tv Wall Street Journal Rpt. NBC May 23, 2010 2:30am-3:00am EDT
wheelock. thanks for watching bellator 19 from the verizon theater in grand prairie, texas. this is bellator fighting championships. hi, everybody. welcome to the "wall street journal report." i'm maria bartiromo. today reporting from las vegas. the market hits correction territory down 10% from recent highs. it's scary out there. what should investors do now? taking a gamble on vegas. i'll talk to the mayor of sin city about gaming, real estate and what makes this 24-hour neon city tick. former baseball great reggie jackson's new pitch. he and bobby valentine. "the wall street journal" report begins right now.
here's a look what's making news as we head into a new week on wall street. the markets ran smack into a correction this week tumbling about 10% from their recent highs in april. the major indices falling sharply on concerns about europe's debt crisis and the fears that that contagion is spreading to the united states. the dow jones industrial average falling nearly 400 points on thursday alone, its largest percentage drop since march of 2009. volatility skyrocketed as the market fell. earnings news meanwhile as companies beat analysts' expectations last quarter including retail he recalls home depot and walmart and lowe's. tech giant hewlett-packard also beating estimates. the federal reserve open market committee released minutes from the meeting in april and the fed is slightly more optimistic than it had been. the fomc saying the recovery was more firmly staebld and slightly increased economic growth estimates for 2010 while
lowering estimates for the unemployment rate. the securities and exchange commission came one a plan to prevent another flash crash like a few weeks ago proposing circuit breakers stopping trading on individual stocks that move 10% in five minutes. it would apply to s&p 500 stocks and would begin after a ten-day comments period. fear is the overwhelming sentiment right now on wall street. are we headed for another crisis or is this simply a market correction? joining me paul mcculley, managing director of pimco. good to have you on the program. >> thank you, maria. >> it has certainly been a wild ride out there. let me begin with the markets. this week the major indices hit corrections territory down 10% from the recent highs for the dow, the nasdaq, the s&p 500. mostly because of the worries imported from europe. how do you see things? what does this mean for a long-term investor? >> for over the last year we've been talking about the economy being a bumpy journey to a new
normal. and we clearly have hit a bump and the bump is emanating out of europe, which is truly having a financial crisis. so i think the markets are rationally de-risking. it's not present but it's par for the course if the course is going to be a bumpy juniory to a new normal. >> it certainly feels like there's a lot of fear out there. do you think this continues? is there more of a correction to come? >> i think it's going to continue until you see an adequate policy response to insure investors that the world of growing concern, if i can put it that way. i don't think we've seen that adequate response yet. you can see that europe has tended to be very reactive and the market has effectively booed every policy measure they come back with. i think we're in the game of 2008ing sunday night to see what announcements will be made by policymakers to try to get private sector investors to get
their mojo back. >> right. so that they come out with some policy ideas before the asian markets open for trading sunday night, which of course is feeling like a deja vu. japan may be timing -- even china slowing down. the government said, we want to slow things down here. so how do you invest in this environment, paul? is it having an impact on american companies in your view? >> i think that's one of the big issues that the stock market is grappling with is whether or not these financial woes actually morph into economic weakness in the real economy. and i think that's a very legitimate risk because the real economy runs on animal spirits and your animal spirits, if you're in the real economy, are not particularly enlightened when you look at the newspaper in the morning and see that your 401(k) became a 301-k. so i think there is a significant risk of it morphing back into negative animal spirits on main street. so therefore i think the markets
threaten to grapple with the policy uncertainty and policy woes at the same time they have to worry about a retreat of animal spirits on main street. >> so how do i want to invest, then, in that environment, paul? are you raising cash? what are you doing in the face of all of this? >> i think investors should have been holding a fair amount of cash. and we've been holding a fair amount of cash because if the road is going to be bumpy, you want to have liquidity and you want to have cash to take advantage of opportunities. so i think that overall strategy makes sense, is that you have a decent amount of cash that you're not too quick to put it to work because when these markets are this choppy, they tend to overshoot. so don't try to catch a falling night but wait until you see a policy response that is overwhelming force that is going to work. and the policy response has not been overwhelming for us yet. so therefore staying on the sidelines seems to be the better
part of valor to my. >> and of course financial regulation one of the policies reform coming. it's passed the house. the senate version taking shape right now. a lot of people certainly at this conference and throughout business are saying that that's another issue for the markets because the banks and the business sector doesn't know how their businesses will change. and there's a lack of clarity. so what do you hope to see? and is this a good thing that we're getting financial regulation? >> there's no question that we need regulatory reform. the crisis that came about in 2008 as a result of too lax regulation, too much leverage, too little capital in the system. therefore, we need regulatory reform. the big uncertainty is what it's going to look like exactly and also the risk that they overdo it. that rather than trying to find a moderate force for regulation, they put a stranglehold around the ability of the financial system to create the credit that leads to economic growth.
so i think the markets are beset with a great deal of uncertainty. and uncertainty means higher risk premiums. that means lower prices for risk assets. >> great to have you on the program. we so appreciate your insights today. thank you. >> thank you, maria. >> see you soon. paul mccully joining us from pimco. up next on "the wall street journal" report quog fabulous las vegas's biggest booster. rolling the dice with the mayor of sin city. how what happens in vegas impacts the economy in your state. how to hit a grand slam when it comes to financial advice. i'll sit down with hall-of-famer reggie jackson and talk money, pressure and advice to young people. as we take a break, take a look at how the stock market ended the week.
with nicknames ranging from sin city to entertainment capital of the world, las vegas is one town with a large identity. how is business in this desert boom town today? oscar goodman is with me. he's the three-term mayor of las vegas, nevada. good to have you on the program. >> the first thing you do when you come here you have to say it right. it's nevada. >> nevada. las vegas, obviously has been the place for conferences and for business to go to have various meetings. how are things going on that front? characterize how things are going -- >> i can tell you anecdotally because i'm out and about every day making a speech to one group or another. conventions are coming here. whatever damage was done in the past as far as don't go to las vegas or the super bowl or fly private jets that's past us. this is a perfect example, this particular convention. these are folks who come here
for serious business during the daytime, serious meetings. and at night they go out and have a ball. that's a great thing. that's what vegas is about. >> they want to spend money. >> and have money to spend which is probably the own you only issue as far as the economy right now. the occupancy rate is very, very good. the difference between now and years past is the folks coming here are not spending the way they did. once they have confidence in their monetary unit and their economy they'll come out here and vegas will be back where it is. >> let me ask you about your budget meeting that you had. i know las vegas has just the city $80 million deficit. this week your city council approved the 2011 budgets which of course includes some cuts. 200 city employees. tell me about the fiscal challenges facing urba mayors right now because your story is not very different than mayors across the country. >> we get our monies to pay for the services that the city provides to constituents by what's called the consolidated tax. it's based on a sales tax as well as a real property transfer
tax. real property transfers as you know are very, very low at this point in time and the sales tax because of the economy in general isn't what it used to be. so we've had a slide over the past 2 1/2 years and we had to make adjustments because unlike the federal budget, we have to balance ours. we can't print money. we can't go into debt. we have to have a balanced budget. i said to city employees. you have a choice. i don't have to fire anybody. you have to remain flat. no colas, no longevity and a take 8% rollback. that was their choice. >> you make a good point. you can't print money. for a long time las vegas obviously was the fastest growing city in the country. >> yes. >> and sunbelt, nevada, arizona was badly hit of course by the housing crisis. what's the state of housing here now? >> the most foreclosures unfortunately and plenty more to come as i understand. the banks are holding back a lot of the potential foreclosures. but interestingly, the foreclosed homes when they're putt on the market now, they are
of a value. it is not as though they're throw-aways. people are coming in and bidding for them. a year ago you could have picked up a foreclosed home for virtually nothing. now people are interested in buying them. i believe the inventory will be used up. >> you feel like things are definitely better. >> i'm a half full guy as far as the glass is concerned. optimistic. i feel this town is coming back and we have the infrastructure in place to be there. we've got the best of everything -- the best hotels, best gaming, best entertainment, best food, best shopping. so why shouldn't we be the best? >> what do you think the behavior of las vegas, the economic behavior and the behavior of people can tell us about the behavior of the rest of the country? >> well, i'll give you an anecdotal story. one of the casino executives last july 4 said he wished he had a pizza truck in the parking lot rather than owning the hotel because people coming into the hotel and paying a reduced rate
came in with coolers. i think that says what's happening in the country. instead of going in and having room service, they go in and bring their own food. >> you're so connected today character of this place, las vegas. >> the only thing i'm missing is having my show girls with me. >> traveling with show girls. >> wonderful thing about it is now that we're friends i'm going to offer you a job. you don't have to go to new york. you can stay here and be one of my show girls. >> i'll have to think about that. celebrity spokesperson for bombay sapphire gem. what do you love about this job? >> it's the best job in the world. i go everywhere with two beautiful women. my wife gave me immunity as long as i'm the mayor. i drink to excess. i gamble with both fists. i bet on anything that moves. if there's a cockroach down there, i'm going to tell you it's going to go left if you have bet it's going right. >> you're having a lot of fun. thank you so much for all you've done here in las vegas. up next on the "wall street
journal report," he had opinions on everything. now mr. october, baseball great reggie jackson is back. tough money, money advice and mentoring young people. with gold around $1200 an ounce, how much extra cash can ounce, how much extra cash can you find on what's around your boss: so word's gettin' out that geico can help people save in even more ways -
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stirred the drink for the yankees. a home run-hitting hall-of-famer. the other bobby valentine. reggie jackson. both here to talk about leadership and investing. thank you for joining us. >> always good to be with you. >> good to see you. we're here at this conference with all these business people. let's start right there. are there lessons that you have learned managing, playing on the field, that can be brought into the business community in terms of leadership and management? reggie? >> i certainly think so. you know, when you get a chance to listen to some people who have tremendous vision like mike milken who seems to see around corners when it comes to what's going to be going on in the world and get a chance to listen to people when they start talking about what they think is important to america and what they think is important to the rest of the world, where to invest your money, what's going to be important, what's going to be in need.
it's just as interesting to me as listening to whether it's joe girardi talking or case stengal or bill belichick. >> it's about getting people motivated. >> i think it is. bill clinton was here talking about it yesterday that people working together can overcome anything. and as reggie said in our talk, it's not always the best team that win but it's the team that plays the best. and with a we need to do in all our business ventures in the united states and the world and what we need to do in our sports venture is get those teams playing the best so we can be the best. >> is there a vacuum of leadership today in business? you can't -- everybody is not a great leader. and we've seen some shortcomings in terms of what we have all just come through, the financial upset. what do you think? >> i'm involved with a group that does some investing for me.
and i can feel it from their heart that they care about me. those people that i'm engaged with. i know the guy's son and i know him as a father for a very, very long time. sports, the same way. buying in, having a commitment about doing your part as the team. i don't think there's a lack of leadership in our world. i don't think there's a lack of leadership in our country. i do think there's a lack of wanting to be on the team and doing the right things. to do the right thing and then expect to get something in return for it, that's not what it's about. be humble. contribute. recognize that you're not the center of things, that all of the people on the earth, all the people in our country are what's most important. and make your contribution to do the best -- to do something better and something good for all. >> setting the right example as i mentioned and as those viewers remember when reggie played. he hit them as far as anyone. he loved the spotlight.
he always came up big. but he also always ran as fast as he could from home plate to first base on those balls that were hit to the second baseman. he was going to be out, but he always gave it his best. and that's the lesson that we all need to take home with. >> but there were times out there that you were afraid, right? we talked about this on the panel. share with us what it takes to get through the noise that could be going on in your head that perhaps could limit somebody. and were there times out there when you were in the game and you're thinking, i don't think i can have the a-game that i usually have? >> maria, i have to tell you, as i said as we were talking earlier on stage, i told these stories -- i'm a big fan of derek jeter, alex rodriguez. i told stories to them that, man, sometimes i've gone to home plate looking around, look up on the board and say that's reggie jackson, get this big applause.
i knew i wasn't going to get a hit. i knew i would probably strike out. i said to one catcher if you let me know what's coming i just want to hit a ground ball to second and look like a baseball player. i tell those stories to derek. he's rolling on the floor. we're having a great time. but, yes, i've gone through times when i was afraid to go up there. but i had to act like it. i have to go every day and play every day. you just go and you go blind. you have blind faith and you can through it and respect the leadership of the team, respect the rest of your players and be part of what they're trying to do. even though you know they may not have it. >> how has the game changed today? >> well, it's changed that they practice less and make more. but the athletes are fabulous athletes out on the field today. you know, the business of baseball is probably the thing that has changed the most. not the swing or the throw or the field. so what the players have to do is learn to adapt within this new structure of baseball as a
huge mega business in our world. >> reggie, final word? >> the money certainly has changed, maria. but whether it's ryan howard or whether it's derek jeter or albert pujols, they could have played in any era. whether the great pitchers of doc holliday compare to bob gibson or marishall. they live better but the talent is the same. >> thank you. reggie jackson, bobby valentine. up next on "wall street journal" report i look at the news this upcoming week that will have an impact on your money. what if that money fits in your jew jewelry box. find us on facebook at wsjr with maria.
for more on our show and our guests check out the website wsjr.cnbc.com. you'll also find a link to my blog investor agenda by cnbc.com. i hope you will check it out. now a look at the stories coming up in the week ahead that may move the markets and impact your money this upcoming week. we have several key housing reports out beginning monday when the nation's realtors release the number of existing homes sold last month. that will be an important indicator as far as where we are on the market. tuesday the s&p kay scherrer prices are released that tracks housing prices in 20 markets
across the country. wednesday last month sales of new homes will be reported and thursday the second reading of the first quarter's gross domestic product. the gdp is the broadest measure of the economy and currently showing a growth rate of 3.25%. this will typically move markets. on friday, total personal income and spending will be released and finally today, did you ever think about selling grandma's jewelry for a little extra cash? with gold soaring price per ounce sears holding parents to both sears and kmart has launched a gold buyback program. it turns customers' unwanted bling into cash. >> broken chains, jewelry from the '80s. don't tell my mom. you get your package at the store. you pick it up, bring it home. you put your gold into a baggy, drop it off at u.p.s. and it is delivered in five days. and then we'll decide a valation as to what the product is worth
and combine that into an offer and communicate that to the customer electronically. >> once the customer accepts it's sold at jewelry counters. that will do it for us today. thank you so much for being with us. next week join me. my guest former president bill clinton. what he thinks about wall street reform and america's economy right now. each week, keep it right here where wall street meets main street. have a great week, everybody. i'll see you again next weekend.