tv Nightly Business Report PBS August 28, 2009 7:00pm-7:30pm EDT
captioning sponsored by wpbt >> paul: consumer spending ticks up, but there's a catch, much of the gain came from cash for clunkers sales. so will americans still spend when aid from uncle sam disappears. we get some answers. >> susie: intel says consumer demand is picking up as more and more people buy laptop computers. the computer chipmaker says it expects to post stronger sales in the third quarter. >> paul: tonight's market monitor guest is a long-term bull, but he thinks profit taking might be wise right about now. he's john dorfman, chairman of thunderstorm capital.
>> susie: then, rooms full of people busy drawing the latest in animated films. but it's not hollywood, it's india. we look at the latest outsourcing trend that's turning into a blockbuster hit for bollywood. >> paul: i'm paul kangas >> susie: and i'm susie gharib. this is nightly business report for friday, august 28. "nightly business report" is made possible by: this program was made possible by contributions to your pbs station from viewers like you. thank you. t 7//&
>> susie: good evening everyone. people didn't earn more money in july, but they spent a bit more and economists welcomed the news. the small pop in spending, just 0.2% is thanks to the "cash for clunkers" program. personal income was unchanged last month according to a report today from the commerce department. the big question now is whether frugal consumers will keep spending, even when the government's stimulus programs end. scott gurvey reports. >> reporter: it was quiet today at the hyundai dealership in jersey city. when you dig beneath the headline that said consumer spending was up in july, you quickly discover that without the cash for clunkers program, spending was flat. in fact, spending on non-durable goods declined for the month indicating that consumers buying cars cut other spending to keep within their budget. economist julia coronado believes that behavior will continue. >> they're much less willing to spend freely. everything is planned out and carefully executed so i think we are absolutely in a new normal and i don't know how long that
will last. but it will definitely be a couple of years as consumers rebuild their savings and sort of adjust to the shock that's hit them. >> reporter: this long term change in buying habits raises concerns the economic recovery will falter once government stimulus programs end. a cash for appliances program is now in the works but the clunkers program has ended and incentives for homebuyers end soon. still, economist michelle meyer believes the private sector can provide the stimulus for future growth. >> there's a decent recovery going on in the housing market which we think should the fuel momentum elsewhere. and we're starting also to see businesses hire and seeing a decline in jobless claims. so there are signs that the economy is recovering and that it will be sustainable even after fiscal stimulus fades. >> reporter: and at the hyundai showroom, manager frank valanzola is optimistic. >> obviously we have less traffic in the showroom than we had during that period. but its steady still. we're selling cars.
it's not going to be what it was for the month of august. but we're looking for year over year improvement hopefully september will be better than last september. that's how we gage success in this business. >> reporter: most economists believe the secret for success will be jobs. not until employment picks up will sentiment improve and consumers become more willing to part with their money. scott gurvey, "nightly business report", new york. >> paul: after eight consecutive advances, wall street's blue chips opened lower on profit taking. the dow fell 35 points early on, but the tech laden nasdaq gained 10 points partly on intel's boost in third quarter revenue guidance and dell's upbeat outlook late yesterday. news of a drop in consumer confidence helped send the dow to a 75 point loss at noon which was a drag on the market in general, leading to a mostly lower close.
the closing is among several changes in the company's manufacturing operations. whirlpool says production of some of its refrigerators will be transferred to an existing plant in mexico. the company is still deciding what to do with 300 employees who work at a product- development center. whirlpool continues to cut costs as demand for big-ticket items has fallen during the recession. >> paul: those whirlpool workers will receive unemployment benefits. but a growing number of jobless people will soon see their benefits run out. as we continue our look at reviving the economy, darren gersh reports, many people who rely on unemployment checks are looking to congress to keep those weekly payments coming. >> reporter: after almost a year of searching for a full-time job, bill boteler was worried he would exhaust his unemployment benefits. he was able to survive, he says, because congress passed emergency legislation extending those benefits. >> the cost of living in d.c. is
very high. so, without it, it would be just impossible. with it, you can just make it if you're real careful. >> reporter: boteler lost his job with an environmental non- profit in october of last year. though he works two part-time positions now, he's struggling to get job interviews. in the meantime, he calls his unemployment checks crucial. >> i really just have enough for the rent, basically. and then i try to figure out ways to, you know. sometimes, my friends sometimes buy me something to eat. >> reporter: but unless congress approves another extension. boteler and millions of others could see their checks stop. the national employment law project estimates over half a million people will exhaust benefits by the end of september. in all, 1-1/2 million will run out of coverage by the end of the year. democratic congressional leaders say they won't let that happen. they are promising to extend unemployment benefits when they return to washington next month.
the national employment law project, or nelp, executive director christine owens considers a benefit extension money well-spent. >> it would be more costly to the economy for us not to take care of those working families than it would be to invest in this benefit extension. and in fact, over time, this pays itself back. >> reporter: not everyone agrees. douglas holmes represents the business community, which is now struggling to pay benefits to workers. he says the extension could cost taxpayers as much as $70 billion. >> we need to sort of ratchet into a different gear and look at what we should be doing for the long-term unemployed, and not just paying additional weeks of unemployment insurance compensation. >> reporter: but for boteler, government money for unemployment insurance is a question of fairness. >> what about all the money they spent on the bailouts? that's costing the government a lot more money. >> this is what really keeps the people going. this is the thing, this makes a difference. >> reporter: congress is now
considering a 13 week extension of benefits, but only in states with high jobless rates. with the national rate expected to keep rising, advocates for the unemployed say that's not enough. darren gersh "nightly business report", washington. >> susie: in a big legal victory for comcast, a federal appeals court has essentially given giant cable companies the go- ahead to expand or merge. the decision announced today, threw out a rule that limited cable companies to 30% of the market. comcast, the biggest u.s. cable- television provider, opposed the measure, saying it froze its business. the restriction was imposed by the federal communications commission to avoid cable monopolies. the court disagreed, saying the limitation didn't consider competition from companies like direc-tv and dish network.
>> susie: the i-phone is saying "knee-how" to a new market: china. today apple and wireless carrier china uni-com announced the i- phone will go on sale there before the end of this year. china has the largest wireless market in the world in terms of subscribers with 650 million mobile phone accounts. about 140 million of them are on china uni-com. the company didn't give financial details on the deal and didn't say how much the i-phone will cost in china. the challenge for apple will be marketing a new product where its brand isn't widely known. i-pods in china accounted for less than 8 percent of all mp3 music player sales in 2007. >> paul: susie, apple shares topped the most actives on the nasdaq. we'll see them in just a moment as we take a look at our stocks in the news tonight.
and those are the stocks in the news tonight, susie. >> susie: paul, walt disney, warner brothers and sony entertainment have something in common: they all out-source animation to india. making animation films in india is much cheaper than in hollywood and that's fueling a boom for india's growing animation industry. as sapna bhachia reports, it now generates annual revenues of about half a billion dollars, and is poised to cross the billion dollar mark in just a few years.
>> reporter: in this office in hyderabad in south india hundreds of animators are breathing lives into cartoon characters. if you think that animation is child's play, then think again, as this is the place where only the tough survive. this cliché is true for tapas chakravarty who is the c.e.o. of dq entertainment, one of the first companies to get into animation outsourcing. >> i remember 2001 it was so difficult even to get my foot into the door of any company. and today we get red carpet welcome and, the most coveted international awards like the emmys are getting picked up by indian companies. so, what is the secret behind the success of the indian animation outsourcing, story?
it is money. the hiring cost of skilled people in india is low as a result of which production costs come down. a full-length animated movie in the u.s. will cost $100-125 million, as compared with $25-30 million if work is outsourced to india. animation is a highly labor intensive industry where numbers are important. >> we have around 22,000 to 25,000 drawings for a complete 22 min show. >> reporter: baswa raju works as a production manager and is responsible for the timely delivery of the animated product. more than 100 people work on a 22 min film. the average age of people working in this industry is 25 and all of them are eager to learn. >> six months to one year of training you have a qualified guy in your hand, two years of practice and he can compete with anyone in hollywood.
>> reporter: like hollywood india has its bollywood, which churns around 1,000 movies a year making india the worlds largest producer of films. analysts like indu mirani think that this fact further helps the animation industry. >> you get the same technology as you would get in hollywood or australia or anywhere else and yet it is far cheaper to do it here so i think, it is a very simple business decision. >> reporter: clients from different countries send the scripts and storyboards to india for production. badri narayan works as an animation supervisor and is responsible for the creative side of business. >> we get the storyboard and then we start with the layouts, i have to check the quality of layouts with the references given by the client or the director. once the layout is approved by me i give it to animators in sequences. >> reporter: this is how a 2d animation process works. now, indian companies are also doing 3d and highly skilled special effects animation where more digital skills are
required. when the film golden compass picked up an oscar for visual effects, artistes in india who worked on the movie rejoiced. >> in 3-4 years india will be the hub of animation content development the way it is the hub for software development. >> reporter: and, people in india will build this story frame by frame. sapna bhatia, hyderabad, india. >> paul: monday, our commentator says washington can't fix the economy alone, it needs the private sector to do some heavy lifting. >> susie: investors are bailing out of cerberus capital management's two core hedge funds. the wall street journal reports the company has been swamped with redemption requests: investors are asking for the return of $5.5 billion or 71% of those assets.
cerberus began a restructuring last month that opened a window for clients to pull money out of the fund. but it figured redemptions would total less than half the funds' assets. >> paul: the government is suing u.p.s., for limiting its workers' ability to take medical leave. the case involves a u.p.s. worker, with multiple sclerosis who was fired for exceeding the company's 12-month sick leave policy. the u.s. equal employment opportunity commission says u.p.s. failed to accommodate her condition, in violation of the americans with disabilities act. u.p.s. calls the lawsuit "surprising and misdirected." z euu@xcss
>> thank you very much, paul, good to be here. >> paul: do you think wall street's strong advance in recent months has made stocks overpriced in relation to the strength of the economic recovery? >> overall, no, paul. every spring in baseball, the pitchers are ahead of the hitters. every time the country comes out of a recession, the stock market advances a lot before the economy ever really start to show upward momentum. that's exactly what's happening here, and it's kind of to be expected. >> paul: what about these huge percentage gains in some of the fpblz, like citigroup, fannie mae, a.i.g., freddie mac? is this speculation at its peak or what? >> the so-called headless horse man. those i do believe are overvalued, considering the delusion that has already considered and will consider with those stocks. if i'm going to be in financials i'd much rather be in the smaller ones. >> paul: so you'd stay clear of these? >> i really would. >> paul: now if the economy is recovering, will interest rates sooning heading higher?
>> soon, i don't think so, but in a year or so, i think they probably will. the voracious demand that the government's gog have for raising money to finance these deficits may tend to push the interest rates higher. >> paul: back in march, you said the obama economic stimulus seemed to be working. how about now? >> i think it is helping. i think it's helping in two ways. it's helping financially to a degree, and i think it's helped psychologically. there's much less panic among the investing public. >> paul: you recommend four stocks to buy and one to sell short in march. let's see how they've done. berkshire hathaway up 20% and merck up 21%. are you still with these stocks? >> yes, i am, paul. >> paul: let's have two more. general dynamics up almost 60% and overseas ship 47, you are really on all burners there. are you still with these? >> yes, i'm still with those as well. >> paul: you had one stock you
said to sell short, star scientific. sell short at 4.32 and it is now less than a dollar, a profit of 77%. congratulations, john, great call. >> thank you very much. and we have covered that star scientific short now about a buck. >> paul: do you have any new recommendations? >> i sure do and i had-- like to start right out with general dynamics again, even after rising 60s%, it's still at nine times earnings. unfortunately, we're in a world where we need military equipment and i think that's still a good buy. >> paul: g.d. is the trading symbol on the big board. number two selection. >> number two i'd like to go with a small energy company called boots and coots, named after two of the three fellows who started it, their nicknames. boots and coots puts out oil well fires and deals with oil well blowouts and does preventive maintenance.
the founder was played by john wayne in the movie in the 1960s. that's right. i remember that. this is a cheapy, $1.29, and w.e.l. is the symbol for trading. let's go ahead with another one. >> i would pick humana because no one likes health care stocks these days. people think they're too defensive and they're also worried about what the obama administration is going to do in the health care area but huh-uh manna is a seasoned company. >> paul: another selection. >> i'd e caption test caption test cap in china. it is, of course, in bed with the government, as many companies are there. but china has good growth, especially relative to the rest of the world. >> paul: this is a three-month chart on the pink sheets, intentally. okay, go ahead. go ahead, john. >> for my fifth and final recommendation i would like to
do another short sale that i traditionally do with you, paul. and this time i would short talbot's, the women's clothing retailer. really two reasons, one, i think they're a little out of touch with fashion. two, their balance sheet is in a bit of a shambles. their net worth is currently negative. >> paul: tlb on the big board. john do you personally own the stocks? >> my clients are long and short the stocks i mentioned and i am personally. >> paul: thanks for sharing your views with us once again. >> you bet. >> paul: my guest john dorfman of thunderstorm capitol. >> i'm susie that's "nightly business report" for friday, august 28. i'm susie gharib goodnight everyone. and have a great weekend. you too, paul. >> paul: and you as well, susie. i'm paul kangas wishing all of you the best of good buys. "nightly business report" is made possible by: