target of $270 million.
BRADLEY JOHNSON: You really couldn't design a better place for Madison Avenue to pitch its wares, post 9/11. There is going to be a global feeling and a lot of patriotism.
LISOVICZ: Even struggling companies, like Xerox, are playing in the Winter Games. Xerox is unveiling its first big ad campaign in a year. Kodak's relationship with the Olympics stretches back more than a century.
KENT McNELEY, EASTMAN KODAK: The Olympics are very much about competition, about inspiration, about the celebration of life, and those are some of the values that, from Kodak's standpoint, have been most associated with our heritage.
LISOVICZ: But it may be downhill for the rest of the year. Media buyers say the Olympics may siphon off business that may have gone elsewhere.
MELVIN BERNING, MEDIAWEST WORLDWIDE: The Super Bowl was probably impacted to some degree, and I think as you look out the NCAAs and the NBA might be impacted. LISOVICZ (on camera): But NBC's prime time is a gold medal favorite this sweeps month. The network says it hopes to win every night of the 17-day event, and even with Olympic production costs of $645 million, those ad sales are expected to give NBC a profit of $60 to $75 million. Susan Lisovicz, CNN Financial News, New York.
(END VIDEOTAPE)
DOBBS: And that is MONEYLINE for this Friday evening. Thanks for being with us. Have a very pleasant weekend. Good night from New York. "WOLF BLITZER REPORTS" begins right now.
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