title fights. for jimmy smith, and our entire crew, i'm sean wheelock. thanks for watching bellator xxxi from lake charles, hi, everybody, welcome to the "wall street journal report." i'm maria bartiromo. it's been a september to remember. the markets have had the best september in more than 70 years. but what happens next? where do we go from here? and how should you invest today? we'll tackle the top of the charter schools with the producer of the controversial new movie "waiting for superman." and the ceo of harlem success academy. should education be treated like a business? and knocking down roadblocks to retirement. how to get your portfolio back on track. when is it time to break down? and what if you're caught in the middle? the "wall street journal report" begins right now. >> this is america's number one financial news program, the "wall street journal report."

now maria bartiromo. >> here is a look at what is making news as we head into a new week on wall street. the markets wrapped up what is traditionally a miserable month for stocks with a spectacular performance. the dow jones industrial average having its best september in 71 years, rising more than 700 points for the month. the other major indices were impressive as well. the s&p 500 up better than 8% on the month. the nasdaq up more than 12%. the week, meanwhile was less spectacular than the month. the dow fell about 50 points on monday, rebounded on tuesday, and was soft midweek. on friday, the markets rose. insurance giant aig reaching an agreement in principle to repay the federal government for its rescue in 2008. initially, though, the government will own 92% of aig. eventually it plans to begin selling that stock in the open market. home prices are up for the fourth straight month, according to the s&p case-shiller home

index. they still remain about 28% below the peak in july of '06. and jpmorgan chase will delay more than 56,000 foreclosure proceedings because of paperwork errors. that comes on the heels of g-mac halting foreclosures and evictions in 20 states for similar reasons. it certainly has been an extraordinary september for the markets. what is next and where do we go from here? joining us is doug cliggott. great to have you on the program. so the best september for the stock market since 1939. really surprised everybody. >> it's stunning. >> do you think the momentum continues into october? >> i think it will be tough to keep it going. we like to look at quarterly data, and often what you see is when in any particular quarter, if one asset class does a lot better than another, stocks did much, much better than bonds in the third quarter, you tend to see a reversal at the beginning of the next quarter.

if we look backward, if you can remember the second quarter was pretty tough. stocks went down a lot, bonds did well. so you got a reversal of that in july. we're looking for the same thing in october, where essentially people will take gains, we think. >> and of course we are going to start hearing earnings. we've got the earnings for the third quarter coming out in the next couple of weeks. do you think the earnings will be strong? is that priced into the market? what are you expecting? >> we're expecting a pretty significant moderation in earnings growth. we try to link economic data to the earnings data. and there is a lot of data points that suggest the u.s. economy really did slow down in a meaningful way in the summer, and we think that slowdown that really we've been living through, that's going to show up in earnings when companies start reporting them. we don't think they're going to be terrible, but we think they're going to be more mixed. >> it sounds like i should be lightening up on stocks, my exposure to stocks here? >> well, i think one of our

themes is that you should be a patient investor. you should try to resist the urge to really move your asset allocation around a lot. i guess i'd rather say we wouldn't be encouraging people to put new money to work in the equity market right now. >> i see, okay. so should i start selling? >> well, depends on how much exposure you already have. i think we've got a couple themes that we think are both relevant now and could be relevant for a couple of years. we really like the pieces of the market where companies have a high dividend yield and relatively low volatility, areas like telecom services and consumer staples. but some of the highly cyclical areas that have done very well say like retailers, we would recommend reducing exposure there now. >> i see, okay. so we're approaching the midterm elections. obviously another catalyst for this market. >> yes. >> what kind of an impact are you expecting from the midterms? >> when we looked at midterm

outcomes in the past, we looked at data really going back to 1930. so we've got 20 midterm elections. what you see is the market usually does well ahead of them, and then not much happens afterwards. so to use the jargon, the market buys the rumor. it buys the hope of change. and then when it actually happens, not much happens. >> and that is irrelevant, irrespective, rather, of what happens in the midterm? >> well, i think what you tend to see in a midterm is you move in from an extreme. and sometimes that's good. in the '90s, it was great because the american economy was doing fantastically well. you didn't need much to happen in washington for it to continue. it's hard to argue the u.s. economy is doing fantastically well, now. so gridlock i don't think is going to be a great thing. >> and of course that is why you're seeing this move into gold.

a fear trade in some regard, or perhaps the dollar movement also moving money into gold. would you recommend getting into some of these commodities that have already been such big movers? >> they've moved so much, maria. i think a diversified portfolio is a really good thing. having a small portion of your portfolio in gold makes sense. adding new money to it now is a tough one. you know, in our view, the strong move in gold, sort of gold going up, the dollar going down, even oil has moved up a lot, we see that as related to the belief that the federal reserve is going to do another round of asset purchases. in a sense, make an even easier monetary policy. and in that environment, commodities tend to do well when the feds generating as easy a policy as humanely possible. >> you know, it's interesting, because the fed keeps saying, look, we're going to be there if the economy deteriorates

further. and on the one hand, you would say okay, all of this easing is positive. but on the other hand, it's a result of a weak economy. and so the fundamental backdrop is not very good. >> well, how does -- how does fed policy give us growth? fed policy gives us growth by manipulating behavior so that we borrow more. a lot of americans don't want to borrow more. >> right. >> so it's really hard for the federal reserve to do anything to generate job growth and stronger economic growth. >> great to have you on the program. >> thank you, maria. >> we so appreciate your time today. doug cliggott joining us from credit suisse. up next on "wall street journal report," we're going back to school, discussing education reform and the growing business of charter schools. and saving enough for retirement. how to bounce back when your portfolio has hit a bump in the road. as we take a break, a look at how the stock market ended the week. ♪

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with our economy and workforce becoming more global and certainly more competitive, are we keeping up in terms of teaching our children? the documentary film "waiting for superman" trains its lens on the struggle of many american children to get a strong public education. it's reigniting debate about what makes classrooms work. joining me now is the producer of that film, lesley chilcott as well as eva moskowitz. lesley, congratulations on the film. "waiting for superman" opened nationwide on friday. but education reform can be such a politically charged issue. how do you present it in a way that it advances the discussion? >> i think we do it by following five families. five families and they're doing everything they possibly can to do to get into the one good

school in their neighborhood. and they're looking everywhere. they're trying everything, and there just are not enough spaces. so we follow these families, and you watch their struggle. and we intercut that with a look at some really successful schools like eva's school, and how they figured out a way to beat the odds and actually figured out a way that every single kid can learn. >> let's talk about your school, eva. 1.5 million students attend charter schools nationally. you run seven in new york city, one of them of course featured in the film. talk to us what is a charter school, and why you think your autonomously managed charter schools are more effective than traditional sort of zone schools. >> sure. well charter schools are public schools by law. they are free from the bureaucracy of the district on the one hand, and from the work rules of the labor unions on the other hand. so we have the freedom to organize our school around a radical principle, which is

teaching and learning. so the school is not organized around the needs of adults, per se, but around the needs of teaching and learning. >> isn't this amazing that this is so radical? >> it is. >> but we have been sort of handicapped by some of these issues, labor unions and organizing schools based on what the adults see as most important. >> it really is true. and when you see the schools co-located, so i aamco located in all of my seven schools, it almost feels unfair to the district schools because it's hard for them to succeed when they have life-time tenure, when they have to lay off people based solely on seniority, not merit. the principal is not allowed to take into account merit. that's a weird way to run a set of schools. >> it's a very weird way that the principal cannot really put the best athletes on the field, if you will. lesley, charter schools are not the only possible solution to the challenges our public

education system faces, right? for example, they have limited resources for students with special needs or disabilities. so how do we apply the good things about charter schools to the entire system? >> i think the most important thing that we can learn from charter schools is we take the things that they're doing that are working, you know. as eva was saying, there is the freedom to choose your own team. so one of the things that we're really missing in america is we don't culturally value our teachers. it's not a prestigious position. now sure we value some of them, but you don't have a lot of 11-year-olds growing up and saying what i really want to do in life is become a teacher. and a lot of the top countries, i used to teach in japan when i was younger. and i got so much respect and i was a young teacher. they're brought up with teachers are heroes, we need to respect them. it's one of the best possible jobs you can have in society. and charter schools, one of the reasons they're doing so well is their teaching staff is so amazing. it's important to remember that about 90% of our kids are still

in mainstream public schools. i think when you look at that and we ask questions about tenure, and we ask questions about not being able to reward teachers and give them the professional development they need and not being able to evaluate them, to ask those questions is not to be against anything. i mean the film, our goal was to create, reignite this national conversation around the issue and get all sides talking to each other. and i think people need to go see the movie for themselves and judge and learn. >> so are we rewarding excellence then in terms of teaching? are we paying good teachers more money? i mean salary should be going higher in some cases, right? >> right. and i think everyone agrees that teachers need to be paid more. i think that's in whatever kind of school, you know. we have to -- it's not community service. this is a professional job. we say our children are our future. well, if that's true, then we need to put the most qualified, talented person in the front of the classroom with them.

so i think there is some new union contracts in the regular public schools like the one in denver, for example, where teachers are evaluated, and there is an opportunity for merit pay. and we have to really look at these. >> and i completely agree with what lesley is saying, but i would just add that the problem is not a lack of know-how. the problem is actually a political problem. we have the teacher unions having disproportional influence in the state houses. many elected officials are influenced disproportionately by the special interests. >> because the unions deliver the votes for those people. >> and they also contribute the money. look at michelle rhee in washington, d.c. the aft put a million dollars into defeating mayor fenty, because she had the courage to take on the contract issues that lesley is so eloquently speaking about. so we're going to have to solve that problem. and i would like to see the business community engaged in that issue. we have -- this is going to take

the entire country to solve this problem. this is not a problem, as the film points out, that simply affects the disadvantaged. the middle class are also affected like this. affected by this. we are 26 out of 29 industrialized countries on the standardized math and science test. other countries in this competitive global economy are eating our lunch. and if this nation is going to survive economically, we are going to have to solve this problem. >> lesley, isn't that a great point, though? when you look at math and science and where the u.s. is versus our friends around the world, what can we do to insure that our students have the right skill sets to thrive in this new normal of an economy we're talking about? >> i think that we have to take a look at our standards and come up with these common core standards. and our standards have to be world-class. we have different standards state di state. and we need to come up with

these uniform standards. we need to value teachers, like i was talking about earlier. >> it's a great point. >> eva, lesley, great to have you on the program. >> thank you. >> we appreciate your time. up ahead, how to forge a smooth road to retirement. strategies for clearing life's financial roadblocks. and become a fan on

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worried that your path to retirement is littered with roadblocks? with portfolios damage bade market downturn, and baby boomers staying on the job longer, many americans fear not having enough for the golden years. joining me with advice for getting back on track, "money" magazine's senior editor walter updegrave. great to have you on the program. everyone is focused on their 401(k) and portfolios because these last few years have been really a wild ride. in many cases, a down performance for so many investors. so how do you take retirement into account when your portfolio is still in recovery in terms of savings? >> well, i think the first thing is people's natural reaction is to try to find an investing way out of this. so they maybe sort of take a little more risk in their investment portfolio, and they may be setting themselves up for a trap. really the first thing you want to do is bump up your savings rate a little bit more. that may be the least attractive, but it's really the most effective. so for example, we show in our retirement issue how increasing your savings rate from 8% to

10%, or if you can get it up to 12% and have a really big effect on the eventual size of your nest egg and increase your odds of being able to retire with security. >> so you've really got to take a lard look at where you're spending money and start cutting back and putting that money into savings? >> exactly. and if you can do it on a automatic basis, you're much better off. for example, more money in your 401(k) because it's coming out of your paycheck before you get your hands on it, things like maybe setting yourself a reminder, putting some money into an ira. when you're 50 you have the catch-up contributions, an extra $5500 into the 401(k) and extra $1,000 into the ira. >> that's very interesting. thank you for making that point. many people think that they won't be able to stop working when they're carrying so much debt. what if you have a significant mortgage? do you trade down? >> if you have a substantial amount of equity in your house before you retire, you may want to consider downsizing to a smaller house. if you have enough where you could sell your house, buy

something for cash or almost all cash, you sort of avoid that mortgage payment, which is very nice to go into retirement without that debt hanging over you. if you don't have that much equity, you still may be able to get enough out where you can put down a down payment. you still have maybe a mortgage, but the payment is much smaller than you would have on your regular house. aside from that, if you don't want to go that route, and if you have enough money in savings, aside from what you need for emergencies, you may want to pay down on your mortgage so at least it's not going to last as long in retirement. >> so you do recommend paying down as much of your mortgage as you can, even though perhaps your -- you know, you've got those interest rates. it is more economical to -- is it smarter idea to pay down the mortgage even with rates where they are? >> well, the thing is when you pay down your mortgage, you're essentially locking in, assuming it's a fixed-rate mortgage, a fixed rate of return, and it's very secure because you know what that rate of return will be. the mortgage is fixed. a lot of times that's much

better you'll get on a safe investment today where interest rates are 1% or less than 1%. it all depends on whether or not you have enough to do this without dipping into your retirement savings. >> okay. another common roadblock, parents juggling college expenses with their own retirement planning. how do you balance those two? >> this is a case that you have to look at what is expected of me. what kind of contribution also colleges expect from me there is a calculator online at collegeboard.com, the expected family contribution. go there, see what kind of contributions expected. you can then look at schools and see how much of the need they're willing to meet. and not only that, but how they're going to meet that need. some schools will do it primarily through loans or work programs. other schools may be more willing to give you scholarship grants. so you want to if you can find the ones that are more generous with the grant and that way you're paying out a little bit less. you may have to resort to loans. in that case, you probably want to do the student loans first,

the stafford student loans and then only resort to the parent plus loans. before you take out the loans, go to a calculator, make sure you understand what the payments are going to be because you're probably going to be making them in retirement these days. a lot of people are marrying later and their kids are going off to college just at the time when they're preparing for retirement or maybe in retirement. >> that's so common. great to have you on the program. thank you so much. we appreciate it. walter updegrave joining us. up next on the "wall street journal report," we'll take a look at the news this coming week that will have an impact on your money. and then girls empowering girls. from louisiana to liberia, the yankees campaiunited nations ca. download nfl mobile only on verizon and get live thursday and sunday night nfl games and nfl redzone. now everything football is everywhere. get the nfl with nfl mobile.

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for more on our show and our guests, check out our website, wsjr.cnbc.com and investor agenda@cnbc.com. hope you will check it out. now a look at the stories in the week ahead that may move the market and impact your money this week. on monday, more information about housing. from the national association of realtors. the strength of the nonmanufacturing segment of the economy. on thursday, third quarter earnings season kicks off. dow component alcoa reporting its third quarter earnings, as well as consumer giant pepsico. and then on friday, the big kahuna of economic reports, the september jobs report will be out. we will learn how many jobs the economy created or lost in the last month. and finally today, giving a high-five to a more empowering social network.

launched at a pep rally in new york this week, the u.n. foundation's girl up campaign asks american teenagers to give a high-five to their peers in developing nations. these are $5 donations for school supplies, water, medicine, or other opportunities. there are more than one billion young people age 10 to 19 globally. more than half are adolescent girls in developing nations. that will do it for us today. thank you so much for being with me. next week my guest former council of economic advisers chair martin selsteen. have a great week, everybody. i'll see you again next weekend.

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