details about the people and places we profiled, log on to our website at www.inwine country.com. welcome to "wall street journal report." the fed speaks, stocks spike, but not all of the news is good. is it too late to get in on the summer rally? and where are the markets and the economy heading next? profiting from pollution, and how you can make green from those smokestacks and help to improve the environment, and what you need to know about your credit score and how to fix it and why it matters and how you can save money, because of it. the "wall street journal report" starts right now. this is america's number one financial news program, the "wall street journal report." now, maria bartiromo. >> hello, i'm bill griffeth, and maria will be along in a few minutes. >> here is a look at what is making news as we head into a new week on wall street. as anticipated, the federal reserve's open market committee kept a key interest rate at or

near zero percent. the fed statement though which provides important insights into how the members of the ofmc are thinking is slightly more optimistic than it had been. and the open committee says that the economy appears to have a bottom and economic activity is leveling out. that helped to push the markets higher wednesday and the dow was up 100 points after two days' declines and the dow rose again thursday, but fell on friday. retail sales numbers released by the government were disappointing and the commerce department said they edged down by .1% in july. most analysts had been anticipating a slight increase. an astonishing number from general motors saying that the new electric car the chevy volt could get as much as 230 miles per gallon. now, the car won't be available until sometime late next year, and that mileage test was under very specific conditions. the volt can go 40 miles on an electric charge, and after that, a small gasoline-powered engine

will kick in. so the big news this week is not so much what the feds did, but what it said, and joining us now to help interpret that and where the markets and the economy may be going next, mike cuggino is manager of the permanent portfolio funds with more than $4 million in funds, and diane swonk who is chief economist at mesirow capital. diane, they said that the financial conditions are leveling out and further financial conditions are improving further. do you agree? >> i agree. they certainly are leveling out and they certainly didn't say they were soaring ahead, did they? >> no. >> well, saying we are seeing some currents in the economy, and good news and bad news. the armageddon scenario is behind us, but we are moving into a recovery, but it is fragile at best, and that left the backdoor open to continue the quantitated easing if necessary, and expand the

balance sheet, although i it would like as we continue into move into 2010 to reduce the ballness will sheet and not raise the rates for quite a while, but certainly accommodate it. >> well, what about it, mike? i think that at some point there needs to ban exit strategy, they will need to do that and the fed will need to raise the rates. when does that start? >> yeah, i agree. they took maybe the first baby steps in this announcement where given the appointment of ben bernanke will impact the markets through q-3 and q-4. >> do you think he be reappointed? >> well, i don't know. it is a tough question, because there is debate going forward on both sides and certainly reasons to go forward because he steered the financial economy around the crisis in the last year and on the other hand he was around presiding over it in the early stages when it was created, so it a double-edged sword.

so we will see what happens. >> diane, earlier this week, disappointing news on the economic retail sales and the rise in jobless claims and bump in the road or something else going on? >> well, again, the u.s. consumer is badly hampered and what we saw is the u.s. sales disappointed despite the cash for clunkers program which added $1 billion in spending in july. the payoff was huge for auto dooelers, but not for overall retail sales. i think it would have been weaker absent the cash for clunker program, but the government is providing morphine for a more painful economy for the u.s. economy, but not curing what ails us. vehicle production was up for month of july and picking up even more on the heels of the cash for clunker program which is more than we got out of $150 billion in tax rebates a little over a year ago and we spent that money filling up the gas tanks rather than stimulating

the production, so this program is at least giving us a bang for the dollar. >> and mike, the stock market has performed in a great way since the march 9 lows, too much too soon? due for more correction or what are you thinking? >> well, both. we came from such lows in mar thatch a snap-back rally was inevitable. the market stalled in june and late may when it needed firm economic underpinnings to keep going and it was whether it was a bear market rally or sustainable market. what we saw the with q-2 earnings coming out this summer is that they were better than expected as a general rule and that gave us underpinnings for the rally we had for the summer. going forward, we need to see more of that and we also need to start to see more news on the consumer housing foreclosure which is too high, and unemployment too high, and those sorts of things have to move the economy forward from here. the jury is still out as to how

robust that is. >> what do you like in the market? certain sectors? >> well, in the long term, i like the u.s. market generally. it predicts future economic recovery so from that standpoint, the market was vindicated. and we like the positive yield curves to allow the firms to grow out of the earnings out of the balance sheet issues and we like u.s. manufacturing on the basis of the global economic growth story still intact, and encouraging news coming out of europe this week as well as asia. i like the natural resources and commodity story as part of the global growth story which is a longer term growth story. >> and diane, in the longer term sector of the economy, housing, in your view, has it bottomed? >> it has bottomed, but the problem bottomed at such a low level and declined for so long, it is in a deep hole it won't climb itself out of. i do believe it has bottomed, but it doesn't mean much of a bounce going forward. for some buyers going back into the market, and some buyers

bidding on homes, and still a lot of foreclosures, so it is still a buyers' market for some time to go, but it is adding to growth in the second half of the year after four years of taking away from growth. >> mike cuggino and diane swonk, thank you for seeing you today. and now, coming up, are we better off than we were a year ago? and that is what authors and business leaders are talking about in their own words. >> you have credit coming in and residual values strong, and used car prices are quite strong, andle is of the traditional leading ind kicators are flashi green for the industry, so while the impact of the cash for clunkers stimulus would go away when the program goes away, is the fundamentals a of the market beginning to recuperate. >> there is a lot of risks ahead, and the markets are tightened to perfection, but we have a balance sheet that needs

repair. we have problems in the housing sector, and we have ultimately to get out of a massive amount of fiscal stimulus, and monetary stimulus. >> we have much fewer people employed today with almost the same level of debt than we did before the crisis. plus, now we are converting private debt into government debt. okay. so, we have more problems today. up next on the "wall street journal report," profiting from pollution? we will take a look at the market innovations that could turn environmental concern into a good investment. they are three little numbers that can determine an awful lot of your financial life. your credit scores. how to keep them healthy. as we go to the break, a look at how the stock market ended the week.

i'm racing cross country in this small sidecar, but i've still got room for the internet. with my new netbook from at&t. with its built-in 3g network, it's fast and small, so it goes places other laptops can't. i'm bill kurtis, and wherever i go, i've got plenty of room for the internet. and the nation's fastest 3g network. gun it, mick. (announcer) sign up today and get a netbook for $199.99 after mail-in rebate. with built-in access to the nation's fastest 3g network. only from at&t.

this year, u.s. businesses and consumers are expected to emit 5.5 million tons of carbon dioxide from fossil fuels which makes us the world's largest polluter per capita and second to china if in terms of total emissions, but is there an opportunity toic mag lower emissions good for business? maria, spoke to one environmental economist who is taking a cue from the traditional commodity exchanges and instead of trading on futures in corn and soybeans and wheat, he is trading on air. >> with the administration's promise to lower greenhouse emissions this decade, and the congress' first cap and trade system, more members of the business world are trying to find market solutions to environmental issues. joining me is richard sandor, ceo of the chicago climate exchange, the world's first greenhouse gas emissions

reduction registry and training system. richard, great to have you on the program. >> great to be here. >> what an interesting idea. how do you make air a commodity? >> well, i was asked that 30 years ago when i developed bond futures and they said how do you make money in commodity? it is much the same thing. you regulate and give out the right to amend. if you don't use all of your rights, you can sell them to somebody else. if you don't have enough rights, you buy them from somebody else. >> so you founded the chicago climate exchange in the late '90s after the u.n. kyoto protocol set binding protocols for the nation to lower emissions, and the united nations did not sign that agreement interestingly. but what companies for example now are going to be trading on it? >> well, the exchange includes companying like ibm, ford,

dupont, intel -- it is 112 members and if you added the emissions together, they would be bigger than germany. so actually the united states already has the largest cap and trade market in the world. >> how big of an industry is this? >> it is going to be huge, because it is carbon touching anybody from chemical makers to automobiles, to building -- across every single sector that you can imagine. i think that carbon ultimately will be the largest commodity in the world. >> is there a place for individuals to participate in this? individual investors? >> oh, sure. we will have futures in carbon and we already do on the european affiliates of 700,000 contracts which is a regional project here in new york and believe it or not, we trade regional carbon in the northeast and that market is bigger already after 11 months in steel

and lumber. >> now, is it sustainable and do you think over the long run there will be a carbon tax on polluters? >> no, we have the perfect case in the united states. in the 1990, we passed the clean air act to try to get rid of acid rain. it was 18 million tons, and we got it down to 9. it cost $1 or $2 billion a year and throws off $122 billion in reduced medical expenses. so it is worth -- and as a matter of fact, the success of the acid rain program is what drove the world to come up with carbon trading as an alternative to taxes. >> i mean, i guess that people need to see first what a big problem it is, and then look for solutions and opportunities to trade, but in june, the american clean energy and emissions act set reductions on greenhouse gases by 2020 so we have a deadline in place. and the congressional budget

office estimates that could cost to economy $22 billion which is really fascinating. in 2010 a dollars or $175 per household. do you think that congress is taking the right steps? >> i think that congress is absolutely taking the right steps. we have more to go in the senate. they will enhance the bill, and then you have the joint committees of both houses to reconcile any differences. but i think that unambiguously, they are tackling the problem, going through the issues, trying to develop a program that has cost containment. >> so, do you think of yourself as an environmentalist or capitalist? >> i think that i am like patty hearst, i have basically kidnapped by the environmentalists, and i fell in love. i developed the financial markets and then the stockholm syndrome hit me. a dear friend in graduate skills asked me to put my skills for the environment and i just love

it. >> are we doing enough do you think to lower carbon emissions? >> i think that the bill will get us in the right direction. i worry that there is not enough clean air, not enough water in the united states. >> sure. >> we take a look at things that we generally thought were free, and once you put a price on carbon, you are going to get the modifying the microseed pollutants and get biodiesel and a whole new industry that will both generate jobs for america and make us energy independent. that is what it will doer fous. >> yeah, that is a great point. i am so happy you made it. richard, great to have you on the program. >> pleasure to be here. >> thank you. richard sandor. up next on the "wall street journal report," your credit score and what you should know about the numbers that signal your financial health and how to keep them in good shape. and small no interest loans have

helped millions of people in helped millions of people in poverty stricken

[ engine powers down ] gentlemen, you booked your hotels on orbitz. well, the price went down, so you're all getting a check thanks. for the difference. except for you -- you didn't book with orbitz, so you're not getting a check. well, i think we've all learned a valuable lesson today. good day, gentlemen. thanks a lot. thank you. introducing hotel price assurance, where if another orbitz customer

books the same hotel for less, we send you a check for the difference, automatically. cash for clunkee at your chevy dealer. with more eligible models to choose from than anyone. if your clunker qualifies to be recycled, you can get a $3500 or $4500 government rebate. and just announced! if you qualify for the clunker rebate, you may also qualify for 0% apr for 72 months. that means you can buy this silverado half-ton for $228 a month after a $3500 government rebate and no down payment. go to chevy.com for details. your credit score -- it is a three-digit number with a lot of power. it impacts your ability to get credit as well as the interest rate that you receive when you get a loan. for years at three major credit agencies have used a version of the formula called fico which

was created by the fair issac corporation, but recently equifax and transperion have joined together to form their vantage score. maria spoke to the ceo. >> i am now speaking to barrett burns, the ceo of vantage score. can you tell us how your credit reporting works? the scoring algorithm and how is it different from fico which is of course what a lot of people are familiar with? >> well, our model scores many more people. we recognize that many millions of people were being excluded from the credit process, because other algorithms don't recognize what the information is in the bureaus' files. so we score many more people who have access to mainstream credit. >> is the price the same, and the scoring the same as fica?

>> well, we don't know. we license the algorithm to the three bureaus and they compete in the marketplace. >> a u.s. district court judge recently dismissed claims from the fico corporation that your corporations engaged in unfair vantage scoring, and how are you achktsed with this ruling? >> well, it is business as usual with the ruling. we went into court to ask the charges to be dismissed. we are pleased with the vast majority that the charges were dismissed and moving forward. we are assuming that some lenders may have held back pending the ruling, so, you know, we are moving forward. >> now, is there any sense of sort of how healthy consumer balance sheets are today based on the information that you have? what can you tell us about what is going on with the consumer today in terms of the debt load and their overall health in terms of the finance? >> well, actually some scores at the lower end are improving.

it is all a function of are people paying their bills on time, and that is the biggest determinant in improving or degrading a credit score. but an algorithm can understand your payment behaviors very quickly. so if you are improving the payment patterns our score will pick it up very, very fast. >> as far as the score, what are you seeing from the learneds today in terms of the importance of the actual numbers attached to the credit score. how high should the numbers be for getting a mortgage for example or buying a car? >> well, if you are in the 700s or 800s that is good credit. but it depends on the criteria from the lenders themselves, and their target market and credit criteria and pricing. it all starts with a accurate credit score. >> if you have a bad credit score, how easy or tough is it to revive your credit score? how do you do that? >> paying your bills on time is the best way. to improve your credit score, and they can, the algorithm will

learn that very, very quickly. >> what about the current environment? what about the economic slowdown, unemployment rising -- how does that come into play and affect credit risk? >> well, not directly in an algorithm, because we use and it is all fact-based. we don't use any econno-metric models, so indirectly, if you run employed for a long time and run out of cash reserves, but there is not a direct correlation of the models in economic factors. >> great to have you on the program, and we so appreciate it. barrett burns of vantage score. up next on "wall street journal report," the look of the news this week that will impact your money. and the white house recognizes some of the world's most giving citizens, including the economist who pioneered microcredit by giving away his own money.

♪ once you've dealt with the things that come between you... don't let erectile dysfunction get in the way. ♪ viva ♪ viagra! viagra...america's most prescribed ed treatment... can help you enjoy a more satisfying sexual experience. to learn more, spend some quality time with viagra.com ask your doctor if your heart is healthy enough for sex. don't take viagra if you take nitrates for chest pain... as it may cause an unsafe drop in blood pressure. side effects may include headache, flushing, upset stomach, and abnormal vision. to avoid long-term injury, seek immediate medical help for an erection lasting... more than four hours. stop taking viagra and call your doctor right away... if you experience a sudden decrease in vision or hearing. now's the time. ask your doctor if viagra is right for you. ♪ viva viagra! of the world's most revered luxury sedan.

this is a history of over 50,000 crash-tested cars... this is the world record for longevity and endurance. and one of the most technologically advanced automobiles on the planet. this is the 9th generation e-class. this is mercedes-benz.

here are the stories that are coming up that may move the markets and affect your money this week. on tuesday, second quarter earnings will be released by the final two dow components of the season, home depot and hewlett packard and target and sachs. and also, the commerce department will release dpi which measures wholesale levels.

and also numbers in construction will be released. and friday, realtors will report the number of homes sold in the month of july. finally the nation's highest civilian honor the presidential medal of freedom was received by 16 people this week in the east room of the white house. among the recipients noble laureate, a bangladeshi microsoft pioneer when he gave away $17 of his own money to the poor to start small businesses. >> offering himself as a guarantor, he with drew a loan and paid off their debts and founded grameen bank. a bank that has dispersed over $8 billion, and lifting millions of people from poverty with microloans. he was just trying to help a village, but he somehow managed to change the world. >> by the way, banker to the poor, he and the grameen bank have a 97% repayment rate.

astonishing. that is the show today. and thank you for joining us. maria will be back next talking about retirement strategies and how to make smart decisions in good times and bad. if you have questions on retirement you want our experts to answer, e-mail us at maria@wsjreport.com. thank you for joining us where wall street meets main street. i'm bill griffeth. thank you.