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tv   Nightly Business Report  PBS  December 8, 2010 1:00am-1:30am PST

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>> tom: a good deal for americans-- that's what president obama calls his tax cut compromise. >> it's tempting not to negotiate with hostage takers, unless the hostage gets harmed. then, people will question the wisdom of that strategy. in this case, the hostage was the american people, and i was not willing to see them get harmed. >> susie: what the tax cut package means for the u.s. economy and you. you're watching "nightly business report" for tuesday, december 7. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
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this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt
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>> tom: good evening and thanks for joining us. america's new tax cut plan was the hot topic today, susie. from lawmakers in washington to market traders and working families across the country, people were debating whether the tax cuts will kick start the economy. >> susie: tom, the president defended his compromise with republican lawmakers, calling it real money for real people. but others weren't sold on the plan. they're worried it costs too much or gives too much to the wealthy. >> tom: so what is the bottom line impact on the economy? darren gersh takes a look. >> reporter: a rough estimate by economists is that the agreement the president struck with republicans will boost growth next year somewhere between one half and one full percentage point. which is why mr. obama says he decided to act. >> a long political fight that carried over into next year
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might have been good politics, but it would be bad for the economy and it would be a bad deal for the american people. >> reporter: translate that extra growth into jobs, and you get up to a half a million more workers next year than there otherwise would have been. laurence meyer, one of the nation's leading economic forecasters, says that could bring unemployment down to 9% or lower next year. >> well, yeah, that's a pretty big deal. now, it's still not good. we're a long way from home. we're a long way from where we want to be, but this is a significant step. >> reporter: here's how it works. since the bush tax cuts are already in place, extending them won't add to growth next year. but cutting the payroll tax, as the president wants to, will. meyers estimates the net impact on the economy from the payroll tax cut and related changes is $50 billion. and extending unemployment benefits for all of 2011 puts another $50 billion into the pockets of unemployed. >> it's not a huge deal, but that's a very good way of
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stimulating the economy, and it's dealing with personal hardship. >> reporter: the least effective stimulus comes from business tax breaks-- in part, that's because there are so many generous incentives already in the tax code. and many small business owners say, before they buy any new equipment, they need to see more demand. the president's compromise helps small businesses by helping their customers, says economist bill dunkelberg. >> we'd be glad to hire if we had more customers. we'd be glad to buy new equipment if we had someplace to sell the output from the new equipment. but right now, none of that stuff looks like it pans out, so we don't do it. >> reporter: while many economists like this agreement, two groups were not pleased-- liberal democrats, who say it's too generous to the wealthy, and deficit hawks, who say it's not paid for. darren gersh, "nightly business report," washington. >> susie: for another perspective on the outlook for the u.s. economy, we hear tonight from the head of the biggest bank in the country, bank of america. brian moynihan took over as c.e.o. a year ago. bank of america, based in
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charlotte has $89 billion in revenues, 53 million consumer customers, and it's the number two mortgage lender. earlier today, i sat down with moynihan in new york and began by asking, how's the economy doing? >> i think we're in recovery, and we continue to make progress for it. consumers are spending a little bit more. and t market companies are borrowing a little more than they did in the summer. so i think we're moving forward. >> susie: but, you know, brian, with unemployment close to 10%, most americans don't feel like we're in a recovery. >> right. and that's the issue we have. we have sort of an issue of the idea with society you have a group of people who's jobs are heavily impacted by this recession, crosswalk, home construction, auto, and things like that. and a group of people who aren't so heavily impacted. and they've been able to maintain earning money and things. i think policy-makers, the business community, and
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everybody has to get together and help solve going forward. it can't be solved in the short-term, but it has to be solved long-term to build a better employment opportunity base for our country. >> susie: from your perspective, what is it going to take to get businesses to buy again? >> their belief they are going to buy. when you see people going into restaurants more. the average has picked up dramatically in the last six months. the spending on leash has gone up, which means more jobs in hotels and restaurants. and that's when people higher. they need to understand they have a top-line growth, and the conditions by which they're going to put people to work will maintain. both the economic conditions and regulatory conditions, and they can operate their business. >> susie: let's talk about the consumer, because you're in touch with them through credit cards and mortgages. how is the consumer doing? >> they're doing better now than they were earlier this year and the year
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before, and the year before that. delinquencies continue to fall, continue to come down. showing that the average consumer's job prospects and stuff, and they're able to pay. the length of unemployment is a serious issue for us. those consumers are still in difficult shape. so you have a group of consumers that need to get back to work and all of that, but the parts that are working have made it through, are recovering, spending a little more, borrowing a little more and moving forward. >> susie: what about the bank's consumer costumers? are they making their payments on the credit cards and mortgages? >> the delinquencies are down. but they're still not down to where they need to be. but since the middle of '09, we've seen the delinquencies come down. in some cases, like the credit card, are the lowest they've been in 2005. >> susie: you've gone thousands and thousands of
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home loan modifications. do you expect most will default? >> on average, half are defaulting. if you didn't try at all, all of them would default. >> susie: what about new loans of all types. most people say it is so hard to get money. are you making money readily available for businesses and consumers? >> if you look at small businesses, we committed this year to do $5 billion more and activity, renewal of loans to small businesses, than we did last year. companies with under $50 million in revenue, we've done $12 billion more this year. so the credit is available. industries are still struggling, residential construction, some of the smaller restaurants. if you and i want to start a restaurant tomorrow, it is hard to get a loan to do that because the default rates ran 20% to 25%. but for core loans, for core companies doing something that have been around 10 years, the credit is readily available at this point.
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>> susie: is it possible that banks have gone too far in tightening their lending standards? >> it is in certain industries where the business prospects are still difficult, the credit is not made readily available. for general industries, they are. we have brought the standards up, and we had to because the fraud rates got too far and too high. >> susie: what about the questions about faulty paperwork, and what is all of this going to cost bank of america? >> i don't know the costs. the simple thing is we want to make sure every customer we foreclosure on knows it is done properly. if you look at it in the abstract, we've done a lot of work over the last 30, 60 days to double check our processes and double check our work. >> susie: many banks are expected to reinstate their dividends in 2011.
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any chance bank of america will be one of them? >> we're going to do it as soon as we can. we're going through an analysis with our regulators that allows to you analyze -- stress test, whatever you want to call it. we have to realize our capabilities to withstand ebbs and flows in economy. >> susie: it took a hit with concerns that wikileaks are targeting a major american bank. do you think it is bank of america? >> i don't have any clue. i don't know if it is or if it is. if it is, we'll be prepared. >> susie: if it is, what will you do? >> we'll handle it like we do anything else. it is not like our company has had a share -- between all of the different things we've had to testify, that there hasn't been a lot out about or colon. i don't know what the fellow has. he has never sken to us. we'll deal with it when it comes out. >> susan: brian, a pleasure dealing with you. >> thank you, >> tom: here are the stories in tonight's "n.b.r. newswheel."
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after initially rallying, stocks settled mixed in reaction to the tax cuts-- the dow fell three points, the nasdaq rose three and a half, and the s&p 500 was up a fraction. trading volume rose from yesterday's levels on both the nyse and the nasdaq. if the labor department's latest data hold true, we could be in for a pick-up in hiring. the agency showed a sharp rise in job openings during october, up 12% from september to 3.4 million positions. that rise comes as more than half the nation's largest cities report a drop in unemployment. the jobless rate fell in 200 of the 372 largest metro areas in october. it's not all good news, though-- nearly a third of big cities saw a rise in unemployment. but consumers are borrowing more. the federal reserve today reported consumer credit rose by $3.4 million in october to almost $2.5 trillion. that's the biggest pop in borrowing in over two years, and it came on a jump in car loans and student lending.
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still ahead, tonight's "word on the street"-- "uncovered." we look at a trio of stocks that may be poised to pop when the economy picks up steam. >> susie: $90 a barrel for crude oil today. it's the first time prices traded above that milestone in more than two years. but by the close of trading at the new york merc, january crude futures pulled back to settle at $88.69, down 69 cents. suzanne pratt takes a look at what higher energy prices will mean for consumers. >> reporter: it could be the last thing consumers need right now. the price of crude is closing in on 90 bucks a barrel. that surge is pushing gasoline and heating oil prices higher, too. before year-end, the national average at the pump is expected to hit $3 a gallon. in new york city, it's already above that. some experts worry "fill 'er up, please" will mean less gifts under the tree this christmas. economist drew matus, however, is not too concerned.
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>> it's probably going to hurt consumer spending overall. whether it's actually going to hurt it over the holidays, i would doubt it. i think there's some pent-up demand. i think consumers, particularly those that are still employed, are doing okay with regard to their labor incomes. >> reporter: there is much debate on the relationship between oil prices and the economy. some experts say a spike in energy costs acts like a tax on consumers, because many people have no choice but to drive to work. as a result, they spend less on less vital things. here's the magic economic formula-- every $10 spike higher in crude prices trims a half a percent off of g.d.p. many experts say consumers should be able to handle the current cost of oil, as long as it doesn't move much higher. that is, of course, the big question. some banks are now forecasting higher prices for crude oil in the next year, at least $100 a barrel. but oil trader john woods predicts oil is close to topping out.
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>> you might get a push up to $94, $95, but, you know, if you look at today, i'd expect us to get down around $88 and then rally some from there. the thing is, this economy cannot support $100 oil. it just cannot happen, and it won't. people will be just, like, "forget it!" >> reporter: woods also credits speculators for the recent run- up in oil prices. he says that type of investment demand is fleeting, and calls it another reason prices won't remain elevated. suzanne pratt, "nightly business report," new york.
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>> tom: early buying gave way to a bit of an afternoon swoon as the big three stock indices closed mixed. we start with an intra-day chart of the s&p 500. with the initial pop, the index hit a new post-recession high, but the gains evaporated in the final hour and a half of trading. this is familiar territory. the index has had trouble getting over the 1,225 level-- backing down from that in april, in early november, and today. meantime, we have seen bond interest rates spike on the heels of the tax cut agreement in washington. the cost of uncle sam to borrow money for ten years has been rising since the federal reserve
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in early november announced its plan to buy government bonds. tonight, the yield on a ten-year government bond is at a six- month high. as bond yields rise, bond prices fall. credit rating agency moody's says america's triple-a credit rating is stable for now, but is worried about what's going to happen in two years when the tax cuts expire. the moody's analyst thinks, longer-term, the outlook rests, in part, on cutting spending. speaking of cutting government spending, ireland unveiled some steep tightening of the government budget-- $6 billion in spending cuts and a $2 billion jump in taxes. bank of ireland shares here in the u.s. jumped more than 20% on very heavy volume, thanks to the new austerity. farm equipment-making stocks were growing today, led by agco. its top boss thinks russia will have new incentives for its farm industry. agco stock added almost 4%, deere rallied 3%, and caterpillar was up more than 1%. but all three stocks are at new
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52-week highs, and all rallied on twice their usual volume. the utility sector was the biggest drag on the overall market, but natural gas utility nicor jumped, thanks to a deal in the works that would create one of the nation's largest nat gas distributors. agl resources is buying nicor for $2.4 billion in cash and stock. the combined companies would have 4.5 million customers in seven states. nicor shares rose $2.03, or 4%, to $48.79 agl stock fell $2.15, or almost 6%, to $34.98 women's apparel retailer talbots checked in with better than expected profits coming into the holiday season. earnings came in two cents ahead of estimates. the earnings per share dropped from a year ago because there are more shares trading compared to last year. the stock dropped 23% on more than ten times its usual volume.
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has been on a tear this year. it hit over $200 a share at the end of november. the stock, though, was down about 4% after hours on the executive resignation, one to watch tomorrow. that's is tonight's "market focus." and that's tonight's "market focus." >> tom: the u.s. economy has been growing for more than a year, even though new jobs remain scarce. instead, many companies have been finding ways to do more with less. tonight's "word on the street"-- "uncovered." bryan ashenberg is the portfolio manager of breakout stocks at he joins us from the nasdaq.
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>> tom: brian, welcome to "nightly business report." nice to see you. >> thank you for having me. >> tom: you've been looking to uncover companies that may be poised to pop if the economy can pick up steam from here. we're going to talk about three of them, but before we do that, what separates this trio from the rest of the market? >> playing a stock for a cyclical recovery have be profit table. successful businesses can emerge from these periods more successful because they're coming out lean and mean. >> tom: we'll begin with b.e.a. aerospace. a supplier to the airline manufacturing industry, b.e.a.v. close to a two-year high. >> we're seeing an increase in air travel. more people are flying, and more flights are being flown. this is creating a scenario where there is a greater wear and tear on the planes, which benefits the company. and what we're seeing is that for the first time in a long time, airlines have increased cash flow. so they're actually adding
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capacity and in the form of new planes. >> tom: the next one in is transportation, but on the ground. navastar, n.a.b., the ticker symbol, makes trucks and military semi. the stock near a 52-week high. a lot of investors have already discovered this one? >> we're just at, i believe, of the beginning 'what is recovering the north american truck market. currently the truck market has average age of the rigs of nine years, which is the highest level it has been in 20 years. there are regulatory reasons, and money pouring to truckers for the first time, and the rigs need to get replaced. as the companies replace the rigs, nava star is the biggest one. >> tom: w.m.s. industries, certainly not
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a household name, but this is a firm that makes slot machines, of all things. the stock has had a nice rally since the october lows. is it a replacement cycle for casinos? >> there are two trends. that's the first trend, which is very important. there has been massive underinvestment by the casinos replacing the slot machines on the flow. right now the replacement rate is running 20 years. and more typically it is between eight and 10 years. and we're seeing local, state, and international governments looking to fund the huge budget deficits they have. what they're doing is legalizing gambling in many jurisdictions where they had not been before. >> tom: what about disclosures for this trio? >> i don't own any of these stocks personally. >> tom: you can read brian's article on our guest tonight, brian ashenberg with >> susie: here's what we're watching for tomorrow:
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quarterly results from retailers costco and neiman marcus. we'll find out how hilary kramer's health care stock picks are doing in our "street critique" segment. and we'll answer your questions. there's still time to contact us by email at, or you can send us a note on twitter or facebook. one of bernard madoff's first clients has agreed to turn over $625 million to the government. carl shapiro did business with madoff for over 40 years, investing hundreds of millions of dollars but withdrawing far more. the money will go to madoff's ponzi scheme victims. separately, the trustee for madoff investors is suing the owner of the new york mets baseball team. mets owner fred wilpon made $48 million from his dealings with madoff. >> tom: the food and drug administration does not have the authority to regulate electronic cigarettes as drugs. that was the ruling today from a federal appeals court. "e-cigarettes," as they are called, are sold to help smokers quit the habit.
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but the court says they're not marketed to treat or cure a disease, so the f.d.a. can only regulate them as tobacco products, like nicotine patches. 0 >> tom: with the end of the year
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just around the corner, tonight's "of mutual interest" looks at making the most of your mutual fund losses. here's john waggoner, columnist at "usa today." >> if your mutual fund has given you lemons, don't make lemonade- - sell them and squeeze out the tax benefits. the average stock fund is showing double-digit gains, but many investors still have losses. the standard & poor's 500 stock index is still more than 15% below its 2007 high. if you sell your lemons now, you can use your losses to offset any amount of taxable gains. if you sold a fund earlier in the year for a $1,000 profit, for example, you can use $1,000 of losses to eliminate your tax on the gain. if you have more losses than gains, you can deduct up to $3,000 of losses from your income this year. if you still have losses left over, you can carry them into the next tax year. you can't reinvest in the fund, or a substantially similar one, for 30 days. otherwise, you'll have a wash sale, and the i.r.s. will disallow your loss. you can, however, move your money to a reasonably different fund. if you sell fidelity magellan and buy the vanguard 500 index
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fund, for example, you won't trigger a wash sale. but you may be better off waiting until the new year before you buy a new fund. this time of year, funds tally up their capital gains and distribute them, and the tax bill, to shareholders. if you buy a fund now, before it declares its distribution, you're just buying a tax liability without enjoying the fund's gains. when you do buy another fund, consider one that minimizes those pesky distributions. most index funds, for example, have minimal distributions, and they have low ongoing fees, too. you'll pay less in taxes and make investing just a bit less sour. i'm john waggoner. >> susie: that's "nightly business report" for tuesday, december 7. i'm susie gharib. good night, everyone, and good night to you, too, tom. >> tom: good night, susie. i'm tom hudson good night, everybody. we hope to see all of you again tomorrow night. "nightly business report" is made possible by:
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this program is 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 >> be more.
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