bubble and we don't think about to burst either. >> tom: the fed's role in the bond market, and what it means for investors seeking safety. you're watching "nightly business report" for wednesday, october 6. 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. captioning sponsored by wpbt >> susie: good evening everyone. up, up and away-- that's where u.s. treasury prices headed for the third straight day. tom, another weak report on private sector employment that ignited today's rally in bonds. as government bond prices climbed, the yield on the 10- year note fell as low 2.36%. >> tom: that's the lowest level for the benchmark note since january of last year. >> susie: the recent run-up in

treasuries has renewed talk of a bubble in the bond market. suzanne pratt takes a look at whether it's a mistake for investors to buy bonds at current high price tags. >> reporter: as if small investors don't have enough to worry about, now there's a debate on wall street as to whether a bubble is brewing in government bonds. if there is and it pops, it would create big losses for bond investors, who have been seeking the safety of treasuries. b.n.p. paribas bond expert suvrat prakesh doesn't see a bubble. >> most investors i speak to are more concerned about disinflation than inflation, which is the main premise for the argument that the bond market is in a bubble. >> reporter: according to the investment company institute, people have poured more than $200 billion into bond funds since the beginning of the year. the heavy demand, coupled with large purchases of treasuries by the federal reserve, have pushed bond prices higher and yields to historic lows.

so far this year, u.s. government bonds, as measured by barclays capital treasury index, have returned close to 10%. barclays bond strategist michael pond doesn't believe there's a bubble either, but he says for now, the best days are over for bond investors. >> we think returns on bonds are modest at best from here, and we do think they'll actually be negative over the next year. but, only modestly so. we think the better investment within fixed income is actually in the tips market, where investors can get some inflation protection on their securities. >> reporter: the concern is once the economy really starts to pick up steam, the fed will lift interest rates. that means bond prices will fall. still, some experts say as long as rates don't spike sharply higher, bonds will remain a safe bet. >> we see a gradual rise in interest rates, but not enough that it would wipe the capital

gains on holding treasury bonds. >> reporter: inflation of course is the biggest risk for bonds, as it would be the most likely tool to burst any bubble. but, most experts say it would take a big pickup in the inflation rate, which is currently stands at a meager 1%. suzanne pratt, "nightly business report," new york. >> tom: the rhetoric continues heating up over china's currency policy. treasury secretary timothy geithner today warned the global recovery could be undermined by countries keeping their currencies from rising in value. while not specifically mentioning china, geithner said it sets a bad example to let large economies with undervalued exchange rates keep their currencies from appreciating. >> it's unfair to countries that were already running more flexible regimes and let their currencies appreciate, and it requires a cooperative approach to solve, because emerging economies individually would be less likely to move, to allow their currencies to move up, unless they're confident other countries will move with them. >> tom: the u.s. house recently

passed a bill that would put tariffs on chinese-made goods if china doesn't allow its currency to rise. geithner's comments came as the international monetary fund cut its estimate for next year's global economic growth to 4.2%. the i.m.f. echoed geithner's comments, saying emerging countries need to be more flexible with their currencies. >> susie: here are the stories in tonight's n.b.r. newswheel: a mixed close on wall street: the dow gained nearly 23 points, but the nasdaq lost 19 and the s&p 500 off a fraction. trading volume was down slightly from yesterday's levels, with under a billion shares moving on the big board and just over two billion on the nasdaq. payroll processing firm a.d.p. says businesses cut jobs last month, 39,000 of them. economists expected a gain of 20,000 jobs in that report. and the panel looking into b.p.'s gulf oil spill says the obama administration's response to the spill was lacking.

specifically, it faults the white house for underestimating how much oil was flowing into the gulf. the panel believes that gave the impression of being unprepared or not fully candid about the problem. >> tom: still ahead, the mid- term elections and your portfolio. "street critique" guest hilary kramer joins us with stocks she thinks are poised to do well heading into november 2. >> susie: california today took the wraps off its budget for 2011. it closes a shortfall of about $18 billion, and includes $7.5 billion in cost cuts. state lawmakers will vote on it tomorrow. meanwhile, people in california and four other stressed states are at odds with policymakers on how to solve financial problems. that's according to a big report out today looking at the fiscal issues in arizona, california, florida, illinois and new york. joining us to explain, susan urahn, managing director of the pew center for states.

>> hi. >> susie: from reading your report it seems like there's a disconnect between what the public wants and what state officials are doing to solve this financial crisis. is that the key take away? >> i think it's true. the public in our polling stated very clear preferences for what they want from state government. the challenge is that given the current fiscal crisis, it's hard to see how policy makers are going to be able to give them everything that they want. >> susie: let's look at what some of those preferences are that you outlined in your report. for starters the public thinks that statement government, too big and too wasteful. were you surprised by that reaction from the people that you surveyed? >> no. i think being too big, we've heard before. but more of the respondents were concerned about how effectively and efficiently government operated. in fact most of them thought that state government could cut spending significantly without

affecting services. in some cases 20% or more. it's remarkable, you look at california, 20% would be 16 billion dollars. cutting $16 billion without affecting services would be tough. >> susie: and speaking of services, one thing they said they do want to keep the essentials, the public wants public school education and health services to stay intact, and they said according to your survey that they're willing to pay higher tax toes keep them. is all that achieveable? >> well, it's true, that's what they said. i think the challenge there is that if you look at k-12 education and health and human services, by and large that's the largest part of state budget half or more in virtually every state. so trying to protect those in the face of this kind of fiscal stress without making any cuts is going to be a challenge. >> susie: they do offer, according to your survey, suggesting ways to raise money, one of them is to tax corporations, wealthy

individuals, and taxes on smokers, drinkers and gamblers, the so-called sin taxes. they also do not want more borrowing. so can all of that close the budget gap in the states you surveyed like new york and illinois? >> the challenge there is that those revenue streams are not the primary ones for states. the primary revenue comes from income tax and sales tax. and the public does not want to increase those. so it's going to be very hard, verging on impossible to close budget gaps by taxing the other guy. >> susie: moving along, a final point they said is that they don't trust elected officials. to do the right thing. now, we know that there are like 32 openings for a new governor in the updon't mid term elections. what kind of advice would you give to these new governors in terms of deal with the public's demands? >> i think in these states where there's severe fiscal stress,

for the fourth year in some cases what's really challenging is that policy makers will be making very tough decisions in the face of a public that does not trust them by and large, so they really need to help the public crystalize the tradeoffs that will have to be made. because the public is not there yet. >> susie: it a fascinating report, a lot of interesting issues. thank you so much. >> you're welcome. >> susie: our guest tonight, susan urahn. managing director of the pew center on the states.

>> tom: the markets trying to digest some of those big gains from yesterday. we saw a mixed hearing for the major indices. >> tom: just modest moves for the major indices as investors await the jobs report friday. what led the way? energy led the way with another increase in oil prices. the energy select e.t.f. has been steadily climbing since its august. it gained almost 1% today to close at a five-month high. now oil is up five out of the last six sessions, today closing above $83 per barrel. a government report showed fuel supplies dropped in the latest week even as oil inventories were up.

light sweet crude has been climbing. it wasn't just oil companies fueling the stock rally, though. coal miner massey was up 6%. it received some positive analyst comments. oil driller helmerich and payne was up almost 3%. cabot oil and gas is at a one- month high. it announced strong results from a shale natural gas well in texas this week. general electric took the top spot of dow industrial gainers. the conglomerate is back in the acquisition business, picking up an energy equipment maker. among others. g.e. shares rallied more than 2% on heavier-than-usual volume. one of the most actives. tonight's close is a five-month high. g.e. is paying $3 billion for dresser, a maker of gas and oil equipment. this is g.e.'s biggest deal of the year and at least the third since july focused on energy. at&t, meantime, was the biggest loser of the dow with market rumors heating up again about a competitor possibly getting its own iphone.

let's begin with stock. at&t stock has been in an uptrend since late june. it hit a new 52-week high yesterday before slipping 1% today on stronger volume. the rumors focused on verizon selling apple's iphone early next year. verizon's chief operating officer declined comment but he did say he thinks verizon and apple's wireless interests will eventually line up. verizon stock saw a fractional gain but twice its usual volume. apple was essentially unchanged. but blackberry maker research in motion fell more than 3%. a morgan stanley survey of corporate information officers finds blackberry's market share in north america is shrinking. and while we're talking about telecommunications, how about equinix. it provides internet connections and website space. the company lost a third of its market value after cutting its revenue outlook. it said it had to discount its services to get longer-term contracts renewed. cigarette company philip morris may not spend 450 million dollars for a tobacco company in colombia after that country's

anti-trust regulator put conditions on the deal. investors didn't seem to mind, bidding shares of p.m. up almost 2% to just below a new high. the company says it is evaluating its options and willd ecide whether or not to continue with the deal in the next three months. earnings season begins tomorrow after the close with alcoa, and with the stock staging a rally. shares are at a five-month high leading into tomorrow night's results. the stock was one of the best dow performers during the september rally. and that's tonight's "market focus." the election uncertainty means opportunities in housing, health

care and sunshine. so says tonight's "street critique" guest. she's hilary kramer, editor of gamechangerstocks.com. great to see you, welcome back to n. b. r.. >> thank you, great to be here. >> tom: with all the uncertainty about the outcome of the election you're putting money to work in the market before election day. why? >> because there's trillions dollars on the sidelines just waiting to be deployed, it's going to come from the bond bubble and go into the stock market and right now there's uncertainty about elections and you're going to see a bull market once those elections take place. >> tom: and you're putting money to work in a housing related stock here with p. m. i. group and radiant. these are two private mortgage insurers. both of them have seen nice ralies since august, but still trade at just half the price they were back in the springtime. why now? >> okay. you want to get into p. m. scompichlt radian now because when the republicans come in you are going to see much more emphasis on the private sector taking risk and less emphasis on

freddie mac and fanny mae. already the obama administration started this, on october 4 they forced the f. h. a. to raise insurance premiums. so a company like p. m. i. and radian are going to do very well plus some of the biggest hedge fund legend have taken large stakes in p. m. i. because they see the recovery in that market. >> tom: from housing to health care, and health care reform, clearly will continue to roll out even if republicans take the house. you're looking at shire pharmaceuticals, a u. k. based drug maker, what makes you like this one? >> i think there will be a lot of mergers and act which sayss, -- act which acquisitions, especially big pharma. you're going to see big pharma companies, that more than half their revenues could be lost when some of their big most buster go off patent and become

generic. so a company like shire is in play because they have a huge adhd franchise as well as profitable orphan drunks as we all them. >> tom: so you're looking for cross border measure there. satcon, you like this one. so assuming republicans take control of the house, you're still willing to make a bet on renewable energy? >> yes. on renewable energy white comes to the large scale utilities, that's where we're going to see it increase, and mainly at happens is that you have wind and you have solar and it will become increasingly larger part of the utility companies. but that energy has to be harnessed and it has to go up into the traditional electricity grid. and the way it happens is with inverters. in satcon it's a leading solar voltaic converter company. >> tom: you like goldman sax, shares down about 4%. do you still like it?

>> i absolutely love goldman sax but for a different reason, it has to do with mergers and acquisitions, especially cross border mergers and acquisitions. we've had a lot of m and a activity in the first part of the year and goldman sax is the leader in terms of revenue. >> any ownership? >> yes, i own goldman sax and i own shire, both of those. >> tom: great, hillary kramer our guess tonight. >> susie: here's what we're watching for tomorrow: a report on september chain store sales, along with august consumer credit. alcoa kicks of third quarter earnings season, we'll talk with c.e.o. klaus kleinfeld. our coverage of the midterm elections continues in nevada. the state is struggling with a massive housing bust and high unemployment. we'll look at what people there are thinking before they head to the polls. the phrase "going green" can often mean different things to consumers and companies.

so the federal trade commission wants to change that. today, the agency issued new guidelines for businesses. now, marketers must prove claims for being eco-friendly and recyclable. the so-called green guidelines were last updated 12 years ago, before the widespread use of terms like "carbon offsets" and "renewable energy." >> tom: fritz henderson is closing the book on his consulting work for g.m. the automaker's former c.e.o. stayed on as an advisor after being forced out late last year. now he's ending that relationship permanently, and joining oil refiner sunoco as a senior vice president. g.m. has had four c.e.o.s in the last 18 months. the automaker is expected to go public again next month.

>> susie: in the "money file" tonight, five steps to figure out how much life insurance you need. here's john simons, editorial director of personal finance at black enterprise. >> reporter: let's face it, life insurance compels us to contemplate something none of us really wants to deal with-- death. getting the right amount of coverage forces us to assign a dollar amount to the financial impact our deaths will have on our dependents. it's important to have a rough idea of the coverage you need before you sit down with an insurance agent.

here's how to do it in five easy steps: step 1: you'll need to add up your current debts. that is, your mortgage, your auto and other loans, and credit card balances. step 2: add in a rough estimate of your burial or cremation costs. step 3: take your gross annual income and multiply it by the number of years it will take your youngest child to reach age 18. (add about 3% each year for inflation.) then add in an estimate of what it will cost for all of your children to complete college. at this point, you should have a pretty large number. from here, we go to step 4, where you'll subtract the assets in your retirement, savings, and pension accounts. also subtract any payout your family is expected to receive from other insurance policies. step 5: subtract your spouse's salary multiplied by the number of years he or she plans to work

after your death. tally it up and you're now ready to meet with an insurance professional to come up with a more exact amount of coverage with premiums that fit your budget. i'm john simons. >> tom: back in his day, founding father george washington quite the liqour maker. in 1799 alone, his distillery produced 11,000 gallons of whiskey. craft distillers gathered at washington's estate today to recreate his peach brandy and talk shop. as stephanie dhue reports, their biggest challenge these days is interpreting the spirit of the law. >> reporter: at george washington's mount vernon estate, the peach brandy is made with a wood-fired stove and oak barrels. its different from the controlled steam and stainless steel frank mckenzie uses in his finger lakes distillery. he left the banking industry in 2007 to start the business. >> it's been a lot of work. we're certainly trying to make a

viable business and there's a lot of interest in locally made products at the moment, and handcrafted spirits, so the timing was good. >> reporter: mckenzie thought regulation in the banking business was a challenge, but he says it's nothing compared to the web of federal, state and local liquor laws. >> unlike in george washington's unlike in george washington's day, the liquor business is highly regulated. across the country, there are more than 4,000 laws effecting distilled spirits. from vermont to california, distillers like lance winters say keeping track of the different state laws can be a daunting proposition. >> there are so many of 'em, that typically, even the people enforcing have to sit with a manual to try and find different things that you may potentially be doing wrong. >> reporter: ted huber's family made liquor on their indiana farm in the 1800s, long before prohibition outlawed it. in the late 1990s, huber tried to get back to those roots, working to change the liquor laws in his state. >> really tied it to agri- tourism-- going back to mother

earth, growing the berries, growing the fruits-- adding that value to it and the tourism aspect, too so our legislature decided that would be a nice thing for our state to have. >> reporter: he succeeded in 2001 and is now selling specialty brandies at the family winery. there are plans to sell the specialty peach brandy made here today, to help pay for education programs at mount vernon, but to do that, they'll need special permission from the state. stephanie dhue, "nightly business report," mount vernon, virginia. >> thomas: that's "nightly business report" for wednesday, october 6. i'm tom hudson. good night everyone, and goodnight to you too, susie. >> susie: good night tom. i'm susie gharib. good night everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by:

this program was made possible by contributions to your pbs station from viewers like 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 more. >> be more. pbs.

narrator: august 18, 1960. 100 miles above earth, a secret race in space has started. corona, america's first photographic spy satellite, has just been deployed.