tv Nightly Business Report PBS September 30, 2009 7:00pm-7:30pm EDT
year after spending months in the hot seat after buying merrill lynch. >> susie: a deal dissolved. penske pulls the plug on its deal to buy saturn, so general motors says it will shutter saturn for good. >> paul: it's a third quarter to remember. sam stovall joins us as wall street wraps one of its best quarters in years. he's the chief investment strategist at standard and poor's. >> susie: then, dot-com and beyond. the number of possible web addresses will soon explode. we talk to the man in charge of keeping tabs on where you can surf in cyberspace >> paul: i'm paul kangas. >> susie: and i'm susie gharib. this is "nightly business report" for wednesday, september 30. "nightly business report" is made possible by:
this program was made possible by contributions to your pbs station from viewers like you. thank you. 7//& >> susie: good evening everyone. ken lewis is stepping down as c.e.o. of bank of america. in a surprise announcement late today lewis told the board of the banking giant he'll be retire at the end of the year. he's leaving after a tenure
marked and marred by the bank's purchase of merrill lynch january 1. lewis and b.o.a. have come under fire since it was learned merrill gave billions of dollars in bonuses to employees while getting bailout money from the government. lewis says he's confident in leaving now, because b.o.a. is ready to meet the challenges of a global economy. the bank says lewis was a key player in establishing it as a global financial franchise and now it will look for a successor. joining me now on the phone for the latest analysis of lewis' retirement from b.o.a. is dick bove, bank analyst at rochedale securities. her hello. >> susie: why now? why the timing of today's departure? >> i think there are just too many governmental actions being brought against the company. i think that new york city and ohio are both suing the company. you've got the s. e. c., congress, and a federal judge all wanting to do something against the company. so that's the reason why now. >> susie: do you think that the obama administration had
anything to do with lewis' departure? >> well, to the degree that they control the s. e. c., the answer would be yes. but i'm not sure it's at the top of their agenda. >> susie: all right. who will be lewis' replacement? could you see it as being from the outside or somebody inside the bank? >> well, the to people i think would be in top position would be brian moynihan, who is the head of the retail bank, and the person that i like the best is barbara desoures,. >> so you think it will be an insider? >> i believe. so it would be against the tradition and culture of this company to take one from the outside. >> susie: what about sally kraucheck who just got a big job over at bank of america? >> he's not in the running because she's not a bank of america person and she has no history at the company. >> susie: what do you think will be the null one job of the new c.e.o.? >> you've got to control the loan losses that are in the
company. i think that the acquisitions of merrill and countrywide, despite what people think, were huge successes for the company, they benefited the bank. the area where the bank has serious problems are in the loan losses, that's where the greatest attention has to be paid. >> susie: bank of america stock is up in after hours trading. would you be a buyer of the tok at these levels, around $17? >> yes, i think the potential of the stock is enormous given that the fact that its loan losses over the next few years should contract from 65 billion a year down to about $10 billion a year and that will cause earnings to soar. >> susie: all right, dick, thank you for coming on the program. >> thank you. >> susie: my guest tonight, dick boef. >> paul: it's the end of the road for gm's popular saturn. in a surprise announcement late today general motors said penske automotive scrapped talks to buy the saturn brand. one of the world's largest car
dealer networks penske was concerned it might not be able to get vehicles after its manufacturing contract with gm ran out. gm and penske had been working on a deal since june. gm now says it will phase out saturn and its distribution network of 350 dealerships. we'll learn more about this tomorrow, as we talk with gm's global marketing director michael di-giovanni about the automaker's september sales numbers. it was a rough start for wall street today as investors focused on a weak private reading on employment and a survey showing a contraction of mid-west manufacturing activity. by 10:00 a.m. the dow had tumbled 130 points with the nasdaq off 28 points. cash-laden investors bought into the weakness lifting the dow to 13 point gain by 1:00 p.m. with the nasdaq up 11 points. energy and tech stocks led the comeback, helping the market close well above the day's lowest levels.
public offerings. after a drought in the i.p.o. market due to the recession. so is this the beginning of a gusher of newly public companies? scott gurvey reports. >> reporter: with the market rally, it was only a matter of time before the green shoots of initial public offerings sprouted. after seven months of a virtual shut down in the ipo market, the number of new issues has been rising, although it remains well below last year's levels. last week, a123 systems went public on the nasdaq. this company makes batteries for electric cars, an industry targeted for funding in the economic stimulus package. investors have already bid its stock price up by 50%. but david menlow of ipo financial network worries they are being too speculative. >> the big trap for investors are gonna be those companies that come into the marketplace as a result of any stimulus spending that is coming around the corner, next week, next month, in the next quarter, what have you. these are companies that will not immediately benefit from
whatever money is being thrown around but it will be the perception that everyone will get trapped into. >> reporter: in fact market performance for several new issues has been poor, with prices staying around their first trade. two real estate investment trusts had rocky roads to market this month. two others were canceled. william smith of renaissance capital says the current market reminds him of the 1970s. >> it was a very troublesome period. there was no ipos during that period. right after, when, in the mid to later seventies, the ipo market did come back. however it took a long time to do that. it was more in dribs and drabs rather than a big bang. and so we're not expecting any kind of a big bang anytime soon. >> reporter: the experts warn investors to pay particular attention to each specific offering. this is not, they say, a climate where a rising stock market will lift every ipo. >> obviously the big question how are you going to find the right deal? it's going to be really as simple as investors doing their
homework and not relying on other people to say hey this is a great stock you got to do it. >> reporter: there is still a lot of money sitting on the sidelines and many private equity firms have invested in companies they eventually plan to take public. that means next year may be the year the ipo market returns to some kind of normal. scott gurvey, "nightly business report", new york. >> susie: the internet is a little more global tonight. the commerce department today agreed to relax its control over the non-profit company that sets the rules for web site domain names. in theory, it means the internet will now better reflect its global footprint.
in practice, it means stay tuned for a ton of new places to surf, which may be good or bad news. darren gersh explains. >> reporter: just when you think you're a master of the internet, they throw in something new. >> a dot sport, you know or a dot berlin or a dot new york city. >> reporter: that's rod beckstrom, ceo of the internet corporation for assigned names and numbers, icann for short. icann is like the internet's postmaster general, making sure every website has a unique address. and the number of possible addresses will explode next year as icann expands the neighborhood beyond top-level domain names like dot com and dot org. >> when icann was created by the us department of commerce 11 years ago, the mandate, right there in the top was "you need to create competition in this marketspace for names by creating new top-level domains." and in general people like to have options and choice and it leads to innovation. >> reporter: so how much innovation and choice will people have that they didn't have before?
>> what they didn't have before is firstly, they had to have latinate characters, we think as english characters all the way through the dot com or dot net. that is going to change. >> reporter: that means a website in china will be able to write its domain name using chinese characters. and for companies: instead of, say, coke.com, you might simply use coke. but where icann sees choice, many businesses see added cost. after the expansion, companies will have to register hundreds of new domain names to protect themselves from cybersquatters, those people who register valuable online names and sell them off to the highest bidders. steve delbianco represents e- commerce giants like ebay and verisign. at a recent congressional hearing, he argued new domain names won't lead to more innovation. >> dot food won't create a single new restaurant. it won't create a new webpage. it won't create new restaurant reviews or online reservation sites for restaurants. they've already got those. >> reporter: beckstrom says when dot com was created, critics said the same thing. >> someone said we are going to
create this dot com, but no one is going to use it. why is there any reason to have dot com. we don't need it. and the reality is that dot food may or may not make it. dot new york city may or may not make it. but why not let the free market decide. >> reporter: this is an important day for icann: the u.s. government has agreed to relax its control over the non- profit company, making it more international. >> over 100 million new users will come to the internet this year. 95% of those are outside the united states of america. so the internet is a truly global phenomenon and we need the buy in of the community and stakeholders worldwide. they should be governing this collaborative body, not just one country. >> reporter: online experts say domain names matter less now, since most people find sites through search engines. but annalisa rogers thinks dot green will be different. she's setting up a non-profit registry that will help people find companies and programs that help the environment. >> i think it's a big deal for the environment and for the planet as a whole.
the movement is happening and dot green gives it a chance to happen online. >> reporter: you can see the complete inteview with icann's rod beckstrom at nightly business report on pbs.org or pbs.media or pbs.interesting or pbs.watch or just plain at pbs. just kidding, at least for now. darren gersh, "nightly business report," washington. >> paul: now, let's take a look at some stocks in the news tonight.
>> thanks, paul, good to talk to you. >> paul: what a bullish quarter it was. look at these gains. let's have a look at some of these averages, they are really up. 15% and better. what do you make of this quarter, why all the bullishness? >> well, paul, certainly it was a good quarter. it was the fifth best third quarter since 1929 for the s&p 500. and i think certainly it's because we have investors who are hoping that the third quarter gdp will come in stronger than they expected because of a weaker year over year changes in energy prices and a weakening dollar that that probably could signal an improvement that third quarter earnings results. >> paul: what sectors led the market higher in the quarter? >> well, with this kind of performance i think you'd be priced if it were not the cyclical sectors, and yes they were the leaders. industrials, financials and material stocks all led the way higher by about 19% or so. >> paul: the weakest of the sector was? >> well, basically a rising
tide lifts all boats, so these three were higher, but they were definitely the defenses of consumer staples, health care and -- >> paul: looking ahead to the fourth quarter, can we expect the gains to continue, sam? >> i think the gains will continue, but probably not at the same magnitude. october, which is usually a relatively flat month i think could end up being a little better than expected because i is the first october since the new bull market, and traditionally the first month following the end of a bear market does relatively well. if economic growth is likely to continue to be working its way slowly higher, then i think that could help pull prices with them. >> paul: what times of stocks do you think will lead us higher should we go that way? >> again, i think that it will probably be the cyclical areas in this case consumer discretionary, probably
industrials and technology stocks could do fairly well. >> paul: what sectors would you absolute avoid over the next three months? >> again, i would tend to say that if the market is in an upper trend, a trend is your friend is the old saying, traditionally the defensive areas are the ones that lag. they are good dividend yields, but health care, consumer staples and utilities probably will be under performers on a price basis. >> paul: we've had a lot of analysts saying that the market has gotten ahead of itself when you compare to it the improvement in the economy. what are your thoughts? >> well, paul, i think what traditionally happens is that investors underestimate the strength of a new bull market. there's a lot of cash on the sidelines, a lot of people have been waiting for a correction in the stock market that really has not materialized. and if history is any guide, and certainly not gospel, we could he 1200 for the s&p 500 by the summer of next year. >> paul: where do you see the standard and poors 500 at thele of this year?
>> i think certainly higher than where we are right now, probably approaching the 1100 level. >> paul: 1100 level. fair enough. any last thoughts for our viewer as we end the third and start the fourth quarter? >> well, paul, certainly i would just say that we are looking for an economic recovery, probably the word recovery will not be spelled with the letter v, but probably with an elongated u. so i would say be optimistic but not overly so. >> paul: sam, i want to thank you very much for sharing your views with us once again. >> my pleasure as always, paul. >> paul: my guest, standard and poor's sam stovall. >> susie: tomorrow fed chairman ben bernanke testifies on capitol hill about giving the fed more power to oversee banks. >> susie: only 85 more shopping days 'til christmas and wal-mart is using all of them to attract bargain hunters. the retailer is pricing more than 100 toys at ten dollars each. they include classic board games, popular dolls and action
figures. some items are marked down more than 50%. last year, wal-mart offered just ten toys at ten dollars. the prices are aimed at recession-minded shoppers keeping a tight rein on the purse strings this year. >> paul: chevron has a new chairman and ceo and he'll take the reins at the end of the year. john watson has been with the nation's second largest oil company since 1980, most recently as vice chairman. current ceo david o'reilly is retiring after 41 years with the company. euquu
>> susie: here's a look at what's happening tomorrow. september auto sales are released along with the august reports on personal income and construction spending. in the money file tonight why the sidelines aren't the best place to be if you're planning for retirement. here's charles bennett sachs vice president and wealth manager at evensky and >> why safe isn't always safe it was mark twain who said that he was more concerned about the return of his money than the return on his money. in this time of uncertainty, it is this very reason why investors have so much cash on the sidelines these days. and who can blame them after the
year we all just lived through in the investment markets? we are in the midst of a global slowdown the likes of which we haven't seen in decades and while many see glimmers of light at the end of the tunnel, some see sustained darkness for some time. cash holdings while generally safe from a principal protection standpoint are far from safe when it comes to meeting future spending goals primarily due to time and inflation. time because you are probably going to live longer than you think, in fact there's a one in four chance that you or your spouse will live until age 95. inflation acts as the hidden tax always working to erode ones buying power with devastating results over long periods of time. the solution? being an owner of a diversified basket of businesses, affords one the opportunity to share in the profits of those businesses. and while individual businesses will fail, the overall basket tends to do well over time. its also important to realize that its not necessarily an all or nothing game. studies have shown that while humans tend to gravitate to an
all-in or all-out approach, having some blend of cash, stocks and bonds is most appropriate for the vast majority of investors. don't let the powerful feelings of fear and greed cloud your judgment and derail your long term plan. i'm charles bennett sachs. >> paul: recapping today's market action stocks slip as wall street wraps a winning quarter. the dow lost almost 30 points and the nasdaq fell 1-1/2 points. to learn more about the stories in tonight's broadcast, to watch our streaming video and to take part in our daily blog, go to "nightly business report" on pbs.org. you can also email us at email@example.com. that's "nightly business report" for wednesday, september 30. i'm susie gharib. goodnight everyone. and good night to you paul. goodnight susie. i'm paul kangas wishing all of you the best of good buys. "nightly business report" is made possible by:
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