tv Nightly Business Report PBS November 20, 2010 1:00am-1:30am EST
>> susie: looking to put some horsepower in your portfolio. now that general motors stock is trading again, should you buy it or would you be better off in a ford? >> tom: a look at which stock will rev-up your portfolio. you might be surprised at the answer. you're watching "nightly business report" for friday, november 19. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
g.m.'s stock offering investors are wondering whether or not g.m. is a buy. >> tom: susie, we can see that uncertainty in the two days of trading of g.m. shares. at one point, today g.m. came close to yesterday's offering price of $33 a share. but by the closing bell, g.m. gained traction rising seven cents to close at $34.26. rival ford also rose up 1%. >> susie: despite all the hoopla about g.m.'s rebirth, investors are wondering which stock is better: ford or g.m. erika miller reports. >> reporter: when shopping for a car, it's hard to decide which one to buy. do you go with the latest model? or the one with a proven track record? the same debate applies to buying auto stocks. analyst jason alper recommends buying g.m. shares. he's forecasting a nearly 40% gain in the next 12-months. part of the reason is strong sales in china. >> they produce roughly 2.5
million cars; sell roughly 2.5 million cars in the u.s. and roughly five million abroad in 2009. people fail to realize that. so, i think the g.m. story, while it's obviously a north american company, it's more of an international story. particularly an asian story. >> reporter: but even the bulls see big challenges ahead. they say g.m. needs to improve the quality of its vehicles to boost its u.s. marketshare. they also think the company needs to reduce its reliance on s.u.v. and truck sales. there's also a warning for dividend-seeking investors from g.m.'s chief financial officer chris liddell. >> the cash proceeds that we'll get over the next few years are going to repay our debt, redeem our preferred stock, and fully fund the pension plan. until we've done those things, we're not really considering a dividend. >> reporter: ford doesn't have a dividend either. but some investors may be drawn to the momentum in the stock. it's up more than 40% since september. s&p's ephraim levy sees only another dollar or two upside. so, he'd wait for a pullback. >> specifically, ford has done an excellent job on its turnaround.
its products have improved. people come to ford now. put it on their list as possible buys, because of the quality. because of the technology. because of the utility. >> reporter: there is one auto stock levy recommends, but it's not well known to americans. it's tata motors-- the indian owner of jaguar. more importantly, tata is the maker of the nano-- a small, fuel efficient car. >> they are also well known now for having the cheapest car-- the nano product-- something that they are selling rapidly at home in india. but they expect to export that to other markets in the future. >> reporter: auto makers have one thing in common: a dependence on global growth. so, if the economy slows, investors will likely slam the brakes on auto stocks. erika miller, "nightly business report," new york. >> tom: here are the stories in tonight's n.b.r. newswheel: wall street turned early losses into a small closing gain: the dow rose 22 points, the nasdaq and the s&p 500 were both up three points.
trading volume ended the week at just over one billion shares on the big board, a small drop from yesterday. nasdaq volume was lower, at 1.9 billion shares. fed chairman ben bernanke today answered critics of his plan to buy $600 billion worth of government bonds. speaking in germany, he said quantitative easing will boost real economic activity. bernanke also warned china's under-valued currency puts the global economy at risk. meanwhile, china's central bank today boosted bank reserve requirements for the second time in a month. banks will now have to have 18% of assets on hand. the goal: less bank lending. still ahead, greetings from kansas city. we take you to the home of one of the world's best known brands and meet the family behind hallmark cards. >> susie: spending and jobs. those are the two issues now dominating the agenda in washington. on the spending side, the president's deficit commission is preparing to deliver its final report in a few weeks.
robert reynolds, the c.e.o. of putnam investments, says the key to balancing the budget is faster economic growth. darren gersh recently spoke with reynolds and began by asking him what should be done to create jobs. >> i think you need some type of incentives in place. one thing we recommended was a three-year program, that if you add 1% to your u.s. workforce, you get a 10% reduction in business taxes. if you added 10% to your u.s. workforce, you get 100% deduction in your business taxes. so incentives to get people working again. >> give me the big picture for people who are concerned about their retirement savings, which you work on quite a bit. listening to the deficit commission, and listening to all of these reports, what is the big picture direction people should take from all of this? >> i think the big picture is i think people are concerned. we have a tremendous
demographic challenge facing this country, unless things like social security are addressed, the private system, making it even better than it is today. there is a risk, going out to 2020 and beyond that you could have elderlyly poverty. and that's something that, to me, is unacceptable for this country. but it can be addressed. >> but with all of the problems we've been talking about, people have been rushing into bonds, thinking seacht. i don't want anything at risk. so we've had a big run-up in bonds. are those people taking on more risk -- >> they went into bonds for the right reasons. they have been burnt twice and the last decade with pretty severe down markets. so the turn to bonds and -- you know, bond returns have been r & r very -- very, very good, and the question is what do they do now. the thing about it is, there is so much money today in short-term investments, either money
market funds or bank deposits earning less than 1%. to double your money at that rate, you would have to wait 100 years. so it's not a way for people to save for anything. so you really have to get people back investing in equities. >> but part of the uncertainty seems to come from the fact we're having a debut here in washington, whether or not the proper fiscal policy is to cut spending, cut debt, or whether the problem is that the economy doesn't need more investment right now. that people are holding back because we have too much debt. we're deleveraging, and that you need to spur demand. where do you come down on that? >> yeah. i would say that what needs to grow is the private sector. the private sector is where growth comes in this country. it's where jobs come from. it's where -- >> but if they see -- but if the private sector sees no demand, won't they keep
holding back? isn't that the chicken and egg problem? >> but the demand is suppressed by the uncertainty. now the charges that washington either delivered to the people, or in two years we're going to have another shakeout. >> all right, bob reynolds, c.e.o. putnams investment, thanks for your time. >> my pleasure. >> tom: in spite of two volatile sessions this week, tonight the major stock indices are pretty
much where they were a week ago. let's take a look in tonight's market focus. worries about ireland and china and the g.m. i.p.o. crowded the headlines this week. the dow gain one-tenth of 1% since last friday with the big loss on tuesday and big jump on thursday. it fell by the thinnest of margins. and the s&p 500 added 50 cents this week or less than one-tenth of 1%. after a weak opening this morning stocks drifted higher, led by the materials sector. steel and gold were back on top. u.s. steel and iron ore producer cliffs natural each gained three percent. miner freeport m.c. moran rebounded 2%. earlier in the week, these were among the sector losers. among the best performers today was hewlett-packard.
it's earnings are due monday after the close. h.p. stock added almost 2% today. monday's earnings call will be the first under c.e.o. leo apotheker. he took over last month after mark hurd was fired in august. h.p. shares are still 8% below where they were before hurd was let go. apotheker came to h.p. from business software giant s.a.p. and hurd now works at competitor oracle. those two firms are in court over damages for s.a.p. stealing oracle software. closing arguments are monday. s.a.p. improperly downloaded oracle software. s.a.p. thinks it should pay $40 million in damages. oracle wants at least $1.6 billion. oracle shares were fractionally weaker today. last month, they hit their highest price since 2001. s.a.p. stock gained a fraction today. analysts say the trial shouldn't impact the business of either company, but it indicates how tech companies will protect their intellectual property. also in business software,
salesforce.com was the biggest s&p 500 gainer. the stock jumped 18% on more than seven times its usual volume. the stock is at an all-time high. the company's latest quarter and outlook were better than expected. and finally mela sciences. what a week for its shareholders. the stock went from $6 on monday to $3 tuesday when the f.d.a. said a skin cancer detection device may do more harm than good to a 96% rally today. an advisory panel recommended approval. of course, the big i.p.o. this week was general motors but there were other new issues as well. l.p.l. investment, an advisory service for independent financial advisers came out at $30 and has had a nice gain. management consultant booz allen hamilton started at 17 and is higher than that despite a small drop today. and online chinese automobile marketing company bit-auto began at 12. today, it closed at $12.05.
and that's tonight's market focus. >> susie: the bush tax cuts. they expire at the end of december and it's a thorny issue whether they should be renewed or allowed to run out. kevin depew of minyanville.com looks at both sides of the debate in tonight's "two ways to play." >> susie: kevin, first give us a case of why the bush tax cuts should be renewed? >> the argument here is fairly simple, susie. the more americans pay in taxes, the less money they
have to spend in investing in the economy. we're emerging from a debt crisis. we've had banking bailouts, automotive bailouts, and a collapse in housing prices. the american people are still squeezed. if we don't extend the tax cuts, we risk a double dip recession or maybe even worse. >> susie: what if congress does nothing, and we go back to tax rates were were paying in 2001. what would that mean? >> we've had the banking bailouts and automotive bailouts. the congressional research serious says it is going to cost anywhere from $3 trillion to $5 trillion to extend the tax cuts out another 10 years. the bottom line is we can't afford it. >> susie: what is your feeling on the bush tax cuts. we'd like to hear from you. go to nbr.org. >> tom: here's what we're watching for next week: our friday market monitor guest is mark luschini, chief market
strategist at janney montgomery scott. also, we'll see october's reports on new and existing home sales. and monday, with the unemployment rate at more than 9.5%. will the u.s. ever return to full employment? we look at the new reality when it comes to jobs. >> susie: there's a new rule to protec consumers from companies promising to help with mortgage modifications. the federal trade commission says those firms can no longer charge an up-front fee without giving the borrower a written offer to lower loan payments. other no-no's: mortgage-relief companies can no longer tell customers to stop talking to their lenders. and the firms also have to back up their claims, showing borrowers evidence of past successes. >> tom: a legal victory today for 10,000 ground zero rescue and clean up workers. they sued new york city over exposure to potentially toxic dust from the world trade center attack. firefighters, police officers and other workers blamed city officials for sending people to the site without proper protective gear. today's settlement will provide at least $625 million. only about 500 workers declined the offer.
>> tom: kurt, welcome back to "nightly business report." nice to see you. nice great to be back, tom. thanks. >> tom: when you talk about politics in the market, you're referring to the debut over tax cuts. it is wiser for investors to wait for clarity or wait for congress to act on the tax cuts. >> we think there is a degree of likelihood the tax cuts are going to be extended. this is one area of compromise. income and capital gains for all earners. we think it is likely to happen and be one area compromise. when you've got a slow-growth economy like we have, any kind of tax increase over gridlock in congress is a problem. that is something to look out for, but we think that the scenario that will play out is that the tax cuts will be extended temporarily for one to two years. >> tom: an extension of the tax cuts may be supportive to the economy, but is that going to be supportive for the stock market? >> what is surprising is we've had roughly 7.5%
increase in the s&p this year, and it has come as a result of strength in corporate america. the earnings numbers have been very strong. but when that fades, we turn our attention to things like geopolitical risk, the situation in europe. and that has tripped up markets. the surprising thing is we've had gains in financial markets, and particularly in riskier assets. >> tom: traditionally a volatile sector is technology, but you're not shying away from it. a new pick you've brought along is technology. and you're using spider e.t.f. x.l.k., the ticker symbol. what is the catalyst from here? >> the tech sector has done okay so far this year. and yet, you know, we think valuations are still pretty supportive. we think that the up-grade cycle among businesses is going to remain supportive, and the overall sector outlook to us looks pretty strong. >> tom: and you also
like consumer staples here, which is an interesting traditional defensive play. a proxy for this is the consumer exchange rated fund, x. l.p. why get defensive with consumer staples. >> we like a mix like i.t., because these are it's things you buy in all economic environments. the consumer staples sector has lagged the overall market. there is a high dividend payout this year as well in that sector, so we think that the combination of the dividend payout and the high exposure to emerging markets which a source of strength in the world economy, provides support to this sector. >> tom: if there is one commonality, it is the search for dividends and income, and you like that directly with the utility space. with the x. l.u. utility selector spider exchange traded fund. do you expect much capital preesh or depreciation as
you're collecting the dividend checks? >> yeah. dividends have been really the source of earnings for holders in the utility space. it has lagged the overall s&p 500. so we think the dividend payout for the utilities is really where you're going to get most of the earnings. and the performance from investments here. >> tom: may 28th you were last here. you brought along three picks. corporate bonds, l.q.d., that is up by 4.5%. and e.e.m., 22% rally, and x. l.e.up 20%. do you like any of these still? >> we've pulled back on the energy side, but we still like emerging markets and the corporate story, we think, has some resilience left to play out. >> tom: on the bond space. any disclosures tonight? >> not for me or my immediate family. >> tom: some new idas from our market monitor this week, kurt reiman.
>> susie: and finally tonight, a family business that has touched most of our lives at one time or another: hallmark. it began a hundred years ago, when j.c. hall was only 18 years old and started the greeting card business. today hallmark has more than 13,000 employees worldwide and is still run by the hall family. in tonight's "all in the family" diane eastabrook tells us how this iconic brand continues to dominate the greeting card industry. >> reporter: when you see the name hallmark, this is what you think of... >> happy birthday from minnie mouse... >> reporter: hallmark is known worldwide for greeting cards, wrapping paper, holiday ornaments, and in the u.s., a television network. but, less known is the family behind the kansas city-based firm. donald hall junior is the third generation to run hallmark. while touring the company museum he told me what's kept the iconic company around for so long. >> our creativity, our innovation, and constant change.
>> reporter: it all started in 1910 with j.c. hall-- an ambitious nebraska teen who came to kansas city to sell postcards. when the postcard fad fizzled, j.c. turned to greeting cards and an empire was born. hall was a shrewd businessman who licensed works by walt disney and norman rockwell. he was also an innovator, who invented tiered card displays still used today. in the second half of the twentieth century j.c.'s son donald expanded hallmark, buying the crayola brand and branching into television. today hallmark is a $4 billion privately held company with more than 13,000 employees. don junior and his brother david are carrying it into the 21st century. and, they see as much opportunity for hallmark now as their grandfather did 100 years ago. >> people are separated from distance more. they're busier, so the opportunities for real human connection is more challenging.
if you think about how often you have the need to connect with others it's almost a limitless arena. >> reporter: with more people connecting through the internet, hallmark has embraced technology, offering greeting cards online and over handheld devices. recordable books are becoming some of its hottest sellers. >> this is the story of impossible things... >> reporter: to stay connected to customers, the halls stay closely connected to their business. >> when you press jingles ear, you'll hear a bell. >> reporter: david often meets with product designers. on this day he's being updated on a new interactive plush toy that can link to apple's ipad. >> ruff, ruff. cute, that's very fun. at hallmark the employees are as much a part of the hall family as the halls themselves. that's because the family credits all 13,400 with making the company the success that it is. and if you look at this banner behind me you'll see the names
of every single one. >> hi, how are you doing? >> reporter: don stays connected to employees through monthly ceo forums which let workers ask questions about the company. >> how does everyone see christmas 2010 shaking out? >> two weeks ago over the weekend we had the ornament debut and that was not as successful as we wanted it to be. i think this is a great way to foster dialog. it's a great way for me to collect information and get a broad view of business. we believe very strongly that culture drives behavior and behavior drives results. >> reporter: culture also drives continuity at hallmark. many so-called hallmarkers have worked here for decades. craig lueck has been an illustrator for 27 years. >> even though it's so huge, it still has that sort of intimate more family feel to it. we have deadlines, but there seems to be time to keep refining the craft and the skills.
>> reporter: the halls say keeping hallmark family-owned lets them focus on customers, rather than profits. and they think that could keep this company around for their grandchildren to run. >> this brand is in the business of needs that will be around in a hundred years and we know that. yeah. >> reporter: diane eastabrook "nightly business report," kansas city. >> tom: that's "nightly business goodnight everyone and have a great weekend, you too, susie. for friday, november 19. i'm tom hudson. >> susie: good night, tom. i'm susie gharib goodnight, everyone. we hope to see all of you again next week. "nightly business report" is made possible by: