Marketplace: News Archives

Monday, December 18, 2000

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It's Monday, the 18th of December. I'm David Brancaccio.

George W. Bush made his first trip to Washington since becoming President-elect, and who was the first person he wanted to meet? Alan Greenspan, naturally, as he's the orchestra conductor of ten years of economic prosperity. The two met for breakfast today, even though the Fed meets tomorrow to set interest rates-and Presidents, and Fed Chiefs are traditionally at pains to show that politicians don't meddle in interest rate decisions. Marketplace's John Dimsdale has more from Washington.

Dimsdale: "Alan Greenspan is famously opposed to George Bush's big tax cut idea. Asked about their conversation at a photo op later in the day, the President-elect refused to characterize their discussion on tax cuts, but did say they spent a lot of time talking about energy."

Bush: "We must be concerned in this country about energy. We must be concerned about shortages. And at the same time, obviously concerned about conservation."

Dimsdale: "Bush called it a good meeting, and said he respected the Fed chairman, trying to show there's no lingering bad blood from George Bush, Sr.'s bitter feeling that Greenspan's tight money policies cost him the 1992 election.

Ironically, Greenspan's Fed may be about to hand Bush, the son, with some growth enhancing lower interest rates ... altho probably NOT at tomorrow's meeting according to Mark Zandi at Economy.com."

Zandi: "They have what economists call a moral hazard problem developing. I think everyone out there feels the Fed will ultimately bail us out if we get into too much trouble. And when people feel like they're going to do that, they take on too much risk, and that's something policy makers would like to avoid. So they'll probably move a little bit slower, cause a bit more pain and suffering than most of us would like to see before they actually pull the trigger and ease interest rates."

Dimsdale: "...Which Zandi and others predict will happen at the next meeting the end of January.

In Washington, I'm John Dimsdale for Marketplace."

Moon: "Chrysler's weak sales and ballooning losses are causing German executives to warn that there's worse to come - that 2001 will be 'more difficult than the current year.'

While some analysts suggest the automaker is lumping other costs and charges in with operating expenses to get all the bad news out of the way, Automobile magazine's Jamie Kitman doesn't see much good news on the horizon..."

Kitman: "I guess people say, the cliché in the industry is that, you know, you're let out of troughs in the market by product. And I think that while the PT Cruiser's been very successful, it's a relatively low-profit item, and I think that other than that, on the car side, Chrysler's upcoming product is less than stellar."

Moon: "And as Kitman sees it, that's only part of the problem. He says Chrysler and other automakers will be taking losses on vehicles coming off leases - vehicles that won't produce the money the companies thought they had made two and three years ago.

Overall, if doesn't offer much hope for a short-term turnaround. So what's ahead for Chrysler? Kitman says some radical moves have been rumored."

Kitman: "Some people have suggested that Daimler will soon spin off Chrysler again. If they were to do that, it'll clearly be a much weaker company that is was before, when they felt it was necessary to merge in the event that something like this would happen."

Moon: "Kitman and other analysts say they don't see Chrysler breaking even in the foreseeable future. I'm Bob Moon for Marketplace."

A deal that would create the world's biggest drug company has scored a major drug victory, as Tanya Ott reports from the Marketplace HealthDesk.

Ott: "British drug companies Glaxo Wellcome and Smith-Kline Beecham say U.S. antitrust authorities have approved their 72 billion dollar merger deal. The merged company - which will be known as Glaxo-Smith-Kline - must still be formally approved by the British High Court this Wednesday. Analysts say approval is likely. This is just the latest in a sweeping round of mergers and consolidations which drug industry analyst Hemant Shah says won't last forever."

Shah: "...at some point, some of these companies will become just too big. Their future growth is going to be much, much slower."

Ott: "The Glaxo, SmithKline deal was approved by the European Commission in May, and was originally scheduled to be completed in the summer. It was, however, held up by Federal Trade Commission questions about the combined companies' power in certain markets. SmithKline had to sell off several products to get FTC approval. From the WGBH HealthDesk, I'm Tanya Ott for Marketplace."

Gardner: "It wasn't that long ago that a company could just whisper "dot-com" and "IPO" in the same breath, and investors would start salivating. But a lot of those new dot-coms turned out to be all sizzle and no steak, and investors lost their appetites. This year's top ten IPO losers, according to Thomson Financial, are almost all Internet-related. Pets.com, VarsityBooks.com, and Snoball.com are all off 95 percent or more from their offering price. Thomson's Richard Peterson, author of the new book, Inside IPOs, says investors wised up this year."

Peterson: "It coincided with the Nasdaq peak. Some investors and maybe some more prudent commentators realized the frothiness where companies were selling at 100 times earnings. You had companies such as Priceline that were being valued greater than some members of the Fortune 500."

Gardner: "There were some big IPO winners this year, however. Thomson's top 10 include many high tech companies, but these high techs make real products rather than sell things or provide content over the 'Net. Software maker Embarcadero Technologies is number 1, up 315 percent from its offering price this year. Others IPO winners this year are more traditional, including a life insurance company, a drug company, and yes, even a donutmaker. Krispy Kreme sold for 21 bucks a share initially. It's now trading at around 73. In a year when the financial markets and the presidential election had our stomachs churning, evidently, a glazed donut can be a comfort. I'm Sarah Gardner for Marketplace."

Today, the Dow rose 210 points or 2 percent, as investors in blue chip companies took heart in that Wall Street Journal article suggesting the Fed might cut interest rates soon. The Nasdsaq fell 1.1 percent. Details when we do the numbers.

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