captioning sponsored by wpbt >> susie: wall street's bull run celebrates its second anniversary with flat trading in stocks. but there's big action in bonds, as the king of bonds sells all his holding in u.s. treasuries. >> tom: we ask pimco's bill gross why he's bailing out of government debt and where he's putting money now. you're watching "nightly business" report for wednesday, march 9. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:

this program is made possible by contributions to your pbs station from viewers like you. thank you. >> susie: good evening, everyone. the world's largest bond fund is betting against bonds. pimco's total return fund has sold off its government bond holdings to zero as of the end of february. tom, this is a strong signal from pimco's flagship fund that it sees little value in owning u.s. treasuries. >> tom: susie, as a result of those bond sales, pimco is sitting on $54 billion of cash. the fund still owns other kinds of bonds.

it's holdings are diversified among mortgage bonds, corporate debt, foreign bonds and municipal securities. >> susie: so what's the reason behind the bond fire sale? joining us now: william gross, the founder and co-chief investment officer of pimco. hi, bill, nice to have you here with you. >> hello, susie, thank you very much. >> susie: so your pimco return fund has had great returns up so far this year, it was up 8% last year. tell us why are you selling treasuries now. >> we haven't lost faith in the u.s. government. america is still strong and the economy is growing, and we have perhaps 30 or 40 billion dollars worth of u.s. treasury bills. but those are shorter maturity obligations. so the argument really that we have is really a one of valuation. we simply think that longer dated treasury yields, and to

cite a few examples, two-year at 70 basis, and five-year treasuries at 2% plus or minus simply are not reflective of where they should be or eventually going. if yields in longer dated segments then prices move lower. so it's not a negative thing in terms of the u.s., it's simply a overevaluation in terms of price. >> susie: so what would make you a buyer again? where would you have to see the yields on these various bonds? >> well, historicly, susie, let's take a 10-year treasury, today they had an auction, a yield of around 3.5%. historicly when the u.s. economy is growing in nominal terms, that means real growth plus inflation, close to 5%, which is what it's doing now, the 10-year treasury has yielded about 5%. now it means that it's yielding 1.5% less than it

should. and one of the primary reasons we think is simply because the fed has been buying treasuries in large quaunity, and this particular program will continue for another three months or so, but then it will end. so at that point to our way of thinking it becomes a question of musical chairs, who is caught with the 10-year treasury at low yield, and it should be moving higher. >> susie: well, to pick up on what you're say going the federal reserve's strategy, when the fed stops its bond buying binge, is that going to be a time for pimco to jump back in? >> i think so. having confidence in the u.s. government and the credit worthyes in, we're a triple a credit, it becomes a function of being paid in an appropriate rate of interest relative to the growth of the economy. and no one really knows what will happen on june 30th, nor do we know that the fed will

abandon the program. but looks like they will. to the extent they don't buy on an annualized basis most of the deficit that's a trial young and a half dollars, then somebody else has to and that typically results in higher yesterdays and lower prices, but we'll have -- higher yields and lower prices, but we'll have to see how those prices go. >> susie: investors who are listening to you now holding treasuries, should they sell them, and if so where should they put their money? >> well, investors should look in several directions, sus i. i think they should look to the corporate debt, corporations are in what we call the cat bird's seat these days, their profit margins are high, their taxes are low. their p. e. ratios are accelerating in terms of risk markets, so corporate bonds, a good risk with a higher spread or a higher yield. in addition you should probably go outside the united states.

the emerging markets, the developing countries are improving credit, they have better balance sheets than the united states. brazil, for instance, has half the debt relative to gdp that the united states does. as does mexico. so these countrys are moving ahead, growing more strongly, and actually have better balance sheets than what we have here in the united states. so look outside the united states as well. >> bianca: interesting advice, and we'll be watching carefulfully to sew what you do with all that cash you have on the books. thanks, bill, for coming on the program. we've been speaking with william gross, pounder of pimco. >> tom: here are the stories in tonight's "n.b.r. newswheel." stocks stumbled on this two-year anniversary of the bull market. the dow and the s&p 500 were both off a point while the nasdaq lost 14. trading volume was lower on the n.y.s.e. but higher on the nasdaq. exxon's c.e.o. told investors

there's plenty of oil to handle global demand, and he's not now worried about supply disruptions. but rex tillerson said higher gasoline prices could be a big problem for american consumers. >> i don't know if the tip-over is at the same $4 level or not, i just know that when we went through that the last time, $4 was like a significant emotional event for a lot of people. >> tom: meanwhile, opening statements were heard in the insider trading trial of hedge fund manager raj rajaratnam. prosecutors told jurors the galleon group co-founder traded on secret information "again and again and again." still ahead tonight: if you've got to have that morning cup of joe, it's going to cost you more. how the spike in coffee prices is affecting consumers and small coffee shops. >> susie: the obama administration is taking some fire today over its policy on free trade. senators pressured the president to get tougher with china just as mr. obama named commerce

secretary gary locke as his new ambassador to beijing. as darren gersh reports, lawmakers are also pressing the administration to wrap up work on trade deals stretching from korea to panama and colombia. >> reporter: the president turned to gary locke, the son of chinese immigrants, to handle the delicate job of protecting u.s. economic and security interests with a huge u.s. trading partner. >> continued cooperation between our countries will be good for america, it will be good for china, and it will be good for the world. as the grandson of a chinese immigrant who went on to live the american dream, gary is the right person to continue this cooperation. >> reporter: cooperation is not how many members of congress see it. while the president was naming his new ambassador, senators like oklahoma's tom coburn were urging the obama administration to crack down on chinese violations of u.s. intellectual property. >> the signal needs to be sent that their response thus far is highly inadequate. it's thievery. >> reporter: senators pressed

the administration on other trade deals, too. the korean free trade agreement is ready for congressional consideration, but max baucus, the chair of the senate finance committee, urged action on pacts with colombia and panama, too. >> it's clear to me that none of the agreements are going to pass unless they're all packaged. >> reporter: the colombia trade agreement has been held up by labor union concerns over protections for worker rights in that country. but the american public is also increasingly skeptical free trade benefits american workers, a concern u.s. trade representative ron kirk says he finds around the country. >> i mean to tell you not only in cleveland, but i can promise you, you can find them in ohio, you can find them in montana, you can find them in texas. >> reporter: but the brookings institution's josh meltzer says a free trade deal with korea will have some clear winners. >> there is going to be significant benefits for the automobile sector. the agriculture sector is also going to benefit. >> reporter: the korean free trade agreement is expected to

boost u.s. exports by more than $10 billion-- enough, the president says, to create at least 70,000 jobs. darren gersh, "nightly business report," washington. >> susie: bad news for java lovers: the cost of coffee beans has jolted higher this year. many large chains like starbucks have been able to absorb the higher prices, but not so at smaller retailers. erika miller visited one new york city coffee store today to

see if even higher prices are are percolating. >> reporter: for many americans, coffee breaks are a daily ritual. >> i'm a coffee freak. i like the taste. it's not just the caffeine. >> reporter: it's a habit that is becoming more expensive at oren's daily roast and other coffee stores nationwide. c.e.o. oren bloostein has had to raise prices twice in the last six months. >> for a cup of coffee, we raised between five cents for, say, a drip and ten cents for an espresso beverage. the beans, 75 cents to a dollar. >> reporter: part of the reason the price of coffee is going up is more consumers are drinking it, thanks to an improving global economy. at the same time, coffee supplies worldwide are the lowest on record. so, coffee futures are at a 34- year high, closing in on $3 a pound. they've more than doubled in the past year. commodity trader alan knuckman thinks the rally will continue. >> we've got very, very small

stockpiles, and the growing season has not gone well. so that gives us an undertone of support. >> reporter: that's bad news for coffee drinkers, but, so far, many are taking higher prices in stride. >> i haven't noticed at all. >> the reality is, if you need your coffee, you need your coffee, and you'll pay an extra quarter. >> reporter: so it's easy to understand why shares of starbucks continue to perk higher despite rising coffee bean prices. they're up 35% in the past six months. analyst eric kolb has the stock rated "hold" based on valuation, not rising commodity prices. >> we feel their growing international expansion and the further effects of their restructuring and other improvements initiated a few years ago, that the rising commodity trends can be absorbed. >> reporter: not so for oren's, where other costs are also rising, like energy, employee healthcare and paper goods. still, bloostein is not tempted to cut corners. >> i think it's the only reason we're still in business is because our coffee is better. we'd never ever cut the quality.

>> reporter: which means another price hike may already be brewing. erika miller, "nightly business report," new york. >> tom: the bull market turned two years old tonight, but not much celebration today in the market. let's get you updated with tonight's market focus. >> tom: the major stock indices didn't move much today, but what a two years it has been since the recessionary closing low two years ago tonight. since march 9, 2009, only 13 of the 500 components are lower. the best sector has been financials; the weakest, telecom stocks. as for today, we'll roll out the past 90 sessions for oil, concentrating on the move up beginning two weeks ago.

and that move has stabilized some, but still over $100 a barrel. investors continued taking refuge in utility stocks. it was the best performing sector today, led by this trio of electric utilities: first energy, exelon and public service-- each tacking on at least 2.5% today. meantime, we keep seeing money come out of material stocks like steel makers and agri-business stocks. this materials exchange traded fund had risen 22% from a year ago through the high last month. it's down 6% from that high, down another 1.6% today. take a look at the past month for finisar. the shock was shellacked today, losing almost 40% of its value. volume was 12 times normal. as we extend our look to the past 180 sessions, tonight's low is a three-month low.

finisar makes fiber optic equipment, and its outlook was weaker than expected. finisar wasn't alone in the sell-off, though. j.d.s. uniphase shed more than 16%. j.d.s.u. had been on fire since early february after announcing a big upswing in sales. this entire group had been rallying, but they got hit today. oo-claro fell more than 18%, op- link dropped 12%, ciena was off more than 5%, and alcatel-lucent fell 3.5%. one tech stand-out today was i.b.m. the 2% rally takes the stock to an all-time high, and up more than 30% over the past year. yesterday, big blue forecast double-digit earnings growth through 2015. teen retailer american eagle outfitters added 5% after better than expected earnings. it also confirmed it is looking for a new c.e.o. aeropostale saw a much smaller 1% rally after announcing plans to expand into asia. speaking of retail and expansion, kohl's pushed up to

its highest price since december. it plans to open nine new stores, renovate 100 others and hire 1,200 people. finally, a big i.p.o. tomorrow with hospital chain h.c.a. selling stock at $30 per share. raising $3.8 billion, it's the biggest private equity backed i.p.o. in u.s. history. and that's tonight's "market focus." >> tom: over the next five years the chinese government

wants to raise worker incomes by 8% a year. tonight's street kra teak guest wants to profit from that emerging middle class in china. hilary kramer of editor game changer stocks.com. your newest china idea here is seven days, this is an economy level discount hotel group. and it's a lot cheaper than than it was last night after an 11.6% drop. why are you trying to catch this falling knight? >> it's really not a falling knight. china in general has not performed like the u.s. market. the hotel chains droped with real estate bubble expectations in china, but yet there really aren't very many rooms, 77,000 rooms for over a billion people in china. so here's a hotel chain, it's an opportunity to jump in, into playing the consumer that has more money that's traveling, that's spending. >> tom: to be clear, you're just watching this one, you haven't put any money to work

yet? >> i'm watching this, because as we know i'm in focus media, i'm in china netstar, a drugstore chain, an excellent stock for anyone who wants to capitalize on china to jump into. >> tom: tom sent us this note. you mentioned it back on january 5, 2011. has increased, has performed nicely. have you taken profits? >> no profits. a two-year hold because digital realty is real estate for technology companies, specifically crowd computing which is where all the growth is, so you're talk baig sweet spot in technology. >> tom: this is a frequent question folks want to get updated on. are you still holding super

media? you chose this on september 15, 2010. and the stock prices have been volatile, but headed lower generally speaking. >> at first you would have had a chance to make 40% on your money, that's the key here. what's important for investors watching to understand is that if you see the opportunity and you make even 25% on your money, take some off the table. i'm in super media for the longer term. for me it's about the m and a activity that someone may be out there who wants to get into social media and would use a cheap company as a means to do that. the old yellow pages, but they've migrated onto the internet. >> tom: any other disclosures tonight? >> i do not own seven days sbn, i am watching it carefulfully, but i do own the other two stocks. >> tom: you can follow along with us and e-mail us at street critique at nbh.com. tonight hilary kramer with gamechangerstocks.com.

>> susie: and here's what we're watching for tomorrow: weekly jobless claims and an update on imports and exports from january's international trade balance. also, farmland values in the midwest are climbing at their fastest rates since the 2008 boom. we'll see who's buying the land and just how they're planning to use it. so what's the fastest-selling electronics device ever? it's microsoft's kinect. the guiness book of world records confirmed it today. microsoft has sold more than ten million in just over four months. the accessory for xbox 360 game consoles lets users control the on-screen action by moving their bodies instead of a controller. kinect costs about $150. so far, it's added $1.5 billion to microsoft's coffers. >> tom: it seems the rich really are getting richer. "forbes" says the combined wealth of the world's billionaires now stands at a record $4.5 trillion.

the magazine is out with its annual list of the world's top billionaires. mexico's carlos slim ranks took the top honors for the second year in a row. bill gates is second; warren buffett, third. and for the first time, countries outside the u.s. can now boast of having more than 100 billionaires. china has 115 while russia, 101.

>> susie: with more americans facing foreclosure, tonight's "money file" is here to help. here's john simons, editorial director of personal finance at "black enterprise." >> last year, there were more than 1.2 million real estate repossessions. this year's foreclosure tally is likely to be even higher. for many american homeowners, foreclosure is looming and very real, but it is possible to rebound from such a crushing circumstance. here are six stepso emotional and financial recovery. one: before your bank confiscates your home, locate affordable rental housing. two: if you've lost your job, secure new sources of income, whether through unemployment benefits, a temporary placement, or part-time work. three: regroup emotionally. don't blame yourself or other family members for your predicament. commit to working as a team to rebuild. four: educate yourself on intricacies of personal finance. learn how loans work. study how credit scores are calculated. five: seek out free counseling from organizations like the

national foundation for credit counseling, or locate a federally-approved advisory service at www.hud.gov. six, draft a budget and stick to it. include specific amounts you'll repay and timetables for attacking all your remaining debts. best of luck. i'm john simons. >> susie: that's "nightly business report" for wednesday, march 9. we want to remind you this is the time of year your public television station seeks your support. >> tom: support that makes programs like "nightly business report" possible. >> susie: thanks for joining us, and don't forget to support your public television station. i'm susie gharib. good night, everyone. you, too, tom. >> tom: good night, susie. i'm tom hudson. we'll see all of you again tomorrow evening. "nightly business report" is made possible by:

this program was made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org >> more information about investing is available in "nightly business report's" video "how wall street works". to order this dvd, call 1-800- play-pbs or visit online at shoppbs.org. >> be m