Marketplace: News Archives

Wednesday, December 18, 2002
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It's Wednesday, the 18th of December. I'm David Brancaccio.

With the White House and Britain saying there are serious omissions and problems with Iraq's weapons declaration, and concern that President Chavez in Venezuela might use violence against demonstrators and strikers calling for his removal, the price of oil hit a 3-month high. In New York, the benchmark futures price closed at $30.38 cents a barrel -- up 28 cents. Marketplace Stephen Beard has more from London.

Beard: "Today's critical remarks about the Iraqi dossier have focused fears on the double threat to oil supplies: An attack on Iraq would deprive the market of 2 million barrels a day, and the U.S. is already losing the same amount as a result of the oil strikes in Venezuela. A daily loss of more than 4 million barrels would be quite a blow, says Michael Herberg of the University of California at San Diego: "

Herberg: "There is enough spare capacity to make that up, largely in Saudi Arabia. But it leaves the world oil market very tight; there will be very little spare capacity left over -- if you get into that scenario."

Beard: "Some oil analysts and traders spoke ominously today of 'the countdown to war' and talked of a potential shock to world oil supplies. But Ed Muller, an experienced oil investor is taking a more relaxed view. For one thing, he doesn't think the Venezuelan oil strikes will continue for very much longer: "

Muller: "I think the expectation is that this is going to sort out. I, for one, would have thought it would have already sorted out, so I've been wrong for a few days. But it's going to sort out -- I believe that. And, I think the marketplace believes that. Oil is too massively important for Venezuela. This thing will come to a head and production will start up again."

Beard: "There are other reasons to be relaxed about oil supplies. The U.S., Europe and Asia have sufficient strategic reserves to supply the world market with 13 million barrels a day, almost the entire output of the Persian Gulf for a month or two. But as today's spike in the oil price showed only too well, markets hate uncertainty -- and there is nothing more uncertain than war.

In London, this is Stephen Beard for Marketplace."

A senior official of the Islamic militant group Hamas, his wife and five brothers who worked at a Texas computer company were indicted today on money laundering charges. Federal agents arrested the brothers at a company called InfoCom, near Dallas. The leader, Mousa Aba Marzook, and his wife are believed to be in the Middle East. Attorney General John Ashcroft claims Infocom and its employees financed terror by making illegal computer shipments to Libya and Syria, and helped the Hamas leader hide profits and capital investments in the company.

The Justice Department also connected Infocom and the Holy Land Foundation, a Muslim charity in the U.S. shut down a year ago for allegedly funding Palestinian suicide bombers. They both had offices in the same Texas office building and both are said to have received "seed money" from the senior Hamas official.

South Koreans vote for a new president today. The winner will replace Kim Daejung, the man who guided the country to prosperity after a financial meltdown 5 years ago. The Nobel Peace Prize winner also helped engineer a historic thaw in relations with North Korea. Controversy over who should replace him, and what stance Korea should now adopt towards its neighbor to the north, has sparked the largest anti-U.S. rallies in Korea since American troops first arrived during the Korean War. Marketplace's Jessica Smith reports that there's a generational divide splitting voters on U.S. policy toward Korea.

Smith: "Nearly 100,000 mostly young South Koreans packed the streets of the capital over the weekend to protest the U.S. military presence and Bush's hard-line approach to North Korea. The candidate many of them support is the relatively youthful Roh Moohyun, a labor lawyer who says he won't be pushed around by longtime ally the U.S., and will continue economic aid to North Korea. And, $500 million have flowed from South to North as part of a so-called 'Sunshine Policy.' Political analyst Michael Yoo explains why many South Koreans want to keep the money flowing."

Yoo: "Korean people they don't want to face a war now."

Smith: "Yoo uses the theory of a rat being pushed into a corner."

Yoo: "If they're cornered, the rat bite you. The rat has atomic bomb now, they say."

Smith: "If South Koreans don't help the North, he adds, the rat will bite them. Its not just fear, but prosperity, that may underlie young voters' more magnanimous attitude towards North Korea. Scott Snyder with the Asia Foundation in Seoul says younger voters have grown up in a time of rapid economic development and want to keep what they have. He adds, they see economic aid as manageable for Asia's fourth-largest economy."

Snyder: "And, it's seen broadly more as humanitarian, helping people in need, whereas the cost of a military conflict and the devastation it would cause -- the drastic drop in GNP and personal standards or living -- is a prospect that I think is not at all attractive."

Smith: "Older South Koreans have seen war and poverty, and are more cynical of Pyongyang's intentions. Snyder says older voters favor Roh's main opponent, Lee Hoichang, who favors cutting off aid and isolating North Korea. Polls show a tight race, with almost 25 percent of voters undecided.

In Tokyo, I'm Jessica Smith for Marketplace."

Steve Tripoli: "Conseco was primarily an insurance company focusing on lower-income consumers before deciding there were other ways to make money from that customer base. Standard & Poor's analyst Timothy Clark says that choice proved fatal."

Clark: "Conseco's decision in the late 1990s to expand into consumer finance ultimately led to the company's downfall."

Tripoli: "Conseco choked on its 1998 purchase of Green Tree Financial Corporation. The $6 billion deal brought Conseco a lender specializing in mobile-home financing just as that business peaked. Defaults rose, and among other problems, Conseco found itself saddled with 19,000 repossessed mobile homes that it could only sell at a steep loss.

Timothy Clark says it wasn't just a declining industry that hurt Conseco. The company's assumptions about its own capabilities played a role."

Clark: "Not all financial services company models work. It's very important for a financial services company management to have full knowledge of the fundamentals of all the businesses that are operating under its umbrella."

Tripoli: "Clark says Conseco didn't have that when it ventured away from insurance.

Co-founder Stephen Hilbert didn't suffer much for the company's miscues. The one-time encyclopedia salesman became one of Wall Street's best-paid executives in the 1990s, before Conseco's board ousted him.

His successor, Gary Wendt, hasn't done badly either: Hailed as a turnaround expert when Conseco brought him in, Wendt commanded a $45 million signing bonus; then, couldn't pull off a turnaround. And, that's not counting his salary.

I'm Steve Tripoli for Marketplace."

And, that's the top of our news. The Dow fell 88 points today, about a percent. The NASDAQ fell 30 points, 2.2 percent. Details when we do the numbers.

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