tv Nightly Business Report PBS April 19, 2011 7:00pm-7:30pm PDT
>> susie: is goldman sachs losing its luster? the investment bank reports better-than-expected earnings, but were they good enough for investors? >> a far bigger problem for goldman sachs really is what is happening outside or beyond the reputational issues, what's happening in the broader markets. >> susie: one goldman experts weighs in on the bank's issues, as we look at its future challenges. you're watching "nightly business report" for tuesday, april 19. 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 >> susie: good evening, everyone. tom hudson is on assignment. stocks bounced back today, thanks to a batch of solid earnings reports from corporate america. but one of wall street's biggest names wasn't among them-- goldman sachs. the investment bank's first quarter profits were down 21%. goldman earned $1.56 a share, a big drop from the $5.59 it earned a year ago. still, the results were much stronger than analysts expected. suzanne pratt takes a look at some of the speed bumps on the road ahead for goldman.
>> reporter: this is a familiar image when you hear the words "goldman sachs." that's c.e.o. lloyd blankfein on the far left, testifying before congress early last year about who gets blamed for the financial crisis. fast forward to today, when goldman reported its latest quarterly results. the numbers were okay, not stellar, yet the giant investment bank continues to prove it's weathered the financial crisis and recession pretty well. nevertheless, goldman is now facing new headwinds, including a tarnished reputation. but suzanne mcgee, author of "chasing goldman sachs," says the bank should be most concerned about its rival, j.p. morgan chase. >> it's been profiting quietly from all the hullabaloo surrounding goldman sachs. and if i were sitting there in goldman executive offices, i think i'd be looking over my shoulder fairly constantly and worrying about what they are doing than perhaps what the public thought of me. >> reporter: and then, there's the question of blankfein and his big, but somewhat scuffed, shoes. blankfein apparently has no
plans to step down just yet, but already on wall street, the succession speculation has begun. while there's little agreement on a frontrunner, there is on one point-- the new chief will not be an outsider. >> it historically has not done that. it would be almost a violation of their culture at a time when they're trying to go back to their roots, culturally speaking. >> reporter: and, of course, goldman's stock price is another challenge. so far this year, the shares are down 10%, more than its brethren and lagging the overall market. morningstar analyst michael wong does not believe the public's anger toward goldman is the problem. >> we believe that the company's stock is mainly being affected by the cost of financial reform- - the capital requirements and also some other threats to its business model, such as the volcker rule. >> reporter: then, there's still questions about future financial reforms. no one really knows how those changes might affect goldman's business model and earnings power in the years to come. suzanne pratt, "nightly business report," new york.
>> susie: here are the stories in tonight's "n.b.r. newswheel." positive earnings news put investors in a confident mood today. the dow added 65 points, the nasdaq rose 9.5, and the s&p 500 up seven. big board volume dropped below a billion shares, while nasdaq volume slipped to 1.7 billion shares. nasdaq o.m.x. group and the intercontinental exchange have sweetened their bid for the parent company of the new york stock exchange. nasdaq is willing to pay the nyse euronext $350 million, if regulators block its proposed takeover. the nyse has said it doesn't want nasdaq's $11 billion bid. the big board is standing by a deal with deutsche boerse, saying the nasdaq offer is risky for shareholders. the weak housing market saw a slight boost last month. construction of new homes and apartments rose 7% from february. building permits, an indicator
of future construction, were up 11% after hitting a five-decade low in february. >> reporter: i'm diane eastabrook in biloxi, mississippi. coming up, i'll tell you what the shrimping industry here is doing to gets its products back on your dinner plate. >> susie: in japan, workers started today draining highly radioactive water from the basement of that badly damaged nuclear plant. it's the latest step to stabilize the fukushima daiichi plant and prevent more toxic spills into the ocean. meanwhile, initial damage estimates from japan's massive earthquake and tsunami are coming in from the insurance industry. total insured losses range from $12 billion to $34 billion. to get more perspective on that, earlier today, tom hudson talked with shivan subramanian, the c.e.o. of f.m. global, a commercial property insurance firm. tom began by asking what the firm's damage estimate is.
>> yes, right now, even though we have $7.3 billion of capitol in one of the largest property and shores in the world, i would estimate there are japanese losses that are going to come under $150 million. >> tom: so a bit on the lower side from some of your competitors. what's the biggest loss for f.m.f. global in japan? >> in japan, most of them are earthquake-related, where there is damage to buildings or within the properties. and second, behind that is some water damage because of the tsunami. >> tom: are you able to model any longer lasting damage from the radiation problems, from the damaged nuclear power plant? >> no. it is very hard to do that. and right now, as you know, it's the area that is cordoned off is at least 50 miles in diameter, and it is going to take us a while to look at it. the one thing i would say is given from what we know
from what's going on, is that, you know, this is a country that is very well-prepared, and has done a lot of good things in derms of disaster preparedness, and so if there is any country that is going to recover well from this, it is probably japan. >> tom: but address, from the industry's perspective, from insurance, shivran, how the unknown impact of the continuation of the nuclear system may impact not only japan but worldwide. >> yes. and there are several issues that are not just the nuclear contamination, but also the fact it has led to a substantial reduction in power supply. which means that a country that is so finally tuned with this manufacturing processes needs to have power on 24 hours a day, seven days a week, which is how they run their businesses. and they now have rolling black outs. and when you combine that
within the potential of damage from nuclear contamination, it could become a long-term situation. >> tom: talking about business interruption, is there much of that in japan, and is that affected by the rolling blackouts that can become more in the next weeks or months? >> absolutely. the one thing we will not know for at least 90 to 180 days, if not more, what exactly is the impact of business interruption. you can have business interruption many, many ways. one example that most people don't realize, you can have a supplier, supplying a supplier, supplying a supplier, and there is somebody in the midwest who has the chain of suppliers. so it may take them several months before they realize or feel the impact from the business interruption. this is something that will take a while to know what the extent of the damage will be.
>> tom: you did that global thread when it comes to the situation in japan to a small manufacturer maybe in the midwest. what about the impact on japan for the global insurance. any impact, do you think? >> absolutely. you can divide it up into two groups. one is on the commercial side, for commercial properties, which is backed up by the worldwide basis. and they have all been hurt in different ways. i would suspect what this will mean for commercial property pricing is that the downward trend of the last five years will stop, and it will flatten out, and pricing will start to go back up again. >> tom: shivran, we appreciate the insights. our guest is shivran at f.m. global.
>> susie: tomorrow marks the first anniversary of the "deepwater horizon" oil spill. the b.p. well started hemorrhaging crude just weeks before mississippi kicked off its five-month shrimping season, its five-month shrimping season, and eventually, more than a third of the gulf of mexico was closed to fishing. tonight, in part two of our series, "revitalizing the gulf," diane eastabrook is in biloxi, mississippi, where the shrimping industry is trying to get its catch back on america's table. >> reporter: in biloxi, mississippi, shrimpers are painting and prepping their boats for what they hope will be a huge catch in the gulf of mexico.
to veteran shrimper voo win, anything will be better than last year, when the b.p. oil spill decimated the harvest. >> they closed certain areas that make it very difficult to find the shrimp. >> reporter: the rig accident sent oil gushing into the gulf about a month before the start of mississippi's shrimping season, closing many fishing areas. while shrimpers got out later in the season, the two million pounds they caught was a fifth of the ten million pounds they hauled in a year earlier. that left shrimp processors with skimpier inventories of frozen product. richard gollott's golden gulf coast packaging company sells brown and white shrimp to customers across the u.s. he says there's concern the oil and dispersants used to break it up might affect reproduction. >> the only product that might have a problem with spawning and eggs and such is the brown shrimp, which is just north of the area where the oil spill was
at. but i'm optimistic. i think we're going to have a good season. >> reporter: at desporte and sons, the issue isn't so much quantity, but quality. the 115-year-old family-owned company sells fresh seafood, and it's deli cooks it up for customers. co-owner sean desporte says some consumers still aren't buying gulf shrimp over fears it is contaminated. >> once the news started talking about the oil in the gulf hitting the islands and stuff like that, people were scared, people were afraid to buy seafood. the perception is still there, but it is getting better. >> reporter: the fda and the national ocean and atmospheric administration have been testing gulf seafood since last may. together, the two agencies have tested more than 9,000 shrimp, oysters, and fish. they say they've found no evidence of contamination. joe jewell is the assistant director for the mississippi department of marine resources. his office has also done tests
and found no safety problems. still, he understands consumer concern. >> it was a very large oil spill that occurred, and some of the public still has issues with that. but we embrace that, and we want the public to understand that we understand that and we still have a little bit of homework to do. >> reporter: part of that homework includes a new public relations campaign with billboards and flyers promoting the safety of gulf seafood. help is also coming from men and women in uniform. a couple of months ago, the defense department started stocking some commissaries with gulf fish, shrimp, and oysters. christopher burns, sales director for the defense commissary agency, says the goal is to get gulf fish and shell fish in all 249 commissaries here and abroad. >> we thought what a great opportunity-- if we could add some additional gulf seafood items and supplement our current program, we could provide market exposure for those items.
we could provide our customers with some alternative products, and hopefully, in the end, it will help with the recovery of the gulf economically. >> reporter: the fda and noaa say they'll continue to test shrimp and other seafood from the gulf into the summer. mississippi's shrimp industry hopes that additional testing and time will convince skeptical consumers to buy its product again. tomorrow, we'll head to louisiana, where oil rig workers are retraining for the deep waters of the gulf. diane eastabrook, "nightly business report," biloxi, mississippi. >> susie: back to basics on wall street, as investors focused on the latest batch of earnings. an encouraging report on housing construction also gave stocks a lift. let's take a look in tonight's "market focus." at least two dozen s&p 500 components were out with quarterly results.
then, after the bell, two tech titans reported, ibm and intel. let's start with intel-- it surprised investors with solid numbers. first quarter earnings came in at 59 cents a share, 13 cents ahead of estimates. revenues jumped to $12.8 billion, about a billion more than expected. looking ahead, intel sees full year revenues up a respectable 20%. investors liked the news. the stock rose almost 4% in after-hours trading. during the regular trading session, intel stock was up 24 cents to $19.86. shares have been floundering since february on a sea change in demand from p.c.s to tablets. now to ibm-- it also posted better than expected numbers. big blue's first quarter earnings jumped 17%, coming in at $2.31 a share, a penny above projections. the dow component also lifted
its full year outlook. here are a few highlights-- ibm posted double-digit revenues gains in software, systems and technology, and mainframes. as for its stock price, the company's on a roll. from lows hit in the first half of last year, ibm hit an all time high last week-- $166.21. johnson and johnson was the blue chip star of the day. it was the top performer of the dow, also reporting better than expected sales and earnings. it earned $1.35 a share, ten cents higher than estimates. revenues jumped 3.5% to $16 billion. and j&j also raised its earnings forecast for the year. today's gains put j&j back into positive territory for the year so far. the stock closed at $62.79, up more than $2, almost 4%. shifting gears, we turn to harley davidson, the weakest performer today among s&p 500 stocks.
shares downshifted into the red after the motorcycle maker confirmed it's losing market share to cheaper used bikes. they were down 5.3%, or a loss of more than $2. it's also struggling with some component shortages from a supplier out of japan. and finally, we saw some life in home builders, thanks to that surprise jump in housing starts we told you about earlier. take a look at pultegroup, ryland and k.b. home-- their shares rose more than 3%. and that's tonight's "market focus."
>> susie: oil prices notched higher today, closing above $108 a barrel. that brings us to tonight's "word on the street"-- "oil." dan dicker, senior contributor to thestreet.com, says the big beneficiaries of those higher prices are oil refiners. when i spoke to him a short while ago, he explained why. >> well, they're the only sector that benefit franchise a higher oil price because they're the only ones who can take a high oil price and translate it into an even higher gas price they can collect from consumers at the pump. they are the only ones who can, in fact, benefit from what we're seeing, $105, $106 crude. >> and refiners benefit from the big price benefit. between the west texas
crews, and the crude that traded in london, right? >> right. the simple way to think about it is the input cost is related to the west texas cost. and the price they can charge at the pump is related to the spread. and the wider the spread gets, the more profit they can make. that's what has been going on. >> we've seen gasoline prices begin to level off. from the point of refiners, is that a negative? >> no. even if they maintain themselves here, they'll really be minting money. the refin ners are just making money. >> and that's one of the reasons why you're going to talk to us about three stocks you think will do very well as investments. they all trade on the new york stock exchange. chevron, co conoco phillips, and hess. what do you think they have going for them. >> that's right, susie. what's happened is that
these down-stream results tha they're going to report starting next week are going to really surprise the analysts, and i think they're going to surprise the street. that's because they've had such a terrible time in the refining margins for the last five, six, seven quarters. this is the first time they're going to make a lot of money. it will make a big difference on the bottom line. i think there is a moment here when you can leverage into some of these names and wait for these reports to come out and take the surprise up with the market. >> now, these stocks are off of their highs. do you still see upside for them? are these buy and hold kind of stocks? >> absolutely, they're buy and holds. but in terms of this refining profit, it is going to be the sharp kind of value play where you're going to try to get the stocks before it makes a big rise, based on a report that is going to be a lot better than most people expect. >> i would like to quickly ask you about the b.p. oil
spill because it is the one year anniversary of that disaster. you've been focusing on the deepwater drilling. you're a fan of diamond offshore. tell us why. >> it is the own offshore company that hasn't really performed well post-this b.p. spill. where some of the others performed very well. particularly n.o.v., national oil varco, but transocean, which was partially responsible for the b.p. spill has lagged a lit bit, but the only one that has no problem is n.o.v. >> dan, do you have any closure to make about the stocks you mentioned today? >> yes, i own chevron. >> and that was dan dicker of thestreet.com. and you can read his article on thestreet.com and there is link on our
website as well. here's what we're watching for tomorrow: existing home sales for march are released, and it's another busy day for quarterly earnings reports. we'll hear from abbott labs, american express, apple, at&t, and wells fargo. and as its japanese rivals have supply chain problems, we talk with south korean auto maker hyundai about its plans to accelerate sales. america's first offshore wind farm is one step closer to reality. federal regulators today green- lighted a project to build and run 130 wind turbines off the massachusetts coast. the wind farm could generate power and jobs, and it'll cost more than $2.5 billion to build. but there are still challenges, including nearly a dozen lawsuits trying to block it on environmental concerns. it looks like the high price of gasoline is still putting a dent in sales. new figures show gas sales were up last week, but not up by as much as you'd expect if you looked at last year's numbers.
high school seniors. students and parents are crunching numbers, trying to figure out if going to college is affordable. michael mandel has some thoughts on the subject. he's chief economic strategist at progressive policy institute. >> all across the country, high school seniors are either enjoying the relaxation of being done with the admissions process, or are still deciding which college to choose. meanwhile, their parents are just stunned at how many thousands of dollars college will cost. is all that money worth it? the calculation is not as easy as it once was. since 2000, the earnings of young college graduates has dropped 15%, adjusted for inflation. over the same period, the real cost of college tuition has gone up by around 50%. the other factor is unemployment. a college degree used to be a guarantee of getting a job. these days, however, there are an awful lot of unemployed grads. so, having added up all those negatives, is college still worth it?
the answer is yes. the key is to think about a college degree as a stepping stone, not an end point. about one-third of grads end up getting an advanced degree, and those folks are doing well in today's global economy. education is still the key to success. i'm mike mandel. >> susie: and finally tonight, they're not "all my children", but a wife and mother, and they're about to cause problems for the abc television network. the mom and spouse of a hoover executive are so mad the network's cancelled the soap operas "all my children" and "one life to live" that the exec is canceling hoover's advertising. the vacuum company's vice- president of marketing used its facebook page to announce the move, and the response has been positive and overwhelming. thousands of people say they support hoover's decision. no comment yet from abc. and that's "nightly business report" for tuesday, april 19. good night, everyone. we hope to see all of you again tomorrow night.