captioning sponsored by wpbt >> paul: one of the president's top economic advisers says the economy's been to the brink, but we're back from the abyss. coming up, a closer look at how the economy's doing and where it's headed in the second half. >> susie: from general electric to bank of america to citigroup, some of the nation's biggest blue chips posted earnings today. results are down, but still better than expected. an update in stocks in the news. >> paul: tonight's market monitor guest thinks stimulus programs around the globe are working. he's gary motyl chief investment officer at templeton global equity. >> susie: just a few years ago, everyone was jumping on the ethanol bandwagon, but gasoline prices dropped and credit costs soared. now, ethanol is being back- burner. >> paul: i'm paul kangas. >> susie: and i'm susie gharib. this is "nightly business report" for friday, july 17. "nightly business report" is made possible by:

this program was made possible by contributions to your pbs station from viewers like you. thank you. >> susie: good evening, everyone. the economy is impressive again. that's what president obama's top economic adviser lawrence go higher in the months ahead but says that doesn't mean

the stimulus effort has failed. instead, he believes the policy helped saved the economy. >>. >> if we were at the brink of catastrophe at the beginning of the year, we've walked some substantial distance back from the abyss. >> susie: but a major part of the administration's agenda could pose new economic challenges: healthcare reform. late today, president obama said his healthcare overhaul cannot add to the federal deficit and he means it. joining us now for how that could affect what's ahead for the economy-- mark zandi, chief economist of moodyseconomy.com. >> susie: nice to see you again, mark. >> good evening. >> susie: all right, president obama really pushing now for health care reform but do you think this could derail the economic recovery which is so fragile? >> it could if health care reform isn't paid for.

it's important to insure the uninsured. we have to pay for it. if we don't pay for it, it'll lead to larger deficits, more debt and higher interest rates in a much weaker economy. that'll happen sooner than later. that has to be part of a reform. we have to pay for it. >> susie: there are many people saying let's postpone health care reform for now. let's get the economy fully recovered and then we can deal with that. what is your view in that debate? >> well, you know, that ship has sailed. if we were in the beginning of the year, i might have argued that as well. we have a lot on our plate. it'll be nice to get a win, get something done right. health care reform is a big project but we're now down the path and we have to make it work. >> susie: wall street was encouraged this week by a whole batch of positive earnings reports whether you were talking about intel from the tech sector or goldman sachs and j.p. morgan from the banking sector, johnson & johnson, is the economy really doing better because a few big companies reported strong

earnings? >> yes. i mean, just think about the opposite. if big companies were falling, that would signal the economy was heading in the wrong direction. the fact they're making money and in some cases profits are rising is an indication the recession is coming to an end and we'll be out of recession, i think, by late this year. >> susie: but when you dig into some of the numbers like j.p. morgan, for example, you see that the consumer loans are still in bad shape. they have credit card losses, all a sign the consumer is still struggling financially. so what kind of recovery are we talking about if the consumer is not on board? >> you're right, susie. i think the economy will get out of this recession and into recovery by early next year but it will be a very muted recove recovery. the secretary or, um, advisory summers said unemployment would rise until next year. he's absolutely right. it's not going to feel very good for most people until

unemployment begins to decline and that won't happen until late next year. >> susie: it may even go later according to a former fed governor, larry meyer, today saying the u.s. won't reach full employment, and by that, he means 5% unemployment, until maybe the year 2015! >> yeah, you know, that's a reasonable forecast. the unemployment rate is 9.5% today. it will rise into the double digits, probably peak next spring. it will start to decline after that, but it will take a number of years to get it down to a level we consider full employment, a level where most people think if they go out and want to find a job that they can get one. that probably really won't be until mid-in the next decade. >> susie: every economic report that comes out, mark, there's a positive side to it and a negative side. others are saying look at the foreclosure rate, look at how much that's going up. so do you think the government programs that are supposed to

prevent these foreclosures and other housing issues are they working? >> not well enough. in fact, if i were to put my finger on the one thing that could derail the end of this recession and recovery early next year, it will would be the foreclosure crisis. foreclosure continue to mount. the president's loan modification plan in an effort to stop the foreclosure crisis is not working very well, at least not yet. now, the president is working really hard making changes to the plan and he's calling mortgage servicers, the folks that actually modify the loans, to gather in washington in a couple or few weeks to get it moving. i'm hopeful that this will work and in a year we'll get more mod's and the foreclosure crisis will abate. >> susie: we just have a few seconds left. a lot of people calling for a second stimulus or maybe a second stimulus for small businesses. in a few words, what's your view on that? >> i think we should wait until the end of the year,cy see how the stimulus is working. if it's not working well enough and we think the economy needs

more help then, yes, another round of stimulus for the economy would be helpful and something directed toward small business would be great. >> susie: we have to leave it there. thank you, mark, have a great weekend. >> you. >> susie: my guest tonight is mark zandi, chief economist. >> paul: after four straight days of gains, wall street spent most of the day slightly lower on light profit taking with better than expected results from bank of america, citigroup and g.e. cushioning the losses. at noon the dow was off 12 points, the nasdaq down eight points. the mild selloff convinced some buyers the path of least resistance was up so a late rally produced a mixed close. the dow jones ended with a gain of 32.12 at 8,743.94. it rose every day this week, advancing 597.42 points. its best week in months. the nasdaq added 1.58 to 1,886.61 today. it also rose every day this week for a net gain of 130.58 points. the s&p 500 fell .36 to 940.38

today. and for the week up 61.25. in the bond market, the 10 year note fell 21/32 to 95-21/32 putting the yield at 3.66%. >> susie: a funny thing's been happening lately in the investment world. despite the worst bear market for stocks in decades, investors are pouring money into exchange traded funds or e.t.f.s. there are now 800 e.t.fs listed on u.s. exchanges more than five times the number just five years ago. what's behind the boom? suzanne pratt takes a look. >> reporter: from sugar to wind energy to gasoline prices and luxury items-- you name it-- it seems there's an e.t.f. for

almost anything that's right, there's one for the gaming industry, too. exchange traded funds, or e.t.f.s, are a basket of securities that usually mirror an index, from well-known benchmarks to obscure measures. many are first cousins to regular index mutual funds. but, lately investors have been hungry for e.t.f.s mostly because of their transparency, tax efficiency and cheap price. they can also be bought or sold at anytime, a clear benefit in the recent bear market. strategic insight has been keeping tabs on e.t.f.s for more than a decade and co-founder avi nachmany credits mass appeal for the rapid growth . >> they satisfy a very wide range of audiences, institutional investors, hedge funds, financial advisors, mutual funds that actually invest a portion of their assets in e.t.f.s. >> reporter: the e.t.f. pie is dominated by barclays global

investors with its ishares, soon to be owned by blackrock. state street global and vanguard slice up much of the rest. that pie is getting tastier. e.t.f. assets stand at close to $600 billion-- double what they were four years ago. but e.t.f.s account for less than 7% of the total fund assets here in the u.s. so, experts see huge potential for growth. vanguard's 39 e.t.f.s make up less than 10% of the firm's total assets under management. but, vanguard's fran kinniry calls e.t.f.s the biggest opportunity he's seen in some time. >> we are very conservative in our product development and launches. we are very committed to the e.t.f. landscape and we think it is going to be a major part of vanguard as we move forward. >> reporter: this spring, bond king pimco and charles schwab announced they, too were launching e.t.f.s, a move some experts predict will change the e.t.f. landscape and attract more retail investors.

not all providers however are gigantic. wisdomtree is an up and comer with less than one percent of the market. it is, by the way, the only pure play public company that provides e.t.f.s. while the three-year-old firm offers 51 equity and currency e.t.f.s, it's yet to see a profit. wisdomtree president bruce lavine isn't' worried. >> the e.t.f. business is exceptionally strong and i don't thing you've seen anything yet. i think it's going to really dominate in the financial services industry over time. some predict e.t.f.s will pose a legitimate threat to traditional mutual funds in the coming years. while others say, it's more likely they'll learn to coexist. >> we're not concerned about real cannibalization per se. we think it's a different buyer. >> reporter: for those who worry e.t.f.s are the flavor of the month in the investment world, consider this: they're trying to get a foothold in the lucrative 401(k) business.

if that happens, e.t.f.s could really explode. suzanne pratt, "nightly business report," new york. >> paul: now let's taka look at some stocks in the news tonight.

>> susie: not long ago, ethanol was considered the miracle cure for the nation's energy problems. companies were booming thanks to easy money and a government mandate to blend ethanol into the nation's gasoline supply

but now many firms are scrambling to stay in business. as we continue our look at "reviving the economy", dana bate reports the ethanol industry appears to be running on empty. >> reporter: these corn fields were once touted as the future to our energy independence. companies sprung up around the country to produce corn-based ethanol, hoping it would fuel their bottom lines. at least ten producers have filed for bankruptcy this year. plans to build new plants have been shelved. sales of e-85 blends have dipped. environmental policy expert ken green says the economics of ethanol have come home to roost. >> at the end of the day, it's only competitive with gasoline when gasoline is very expensive, and gas doesn't stay expensive for very long. and so once the economics of it really worked their way through the system, and everybody went, "wow, i'm not going to make any money off of this," that was part of the collapse. >> reporter: bob dineen heads the renewable fuels association.

he says like many industries, ethanol has had a tough year, but things are improving. >> you see plants that had to shut down temporarily coming back online, you see profitability returning to the industry. we're still dealing with volatility in energy markets and a difficult road ahead, but we're getting through it. >> reporter: the u.s. ethanol industry has enough capacity to produce 15 billion gallons of ethanol this year-- far more than the nation can use. then there's the issue of environmental impact. recent studies have shown the production of corn-based ethanol might actually increase greenhouse gas emissions, not reduce them. so a move on capitol hill to make companies pay for their carbon emissions could cut into profits. >> you're going to add to their business burden, not make it easier on them. >> reporter: environmentalists like tim telleen-lawton of environment america say we can't just focus on gasoline substitutes. >> we increase the efficiency of cars, we can reduce the amount

we're relying on cars by using better public transit. we can use more electricity from clean sources like wind and solar power, such as through plug-in hybrids. >> reporter: the future for the corn-based ethanol industry is murky. but having those firms in place now gives the industry a head- start toward developing ethanol from other plant sources. the question is whether scientists can develop that fuel on a commercial scale fast enough. dana bate, "nightly business report," washington >> paul: monday: with the economy in recession, the nation's airlines are struggling to turn a profit-- an update on their outlook. >> susie: a big win for dallas mavericks owner mark cuban. a federal judge threw out an insider trading lawsuit against cuban. but, it's not exactly a slam dunk. the judge gave the securities and exchange commission 30 days to amend its complaint. the agency claims cuban acted on confidential information when he sold his stake in web firm mamma.com to avoid losing three-quarters of a million dollars.

>> paul: some of the nation's lawmakers want to see the paperwork on uncle sam's bailout of general motors and chrysler. members of a congressional committee want to read the e- mails on who decided what plants and dealerships would close and how worker and retiree benefits would be cut. the fear is that some of those moves were spurred by politics not economics. no comment on the request from g.m., chrysler, or the treasury.

>> susie: here's a look at what's happening next week. our friday market monitor guest is frank cochrane, president of investment timing consultants. on the economic calendar: wednesday, the weekly report on crude oil and gasoline inventories. thursday, existing home sales for june and weekly jobless claims. friday, a final look at july consumer sentiment. also next week, quarterly results from 3-m, apple, a.t&t, boeing, caterpillar, coca-cola, delta airlines, ford motor, merck, microsoft and u.p.s. >> paul: my guest market monitor this week is gary motyl, chief investment officer of the templeton global equity group. gary, welcome back to the n.b.r. >> pleasure to be here, paul, thank you. >> paul: now, you take a value-oriented approach to global investing. what's your current opinion on

the world markets? >> we think the world markets are still undervalued and do offer good potential over the next one to three to five years. >> paul: a bull? >> a bull but not an outrageous bull. >> paul: oh, ok. are the economic stimulus programs working here and abroad? >> in the united states, stimulus programs haven't kicked in yet. we're seeing more evidence internationally that some of the programs are having an effect, particularly in china. long-term, that's something that we'll monitor. i would note that unemployment rates are still fairly high across the world and in most industries, there's still significant overcapacity. not sure inflation is a problem in the near or intermediate term. >> paul: ok. what are the most attractive countries in your opinion? why? >> we're finding good value in virtually every country right now. low valuations are abundant in the united states as well as in

europe. in europe, most of the companies we're investing in do have a more global outlook as opposed to being focused within the european comme community. >> paul: what industries are your favorites and why? >> one area we find very attractive right now is the technology area. this is an area being a value investors don't have an opportunity to invest in frequently. right now the valuations look very good. this group underperformed in the markets the last 10 years. i think we have a number of stocks we like one of which is taiwan semiconductor manufacturing. this is listed on the big board simple tsm. world leader and semiconductor manufacturing. great technology. great balance sheet. cash in excess of debt, 5% dividend yield. very, very strong competitor in all its markets. we look to have this company growing nicely in the next few years. >> paul: ok. another industry you like? >> telecommunications is one which has been a little under the radar over the last few months but we think it still

offers very good value, especially on a total return basis. many stocks have strong balance sheets, good dividend yields. one we like is telefonica in spain. it's doing well in europe. it gets 40% of its revenues from latin america. >> paul: this trades on the big board tef, right? >> correct. >> paul: another industry you're fond of? >> something a bit controversial is health care. obviously we're all aware of what is going on with potential health care legislation but we think the valuations are attractive and discounts some of the problems. navartis is a company which is head quartered in europe. >> paul: switzerland? >> correct. trades on the new york stock exchange under the symbol in scrrx vs. stock with low p.e. multiple, 4% dividend yield, good breath of business. one thing i don't know people are focusing in on are is the potential of pharmaceutical companies particularly in europe to tap into the emerging markets

as those economies expand and the governments try to improve the health delivery systems. >> paul: we have a minute left for one more industry you like and one choice. >> in the financial area, i think there's an interesting stock. it is, however, not listed in the united states. it trades on the frankfurt and munich stock exchanges. germany company called munich reinsurance. this company is the second largest reinsurance company in the world. again, strong balance sheet, aa-minus debt rating. very good dividend yield of about 6%. they'll be able to take market share and really benefit from a good pricing environment in that area over the next few years. >> paul: we don't have a chart on the munich read because it doesn't trade anywhere in the states but you explained it very nicely what it's all about. gary, do you personally own these stocks or have any other disclosure? >> i don't own them directly but i do own them through the various templeton mutual funds i hold personally. >> paul: fair enough. i'm afraid our time is up but i want to thank you for being with us again, it's been a pleasure. >> thank you, paul.

>> my guest gary motyl of the templeton global equity group. >> susie: and finally tonight, rhode island is known as the ocean state and new billboards there are trying to make residents there feel less blue over the economy. the signs are posted along the state's highways. and say things like: "the interesting thing about recessions is that they end." the billboards and their optimism are needed, because rhode island's unemployment rate stands at nearly 12.5% other signs tell drivers their self worth is greater than their net worth. >> paul: there's a philosophy worth adopting. >> susie: yes, indeed. >> susie: that's "nightly business report" for friday, july 17. i'm susie gharib goodnight everyone and have a great weekend-- you too paul. >> paul: and you as well, susie. i'm paul kanga caption test caption test caption test possible by:

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