tv Nightly Business Report PBS December 9, 2013 6:30pm-7:01pm PST
this is nightly business report with tyler mathisen and susie gharib, brought to you by? >> street.com, news and indepth analysis, we provide objective independent ratings daily on over 300 stocks, learn more that the the street.com/nbr. focus on washington as the budget deal inches closer in d.c., there is a chance of a taper increase at the next fed meeting. what does it mean for taking stock. and the new american airline, the world's largest carrier is open for business. but is bigger really better? and rents are rising, and rising fast, but are the soaring
pricing one that this country has never seen before? >> good evening, everybody, and welcome, i'm tyler mathisen, stocks eked out small gains on this slick and slippery monday, and shares were not the only reason they had trouble getting traction, there was more on the taper today, in case you have been away, there is discuss on when and where the federal reserve may wind down the spending measures. today, the talk came from two fed bank presidents, dallas' richard fisher said the bond buying program should be curtailed at the earliest opportunity. meanwhile, james bullard said the strength boosts the case for tapers as soon as the feds meet. today's modest gains coupled
with friday's surge suggests that the whole idea of tapering doesn't scare investors the way it once did, the dow up five points, nasdaq gained six, the s&p up three. and policy-makers watching closely the budget talks on capitol hill. the hope is that lawmakers make a deal before adjourning for the christmas holiday and removing the fear of another government shutdown. john harwood joins us more from washington with all of this, john, when we were talking to you about this last week, you said lawmakers were close to a deal. where do things stand now? >> they're still talking, they hope to announce a deal tomorrow, but susie, i have to tell you it is like academic politics, the smaller the stakes, the more intense the fighting. we're not talking about the deal that hits taxes and medicare and social security, but you're hearing talk the $90 billion deal they talked about last week
may shrink down as low as it could. they're looking at significant deficit reduction or whether it will simply be re-shuffling money from the sequester cuts which members of both parties don't like, to cuts they like better. is the doing away with this blunting the effects of the mandatory budget cuts under the sequester, that i gather in different ways in different programs, both parties would actually like to see happen. >> yes, that is the bulk of the deal, tyler. it would lift the caps for defense spending which a lot of republicans, some democrats don't like. and would also lift the caps somewhat on domestic programs. again, they're mostly democrats but also some republicans think that it squeezed the domestic spending too hard. that is the motivation for the deal. as you have a small stakes deal, members with particular constituent pressures under fire in that deal are resisting like members from the washington area
who represent a lot of the federal employees whose retirement benefits may be affected. >> yeah, you know, john a lot of businesses and ceos are watching carefully. they're talking about a lot of uncertainty in washington, and of course a lot hinges on this deal. when do you think they expect to announce the outcome and vote on it? >> a lot of members have gone to south africa for the funeral services for nelson mandela as the president of the united states has, so they wouldn't vote on the deal until at least thursday, they hope to announce it tomorrow until they could move through the legislative machinery toward a thursday vote. but again, the longer disagreements go on the more risks you have that it could be delayed slightly, i still would expect in the end they will get it done this week. >> all right, john harwood reporting from washington, thank you, john joe a group of economists reporting stronger growth, they predict the economy will grow at a 2.8% prediction,
higher than earlier estimates and we'll see job growth of about 200,000 a month in 2014. and it is costing a little more to fill up the gas. according to the survey, the price is $3.28 a gallon nationwide, still ten cents lower than it was a year ago. do you feel any wealthier these days? the federal reserve says you should, with the houses hitting a record high, next to the rising stock market adding it all up. u.s. households are now worth a total of more than $77 trillion. but the soaring home values have cost a surge in the market, and prices of houses have risen dramatically. there is talk that they're looking at the beginning of a rental bubble.
>> when millions lost their home to foreclosure, they had no choice but to rent, and when the mortgage crisis curtailed millions more for potential home buyers the rush to rent rose own more and so did the rent. >> we are in the middle of the worst rental affordability crisis that this country has known. a new study released today in washington by a harvard joint center for housing found that half of all u.s. renters now pay more than 30% of her income on rent, up 13% from ten years ago, for those in the lower income brackets the jump is even worse. >> the 40% increase in the number for americans, let's be clear what it mean business, they're paying more than half of ever dollar they earn for housing. >> the accelerated growth is up 3% from a year ago, and numbers are not lost on this lady, she
has been renting for over two years, and the rent on her bethesda, maryland apartment has increased for the maximum allowable every year. >> it is frustrating, we pay for rent. we also pay for parking and just knowing that every june month is going to increase significantly, as you know, as frustrating -- >> and annie pays almost as much in student loan debt as she does in rent. that makes saving for a down payment to buy a home more difficult. >> the moderate incomes for people have not been going up as fast as inflation, you have a situation where it could be difficult. >> the good news is, construction has been ramping up. and the obama administration is trying to entice more private capital back in the market. but rental demand is unlikely to ease any time soon, nor are r t
rents. uncle sam is now officially out of the car business. the u.s. treasury has sold the last batch of shares for general motors, closing out the 2009 bailout. taxpayers lost money on the deal, the treasury invested almost $50 billion to rescue gm and got almost all but 12 billion of it back. and the main competitor to u.s.-based boeing announced it is cutting 5800 jobs over the next two years, many from its defense and space division as it looks to reduce costs. also making news, the merger of american airlines and u.s. airway has officially been completed, creating the world's largest carrier. shares of the new company rose nearly 3% in their first day of trading. now, the new airline will feature 6,700 daily flights and a global network to rival giants like united airlines and delta.
but will it be a good things for travellers? >> reporter: in an industry where bigger is being touted as being better, the new american airlines is promising great service and competitive air fares now that it has merged with u.s. airways to form the world's largest airline. >> nothing about this transaction will affect the air prices, as we discussed in the past we're putting these two together. >> reporter: american now has the size and network to compete with united and delta. in fact, that trio of airlines, along with southwest, will now fly almost 90% of the commercial flights in the u.s. each has gone through a merger in recent years, raising concerns about whether bigger really is better for fliers. >> but in the absence, in this particular combination, this wouldn't be anybody to challenge
the deltas and united. now, if you roll back the clock and say united never happened and delta never happened, so now you got six instead of three there probably would have been some incremental service offered by the sixth that won't be offered by the three. >> the federal government tried to block the american u.s. air merger saying it would hurt competition on certain routes. eventually it settled with american and forced the merged airline to give up a small percentage of its flights into major cities. this merger means that almost 100 million people will belong to the american airline's frequent flier program, despite that enormous number, american says nothing will change with the program. frequent fliers hope that is the case. >> i think that american airlines should be able to handle it. they will be fair and right about it. >> they just have to wait and see. it has been good up until now, so i have no idea. >> dallas, texas, nightly business report.
and still ahead, regulators are going to vote on one of the most difficult crises of the reform act. how about the so-called volcker rule, and will it protect you? coming up. in a rare show of unity, eight of the nation's biggest tech companies have pushed limits. google, microsoft, apple, facebook, twitter, linked in, yahoo! and aol sent an open letter to congress, calling for reforms and restrictions on how the government collects data on internet users.
they also want government agencies to be more transparent on what they're looking for. well, some of the tech companies have seen their share prices soar this year, but not every company has been so foreig fortunate. we take a look at some of the stocks. >> reporter: dogs to darlings, when one of the biggest losers one year turn into rising stars the next. it is a trend that the portfolio managers watch closely. >> it is almost a wall street tradition but not one lightly taken, and especially in a year where you have seen significant out-performance by many stocks. >> it happened last year when bank of america more than doubled. one of the top gainers in the s&p 500. a year after it lost 58% signs of recovery in the housing market and better than expected earnings were good for bank stocks in 2012. on the other hand, best buy, hp,
pitney bowes, among the worst performers in 2012. but best buy and pitney poli bo were among the top ones, taradater are among the list of worst performing stocks, the analysts are cautious, citing the vulnerability we've seen, cliff johnson says it is all about the economy. >> what really matters to this company is that the economy has to do well. the economy is going to do a little better in 2014 and 15. >> they say it came off of a stronger earnings, but the bears are demanding that it cut costs,
plus, gold is slower than usual, as for taradatter, there are concerns, the analysts are a bit cautious this year, wondering whether the economy will be strong enough to turn them into darlings in 2014. and cisco will buy its rival, u.s. foods, creating a giant. we begin the focus there. after a $3 and a half billion deal is final, cisco expects annual sales to grow about $6 billion. the company will have a quarter of the food distribution market in the u.s. and u.s. foods will take a 13% stake in the company. shares were trading at an all-time high today, up more than $37. and package food company white way is buying private earth bound farms for $600
million, white way is the parent of dairy brands like silk and organic, they're the largest produce brand in north american, shares of white way grew to $22.92. and mcdonald's reporting slower sales in november, the sales decreased as competition got tougher and traffic was flat. global sales didn't change in october, which also disappointed investors. and given makes a remote imaging system that lets doctors diagnose stomach disorders, it is 27% more than givens friday closing price, shares of
kavidian closing up. just last week, we told you an activist hedge fund was pressing abercrombie and fitch. they're trying the compensation more closely to the performance in the new agreement. the stock was off 2% to $34.10. and mosaic will buy back about 10% of its outstanding stock from cargo trust, the world's largest fertilizer maker said the move will wind down ties between mosaic and carter. it will be final in the next eight months, the mosaic shares were down to $46. and more trouble for the world's largest bank, now the u.s. government is investigating
the hiring practices of j.p. morgan chase outside the united states. so far federal authorities have unveiled e-mails that linked the hiring of a top chinese company official's son and efforts to yield business sales with that government-owned company. and j.p. morgan is not along, the securities and exchange commission is investigating similar deals among goldman sachs, among other. and one of the most protected divisions is here, the so-called volcker rule. the u.s. regulators are expected to vote tomorrow on a final version of the rule. it is the element of the dodd-frank reform law that is design to ed to keep some of th nation's biggest banks from trading. many believe it could put taxpayers at risk if the trades melt down. joining us now to discuss is dick bovet, the vice president
of research at rafferty capital. always good to see you. when you really cut to it, how many banks are likely to be affected by it, and how dramatically? >> well, it is going to affect a very tiny number of banks in the united states if it comes out the way we think it is. you have to realize they keep changing it. but if they put into effect the way we think it is, then j.p. morgan, goldman sachs, morgan stanley, to a lesser degree, and citigroup would be affected. and virtually all the other banks in the united states would not be affected. if, however, they choose to put something in there concerning hedging then the top 100 banks in the united states would be affected and would be affected pretty negatively. >> so explain to us that aspect of hedging because there has been a lot of complaints about that. how does that put these banks at a disadvantage?
>> well, it doesn't put the banks at a disadvantage, it puts the customers at a disadvantage. it basically takes away from the customer the ability to lock in an interest rate or to lock in what the cost of a foreign exchange transaction would be. and therefore, it causes less activity in the banking industry, and it causes less trading. but remember, the person who gets impacted by this most is not the bank. it is the person who does business with the bank. >> i was speaking last week with one top banker who said that we like to carry in our inventory lots of stocks, lots of bonds because that is what our customers want. and they would say that -- and he, this person said that they need to hedge, that they need to trade to protect that large inventory. that is his point of view, is it legitimate? >> well, i think it is. i mean, if you make the assumption that fidelity wants to sell a million shares of ibm,
then it is only natural buyers, for 600,000, then if goldman sachs can't hedge that 600,000 shares then they could stand to lose a great deal of money, but by hedging they can lock in what the potential gain or loss would be and therefore they can allow that transaction to occur. the probability of letting it occur at a reasonable price goes away. and therefore, the ibm sale occurs at a much lower price which affects all the other prices. >> and this so-called volcker rule has been created by business and investors, what does it mean for the individual investor, does it impact them at all? >> well, for the individual investor then the big companies that i just mentioned, it would have a negative impact, i feel pretty certain about that. because basically it will reduce
overall trading in the united states markets. it will have a bigger impact on the average american, however, because if it goes into effect the probability is that interest rates will be higher than they otherwise would have been. cost of a loaf of bread or gasoline would be higher. it also results in affecting the trading, so liquid would go overseas, it would do quite a bit of harm. >> why is a loaf of bread going to go up because of the volcker rule? >> because the price of wheat will go up. in other words there is no liquidity for the price of wheat, then the price spreads causing higher prices for wheat, which causes higher prices for bread. >> all right, dick bovet, vice president of research at
rafferty capital. >> and coming up, why the health care law is creating an uneven playing field for some of the hospitals, and what some of them are doing about it. a new big worry for hospitals if the new rules in the affordable care act means sharp cuts in federal reimbursements for medicare in the new year. >> what we're going to do today is assist you going on line and set up for the account. >> reporter: at parkland memorial hospital, the push is on to get patients insured for affordable care act plans. >> when we opened up at the hospital, we typically opened up with 50 people coming in. with ten employees that already
puts us about an hour behind. >> reporter: in 2012, parkland provided $600 million in care for its uninsured patients. with the affordable care act they could still see themselves in the red. >> a third of our revenue comes from special payments, if we don't have that revenue, we can't support the programs they support. >> reporter: more patients will be insured. but texas is among two dozen states rejecting medicaid expansion which will provide free insurance for adults with little or no income who cannot afford to buy coverage. >> by not expanding medicaid, i estimate that that is costing parkland about $30 million a year starting next year. >> reporter: in doctor's offices, the worry is that patients who buy low cost aca plans will face high out of pocket costs for things like lab tests. >> once you get that preventive care, if there is an abnormal
lab or finding, what is the follow-up? will it be covered by that insurance company? >> reporter: another worry, the most affordable plans have narrow networks which could restrict doctors already seeing low income payments at clinics like this one. >> if patients were not drawn to plans, then we're pursuing those plans ourselves, we're trying to get enrolled into those networks so that we'll go to take care of the patients. is this is a unique moment where we haven't had to think that way before. >> a commonwealth fund study estimates that by 2022, taxpayers and provider news states that reject medicaid expansion will lose out on billions in federal funding. it will cost texas $9.2 billion that year, while florida, which also has some of the highest rates of uninsured patients will see a net loss of $5 billion. >> hospitals in states with medicaid expansion will have yet another advantage over facilities like parkland and
other facilities that don't expand. even if a patient shows up and is uninsured and otherwise eligible, they can seen them up for temporary medicaid coverage and get results. >> so it would be enormously better if we were a part of medicaid expansion, making perfect sense any way you look at it. >> providers expect the states will expand, eventually. in the meantime, they will try to enroll as many patients as they can. and to read more about parkland memorial hospital in dallas and what they're doing to get patients insured go to our website at nbr.com. and finally, amc entertainment which is planning on going public is planning on a unique way to reward some of its best customers, setting aside some of its ipo shares just for movie lovers. the chain is making part of the $68 million ipo available for the stubs loyalty members.
the frequent movie goers who pay every year for perks like skipping on-line ticket fees and getting a break at the concession stand, now they will get a little bit of a break at the stand. >> that is the nightly business report for tonight, i'm susie gharib, thank you for joining us. and thanks from me, as well. have a great evening. we hope to see you back here next week, as well. nightly business report is brought to you by street.com, outsi our objective rating service provides objective rating on over 300 stocks, learn more at the nbr