Wall Street Week With Fortune; 0311

Coming up on Wall Street Week With fortunes the convention is over and the rising numbers are good. John Zogby tells Charan gets more of his exclusive polling shows about the all important investor class ended up really getting better. The outcome of the presidential elections may depend on the answer. Do you have goals and searches for the folks examining physician the folks. Welcome to Wall Street Week With fortune. Wall Street is made possible in part by Wausau insurance. We know most workplace risks are at this obvious but we also know that any risk can have a big impact on a company's bottom line. Nuveen investment now you can learn everything you need to know about

exchange traded fund comforting as an ETF connect an educational website of Nuveen investments. He's proud to support Wall Street Week With fortune and by contributions to your PBS station from viewers like you. Thank you. Welcome to fortune. I'm Jeff call them and I'm Karen gets the gloves are off and the fight for the White House is in full swing. The latest polling numbers from John Zogby taken at the close of the Republican National Convention show President Bush gaining momentum. In fact Bush is enjoying a double digit lead over John Kerry among self identified investor class voters John Zogby joins us with the meat and potatoes of his latest poll. John you're on record as saying this is Kerry's race to lose did Bush succeed in snatching victory out of Kerry's hands. No victory is way too soon for for President Bush. He had a good week a good convention brought his Republican ducks all in a row. He

now for the first time in my poll is getting the support of 90 percent of Republicans. But there are still undecideds out there care and 5 percent of the electorate and they were watching. Why weren't they watching. Well they tell us that they're interested they're likely voters they have other things on their minds. They will start to pay attention. Some said after Labor Day. Others for the most part said after the debates there will still be a considerable number who won't make up their minds until the last few days. Was Bush successful in making this election all about terrorism and national security. Before you ask answer that. Let's listen to what he had to say. This moment in the life of our country will be remembered generations will know if we kept our faith and kept our word. Generations will know if we seize this moment and use that to build a future of safety and peace. The freedom of many and the future security of our nation now depend

on us. And tonight my fellow Americans I ask you to stand with me. What about that statement. He did a good job this week of focusing on his strengths decisiveness leadership handling the war on terrorism. That will be his theme throughout. However there is an opponent who represents the other half of the country who will be talking about the economy and talking about health care about the execution of the war in Iraq the battle is now in joined by two equal forces. Well what about those big issues such is the economy and health care. Those are the top issues in the country they remain to be the number one all year has been the economy and in our last poll we found health care actually is the number three issue actually slightly ahead of the war in Iraq. And so the top four issues to repeat are the economy.

Score one for Kerry. The war on terrorism score big for for Bush health care. Score again for Kerry. And on the war in Iraq an even split slight favorite Kerry. Do you think a bush just post convention bounce will last bill. To be perfectly honest with you it was enough of a balance to thrust him in the lead where he had been essentially down. But frankly I think that he'll bask in this for about 48 to 72 hours and then I think there's in it a fundamental equilibrium in this country. You'll see Kerry out on the hustings you'll see Kerry trying to regain some of the soft support that he lost over the last couple of weeks. And you'll see two co-equal forces battling it out over the next couple of months. Can you talk a little bit about the bounce. Where did Bush start and where is he sitting now. Two and a half weeks ago he was down 50 to 43 against Kerry. And so he bounced up to forty six. Where did he belts most

importantly. Republicans he solidify them secondly for the first time in my polling this year Bush actually leads among independents. Also the group that we have talked about several times this year self-identified investors not as many of them as there used to be. But those self identified investors have to go with Bush. He has to lead among them by double digits in order to win this race. We saw him succeed this week. He leads Senator Kerry by 10 12 points now among self-identified investors. He had actually ceded quite a few of the that group over to Kerry in late July and August. Who are these self-identified investors. Is this class growing. Actually they were growing 97 98 all the way up into early 2002 and then by mid 2002 we started to see a decline. So whereas they were about a half of the total electorate they had actually gone down to

29 percent today. You'll see that they are roughly about one in three of the totally electorate and the undecided group is that growing. It really is not. Our poll yesterday shows nine percent undecided. But I need to explain that Kerry lost points and from last poll until now whatever he loses in points that goes into the undecided column. Whenever George W. Bush loses some points from his total it goes over into the undecided column where we sit right now here and there are 5 percent hardcore undecideds. The rest after that are partisan soft partisans. One way or another. That doesn't seem to leave much wiggle room for either candidate. There is barely any wiggle room. Gone are the days at least for this year where there is 15 18 percent undecided at this point in time and another 15 or 20 percent who are soft. That's wiggle room. This now is all

about getting out the base and then ultimately during the debates and in the last week appealing to that last small rung of undecided voters who will tip one way or the other at the last minute. What do you think will tip those undecided voters could be anything it could be a major event or a major mistake. It certainly could be a performances in debates. You have two distinctive character is the more cerebral one would argue maybe cold personality of John Kerry very affable congenial president maybe not so heavy in terms of verbiage but two completely different guy's demeanor will have a lot to do with whether Americans undecideds feel they can bond with one or the other. If the debates are focused on issues. Then score big for Kerry if the debate is focused on Congeniality.

The war on terrorism that sort of thing. Score big for the president way too early to tell what's going to happen here. With less than two months to go to the election John Fletcher prediction. I still think it's John Kerry's to lose because behind the numbers that we saw coming out of the convention the president still had a negative job performance rating negative wrong direction as far as the country was concerned. And lastly a negative reelect there still slightly more that say that it's time for someone new then that George W. Bush deserves to be reelected. So his very metric ratings are better today than they were a few weeks ago. But there is there are not home free yet. John Zogby thanks for joining us. Thank you Karen. Well as John Zogby says the voters consistently say that as far as they're concerned this election isn't about Iraq it's about jobs and the economy. But with the U.S. still a million jobs short of where it was when President Bush took office did he offer a compelling defense of his record in his acceptance speech. On the other hand with jobs increasing and unemployment now at its lowest level in three years.

Can John Kerry still play this issue to his advantage. Mickey Kantor was secretary of commerce and the U.S. trade representative during the Clinton administration. Also the Clinton campaign chairman in 1992. He's advising the Kerry campaign and joins us from campaign headquarters in Washington Todd Buchholz has been an economic adviser to both Presidents Bush and is author of Bringing the jobs home. Mickey let's start with the news the new jobs report is decent job growth good the weak job growth of previous months revised upward the unemployment rate down. This is all good news for President Bush that means it's bad news for John Kerry. Isn't it getting harder and harder for him to contend that the U.S. is in economic distress. Not at all in fact is bad news for the American people in the last three months only been net three hundred twelve thousand jobs created we need to create 150000 jobs a month. That means that we would be 450000 we are light about one hundred thirty thousand jobs that means the job picture has gotten worse. More importantly this is the

the most tepid recovery in 50 years from a recession. And if you add to that the fact the jobs being created pay on the average about $9000 less per industry than the jobs that we lost. We've got real problems the reason the unemployment number went down which I think Todd will will confirm for me is the fact that people who quit looking for work that's why the job number dropped to five point four percent of the country is still down a million jobs since the president took office that's the worst record since Herbert Hoover. How can he claim he's been anything other than terrible for the U.S. worker. Well first of all the unemployment rate is lower than it was during the average of the 70s the 80s and even the 90s under the Clinton administration. And you know what else I'd say if John Kerry were not threatening to raise taxes to reduce repeal the dividend tax cut the stock market would be higher and confident he would be even higher as well. The other thing John Kerry is doing is threatening to undo trade agreements including some of those negotiated by Mickey Kantor.

Well that look in one poll just to get the importance of this is you had one poll 32 percent of those polled said the economy and jobs were their top issue. Only 18 percent said Iraq. Just four percent said terrorism. So let's listen to what President Bush had to say some of what he had to say about his economic agenda in his acceptance speech. Many of our most fundamental systems the tax code health coverage pension plans worker training were created for the world of yesterday not tomorrow. We will transform the system so that all citizens are whipped prepared and thus truly free to make your own choices and pursue your own dreams. And he offered some details after that but taught in light of how important voters think this issue is. Did he offer nearly enough of an economic agenda. Oh I think I think he did in my book bringing the jobs home I asked the question.

Imagine or I present this rematch and you're applying for work and you wearing a sign around your neck that says I'm really expensive and I don't know very much. That's the plight of the American worker. We've got an education system that needs dramatic reform. Our schools are like Ford Pintos from the 1970s under-powered underperforming and under threat from foreigners. We've got a litigation system that robs 2 million jobs from the U.S. economy. We've got an immigration system that needs serious reform and what President Bush wants to do is push aside these obstacles so American workers have a chance to compete fairly. And those obstacles primarily are put there by special interest groups primarily by special interest groups that are behind John Kerry and the Democratic Party including trial lawyers teachers unions and other groups such as that. Mickey Kantor John Kerry says he has a plan to create 10 million jobs over four years. Is there anything truly that that president or any other president can do to create that many jobs. Of course it is in the course Prezi United States last night didn't mention any of the barely mentioned jobs.

It was astonishing. We're talking about losing a million jobs we're going to have the first president to lose jobs in a four year term since Herbert Hoover and he doesn't mention. Let's start with deficit. Not a mention about the budget deficit which is the largest in American history which is driving. Private capital out of the markets which means we don't have enough investment to create jobs that's number one number two. We have a tax cut that went to the wealthy and not to the middle class not to the poor in our country. We did nothing to stimulate this economy in a way that we should. And now that that tax cut is hurting us because now we have the four hundred twenty two billion dollar deficit number three. Nothing in there about health care costs which are driving jobs overseas which Todd will tell you. American businesses leave in the main because health care costs have gone so high in this country President has no plan for that John Kerry does Number Four nothing about energy independence. We've got to do something with conservation something with alternative sources something with more production here at home without spoiling our environment as this administration would want to do in many cases. And we've got to move forward.

This president has no plan. John Kerry has a real plan. We have got to do something about change. If we don't change we're going to continue to lose jobs continue to be less competitive. Let me say something what Todd said I know we didn't mean this. American workers are the hardest workers in the world. They can compete if given plans programs and and the energies from the White House to go forward and that's not what they can't commit they can't compete if they're confronting high taxes if they're confronting lawsuits frivolous lawsuits that push jobs offshore. I mean the fact is John Kerry I will grant you does have a dynamic program but it's dynamic because it's on all sides of the equation. He's voted for every free trade agreement and yet now in his campaign he's pandering to unions and saying he wants to revisit all of them. He says he likes lower taxes for corporations and yet he's proposing higher taxes for individuals. There's nothing new here except his ability to be on all sides of the map and that map does not point to prosperity. The only individuals. That he is

going to rescind the tax code of those in the top 1 percent many of whom make over a million dollars a year. I think they can afford to sacrifice when we have a war going on in Afghanistan an unfortunate war in Iraq which is being badly run and which are sacrificing young American men and women because of this president's miscalculation as this president called it a miscalculation it was his word not anybody else's word. What we need to do is make sure we make the tax code fair. We lower taxes for the middle class and we and we roll back the taxes of those the wealthiest who need to sacrifice who can afford to pay for this adventure in Iraq and for what we need to do in Afghanistan in the war on terror. Let me ask you about something that even some Republicans are angry with the president about the federal deficit is at a record level. In addition spending especially discretionary government spending has increased at a very rapid rate. He has even done some protectionist things imposing tariffs on steel and lumber. What kind of Republican is that.

Will I was against the tariffs on lumber and steel and the president happily rescinded on steel. So I agree as the president made it last night he's got some flaws he's got some blemishes and I would freely admit that. At the same time you have to recognize that a wartime president is spending more money on defense and at the same time in order to keep coalitions find a little bit more difficult to get a coalition in a narrowly divided Congress to cut spending. The president recognizes he has to do that and I agree much more needs to be done I'd also point out though that if the deficit were as disastrous an issue as Mr. Cantor and the Democrats point out that interest rates would not be at unbelievable lows homeownership rate in the U.S. is approaching 70 percent because interest rates are at the most attractive levels since 0 0 0 since the Eisenhower administration. If the deficit were so big a problem the bond market would be in a panic and interest rates on car loans would not be 0 percent but would be 9 or 10 percent. So that tells us there's a lot of

political PR puffery in complaints and hand-wringing about the deficit and not economic reality. Let me ask both of you a political question with less than nine weeks to go before the election. Does it really matter what either candidate says about the economy or is it entirely a matter of how the voters feel about the economy. Well it's a combination of both what the voters feel that was the most important most look at a. Typical middle class family vamose got no tax got about average at three hundred dollars you have and their incomes have gone down in three and a half years an average of fifteen hundred dollars per family. And add to that that paying 50 percent more in health care much more in college costs much more for gasoline much more in state local taxes are being squeezed at both ends. And the fact is these middle class folks are the ones also threaten with the jobs and let me just add one thing. Their jobs are threatened and they're the ones whose sons and daughters husbands and wives brothers and sisters are fighting for us in Iraq and Afghanistan. They're the ones we ought to be concerned about not those at the upper end the top 1 percent that this

administration tends to want to help. You can cite one can cite an awful lot of good economic news. The polls continue to suggest that people feel bad about the economy is there anything you think the president well about. Look consumer confidence is actually quite high. Business confidence the purchasing managers index both for manufacturing and for services are very high. Let's let's let's also remember a little history. Mr. Bush inherited a steep recession a market meltdown. From President Clinton and Vice President Gore on top of that of course September 11th took took place and at that point Democratic pundits economists and strategists were warning of a Japanese style depression the fact is the American people demonstrated unbelievable confidence unbelievable composure. They kept buying automobiles. They kept buying homes. So for all the polls that say people don't feel good about the economy I think we also look at have to look at the reality the cars being purchased the homes they live in and the lives

they are leading and the composure that they demonstrate despite all the chicken littles that the Democratic Party can send out to go look these are contentious issues but we've got to stop there guys so thanks very much to Mickey Kantor and very much appreciate thank you. Consumers are expressing confidence not just by buy houses but stocks as well. The Dow managed to post its fourth consecutive weekly gain adding 65 points despite Friday's weakness ahead of the long holiday weekend. The Nasdaq fell over 17 points on the week hurt chip sector selloff in the wake of Intel's negative mid-quarter update. But the S&P 500 managed to eke out a nearly six point weekly gain. Wall Street Week With Fortune contributor Michael Farr joins us now with an investor. Perspective. Hi Michael. Hi Karen. We've heard a lot of noise this week. Should investors be reacting or responding to any of it. Yes how I think they ought to respond by covering their ears and turning away from the radios and TVs and all

of the noise you know the political noise that we're hearing doesn't. Will not I don't think have any great impact on the markets. Yes some stocks do perform better under a Democratic administration versus a Republican administration. But bottom line the fundamentals are what's going to drive is what's going to drive stock prices. The economy's improving. We are adding jobs this week's job data were very good. So it is these fundamental numbers get better earnings numbers are improving. Things are coming still on an upward bias and long term patient investors can still make money. You did a lot of research and talked to a lot of people. What sectors a poison to advance regardless of who's president. I think several sectors that probably the broad market in general the ones I guess I don't like I shouldn't start this way but oil energy the ones that have been doing so well those commodity sensitive stocks I think have had a pretty good run and I would look elsewhere.

Education stocks both candidates are saying they support education even though not a lot of federal dollars go to education. Some of those companies have dropped significantly because of regulatory problems they've sort of been bad if you will. But the whole sector's gone down which is made some of them look pretty attractive. Education Management Corporation seats around twenty nine dollars a share 20 to 23 times next year's estimates growing earnings at around 22 or 23 percent per year. That's a relatively inexpensive company financial services I think will do well sort of no matter what maybe a Fannie Mae or Freddie Mac do better under a Kerry administration he's been sort of soft talking both of those. But by and large you get a Bank of America at 12 times earnings. Growing those earnings at 12 percent with a 3 4 percent dividend. That's a cheap stock I think and broadly diversified even in a rising interest rate environment.

Yes because in a rising interest rate environment the interest rate environment is going to be rising because this expansion because there's something inflationary because there are more buyers. Bank of America has investment banking they can do new stock issues they can do mergers and acquisitions and they're well diversified. So yes I think even a rising rate environment they will do well. What about health care that's another hot button issue hot button issue probably going to be do better under a Bush administration than a Kerry administration. Kerry is even talked about perhaps supporting a reimportation of drugs from Canada. That would be bad for the big pharmaceuticals. They look inexpensive right now. I like Pfizer in that space. I like Waters Corp. just as another way to take a look at some of those health care stocks waters corporation makes mass spectrometers these are the big heavy duty machines that analyze specimens and data and spit out all of the codes and tell you you know what your blood count is. Biotechnology companies stop

buying these big machines as did pharmaceuticals as did the hospitals. They're buying them again when the market slowdown recession. They stop buying. This is a market leading company and they're buying those companies again. Demographic shift also supporting health care demographic shift supporting health care. No question about it the graying of America as the baby boomers age they're going to be using more pharmaceuticals all the rest. I think too with the with the increased homeownership now 70 percent in this country that's another argument to support the financial stocks. Americans are becoming more stable financially. Michael Farr thanks again for joining us. Thank you Karen. Well that's our program. Next week we're going to drill down inside the market and the campaign with a number of savvy players including former Treasury Secretary Robert Rubin. Thanks for joining us we'll see you next week. So all the best reporters begin with the right people. Savvy dedicated

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