Wall Street Week with Louis Rukeyser; 3042; Changes in Healthcare

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And by contributions to your PBS station from viewers like you. Thank you. Produced Friday April 20th. Our panelists are Tom Gallagher Gretchen lash and Liz Ann Sonders. Tonight's special guest is Kris Jenner portfolio manager T Rowe Price Health Sciences fund. Good evening I'm Louis Rukeyser This is Wall Street Week. Welcome back. Well the world of money may not have been providing you with a surfeit of happy entertainment over the past year but this week once again it was show time on Wall Street. We had a glorious revival of bells are ringing as NASDAQ brought down the house by completing a ten session gain of more than a third thereby at least temporarily silencing those a surveyed critics who kept telling us that technology had long since closed out of town. While the Dow Jones Industrial Average which has

conspicuously refused to enter even a minimal bear market delighted the crowd by stating its best week in nearly a year. Observers couldn't agree on the exact reason for this resurgence but at least some of the credit went to the opening of the producer's story in that ever and chanting kick chorus. The Happy Feet of the Federal Reserve Board. The Fed which nearly put out all the lights with its untimely tightening in a year ago now finally seems to have recognized the error of its ways and has as of Wednesday fully reversed all those increases hinting strongly that this belated unraveling does indeed have further to go. This still tacit admission received a standing ovation from investors who are already in a good mood. Indeed Nasdaq had climbed another five point four percent in the less than 90 minutes before the Fed announced its

surprise fourth half point rate cut of the year. Why next thing you know Alan Greenspan may be listed as the producer of a carefree revival of that Evergreen farce. Irrational exuberance but not all the financial theatre news this week was euphoric. Many companies continue to report disappointing earnings and while there was a new thread of indications that conditions might at last be stabilizing. If you thought that we would be seeing a truly vigorous economic revival before next year. Still it was a busy week for the securities analysts who were visible as usual in the production they were born for follies. In their usual role as lemmings they have been rushing us over the cliff for months downgrading stocks at seven that they had recommended enthusiastically at 170. But now that stocks have started to move up surprises so have the analysts radians Bloomberg reported

tonight that since U.S. technology companies started climbing on April 5th analysts have made one hundred fifty one count them one hundred fifty one upgrades on tech stocks. They scorned at lower prices their slide rules may not always work very well but they have one heck of an accurate rearview mirror. And while it began to appear that the show might actually go on on Wall Street those noted thespians in Washington were putting on two big productions of their own. First there was the Bush administration scrambling to reverse what it clearly regarded as its biggest public relations disaster to date. The impression that it was less than wholly committed to environmental cleanups in such fringe areas as say the nation's drinking water. Call that production arsenic and red face. But Congress not to be outdone was putting on its own revival of One Flew Over The

Cuckoo's Nest. As hope faded for early action on the kind of tax rate and capital gains cuts that might genuinely jumpstart badly needed capital investment in the US economy. The crowd our legislators seem to believe just wasn't ready for anything that far out. Meanwhile on the television front there was a new show this week that seems to have offended a number of viewers of this program as they see it. Hostess Anne Robinson of NBC is the weakest link has been Committee leaves Majesty against your very own genial host by ripping off the trademark wink with which I regularly assure you that I'm on your side. Typical of this angry response was an email we received from Mike Chopra of Herndon Virginia. Isn't a wink and a goodnight copyrighted or patented because I believe it's time to sue the lady who hosts the weakest link. She did a real

poor impression of Lois at the end of her first show. Perhaps she needs to be sent a tape or two of the program. Well Mike I quite agree but I think we may have some mild legal difficulty in getting the Supreme Court to uphold my proprietary rights to a facial tick. However I do have a message for the lady. If she doesn't improve her imitation and Robinson you are the weakest link goodbye. We tonight will say hello to a doctor who has become an expert on financial health in drug stocks and we'll take a look at some promising new products in the pipeline. But first let's see who was handing out the uppers in Wall Street. The Dow made it two great weeks in a row up nearly 800 points in that fortnight on the assumption that daylight might actually return to the economy a few months hence and that the Fed was at last fully on board for this week. The Dow gained more than 450 points to close just under ten thousand five hundred eighty.

But the biggest action was elsewhere notably in the long battered Nasdaq which in the past fortnight has had two of its three biggest weeks ever. It was enough to scare our bearish facon poor back into neutrality. A bet that the Dow will close three months hence. Within 5 percent of where it is now. That was the correct vote three months ago. So our halo goes to the only elf who made it then Bob Stovall Routh made a similar switch on Nasdaq where bearishness was the right bet. Three months ago a month before he made it in addition to the Fed's move Ralph cited such technical changes for his upgrade as broken down trends reached resistance an impressive upside volume. Do you ever get the feeling that all these people are just guessing. Well the bond market was little changed some economic observers to court that was short term rates now lower than long term rates and upturn two or three quarters from now seemed a

reasonable forecast. And in the best news of the week for men looking for cheap dates. A study at New York's Mt. Sinai Hospital found that women process beer much better than wine or liquor. It seems they have lower levels of an enzyme that allows men to break down drinks with high alcohol levels nearly twice as fast. It was not immediately known if feminists will now be foaming. Within sunders Are you ready to drink to a tech revival. I am I really feel good not only about the market in general but technology stocks if you think about where investors were a year ago. I think there's a mistake being made now and it's actually very similar to a mistake that was made a year ago which is the assumption that the conditions of a year ago were permanent strong economy aggressive spending on technology. But the as it typically does a psychological pendulum swung completely in the opposite direction and I think the view that really is pervasive now of slow growth

economy and no spending on tech and the fact that that's permanent that's not the right answer either it's probably somewhere in between. And another view that was popular in the media in recent weeks was that when the turn came that wouldn't be the same old tech stocks but in fact it was Intel it was Microsoft it was the same all names. Is this going to continue I think to some degree yes and I think one of the nice things about this environment is that with all the carnage out there with so many of the smaller companies in the less well capitalized companies in the less well managed companies are starting to really have difficulty in some cases going out of business and I think this environment is going to afford the bigger well-managed companies the ability to pick up market share and in many cases maintain their dominance. There was one favorite you think still has a ways to go. I still like Microsoft speaking of the behemoths and AOL although I wouldn't consider that a technology company anymore but I like all the growth industries right now. Well nice to have such a happy face with this device. Tom Gallagher watching you're not allowed to be happy all the time. What are they going to do down there about taxes.

Oh I think that there's a shift in the debate in Congress going from Bush's 1.6 trillion dollars but backloaded tax cut to something a little smaller but more front loaded. And I actually think that's that's not a bad shift I think the economy could use a little extra lift from tax cuts this year. Well the kind of argument is that the consumers hold up pretty well that would really fall off a cliff of capital spending. Will this proposed tax bill help much there. Well if they pass it in a timely way then it would probably kick in I think in say in the fall in September October it's the time when people start getting their their checks. So I think that it you know it's a useful thing it would. So really the Treasury only look for action by June 1st and you get it. Well I think what he's hoping for is that the Senate passes it by then and the hope is that House Senate compromise can be passed by July 4th. That is a little optimistic you never bet against the way in Congress so I think that sometime in July probably more likely late July is the best is the best bet. Are there any financial implications to the arsenic controversy in the country I would not suggest maybe a

lot of you should take it. It's not that I'm aware of the environmental issue is going to be a big factor in the debate this year when the president makes his energy proposals I think environmental opposition is probably going to prevent much movement efforts to open up more lands for public more public lands for drilling and also it'll be harder to relax environmental restrictions for building new power plants and that sort of thing. Well tonight what do you make of the situation. Of the market. And it's not what you want to come back on. Why don't I do my part it's not part of the move in the data stack which has certainly been dramatic since April 4th up 40 percent is a design I said just an oversold bounce. I do agree with Liz Ann that that we've seen the worst and that was that we were going to be trending upwards from here but I actually think that this bounce was. Perhaps a little excessive and that in the next couple of weeks the economy not totally out of the woods. We'll be testing close to the lows and that will be a great time for people to get in.

So you see one more test of those. That's another thing that was I think there's an. What would you buy those lives. I agree I would buy into both Tech and other growth areas I like Texas Instruments and Xilinx controversialist Nokia and in the other growth areas that are early beneficiaries of internal like Bed Bath and Beyond and actually MBNA because I think that the tax rebate will lead to a lot more credit card receivable growth in the fall. But for the very near future you think was too much too soon. I think I'll be very chance. You know if you want to keep your finances springing forward. Send your queries comments and vernal ruptures to our evergreen financial lawn party here in Owings Mills Maryland 2 1 1 1 7. And just a final reminder that next week will mark our 12th annual induction into the Wall Street Week With Louis Rukeyser Hall of Fame. So there's still time if you have a favorite you like to nominate for the judge's consideration to visit our website at PBS dot org and tell us who you think should be the 22nd member of that elite academy. And now before we meet tonight's special guest a leading expert on the health care

industry. Let's take one of our periodic looks at how much progress we're making in finding cures for some of the major threats to our health. As we say again to the nation's drug industry it's time for a checkup. My guest is a den of 5 8 new drugs that he thinks will be store performers over the next few years. Two are aimed at lowering cholesterol. The first is crest or initially developed by a Japanese company and now licensed to AstraZeneca. A recent study reported that it brought 87 percent of patients to target levels. We do seen so-called bad cholesterol by from forty to fifty eight percent while increasing in so-called good cholesterol by 13 percent. Another new treatment for elevated bad cholesterol levels is a once daily combination of Merck's Zocor and shearing ploughs. He said a mob the two companies are partners for this therapy which they believe lowers bad cholesterol levels better than any single drug for at least some of those suffering from sepsis in which

infection can cause rapid organ dysfunction and ultimately death. There's an early product XOVER and clinical trial results indicate that it reduces the relative risk of death. By close to 20 percent. Just this spring there's new hope for us gets a Phenix as Pfizer has begun shipments of Geodon a capsule that is said to be lieve hallucinations delusions lack of emotion and other depressive symptoms. It was originally launched in Sweden last September under the trade name as well docs. Three ongoing trials are testing a new medication for two kinds of high blood pressure as well as for heart failure. The drug is called then live. It's from Bristol-Myers Squibb and the results are expected to start arriving in the middle of this year. Regulatory approval is being sought this year for two new drugs aimed at I still arthritis and rheumatoid arthritis and pain in general. Pfizer and pharmacy have teamed up to develop and market once a day vowed to Cox it

which the manufacturers say powerful eases pain and improves patients physical function. Merck is developing its own product for the same ailments Tora Cox YP which also fights pain in the once a day treatment. And finally there's a new inhalant form of short acting insulin for type 1 and Type 2 diabetics. Pfizer and a Ventus farmer are working together to CO develop co-promote and Co manufacture Exubera which they say produces blood glucose control comparable to that of injected insulin in the test so far. They'll begin regulatory submissions this year. Feeling better now. If waiting for the nurse and come with me as we meet tonight special guest Kris Jenner. That's welcome. Delighted to have you with us. Thanks for having me. Kris Jenner is not your typical financial analyst. He was the backup quarterback at the

University of Illinois and earned an MBA degree from Johns Hopkins. Now he doctors portfolios and calls the plays for the high performing team Rowe Price Health Sciences fund. Last year when most other stocks faltered his fund gained more than 52 percent. This year though it's been suffering is down by just over 20 percent. Chris health care stocks were again notable laggards in this week's rebound. Have they had their run. Perhaps Lou in the short term I think that the near-term sentiment is that with the Fed cut. People are looking for things that aren't as defensive. And health care has traditionally been a defensive area. But I think if you have a longer timeframe historically these stocks have done very well so in the near term perhaps a bit of a breather. But over the longer term there will be very well. What's the most exciting area you cover now. Who are the most exciting but most challenging area is biotechnology. I think that we are in a golden era of biology where

the pace of discovery is very much accelerating. I think in the last 20 years we've seen substantial in Vance's in electronic technology. I think the next 20 years we're going to see substantial inventions in biotechnology. But the biotechs like the techs in general are a little more volatile than other securities. What ones do you think have the quality that gives them staying power. Well Lou you're right to identify that these are fraught with risk and one cautionary note that an investor needs to take a well diversified approach. But we're really focused on those companies that have products on the market or have visibility of products in late stage human testing and those are the ones where we think the upside is it's going to be so substantial over the next three to five years. An important lesson is if you can develop a breakthrough product and put that in the context of a relatively small company the upside can be enormous. Well you've told us what it takes to get you approval of those stocks have names. Well there's a couple that have already had their first product on the market MedImmune is a

company very important product called center just for the Prevention of RSV ident Pharmaceuticals has right toxin which is a breakthrough product for non-Hodgkin's lymphoma. And then Lou there's 12 to 16 companies of a smaller variety that don't have earnings yet that are moving into the sweet spot where I think there's going to be lots of upside. About among the traditional drug companies what to assist with there. We think that 15 percent earnings growth is attractive it is historically been attractive. We may be in a period here where it's not viewed as attractive given that people are looking for stocks that may benefit from an economic upturn. But the go to name that we have traditionally favored is Pfizer. We think it's a powerhouse well-managed and we think it's 5 billion dollars in R&D spending will give it earnings growth that is far more durable than I think a lot of pessimists believe. The other behave Mr. Hughes Lizenz wood is Merck which had a disappointing day today. What's your assessment of that stock.

Well we haven't used Merck as much. I think it's a very well run company but I think it's relative earnings growth in comparison to some other possibilities just isn't as attractive. But if you hold it here if you own it here I would hold it. Chris in your Honor we've assembled an extra healthy panel with Liz Ann Sonders Chris. You didn't mention much about the medical device companies didn't know what your opinion was Companies like Medtronic. I think they're kind of in an awkward period here because they're going through a transition to a new product phase but the upside here could be very substantial both Medtronic and guide and have new therapies for congestive heart failure. And if those benefits to the congestive heart failure patients are as great as the companies think. I think there's going to be a very big up lead to those companies. Chris the debate over Medicare drug benefits important issue and in Washington what he think's going to happen and what will be the impact on drug companies if that something did happen. Well I think that I would be optimistic too optimistic if I said that we

would get a prescription drug benefit this year. I would hope that Congress and the president could work towards that goal. But I think realistically it's not going to happen. I think that if we can have a prescription drug benefit it makes good public policy I think the only concern is that is that done in the context of overall Medicare reform. I think if we have a situation where the government becomes a monopoly purchaser of drugs I think that is a long term problem for the industry. Christine you talked recently about last year's slowdown in FDA approval of new drugs. And I wonder what your outlook was of that trend continues. Gretchen I think that that was a that is a transit phenomenon over the last six to seven years we've seen very substantial improvements upon the FDA and decreasing regulatory approval times. Interestingly this year there's there's a rule that comes before Congress for funding. And also interestingly enough we haven't had leadership at the FDA for a while so I think if both of those are remedied

we'll start to see a pick up and improve all times. Which of those new drugs that we talked about earlier do you think has the greatest potential. Lou I think crest or does I think that the cholesterol market is still despite its 14 15 billion dollars in worldwide revenues now it's still poised for poised for very substantial growth. I think that that's a compound that probably will have four to five billion sales in 07 or away. It's special to me as I'm for the biotech group the blue chip that traditionally was and Jan's been a disappointing performer for some months. I was under a legal cloud What do you think of it now. Or very constructive on Manton longer term I think Amgen has a real opportunity to accelerate its growth rate in the 0 3 to 0 5 timeframe and I think it's become a little bit of a show me stock in their time because the approval of the product that's going to move those earnings called Aram nest is still awaiting FDA approval so I think investors want to see the whites of the eye of Ernest approval before they jump on board.

The only healthcare stocks you'd actively sell at this point. No not really Lou I mean I think Liz and asked the question about how what our view is on medical technology and maybe that's an area that one might de-emphasize for a period of time but Lou there are so many good opportunities here. The pharmaceutical stocks are trading at just a small premium to the S&P 500 5 percent that is historically been a very attractive entry point and I think as I said there's a very long term secular story to be told for the biotechs. So I'm pretty constructive on the group overall. Talk a little more about the age of Moe's. You know we think that the pricing cycle still very much favors HMO stocks. We think the best in breed there is United Health Care. It's a stock that has done extremely well and we still think has a lot of upside. Another another health care service name that your viewers may be interested in is Lab Corp. It's a trend towards increasing diagnosis and diagnostics in overall health care. And that would be another

service name that we would offer. So you're view basically is that near-term excitement might be lacking in this group but it's one of the best performers I think over the next five years. Well Lou I think there's three very powerful secular trends here one is the demographics. Two is this golden era of biology and three Lord only knows that we have a tremendous need to solve a lot of diseases such as cancer and Alzheimer's. So as long as we keep getting sick they'll keep making some profits. That's right. Thanks very much Christiana thanks to the panel hope you'll be back with us again next week. My guess will be a veteran strategist who has helped guide investors to many an up and down. He's Al Goldman the widely followed sage from A.G. Edwards. And he'll be giving us his latest thinking on where the investment road will be leading next so I hope you'll join us for the journey. Meanwhile it was a demo Street Week in Night Long Street Week With Louis Rukeyser is produced in association with Kaiser television incorporated by Maryland Public Television made possible by. The

way. This is a boy's head to face. Challenges. Who can they turn to. Nothing facing the economy as a way for a business overseas. The answer was. That people. Were going to. Buy A.G. Edwards providing a full range of personalized financial retirement and estate planning services. A.G. Edwards trusted advice exceptional service by Oppenheimer Funds. Every year millions of Americans place their financial futures in the hands of one mutual fund company. Oppenheimer Funds the right way to invest. By the government fund. Seeking the outstanding investment values for the aggressive portion of your portfolio. And by contributions to your PBS station from viewers like you. Thank you for a preview transcript of this

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