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David Asman: Welcome to the Informer. With us this week are Managing Editor Dennis Kneale, Editor Bill Baldwin, Staff Writer Joanne Gordon, and Staff Writer Chana Schoenberger. Let's start with Dennis. This one billion dollar settlement between the brokers and the SEC. What do you think?
Dennis Kneale, Managing Editor: The market reacted pretty well to it on Friday. In the long run, though, this is a disaster for investors. This is not a good thing. If you talk to enough people on Wall Street, and we did this week, they are very bleak about the prospect of this. It's extortion to buy off politicians like Eliot Spitzer, the New York State Attorney General, and make him go away. It's not going to benefit shareholders. It's not going to make things better. It's going to make them worse.
David Asman: Chana, what do you think?
Chana Schoenberger, Staff Writer: I think you're right. I think this is a disaster, but there is a silver lining. The independent research that these firms will be funding will be required to give this research to their brokerage clients. That means that Merrill Lynch (MER) is going to have to give me independent research from people like Sanford C. Bernstein. It can only be better for people to know more about the companies they own.
Dennis Kneale, Managing Editor: Sanford C. Bernstein, this is an independent research firm, recommended WorldCom stock at the same time it's parent company Allied Capital (ALD) owned 11% of WorldCom the company. Even independent research isn't independent. There's always a conflict of interest. We forgot research exists to sell stocks.
David Asman: Wow, good debate, but we have to move on. Chana, cable programming, something that's near and dear to our heart here, what do you think about it?
Chana Schoenberger, Staff Writer: I am going to tell you about cable programmers, which are the people who actually do the channels. Companies like EW Scripps (SSP) who do the Home & Garden channel and the Food Network. The problem is the cable systems have such unbelievable heft these days. The top two, Time Warner and AT&T Comcast just have such heft that they are going to be able to squeeze power out of the channels and it's not going to be good for them.
David Asman: All right. Dennis, very quick response to this.
Dennis Kneale, Managing Editor: Everyone keeps betting against cable. Cable falls for a while, but it always comes back up. It is the medium of the future. I'd say stick with it.
David Asman: All right. Joanne, let's talk about real estate. We've all heard about the bubbles existing. There's a lot of conflict in that industry.
Joanne Gordon, Staff Writer: You've got to like the retail REITS, the Real Estate Investment Trusts. Simon Property Group (SPG) made a hostile bid for one of its competitors. This may not happen. They do not want to get rid of this portfolio. Now Simon isn't going to go into a bidding war. They're not going to go much over $18 over the stock price they've already put in. So, if you want to buy Simon (SPG), evaluate it on it's own merits right now, which are pretty good. Revenue's up 6% in the past three quarters. Earnings growth, I like them.
David Asman: Bill, would you buy Simon (SPG)?
Bill Baldwin, Editor: I'm wondering if by combining two big malls you wind up curing the vacancies in each of them.
Joanne Gordon, Staff Writer: Simon (SPG) has 92% occupancy right now. Occupancy is not a problem for them, right now. Plus, they don't have K-Mart in their malls, so they're not dealing with a lot of bankruptcy.
David Asman: All right. So, watch for Simon (SPG). Bill Baldwin, someone told me you are actually against a tax break?
Bill Baldwin, Editor: Not quite. But, let me just give you some good news and some bad news. The good news is that the Republicans on Capitol Hill just might increase the maximum loss you can take against your salary with your capital losses from rotten stocks. It's now $3000, might go to $8000. That's great. Now, here's the bad news. What if everybody does that and there's a wave of selling next year. Now, my advice is go ahead and sell losers in January, not in December when everyone else does. Sell them in January and buy those same rocket hot tech stocks back next December at even lower prices.
David Asman: Well, there's some advice. What do you think, Joanne?
Joanne Gordon, Staff Writer: On the whole, I do not think this is going to induce a wave of selling. You'll have a couple of short-sided investors who think this tax break will pay off their credit card bill. But, on the whole, I don't think you can buy off investor faith in the market.
David Asman: Thanks everybody. That's it for the Informer.