Wall Street Week with Louis Rukeyser; 2439; Let's Go to the Movies

Iraq. Celebrating its 25th year as America's most popular program on the economy people and their money. Wall Street Week With Louis Rukeyser is made possible by the Corporation for Public Broadcasting. And by the annual financial support from viewers like you

by MF s and FS helping mutual fund and institutional investors achieve their financial goals since 1924 by A.G. Edwards serving the investment needs of individuals and businesses for more than 100 years building a foundation of trust research and commitment to investor success and by Prudential Securities with more than 50 600 financial advisors nationwide provincial securities can help you invest your money wisely. Brokers Friday March 24 Our panelists are Katie Brown Frank. BIELLO and Allison being tonight's special guest is Jessica Reif managing director Merrill Lynch. Good evening I'm Louis Rukeyser This is Wall Street Week. Welcome back. Lights camera action. That's the theme across America this weekend as Hollywood prepares to dazzle us with the

Academy Awards on Monday. But a bunch of hams in the American economy have already grabbed center stage. On Wall Street the saga this week was right out of Pulp Fiction. A market consigned by the wiseguys to a dismal first half performance continued to demonstrate that the only thing rarer than an agent with a heart is a bear who doesn't look totally silly tonight. As the cameras roll for our own epic presentation the only investors who can truly claim to be nobody's fool. Are those who sensibly persevered and as a result can rejoice at the sight in breathtaking Cinemascope of virtually every widely followed stock average flying at unprecedented heights higher even than the thumbs of Siskel and Ebert. Even the wilder the no bond market has been undergoing a redemption worthy of Shawshank. Having finally discovered that the economy is slowing without collapsing

and that the near-term threat of inflation had been ludicrously exaggerated the bannisters resumed a spectacular rally that has taken long term rates down nearly a full percentage point in just four months. Even the incredible shrinking dollar by week's end was looking less like Deadwood than Ed Wood eccentrically bouncin against most European kind of currencies while still plunging against the yen which benefited from the single biggest monthly American trade deficit since Columbus went in search of imported spices. But the end strength which increasingly looks more like a Japanese problem than an American one was so isolated that the dollar's overall performance for the week could be happily described as Four Weddings and only one funeral. Meanwhile in the real entertainment capital of America Washington D.C. Democrats and Republicans were angrily accusing the other of rigging the national quiz show. With the

Democrats claiming that Republican budget cuts would be heartlessly hard on little women and little men too. And the Republicans retort in that a new sense of personal responsibility was the only way to end Bullets Over Broadway. By the end of the week though any chance on either side of the aisle of truly reducing the tax rate increases of the 1990s seem to be fading faster than a re-elected congressman's commitment to term limits. Proving that the most incisive comment on the entire Washington scene was uttered by the distinguished political analyst Forrest Gump. Stupid is as stupid does. We tonight will rush to the aid of the national IQ by turning our attention to the industry that is said on all sides to be right in our minds. Media and Entertainment. And see where the financial Oscars might be found in 1995. But first let's see what sent them really in. In Wall Street in the week has passed and the Dow Jones Industrial Average continues to

confound the critics just a month and a day after first closing over 4000. The index of 30 blue chip stocks made it comfortably past forty one hundred heartened by indications that the economy was slowing enough to discourage new rate increases next week but not enough to precipitously a recession. For the week the Dow gained 65 points to a new high of forty one thirty eight point six seven and the Dow was joined in record territory by all our major indexes except the AMEX which has been held back by its heavy concentration of gold and other out of favor hedges against inflation. Indeed regular old common stocks have been so strong that they scared one Elph. MICHAEL METZ lowered the consensus to plus one by downgrading from bullish to neutral on the Dow's next six months because he said at current levels the stock market has fully discounted the best of all possible worlds a soft landing without a recession

a favorable money scary climate and low inflation. It is overdue he headed for a protracted consolidation. But while many observers think both the stock and bond markets are now undeniably due for retreat as indeed many observers always think. The possibility of such a timeout has not yet done much for precious metals which continue to store all and basically ignore the turmoil in the dollar. Well if 1979 ever comes back. Meanwhile many viewers have asked me to comment on President Clinton's quip about us to the Radio and Television Correspondents Association Dinner in Washington when he reportedly said and I respectfully quote you know every year I come here even though I've only been here a couple of years I recognize more and more faces and now I'm getting so good at it I can tell when people are missing. This year thanks to Mr. Armey and others PBS couldn't afford a ticket for both McNeil and Lehrer. I know that because Louis Rukeyser told me that when he checked my coat at the door unquote. Well folks my

reaction is simple. They report discover the SLI untrue. And besides he still owes me a quarter. Frank Caprio. How long can this hit movie almost be continue to wow the customers for. Quite a while why. I think we are going to go to forty four hundred maybe forty five hundred Dow straight up. And now we'll have a correction a pullback with a pullback will be contained around the thirty nine hundred area 38 50. This is another very powerful leg in a bull market and it was across the board in Latin American markets took off. The only market that didn't do well today was the Japanese market. What do you think is the key. The key to the market who is doing so well. Oh yeah I think it's obviously the slowdown the economy. It may well be that the market's recognizing that Alan Greenspan is going to engineer a soft landing that will slow down the growth and off that inflation is not a problem. No rate increases pretty much until the fall if it if that and that's why the bond market is celebrating some rotation going on in between different

groups. Which ones do you think were attractive now. Well I think the high tech still gets a score of those stocks like Motorola are still relatively cheap. Intel on earnings is still cheap. Some of the software companies like Microsoft may be a little east. But the technology is clearly one of the plays. That's why I got you can you maybe right Ed Brown what do you make of what's going on. Well I agree with everything Frank said and I do think Sirius is covered but I think they're selling everything. I think there's a certain beauty to the situation but also I think there's a danger on the beauty side. We don't have any excesses. Corporate America is a lean. Inflation is not a threat. Inventories and most sectors are in good shape and the market is not very extended. Oil and all that pessimism reinforces what you're saying to us both. But we don't see the market doesn't seem to be a fork.

That's correct the advisors don't seem to be a forward no. Now the danger and the danger I think is that a lot of people still sitting on the sidelines who did not want does not believe the soft landing can be done. And there could be a buying frenzy a buying panic and overdo it. You know we're almost up 10 percent on the Standard Poor's 500 already and we could blast through to that to an extent that we will get a setback would you be a buyer of anything. Yes yes. I'm a fairly fully invested. Why would you actual question I asked Frank is there one group of things to be attractive now even at these prices. Oh I think there's a group as was mentioned earlier the technology sector in the last week or two it's just been explosive on the upside. I think I would hold back except for company maybe like Motorola that has not participated in this and there is some kind of selective stocks that haven't done too much Refco for example has not participated. I wasn't able to make what's going on. Well I don't agree as much I'm a little bit concerned about the market. I agree more along the lines with Michael Metz which is while the rate of growth might slow down

it looks as if the absolute levels of the economy are so high that the Fed is going to be compelled to tighten at this point it looks as if the markets really anticipating an ideal world. You think we may talk next week. You know didn't they wait till May. I think they'll wait till May so we probably do have a little bit more of a rally here but we could start to see some type of a correction if the Fed starts getting tighter with interest rates or the economic statistics start coming out stronger pursuing your line that you've just expressed is it your view that since the market now thinks everything's going to be perfect at the first sign that something isn't they might panic a little bit. I would say so I've seen it with individual stocks that when there's disappointing news there's been a pretty healthy sell off. So I think that could be of concern. Would you be doing any buying though I would do just be very cautious. I would be doing some buying but I would be looking towards more steady growth type of companies that are not overly economically sensitive or interest sensitive and much more multinational in nature and not is reliant on the U.S. economy. What are some of them. Coca-Cola McDonald's names like that.

You want to be refreshed and have some sustenance during this ad's difficult period ahead already. Now this is the point in the program when we usually pause for a round of your questions and I will be taking a little extra time to look at what some people regard as the most American of all businesses the movies. But save some of your popcorn because we'll be back next week to all our regular features. So keep projecting your questions to us here at Wall Street Week Owings Mills Maryland 2 1 1 1 7. Or fax them to us at 4 1 0 5 8 1 0 9 8 0. Now before we meet tonight's special guest let's get a jump on Hollywood's Academy Awards ceremony next Monday night by PANDIAN out our very own Wall Street Week. Bottom line awards. If you just counted in dollars and what Hollywood mogul doesn't the undisputed monarch of the cinema jungle in 1994 was Disney's The Lion King which took in three hundred four million dollars at the U.S. box office alone last year and will be adding to that total in 1995 with

high video sales. The worst flop of the year in the purely financial sweepstakes was Warners Wyatt Earp directed by and starring Kevin Costner. That wild turkey cost 65 million bucks to produce and made back only 25 million though since the film went on and on for three hours 15 minutes. That we do says the last two only two hundred five thousand dollars per minute. And if you just count the way the bankers count the BEST MALE ACTOR of 1994 clearly had to be on most What's an acre since he got paid 12 million dollars by Twentieth Century-Fox to make two launches and that's the truth. I regret to have to report however that sexism rained since 1994 as top female in her Julia Roberts was unconscionably paid only two thirds as much as Arnold gets to make one of Vista's. I love trouble. How can those chauvinists expect

Mrs Lovatt to survive on only eight million dollars a picture. Two big movies vide for the award for investments of the year. Forrest Gump cost a piddling forty eight million dollars and has already taken in three hundred ten million before 1995 ends. Forrest will have earned so many boxes of chocolates that will make the Lion King look like a cub and hardly anybody in the business was up to speed. Which of course 20th Century Fox a mere 20 million Somalians and brought in more than one hundred twenty one million partly because it seems women were actually willing to go to an action movie as long as the principal actress was not a total airhead and the principal actor was deemed sufficiently cute. Runner up in this category was that immortal cinema classic Ace Ventura Pet Detective who's gross as the trade so aptly puts it totaled more than

seventy two million dollars. Three hundred eighty percent profit on new lines. Fifteen million dollar investment. But even those three blockbusters couldn't win the award for most bang per buck. The best percentage return on investment was scored by Four Weddings And A Funeral which cost a bargain basement five million dollars to make in England and Scotland and brought in 52 million or more than enough to hire a detective for every pet English spaniel and Scottish terrier on the island. And in our final category of actors with the best new reasons to watch this program without fail every single week the male award goes to Jim Carrey whose last three epics Ace Ventura Pet Detective the mask and Dumb and Dumber have grossed a total of close to 300 million dollars of which more than 8 million went to Lucky Jim and who is now presumably in need of all the

investment help he can get. As for the most financially desirable actress of the year the winner is clearly Demi Moore whose success is with indecent proposal and disclosure have raised her right into the Schwarzenegger category which means to me will now be making 12 million dollars a picture of herself and her clothing budget seems minimal. Well is that absolutely everything you could possibly want to know about the movie business right now. But do you still insist on actually making a buck or two for yourself if you're ready for your close up. Let's go over now and meet tonight's special guest Jessica Reif Jessica welcome back nice to have you again. Nice to be here. Jessica Reif actually gets paid for watching this stuff. A highly respected securities analyst for the past 11 years she spent three highly rated years as senior media and entertainment analyst for Oppenheimer and company before switching screens

to Merrill Lynch where she's been a featured presentation herself since 1994. Jessica Hollywood will present itself Monday night as in the pink of health. Is that true financially. Generally the industry is very healthy. 94 was a terrific year the first quarter of 95 is actually fairly fairly weak domestically. But the good news is that the foreign markets are growing dramatically. The filmed entertainment industry is one of our biggest exports and the weak dollar will certainly help earnings back here. Does the movie business depend on the quality of each year's product or is there something else that has to be factored in each of the companies are so diversified at this point that the film business is is just one segment and sometimes a very small segment of earnings. Disney is the purest play film detainment is the biggest part of their earnings and the home video business is really the biggest part of those earnings. Disney has been described over the years in this program as primarily a this that and the

other depends on whether they would talk about real estate or whether we're talking about travel. You say that movies are now the essence of Disney. Absolutely. Filmed Entertainment is the largest segment of their operating profit. To what extent is the video market helping Disney. It is an enormous part of their operating profit. As an example Disney was the first studio really to do a title release directly to the video market return of it was the sequel to Aladdin on a five million dollar investment. Disney made 100 million dollars in profit from the domestic release alone we expect from The Lion King home video. They will probably make close to a billion dollars in profit. And their actors never complained about the lighting either I suppose. That's right they keep all that money I gather from your enthusiasm that even after a revival of and run up you like Disney at least But yes Disney is one of our techs. What else do you like. News Corp is our favorite stock in the group. It is by far the

cheapest stock in the media and entertainment sector. It's Fox Broadcasting and Fox television stations are performing extremely well. Actually the most improvement of any of the networks this season and of course they have an investment in Star Television which is a direct broadcast satellite operation covering Asia. Rupert Murdoch owned everything before he finished. He is amassing a fantastic global distribution system with television and satellite channels worldwide. There was a lot of publicity again this week about the so-called Green Works these three highly successful guys getting together and this week Microsoft is joining them. Does it have any impact on the business yet or is it just a future dream is still very much in a startup phase and it is definitely raising quite a bit of money but it will be a factor we believe in the future. Within a few years they should have six to eight films per annum and by 1998 they should have an animated film and at that point they could really be a true competitor to the industry.

They just got half a billion dollars alone from Paul Allen the Microsoft is up meaning that they don't need a small investor. Well they don't want to small investors right now but if they were very smart because they're not only taking investors they're taking strategic investors and an investment from somebody like Paul Allen can move them into the interactive production business an area they may not have been in. There's endless argument about the networks a few years ago a buy so they were doomed. Then they got the right to get money for producing their own programs in syndication and so forth. What's your view of them today. The broadcast network business is a fantastic business. They the networks reach 99 percent of US television households every single day. And that distribution system is incredibly valuable. It really sets the value for programming for the afterlife of programming. And it is the most cost effective way for advertisers to reach a mass audience. So we're going to buy one of those networks I think. Which one do you think will go for it. I think that CBS is the likely network to be sold. But there are number of potential

buyers. Would you be a buyer that CBS Dr. No I would not. On a fundamental basis CBS our value for CBS is in the 45 to 50 dollar range. And on a private market value basis 75 to 80 dollars. So at this point the risk reward seems to be in favor of the risk of the risk side and given their recent ratings we would just not say why. Yesterday you know out of tonight we were some of the panel of matinee idols and glamorous stars starting with Frank Caprio like you look at Jessica the cable stocks have done very little in the past three or four months really been a drag and the thinking in Wall Street is that they're going to be eaten alive by the telephone companies in this future competitive entertainment and the whole list and you know your high cable stocks and how do you argue against companies the cable operators are so much more entrepreneurial than the telephone companies. They're lean they're mean they're architecture can be upgraded very easily

and in increments and given the Sprint cable alliance we think that the cable companies both Cox Comcast and telecommunications I think will be in the telephone business within the next three years. In both wired and wireless with a national roll call telephone company I think about. Jessica with everyone racing for this pipeline not just into the home. What do you think the tolling line will be between the hype and the reality of receiving super criminal profits from all of this investment. It's true that because of rate regulation the cable companies have had flat actually negative operating cash flow we think but by the third quarter of this year the cable comparisons will start to pick up for two reasons One is that they work through the second round of rate regulation but also will start to see the beginning of new sources of revenue like the Sega channel and hopefully by late 95 or early 1996 we will start to see compression boxes which means pay per view. You

don't have to go to the video store if you don't want to. I was surprised you thought CBS was the most likely network to be sold. Jack Welch is always in the press talking about selling NBC. Do you think he'll ever really sell that. No actually at this point. I think there are a buyer. I think they would like to have a strategic partner Turner Broadcasting would be a terrific partner. But it appears that they have absolutely a commitment to that business. And she beat up on CBS and said you think NBC will be taken over want to tell us about Cap Cities ABC Capital Cities ABC is is truly the best run broadcaster they have to reflect properties both domestically and abroad. We like the stock we have it is a buy. Our only modest concern is that they they have been strong very strong ratings growth this season. But we believe that the upfront advertising market which takes place in June will be incredibly strong and Cap Cities. Fox which is owned by News Corp. and also NBC will do very very well.

I was when we started out by talking I mean she would just say we started out by talking about the Oscars Monday night. How important are they economically studios and who do you think's going to get the most benefit. Well for a film it really depends where it is in the cycle for a film that's already been released in the movie theaters and through the video market it has less of an impact. But for Paramount which is owned by Viacom or even next which is owned by Disney if Pulp Fiction or Forrest Gump win certainly the video sales will be good. Certainly the libraries will have more value because they'll be associated with a winning picture. Where you are in the business of knowing everything tells who's going to win. I don't know but I do think that Viacom the parent company of Paramount will be a winner as well. Finally since we talked about the networks about the syndicators those who are not networks but syndicated programs about King World is by far the strongest indicator we believe the stock is very cheap.

There's not a lot of downside from here. The company is reportedly looking at ways to increase shareholder value. There are a number of ways they can do that whether through buying back their own stock or simply selling or taking in a strategic partner already that we do have to stup Many thanks Jessica Reif your usual concise overview of the whole industry. Many thanks to our panel hope you'll be back with us again next week. My guess would be the financial world's equivalent of the energizer bunny. He's Morris mark with remarkable staying power and in the distinction of being the only single style manager of stocks. They're ranked in the top quarter for three straight years. Let's see how we did it and if he's still going. Meanwhile there's been Wall Street Week. And with regard to Wall Street Week With Louis Rukeyser is a production of American Public Television made possible by the Corporation for Public drawing. Yes there and by the annual financial support from viewers like you my MFA s MF s helping usual fund and institutional investors achieve their financial goals since 1924 by e.g.

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