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tv   Nightly Business Report  PBS  November 13, 2009 7:00pm-7:30pm EST

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>> paul: fresh signs of weakness in the u.s. economy as consumers fret over the future and the trade gap widens by the largest percentage in a decade. that trade imbalance is pressuring the dollar and pressuring your wallet.
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>> the fact that they don't believe they need health care and the fact that they are willing to take risk is a deadly combination. >> susie: he's talking about his peers and why young americans could be key to making health reform work. >> paul: tonight's market monitor guest says he's still extremely bullish on gold and silver. he's michael o'higgins, president of o'higgins asset management. >> susie: then, japan airlines is struggling to gain altitude, being weighed down by billions in debt and another round of losses. that's why some say fixing jal could be a major test for japan's new reformist government. >> paul: i'm paul kangas. >> susie: and i'm susie gharib. this is "nightly business report" for friday, november 13. "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. thank you. captioning sponsored by wpbt >> susie: good evening, everyone. our trade deficit is getting bigger, much bigger. the latest numbers from the commerce department today show the u.s. trade deficit expanded more than 18% in september. that's the biggest one-month increase in ten years. even though american businesses increased exports, imports, especially oil imports, rose even more. economist david wyss says the trade gap is a threat to the economic recovery. >> the major risk is that we get into a downward spiral that the
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trade deficit will put downward pressure on the dollar. that could cause foreign investors to pull out of u.s. assets. sending interest rates higher and further slowing economic growth in the u.s. >> susie: the falling dollar has been a big concern to wall street. >> they have been heading south since last year on growing concern about the. is economy and it's worrying people from wall street to main street. as erica as erika miller explains, even people without a penny in stocks or bonds are feeling the impact. >> reporter: americans planning a winter vacation might want to avoid popular european destinations like london and paris. six years ago, you could buy a euro for 87 cents. now it will cost you almost $1.50. in practical terms, that means non-luxury hotel rooms at $300 a night in many european cities. but travel agent jennifer wilson buttigieg says many of her leisure clients would rather
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stay in cheaper rooms, than not go at all. >> business is off. most luxury brands are trending 30% off. and we've held those trends pretty closely. but if someone is really hoping to go to the amalfi coast. we're just in our offices today, they're still going to go quite honestly. >> reporter: but a weak dollar can affect you, even if you stay home. at the pump it pushes up the price of gasoline. for example oil is priced in dollars. so, when the currency declines, middle eastern crude producers charge higher prices to compensate. and that gets passed along at the pump. if you like expensive french handbags, for example, you may have to pay more. but not necessarily. often businesses opt not to raise prices for fear of losing customers. economist jonathan basile says stores can offset higher import prices by cutting expenses. >> labor makes up the biggest part of any balance sheet on the cost side. and right now, labor cost pressures are non-existent. if anything, they are shrinking >> reporter: china is one of the biggest exported to the united
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states. and it pegs its currency to the dollar. so at a stores that sell a lot of chinese goods-- prices are typically not affected much by currency fluctuations. while prices for some imports may be rising due to the weak dollar, the bottom line is that inflation doesn't seem to be much of a risk. >> if every product in the u.s. was imported, i would be more concerned about that. but it isn't. and not every price of an import gets passed through all the way to the consumer anyway. >> reporter: speaking of passing through the weak dollar makes it cheaper for europeans to vacation in cities like new york. that bring badly-needed money to the stores, hotels, and restaurants. erika miller, nightly business report, new york. >> paul: weakness in the dollar helped wall street open higher as did disney's better than expected earnings that we told you about last night. buyers were also inspired by j.c. penney's more upbeat earnings and revenue forecasts. two hours into trading the dow was sporting an 80 point gain with the nasdaq up 13 points.
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investors brushed off an unexpected drop in consumer sentiment and the rally continued into the afternoon with the help of buyers afraid of missing the gains. so stocks went on to close broadly higher.
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>> susie: next week will be a big one for health care reform. the senate is expected to unveil more details of its reform bill. and the congressional budget office is expected to deliver an estimate on just how much that bill will cost. as darren gersh reports, one of the groups that will see the greatest changes is now one of those least likely to have health coverage. >> reporter: although it may sound odd at first, one of the key goals of health care reform is to get young, healthy people those least likely to get sick to buy insurance just in case. it makes sense to joe maniscalco. >> the fact that they don't believe they need health care and the fact that they are willing to take risk is a deadly combination. >> reporter: as a member of george washington university's college democrats, it may not be surprising that maniscalco supports health care reform. one feature he likes best is a
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new law that would let him stay on his parent's health plan until he turns 27. >> it allows you to settle down, get a job and make an income where you can afford to start paying off your loans and you can afford to start paying for health care. >> reporter: while many important details are being worked out, health care reform will mean big changes for 20- somethings. to begin with, they would be required to buy insurance or pay a fine. right now one in three are uninsured. subsidies would offset some of the cost. and the premiums would be set so younger workers pay between two to $3,000 a year, that's roughly one half to one quarter of what older americans would pay. in essence, with more young people buying insurance, their parents will be paying somewhat less. the reason for that, says health expert stephen zuckerman is simple. >> the group that is having the greatest affordability problem are older workers who are not yet eligible for medicare. >> reporter: that doesn't
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necessarily sit well with ali esteva-sanders who is young and healthy and would rather use her money to pay off student loans. >> i don't think the younger generation needs to support the older generation. i think every generation should support itself. >> reporter: this is a very personal issue for esteva- sanders. she is thinking about becoming a doctor, provided, she says, the government doesn't nationalize the system. >> i don't want a government to tell me the procedures i can run, the amount i have to charge for the procedures. i want it to be up to me, not the government. >> reporter: esteva-sanders admits most of her classmates don't share that view. even though it could raise their costs, a recent pew center poll shows younger americans are the strongest supporters of health care reform. darren gersh, nightly business report, washington.
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>> susie: it's been said bernard madoff could not have pulled off his massive ponzi scheme without help. today, the feds arrested two alleged accomplices. prosecutors say jerome o'hara and george perez created computer programs that helped facilitate the fraud and conceal it from regulators. the former madoff employees face a maximum of 30 years in prison on conspiracy and related charges. the securities and exchange commission filed separate civil charges and financial penalties against the pair. the sec says madoff's scheme would not have been possible without o'hara and perez, paul. >> paul: susie, lawyers for o'hara and perez said their clients are innocent until proven guilty, both were released on bond today. now let's take a look at our stocks in the news tonight.
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and those are the stocks in the news tonight, susie. >> susie: rising fuel costs and falling demand are big problems for airlines around the world but few are struggling as much as japan airlines: it posted today a loss of nearly $1.5 billion for the first six months of its fiscal year. asia's largest carrier also asked the japanese government for help in restructuring 15- billion dollars worth of debt. as lucy craft reports, those problems are opening up opportunities for j.a.l.'s competitors. >> reporter: a once-prestigious corporation and major employer.
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now synonymous with failed management, bloated payrolls and legacy debts. yet too big to fail. sound familiar? in many ways, the decline of japan airlines seems an instant replay of the g.m. saga. until now, cost-cutting attempts have been only half-hearted. >> it's like, the plane is overloaded, the power is not so good, so they've got the door open, they're throwing things out the door, and it helps a little bit. but the plane is still going down. now they're getting so close to the ground, they're running out of money. but getting more money is only a temporary sort of thing. they also need to get costs under control so they can get back to break-even. that's not easy. ( applause ) >> reporter: fixing japan airlines, or jal, is a test for the new reformist government. it has vowed to halt the coddling of sacred cows like jal, which has continued to behave like a state fiefdom despite privatization. but turning around jal will be a tougher job than g.m., because bankruptcy is not an option.
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economist motoshige itoh says that because jal accounts for more than half the domestic flights in japan, its bankruptcy would paralyze local air transport. >> if g.m. just stop producing automobiles for two months, that doesn't cause a problem for consumers. but in the case of japan airlines, if jal just go to bankruptcy, like chapter 11, in the context of the united states, what would happen is the service would stop suddenly. we have four big islands, so airplane is very important transportation for long distance, from one part of japan to the other. >> reporter: but observers like merner are skeptical whether the carrier, crippled by its unusually rich payments to retirees, will ever make money. >> now they have to come to an agreement with the employees, former employees, to cut pensions way down, well, they won't be happy. they'll go on-strike, have protests, so everything is in
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disarray right now, everything has to be reorganized. >> reporter: but for u.s. carriers, there's a silver lining to all this red ink. delta and american airlines are locked in a fierce struggle to gain minority stakes in japan airlines. the tie-up would give delta or american access to some of the most lucrative routes in asia - itself, the fastest-growing aviation market in the world. economist itoh says an alliance with jal with its many flights to china, south korea and indonesia, offers reward, with little risk, for the potential u.s. partner. > the routes between these countries and japan is probably expected to just increase demand. so i think there's a huge opportunity for american aviation companies to be involved in this kind of route with japan airlines. >> reporter: whether jal proves basket case or bonanza, will hinge on how aggressively government and a new ceo can attack costs. lucy craft, "nightly business report", tokyo. >> paul: monday, general motors
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ceo fritz henderson tells us how the automaker's doing with its turnaround. >> susie: wal-mart is using its double-a credit rating to help more than a thousand of its vendors get the money they need to finance their operations. suppliers can go to a bank with a purchase order from wal-mart and use that as leverage to get short-term financing. wal-mart's supplier alliance program comes after cit group, a lender to nearly a million small and mid-size businesses like apparel makers filed for bankruptcy >> paul: pilots at u.s. airways say talks with the carrier are hopelessly stalled. so their union today asked for help from a federal mediator. the pilots and the airline have been negotiating a new contract since 2005. that's when america west bought u.s. airways. since then, the merged company's pilots have been flying under separate union contracts and work rules. u.s. airways had no comment. euu
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>> susie: here's a look at what's happening next week.
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my guest market monitor this week is michael o'higgins, president of o o'higgins asset management in florida. welcome back. >> nice to be here. >> wall street continues in a rally mode that seems unstoppable. what is the main driving force behind this impressive bull? >> it's the fed's money printing machine. >> simple as that. >> trillions of dollars. they've got to find a home somewhere. >> and they are fining in the stock market. >> i mean businessmen aren't confident so they aren't going to invest in factories and creating new jobs so it goes into speculation. >> what could turn the tide and cause a sharp downturn? >> well, i think the market usually falls on its own weight, periodically,
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particularly if it gets ahead of itself. it probably a little ahead of itself. it has had a huge run since march. an typically even if this is a cyclical bull market which it may or may not be we should get a 14 to 15% correction from here. >> do you think it is overdue, is that what you are are i are saying. >> probably. the sentiment measures that typically accompany at least a short-term top seem to be prevalent right now. >> uh-huh. >> for some time now and especially on your last visit with us in early may, you recommended buying mostly gold and silver stocks and they turned out to be very profitable. let's see how those pics that you gave us have done since early may. market investigators up 50.7 percent, are you still -- do you like it. >> no, and i will talk about that later. >> okay. how about the ishares, silver trust. silver is running behind gold. >> well, it has been
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outperforming gold which it normally does, you know, catching up, it was too cheap the last time but interestingly now, now it stalled and even though gold is making new highs silver is not which is another worrisome sign. >> but are you still with the silver trust shares. >> no, i have sold them. >> okay. then let's have two more of those five-pics. the spider gold shares up 26.2%, still like it. >> that is a physical gold. i still like that. >> and currency share canadian dollar, even they are up nicely, up 6%. >> i own that in some accounts. in australia dollars. >> and there was one other recommendation you had. that was a very conservative one, the tips bond fund. even that is up 5.8%. >> that was really a cash alternative. are you getting 10 basis points, .1% on cash and this was a way of getting a little bit more plus being protected against inflation which cash is not. >> of your five selections, all five were up and some of them substantially. i congratulate you on some great choices there.
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>> thank you, paul. >> how about some new recommendations. >> well, right now i'm very bullish on gold, still. but i worry that if the stock market gets hit the gold mining stocks would also, they typically get hit in a down stock market because in addition to being gold related they are also stocks. so i have sold my gold mining stocks. >> now you like the gold shares. >> and i like the physical gold etf. this is the i shares spdr. the symbol is gld. each share is the equivalent of one tenth of an ounce of gold. >> and it move its almost penny for penny with the price of gold, right. >> yeah, with the exception there is a small haircut for expenses, .4% is their expense ratio. >> do you have a second choice? >> well, yeah, i'm also short the stock market through i'm short the s&p. through the profund, proshares, symbol sh. >> is that a leveraged short fund?
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>> no, it's not. it's one for one so it's not leveraged. it will move -- >> so you are in a very defensive mood only mostly gold and shorting the standard & poor's 500 through that particular etf. >> that's correct. >> okay. not a very bullish fellow but you certainly faired well since your last visit. and i congratulate you again. do you personally own any of the securities mentioned here? >> yes, i own them all. >> you own them all. well, that's a good sign for us. >> thank you, paul. >> thanks very much for being with us again. and sharing your views. my guest michael o'higgins of o'higgins asset management. >> susie: recapping today's market action, strong earnings help propel wall street higher. the dow gained 73 points and the nasdaq added nearly 19. to learn more about the stories in tonight's broadcast and to read jeff brown's blog on what the whopper index can teach your kids about money go to "nightly business report" on pbs.org. you can also email us at nbr@pbs.org. caption test caption test
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caption test cruise ship made its global debut toda at its home port in south florida. royal caribbean's oasis of the seas stands 20 stories high. it's five times larger than the titanic and comes complete with an ice rink, a small golf course and a 750-seat outdoor theater. the ship has 2,700 cabins and can accommodate more than 5,000 guests and 2,100 crew members. but size comes at a cost: the price tag for the oasis of the seas is $1.5 billion. and paul, we'll get a closer look at the ship next week when jeff yastine goes aboard to interview royal caribbean c.e.o. richard fain. >> i'm really looking forward to that. >> i would love to go ice-skating on that. >> i bet you would. >> that would be a new experience. >> especially when it hits florida. >> that's >> susie: that's "nightly business report" for friday, november 13. i'm susie gharib
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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: of an established investment firm have come together. wachovia securities is now wells fargo advisors, with financial advisors nearby and nationwide. for the advice and planning expertise to help you address today's unique challenges, we're with you. wachovia securities is now wells fargo advisors. together we'll go far.
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this program was made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org we are pbs.
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