tv Nightly Business Report PBS September 14, 2015 6:30pm-7:01pm PDT
this is "nightly business report" with tyler mathisen and sue herera. too close to call? the factors the federal reserve weighs as it prepares to make what could be a historic addition on interest rates. your higher money, how higher interest rates may impact your long-term investments. college calculus. is a degree really worth the price of admission? new data helps students ants that question, all that and more tonight on "nightly business report" for month, september 14th. good evening, everyone. welcome. i'm sharon epperson in tonight for sue herera. >> and welcome from me, i'm tyler mathisen. is it really halfway across
september? it's finally here, what many have been worrying about. on thursday, the federal reserve will announce the decision on interest rates and just possibly the central bank will hike rates for the first time in nearly a decade, the first step away from an era the ultra-low interest rates. whether policymakers move is anything but certain. a moon ago, many if not most economists felt the fed was positioned to hike the rates, but that all changed as uncertainty bled over into markets here. days before the meeting, many are calling it a topup. hampton pearson looks at the factors the federal reserve must weigh. >> as the countdown to what could be continues, a debate over whether policymakers will raise rates for the first time in more than a decade has become
too close to call. economic turbulence in china in recent weeks and market volatility has jump-started the debate over the timing of liftoff. >> by all the macro fundamental indicators, it's about time. i think the debate really is more whether the turbulence in the last few weeks coming out of china and other parts of the world affecting our own markets is a reason to slow down on this. >> since the last fed meeting, janet yellen and her fellow monetary policymakers will have data showing a rebound in economic growth, a solid job market argumenting monk than 200,000 new hires a month with unemployment down to 5.1% in august. in the next two days new data on retail sales and the other half of the fed's mandate -- inflation. >> i think they made it clear they think of a lot of different things, but the most important things are what are the labor market conditions, which are getting much better and what is
inflation? inflation has stayed low. if anything, it looks like it's dropping. >> reporter: perhaps the biggest wild card is how the markets react in nearly a decade. part of the balancing act for policy makers, because the markets and the fed have become codepende codependent. two washington wild cards for the fed -- a possible government shutdown at the end of september if congress can't recall budget disputes, and treasury second quarter tear jack lew predicts a face offis congress over increasing the debt limit. for "nightly business report", i'm hampton pearson in washington. whether a rate hike comes later this week, later this year or even into next, it is coming. there will be more after that, but the pace of the interest rate hikes is expected to be gradual. the size of each rate hike expected to be small. while the impact may be limited in the short it were, the same
can't be for the long-term effect. according to the most recent survey, economists see the cycle ending in about three years in the third quarter of 2018, with the fed funds rate reaching 2.79%. the current target rate is near zero. there are steps you may want to consider taking right now to prepare for high are borrowing costs down the road. if the full thrust of the rate hike debate has you wondering what fa do where your investments, you're probably not alone. yet, those ups and downs as dramatic as they may be, are a good reason to keep an eye on your asset mix. rather than worrying about where the market will be next week or next month, stay focused on the longer-term investment goals. a quarter point rise won't likely have a major impact on the day-to-day life. the interest on a savings account still won't make you smile, but if rates continue to rise, you will begin to notice.
when it koums to the cash portion of your investment port for the i don't, as rates begin to climb, continue overlapping the expiration dates. it allows you to step up to a higher rate, as for bonds? short-term bold and bond funds may be safer if the fend is raising its lending rates. expect bond yields to climb. if you're in a longer-term bond or bond fund with mostly ten year or 30-year bonds, you'll have to stand by as the value drops. if you're in shorter-term drops, you'll limit the time while also gaining the benefit of a rising yield. retirement savers look under the hood. bond funds are a big part of target funds, as you get old you are, yew plan tends to put more into fixed income so, check on what time of bond funds are in your planned. mortgages will also be impacted so, if you're determineding to the lowest possible rate think about taking action before the fed, but 30-years mortgage
ratingsv hovering around 4%. rates were double that 15 years ago. that's a level we're not likely to see anytime soon. here with more perspectives on what to do, as mark cortazzo. i don't know whether you agree with what sharon just said or you disagree. i'm not inviting you to contradict her, but when rates do rise, is it -- whether it's this week or this year or next, is it necessarily a time to do anything? >> well, you know, rates rising people use as a general statement, and we think there's two different aspects. short-term rates that we do believe will rise in the short to intermediate term, but the impact on longer-term rates, sometimes when you see interest rates rise on the short term, they take future growth out of the economy. you can see longer term rates come down a bit and a flattening
of the yield curve. so depending on why you own bonds. if you're an accumulator and you have bonds to stabilize your portfolio in times of volatility, i think you stick with high quality, things that do hold up well in an environment like that when equities are doing poorly, but if you're a retiree looking to invest for income, i think if you have individual bonds, you hold them to maturity. if you have a short-term fluctuations of the value, it's not as big of a concern if you know at maturity you're going to get the principal balance. >> if you're longer term, there are some firms say we're going to reduce it just a bit, instead of 75% -- or 65 bonds of fixed in -- i could air 35% fixed income/65% stocks we're going to redue it to under 30%. would you say that reducing fixed income makes sense? >> well, cash is earning close to zero or at zero.
by reducing that exposure, you giving up volatility, but also all of use you are yield. you better be right that the interest rates are going to rise in order for that to weigh in your favorite. if you have a laddered bond portfolio, or a port follow -- everybody year, as those bonds come due, you're reinvesting into those new higher rates. if you need the money in a year or 24 months from now, i could stick with cash and shorter-term trusses. if there is part of a portfolio to be a buffer in the equity piece, if you're in accumulation, i would act differently and invest differently than if you're drawing income. >> if rates rise at a modest, moderate pace, what will the effect be on my equity portfolio? >> well, we run a different portfolio that the yield on it is about 1% higher than what you're getting on a ten-year
treasury. we've positioned some of the components in there with company that is do benefit from rising interest rates, company that is have a lot of short-term interests. >> like what? >> like paychecks, they take the money from the employer, hold it for days before they cut checks and pay. when rates were 3%, 4% 5%, they were making a lot of money on that float. those are companies that that increased income is riskless. that can improve their profitability. >> generally are you looking at smaller cap, mitt cap, as opposed to larger cap? >> we like larger and mid cap tooks, things that have good consistent cash flow, companies that are prescription based, reusable consumers. >> mark, thank you very much. appreciate it.
we're hesitant to take any big positions ahead of this, the dow jones industrial average spelled 62 points to 16,370, the blue chip indecent traded in the narrowest ranges. the knead dab dropped 16 points. the organization of petroleum exporting countries cut its forecast for oil production and predicted higher demand for next year. if the monthly report, the oil cartel said that oil producesers were starting to feel the squeeze, and would in turn come products and the global surplus. we can expect economic data out of china, also pressured crude today. there is one industry that is highly dependent on the oil market. that's the crude tanker industry. it all has to be stripped and
hauls across the board. morgan brennan explains. >> under $50 a blare, there's one market that's benefited. crude tanker ships. in the first half of 2015, rates were very large crude carriers that carry up to 2 million barrels per trip peaked at 90,000 a day. for some ships hauling oil to asia. by august rates had plunged 27%, 'demand slowed down. still analysts say this sector is poised for its best fourth quarter in years. >> we do think that the tanker market is going to see more up side as we move into the fourth quarter of this year. seasonally you see stronger demand from both the heating perspective and overall energy perspective. we would expect to see from a supply perspective not a lot of incremental deliveries. the demand is coming from asia,
where china is expected to build up crude reserves to take advantage of higher refining margins, and only limited number of new ships coming online, all of this could bode well for stocks, like nordic america tankers and dht holdings. small-cap names, but ones that represent pure plays. tk tankers front line and energy navigation could also benefit, is all have crude tankers in their fleets's well. we have buy ratings, the first is your onav. the second is generate maritime. we also have a buy there. both of these companies have significant spot exposure to the largest of the crude carriers that move crude around the world positively. if sanctions on iraner lifted that could add an estimated 500 to 700,000 barrels of oil daily, pressuring prices and further
boosting demand for the massive shifts that haul crude across the high seas. for "nightly business report", i'm morgan brennan. and if you've noticed, a substantial drop in gasoline prices, you are not seeing things. according to the lundberg survey, the average price fell 27 cents in the past three week, now sits at $2.44 a gallon are are more than a dollar below where prices were a year ago. aaa reports that gas prices have fallen beloaned $2 in three states -- south carolina, many mississippi and alabama. still ahead, go to college, get a good-pays job, pay off your loans. that's easier said than done, until now. new data that can help you determine the potential return on your college investments.
new york's top banking regulator reach an agreement with banks overed chat, symphony communication regulators worry could be an obstacle when they try to conduct an investigation. as part of the settlement symphony will retain copies of all the chats. the agreement was reached with four banks. the labor department contract for more than 140,000 autoworkers expires at midnight. negotiators for the autoworkers have chosen fee at chrysler as their so-called target company. the union will draft the first of three graemtsagreements with
chrysler. the talks come as autosales sit at near record levels. airbus has officially started building commercial jets in alabama. it's a big move that will help airbus strengthen its position in the u.s. marketing while adding more manufacturing jobs. phil lebeau reports tonight from mobile, alabama. >> reporter: they may be european, but airbus executives understand the appeal of sweet home, alabama. >> you and your colleagues are now a part of airbus. >> reporter: this plant will vegually build 48 a years, almost all flown by airlines in america. >> we want to be a global player. we cannot be a global player without a strong industry footprint in the biggest market,
america. we did it in china a few years ago. it was a great success. so this is exactly what you see behind me, becoming global. >> reporter: as airbus expands, lowering costs is a central goal, just as boeing added a plant in south carolina that employs nonunion workers, airbus is following a similar strategy in alabama, where the plant will eventually hire at least 1,000 people who won't be in a union. >> it gives you such an advantage to work without a union, to feel like the union is not even needed, because it's the way airbus treats you. airbus treats you right. >> we're getting put on the -- we have a big old facility come here, so to me it's just awesome. the first a bp 320 will fly out next spring with full product but the enof 2017. if there's enough demand, airbus says there's room to expand this planned.
phil lebeau, "nightly business report", mobile, alabama. investors cheer good phone numbs from apple. that's where well-gin tonight's market focus. the tech giant announcing sales of the new i foiismt 6 2k7 k and 6s plus the company tee pre-orders, the phones will go on sale september 25th. shares roses to 115.31. a report from "barron's" weighed a alibaba today. it questioned the accuracy of some of the claims alibaba has made about user count and shopper spending. alibaba responded in a statement saying we take strong issue about the reporting and feel compelled to set the record straight. it went on to defend itself against the allegations. shares tumbled. and shares of russia's
version of google rose today. this is russian authorities ruled google was abusing the market position in the country and would face penalty. yandex saw its stock pop. shares of raptor pharmaceuticfarm su pharmaceuticals went the other way after the company said it would stop developing its liver treatment. they settled at $7.52. solara holdings will be acquired by an affiliate of vista equity partners, the deal valued at about $6.5 billion. and twitter has partnered up with the payment processing company stripe. the move will let retailers sell on twitter. customers will merely have to click on a "buy" button on the site. twitters shares slipped, though. the federal government released new data over the
weekend that revealed the earnings of people who attended nearly every college and university in the country. the database is designed to help students compare costs with potential earnings. beth akearse is a fellow at the brookings institute. i have to tell you right now i have bookmarked this website, because there's so much information that i think that every parpt who has children and anyone who's interested in what college may cost and what potentially students can earn should have this website and be looking at this information. what do you make of it? >> absolutely. this is a tremendous innovation when it comes to higher ed policy and from the consumer's perspective. historically we've had students making this decision about college with very little information. for the first time they can see what it is they're buying, by looking at how students who have go before them have fareed whether it comes to earnings and success in repaying loans. they can have a reasonable
expectation how they could expect to do after they finish their degree. >> what the government did is look at people who had outstanding student loans and look from 2000, or 2001, and look at the medians pay of those men and women was ten years down the pike. it's a big range of numbers, but beth, one thing that stood out to me, hose disparate the numbers were between what males earned and women earned. in many cases it was way more than the usual women sort of earn 75%. it was a broader gap than that. >> yeah, absolutely. the data in this data set are consistent with what we generally knew before, there was the existence of this wage gender gap. unfortunately we don't know exactly why, and we've had this data set available for about 48 hours, so us researchers are grinding away trying to get some answers, but i think there will
be a lot to come. >> when you looked ten years out, what was going to the college scorecard, you can find out what they're doing in terms of for-profit institutions versus public and private institutions, where the annual costs comes in and what the earnings are. what was earning is the interests ten years out aren't necessarily that high when you're looking at some of these for-profit colleges. you see numbers right there compares the costs to other types of schools. do you think this is how families, students and parents will be using this information going forward? >> i absolutely hope so. what you identity with the for-profit, one of the things that came out in the early analysis of this data, but what i would recommend to households making decisions, you look tess options you are thinking of going to, and you want to do some cost/benefit analysis. the reality is most households are they are sending their children to college to improve their financial circumstances. now they have the ability to do that. >> tell me about surprises, as
you saw them. . i thought there was no surprise at the colleges that seemed to produce the highest earnings, they were the harvards, the stanford, the m.i.t.s across the board, but what were the surprises in there high and low? >> right. as you said, we expected a lot of variation across institutions. and that's not a surprise. i think what we just talked about, the for-profit institutions is where we have seen the biggest surprise in the trends and data. >> worth it or weren't worth is it in. >> in fact they weren't worth it. lower income students, more likely to be -- they're really just facing bad outcomes. those are the wu most likely toss at the for-profit and community colleges. the question is still why is that the case, but clearly points to something that policy makers need to think about. >> a lot of great information on that website for parents and for
families, for students. thank you so much for breaking it down with us. beth akearse with the brookings institution. coming up, eye in the sky. northrop grumman's plans to keep growing, even though budgets shrink. ♪ here's what to watch tomorrow. important reads on the economy, including retail sales, also a measure of industrial production, and a report on business inventory. that, folks is what to watch. two of the biggest names in the defense instrument want to dominate the sky, but they have very different about how to go about doing it. as jane wells describes, it
intensifies a powerful rivalry. >> reporter: there's a dog figd between manned and unmanned markets. against the northrop global hawk, unmanned and a huge part of 21st century. >> the average sortie is in excess of 28 hours and we've had flights upwards of 32 hours. >> reporter: two years ago the pentagon wanted to kill the global hawk even though it had 90% of the lifespan remaining. >> northrop lobbied hard and won the opportunity to test new senso sensors, pitching the idea that the unmanned aircraft could fly longer and safer without a pilot on board. northrop's mick jacker says the sensors and cameras can be bolted on the global hawk. >> it gives you the ability to plug and talk to new sensors. >> the the global hawk is too
expensive and complex to makes deliveries for amazon, so northrop is trying to find new markets. jagger suggests maybe using some of the unclassified technology to perhaps replace one pilot on board long-range cargo commercial flights. in northrop pulls this off and succeeds, it would be a dramatic turnaround for a program two years ago was supposed to be shut down. >> we're flying more hours in fy-15 than in all of fy-13. >> reporter: testing will begin on the global hawk shortly, but lockheed sunday gives up on the u-2 and it would be tough to win over work from a workhorse that has been doing work, and already paid for. "forbes" is out with the list of the most valuable teams in the national football leagues, and the numbers are eye popping. third most valuable, my hometown
favorite, the washington redskins. number two, the new england patriots, valued at 3.2 billion and inflating. topping the list, the dallas cowboys for the ninth year in a row. that team is worth $4 billion, most available sports franchise, folks, in the world, stripping real madrid of that title, sharon. >> wow. >> and the cowboys won last night. >> yeah. go figure. that's "nightly business report" for tonight. i'm sharon epperson. thanks for watching. >> thanks from me as well. i'm tyler mathisen. have a great evening, everybody, and we will see you tomorrow night.