[David Haffenreffer, Cnn Anchor:] You can see that PaineWebber did get a nice rise in yesterday's session, but it could...
[Deborah Marchini, Cnn Anchor:] I was going to say, nothing compared to what is going to happen today. UBS, Union Bank of Switzerland, offering to pay $12 billion, which is roughly a 49- percent premium, for PaineWebber, which is the number-four U.S. brokerage firm.
[Haffenreffer:] Our next guest believes Europe is currently a safer haven for investors, perhaps he can shed some light on the benefits of this trans-Atlantic deal.
[Marchini:] He is chief investment officer Alan Brown, of State Street Global Advisors, joining us from Boston. Good morning to you. The specter has been raised as to whether this is too much money for PaineWebber, what do you think?
[Alan Brown, State Street Global Advisors:] Well, good morning. It certainly is an extraordinarily high premium, but the reality is that there are just very few companies that are that kind of size left for European players to go after, so they are going to come on a high premium.
[Heffenreffer:] They certainly are. And at this point, a lot of investors are wondering what will be the next, perhaps, U.S.-based brokerage company to be snapped up. Any speculation on the front?
[Brown:] Oh, I don't think I would want to try that one, no.
[Marchini:] But, fair enough to bet that there will be another?
[Brown:] Yes. I think we are going to go on seeing a tremendous amount of consolidation in the financial services business on both sides of the Atlantic.
[Marchini:] Without pushing you too hard, Merrill Lynch is still single, is it too big to buy?
[Brown:] That is a big one for people to buy, that is going to cost a lot.
[Marchini:] As far as potential acquirers, Deutsche Bank has been mentioned as one, can you think of any others?
[Brown:] I would think that Deutsche Bank has probably still got enough to digest after its Bankers Trust acquisition.
[Marchini:] We're also hearing this morning, switching gears just a bit over to the airlines, that American Airlines' parent company, AMR, is, I guess, making a bid for Northwest Airlines. Northwest apparently not pleased with the offer all that much. So the negotiations continue, but, is the airline sector something that you are intrigued by?
[Brown:] That was actually something of us surprise to me. I wasn't particularly expecting any major news between carriers here in the United States. There is always a desire for Europeans to be able to link with U.S. carriers, but, of course, the regulatory authorities don't make that very easy.
[Haffenreffer:] It may not be a done deal, since there seems to be some disagreement in the price, at least according to what's being reported by the "Washington Post." Dominating today's trading likely to be the reaction to some positive earnings reports in the Internet sector, and the genetic engineering, et cetera, sector as well. Of course, we had better than expected reports from both Yahoo! and Biogen. Talk to me about Yahoo! first and how significant their report was.
[Brown:] Well, I think it is significant, largely because these companies are on such astronomically high ratings that there really is no room for any disappointment. We have seen how these stocks can be punished savagely, at the moment they go off the growth path that investors are anticipating. They really need to be able to keep this up quarter in, quarter out.
[Haffenreffer:] Do you think this is an Internet story or simply a Yahoo! story?
[Brown:] I am still extremely concerned about the levels of valuations in the Internet sectors. These companies are going to have be able to continue to grow at three, four, five times the rate of the market for decades in order to be able to justify the kind of priceearnings multiples that they are on. And in the Internet world, that represents, you know, 10, 15, 20 product cycles. Who on Earth knows whether they can do it? I think we should remember that the beginning of the last century there were well over 200 car manufacturers here in the United States, today there are three, one of them is owned by Germany. It's all very easy to pick the winners after the event, but can you pick them before?
[Marchini:] You talk about growth. Biogen surprised folks with a penny more than expected on strong sales of Avonex, but there are people who think that the Multiple Sclerosis drug doesn't have that much more growth left in it. What are your thoughts?
[Brown:] I think I would go with that view, probably. I think I would accept that.
[Marchini:] And one more question, you have not been afraid to use the "R" word, and by that I mean recession. Do you think Mr. Greenspan has overdone it?
[Brown:] I think Mr. Greenspan just has the most impossibly difficult job in trying to engineer a soft landing. We've had the economy growing now for an extended period of time, well above its long run growth potential. The idea that just with interest rates alone you can engineer a nice soft landing to a two, two and a half, three-percent growth path for awhile seems to me increasingly implausible.
[Haffenreffer:] All right, Alan Brown, from State Street Global Advisors, good to see this morning. Thank you very much.
[Brown:] Thank you.