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tv   Nightly Business Report  PBS  June 30, 2011 1:00am-1:30am PDT

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>> tom: president obama challenges congress to "get it done" when it comes to raising the nation's debt ceiling. he says the risks of not doing so are huge. >> all of the headwinds that we're already experiencing in terms of the recovery will get worse. >> susie: meanwhile, thousands of miles away in athens, protestors take to the streets as greece marks a turning point in its debt crisis. it's "nightly business report" for wednesday, june 29. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
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this program is made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt >> susie: good evening everyone. there is an event going on here at the new york stock exchange and there's music in the background. a new phase in the european debt crisis-- greek lawmakers passed tough austerity measures today. this opens the way for greece to receive another round of bailout loans from its european neighbors. and tom, the hope is the loans will help greece avoid defaulting on its debt. >> tom: susie, the greek parliament still needs to vote on a second bill authorizing specific austerity cuts in greater detail.
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that could happen tomorrow. ahead of that, thousands of people in athens protested in front of the parliament building. riot police responded, firing tear gas into the crowd. protesters are angry about facing more cuts in pensions and more hikes in taxes on top of what was agreed to last year. >> susie: as the situation in greece intensifies, many people here in the u.s. are asking, "what does this mean to me, my business and my investments?" joining us now to answer those questions? jim awad, investment strategist at zephyr investments. hi, jim. >> hi, susie. >> susie: let's get right to it. a lot of people are saying what does this mean to me. what would you say? >> well, what i would say is that if greece were to default, it's not only would affect the financial system and the banks and the liquidity in europe, it would negatively impact their economies, it would flow right back to the u.s. financial system and the u.s. economy. so it matters a lot to us if
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greece defaults or if other countries, other peripheral countries end up defaulting. >> susie: and another thing a lot of people might not realize is that their money market investments, many of them, money market funds, are invested in european banks which have made loans to greece. so the question is, how safe or how vulnerable are those money market investments? >> well, left to their own they would be vulnerable, because if greece defaulted there would be a lot of banks that would have capital hits, and there's a question as to whether they would be able to repay their money market loans to the united states. but i think in that system, you would have the u.s. central bank and european central banks go in and engage in extraordinary measures like they did in 2008 to keep the funds solvent and the dollar a share limit. so it's a worry, but i think it's probably a manageable worry unless you have two or three countries default at the same time.
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>> susie: for people who want to play it safe, what investment moves should they make? >> i would migrate up the quality scale in every asset class, whether you own bonds or stocks, you want to migrate up to big conservative stocks with a global foot print that have gentlemen graphically devirs -- diversified. you want to go towards high quality triple a rated debt. it's not a time to run into a fox hole, but it's a time to put up a fence because there's a lot that could go wrong. migrate to quality. >> susie: and what about if you own a business, are there any moves you should be making to protect yourself from what's going on in greece and europe? >> well, the risk is that the financial crisis, the financial sector seizes up and goes into a crisis again, and we lose access to credit from banks and financial institutions. so i would say to any business person, build up your crash so that you have liquidity to funder self in case we get a worse case scenario.
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>> susie: there have been a lot of comparisongreece's financial problems with some of the dealt crisis so to peek here in the u.s., i don't know that they're fair comparisons. but is there any kind of cautionary lesson that americans should pay attention to here? >> yes. it's that ultimately the markets, the financial markets will call you to order if your financial house is not in order. and while the u.s. has more time because we have the world's reserve currency, if we don't start getting our house in order as some day the things markets will make us do it, so we've got to get to work and we've got to get to work now. >> susie: a lot of people might think look this whole ripple effect of what's going on in greece to the u.s. is overblown. is it? is it much ado about nothing? >> well, like the housing crisis, it's a big problem, it's a long-term problem, there are going to be casualties along the way. it's got to be managed by
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worldwide monetary authorities. but there are going to be casualties and it's much more than a lot about nothing. these are serious secular problems. >> susie: all right, interesting stuff, thank you so much, jim. >> okay, susie. >> susie: we've been speaking with jim awad >> tom: president obama today said failure to reach agreement to increase the nation's debt limit would have a significant and unpredictable impact on the u.s. economy and markets. warnings and pleads from administration officials and bond-rating agencies haven't seemed to work, so the president called on congress to cancel its vacation to make sure a debt deal gets done. darren gersh reports. >> reporter: for anyone willing to play chicken with the nation's debt limit, the president today offered this warning: we don't know how markets will react when the government hits the wall. >> if capital markets suddenly decide, "you know what? the u.s. government doesn't pay its bills, so we're going to start pulling our money out," and the u.s. treasury has to
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start to raise interest rates in order to attract more money to pay off our bills, that means higher interest rates for businesses, that means higher interest rates for consumers. so all of the headwinds that we're already experiencing in terms of the recovery will get worse. >> reporter: the president called for what he called a balanced approach, matching spending cuts with tax increases on millionaires, billionaires. >> and before we ask our seniors to pay more for health care, before we cut our children's education, before we sacrifice our commitment to the research and innovation that will help create more jobs in the economy, i think it's only fair to ask an oil company or a corporate jet owner that has done so well to give up that tax break that no other business enjoys. i don't think that's radical >> reporter: the president also pressed for more help for the economy, including an extension of the payroll tax cut next year and increased spending on roads
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and other infrastructure projects. but political analyst andy laperriere says that will be a hard sell. >> i think it's also going to look a little weird for congress to pass a $2 trillion deficit reduction package that has the impact of increasing next year's deficit by $150 billion. i'm not sure that's really going to sit well with members of congress. >> reporter: but what will win enough votes is not clear yet, warns m.f. global's chris krueger. >> i'm at 40% odds that it is not signed into law by august 2. i think there is a huge under- appreciated risk here. >> reporter: house speaker john boehner fired back at the president in a statement today, warning there are not enough votes to pass a tax increase because tax hikes destroy jobs. darren gersh, "nightly business report," washington, d.c. >> susie: here are the stories in tonight's n.b.r. newswheel: stocks rose for the third straight day. the dow gained 72 points, the nasdaq up 11 and the s&p 500 added 10.
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as for volume, 910 million shares moving on the big board and 1.8 billion on the nasdaq. a lot of deal-making in the housing market in may. the number of people signing contracts to buy a home surged 8.2% last month. still, the national association of realtors says many of those deals are having trouble closing because buyers are having a tough time getting appraisals for financing. and the marriage between the london stock exchange and the canadian exchange operator, t.m.x. group, is off. the companies are walking away from the deal because they say it is "highly unlikely" they'll get majority approval from t.m.x. shareholders. still ahead, we'll find out what's driving tonight's stock pick: ford. "street critique" guest hilary kramer looks under the hood. >> tom: banks will be able to collect up to 21 cents from retailers every time shoppers swipe their debit card. while that's down considerably
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from what banks could charge, it is more than what the federal reserve first proposed. the fee was 44 cents a transaction, earning banks an estimated $15 billion last year. but today, the fed okayed a maximum fee of 21 cents. consumer advocates had wanted those fees cut to 12 cents. federal reserve vice chair janet yellin says the new rules require compromise. >> the continued vitality of the debit card system requires balancing the legitimate needs of depository institutions that issue debit cards, merchants that accept them, networks that process them and, very importantly, the consumers, who are the customers of both the banks and the merchants. >> tom: how the new rules will impact consumers still is uncertain. a key concern is whether banks will make up for lost swipe fee revenue by charging merchants and consumers other fees.
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>> susie: meanwhile, the nation's largest bank has addressed a major concern for investors and customers. bank of america has agreed to pay $8.5 billion to settle mortgage-backed securities claims. it's the largest settlement by a bank since the financial crisis. b. of a. is also setting aside billions more to cover other mortgage-related costs. add it all up, it's a $20 billion hit. erika miller reports. >> reporter: $20 billion is clearly a lot of money. especially for a bank that lost $2 billion last year. but analysts whose firm does business with bank of america thinks the bank was smart to settle. >> given the situation in which they found themselves post the acquisition of countrywide, i think this was a good deal to put these risks behind them. >> reporter: bank of mesh will pay just pennies on the dollar to investors who bought the soured mortgage securities. but the bank isn't out of the woods yet. as analyst this analyst
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explains. >> there are a lot of overhangs, you know, this was the result of about half of their private label putback exposure, everything that was related to countrywide, everything that was related to bank of america is still out there. there are still lawsuits from the bond insurers,. >> reporter: bank of america's settlement is likely to pressure other big banks to resolve similar complaints. here at j. p. morgan, wells farg oh, citigroup and others ralied today. >> bank of america will probably end up spending more than some of the other banks in terms of percentage of past original nation. but it definitely sets a press deb for future settlements with other banks. >> reporter: but that's not the only hurdle banks are facing, they are also negotiating with all 50 state attorneys general over their foreclosure practices, dubbed robo signing. most analysts think a settlement is coming. with bank america again paying
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the most. >> the state a. g. thing is probably going to be several billion dollars to a bank america. so it actually might be somewhat smaller than this. the other thing about the state a. g. settlement is that parts of that can be taken out of existing reserves. >> reporter: even if you don't own bank stocks, the bank of america settlement could have an impact on you. experts say the faster the subprime mess gets resolved, the faster the housing market can turn around. erika miller, "nightly business report", new york.
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>> susie: the mood is a little better here at the new york stock exchange and not because there's a party going on behind me. but i think there's a feeling that as the quarter comes to a close, less worries about greece, less worries about the banks, as erika just reported. >> tom: that seems to be the case here, because we've seen several days in a row of solid buying interest, really across the broad market. let go ahead and roll with this, with tonight's market focus. a third day of gains for the major stock indices on the heels of bank of america's mortgage bond settlement and greece's government tightening its belt. let's start with the reaction in bank of america shares.
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just heard erika tell you the story. they led the dow industrial average with this 3% gain. volume was very strong after the announcement of its settlement with mortgage bond investors. the stock was at a 52-week low just three weeks ago. up by 3% today. the b. of a. settlement helped other big banks. j.p. morgan was up more than 2%. citi added more than 3%, and morgan stanley rose almost 5%. citi settled a deal of its own involving citi's custody of assets of lehman brothers international. morgan stanley stock was up despite a "bloomberg" report the bank's bond-trading group lost millions in a wrong-way inflation trade. all of this spilled over into mortgage bond insurers too. analysts think m.b.i.a. may be in line for some money. it's stock jumped almost 11%. assured guaranty settled with bank of america this spring. its shares rose 7% and radian rallied more than 5.5%. another in line for the settlement money may be life insurer met-life. investment bank sterne agee thinks met-life could get $200 million. shares were up more than 3% on stronger volume.
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this is met-life's highest share price of the month. we saw a big late-day relief rally in shares of visa and mastercard. as we mentioned earlier, the federal reserve proposed allowing banks charge 21 cents to retailers to accept debit cards. that was higher than first proposed, helping spark this rally. both mastercard and visa are at 52-week highs. material stocks also helped push up the broad market. agribusiness giant monsanto was among the biggest gainers, up 5%. nice rally here. the stock has been in a range of about $63 to $73 all year. today's buying came after monsanto easily beat estimates in its latest quarter. seed and weed killer sales were up. the company also boosted its forecast. steel stocks were also hot. u.s. steel and a.k. steel were upgraded to buy at deutsche bank. the analyst thinks steel pricing will strengthen. both stocks were up more than 5%. allegheny tech also benefited from the bullish sentiment,
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gaining more than 4%. homebuilders were hurt today. k.b. homes fell hard, down 15% as volume spiked to more than seven times the normal pace. really falling off the shelf. shares are at their lowest price since last august. and this was the fuel-- a much- worse-than-expected quarterly loss. it delivered fewer new homes and saw a drop in new orders. news corp sold its myspace business for a fraction of what it paid for it. remember back in 2005, newscorp bought the then-number-one social networking website myspace for $580 million. today it sold it for $35 million to an ad targeting firm. shares of newscorp added about 1%. bit of a relief rally.
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and that's tonight's "market focus." >> tom: on friday, automakers release june sales figures. it has been a month marked by high gas prices, higher vehicle prices and a shortage of some models. tonight's "street critique" guest isn't hitting the brakes. she's hilary kramer, editor of nice to see you. you're looking at ford, the sole u.s. auto maker not to take a bailout during the hard times, share price in the middle of the range it's been in for the past year. what are your expectations?
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>> well, ford has been really beaten down vees avery the rest of the market. my expectation is we could get back up there towards that 52-week high. the reason is that ford is done well with with their fuel efficient cars, tom. in may, 74% increase in two new models and 32% across the board with all their fuel efficient small cars, but even the ex plosher last mob saw 135% increase. 47-mob high in terms of explorer suv sales. but the key here is that ford was just a problem in europe in the fourth quarter of 2010, which brought sales, sales were soft, but the stock never came back, too much concern oil prices, recession, global uncertainty, china. stellar company, i think they're going to take some share from toyota. >> tom: let me ask you about one uncertainty, the uaw union
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talks next month, the union looking to hike wages, maybe get more corporate bore seats does that make you a bit more looery of ford? >> not at all. the unions are a inherent, organic part of the auto industry. they'll be reasonable, they'll be reasonable discussions because everyone wants to move american industry forward. >> tom: let's get to some viewer comments, begining with this one from john. the share price is considerably lower since then. are you still putting money to work? >> you have a 5.4% dividend yield. and it's a scare commodity, so that says it all. >> tom: fair enough. several e-mails on a shipping stock that has seen its share
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of trouble over the past few months. let's take a look at one e-mail from b. j. hrz the ticker symbol, you mentioned it back in january, the share price still trades well below the four and a half dollar price of back then. >> well, horizon is going to take time for the company to get back. but it does look like they avoided bankruptcy with a new credit facility, it's just a matter of time. i'm holding my shares because when you're talking about a dollar and a quarter stock, it is up 50% off of its lows, better to hold than to let it go on the chance that it could come back. because it does have an edge in that it has exclusivity as a u.s. flag carrier shipping company to be able to ship in the contiguous united states. >> tom: do you own everything that we mentioned here tonight? >> yes, i do.
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you can email us, or you can send us a note via twitter at my feed, @hudsonnbr, or n.b.r.'s feed. and facebook too. we'll feature some of your questions next wednesday. our guest this evening on "street critique"? hilary kramer with >> susie: here's what we're watching for tomorrow: weekly jobless claims, along with quarterly results from apollo group, darden restaurants and smith & wesson. also tomorrow, college and credit cards-- they're not a great combination. our "kids and cash" series has advice for helping your coed get a passing grade on spending. more recalls for toyota. the japanese automaker is recalling some hybrid sport utility vehicles. the problem? computer boards with potentially faulty wiring. 82,000 toyota highlander hybrids and lexus rx400 hybrids from model years 2006 and 2007 are involved. toyota says if damage does occur, the s.u.v.s would likely
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just stop running and coast to a stop. >> tom: americas biggest companies are buying more of their own shares. standard & poor's reports stock buybacks jumped 63% during the first quarter to almost $90 billion. it's one way companies return money to shareholders. taking shares off the market can increase the value of remaining shares and boost earnings-per- share results. meanwhile, s&p also reports corporations are sitting on more cash than ever before-- a record $963 billion during the first quarter.
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>> susie: back now to the u.s. debt ceiling. tonight's commentator has a few thoughts on the tough choices facing americans. he's justin fox, editorial director of the "harvard business review." >> unless congress gets its act together to raise the debt ceiling, the u.s. will no longer be able to pay all its bills. choosing whom to stiff will be interesting. do we cut off military salaries? food stamps? social security? the people least likely to get stiffed are probably investors in u.s. bonds and bills. that's because of what could happen if the nation defaults on its debts. think of it as missing a credit card payment, with really big penalties. the u.s. now has what amounts to the best credit card deal in the world. we get to borrow staggering sums of money and pay staggeringly
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little interest. if we default, that privilege will be gone forever. the treasury will have to pay much higher interest rates. so will you. thing is, that privilege helped bring on the financial crisis. it was so easy for americans to borrow money that we borrowed too much. long run, we could probably use more discipline from our lenders. just not now. not like this. i'm justin fox. >> tom: the latest on those talks, senator lautenberg says the u.s. senate will change its schedule to be in session next week, july 4. that is "nightly business report" on this wednesday night, june 29. i'm tom hudson. have a great night, susie. >> susie: thank you, tom. have a great evening everyone, and we hope to see all of you again tomorrow night. "nightly business report" is made possible by:
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this program was made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt captioned by media access group at wgbh >> more information about investing is available in "nightly business report's" video "how wall street works". to order this dvd, call 1-800- play-pbs or visit online at >> be more. pbs.
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