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tv   Nightly Business Report  PBS  June 1, 2010 7:00pm-7:30pm EDT

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>> we're trying to do everything were can. there is no resource limit. we crossed the billion dollar mark on costs today. we're throwing everything at this. >> tom: $1 billion and counting. something b.p. may not survive, the deep water horizon disaster that is pumping millions of gallons of water into the gulf of mexico. >> susie: plus the white house says they have the resources to foot the bill. the white house also launched a criminal investigation into the spill. you're watching "nightly business report" for tuesday, june 1st. >> announcer: this is "nightly business report" with susie gharib and tom "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 >> tom: good evening, and thanks for watching. it keeps getting worse for b.p., and the gulf of mexico here on this day 43 of that massive oil spill. the obama administration confirmed the justice department is investigating the oil company for criminal misconduct. >> susie: tom, so far all efforts to stop the leak have been unsuccessful. and the urgency to come up with a solution is critical now that hurricane season is here. it began today. and a serious storm could spread oil beyond the gulf
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region. >> tom: certainly new worries in all of this bad news drilled into b.p.'s shares, they plunged 15%, raising questions if the oil giant can survive this crisis. we have two reports looking into b.p.'s future and that justice department's criminal probe. we give why stephanie dhue. >> reporter: after meeting with state and federal prosecutors in the gulf region, they confirmed an ongoing criminal and civil investigation. >> the department of justice will ensure that the american people do not foot the bill for this disaster, and that our laws are enforced to the fullest extent possible. >> reporter: legal experts say it is almost certain b.p. will face criminal charges. the government has a wide range of charges, including the clean water act, the migrant bird act. and the treaty action. while criminal charges may not send people to jail, they could result in a
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fine equal to twice the cost of economic and environmental damages. >> there are a wide range of possible violations under the statues, and we'll closely examine the actions of those involved in the spill. if we find evidence of illegal behavior, we will be extremely forceful in our response. >> reporter: b.p.'s doug suttle says a criminal investigation is not keeping them from the response at hand. >> we're only concerned with a solution. it is not interfering at all, not at all, with our response activity. >> reporter: b.p.'s plan to cap the well has undersea robots making two can can cacuts covering the pie. the move is risky because it could temporarily increase the amount of oil pumping into the gulf by 20%. b.p. expressed confidence
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this latest plan will succeed. >> i think we will be able to contain this thing, and capture it in a ship, and minimize the amount of oil spilling into the sea. >> reporter: with criminal and civil actions looming, attorney holder says it is doing it is and b.p. is doing everything they can to contain the well. >> reporter: concern for b.p.'s survival is spreading like oil from the massive spill in the gulf of mexico. those worries are well-reflected in b.p.'s stock price. it has lost more than a third of its value since april 20th, when oil began gushing under the sea while the deep sea vehicle exploded. many experts, like jack jack aiden think they can survive cleaning up the mess. >> survival is not the issue. what is the damage going to be, in terms of public
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perception and investor perception. >> reporter: b.p. is likely to generate as much as $30 billion in cash flow. it is on the hook to shareholders for $10 billion in dividends, and capital expenses are usually $20 billion. that doesn't leave much for cleanup. with some analysts guessing they could run well into the billions. still, experts any b.p. could easily borrow money to pay for it all, and it could cut assets or its dividend. b.p.'s dividend currently is near 9%. one of the highest in the industry. >> they could easily cut the dividend if they want to. notñi necessarily they should do, but probably for public relations, they might decide temporarily to cut it or suspend it, or do something about it.
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>> reporter: some analysts are also speculating that the plunge in b.p.'s share price could make the company a takeover target. but other others see that as an unlikely scenario because there are few companies that have deep enough pockets to take on b.p.'s trouble. and experts say the cost of crude is the bottom line for b.p.'s damage. suzanne pratt, "nightly business report," new york. >> susie: here are the stories: a seesaw day on wall street as stocks moved in and out of positive territory, finally closing in the red. the dow lost 112 points, and the nasdaq fell 34, and the s&p 500 was off 18 points. now, coming off the holiday, volume here at the big board held steady from last week. on the nasdaq, 2.1 billion shares were traded.
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construction spending surged in april, rising almost 3%, thanks to tax in cent tiffives for om buyers. and for the 10th straight month, manufacturers contribute it. citing inflation concerns. but it said more heights are, quote,"unlikely because of economic turmoil in europe." canada is the first of the g-7 countries to raise rates since the financial crisis began in 2007. and hewlett-packard said today it will cut 9,000 jobs or 3% of its workforce and take a billion restructuring charge. the changes come at h.p. automates its data centers. >> tom: still ahead on the program, john waggoner, the mutual fund columnist at "u.s.a. today". >> susie: the euro fell
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on gloomy economic news. china, a key european trading partner reported a slowdown in growth. they also warned that euro zoned banks could face another round of loan losses, totaling as much as $239 billion over the next 18 months. this afternoon i talked with a london-based economist. bronwyn curtis. she said she doesn't expect europe to slip into a recession. >> we think there is enough momentum from coming out of the global financial crisis and the fact that so much money has been pumped into these economies, interest rates close to zero, that we will see growth continuing. it is just not going to be like we've had coming out of other recessions, where we've seen really a big pickup in growth. this is going to be very muted, but i don't see a
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double dip. >> susie: with the euro also getting weaker, is that a good thing for european growth prospects, or could it hurt those economies? >> the weaker euro is a good thing for european prospects. if you have a weaker currency, you can export to the rest of the world easier. germany is already one of the world's big exporters, and so it helps them a lot. it helps other countries a bit less, but it certainly helps them. we've seen such a big fall in the euro, that over the next six to 12 months, it will be important they maintain that momentum. >> susie: what is your outlook for the euro. we saw it hit fresh new four-year lows. what is your outlook on the euro? >> interestly enough, i think we're going towards the bottom. it is always hard to tell where the bottom is and you can get a spike
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downward. but we're seeing europe trying to do something about its debt problems. we think towards the end of the year, when the mid-term elections go on in the u.s., the focus will go back to the u.s. so we may see a weakening of the dollar then. we're looking for $1.35 by the end of the year. >> susie: that's pretty bullish. let me talk to you a little about the financial system. there is a lot of new concerns about european banks and their financial strength. how would you describe the financial health of european banks? >> look at it this way: central banks have stepped in very quickly during the global financial crisis, to make sure that the system is sound. and i think they are aware. of course some banks will be a bit more vulnerable. what we're seeing in a place like spain is that they're forcing merges between the weak banks and the stronger banks, and
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we'll probably see more of that. could a bank fail? well, of course it could. and, of course, there are very weak banks. but i think at the moment, most people are focused on government. what will the government of greece do in terms of cutting its spending, putting up taxes. and the same with spain and portugal and italy. >> susie: one thing i hear from many american economists is that they'd like to see the european central bank and other regulators act more forcefully, and they said they have to pump more money into the financial system. what do you think of that criticism? >> well, you can always say that. in fact, they have started buying bonds that they wouldn't have bought before. and so we have seen a move. will they do quantitative analyzing? will they start buying junk bonds? i think that is unlikely at this point. although, once a crisis happens, anything can
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happen. the answer is you need to keep growth going in europe, and you need to see those countries that really have fiscal problems do something about it. the problem is, all of these things are much easier if you've got strong growth. if you think about it, if you want to cut wages, if you've got 10% inflation and you cut wages by 5%. that's pretty easy. if you've got 2% inflation and you cut wages by 5%, that's really difficult. >> susie: what american people want to know if this european bailout plan will be enough to contain the crisis, or will there be bigger problems ahead? >> the finance package alone is not enough. we have to see the government take austerity measures and make them stick. and we also have to see europe working more closely together. not just on monetary policy, but on fiscal policy as well. >> susie: so how will we know if this bailout plan is successful or not? is there a timetable? is there anything we
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should be monitoring? >> i think the best thing to monitor is the markets themselves. so bond yields in the euro zone. and also the euro itself. you'll see, if it looks to be credible, the financial markets in europe will stay below us. if not, you'll see anticipation that they'll have to do other things, like, perhaps, investors only getting back a pers tampa bay devil rays -- percentage of their man they've invested. >> susie: we'll watch closely. bronwyn curtis, thank you so much for your time today. >> a pleasure.
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>> tom: well, june started off right where may left off, both in direction and volatility. let's take a look at tonight's "market focus." clearly a very difficult day for investors. certainly after a very difficult month, no doubt. investors have had to withstand some market swings of at least 1% each trading day for the past month. let's start with today's trade of the s&p 500 index. it was another afternoon swoon, with the markets falling to their worst levels in the final 20 minutes. from the best level, to the lows, it was more than a 2% price swing today. the odds of at least a 1% difference between the daily highs and the lows for the s&p 500 have increased substantially. from 1928 through 2007, about one out of every
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four trading days had that kind of move. but since january 2008, it was once every two days that the s&p 500 has changed by at least 1%, either higher or lower. in may, six sessions alone saw daily swings of at least 3%. howard silverblatt does not expect it to subside any time soon. >> we think it will continue in incertainty. it is not just continuing, it is growing. the oil situation, the job situation, the currency situation, whether the euro will grow or stabilize. and so the uncertainty looks like it is actually in creativincreasing, and we thk it will translate into more volatility in the market. >> tom: the mixed index is win way to measure. when it goes up, the level seems to go down. he says it has picked up.
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>> if you're a shorter term investor and your investing in stocks, you need to be able to ride out these waves. if you cannot, you shouldn't be in this market. >> tom: energy stocks led the way lower today. the deep water horizon oil disaster has added to all of the uncertainty for the shareholders of all of the companies involved. earlier suzanne reported on the prospects for b.p. to survive. anadarko has a piece of the oil field. halliburton worked on it, and transocean operated the actual rig, and cameron makes the below out that may have failed. that marks $40 billion. and anadarko and halliburton were among the top eight most actively traded with these losses. aalcoa, the single biggest percentage loser with a drop of almost 4% came even tho alcoa and the united steel workers union
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agreed to a tentative deal covering 5400 workers. there was a merger forged over the weekend as well, and two others that may be taking shape. in the medical device field, covidien will may $2.6 billion for evp. it was carve out of tyco. it was $22.50 a share. e.v.3 makes vascular products. shares up by 17%. hospital operator tenet health care saw its stock drop to a new yearly low. it is talking about a $1.5 billion buyout by a hospital in australia. analysts worry with more than $4 billion in debt, the buyout may be a stretch for tenet. and radioshack is looking for a buyer. shares were up on heavier than usual volume. the first round wrapped up last week.
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radioshack, however, not commenting this evening. apple also able to fight off a weak market in less than two months. it sold more than two million ipads and shares were higher. that's tonight's "market focus." >> tom: trillions of dollars are sitting on the sidelines in money market funds. whether it's safety investors or savings, that cash is not producing much of a return today. tonight's of mutual interest looks at money market funds which hold about $2.5 trillion.
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john waggoner is joining us. welcome back to "nightly business report." >> thanks, tom. good to be here. >> tom: why should someone consider not parking money in a mutual fund? >> because you make nothing. you make about $10 on 2,000. and almost a third of money markets yield nothing. >> tom: we're talking about an average money market yield these days of .03%. a $3 annual return on every 10 grand you have. why not reach for a higher interest rate. reach for more yield? >> the problem reaching for a yield, people tell investment bankers, don't reach for a yield. the more yield you get, the greater risk you get. if you look at a high yield investment, you're looking at a high risk. >> tom: you did bring
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along some alternatives to money markets. beginning with the traditional old-school, old-fashioned bank certificate of deposit. no risk, but you're going to tie your money up. >> you're going to have to tie your money up, so you keep your maturity short. and you ladder them. you're not going to get rich, but you'll make more than a money market. >> tom: and one with a little more risk are very short-term government bonds. we're talking about an i.o.u. to uncle sam for less than 12 months in some cases, and there is an exchange traded fund that tracks this. s.h.b., the ticker symbol on this one. what do you like about this kind of idea? >> you get more yield than a money fund. you get relatively low risk on the one-year treasury. but when rates go up, short-term rates are going to go up first. but you get more yield
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with relatively little risk. >> tom: you go out a little longer on the so-called yield curve and you take a little more risk, and that leads you to a one to three-year government bonds. and exchange rated fund is out there. ticker symbol c.s.j. you're putting your money to a little more risk, but you're getting a 3% yield. >> absolutely. and there is no credit risk involved. if the government were to go bankrupt, you'd have much more things to worry about. where is my canned goods. what's the dog doing. but you get interest rate risks. if rates go up, you lose a little money. but if you hang on to it, you'll get a better yield. that's about the best you'll get if you take a modest risk. >> tom: john waggoner, you can read his stuff at "u.s.a. today". >> susie: and u.s. auto
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deals were strong over the memorial day weekend. we'll talk to warren buffett about his investment in moody's before he testifies before the panel investigating the financial crisis. more gas pedal problems. this time it is ford under the microscope. safety regulators are looking into possible gas pedal problems with the ford fusion and mercury milano. national highway safety association received three complaints about pedals being trapped. in the past, the agent see probably wouldn't take notice of only three complaints, but that problem led toyota to recall five million vehicles in the u.s. >> tom: hershey has reached tentative agreements at two plants. up to 600 jobs could be eliminated because production would move to a
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newer, more modern facility. hershey said it would be one of the world's largest and most advanced chocolate-making plants. if the agreement is rejected, the company would consider moving the work to other u.s.-based plants. >> susie: the growing u.s. budget deficit has tonight's commentator missing some faces from
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our past. he is todd buckles, author of "lasting lessons from the corner office." >> i'm making a list of people who were big in the 1990s and left the scene. i miss frank sinatra, and siegfried and roy, and one other fellow, ross perot. i didn't care much for him at the time. he was easy to make fun of, short, nasal twanged. and he got george the first kicked out of the white house. why do i miss ro ross perot. he took a portion of his billion dollar fortune and taught americans our debt was a time bomb waiting to explode. he aired corny tv commercials, but he scared he aired corny tv commercials, but he scared republicans and democrats.
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