tv The Kudlow Report CNBC September 5, 2013 7:00pm-8:01pm EDT
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see, there are methods to my madness. i like to tell you that's a bull market somewhere, i promise to find it for you. see you next time! >> a diplomatic cold shoulder. russian president and president obama initially met face-to-face at the sum mit for 15 seconds. now, with their disagreements oaf syria bombing since the end of the cold war have u.s. russian relations ever been this bad. then, a near 3% 10-year bond rate looks like a sign of data growth releases. decent jobs tomorrow likely paipave the way for fed tampering. anyway, we'll have famed economist effa zier joining us
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exclusively. why do so many people keep investing in hedge funds. they have lousy returns that way under-perform the s&p 500. coming up on "the kudlow report" beginning right now. good evening, everyone, i'm larry kudlow. and this is the kudlow report. president obama gathered in st. peters today for addressing the world's financial situation. in a working dinner this evening, it was disagreement over how to handle serious use of chemical weapons that dominated the agenda. nbc's chuck todd joins us now with the latest. good evening, chuck. >> reporter: good evening, larry. or i should say good morning, the first day and night of the g-20 summit is over. president obama only a few minutes ago left the dinner with the 20 world leaders.
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a dinner that lasted until nearly 2:00 in the morning here in russia. the topic of the dinner was supposed to be all things syria. and what the white house was telling me was that wey wanted president to lay out his case and put as many world leaders to his side. he doesn't have a hundr0hundred percent buy in. he was hoping to get somewhat of a half united front. the goal, as far as the white house is concerned, is to get about 10 of news 20 leaders sometime tomorrow to come out in support of what the president wants to do in syria. it may only be rhetorical support. it may not be help with the military. it may not be help with money. but they're looking for that feeling of an international coalition. why? because the white house believes this will help them recruit democrats on capitol hill to support the authorization in
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congress. all of this is connected. and the white house knows this lack or appearance ofl a lack of coalition than is larger than just a couple of countries is hurting them as they're trying to recute members of congress to their side. if they can get a big show of support, they know they're not going to bet one frget one from china, but if they can get one they think it's helpful for them as they try to at least recruit democrats to their side. now, they head home tomorrow and know that they have a weekend of work to do. larry, back to you. >> all right, many thanks. now, relations between vladimir putin may be worse today than at any time in the post cold war period joining the two countries. joining me now is the director of economics, author of the battle of bread and woods and leon allen at the american enterprise institute.
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legion, are relations the worst they've been since the cold war? >> they are simply at a very low point probably since the '98 bombing of serbia. but that was corrected very quickly because there was a different regime in russia. that regime has not seen the hostility of the united states with the united states as a b bonus for its domestic political literacy. on a personal level, i think it is probably the worst, as just the other day, putin essentially accused the american president of lying to american people and the world.
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and if there is proof, there is no proof that they were used by the syrian forces, rather than the forces that he calls terrorists. in order to provoke a military intervention. he also directly accused the secretary of state kerry of lying. hi actually used -- there are seven russian words for lying. he used one of the rudest ones. more importantly, he accused them of lying where they did not at all. he denied that al-qaida is part of the rebel forces in syria where as kerry stated that quite emphatically. >> ben steel, i want to get to some economic and currency in just a moment. but as chuck todd reported from st. petersburg, washington is
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watching president ob. i dare say many in the world believe vladamir putin is a thug. the question is how does president obama handle snims does he add credibility and confidence to the american position? as chuck todd indicated, right now, in the house of representatives, various whip counts by various news organizations show that this resolution is down 3-1. >> president obama has failed to secure not only the home base, larry, but the foreign base. he's gone to st. petersburg without the support of his key allies. really, the yooiunited states r now is in a very key position. >> and what can he do about it. >> he's got to try to play the statesman. they called ker ri eed kerry a
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is an extraordinary thing to do. is there anything that obama can and should do that you can recommend? >> i don't think he can do anything in st. petersburg. he's got to work washington, he's got to win congress. that's the way to convince the world that the united states is serious and that the united states is going to be a major player. >> leon and e rin, do you agree with me that this is a mat other of american credibility? this is where it's come. it's even bigger than barack obama. the point is everyone in the world is watching this story. an obama defeet in at in washin and the house would be cripp crippling. it would give them unbelievable reasons to float and have fun. what should obama do? what can he do? >> well, larry, on your show three weeks ago, i said he should not have gone to that summit at all.
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it gives putin not only the opportunity to be on the domestic and international scene, but, also, now lek which you remember the american president on the international rights. the respect for the u.n. and so north. there's absolutely no way that the g20 summit could help obama in anyway. and, incidentally, if he had heeded my advice, he would have been working in washington. >> what he ought to be doing right now. ben steel, this is allegedly a conference about the world economy, which ain't great. and, in terms of economic growth, there's discussion about currency and reserve funds led by china and others.
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>> there's a bust up there. they had to use this summit in order to take a pot shot of the american system. they've announced this creation of the $1 hun$100 billion kurn reserve fun which they believe has been precipitated by clumsy, federal reserve management of the winding down. but the fed has said that. they're going to have to take domestic actions to salvage their currency, to salvage their economy. ben bernanke can't do it.
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>> after his comments in may, you saw a huge sell-off in emerging market bonds and currencies. this has created a current account crisis. that's right. we're seeing your typical boom busz cycle coming to another apex. >> how serious is this? very important point. is it going to spread worldwide? it doesn't look like it's going to be serious here at home. they're going to spread worldwide to these emerging countries. >> it's going to take a while to get the $100 billion fund in place, okay. this is not something that's going to occur overnight. it's not going to be snumpbs. i'm very pes migsic. i think there was great overconfidence in brazil.
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brazil always is the country of the future. china, as you know, has been very concerned about american stewardship. they've used this conference to link it to the global economy. they say american military action is going to precipitate a further hike in oil prices which, itself, is going to damage the economic world. all right, gentlemen, we will have to revisit this and see how it goes. coming up on kudlow, stocks close higher for a third straight day. that's good. have markets already bottomed in advance of a military strike. plus, a prel view of tomorrow's ever-important jobs. is there really reason for
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continued economic optimism for this second half of the year. don't forget, folks, free-market capitalism is the best past to prosperity. those emerging countries are going to have to engage if they expect to survive on kudlow. we'll be right back. [ male announcer ] imagine this cute blob is metamucil. and this park is the inside of your body.
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does the stock market have a track record of bottoming just days before a military strike? this pattern goes back to world war ii. the iraq bombing of '98, serbian bombing in '99, the iraq war in 2003 and even the libya bombing two years ago. on the eve of potential syrian bombings, is it time to buy stocks? now, we have jeff from lpl financial. the author of this brilliant piece called the stock market has a track record of bottoming days before a military strike. this is stock market history. and it's important. we bring in dennis, founder, editor and publisher of the famed letter. jeff, i always knew you were a smart guy. now you're just off-the-charts smart.
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i'm going to ask you is the same pattern going to hold up? i don't know if this resolution is going to pass. and as we said in the prior segment, right now, it's running 3-to-1 behind in the house of representatives. if there were to be a syrian bombing campaign, does this pattern hold up? >> every single time we've had one of these military conflicts from major world to more localized events, we have seen the market rally in the days ahead of the strike. and so i think, again, domestic concerns may still trump foreign policy. this pullback that we've seen in the market started before the august 21st chemical attack. this is more about the debt ceiling. >> let me just stick with that. i want to have some fun with this. this is serious business. what if i tell you, you may not
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blo believe me, but what if i tell you there will be no shutdown in washington. the federal reserve is going to slow down their bond purchases at some point. by the way, their meeting is the 167th and 18th. i'm presuming the fed would wait a moment or two. but let's say that's all in the market. how confident are you? say i'm an investor and i want to buy. i see the nervousness before the syrian bombing. the bombing is going to turn out to be stronger. the military is preparing a much more comprehensive plachb. should investors get in, then? if all of those fiscal things are out to the side, should investors stay with your his tor kal model? >> i think it will work, larry. i think they should. all of this suggests it's worth
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getting into even ahead of syria. >> it's surprised me -- i was not accepting a second half. i still want to see the jobs and the incomes. ism is very strong. and a 3% 10-year summary could be a sign of strength. is this economy fooling us? >> well, first of all, thanks for having me on, larry, you guys drew the short straw and got me tonight. i apologize for that. >> always. >> i think jeff was brilliant in what he had written. and history shows that that's the way nings occur. there's an old adage on wall street, sell on the trumpets, buy on the cannons. i think that's what this is. you want to be a buyer. once the attack occurs. it's probably going to occur after yomkippur.
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he probably can't get it through congress before then. even if he can't get it through congress, if he does it on his own, which would be constitutional, it probably can occur for another ten days or so. but when that happens, you want to be prepared to be buyer. and i think that the fed is going to go into some sort of slowing accommodation. i can't imagine that the fed is going to announce at its september meeting that that's a change in policy. that's been put off to some time in the future. >> i tend to agree with everybody. . you note in your article, that this time it might be a little bit different. you do have these fiscal issues that you mentioned before. we're at a 3% 10-year.
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you're really sort of longer psych m term? >> larry, so many investors have -- it's been a long trip back to even. now, with economic uncertainty, concerns oobt a military engagement, there are a lot of investors who are saying forget it, i'm going to sell even worse. we don't see a major decline here in the markets ahead. we think the balance of risks favors stocks. den ni dennis, do you agree with that? i'm going to leave oil out of the picture for a second. basically, commodities, your-to-date, have done nothing. if these medium and longer
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interest rates keep rising, what does that do to the commodity's sector? >> it's not bullish. and i think that's, in fact, what's happening. i don't think the fed has any antipathy for the banking system. it's exemplary of stronger economic circumstances. i'm amused at how many people are kpieexcited about and depre about going to 3% yields at the 5 a and 10-year level. >> just one last point. given the steepness of the rate, given that, given the drop in
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jobless claims, which is another key indicator. i mean, i don't know if we're going to grow to three or four or five percent like we should. but all of this signals more than growth in the future. it just seems to me that's inescapable. >> yeah, that's key, larry. there's probably no better indicator of profits than the ism index. it's a great business barometer. we might be due for rebound in profits in the quarters ahead. >> great stuff. thank you for coming on. we appreciate it. up next, folks, america's top hedge funds are raking in cash. does it mean that the rich are just getting richer and leaving everybody else behind? or maybe they really don't deserve your money.
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good evening, larry. let's talk about the u.s. equity markets. they've gotten back all that they've lost and more. at the same time, america's largest hedge funds have been getting bigger and bigger and are closing in on hedge funds. the absolute return magazine list each year the biggest hedge funds which are those managing at least a billion dollars in assets. there's 287 funds that make up their group. they have assets of $1.65 trillion. that's up 7% from the start of the year and the record for total assets for these big hedge funds was just under 1.7 trillion. that was july of 2008. we're not that far off from there. we're taking in more money. the biggest firms are still bridge water, j.p. morgan as set management. the biggest gainers in terms of how much they've garnered, j.p. morgan, apr capital. and the biggest decliners
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include first quadrant and napier park global. it looks like the hedge fund industry, they're starting to recooperate some of the assets that they los lost. >> all right, dominic, stay where right where you are. >> dominic's facts are impeccable. as always. but the one thing you ne glegle to mention is that all of these funds raking in all of this minnesota had a total return of 4.05% through july. 4.05%. the s&p 500 during the same period, had a return of 19.63%. if my math is right, that's about four times as good as the hedge fund. in fact, the morgan stanley
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capital index for the world had a 14% return, which is more than twice at these hedgies. why don't you just buy an atf or an index for the s&p 500 and hold it for the rest of your life? what good is this? >> that potential for them to get in that big trade and make that big, big return is there. i think that pulls a lot of this money off the sidelines. >> you've got guys -- >> it's a gamble. >> i don't want to name names, but you've got guys putting all kinds of money or shorting all
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kinds of things, the retail department stores, health department food stores and getting their butts kicked down. their investors can't be too thrilled about that, dom. >> i want to say something. i want to take the other side of the argument. you're talking about the big payoff. the big rigsing. the big trade. many of the managers i used to work alongside with will tell you if you look at those performance figures, it's sometimes unfair. often times, these hedge funds out perform in times of down markets and under-perform when the market is in a bold, bold rally. they do some of their returns with a lot less volatility. so sometimes -- so, again, i just want to bring that to life. >> but they also take a huge amount for their commissions. that's why i say these e.t.f.s are very good.
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you're right. but you're not always right. i mean, if you go back, i've seen -- like jim glassman, i think he's going back to financial column. he did a long study and buying the index. you look at one of my -- i forgot his name. the professor for princeton university. he has shown in the long run, you're better off buying the index. you're just better off buying the index. >> i think dominic made a very good point. the term hedge means you're hedging your pogtss. in up markets, they tend to short. if you look at the short positions, they've been just demolished over the past 3-6 months. that's one of the reasons these
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hedge fund returns have been way under-performing. in the down markets, you're going to with very glad they're there. >> i want to see that evidence. i want to see those data points. i think with up around down markets, you have this long continuum. you can go dry for 10 or 12 years. you can buy the index, like i did, nothing happened to me for 10 or 12 years. we're up, we're making money, i'm thrilled, my wife is thrilled and i'm not paying 20%. >> the one things you want to remember, for these hedge funders, it's just an asset class. you say etx, those are all pieces of a puzzle. he might do well in the e mesmig
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marketings for you, too. >> to be continued. to be continued. thank you very much, as always. up next, economic confidence looks like it's growing. could be a decent jobs number coming out tomorrow. slower fed bond purchases at september 17th and 18th meeting. i thi the fed is going to wait until any syria bombing is concluded. famed columnist ed lazier is going to join me. i want to know if this economy is, in fact, getting stronger. stay right here. ♪ norfolk southern what's your function? ♪ hooking up the country helping business run ♪ ♪ build! we're investing big to keep our country in the lead. ♪ load! we keep moving to deliver what you need. and that means growth, lots of cargo going all around the globe. cars and parts, fuel and steel, peas and rice, hey that's nice!
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all of that sent the ten-year low and is it time for the fed to do some tightening? here now are the answers, ed lazier, president george w. bush's chief economic advisor and now profession sor at stanford university and the hoover institute. you recently wrote observations on the financial crisis. maybe we'll get to that. maybe we'll get to that on the radio on saturday, also, hint, hint. it's wonderful to have you back. >> great to be with jou, larry. >> i had not been in the camp of the second half rebound, but i may have to change my mind. where are you -- let's start with tomorrow's jobs reports. what do you forsee? >> well, i guess i would start by saying don't overreact, larry. you know these numbers tend to be highly volatile. and even the jobs numbers itself is a very noisy number. if you look at the jobs number,
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suppose it came up with something like 175,000. the typical error on that is about 75 talking about is it could be 250. what i would point to is a couple of things. first, on the good side, the thing you just mentioned, which is the initial claims have been down and down pretty consistently now. they're down in the 330 range, which isn't quite normal. but it's a high end of nor hall. and so that looks pretty good. the other thing that i would say that looks a bit better, only a bit better, but it is better, is that the month lly hires are up. now it's moved up to 4.3, 4.4. it's moving in the right direction.
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>> there are some glitches. >> you're right. and i think you aulgt to focus on when the numbers come out is the employment rate. not the unemployment rate, but the employment rate that. 's the proportion of the working age population who actually have jobs. that number was 63.5% before the recession began. and it's been down in the 58 fnt 5%. we're barely able to keep up with population growth. >> i'm just going to mention, today, for example, we've got factory orders. if you look at core capital investment, it's doing rather poorly. in fact, the last three months it's down. and business investment has really not participated in this recovery. and business investment, typically long term investment,
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is where you get tremendous job kreegs. also, consumer incomes. we had a lousy consumer income and spending report. i know there's a lot of car sales. but, outside of that, we really don't see block buster consumer spending. so i've got some guys, they're real smart e con migss, they're saying we're going to have a couple hundred thousand jobs tomorrow, as we have had for the past six months on average, and the economy may be moving towards a 3% growth trajectory. what's your thought, ed lazear? >> well, i don't think we'll be at 3%. if you look at the numbers, last quarter, remember, you know, came in at about 2.5%. and people viewed that as a good thing. even if we were to get to 3%,
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and i don't think we will be there, but that wouldn't be what was necessary. what we actually need, and this may shock you a little bit, but if we want to get back to where we would have been but for the recession and the very weak recovery, we would actually need 7 years of 5% growth to get there. we've got a long way to go. >> yeah, we could use some deregulation, roll back certain health care programs. i get that. let me just move on. ed lazear, sometimes rising long term rates, rising real rates, are a sign of economic growth and are actually a good thing. is that possible? >> that's right.
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not only sometimes, most of the time that's true. if we look at yield curve, it indicates a growing economy. the other thing we know is that the stock market is what's going to happen in terms of economic growth. and that's been positive, as well. despite the fact that we've had a few bad weeks. sthoez a those are indicators in terms of what's going on. i wouldn't, again, place too much weight on it. primarily, what we're seeing here is the market betting only expectations of what the fed is going to do. i think the fed is going to do pretty much what the market thinks it's going to do. i think the fed has realized that the economy is improving at a very rapid rate. but rather that the ammunition is losing its potency. it's probably time for it to back off. they want an excuse to do that. >> last chance saloon, what do
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you think, ed. they're both close friends. >> ed lazear from stanford and the hoover institute. dwraelt to see you. now, folks, be sure to tune in tomorrow night. i'll be joined by elaine chao. up next this evening, are obama care critics right or wrong about the health care plan, swollen employment and generating only part time jobs. we'll debate when "the kudlow report" comes back. [ male announcer ] this store knows how to handle a saturday crowd. ♪ [ male announcer ] the parking lot helps by letting us know who's coming.
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walmart workers walked out in protest today demanding higher wages. we're joined with more on that and some other top stories. >> walmart workers and supporters launch protest in at least 15 cities stod. now, their demands? a pay raise, better working conditions and that workers allegedly fire or discipline for participating demonstrations be reinstated. walmart says the protests are stunts that have been orchestrated by union members and activists and don't represent the views of most of
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their associates at wall marts. there are reports testing phone screens as large as 6 inches. that would be a big increase from the 4 inch screen on the iphone5. how much you pay to get to this beach? two found themselves in an auction bidding war locking horns for the nearly 19 foot long strip of land just one foot wide -- yeah, one foot wide. $20,000 for the footpath to this beach. the one-foot wide foot bath to this beach. >> tom, that's nothing for a hedge fund guy.
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>> the american enterprise institute. peer pod securities global strategist robert finch. >> i mean, to what extent is health care reform offering part time jobs, cut back hours, cut back 71% of the jobbings cut last year. i think it would be more than an neck doal ef. if you look over the past year, most of the jobs have been full time. >> for big companies, they've
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already had plenty of incentive before. so we're really talking about medium and small businesses. and i think the best answer is really the simplest one. the economy has been weak. >> what's your response to all of that? >> well, you know, it may be true about jobs over the last year when obama care hasn't been an issue over the entire last year. if you look at part time employment, it was actually the first chart in jim's article today. it was a percentage very sharply as it normally does. and then as the labor market heeled in 2010, that ratio of part time employment totally comes down. but, you know, is that upturn something new?
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or is that just a regular movement over a couple months. i agree it's a bit early. but, clearly, a downturn employment has turned around in the last couple of months. that's a possible explanation. >> it is a very zigzaggy kind of chart. it goes up and down. this is all based off the house homd survey. a very volatile survey. i would be surprised if going forward, assuming this employer mandate imp lelements with part-time later. >> which is one thing for viewers. there's the non-farm payroll survey, which is the wild survey with the unemployment rate. but there is also the household survey that jim referred to. it's from the household survey
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that the unemployment rate is calculated. sometimes, jimmy p., the household as you were va is a leading indicator. sometimes that turning point is something to watch. bob, cinch, he's put out a print. the 29 hour workweek may be a plus for the company after the worker. >> meanwhile, they only work 289 hours instead of 30, 35. so there may be incentives on both sides to lower the workweek and hire part time workers. >> if they paid you the same salary for 29 hours as they paid you for 35, i have suppose that might be the case. but that's a huge increase in unit and labor costs. and i don't know many companies that are really going to take that on. a couple weeks ago, i think when
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you were on vacation, nbc news did a story of a number of subway sandwich shops up in new hampshire who was kiting all of their workers back. he was saying i was struggling to get by on a 40 hour week. i can't do it on 29 hours. the jury is still out, but, clearly, the evidence in the last three or four months is tilting toward more part time work. i would like to see how things happen. >> we'll get so more data. there's a reason the labor unions are pissed off. anyway, thank you very much. up next, it's kickoff time for the football season. and if you're looking to go to a game or two, it's going to cost you plenty. find out how much right after this break.
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the nfl season kicks off at the top of the hour. that's 8:00 tonight. if you're planning to go to a game this season, you better get ready to pay up. dominic chu breaks down the most expensive teams and games. >> all right, larry. first, when it comes to the costliest and cheapest tickets on average this season, you ear going to head to chicago and
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jacksonville because bears-tickets cost the most, on average while jacksonville tickets are the cheapest on average. now, as for biggest drop between last season and this season, they posted the biggest game year-over-year. it's still early in the season. they are the top five most expensive single-game tickets so far this season. this is number five, the november 24th game between the broncos and the patriots. number 4 is the october 10th game between the giants and the bears. number 3, the november third game between the steelers and the patriots. our runner up for the pomost expensive game is the september 15th match-up when peyton manning and the broncos come here to visit brother eli manning and the giants and the number one most expensive game,
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my san francisco 49ers traveling to seattle to take only the sea hawks. i cannot wait for the season to start. i was a water boy and the giant doctors all lived in englewood, new jersey. i know the giants are in two of those five big games. >> it's a big market. i think the broncos, i think the 49ers. those are probably the elites right now. >> if you lad to pick one, who would it be? i just have to pick the giants.
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woman: everyone in the nicu -- all the nurses wanted to watch him when he was there 118 days. everything that you thought was important to you changes in light of having a child that needs you every moment. i wouldn't trade him for the world. who matters most to you says the most about you. at massmutual we're owned by our policyowners, and they matter most to us. if you're caring for a child with special needs, our innovative special care program offers strategies that can help.
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>> narrator: in this episode of "american greed"... they said it was the deal of a lifetime. >> put money in god's hands, and god gives it back to you double. >> narrator: and thousands of people put their faith and money into the ministry. >> they said, "we'll double your money in 17 months." that was the pitch. >> narrator: but it was a fraud, and all in the name of god. >> i've seen more money stolen in the name of god than any other way. >> narrator: and later... he was one of the most successful jewel thieves of all time. >> i could make a million dollars one night and start looking for another one the next day. >> narrator: bill mason made it look easy, hobnobbing with the rich and famous and taking their diamonds. >> bill had no desire to rob
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