tv Nightly Business Report PBS September 19, 2013 4:30pm-5:01pm PDT
this is "nightly business report" with tyler mathisen and susie gharib, brought to you by -- >> sailing through the heart of cities and landscapes. on a river you get close to iconic landmarks, to cultural treasures. viking river cruises, exploring the world in comfort. >> double take. does the fed see something in the economy that others don't? with the widely executed cut in stimulus on the proverbial back burner, is it time to rethink the way you invest? >> whale of a fine. jpmorgan will pay almost $1 billion more than expected and
admit wrong doing as part of its london whale trading debacle. and that want its only big legal payout today. what the fines and settlements mean to the firm, its business and shareholders. >> and buying in the sky. we don't like it but we do it, shell out money for stuff when we fly and it's becoming a big profit center for the airlines all that and more tonight on "nightly business tonight," thursday, september 19th. >> welcome, everybody. i'm tyler mathisen. yesterday stock investors were caught by surprise. today they caught their breath. stocks exhaled modestly one day after the rally on the unexpected news the fed would continuing buying bonds every month to keep the economy on track. most figured the fed would take its foot off the gas pedal, if only slightly. yesterday record highs for the dow and s&p.
but today profit taking, not the blue chip dow stocks saw a 40-point pull back. the nasdaq saw a small pullback of 5 but the s&p was down 3. >> some economic data out today were not enough to lift the markets. first time jobless claims were down this week. the philadelphia fed reported factory activity in the mid-atlantic region surged to a two and a half year high this month. and existing home sales rose 1.7% in august, hitting a 6 1/2 year high as potential home buyers rushed to make deals before rates rose higher. and leading economic indicators last month rose 7% from the month prior. >> with stocks just off their record high and solid economic data just out today, does ben bernanke and his team of fed policy makers know something about the economy we don't?
what are they worried about that the rest of us seemingly aren't in sn hampton pearson has more on what the fed didn't see in the economy and what it needs to before it tapers all that paper it's been buying. >> reporter: the day after federal reserve chairman ben bernanke and his fellow policy makeser delivered shock and awe to financial markets, economists and lan lists are revising their play books for predicting just what will it take for the central bank to pull the trigger on tapering. >> the federal reserve chairman is clearly saying read my data. >> in the four months since the chairman mentioned gradually reducing its bond buying program that, date that shows job growth has slowed to just 155,000 per month and mortgage traits have increased a full percentage point, putting the brakes on the housing recovery. >> the committee has concern rapid tightening could have the effect of slowing growth.
>> today there was encouraging data showing existing home sales on the rise and the monthly average for jobless claims at a six-year low. but the debt ceiling and budget standoff between the white house and republicans and its impact on a fragile recovery is, fed watchers say, also on policy makers' radar screen. >> i think that it's -- the politics it have make everybody nervous and the fact that the fed is having to react to not only politics in terms of what's going to happen with the debt ceiling. >> so for now the fed is on hold, awaiting the outcome of fiscal policy battles over the debt ceiling and budget to decide what's next for monetary policy when the fed meets again at the end of october. for "nightly business report," i'm hampton pearson in washington. >> warren buffett spoke about the economy and the fed today. mr. buffett says the u.s. economy is continuing the, quote, gradual increase it started since the fall of twine, end quote.
as for the fed not tapering yesterday, here's what he had to say. >> i didn't have any great expectations one way or the other and it doesn't really make any difference to me in terms of our business or investments whether it's zero, $10 billion or $20 billion. someday it will stop and maybe go the other direction. >> our guest tonight says he was surprised the fed did not taper and that he's not making changes to his investment strategy based on whether it tapers or not. he is jim paulson, chief inrestment strategiinves investment strategist at wells imagine management. did the fed miss an opportunity. >> that's a sign of every successful recovery is the fed reins in its stimulus. i think they had an opportunity. obviously the markets leading up the last several weeks fully, most of us, all thought they were going to taper and the market seemed fine with it. the s&p before yesterday was
close to highs, the market was being led by economically sensitive stocks, didn't look like it was very fearful and now they didn't taper and they've created a lot of uncertainty as a result. they're going to have to eventually come back and taper sometime and now they've created a lot of uncertainty around it, which they probably could have avoid avoided. >> mr. bernanke was saying he was a little about the economy. are you? should we be? >> you know, tyler, i don't think so. i'm fairly pleased with the reports coming out. today's a great example of that. across the board today from unemployment claims to housing to leading indicators to the philly fed all suggesting acceleration in the economy. we have for the first time ever simultaneously expansion going on in manufacturing and in housing, a constant fall in the unemployment rate, five-year highs in confidence, as well as
an all-time high in the stock market. i think certainly the economy is better than it was and yet the fed is still applying the same medicine it was applying when we were at the bottom of the recession. there seems to be a disconnect to me. >> how are you investing in the environment you just laid out for us, jim? >> i would pay more attention to reports off main street than the conversation and the fed. i think that might inch you down the wrong path. i still think we're on the path to recovery, slow for sure but certainly slow, steady progress and i think that's good for stocks in general and it leads me more toward the economic sensitive areas. right now i like the material stocks and technology stocks and the financials. i really like the industrial sector but the stocks have done so well, i think i'd shy away from that, as well as the consumer discretionary stocks. they've just done too well. >> i gather you're of the view that all of the monetary
stimulus, the bond buying, hasn't done much to help or bolster the real economy but an awful lot of people believe it has done a lot to inflate asset prices. where are you on that? and if eventually the fed does take some air out of the balloon, what happens to those asset prices, including stocks, bonds? >> you know, i don't think it's done much for the economy or the markets, i really don't. >> really? >> i think that they put $3 trillion and all of it's come back to the fed in the form of excess reserves. no bank needs those reserves. they're not calling for them so they sit on reserve at the fed, they haven't even been in the economy. i think the stock market has come up because the economy is doing better and people recognize that and they're willing to step up and pay more for it. my evidence of that is the stock market was doing just fine in these last several weeks when everyone expected the fed to start to taper. it should no fear of tapering at
all. so i think we'll be fine when the fed does taper. what i hate is when they seem to put so much mystery around it, it creates some uncertainty just, as i said, tara, what do they know that we don't? >> on that note we'll leave it there and see if we can come up with some answers on that. >> chief financial strategist at wells capital management, and be sure to visit our blog. >> new data from the census bureau confirmed that the economic gains are uneven. in what's been called a selective recovery, overall poverty is flat compared with last year at a record 46.5 million americans bushes it is growing sharply among single-mother household and hispanics. the share of the population and lowest income group below $25,000 a year is also expanding. it's now 24.4% up from just
above 21% four years earlier. despite low interest rates, homeownership fell for a fifth year in a row to a shade under 4% of households. >> a new sur vaf finds most companies plan to give workers a raise next year but it's not going to be very much. nine out of ten companies surveyed say they play to increase salaries next year, but only about 3%, slightly larger than the ones doled out over the last couple of years. >> though home owner rates are down, people who do own homes are feeling better about them and they're feeling better about the term of their home loans and that's changing the way many americans are managing their debt. diana olick explains. >> reporter: during the recession, most americans paid their bills in this order -- first the car, then the credit card, then the mortgage. >> a lot of people were underwater so they let their mortgages go if they couldn't pay all their loans.
>> reporter: now suddenly the mortgage payment is trumping the credit cards, the way it was before the housing bust. >> people are more likely to pay their mortgages as the housing values recover. >> reporter: home prices are not only well off their lows of the crash but they're rising. it makes people feel better about their investment. >> if you own a home, you have to put your mortgage ahead of any other debts. >> reporter: why is that? >> it's the basis of all your financial planning. >> i figure i always need a place to live. i you can negotiate with your left-hander. >> reporter: as with everything ls else in real estate, the story as well as everything else in real estate are local. >> those going through a recovery first are seeing a stronger improvement in the mortgage payment hierarchy. >> reporter: in harder hit markets, the reversal will take
longer. fewer borrowers are choosing not to pay their mortgages altogether. >> it was a billion dollar day for jpmorgan chase. but not in a good way. they settled with british regulators, agreeing to pay a $920 million fine and admit to poor oversight that led to $6 billion in trading losses in the so-called london whale fiasco. in a separate settlement, the bank will pay $389 million to refund credit card customers for illegally pushing costly services on people who didn't want them or need them. kayla tausche joins us with more on this one-two punch against jpmorgan. does this do damage to the reputation of jpmorgan the bank or its ceo jamie dimon? >> reporter: i think jamie dimon has already been under siege. the investigation has been going on for over a year.
we'll have the watch the reputation of the company going forward. with this regulatory onslaught, they've been cancelling new growth initiatives. in the consumer bank they had roughly 60 new products they were going to roll out. they stopped doing that because regulators said you need to focus on what you're doing now and make sure your existing regulatory controls are up to snuff and that this doesn't happen again, doesn't worry about venturing into new businesses quite yet. >> could they lose clients? could it damage their reputation to the point where people don't want to do business with them on a larger scale? >> reporter: it depends on what regulators ultimately say. a lot of companies like working with jpmorgan. they're the fortress bank. if they need a big loan, they go to jpmorgan and they still will. the problem is the bank might not be allowed to take on new clients. in its clearing business which is where a bank or a foreign multi-national company would be clearing dollar business through a bank like jpmorgan, they can't take on new clients because the
regulators have said this is not a well enough observed business and you shouldn't be doing business with new clients. >> today about $1.4 billion in settlement costs. last month it was about $400 million with respect to the ferc settlement on electricity trading. how much has the bank had to set aside to address these costs? >> reporter: it's interesting. it's like a black box. what these banks set aside, they share that number with regulators but don't share it with shareholders. investors have been advocating for that saying we need to see that number but unfortunately we don't get. analysts estimate that jpmorgan has in its reserve roughly $10 billion ear marked just to pay out these fines. the bank also said it expects to pay upwards of roughly $6.8 billion on top of whatever it is they have ear marked already because those fines are growing so much. >> kayla tausche, thanks very much. appreciate it. >> thank you. >> here is another case of employees accused of behaving badly.
a former executive at halliburton, the oil services company, has been charged with destroying evidence in relation to bp's 2010 oil spill. he's accused of ordering employees to delete computer data related to his company's work on that doomed rig. halliburton did the cementing on the drilling rig triggering the largest offshore oil spill in u.s. history. >> still ahead, the syrian president doesn't just control a stockpile of chemical weapons but also a pile of cash. we're following his money trail. but first let's take a look at how the international markets closed today.
a sharp drop in the shares of furniture retailer pier 1. that's where we begin tonight's market focus. the company lowering its profit forecast for the full year after reporting a big miss on revenue and earnings in its most recent quarter the ceo says management and mashing efforts fell short and new merchandise wasn't put in the stores as efficiently in the past. he did note pier 1'sline traffic is up. the stock market responded by falling almost 14% on heavy volume. conagra coming under pressure after reporting weaker than expected earnings and warning of soft profits for the current quarter. brand such as marie calendar's frozen meals aren't selling as well as had hoped. to turn things around, the ceo plans to increase promotional activity. the stock finished at 30.80. >> a different story for rite aid, the drugstore change surprising analysts with an unexpected quarterly profits thanks to increasing sales.
that's usually helps you. the company also raised its forecast for the year. investors sent the shares up more than 23% to $4.58, nearing a six-year high. >> agilent technologies, maker of scientific testing equipment, is splitting into two publicly traded companies. one will go by the name of agilent. the other yet to be named will be focus on the electron being test and measurement equipment business. and moving fast, shares of tesla, all-time high after deutsche bank raised its price target to $200 from 160. tesla says the demand is going up and demand is increasing. shares up 7% to $177.92. >> john kerry is unching the
united nations assembly to move quickly to destroy syria's chemical weapons stockpile. >> the security council must be prepared to act next week. it is vital for the international community to stand up and speak out in the strongest possible terms about the importance of enforceable action to rid the world of syria's chemical weapons. >> but syrian president bashar al assad denies his forces used chemical weapons in an attack that killed almost 1,400 civilians in a town outside damascus. >> president obama said it could take $1 billion to destroy the chemical weapons and if russia doesn't have the money, he just may. he is said to be in a control of a billion. >> reporter: in a country where the average citizen makes less than $3,000 a year, this is the
stuff revolutions are made of. analysts have pegged bashar al assad's personal net worth conservatively at half a billion dollars, but expand that to his inner circle and the assad family fortune runs into the billions. >> you have to have reform across the field, whether it's social, economic or political. >> reporter: that's assad's wife, a british born foreign investment banker in 2005. her taste for high fashion and high society is well known, but the biggest repository of family wealth is likely this man, president assad's cousin, worth billions. he claims he's a legitimate businessman, but the u.s. treasury in 2008 designated him a beneficiary of the regime's corruption. international investigator jules crowl says assad's money trail is a familiar path. >> well, it's a typical family
business. except the family business is a country. >> reporter: for years the u.s. has targeted the assad fortune in hopes of destabilizing the regime. but the success of u.s. sanctions has been limited. since the syrian uprising began in 2011, the u.s. has seized just $80 million. >> they have enough people they can trade with, do business with, bank with that i think the amount of the effect of these sanctions would be actually quite modest. >> reporter: the sanctions did manage to head off a payment believed to be in the millions of dollars owed to syria telecom by at&t, which deposited the money into a blocked account by jpmorgan according to court papers. but for the most part syria simply side stepped the u.s. finance system, bare live missing a beat. where does the money go? russia is a prime candidate and from there to points unknown. experts say the extent of the
assad regime's wealth may not be known unless the regime false. >> coming up, getting ready to board a long flight? well, get out your credit card because the longer the trip the more you spend. but you might be surprised by what people are buying. first how commodities, treasuries and currencies performed today. the u.s. postal service is looking for a special delivery. the u.s. postmaster general testified before a senate committee today requesting an emergency rate increase saying the agency is, quote, financially unsustainable and needs the money just to stay in business. the postal service which lost
nearly $16 billion last year says it will lose another $6 billion this year unless it gets help and fast from lawmakers. >> auto sales have been revving high are all year long, on track for 16 million units sold by the end of december, but now there are signs that car buying may be easing up. j.d. power and lmc automotive, which keep track of auto and truck sales say the rate of sales in september has slowed down considerably, putting the andualized sales rate closer to 15 million units. the reason? part of that all-important and long holiday weekend landed partly during the month of august. >> honda motors is issuing a recall. moore than 400,000 odyssey minivans and acura x are being recalled to fix faulty air bags that could deploy inadvertently. >> the nation's airlines are making flying more comfortable. fate daitia shows they're
collecting a record amount of revenue from passengers buying food, drink and or items on board. on some flights the drinks and money seem to be flow floing a little more freely. phil lebeau has more. >> reporter: this is the future of flying, paying for drinks, food or on-board entertainment like a movie. >> if you're on the plane for that long, you like to have some extra comfort. >> whether it movie or making the time go by, we're all so used to something. we don't just sit and wait our flight to arrive at its destination. >> reporter: what are people buying in the sky? guestlogix says 58% of the revenue north american airlines collected in the first half of this year was for drinks, primarily alcohol. 38% was for food, and 4% was for things like in-flight movies, headsets or seat upgrades. >> in terms of liquor sales, you see certain destinations that
definitely have higher sales per flight in those segments, like flights to vegas, on the way to vegas for sure there's higher average sales by almost double. >> reporter: in fact, the number one money making route in the continental u.s. is between detroit and las vegas, ringing up an average of $179 in drink sales every flight. >> i was on a flight to vegas just recently, last week. a lot of people, you know, getting it going early. >> reporter: ever been on one of those flights to vegas? >> i've been to vegas. one time i even got married over there. >> reporter: while many travelers complain about feeling nickel and dimed by the airlines, the truth is more people are digging into their wallets and spending while in the air. >> four years ago 7% of folks were buying at least one item on board. two years ago that was at 10%, at least one item on board. and now we're at 12%. so the numbers show that people
are becoming more comfortable. >> reporter: since most airlines no longer take cash, buying on board has become less of a hassle. but do passengers like it? not everyone is so sure. >> overall to think that people are going to buy normal things on an airplane that they don't need for their trip just isn't going to happen. >> reporter: like it or not, this is just the start. airlines are looking at how to get passengers to buy more things in the air. until that happens, drinks will remain the purchase of choice for many travelers. phil lebeau, "nightly business report," chicago. >> shocking people drink on a flight to las vegas, isn't it? with all that money being spent mid flight and cocktail served by airline staffers, a travel web site asked readers if they've ever tipped a flight attendant while flying. the answer may surprise you, folks. out of more than 500 people who took the poll, nearly 30% said, yes, they have tipped the flight
attendant in the past, maybe for exceptional service, or a terrific demonstration of flotation devices or maybe keeping the cocktails flowing. >> i'm surprised. i didn't think you were allowed to do that. >> i haven't seen it or done it but maybe i'll think twice. >> who knew. that's "nightly business report" for tonight. >> have a great evening, everybody. we'll see you back here we hope tomorrow night. "nightly business report" has been brought to you by -- >> sailing through the heart of local cities and landscapes. on a river you get close to iconic landmarks, to local life and cultural treasures. viking river cruises, exploring the world in comfort.