tv Nightly Business Report PBS December 28, 2009 7:00pm-7:30pm EST
>> it makes me not want to travel by plane as much. >> paul: new security measures mean tough times for air travelers but they could also mean a tough future for the airline industry. an industry just gaining altitude after struggling with costly fuel prices and recession. >> susie: the blue chips mark fresh highs for the year. we look at where wall street could be headed in the new year with joe battipaglia. he's market strategist at stiffel nicolaus. >> paul: retailers were among the winners on wall street today. early results show late shoppers may have rescued the holiday shopping season. >> susie: then, when it comes to investing risk is a 4-letter word. we talk with a professor who says our risk tolerance when it comes to investing is often hard-wired into our dna.
thank you. captioning sponsored by wpbt >> gharib: good evening, everyone. a frustrating day for air travelers. people travelling for business or vacation, and the increased security rules after the terrorism incident over the holiday weekend. but the restrictions are causing more than just headaches for passengers. they are calling into question the outlook for the airline industry. erica miller reports. >> reporter: at many airports around the country you'll see frustrated faces. and long lines. you'll also hear comments like these: >> i think it's sounds like a lot to ask at this point given what we go though already. it's seems like they comb through everything pretty meticulously at this point already. >> reporter: but it's not just passengers who are being affected. experts say the u.s. airline industry could get hit hard if travelers become less willing to fly due to terrorism fears and added security hassles.
in hawaii, president obama promised the government will do all it can to keep americans safe. >> we do not yet have all the answers of this latest attempt, but the united states will not only strengthen our defense, but we will continue to use every element of our national power to disrupt, dismantle and defeat the violent extremists who threaten us. >> reporter: while leisure travel will be impacted, experts say the biggest threat is to business travel, the bread and butter of the industry. those passengers fly more frequently, typically pay higher fares. kevin mitchell of the association of corporate travel executives says just a few business ticket cancellations per flight can have big impact. >> if you lose three or four high paying business travelers on a flight, you can go from being in the black on a flight, to being in a red.
in today's economic environment, for the airline industry, what we're really talking about is deeper losses. >> reporter: as a result, airlines are appealing to federal officials not to scare away travelers with unnecessary security measures. concern about lost revenue pushed airline stocks lower today. the decline follows gains over the past six months on optimism about the economic recovery. the big question is whether we'll see more bankruptcies and mergers in the sector, like we did after 9/11. analysts say the answer depends on how burdensome security precautions become. and how long they last. erika miller, "nightly business report", new york. >> susie: after pumping over $2- trillion into the banking system, it looks like the fed is preparing its exit strategy. the federal reserve today proposed a new tool that will help it pull money out of the banking system, when it starts to raise rates. the fed says the "term deposit facility" is just prudent planning and has no implications on near-term policy decisions.
but the central bank says it will not impact policy decisions. >> paul: wall street posted modest gains in early trading on reports showing holiday retail sales were a bit better than expected the retail details coming up. the dow rose about 20 points at the outset while the nasdaq gained 8 points. with many traders taking time off for the holiday period, the upturn had little staying power the airline sector was weak after that attempted bombing of a jet on christmas day, but some late buy programs helped stocks recover their early gains at the close.
>> susie: our guest tonight says 2010 will not be a great one for the markets because of a sluggish economy and a poor job market. joining us now to explain joe battipaglia market strategist of the private client group at stifel nicolaus. hi, joe. >> hi susie. >> gharib: i want to say a lot of investors this year were playing it safe, waiting for them to put the money back in the markets and now this terrorist incident over the weekend, what would you say to investors who are worried about putting their money into the markets because of this stress? >> well, this threat was an isolated incident. it looks like the united states is going to be very tight on
this issue. it was an international incident and there are many that have occurred throughout the year and unfortunately that's a possibility that will occur in the years ahead. unless there's something orchestrated of significant side, it will probably not deter the anies or the markets -- the economies or markets from behaving as opposed to terrorism. >> gharib: aside from the terrorism anxiety, you still have a very lukewarm outlook for 2010 in terms of stock market performance. tell us a little bit about your thinking there, about the economy and the job market and other issues. >> we had this stellar rally from the march lows and the expectation that the fixes from the financial system will sustain themselves once the government pulls away and that the economy would have a robustness about it, that the private sector will have robust gdp gains. i expect us to have weaker quarters in 2010 as the government pulls away the props. if that's true, then earnings
will disappoint to some degree, particularly in the second half. that might mean the market will be a difficult place for investors in 2010. >> gharib: tell us more about investment profits because investors look to earnings. can you give us hour analysis on that? >> we hope to have a v-shaped recovery next year, that employment would start to gain momentum so unemployment would fall dramatically. profits would grow 50% from current levels. here's the problem. if the economy only grows at 2% or 3% we won't be able to knock down the unemployment rate. the consumer will still be working through the leveraging and as the federal reserve pulls away from the props interest rates may change, the banking system may go through gut-wrenching change and in the process you don't get the earns results you had hoped for. let's face it, brazil, india and china are great stories but they can't pull the rest of the engine and the market with them. that would be the united states,
japan and europe who are still very sluggish. >> gharib: what's -- it's interesting you brought up the international twist to your analysis, but many strategists are saying it's a sensible strategy for american investors to put more of their stock portfolio into international markets. what is your thinking on that? does that make sense to you? >> well, over a long period of time i would agree because the capital returns will be greater. let's not lose sight of the fact that the markets are synchronized. it gets bad the here and there and they tend to be more volatile, so the swings up are great, but the swings down are harder. so we have a synchronized situation going into a sluggish u.s., japanese and euro market for 2010. the chinese are talking about excess speculation in property and real estate generally. so it could be a difficult time to make the commitment now. the longer-term point of view may bear out that capital is going to the markets and if we reregulate and change the way we
do business we may not be as competitive as we used to be. >> gharib: one quick question, you have the allocation of the 60% investor put their money into bonds, 40% into stocks. interesting mix. you think the investors are better off for bonds? >> well, for the balanced investor it is reversed. we believe you'll see modest single rates return and they'll outperform the market, and we're looking for corporates and municipals in a laddered way to hedge against future changes in rates. on the equity side you want to stay globally diversified, companies that are leading their category around the world, not just in the united states. and go with technology and healthcare to name two sectors where there's a competitive advantage and there's no carry over from the mortgage bust. >> gharib: thank you, a lot to talk about. >> susie: my guest tonight: joe
battipaglia of stifel nicolaus. >> susie: so much for gloom and doom holiday shopping forecasts, new numbers out today show retailers had a greener than expected christmas. mastercard's "spending-pulse unit" tracks receipts. it says sales jumped over 3.5% from november 1 through december 24. but if you factor out the extra shopping day this year between black friday and christmas eve, the increase was only 1%. the shopping season isn't over yet. stores are expected to remain busy this week as shoppers cash in on after christmas sales and giftcards. paul? >> paul: susie, we'll get a better picture next week, as several retailers report their december sales numbers.
and those are the stocks in the news tonight, susie. >> susie: from low interest rates to homebuyer tax credits and foreclosure prevention programs, the u.s. government has become a major player in the housing market. it's even taking on whole neighborhoods, through a grant program designed to help areas hard hit by the foreclosure crisis. money for that "neighborhood stabilization program" is just now getting out the door, even though it was signed into law two summers ago. stephanie dhue reports. >> reporter: in the last year, foreclosures have doubled in east baltimore's belair edison neighborhood. homeowner larry mickey knows the reality of that statistic. >> look right across the street there, you got at least 2 or 3 right across the street that people couldn't afford to stay and they had to move. >> reporter: 13% of homes in
baltimore stand vacant. the goal of the neighborhood stabilization program is to fill those empty houses. this house is boarded, is that typical? >>you may have vacants, but they haven't reached the point of being boarded, this is a somewhat unique property and something we can address hopefully fairly soon. lisa evans heads up st. ambros. it's a non-profit group that buys vacant properties, fixes them up, and resells them with a subsidy for low income buyers. >> we want to make sure somebody comes in and they're not spending a great deal on their first five years of ownership. >> reporter: st. ambros will get $1.6 million from the neighborhood stabilization program. >> for us, it's a continuation of what we've been doing in housing development, buying, acquiring and then rehabbing foreclosed properties in certain parts of the city and totally rehabbing them and then offering them for resale to home owners.
>> reporter: but st. ambros hasn't seen any of the money yet. >> we had high hopes of last spring and then we had high hopes early in the summer and now we're hoping to be able to do some funding in the very first part of the year. we're hoping that come january 1 we'll actually have dollars to actually start purchasing properties. >> reporter: the neighborhood stabilization program was supposed to help communities like this make it through the foreclosure crisis, but like here in baltimore, around the country, the program has been slow to take hold. criag nickerson heads the national community stabilization trust. he helps bring together banks that have foreclosed properties with local governments and non- profits. its an effort that takes time. >> we need to be patient, we are starting slow, but i've been in this business of affordable lending and community development for over 35 years and i've never seen a new hud program, national in scope that has gotten off to a fast start. >> reporter: so far only a quarter of the money in the
program has been assigned to projects, meanwhile the private market is showing some signs of recovery. investors are now competing with non-profits to buy vacant homes. but evans worries some investors are just looking for a quick buck. >> what we're concerned about is the investors who come in who will not do a very good job, who will just do the cosmetic approach, sell, then you have a homeowner who has a property that may need, in fact, more work then they're equipped for and you're back in the cycle of foreclosure. >> reporter: nickerson says the program hopes to encourage private investment. >> certainly, the $6 billion that has been approved and appropriated over the last year and a half isn't going to do more than scratch the surface of the problem - we have whole neighborhoods that are devastated. >> reporter: expect non-profits like st. ambros to be busy over the next nine months. they're required to spend the stabilization money by september. stephanie dhue, "nightly business report," baltimore.
>> paul: tomorrow, we talk with john bogle, the founder of vanguard group, about his outlook for the markets and small investors. >> susie: corn prices popped 2% to a 6-month high today closing at $4.16 a bushel. you can blame the spike on mother nature. last week's snow storms delayed the final harvest of this year's corn crop, leaving about 5% in the field. but you won't necessarily see an increase at the supermarket checkout line. some experts say there's no correlation these days between corn prices and food prices. >> paul: holiday shoppers on e- bay went mobile this year. the web site saw a surge in buyers using cell phone applications. every two seconds, an ebay item was sold worldwide on a cell phone. 1.5 million items, worth more than half a billion dollars were bought by mobile shoppers this year. that's triple the number sold last year. those purchases ranged from
>> kangas: investing involves some area of risk, but the ability to tolerate risk varies from person to person, so your mind, your money is looking at the trade of risk tolerance. joining us is an expert, professor meir statman, of the leavy school of business at santa clara university. welcome to "nightly business report". >> good to be with you, paul. >> kangas: you have studied personalities as a factor in risk tolerance. so are people with certain types of personalities more risk tolerant than others? >> yes. some people are extroverts, for example. they're outgoing people, they're willing to take more risk. conscientious people are less willing to take risk. >> kangas: do genetic factors make some peel willing to take bigger financial risk? >> yes there's good evidence
that it makes you more willing to take risk, but of course environment and upbringing matter as well. >> kangas: financial planners often have their clients answer risk tolerance questionnaires. but do you think the findings on these tests are often inaccurate? >> yes, they are. they neglect other things that matter to investors and to financial advisers. for example, overconfidence. people who are overconfident think that they can take risk, but they cannot. regret, some people look back and they say, gee, i should have been out of the market in 2007. other people just take it in stride. >> kangas: so those questionnaires aren't all that accurate you say? >> well, the question has to be augmented and it has to be focused and seem that investors who are willing to take risk as far as 2007, surely are not willing to take risks last march.
>> kangas: so is risk tolerance just one factor in a person's overall financial profile? >> precisely. precisely. i think that regret matters at least as much. you can see that in the jumpiness of people, in march of this year. i think the trust matters as well. that there's people who are generally trusting, more willing to trust the adviser and follow advice. those who are always suspicious are not. that too is part of our nature. >> kangas: we have less than a minute less, professor, but how do you find a risk level that allows you to sleep at night? >> well, what you do is when you divide your money into parts, and you put in one part -- that's money that will enable you to sleep at night. and the other part you can put the money that will make you rich some day. if you're lucky. >> kangas: so you've got one
part gambling and the other one for safety sake? >> that is who we are, we want both. we want not to be poor and we want to be rich, and a good way of getting both is splitting your money. >> kangas: professor statman, most interesting. i want to thank you very much for your insights. >> thank you, paul. >> kangas: my guest professor meir statman. >> susie: tonight's commentator is bidding a not so fond farewell to 2009. he's alan sloan, senior editor at large at "fortune" magazine. >> the best things to say about this year are that its almost over. and that its giving us an object lesson in the difference between the stock market and the overall economy, on the one hand and the real world, on the other. stocks are way up this year. the economy-as measured by the gross domestic product-seems to have stopped shrinking. in a year or so, the arbiters of business cycles may rule that the great recession ended this spring. but despite the upbeat market and economy numbers, the only green shoots many people are
seeing consist of weeds in the parking lots of abandoned malls. unemployment has gone way up this year, the foreclosure and home price situations have gotten worse. and lets not forget the traumas, such as stocks crashing through mid-march, bank failures in triple digits, and gm and chrysler going bankrupt. sure, there's been some good news lately, with big banks repaying their tarp loans to the government. but even that may turn out to be bad news. i think the banks may end up back in trouble once they're freed from the government, because they haven't changed all that much. so lets bid a not-so-fond adieu to 2009. and to the whole decade, one of the few which ended with stocks lower than they began. lets hope for a better new year. and a better decade. we sure could use them. i'm allan sloan. >> susie: that's "nightly business report" for monday, december 28. i'm susie gharib goodnight everyone. and good night to you paul. >> paul: goodnight susie. i'm paul kangas wishing all of you the best of good buys. "nightly business report" is made possible by: