>> paul: ben bernanke says the economy could start growing soon, but the recovery could be slow because so many americans don't have jobs. we get some analysis on the bernanke outlook from former fed bank president robert mcteer. >> susie: existing home sales surge as buyers pick up bargains and take advantage of the first time buyer tax credit.

the news caps a volatile week on wall street, and sends stocks to fresh highs for the year. >> paul: tonight's "market monitor" guest sees dow 10,000 by the end of the year. he's mark skousen, editor of "forecasts and strategies." >> susie: dealers are expecting a rush on this last weekend for cash for clunkers deals, but what happens next with clunkers claims and future sales. >> paul: i'm paul kangas. >> susie: and i'm susie gharib. this is "nightly business report" for friday, august 21. "nightly business report" is made possible by:

this program was made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> susie: good evening, everyone. ben bernanke said today the prospects for economic growth in the u.s. appear to be "good," and those comments triggered a stock market rally. speaking at a conference in jackson hole, wyoming, the federal reserve chairman gave a more upbeat forecast compared to the fed's statement last week after a central bank policy meeting. but bernanke also warned of "critical challenges". specifically, bernanke said financial firms face "significant losses," businesses and consumers are experiencing difficulty in getting credit, the economic recovery will be "relatively slow," and he expects a gradual recovery in unemployment. bernanke defended the actions taken by the fed during the financial crisis, saying they averted an "imminent collapse" of the financial system.

joining us now with more analysis, robert mcteer, former president of the federal reserve bank of dallas and currently distinguished fellow at the national center for policy analysis. nice to see you on the program again. >> thank you, susie, good to be with you. >> susie: is ben bernanke right about the economic outlook? >> well, i hope so. and probably. i think there's a good chance we'll get a positive g.d.p. number for the current quarter, primarily, though, because of inventory rebounds and the cash for clunkers. i'm not real confident that that can be sustained. i think the consumer has real headwinds that he's facing, and if he's going to be doing any saving in the future, consumption's going to be weak for? time. so if we start a recovery, i think it's going to be a weak recovery, and it could be a false start. >> susie: are you saying that you do not agree with bernanke's assessment that the u.s. economy is coming out of the recession?

>> i think it's-- it's about to emerge. whether it's going to emerge strongly enough for it to be sustainable is-- is what i worry about. >> susie: well, a lot of the another here, because you were talking about the consumer, has to do with unemployment, and, you know, people want to know when is hiring going to begin in a big way. today, bernanke says that there will be a gradual decline in the unemployment rate. what does that mean? >> well, i think, you know, the employment rate is 9.4. i still suspect it's going to go above 10. and the losses in employment have improved, but by historical standards they're still pretty large. i think we're in for a few more months of declining employment and that's going to make the consumer-- declining employment,

rising unemployment. >> susie: i wanted to make sure i understood that. go ahead. so you expect a few more months of that. >> yeah, i think the unemployment rate benefitted last month from a lot of people dropping out of the labor force. as things start to pick up, they'll get back in the labor force and start looking, and they'll be counted as unemployment. so the unemployment rate, i think, is going to rise, at least to 10%. >> susie: you talked a moment ago about consumption and that consumption just isn't there. we know when people don't have jobs or when they're worried about losing their jobs they're not going to spend money and the same thing goes with businesses being cautious during this time of uncertainty. what do you think it's going to take to boost consumption? do you think we need another stimulus package? well, i don't think we're very good at stimulus packages. maybe we should get the chinese to lend us their stimulus package. i think there's going to be stimulus in the economy, but i wouldn't have another formal

stimulus package. that one was much too unfocused, scatter shot, and it just really it probably did some good, but i'm not sure it did enough good to justify the cost. i think the feds' actions and of the money supply, along with the treasury's expansion of borrowing will provide some. fiscal and monetary stimulus. we don't need a special program, i don't think. >> susie: what else can be done to give a boost of growth? where is that growth going to come from? is it just going to be normal market forces? >> yeah. see, the problem is the consumer for many years did not have to save because the consumer thought of his rising 401(k)s and his rising home values as saving, and that's gone away and turned the other way. so now the consumer really does need to save, but if he does, it's bad for the economy.

it's a paradox. the more they try to save the more they weaken the economy, and make saving more difficult. so that's why i think it will be sluggish. >> susie: bernanke's speech today sounded a lot like a job audition. do you think that president obama will reconfirm the fed chairman for another term? >> yeah. i do think that mr. bernanke would have given the same speech even if his term wasn't coming up. however, i think he's done a magnificent job. he's been innovative and creative. there was no rule book for what we've had, and he had to make it up as he went along and i think he did a fabulous job. he deserves to be reappointed. and i think he probably will be. >> susie: all right, well, thank you so much for coming on the program. very interested in what you had to say about the economy. thank you so much. >> thank you. >> susie: my guest tonight robert mcteer of the national center for policy analysis and

former president of the federal reserve bank of dallas. >> paul: the fed chief's optimism combined with good news on housing to send stocks to their highest levels this year. but as erika miller reports, economic optimism isn't the only reason many on wall street are in a buying mood. >> reporter: wild prints... bright orange... and plaids. interesting clothing picks are probably what come to mind when you hear the term "short interest." it's also a widely watched measure of market psychology. over the past few weeks, short interest has declined sharply, suggesting more bears are being scared away. that's just one of many reasons strategist mike ryan thinks stocks will head higher. >> obviously, the more short interest there is, the more cash there is on the sidelines, the more support for the market there is. as the market continues to grind higher, you continue to see shorts getting squeezed out. >> reporter: the market has surged more than 50% since the march 9 lows, so nearly everyone

agrees there could be a pullback of roughly 5% to 10% percent coming. but many strategists, including milton ezrati, think the long- term trend is higher. >> i think the bias is going to be up. and the reason i say that is because we at lord abbett believe that the economy is turning to at least a modest recovery. and as that becomes apparent, the market will have an upward bias. >> reporter: for economic optimism, look no further than today's existing home sales report, which showed a record 7% jump last month. the hope is the housing crisis which sparked the recession may finally be easing. growing investor optimism is being reflected in the "vix"-- the market's volatility index. it's down sharply from last october, the height of the financial crisis. but many pros warn wild swings could soon be back. september and october have notorious reputations as the worst months for wall street. last september, lehman brothers filed for bankruptcy. and the market crashes of 1929 and 1987 both came in october. that's why oppenheimer's michael schwartz recommends investors consider options strategies to protect their portfolios. >> in this environment, where

there could be a potential correction or volatile news coming out, it would be wise to buy index puts on the s&p 500 to protect your portfolio. >> reporter: if he's right and there is trouble ahead, it's safe to assume shorts will be back in fashion on wall street. erika miller, "nightly business report," new york. >> paul: stocks on wall street rallied for the fourth straight day. the session started with an early boost on reports european economies are recovering. by noon, the dow was up 143 points and the nasdaq up 28 points. the fed chairman's comments and that solid 7.2% rise in july existing home sales kept the rally going strong through the afternoon, and stocks ended near the day's best levels. the dow industrial average closed up 155.91 at 9,505.96. this week, it fell only once for an overall gain of 184.56 points. the nasdaq advanced 31.68 to

2,020.90 today. it also lost only once this week, and gained 35.38 points overall. the s&p 500 rose 18.76 to 1,026.13 today, and for the week, added 22.04 points. in the bond market, the ten-year note losing 1 6/32 to 100 15/32, putting the yield at 3.57%. >> susie: the nation's largest dealer group is pulling out of the cash for clunkers program tonight. autonation says it has sold over 10,000 vehicles with clunker rebates. the $3 billion government

program is set to end monday, but what happens after cash for clunkers is scrapped? stephanie dhue gets some answers. >> reporter: cash for clunkers is credited with putting 750,000 new cars on the road in the last month. jerry sanders came to pohanka honda today to see if he could still cash in. >> we were definitely trying to take advantage of the car for clunker deal, and once we found out it was near the end, made more pressing to come in and see if we could find something. >> reporter: inventories are low as consumers have snapped up vehicles. pohanka automotive group's 14 dealerships have sold about 800 cars under the program. geoff pohanka says it really helped get sales rolling. >> it's given people permission to come shop for a car again. car sales have been down about 35% since last year and the industry has pretty much been on its knees. we were looking for a shot in the arm, and this has been a very successful program. >> reporter: but it hasn't been

without its headaches. to date, the government has been slow to process the clunker rebates. that's left dealers on the hook. pohanka is owed more than $3 million. >> cash flow is important to us, and we were very concerned with the government about being promptly paid. we were assured by the government we would be paid. in fact, it's in the law we must be paid within ten days of submitting the claim, and we have claims that are now a month old and haven't been touched or looked at yet. >> reporter: while the cash for clunkers program officially ends at 8:00 p.m. on monday, that's the deadline for dealers to have all of their paperwork in to get paid. as a result, many dealers have already stopped the program or are only doing select deals. consumer groups are worried about dealers pressuring customers to come up with extra cash in case clunker deals are rejected. lena pons of public citizen says consumers need to know that's illegal. >> if ultimately the transaction is rejected with something having to do with the paperwork submitted incorrectly, that loss is supposed to be sustained by the dealer. >> reporter: while the program

provided a boost for the industry, some analysts worry it came at the expense of sales down the road. with inventory low and pent up demand depleted, sales are expected to be weak for the rest of the year. stephanie dhue, "nightly business report," washington.

>> susie: some encouraging news today about the u.s. job situation. 17 states, or roughly a third of the nation, showed decreases in unemployment last month. seven states showed no change, but the other 26 showed increasing unemployment. that includes california, nevada, rhode island, and georgia. they reached their highest level of joblessness since the record- keeping began 33 years ago. unemployment in michigan dropped slightly to 15% from 15.2%, but it still has the highest jobless rate in the country. >> paul: monday, with six unemployed people for every available job nationwide, we look at how to stand out from the crowd. >> susie: harley davidson is touring sites in four states as it shops for a new home for its main motorcycle plant. it's currently located in york, pennsylvania. the company is looking at spots in tennessee, indiana, kentucky and missouri. back in may, harley said the

york plant had too much capacity, and that it wanted to either revamp the plant, which employs 2,300 workers, or relocate. >> paul: a former u.b.s. banker will spend more than three years in prison, despite acting as an informant for the u.s. government. bradley birkenfeld was key in helping the i.r.s. get the names of 4,500 american u.b.s. clients who may have cheated on their taxes. but he also admitted helping u.b.s. clients hide assets. today, he was sentenced to 40 months behind bars, almost a year more than prosecutors recommended.

>> susie: here's a look at what's happening next week: our friday "market monitor" guest is john dorfman, chairman of thunderstorm capital. on the economic calendar: tuesday, the s&p case shiller home price index for june is released, and consumer confidence for august; wednesday, the july reports on durable goods and new home sales; thursday, it's weekly jobless claims and a first look at second quarter g.d.p.; friday, personal income for july and august consumer sentiment. >> paul: my guest market monitor this week is mark skousen, editor of the market letter "forecasts and strategies." welcome back to "nightly business report," mark.

welcome, glad to be with you, paul. >> paul: you maid some very good called on your last visit with us in early march. you predicted the stock market was bottoming out, and the economy and employment would continue to weaken. all were right on the money. i compliment you. great call. >> it's very unusual to be able to pick the bottom. they say you can never pick the bottom of the market, but i lucked out on this one. >> well, where do you see the market and the economy heading now? >> well, my prediction is rather startling, or at least it was several months ago, or back in march. i'm predicting a dow 10,000 by the end of the year. we're at 9400, so it looks like we have a possibility of that happening. with the economy, i'm bullish. i think the economy is recovering, but it's going to be a very gradual process. there's a lot of problems in our economy that we're still suffering from, from the financial crisis. it's going to take us quite a while to get out of it. so i'm predicting a positive

g.d.p. for the first quarter in january of 2010, but i think the stock market is a better place to be. >> paul: how much better will it be? >> you say 10,000-- >> 10,000 on the dow is a positive number for. the year, so i think that's a good thing to see considering all the trouble that we've gone through. >> paul: no inflation this week. the producer price index showed actually negative. will inflation be a problem any time soon? >> no, i don't think it will be a problem soon. commodity prices are rising very sharply. i mean, one of my stock picks was freeport, and copper prices are back up to almost $3 a pound. so there is some flkz coming back into the system. but i don't see is happening at the consumer level yet. >> paul: okay, during your march visit, you recommend three securities. let's see how they've done since

early march. barnes & noble has done very well. a little up over 33%. are you still with it or would you buy more here? >> i think it's time to sell and move on, but it looks pretty good at this point. maybe a stop order would be a way to go. >> paul: there's the freeport copper and gold up 92%. i suppose you've taken some money off the table there? >> yeah, we're selling that as well, or using a stop order. copper produces are very high. i don't see a lot of profit potential left in that one. >> paul: and the third pick that you had was the gold shares, the spied or the big board. and that was a safe heaviun, up 1.5%. not bad. >> yeah, it's up, and i would recommend holding it just as a defensive measure. >> paul: how about some new recommendation, mark? >> well, i have three new recommendations for your viewers, paul. the first recommendation-- in fact all of them are income oriented. i'm recommending anna lee

capital management, the symbol is n.l.y.. this is a reit, paying 14%. they can pay 14% because it's a bit of a leveraged position. but they invest in residential, adjustable rate mortgages. but they use only those guaranteed by the government, like jenie mae. >> paul: we have less than a minute. >> my other two recommendations are hong kong, the hong kong index. it's an e.t.f.. the symbol is e.w.h. and i think they'll take advantage of the asian boom. 4% dividend. and my final recommendation is an oil, a canadian oil and gas trust, erf is the symbol. yielding about 9% or 10%. and i think that we'll take advantage of the economic recovery and we'll see higher oil prices. >> paul: very good. do you personally own any of the securities mentioned here or have other disclosure to make, mark? >> i believe i own the hong kong

index, but that's the only one. >> paul: i'm aafraid we're going to have to leave it there but i want to thank you for being with us once again. >> all right, we'll see you next time. >> my guest, mark skousen of the "forecasts and strategies." >> susie: and finally tonight, have you ever wanted to have your own index? well, now may be your chance. we're learning tonight that dow jones is shopping its stock market indexing business around to potential buyers, and that could lead to a renaming of the iconic "dow jones industrial average." news corp bought dow jones in 2007 for $5.7 billion, but it has written down nearly $3 billion of the dow unit's value this year alone. paul, "the wall street journal" says goldman sachs is brokering a potential sale, which could also take the form of some sort of joint venture.

>> susie: that's "nightly business report" for friday, august 21. i'm susie gharib. good night, everyone, and have a great weekend. you, too, paul. >> paul: and you as well, susie. i'm paul kangas, wishing all of you the best of good buys. "nightly business report" is made possible by: this program was made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org

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