tv Nightly Business Report PBS November 3, 2011 4:30pm-5:00pm PDT
>> the most important aspect of our task over the next two days is to resolve the financial crisis here in europe. >> tom: and that's no easy task. world leaders meet in france as greece's debt crisis comes to a boil. >> susie: in athens, greece drops plans for a bailout vote amid fresh calls for the prime minister to step down. it's "nightly business report" for thursday, november 3. 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. high drama in greece, raising questions about its future in the european union. as world leaders meet in cannes, france, for a summit of the top 20 countries, the greek and european debt crisis dominate the agenda. tom. >> tom: susie, greece's opposition leader called today for prime minister george papandreou to resign. he faces a crucial vote of confidence tomorrow. ahead of that, papendreou bowed to pressure from german and french leaders to call off a controversial public vote of the
country's new loan deal with the european union. >> i believe it's crucial that we show the world that we can live up to our obligations. >> susie: meanwhile, the new president of the european central bank said today that the euro-zone economy is headed toward a "mild recession". in a surprise move, the central bank cut the region's key interest rate by a quarter point and signaled there could be more cuts in the future. >> tom: that was encouraging news on wall street, and stocks rallied for the second straight day. the dow surged 208 points, the nasdaq jumped 58, and the s&p rose by 23. >> susie: with us now to analyze all this-- fred bergsten, director of the peterson institute for international economics. >> nice to have you back on the program. >> good to be here. >> susan: how is this greek drama going to play out? does greek stay in the yu peen
union or not? does greece avoid a debt default or not? >>ening the overwhelmingly most important development today it, and it's critically important, is that the opposition party in greece indicated that it supports the deal that prime minister papandreou negotiated with the european leaders last week. that means whoever is prime minister and whether or not there's an interim technocratic government, there will be unified political support in greece for carrying out the current deal. that means greece will not default. it means greece will not exit the euro area. this means greece, along with the other debtor countries-- ireland, portugal, spain, italy-- has unified domestic political support for cooperating in a resolution of the issue. that was the one thing missing in greece before, so don't worry about who is going to be prime
minister. the confidence vote tomorrow. the issue is now resolved. both major parties support the deal, and that means it will, clearly, go forward. >> susan: you know, every day, we get conflicting reports will of the status of the overall european debt crisis, and the status of solving all of this. one day there's a deal, and the next day it's off. can europe come together to solve this financial mess, and how much longer before they have a solid deal? >> i think europe always does come together to do enough to deal with the current phase of the crisis. they have not been able to get ahead of it, but they have every time come up with enough money, enough program to avoid a really severe crisis. the problem is that the cacophony of voices coming out of europe obfuscates that for the markets and other observers. so it sets up a high degree of uncertainty and anxiety, which
is highly understandable. volatility in the markets is the result. but, again, to look through that veil, the substance is they have always done enough to bring the deals together. i think they will do that this time, running off last week's agreement and what happened in greece today political le. the europeans are overwhelmingly committed to maintain the euro, to maintain the european integration project. it has been their life and soul for the last 50 years, and they're not going to let it disappear. so i'm confident that at the end of the day, they'll do the right thing. i'm also confident that along the way, they will not articulate that very clearly and so lots of people will be uncertain and there will be lots of continued market volatility. >> we certainly have seen a lot of that. but, you know, today the in fact,s rose and rallied because of the news that we heard about the interest rate cut that we reported on a short moment ago. but the european central bank is saying they're expect a mild recession in europe.
what impact will that have on the u.s. economy? will europe drag us down? and can the u.s. economy grow even if there is a recession in europe? >> yeah, the u.s. can continue growing at a modest rate, even if europe has a slight turn-down. i would not expect a significant resession, and that's what mario drogi said today, a mild one. but it will be adverse on us. it will hurt our exports. it will hurt the earnings of our firms heavily invested in europe. it will a a tenth, .2 of a point. they have avoided the abyss once again. there will not be a big financial crise. there will not be a disorderly default by greece that will upset the banking system. that could spill over to our financial system but that to me looks like it's being avoided at this point. incidentally, i think the european central bank will do
more cuts. >> i want to ask you about the euro. because of the wrangling going on during the debt crisis, a lot of people have been speculating will the euro survive as a currency or not. what are your thoughts on that? i know it's hard to imagine, but is it possible the euro will cease to exist? >> no, no. there is absolutely no doubt the euro will continue to exist. it will continue to be the second key currency in the world, based on an economy bigger than our own. as i said, the europeans have been devoted to this integration project for over 50 years. it's rooted in their history of 1,000 years. it's rooted in their economic benefits, particularly for germany. they will stay at it, even if things went wrong in greece and greece got kicked out of the euro and the european union, it would not undermine the euro. the other countries in europe, including italy and spain, seeing the fate of the greece if that happened, would be redoubled in their resolve to stay in the euro. so the euro is safe. i don't think we need to worry about that.
>> all right. thanks for setting that straight. thank you so much for coming on and giving us your thoughts. we really, really appreciate it. >> good to talk. >> and we've been speaking with. fred bergsten. >> tom: still ahead, the european crisis hasn't led to investor panic, but rather investor exhaustion. michael farr, author of "the arrogance cycle," is tonight's "street critique" guest. the middle of the country is probably not where you think to look from a growing financial center. but here in des moines, the state capital of iowa, the financial industry has found a home. >> the 1970s, the 1980s, des moines was largely an agricultural centered community. des moines went through a very difficult time in the '80s, when the agriculture sector was under a lot of pressure. >> tom: larry zimpleman ought to know. he's the c.e.o. of principle financial, a company that traces
its iowa roots back more than 130 years. thanks to what industry insiders describe as a "fair regulatory environment, des moines has grown and attracted several financial firms. life insurer aviva and nationwide insurance are among those making this city of 200,000 among the largest insurance centers in the world. david maxwell has seen the growth over the past decade as president of drake university in des moines. >> des moines is a wonderful combination of a mid-sized city that still behaves like a small town in all the best senses of the word. >> tom: iowa's financial services industry has grown almost 90% in the past decade. it's the second largest contributor to the state's economy after manufacturing; agriculture is fifth. there's a lot of optimism here for the local economy, thanks to financial services like annuities and insurance. the unemployment rate in des moines is 6.5%. if this trend continues, one enviable challenge some state officials are talking about is
having enough people to work. >> really, we're going to have to grow our population to take care of some of the demands that we see in the pipeline. >> tom: debi durham's job is to attract new businesses to the state and get existing companies to hire. >> the jobs are not as numerous, i mean, they're not big employment numbers we're seeing. the jobs that are being created are wealth-creating jobs. they're paying more than a living wage. it's not just about the number of jobs that we need to create in this economy; it's about the kind of jobs we're creating. >> tom: among the industries the state is working to attract is renewable energy, both in advanced manufacturing for wind energy and bio-sciences.
>> susie: american consumers continued to spend in october, but not as much as retailers had hoped. and that's making them worried about the holiday season. an index of 22 chain stores tracked by thompson reuters rose about 3.5% last month. that was less than the 4.5% expected. but as erika miller explains, one industry analyst is still betting that this will be the best holiday season in years. >> reporter: for months now, it's been looking like a christmas more in the spirit of scrooge than santa. unemployment in america remains stubbornly high, and consumer sentiment is at its lowest level
in years. americans are also nervous about what's happening in washington and europe. yet retail consultant craig johnson has this optimistic forecast. >> we think holiday sales year- over-year will be the best since 2004. that's up about 6.5%, which is very strong. >> reporter: his prediction is more than twice what most other industry groups are expecting. it's true that not everyone calculates holiday sales the same way, but the forecast from customer growth partners stands out sharply from the pack. here are three bullish factors that the firm is focusing on: first, disposable income continues to rise. second, the nation's savings rate is now half what it was two years ago. and third, the ratio of household debt payments to income has dropped sharply from its 14% peak in 2007. >> that 14% has crept down the last three or four years to 11%. that's the lowest and the healthiest in 17 years, since
1994, which is... we don't think other forecasters are looking at that. >> reporter: improving household finances is not the only reason some analysts think holiday sales will be surprisingly strong. they say consumers are excited about new fashions in stores and are ready to spend. >> there's flare pants, color flare pants, color denim, sweaters that match those bottoms. >> reporter: john morris is an analyst covering specialty retailers, and he expects fashion forward chains like express will likely do best is season. but one thing is clear-- competition for consumer dollars will be fierce. but so too will be competition among shoppers for hot items. >> overall, the companies have managed their businesses much more conservatively. there are not going to be as many goods on the shelves, so if you want it, you better buy it on that first markdown, because otherwise, it's not going to be there. >> reporter: and if you want to get an early start on holiday spending, how is midnight the day after thanksgiving? for the first time, stores like
macys and target will be opening that early to take maximum advantage of the biggest shopping day of the year. erika miller, "nightly business report," new york. >> susie: groupon hopes it will be tomorrow's big deal. the closely watched initial u.s. stocks continued the repair job of building on yesterday's gains, even with the uncertain fate of greece's bailout plan. the s&p 500 jumped almost 2%, back to where it closed out the month of october. leading the market was energy, followed by industrial stocks, then the tech sector. each up more than 2%. the leading energy stock was coal producer alpha natural resources. profits were up strong, thanks to higher coal prices and demand from steel makers and power utilities.
shares popped 13% up to their highest price since the september sell-off. the company also raised its 2012 shipment forecast. broker jefferies group was whip- sawed on huge volume. the firm has been hit by worries about its exposure to european debt and, today, one credit rating agency cut the debt rating of jefferies itself. here's what the trade in jefferies stock looked like today. shares fell below $10 per share, down almost 20%, at one point, before recovering into the close. that drop during the session hit a new 52-week low. shares are half the price they were a year ago. concerns about jefferies exposure to europe increased after mf global went bust. but jefferies said it has "no meaningful exposure" to european government ious. as the implosion of mf global continues to ripple the market, bloomberg reports the securities
and exchange commission is looking into possible insider trading of mf global bonds ahead of monday's bankruptcy filing. kraft foods was among the best dow stocks, rising 3%. the food company reported earnings better than expected. it also raised its forecast for the rest of the year, leading to today's rally, pushing shares to a new 52-week high. the company plans to split in two. fellow dow stock boeing was gaining some air, up almost 3%. the airplane maker said more than eight air carriers have pledged to buy 600 revamped version of the 737. the new edition will have more fuel efficient engines. the first are scheduled to be delivered in 2017. it was a tale of two teen retailers. aeropostale jumped 19%, while abercrombie and fitch fell almost 20%. aeropostale raised its quarterly forecast. stronger profit margins mean fewer sales at aerostale-- maybe bad news for shoppers, but good news for shareholders. meantime, abercrombie reported a strong back to school season in the u.s., but sales overseas fell.
despite that, the firm continues its international expansion. ahead of tomorrow's october employment report, staffing stocks were moving up. monster worldwide, manpower and robert half international found buyers. weekly initial jobless claims dipped below 400,000 in the latest week for the first time in five weeks. we saw huge volume in a couple of bio-techs. dendreon shares lost a third of their value on ten times average volume. sales growth for its prostate cancer treatment have slowed down due to problems in reimbursements. bio-pharm company medivation more than doubled as volume jumped almost 40-fold. it reported positive results with its prostate cancer drug. finally, cattle futures set a record high. the possibility of the end of import restrictions in japan have fueled the rally. and that's tonight's "market focus." >> susie: another company getting attention after the bell today, a-m-d. advanced micro devices announced big job cuts-- 12% of its workforce, or about 1,400 jobs,
before the spring. the reason-- a tough economy and heavy competition from tablet computers and smart phones have led to a big decline in p.c. sales. the layoffs are expected to save $200 million next year. >> tom: investor exhaustion-- for weeks, the major stock indices have made it a common practice to move more than 1% a day. swings of a couple hundred points for the dow industrial average hasn't made investors panic; it's made them exhaust. that's the assessment from tonight's "street critique" guest. he's michael farr, president of investment firm farr, miller and washington, and author of "the arrogance cycle". michael, welcome back. nice to see you again. >> thank you, tom, nice to be here, always. >> tom: so what do you think is contributing to this investor exhaustion and not panic? >> oh, boy. the exhaustion, i think is kind of easy to figure out. i mean day after day of one money points to the upside and downside. investors are being deluged with
all sorts of different types of news. i mean, even today, whether we were going to hear whether papandreou was going to go ahead with a vote, he wasn't going to do it. he was going to resign, europe was going to collapse. m.f. financial is back on the ropes. investors don't begin ton what to make of all of this noise and they certainly don't like the volatility. >> tom: how do you protect against exhaustion and stay in it for the long run? >> that's really what you have to do. you have to fend off emotion at pretty much every chance that you can and go back to your discipline, go back to your philosophy, and really as important as anything else, know yourself. it's the pointf my book "the arrogance cycle," which is just out, "the arrogance cycle." we talk about knowing yourself and trying to avoid those misthaks this m.f. financial and jon corzine just made. they leverages 40 to one. they said, wait a minute, we think going to make a lot of money here. guess what, they didn't.
when it goes against you, you're wiped out. find a steady, stable, prudent course. this money is really important, and it needs to be there for the long term. >> tom: but, michael, you know, that's a tough description for the markets when they've been as volatile as they have been. we have a couple of viewer questions. eric wrote on facebook, "is the current market volatility the new norm? should we just get used to it?" >> eric, unfortunately, i i don't, we have a whole lot of choice. as soon as we stop hearing about greece here in the next couple of days, we'll be hearing about the u.s. group of 12 who are going to see whether they can get to this debt limit or not. the news is going to stay there and keep us rather volatile. >> tom: that's the supercommittee, of course, that's supposed to come up with new budget cuts or face automatic cuts in government spending. >> which will be ugly. >> tom: they may be. greg sent us this e-mail writing, "my retirement funds have gone nowhere in this weak housing and labor market.
i have five to 10 years of work ahead. would you recommend national or international brick opportunities -- brick being brazil, russia, india, or china. where are the opportunities in this volatility? >> i think the emerging markets are good, and i think a diversified portfolio, particularly when you have five to 10 years left to retirement makes some sense. i think we're goi to see a good deal more volatility, but i would focus on those companies that have lots of cash, that don't have a lot of debt, and are still earning money paying a good dividend and have operations kind of around the world in different currencies. so i wouldn't try to getta-- get greatest but i would always have a shopping list and during the volatile down days i would do some buying. >> tom: we'll leave it there. far, the author of "the arrogance cycle" >> and i've got a copy. thank you. >> susie: here's what we're watching for tomorrow: quarterly results from berkshire
hathaway. the october employment report is out, as well. and pimco c.e.o. mohamed el- erian joins us for analysis of those numbers. also tomorrow, our "market monitor" guest likes stocks that pay dividends and he'll tell us about three of them. he's mark skousen, editor of "forecasts and strategies". eastman kodak, the company once synonymous with photography, is exploring its options to stay in business. its survival now depends on a multimillion dollar patent sale or raising new debt. the warning was issued along with dismal third quarter results. kodak posted a loss of 83 cents a share, almost double what analysts expected. despite this latest blow to the century-old corporate icon, kodak denies it's making bankruptcy plans. >> tom: cubans will be able to buy and sell homes for the first time since the early days of the revolution. it's the most significant market reform yet approved by the government of raúl castro. the new rules affect residential property only, and go into effect next week, according to cubas state-run newspaper. the ban on propertsales took
he's author of "from ramen to riches." >> most young adults in this country have a realistic potential to retire a millionaire, if only they start early and develop good habits with money. to help them get there, one of the most important concepts to teach your kids is the time value of money. simply put, the time value of money means that a dollar in hand now is worth more than at some point in the future, because it can be invested or earn compound interest over time. investing $4.25 per day beginning at age 20 can yield a balance of over $1 million 50 years later if the account earns the historical average stock market return. minor changes in spending habits should make it relatively easy for many 20-year-olds to come up with that amount of money. after all, that's about the cost of a latte. waiting until age 30 requires investing $300 per month to get the same result. age 40-- $700 per month. time is an asset for the young. teach your kids to take advantage of it. i'm james wood.
>> susie: and finally, happy 100th birthday to chevrolet. from the camaro to the suburban, chevy has embedded itself in american culture. from the mid-'30s to the end of the '60's, gm's chevrolet was the american car. but the brand hit a few road bumps in the 1970s. these days, chevy's are making a comeback, thanks to the cruze and equinox models. tom, more than 700 songs mention "chevy" in their lyrics, not to mention the famous ad jingle, "see the u.s.a. in your chevrolet". >> tom: and real quick, susie, i want to thank everybody here at iowa public television. they've been great hosts here in des moines as we've been reporting this week. >> susie: you've delivered some great stuff, too, tom and we look forward to having you back. that's "nightly business report" for thursday, november 3. i'm susie gharib. good night, everyone, and good night to you, too, tom. >> tom: good night, susie. i'm tom hudson. good night, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: