>> tom: the u.s. supreme court will take up the health care reform law, deciding if requiring people to have health insurance is constitutional, but an eventual ruling is unlikely to stop the debate. >> sometimes, the constitution rulings, if they're too sweeping, short-circuit the necessary compromises and difficulties of reaching a political equilibrium, which isn't always there, and we sometimes outsource these things to the court and don't get the answers we want, either. >> tom: and warren buffett changes his tune on technology, buying up a big stake in big blue-- i.b.m. it's "nightly business report" for monday, november 14. 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. thank you. captioning sponsored by wpbt >> tom: good evening and thanks for joining us. susie gharib is on assignment. italy's new government comes under pressure as investors around the globe question whether new leader mario monti can make the cuts needed to bolster italy's struggling economy.

already, we're hearing plans for 300,000 public sector job cuts by 2014 and spending reviews for all government agencies. european markets finished broadly lower and u.s. stocks followed suit. the dow fell almost 75 points, the nasdaq fell 21 and the s&p 500 lost 12 points. trading volume started the week light, with just 709 million shares moving on the big board and less than 1.5 billion on the nasdaq. where stocks head this week will depend in large part on a slew of europe and of u.s. economic reports. from retail sales to inflation, investors are hoping for signs the recovery is finally picking up steam. erika miller reports. >> reporter: if you want to know if the economy is registering growth, it pays to watch the registers. after all, consumer spending makes up more than two-thirds of the economy. unfortunately, tomorrow's retail sales data for october is expected to be fairly soft,

rising just 0.3%. that would be a sharp pullback from september's 1.1% gain, but economist anthony chan isn't worried about holiday spending. >> net-net, we probably will see a little softer retail sales number in october. but the hope is it's temporary and we will see a little bit of a boost to that trend as we go into the calendar quarter. >> reporter: also tomorrow, the labor department reports wholesale inflation data. producer prices are expected to be lower for october after a sharp rise the month before. economists say that expected reversal is thanks to a drop in commodity prices, especially oil. the other big inflation news this week comes out wednesday and tracks prices at the retail level. economists are looking for prices to be flat after a 0.3% rise in september. excluding food and energy, core consumer prices are expected to eke out a small gain. economists say tame inflation

means holiday shoppers will get more bang for their buck. >> that's actually good news for consumer spending, because what the fall or deceleration in consumer prices or producer prices will do, is that it will tend to boost real incomes. >> reporter: but no matter how encouraging the u.s. economic data is this week, it may not be enough to help the stock market. strategist steve freedman says the wild card is what happens in europe. >> you are in a stage where you are just getting a lot of comments from different countries, from policymakers, and those things are random and hard to predict. i think that they do have the potential to continue promoting volatility in the markets. >> reporter: so in this week before thanksgiving, brace yourself for the possibility of more market indigestion. erika miller, 'nightly business report," new york. >> tom: still ahead, tonight's "word on the street" wal-mart. the world's biggest retailer reports earnings just before the most important season for its industry.

thestreet.com's jeanine poggi joins us. president obama's health care overhaul is headed to the u.s. supreme court. the justices announced this morning they will hear challenges to the law, which could lead to one of the court's most important decisions in recent history. at issue? a mandate that requires all americans to enroll in a health insurance program by 2014. 26 states and one business group have asked that the entire law be repealed. the high court expects a decision by june, just over four months before the 2012 elections. tom miller of the american enterprise institute says the case is all about the individual. >> if we believe that there are some balance of power and checks and balances between individual rights and different levels of government, then this is a very significant case, because it will say a lot about what our role and relationship is between government and citizen in the future, and sometimes we have to think about doing things the right way, as well as whether you've won or lost in a narrow

political sense. >> tom: while the white house prepares to defend the health reform law, the obama administration will use money included in that legislation to train and hire health care workers. the initiative earmarks $1 billion for grants focused on improving care for medicare and medicaid patients. in this age of uncertainty, over health care and other regulations, we visited a health care company today as it announced adding 100 new jobs over the next year. mako surgical makes robotic devices for knee and hip surgeries. we spoke with c.e.o. dr. maurice ferre. >> the importance of health care and health-care technology i think is going to play a very important role going forward here in this country. and one of the things that we're doing developing robotic systems for surgery and that's all about innovation, about efficiencies. and you know, we're dealing with a patient population that every day 10,000 people turn over the age of 6 a opinions you mentioned in your public remarks announcing the jobs in south florida, that innovation takes cash.

dow have enough to continue to innovate. >> absolutely. absolutely. that's why we need to be competitive. that's the dream of america. america is about being focused on innovation and creating great, great jobs. these are high-paying jobs. >> and these robotic systems are you sell cost more than a million dollars each. >> they do. >> do your vendors, customers have the cash necessary to purchase these machines. >> you know what we are seeing is our partners, the hospitals around the country, we have close to i a 100 systems all over the united states. we've done over 10,000 procedures and have been around only since 2004 and the product has been going on since 2006. we think this going to continue to go because it shows the importance of what this technology does for the quality of health care. >> is the availability of credit out there for those health institutions to take that step. >> we're seeing it. we're seeing it we're seeing a healthy environment out there on the capital spending of hospitals. hospitals that rolize what this technology brings, better-- better patients, quality of care. these are important messaging to the hospitals.

the 4079s are making these types of investments and we're happy to see that. >> year-over-year you have add 40% to your payroll. dow expect to add a hundred more jobs and other double-digit increase over the next 12 months or so. what are you finding in availability of skills. >> it's a tough environment and you know, we're fortunate to have a lot of people looking for jobs. and you know, we have the ability to hire talent. >> the health-care reform act at its core looks to increase the pool of people in the insured market. would that benefit a company like mako or do some of the regulations and rules involved in that legislation hurt mako? >> you know, i am going to say, you know there is over a million people that have some form of knee or hip implant in the united states. it's estimated by the year 2030 it's supposed to go up to 3 million. that's a significant number. and i think right now that's the way we treat these diseases. and you know, what we're about is focusing on using

technology to improve outcomes. and i think that's the focus. and i think there's a lot of growth in the sector. health care is a very important part of it. and we need to figure out not only to make it more efficient but more cost-effective. >> you touch on a testimony of different industry, health care being the biggest one but also manufacturing and advanced manufacturing in plants like this one here. what are your suggestions to public policymakers as they look to invigorate the job market? >> you know, i mean we have to find ways of stimulating good ideas and good innovation. because you know, with innovation comes good jobs

>> tom: can you name the man who once said this? >> we have embraced the 21st century by entering such cutting-edge industries as brick, carpet, insulation and paint. try to control your excitement. >> tom: that was warren buffett, and he has now embraced the 21st century by purchasing a big investment in one of the oldest technology firms. i.b.m. is one of buffet's largest investments yet. darren gersh reports. >> reporter: warren buffett says he likes companies that are surrounded by a competitive moat, meaning other companies can't easily find a way into the fortress. the motley fool's eric bleeker says that is a good way to think of i.b.m. >> buffett said today no one's ever been fired for picking i.b.m., and if you move away from i.b.m., you're endangering your job and your entire organization. remember, i.t. is built on 99.9% always working, and once you have i.b.m. in your

organization, to move it? that's a risk that you're not going to have that same reliability. >> reporter: that competitive moat must also come at a fair price. buffett disciples point out their guru won't buy a stock unless the price offers a margin of safety of around 20% to 25%. >> that's where i come back and say, "gee, if he is buying at $170 and that's the average price he bought at," then he's obviously thinking there has to got to be at least $35 or $40 more in the stock at the present time, and that's not priced to perfection, that's priced to opportunity. >> reporter: buffett has long argued technology is too hard to understand and too easy to pick wrong. so why i.b.m.? long-time buffett watchers say the key is big blue's very predictable business. >> it may have raised several eyebrows because it is in the technology area, but when one looks at its very stable and growing cash flows, i think that

it is not a surprise at all. >> reporter: at $10.7 billion, buffett's i.b.m. investment is one of the largest he's ever made. the fool's eric bleeker urged buffett to take the plunge last year, though today's news came as a surprise. >> this is like your grandpa saying he's going to go out and buy an old rotary dial phone and coming back with an iphone. >> reporter: it looks like buffett may be over his technology phobia. berkshire hathaway announced today it has also bought a $200 million stake in intel. darren gersh, "nightly business report," washington. here's tonight's "market focus." earnings, the economy and europe all conspired to push up stock prices.

borrowing costs back on the rise for italy, american stocsk sank. >> with a 1% loss on its s&p 500. a little perspective stretching out to 30 sessions with that big sharp rally in october and the sell-off on halloween. we've been trading in a narrower and narrower range hitting lower highs and higher lows. all ten of the major stock sectored today sank. financials lead the way lower down 20%, energy and utility sectors falling 1.2% each. now leading financials lower, it was custody bank of new york melon, shares falling 4.5% way firm warning about its profit hit with the restructuring effort coming designed to save $700 million over the next three years. the bank also noted it faces higher regulatory and legal costs leading to the sell-off.

big losers on the dow, both banking stocks as well, bank of america and jpmorgan each falling more than 2%. >> boeing, however, was the tailwind for the dow industrials rise --.5%. we're now just about 25 cents away from this october high. it was only one of three dow stocks in the green today. was's going on here? well, boeing saw some lift today thanks to a huge order of new planes placed from the mideast. em ritz air wants 50 of boeing's 747s a record order worth at least $18 billion. boeing thinks it could be just the beginning of $450 billion worth of business out of the mideast over the next two decades. the firm says that means judge demand for jets, pilot, maintenance and workers. whe the energy sector was weak watch an anadarko tomorrow after closing around 79 dollars and 28 cents per share t was back above $80 after the close tonight. the company announced a new oil field in northeast colorado may hold more than one billion barrels of oil and natural gas.

now speaking of energy, gasoline futures fell 7 cents thanks to new imports and refinery in the

so, the big question is this: what are the chances that a company or a govovernment can continue to pay its bond obligations and avoid default? you could just roll the dice, but there is another way to try to get an indication of a bond's quality. three companies-- standard and poor's, moody's, and fitch-- have come up with a system of bond ratings. those agencies evaluate the finances of bond issuers and then rate their risk of default. see these as, bs and cs? groupings of these letters reflect how much risk there is in getting your money back, says mark adelson, chief credit officer at standard and poor's.

>> it is every bit as much an art as much as science. it's not just a question of plugging numbers into a spreadsheet and calculating financial ratios. it's about understanding the economy and policies of a sovereign or municipal credit, and understanding the business profile of a corporate credit. >> reporter: at the top of all the bond ratings is triple-a, the absolute best, the safest. move on down the scale to double-a or triple-b. bonds in this range are said to be "investment grade." that means the risk of a bond issuer defaulting is fairly low. drop below that level and it falls into the so-called "junk" or "high yield" category. that means that the risk of default is considered higher. and to make up for the greater credit risk, these bonds generally pay higher interest. but bond ratings are not

foolproof, and sometimes they can be flat-out wrong. in fact, misleading bond ratings were largely responsible for much of the financial turmoil in the late 2000s. for example, many securities tied to real estate loans, such as collateralized mortgage obligations, or cmos, were rated as "investment grade." in reality, as bond expert richard lehmann points out, they were anything but. >> that's exactly what happened here in the c.m.o.s. they were structured in a way that said it would have to be unprecedented foreclosure and default levels by homeowners for these instruments ot fail. and, of course, that's exactly what happened. >> reporter: those mistakes at bond-rating agencies were so serious that they led to a congressional investigation. and they've led some professional bond investors, like bill gross of pimco, to be skeptical about bond ratings. that's one reason some investors insist on buying insured bonds. but even bond insurers have had problems; because of a wave of defaults in 2009, some nearly

ran out of funds. so what else can you, as a small investor, do to manage bond credit risks? well, there are no easy answers, but the most important advice is to keep from putting all of your proverbial eggs in one basket. just as it is with stocks, diversification is important in bond-holding as well. jeff yastine, "nightly business report," miami. >> tom: speaking of diversification, many investors are thinking about putting some foreign bonds into their portfolios. i spoke with aaron gurwitz, head of global investment strategy at barclay's wealth, asking him what the investor needs to consider when looking at bonds issued by foreign firms or governments. >> well, the main factor to consider and the main determine nathaniel of returns on nondollar bonds is what happens to exchange rates. that's the source of risk in those bonds and that's the main reason for diversifying outside of the u.s. >> tom: is it effectively a foreign bond is a currency play

then? >> mostly a currency play. now, of course, most other countries have yield curves, but bond yields go up and down as the economy grows or shrinks. but the main determinant for a u.s. investor of the return on a nondollar bond will be what happens to the exchange rate between the dollar and that currency. >> tom: so when it comes to building a bond portfolio, what do you need to keep in mind? well, to discuss that, joining >> tom: so when it comes to building a bond portfolio, what do you need to keep in mind? well, to discuss that, joining us is george strickland, managing director of thornburg investment management. and here in our studio is john radtke, president of incapital l.l.c., a chicago-based investment banking firm. gentlemen, welcome to "nightly business report." >> thanks for having us. >> tom: jeff yastine

reported earlier about the need to diversify ones bond holding. you run a couple bond funds. would you say owning a bond fund is the best way to achieve that kind of fixed-income diversification? >> i'd have to say yes. for most people i think that owning a bond fund gives you instant diversification plus professional management plus hopefully someone that's going to watch your nest egg very closely. >> tom: john, don't you need a large portfolio to get some kind of diversification if you're owning individual bonds versus a smaller amount of money to get that instant diversification via a fund? >> i don't think so. i just looked at some information sent out by this wab that said owning ten to 15 different credits might give you inadequate diversification. >> tom: is that enough diversification, george, do you think? >> i would tend to say no. and the reason why i say this is because a bond, your upside is sort of limited to your prince p-l and the interest payments

you're going to receive. let's say you have ten or 15 bonds and one of those defaults. you give up one to two years of returns with one bond defaulting. so we think the numbers should be up closer to 30, 40, maybe 50 bonds before you can say a portfolio's really properly diversified. >> tom: one strategy that's often recommended for people considering bonds is to ladder individual bonds, for instance. john, how does that work? >> it's really simple, tom. it's actually buying a series of securities and staggering the mature thys over time so one is maturing giving you an opportunity to reinvest which would mitigate not only inflation but certainly reinvestment risk over time, smoothing out the earnings of the portfolio. >> tom: george, what do you think of the laddering strategy? is it possible for investors to look at a bond fund as a ladder or use multiple bond funds to build the ladder? >> oh, yes, i think it is. we at thornburgh have used laddering for the last 20 years with our most popular fund and i

think it's most effective if you use it over a number of years so that you get the yield of a long-term bond or an immediate-term bond and the risk of a somewhat shorter-term bond as the ladder ages and the bonds move closer to maturity. >> tom: we've noticed about the questions of quality of bond ratings. guys, how does that affect really how people should look at individual bonds for instance, john? >> actually, individual bonds and bond funds carry the same credit risk and one of the concerns our buyers have and why they buy individual bonds is bond funds they go to buy a a.a. bond fund. 5% of the securities in that fund may only be a.a. it's up to the discretion of the fund manager. in many cases they're purchasing lower credits to enhance the performance of the fund. >> tom: interesting you say that. george, how about that issue, about maybe lower quality bonds perhaps within that bond fund? >> well, i can't speak for all bond fund managers, but we look

beyond the rating agencies and i think this is something that a bond fund manager can really provide for investors. and we look to the issuers themselves, we look at their financials and my particular opinion on a rating on a bond, for instance the state of california today, i happen to think it's not an a-rated credit whereas moody's just upgraded it and thinks it's... everything's rosy in california. so i think you have to look with real suspicion on rating agency ratings these days. >> tom: john and george, thank you so much for the advice and the insights. our guests: john radtke of incapital l.l.c.; and george strickland of thornburg investment management. >> susie: so there is a lot to consider in building a bond portfolio. besides selecting the right individual bonds, bond funds or e.t.f.s, every bond buyer should also keep track of what's happening with interest rates. >> tom: susie, that's absolutely correct. like the stock market, the bond market has its daily ups and downs, with those moves usually

reflecting changes in the economic outlook. but unlike stocks, which tend to go up along with the economy, the better the economic outlook, the worse it may be for bonds. that's because the slightest hint of higher inflation or interest rates generally leads bond prices to fall. and to keep up with interest rates and the economy, be sure to tune in to "nightly business report." >> susie: that's where we leave off for now. if you'd like to learn more about the stories in tonight's broadcast, watch our streaming video or to take part in our daily blog, go to "nightly business report" on pbs.org. you can also email us at nbr@pbs.org. >> tom: that wraps up this special edition of "nightly business report." i'm tom hudson. >> susie: and i'm susie gharib. from all of us at "nightly business report," thanks for watching. "nightly business report" is made possible by:

this program is made possible by contributions to your pbs station from viewers like you. thank you. >> 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.