this is nightly business report. >> markets around the world sell off as investors worry about a bank bailout plan for cyprus means for trouble. >> paul krugman diagnoses american's biggest economic challenges and builders say demand for homes up and so are costs and buildable land is scarce. why home builders aren't as confident. we have that and more starting right now. >> good evening. tyler, it's amazing how one small country in the mediterranean can create big problems for the rest of the world. >> this is a tiny bite.

stock markets around the world wobbles as part of the plan to bailout cyprus. part of the plan will take money from the depositors. cyprus has an economy the size of vermont but the assets eight times more than the country's gdp. therein the financial woes come as no surprise to analysts. listen to what alan greenspan said friday. >> europe has been hanging over the american markets for quite a while. the removal of that risk, i think temporarily, i think it is only temporary, has enabled the underlying forces of the market to begin to come into vision. >> and today, the clearer vision

that greenspan referred to was clouded the cyprus, we have the report by cyprus matters. >> reporter: cyprus is a smaller island with a smaller economy. but now they're watching what happens in the tiny mediterranean nation. >> it's a tiny nation. the reason we care about it is of course cyprus like it was in greece. it's what it means for the bigger nations if they follow and go down the same bath. >> banking is a huge part of cyprus' economy. and it's a mess. if it fails the country will probably fail, too and the european union will not let the country fail. here's the thing, the biggest payers are the russians. >> they don't want to bail out the depositors because they are mainly russians. that's what the issue is. >> so finance makers said

depositors are going be compensated. but with the stock market down some 60 percent those chairs are essentially wortless. >> the blanks are closed and won't open until votes on the bailout measure. people are waiting in lines at atms to withdraw money from their accounts and countries are worried around the world that

citizens would take money out of their banks that's why even the most seasoned wall street veterans watching what happens in the tiny island in the mediterranean. for "nightly business report" i'm sue herrera. >> so what does it mean to american investors? we turn to the ceo of pimco the world's largest bond fund. i asked if the situation in cypress is unique or is it a serious issue for the u.s.? >> it is mainly unique to europe and cyprus in the sense that cyprus has a very large bank system and there's no other way they can raise money. the reason why it's relevant to us, susie, is because it's disrupting a certain conventional wisdom which deposits are sacred. ensure deposits are sacred.

and that's no longer the case. >> absolutely. that's what i a lot of people here were thinking about as agents question whether your bank deposits, can you trust bank insurance? even though this problem was all of the way in cyprus? what can you tell people at home tonight? >> i would say no fear kays, there's no fear that the fdic insurance is not going to apply. i think what's happening in cyprus is very special. however, we may feel the spillover in different waste. what's going to happen now, is because unless they fix the blunder that they call them, the mistakes, these are the words that are being used right now within europe, unless they fix that, there's a chance there will be deposits in cyprus of the banks we open thursday. >> what impact does that have on the u.s.? what impact does all of this stuff going on in europe and cyprus have on economic

recovery? can it derail it? >> i don't think it dree rails it. it's an initial head wind. europe is after the biggest economic zone so the thicker europe gets the more head winds we get. the good news, and this is really important for us. we have some healing. we are getting better comeecht and secondly the federal reserve is committed to buying time for the politicians to get their act together. i think this is a head wind but do not see some of it would derail our economy. >> what about the global economy? what about the global financial system what what risk is there to that because of this cyprus situation? this is a big worry for so many people. >> so, the risk scenario, and i should stress it's a risk scenario, not a baseline is that the cypriots are so upset that you get both political disorder and social unrest and that increases the chance of cyprus

exiting the euro zone. if they exit the euro zone, you reopen all these dwhaes are put aside by the very aggressive intervention of the banks. that's the risk, unless they find a solution and unless they exempt the small savers from this levy, that you may get social disorder and political disorder. >> let's bring it here to the u.s. and u.s. stock market. we've had a nice market rally. could this situation disrupt the market rally here and for american investors, is this a time, an opportunity to get in, or is there more turmoil ahead? what do you think? >> so far we've shrugged off this element for three reasons. one is the europeans have realized they've made a mistake and are trying to find a way out. it's not going to be yes, siree but they're trying. second the market is more attractive because europe has a question mark.

third let's not forget wheat going well here. the reason why we, in the united states have shrugged off the news today is because of these things. i would say that. do not forget that we ahave com a very long way. i wouldn't say this is a buying opportunity. i would say this is a reminder that we're subject to the political shots from outside. >> well, the cyprus news and worries about a broader spill throughout europes and world markets down sharply. and u.s. stocks were not immune. but they recouped nearly half of their losses by today's eggs is. being down as much as 110 points the dow finished 62 points lower closing at 14,462 nasdaq down 11 points s&p down 8 now 13 points shy of its all-time closing high. >> looking at the u.s. economy

home builder confidence fell more than expected and for the third straight month. the national home builders said its home index fell points. builders say they are concerned about meeting increased demand for new homes because of bott bottlenecks in the system. not enough workers and building supplies. with us to talk about the outlook, brian westbury, chief economist of first trust advicers. brian, is this a case of an abundance of issue? is that what wobuilders are telling us? >> yes. after a surgery, it takes some time before everything starts to work right again. i think that's kind of what housing is going through. we have massive layouts. we literally shut down the entire industry. i mean, almost, and so, getting it started up again, i think builders are surprised by the strength of sales and wheat

happening now is that there are bottlenecks appearing and there's a shortage of homes on the market. and this is creating, kind of good difficulty, if you will, for builders and for the housing market. it's a shortage of homes on the market in many, many areas of the economy. >> brian, builders are are a little less confident than they were a month before but for technical reasons should home owners be, or people on the market be less confident about buying a house or do you see a good year ahead? >> i see a great year ahead. builders will catch up eventually. last year, i think housing prices were up almost 30 percent. that's a huge game and they're having a hard time catching up. we had lots of immigrant workers, many of them immigrated back out of the united states, or they've moved to different areas of the economy.

and, so, what's happens here, we just have a little problem restarting. one of the other areas that we can see this happening in is lumber, lumber prices now, the price of lumber is back up to where it was in 2005 at the height of the boom. and we're building about one third of the houses that we were building then. the reason lumber prices up so much is that we're not producing as much lumber and yet demand is taying off. >> let me ask you this, brian. the other thing that's geeing up are the rates on mortgages. we've seen on 30 year, 3.6 plus%. not a lot. but as p mortgage rates go up. what does that do to the housing recovery? should it stall it out? >> it could if rates go up significantly more. but we've had -- we had a boom in housing back in the early 2000s. back in the late 1990s.

with mortgage rates of 6 percent or 7 percent or 8 percent. as log as the economy is doing well, as long as wages are rising and i know they're not surging today, as long as we're adding jobs, i don't believe interest rates anywhere near current levels are going to put a dent in the housing market. >> nice upbeat way to end our conversation. thanks a lot. and we want to get a jump on the spring selling season, so for the rest of this week we'll be taking an indepth look. diana looks at the most hardest heim miami market where things are starting to boom again. >> and we have the stumbling blocks in the deal to sequester the government spending cuts but first the look at how the overseas markets fair fared today.

on wall street, more red than green in the stock market and some losses in the oil patch as well. >> that's where we begin our market outlook tonight. the company's ceo expects negative pricing press neuer several airs. looking at the stocks, down almost 4 percent. other drillers almost got hit. neighbors and hall burton down as well. leading the s&p gainers today. jcpenney the retailer got a positive report from an analyst at oppenheimer because of the new joe fresh shot. but says pennies needs to work through its problems. >> as ttrazenika reported a big

drop. and forecast continuing difficulties with competition from generic drugs. shared traded in new york were down slightly at 46.18. >> and after six year on the job, electronic arts ceo offered his resignation during the tenure. the stock dropped more than 60 percent. he said in a memo revenues will be at the low end of his earlier guidance and was accountable for it. shares were down at the close and rose after hours. >> moving now from wall street to washington. this week, law makers are working toward a measure that keeps the government up past next wednesday that's when current funding runs out. but the real budget battle over long-term spending cuts continues. >> republicans and democrats in washington are still fighting

over taxes and spending but they've agreed to keep the fight under control. house already passed a bill to keep the government running past the end of this month. now the senate is preparing to do the same thing and there, the two parties aren't far apart on the details. >> we've con ens didded the number of amendments being talked about seriously. i commend them and their staff through all of their efforts. >> i spoke with them this morning. they've yet to reach an agreement. >> but the gap remains huge for a long-term plan for bringing government spending and revenue inline. >> they'll reduce the entitlement programs but only if republicans agree to tax hikes and jepd speaker john boehner said the house's answer to that is no. >> the president got his tax heights on january 1st. the talk about raising revenue is over. it's time to deal with the spending problem.

>> the two chambers have a way of talking about their differences, not with president obama but on each other. work on the contrasting house and senate plans continue this week. for "nightly business report" i'm john harwood on capital hill. >> i asked when we spoke recently but began by getting him to rate the u.s. economy on a scale of 1 to 10 with 10 being very strong. >> i think it's trying to be a 6 but the government, in generally, the government doing the wrong thing might be pulling it back to a 4. we're definitely off the bottom and economy is trying to recover. . are you concerned? i spoke with form early fed chairman alan greenspan. he said with respect to the sequestered, rising asset prices both in stocks and housing may in part overset the otherwise dill tear just effects of the

federal spending cuts. are you in that camp at all? >> not especially. there's a little bit coming from stocks but the main thing is housing is coming back. we've bit very few house force a long time. household debt is coming down relative to income. balance sheets are in better shape. we have in a way, we've been down so long there's no place to go but up, so the private sector is starting to recover. >> the economy is, you seem to characterize it as luke warm. why are stock prices as high as they are today and do you think they can move up from these levels? >> two things. the economy is luke warm, profits have done very, very well. we've had for whatever reason, a major shift of income away from labor to capital. profits are very high. the other thing is interest rates are still very low, so money has to go some place and it bids up symptom prices. i don't think stock prices obviously unreasonable.

i don't know if it's right or not. but it don't look like a crazy number. >> if you look, we've finished two and a half months of the year. if you look at the future for the rest of the year. how do you think the economy will perform and for stocks? how do you think them de? >> i have nod idea whatsoever on stocks. i think the u.s. economy is trying to grow. a lot depends on what is going happen in washington. does the sequester continue, do we have crazy -- another complication over the debt ceiling. at this point, it is dysfunct n dysfunctional politics getting in the way of an economy gradually getting its act together. >> does the economy in terms of federal finances need what's been characterized as a grand bargain? do you think it's possible? i was listening to a political analyst who said if a grand bargain means somebody has to -- each side has to sign on to raising tacks and cutting entitlement, he knew of no politician who would buy that

bargain. >> i don't think it's likely, but i wouldn't put it this way. i would say the division between the parties is too large. that we've -- we as republicans basically have not acknowledged the election. that's the problem. it is not urgent. the congressional budget office debt projections show pretty much stable u.s. indetectivedness for the next ten years. they do not show anything that looks like a crisis. we have long, long run problems but not anything that has to be dealt with this year or five years from now or seven years from now. >> are you worried about the consumers who paired their debt? it was much higher than a decade, decade and a half ago? >> consumers continued to pear it back some. that's one of the reasons we've had such a slow recovery. it's on the right trajectory. >> if you look at the biggest challenges that you see facing the u.s. economy over the next decade give me three that come

top at mind. >> first of all we're part of a year. we're not alone. europe is really a mess. i worry about blow back from the split cat swachlths that's an economic political problem. i worry about our own politics. we have, you know, it's one thing. i don't think we need a grand bargain but we need a functioning government. i'm not sure we have that. finally i think the environmental issues, we've been pre tenning they aren't there. but they're going to get more and more visible. we really should have been panicking about them long before now and i think by the time ten years up, it will become undeniable that we really should be scared and acting on environmental issue. >> professor krugman, thank you very much for joining us tonight. >> thank you. >> can always count on krugman for a fresh perspective on the world economy. let's take a look at treasury,

currencies and commodities and how they did today. ♪ one upcoming movie that hopes to join that same list of box office winners someday is the film based on the canceled tv series veronica mars. and the money needed to produce the movie is being raisesed in an unusual way. >> veronica mars had a cult following before the show was canceled in 2007. now die hard fans are rushing to turn the movie into a tv movie. >> what are we going to do with this old veronica mars movie?

>> they're linking the power of crowd funding raising $3.6 million from over 55,000 backers, setting a new record for kick-starter, a 4-year-old platform that helps people fund creative projects. it's raised over $500 million. >> for a true fan that's a thing to be able to do. >> in less than 24 hour, thomas and bell reached their goal of $2 million demonstrating the demand warner brothers wanted to see before it would agree to make the film. they generated that demand from passionate fans not by offering a return on investment but with a variety of rewards, everything from $10 for a coach script to $10,000 for a speaking role in the film. 300 people sent 1 thousand for tickets to a premiere. . this is a big win not just for

fans but also warner brothers, proofing the power of a devoted fan base. it could be a turning point how hollywood thinks of pricing a film. >> this demonstrates people will pay more than a $10 movie ticket to see a film but also gauges audience interest. >> a movie studio can combine with a filmmaker and say, we don't know if there's an audience for the movie. let's test that market. >> now all of the studios want to see how veronica mars performs. it's expected to start shooting this summer and hit theaters neck year. >> well, just like hollywood studios, colleges have become pretty good at making money in different waste and with the ncaa men's basketball tournament tipping off this week, the schools involved will all get a piece of the pie. one school is catching in on its basketball program at a far greater rate than the others.

we tell you which university is already a big winner. >> it goes by many name, march madness, the big dance, or more farmerly known as the ncaa's men's basketball tournament. every year, schools from around the country compete for the national title. this year's top overall seed is the university of louisville and they also happen to be the number one in another aspect of the game, money. louisville is the most profitable team in college been, from basketball alone, louisville takes in more than 40 million with huge margins profititying anywhere from $24 million to $28 million. that's largely due to the new kfc yum center. they also get $20 million from donations in alumni which is larger than most school's overall athletic budgets in basketball. >> in the game they beat out legendary programs like kansas, north carolina, kentucky and

indiana. they make the bulk of profits from the fund-raising but the team also draws 20,000 fans a game at a premium that is more nba-like than ncaa. >> average ticket price for university of louisville basketball is $35 which doesn't seem that expensive but more expensive than average ticket price for seven nba teams. >> also like pro basketball they sell beer and concession at another $5000,000 to the bottom line. for "nightly business report" i'm brian shackman. >> coming up tomorrow, more information on housing when we get february housing starts and federal reserve meets interests rates. i'll interview the ceo of coca-cola and how things are going overseas for him. >> see what he says about europe not specifically cyprus, which might be one tenth of one tenth of his business.

europe overall is a significant part ofoca-cola's business. >> that's it for night business news. thanks for watching. we'll see you back here tomorrow night.