Marketplace: News Archives

Friday, December 22, 2000

It's Friday, December 22, 2000. I'm David Brancaccio

'Tis the season for keeping an eye on the household budget. That seems to be the prevailing view as evidence mounts that this might end up being a B-minus or C-plus month for businesses that sell things for the holidays. First, we know that retail sales were down in November, compared with October. Secondly, the closely-followed University of Michigan index of consumer sentiment for December is down six and two thirds percent from the same month a year ago. Kurt Barnard, a respected analyst who publishes the Retail Trend Report, predicts that when you compare purchases in stores a year ago with the same stores now, sales will be up…a little, maybe three percent.

Barnard: "Let's put it this way, it's not too bad, no, it's not bad at all. It's just that it's a lot less than six and a half percent, which we had last year."

David: "Given that inflation could come in a 3.4% this year, a rise of three percent in sales is perilously close to treading water. That does not mean folks are not spending, Barnard says."

Barnard: "People are cautious spenders these days, very cautious spenders. They don't buy on impulse, they don't buy on a whim, and they don't buy frivolously. They buy what they need and what they want to buy, and that's about all."

Davis: "They all want electronics of some form. John wants more megabytes and more rams for his computer. A new computer would be fine, but that's not gonna happen, he's gonna have to live with the upgrades we provide. Nicholas wants DJ equipment...two turntables and a mixer. Rachel wants right now she says she wants a TV for her bedroom, which we have fought for many years."

Davis: "We were pretty well prepared for the holidays although certainly we are gonna have to turn to plastic for some of this and have already. But that's also with a plan that we know we'll have it paid off within a certain amount of months because we try to avoid debt and that way we don't get into trouble when things do go sluggish."

Davis: "We were talking to somebody just last weekend about the wealth effect and people who have really counted on income from investments over the past several years who seen their stocks and mutual funds dramatically decrease. We do have certainly friends and family who have had to make cutbacks based on the fear of their savings. They've watched their saving dwindle."

In Europe, while economies may not be as strong as America's on paper, there's seems to be a more upbeat feel to things as Christmas approaches. Marketplace's Stephen Beard has been watching this from London...

Beard: Torrential rainfall and flooding in Britain dampened the shopper's artier at the beginning of this month, but now the storms have abated, pinned up consumers demand as burst forth engulfing shopping malls around the country. Britains are now expected to spend more on Christmas this year than ever before: 900 dollars ahead on presents, food, drink, and festivities. The clouds may be gathering on the financial horizon, but that doesn't appear to bother the Brits, least of all in London's financial district. Record bonuses for bankers and brokers there are pulling a mammoth-spending spree. How's this for a start: Christmas party. Bloombergs, the U.S. financial information group has done so well at its London headquarters, it spent more than a million dollars on a bash. It was based on the theme of the Seven Deadly Sins. Staff drifted in and out of lavishly decorated rooms entitled Envy, Lust, and so on. In the Avarice room, entertainers circulated waving bundles of cash and shouting "Money, ain't it gorgeous?" In London, this is Steven Beard for Marketplace.

While there have been some cutbacks and even pink slips, Santa is still spreading joy on Wall Street as Marketplace's Michelle Brier reports...

Brier: "On a busy street in the financial district, an old Christmas standard is blaring from inside a busy lunch cart. You think all the doom and gloom news about corporate earnings, economic slowdown, and the stock market losses would be dampering the holiday spirit down here. But it's not. This has been a record year for Wall Street's top financial firm and executives are expecting big fat checks in their Christmas stockings."

Greg David: "They're getting huge bonuses, just huge."

Brier: "Greg David is editor of Crane's New York Business."

G. David: "They're up anywhere from 25 to 35 percent. More than 4 thousand people on Wall Street are gonna get million dollar bonuses."

Brier: "You might be asking yourself "how can this be when the NASDAQ has lost half of it's value since March."

G. David: "Well, the answer is Wall Street firms actually had record profits this year, even though the profits have begun to weaken and the people who work there say 'well, pay us for what we did.'"

Brier: "It is true some trimming has been done. Discount broker Charles Schwab has cut back on bonuses and executive pay and is asking workers to take unpaid leave to save money. Prudential Securities plans to lay-off up to 200 bankers because of slowing growth while Merrill Lynch and Solomon Smith Barney are both considering lay-offs. And the merger of Chase Manhattan and J. P. Morgan will result in 3-5 thousand job cuts. But Wall Street's biggest firms has yet to reduce their payrolls hoping the economic picture improves in the new year. In New York, I'm Michelle Brier for Marketplace."

Dimsdale: "For the last eight years, conservatives had been stewing about Janet Reno's stewardship of the Clinton Justice Department. In John Ashcroft, they have their chance for a big change in course. Not just in anti-trust, but civil rights, ethics violations, immigration, and gun control. Observers expect the Bush Administration's Justice Department to shift focus from business and white-collar crime to more prosecution of organized crime, gun law violations and drug trafficking. There's little in John Ashcroft's record to reveal his anti-trust philosophy, except his conservative leanings will likely lead to less government intervention in business mergers. No telling what he'll do with the Federal anti-trust lawsuit against Microsoft now on appeal. But America Enterprise Institute scholar James Glassman says it's clear Ashcroft will not be as aggressive about anti-trust cases as was Janet Reno."

Glassman: "I just don't think that that kind of thing is going to be happening going forward. I mean, what you'll see is us going back to the kind of anti-trust policies that prevailed in the Reagan and Bush Administrations and it really, pretty abruptly changed late in the Clinton Administration."

Dimsdale: "A more telling appointment will be who replaces Joel Klein, the activist assistant Attorney General for anti-trust. According to Robert Liten, the director of Economic Studies at another Washington think tank, the Brookings Institution."

Liten: "One will assume that a conservative appointee with be suspicious of government intervention, suspicious of radical remedies like break-ups. But those are only guesses because there are conservatives in the Republican Party namely Senator Hatch is the Chairman of the Judiciary Committee who will be very sympathetic to breaking up Microsoft."

Dimsdale: "And as Chairman of the Judiciary Committee, Senator Hatch will have a big say in whether George Bush's Attorney General nominee is approved."

David B.: "John before you go, I'm curious about this big merger proposed late yesterday between the two big defense contractors Northrop Grumman and Liten. Remember the last time Northrop Grumman tried to merge was with Lockheed Martin back in 1997. Any sense of how this deal will fare under John Ashcroft?"

Dimsdale: "This is a very different merger. I mean, even without a shift in anti-trust policy under a Republican that combination of the big defense contractors doesn't appear to have as much overlap that would concern anti-trust regulators. You know Liten make ships and Northrop makes just about everything else. Both companies do have an Information Technology Division that sell to commercial as well as government customers, so one or the other company may have to divest themselves of their I.T. subsidiaries before this purchase is allowed, but it's likely to be approved."

David B.: "Marketplace's John Dimsdale in Washington, thank you."