tv Nightly Business Report PBS July 17, 2009 6:30pm-7:00pm EDT
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captioningponsored by wpbt >> paul: one of the presidt's top economic advisers sayshe economy's been tthe brink, but we're back from e abyss. coming up, a closer look at how the economy's ing and where it's headed in theecond half. >> susie: from gener electric to bank of america to citigrp, some of the nati's biggest blue chips posted rnings today. results are do, but still better than expected an update in stocks in t news. >> paul: tonight'sarket nitor guest thinks stimulus programs around the obe are working. he'sary motyl chief investment ficer at templeton global equity >> sus: just a few years ago, everyone w jumping on the ethanol bandwagon, but gasole prices dropped and cdit costs soared. now, ethanol is being back- burner. >> paul: i'm pl kangas. >> sie: and i'm susie gharib. this is "nightly busess
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go higher in the months ahead but says thadoesn't mean the stimulus effort has failed. instead, he bieves t policy help saved the economy. >>. >> if were at the brinkf castrophe at the beginning of the year,e've walked some substantial distance back from e abyss >> susiebut a major part of the administration's agea could se new economic challengeshealthcare reform. late todaypresident obama said his healthcare orhaul cannot add to the federal deficitnd means it. joining usow for how that could affe what's ahead for the economy-mark zandi, chief economist of moodyseconomy.com. >> susie: nice to see yoagain, mark. >> good evening. >> susie: all right, president obama really pushing now for health care reform t do you thk this could derail the economic recovery whh iso frile?
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>> i couldf health care reform isn't paid fo it's important to insurethe uninsud. we have to pay for it. if we don't pay for it, it'll lead to larger defits, more debt and higher interest rat in a mucheaker economy. th'll happen sooner than later. that h to be part of a reform. weave to pay for it. >> susiethere are many peop saying let's postpone hlth care reform fr now. t's get theeconomy full revered and then we can dl with that. what is your view in that dete? >>ell, you know, that sp has sailed if we were in thbeginning of the year, i mighhave argued that as well. we have a lot onur plate. it'll be niceo get a n, get something doneight. health car reform is big project but wee now down the path and we have to ma it work. >> susie: wall street was encouraged thiseek by a whole batch of positive earnings reports whetheyou were talking aboutntel fromthe tech sector or goldman sachs and j.p. morgan from the banking sector, jnson & johnson, is the economy really
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doing bter because a few big mpanies reported strong earnings? >> yes i mean, ju think about the opposite. if big mpanies were lling, that would signal the economy was heing in the wng diction. the fact ty're making money and in someases profi are rising is an indication the recession is coming an end and 'll be out of recession, thin by latethis year. >> susie: buwhen you dig into some of the numbers like j. morgan, for example,ou see that the consur loans are still in bad shape. they ve credit card losses all a sign the consumer is still struggling financial. so what kind of recoveryre we talkg about if the consur is not on board? >> you're right, susie. i think the economy ll getut of this recession and into recovery bearly next year but itwill be a very muted recove recovery. the secretary or um, advisor summers said unemploymentwould rise until next year
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he'sbsolutely right. it's not going to feel very good for most peopl until unemployment begins t decline and that won't hapn until late next year. >> susie: it m even go ter accordg to a former fed governor lay meyer, tod saying t u.s. won't reach full employment, and by tt, he means 5% unemployment, until maybe the ye 2015! >> yea you know, thas a reasonable forecast. the unemployment rate is 9.5% today. will rise into t double digits, probably peanext spring. it will starto decne after that, but itill take aumber of years to getit down to a level we consir full employment, a level whereost people think if they go out and wa to find a job that they can get one. that probably really won't be until mid-in the next decade. >> susie every econic report thatomes out, mark,there's a potive side to it a a netive side. otrs are saying look at the foreclosure rate look at how
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much that's going up. soo you think the government programs that are supposed to prevent these foreclosures and other using issue are they working? >> n well enough. in fact, if iwere to put my finger on the one thi that could derail the end of this ression and recovery earl next year, it will would be the foreosure crisis. foreclosure continue t mount. e president's loa modificationlan in an effort to stop the foreclosure crisis is not workg very well, at least t yet. now, the president is working reallyard making changes to the an and he's cling mortgage servicers, the folks that actually modify t loans, to gher in wasngton in a couple or few weeks to get it moving. i'm hopefulhat this wi work and a year we'll get re mod'and the feclosurerisis ll abate. >> susie: we just have a few secos left. a lot of people callingor a seco stimulus or maybe a second stimus for small businesses in a few words, what' your view on tt? >> i think wehould wait until the end ofhe year,cy seeow
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e stimulus is working. if it's not working well enoug and wehink the econo needs more help then,es, another rod of stimulus forhe economy would be helul and something directed toward small business woulde great. >> susiewe have to leaveit the. thank you, mar have a great weekend. >> you. >> susie: my guest tonights mark zdi, chief economist. >>aul: after four straight daysf gains, wall street spent st of the day slightly lower on light profit taking with better than expected results from bank of america, cigroup and g.e. chioning the losses. at noon the dowas off 12 points, the nasdaq down eigh points the mild selloff convied some buyers the path of least restance was up so a late rally produced a mixed clo. the dow jones ended with gain of 32.12t 8,743.94. it rose every day this wee advancing 597.42oints. its st week in months. the nasdaq added.58 to 1,886.61 today. it also rose every day thiweek
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for a net gain of 0.58 points. the s&p 500 fell . to 940.38 today. and for the week up 61.25. in the bond market, e 10 year note fell 21/3to 95-21/32 putting the yield at 3.6. >> sie: a funny thing's been happeng lately in the investment world despite the wot bear market for stocks in decade investors arpouring money into exchange traded funds oe.t.f.s. there are now 800 e.t.fs lisd on u.s. exanges more than five timethe number just five years ago. what's behind the boom? suzanne prattakes a look. >> reporter: from gar to wind energy to gasoline priceand
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luxury ims-- you ne it-- it ems there's an e.t.f. for almost anythin that's rightthere's one for the gaming industry, too. exange traded funds, or e.t.f.s, are a basket of securities that ually mirror an iex, from well-known nchmarks to obscure measures many are first cousinso regur index mutual funds. but, lately investors ha been hungry for e.t.f.s mostl because of their transpancy, tax efficien and cheap price. they can also beought or sold anytime, a clear benefit in the cent bear market. strategic insight has been keeping tabsn e.t.f.s for more than a decade and co-fnder avi nachmany cdits mass appeal for the rapid growth . >> they satisfy a ry wide range of aiences, institutional investors,edge funds, financial advisors, mutual funds that tually invest a poron of their assets
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in e.t.f.s. >> reporter: the e.t.f. e is dominated by barclays global investors with its ishar, soon to bowned by blackrock. ste street global and vanguard slice upuch of the rest. that pie is getting taier. e.t.f.ssets stand at close to $600 billion-- double what ty were four years o. but e.f.s account for less than 7% of the total fund sets here ithe u.s. soexperts see huge potential for growth. vauard's 39 e.t.f.s make up less than 10% ofhe firm's total assets uer management. but, vanguard's franinniry calls e.t.f.s the bigges opportuny he's seen in some time. >> we are veryonservative in our product devepment and launches. we are vy committed to the e.f. landscape and we think it is going to a major part of vangrd as we move forward. >> repter: this spring, bond ng pimco and charles schwab annound they, too were launching e.t.f.s, aove some
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perts predict will change th e.t.f. ldscape and attract more retail vestors. not all providers however ar gigantic wisdomtr is an up and comer with ls than one percent of thmarket. it is, by the way, the only re play public mpany that provides e.t.f.s. while the threyear-old firm offers 51 equity andurrency e.t.f.s, it's yet to see a prit. wisdomtree president bce lavi isn't' worried. >> the e.f. business is exceptionally stro and i don't ing you've seen anything yet i thinit's going to really domite in the financial rvices industry over time. some predict e.f.s will pose a legitite threat to traditional mual funds in the coming years. while others say, it's more likely they'll lea to coexist. >> we're not concerned aut real canbalization per se. we think is a different buyer. >> reporr: for those who worry e.t.f.s are the flavor of th montin the investment world, consider ts: they're trying to
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sy money and a government mandate to blend ethanolnto the nation's gasine supply but nomany firms are scrambng to stay in business. as we continueur look at "reving the economy", dana bate reports the ethanol industry appears to beunning on empty. reporter: these corn fields werence touted as the future to our energy independen. companies sprung up arou the country produce corn-based ethanol, hoping itould fuel their boom lines. least ten producers have filed for bankptcy this year. plans to bui new plants have be shelved. sales of e-85 blends have dipped. environmental policyxpert ken green ys the economics of hanol have come home to roos >> at the end of the dayit's only competitive wh gasoline when gasole is very expensive, and s doesn't stay expensive for very long. and so once the economs of it really worked eir way through the syem, and everybody went, "wow, i'not going to make any money f of this," that was pa of the collapse.
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>> reporter: bob dineen hes the renewable fuels asciation. he says like many industries ethanol hahad a tough year, but things are improving. >>ou see plants that had to shut down teorarily coming back online, you see profitabilitreturning to the industry. we'rstill dealing with volatilityn energy markets and a difficult ad ahead, but we're getting thugh it. >> reporter: t u.s. ethanol industry has eugh capacity to produc15 billion gallons of ethanothis year-- far more than the natiocan use. then there'she issue of enronmental impact. recent studies have showthe prodtion of corn-based ethanol mit actually increase greenhouse gas emissions, t reduce them. so a move onapitol hill to make companies pay f their caon emissions could cut into profits. >> youe going to add to their buness burden, not make it easier on them. >> reporter: envirmentalists like tim telleen-lawton environment america sawe can't just foc on gasoline
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substitutes. >> we increase the eiciency of ca, we can reduce the amount we're relyinon cars by using tter public transit. we can use more electrity from clean sours like wind and solar power, such as thrgh plug-in hybrids. >> reporter: theuture for the rn-based ethanol industry is murky. but havi those firms in place now gives the industry head- start tord developing ethanol from other plant soues. the question is whetr scientists can develop that el on a commercial scale fast engh. na bate, "nightly business report washington paul: monday: with the economy in recession, th nation's airlines are ruggling to turn a profit an update on their outlook. susie: a big win for dallas mavericks owner mark can. a federal jue threw out an insir trading lawsuit against cuban. bu it's not exactly a slam dunk. the judggave the securities and exchange comssion 30 days amend its complaint. thagency claims cuban acted on confidential information whehe sold his stake in web rm
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mamma.com to avoid losing three-quartersf a million dolls. >> paul: some of the nation' lawmakers want to see the paperwork on uncle sam's baiut of general mots and chrysler. members of aongressional committee want to read the e mails on who decided whaplants d dealerships would close an how worker a retiree benefits would be cut. the fears that some of those moves were spurred by litics not econics. no comment on the requt from g.m., chrysler, or the treasy.
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>> susie: here a look at what's happening next week our fridayarket monitor guest is frank cochrane, preside of instment timing consultants. on the economic calendar: wednday, the weekly report on crude oil d gasoline inventories. thursdayexisting home sales for june and weekljobless clms. frid, a final look at july conser sentiment. also next week, quarterly results from 3-m, apple,.t&t, boeing, caterpilla coca-cola, delta rlines, ford motor, merck, microsoft and u.p.s. >> paul: my guest marketonitor thiseek is gary motyl, chief investment officer of e templeton global equitgroup. gary, welcome back to the n.r. >> pleasure to be herepaul,
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thank you. >> paul: now, you take a vae-oriented approach to globalnvesting. what'sour current opinion on the world markets? >> we think the world markets aretill undvalued and do offer good potential over the next one to three to five years. >> paul: a bull? >> a bull butot an outreous bull >> paul: oh, ok. are the economitimulus programs worng here and abroad? >> in the united stas, stulus programs haven't kicked in yet. we'r seeg more evidence internatnally that some o the programs are hing an effect, particular in china. long-term, thas something that we'll monitor. i would note tt unemployment rates are still fairly high across the world and in most industries, there's still siificant oveapacity. not sure inflaon is a problem in the near or intermediate term. >> paul: ok. what are the most attractiv cotries in your opinion? wh >>e're finding good value in virtually every countr right
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now. low luations re abuant in the united states as well in europe. in europe, mt of the companies 're investing in d have a more global ouook as opposed to being fused within the europe comme community. >> paul: what industries ar ur favorites and why? >> one area we find very atactive right now is the technology area. this is an area being a value vestors don't have an opportunity to invt in frequently. right now the valuation look very good. this group underpeormed in the markets the last 10 ars. i think we have a numbe of stocks we like e of which is taan semiconductor manufacturing. this is listed on the big brd simple tsm. rld leader and semiconductor manufacturing. great technology. great balance sheet. cash ixcess of debt, 5% dividend yield. very, very song comtitor in all its rkets. we look to have this company gring nicelyn the next few years. >> paul: ok. another indust you like? >>elecommunications is one
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whichas been a little under the radar over the last few mohs but we think it still offers very go value, pecially on a total return basis. many stocks have strong balance sheets, good dividend yields. one we like is telefonica in spain. it's doing wl in europe. it gets 40% o its revenues from latin america. >> paul: ts trades on the b board tef, right? >> correct. >> paul: another dustry you'r fond of? >> sometng a bit controversial is health care. obviously we're al aware of what is going on with potentia health car legislati but we think the luations are attractivend discounts some of the problems. navais is a companywhich is headuartered in eure. >> paul:witzerland? >> correct. trades on the new york stock exchange under the syml in rrx vs. stock wi low p.e multiple,% dividend yield, good breath of business. one thini don't know people are focusinin on are is the
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potential of phaaceutical companies particular in europe to t into the eerging markets as those economies expand and the governments t tomprove the health delivery systs. >> paul:e have a minute left r one more indtry you like and onechoice. >> in the finaial area, i think there's interesting stock. it is, however, nolisted in the ited states. itrades on the frankfurt and munich stock exanges. germy company calledmunich reinsurance. thisompany is the second largt reinsurance cpany in the world. ain, strong balanceheet, aa-minus debt rating. very goodividend yield of about 6%. they'lbe able to take market share and really benefit froma od pricing environment inhat ea over the ntfew years. >> paul: weon't have a crt on the munich read bause it doesn't trade ywhere in the stes butyou explained i very nicely what it's all about. gary, do you persolly own these stocks or have a other disclosure? >> i don'twn them directly but i do own thethrough the varis templeton mutual nds i hold persolly. >> paul:air enough.
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m afraid our time is up but i want to thank yofor being with us again, it'seen aleasure. >> thank you, paul. >> my guest gary motyl of the templeton glal equity group. >> susie: and finay tonight, rhode island is known ashe ocean state annew billboards therare trying to make residents there fe less blue over the economy. the sis are posted along the state's ghways. and say thgs like: "the interestg thing about recessions ithat they end." e billboards and their optimism are needed, becau rhode island unemployment rate stands at nearly 12. other signs tellrivers their selforth is greater than their net worth. >> paul: there's a philosoy worth adopting. >> susie: yes, indeed. >> susie: that's "ghtly business rort" for friday, ly 17. i'm sie gharib goodght everyone and have a great weekend-- you topaul. >> paul: a you as well, susie. i'm paul kangas wishing all of you t best of good buys. "nhtly business report" is made possible by:
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