tv Nightly Business Report PBS August 14, 2012 1:00am-1:30am PDT
>> this is n.b.r. susie: good evening, i'm susie gharib. tom is off tonight. congressman paul ryan joins the romney ticket. we look at what choosing ryan, the powerful house budget committee chairman does for mitt romney's presidential chances. and an update on the 2012 drought: what is the federal government doing now to help farmers. that and more tonight on "n.b.r."! >> susie: the economic agenda of mitt romney and paul ryan was "topic a", across the country today. presidential candidate romney, and his new vice presidential pick, hit the road today to talk to voters about their economic plan. ryan was stumping in iowa, his first event alone. and romney was in florida, continuing his bus tour of swing states. voters, and investors are trying to figure out what this new ticket means for the economy,
and their investments. washington bureau chief darren gersh reports. >> reporter: for investment pros, analyzing what paul ryan could mean for markets is two- step process: first, will he help romney win? he has clearly energized conservative voters and may help put wisconsin into romney's column, but his plan to transform medicare is an awfully big target. >> there are so many senior citizens who might be unnerved by his proposals. if romney doesn't win florida, it's awfully hard seeing him winning the white house. >> reporter: step two. if ryan does put romney over the top, who benefits from his focus on deficit reduction and spending cuts? at first glance, that looks friendly to bond investors worried about deficits. >> romney has certainly thrown down the gauntlet with his pick and if he does win, in all likelihood the senate will go republican and we will see some real changes-- some fiscal austerity, some tax changes, and the beginnings of reform of entitlements. >> reporter: ryan's budget plan
cuts spending deeply, but also cuts taxes too. so if romney follows his lead, markets may find the immediate impact is not too different than what would happen under president obama. another market focus is what happens immediately after the election. >> if romney got elected and ryan was part of the reason for that, then that postpones the fiscal cliff decisions until early next year, that is at the start of a romney administration. increasingly, we are looking at one way or another most of those fiscal cliff policies actually going into effect and then being revised early in january. >> reporter: for stocks, a romney-ryan win looks mixed. the odds of a corporate tax cut would go up, but the chances of getting more help from the federal reserve might go down. >> ryan has tangled with bernanke, been critical of the quantitative easing programs, so expect a much more hawkish fed under a romney/ryan administration than under a second term obama administration. >> reporter: one thing is clear, by picking ryan, governor romney has clearly focused the election on budget deficits and the size of government.
whether that is good or bad for markets depends on whether you think deficits are the result of a bad economy or the cause. darren gersh, "n.b.r.," washington, d.c. >> susie: joining us now for more analysis, jared bernstein, senior fellow at the "center on budget and policy priorities", and formerly economic advisor to vice president joe biden. also with us, dan mitchell, senior fellow at the cato institute. gentlemen, thanks jor phoning us, dan, let me begin with you, as darren said in that package the whole thing comes down to who is going tozrgk.t the economy stronger and growing again. will the ryan and romney ticket make the economy better? what do you think? >> assuming that president romney wins and he does something like the ryan budget, i think that would be beneficial because the whole key to the ryan budget is that over the next ten years, government spending would only grow by 3% a
year. and since nominal gdp presumably will grow faster than 3% a year, that means slowly but surely we'll shrink the burden of federal spending as a share of gdp. having those trend lines out not future i think would be enormously beneficial as terms of leaving resources in the private sector where they will be used efficiently, rather than the government. and it will also leave room for better tax policy, lower tax rates to make america more competitive. >> susie: okay, let's get jared in, jared what are your thoughts on that, who will ultimately be better, obama or romney for the economy? >> well, you know, i think we've seen this movie before, really what both romney and representative ryan are proposing here is a replay of supply-side trickledown. if you look at the tax cuts, for example that dan just referenced, not only does ryan suggest and romney agrees that we should make the bush tax cuts permanent, but that we should essentially double down on them and cut taxes another 4
plus trillion. you're talking about a $9 trillion tax cut over ten years. it is absolutely implausible to me or anyone who has taken a serious look at this that they're going to cut spending anywhere near that amount. we also know they want to increase defense spending. so what we're looking at at larger budget deficits and that kind of supply side trickle down stuff that never works the way it's supposed to. >> well, dan, do you think that ryan will get his way and cut the deficit as much as he's saying? >> obviously it depends on what the makeup of congress is next year. whether a republican senate where you tend to find some more moderate, get a little weak-kneed about finally trying to detain the will vie than of the federal government but the whole key is how fast does spending grow. during the bush years on average government spending grew more than 8% a year. paul ryan's budget has government spending growing 3% a year. that is really the key in the long run if we let
spending grow, 6, 7, 8% a year, inevitably we will be great because if government growfaster than the economy year after year after year, it's inevitable. it's a matter of mathematics. and that's the key so we do want we want pore dependency or -- >> look, here is how you know that what dan just described, while plausible in his explanation won't happen in congress. the sequester, the automatic budget cuts, you guys were talking about the fiscal cliff. we have republicans who voted for that sequester, already backing away. well n 2014, representative ryan's plan calls for spending cuts that are three times those of this automatic sequester. congress will not go there. they've never gone there. what we're going to see is massive tax cuts that favor the rich and implausible spending cuts leading to the big budget deficit. >> but that's why i agree. >> ultimately this is whether republicans really mean what they say. >> susie: real quickly, less
than a minute, what american voters are really fixated on are jobs. you can talk about tax cuts and deficit reduction and entitlements but it ams can down to which candidate is going to be get more people hired. so dan, you first, you know, will romney and ryan get more people back to work? >> well, real quickly f you have lower tax rates you make it more comfortable to create jobs, we'll have more jobs. the alternative less government grows and we become europe, we'll have double-digit unemployment. look at what shapping in greece and italy, i don't want that to happen in america. >> here we have a very stark difference between the two can gatts in the very near term. president obama has proposed job measures for 2013, 2014, things that help preserve the jobs of teachers and firefighters, things that help rebuild our intrastructure. governoromney has explicitly said i won't go there i don't believe in any that kind of thing. so in the near term i'm sure that the obama side would d
more in terms of near-term job measures that would help in the short term. >> but that's only if you believe in keynesian economics. we saw that that doesn't work. >> that's another discussion, i think worked a lot letter than you do. >> susie: certainly this is a conversation, and a debate that is going to at any time. hopefully we'll get you back as the campaign carries on. thank you so much. really appreciate you coming on the program, jared bernstein from the center on policy, budget an policy priorities, dan mitchell from the cato institute. >> reporter: i'm erika miller on wall street. the second quarter was challenging for corporate america. still ahead, i'll tell you why the third quarter may be even tougher. >> susie: wall street kicked off the week on the downside. concerns about a slowing of the global economy weighed on investors. weak economic numbers out of japan today re-ignited worries about a global slowdown. the dow fell 38 points, the nasdaq managed to add one point, and the s&p 500 fell almost two points, its first loss in seven sessions.
>> susie: meanwhile, oil prices hit a three-month high earlier in the trading session pushing above $94 a barrel. fresh concerns today about tensions in the middle east disrupting supplies, helped to drive prices higher. but fears of slowing growth kept those gains in check. by the close, oil ended the day down slightly to a little less than $93 a barrel. >> i think we have enough information out there where it could easily spark this market one way or the other. a hurricane in the gulf could take it up quite a bit. another enormous bad data from these countries coming out or, germany saying that they're in a recession and they're going to start not going along with the bailout of the euro could also send the market quite a bit down. >> susie: alan harry thinks oil prices could move up over $100 a barrel, if tensions escalate between iran and israel.
>> susie: rain and cooler temperatures are bringing some relief this week to drought- stricken farmers in the midwest. but the respite is too little, too late for the nation's corn crop. diane eastabrook reports on the latest government efforts to help producers, and calm jittery world markets. >> reporter: with futures prices for corn still rocketing past $8 a bushel the government threw out a life line today to livestock producers. the department of agriculture said it will buy up to $170 million of pork, beef, lamb, chicken, and catfish for government food assistance programs. the idea is to help livestock producers struggling to pay for higher feed prices caused by the drought.
at the same time it could also temporarily balance the nation's supply and demand for meat. meanwhile, the worst u.s. drought in half a century is sending alarms to trading partners across the globe. officials from france, mexico, and the u.s. will hold a conference call at the end of the month to decide if there should be an international emergency meeting to discuss soaring grain prices. an emergency meeting could be called as early as september. french officials say they want to avoid potential export embargoes like the one russia adopted a couple of years ago when a severe drought dama d crops in that country. diane eastabrook, "n.b.r.," chicago.
>> susie: also on wall street: the verdict is in on earnings for the second quarter, and it's not encouraging. nearly all s&p 500 firms have reported earnings, but profits are up only fractionally compared to last year. ost likely this will be the weakest earnings growth since third quarter 2009. and as erika miller reports, it looks like the second half is also likely to be challenging for corporate america. >> reporter: there's one thing more tro tling than the outlook for earnings in the second half of the year. it's the outlook for revenues. >> we are looking for revenue growth to be negative, for revenues to decline for the back half of the year. analysts already have that baked into their models for the third quarter. and i'm fairly sure they're going to bake that into the fourth quarter as well. >> reporter: the latest results paint a pretty bleak picture. most s&p 500 firms have beaten earnings expectations, but less
than half have been able to top revenue forecasts. at 41%, it's the lowest level since the recession. so, the bottom line is this: although corporate profits are rising, it's largely because of cost-cutting, not sales growth: >> we thought cost-cutting was a story of 2011. how can companies continue to report profits? they're running as lean as the possibly can. how could they possibly have any more fat to trim? what we're thinking in the second half, with companies saying there is a commitment to cost management and cost reduction, they're going to find other areas to pull from. short says that may mean more firms unloading unprofitable businesses and non-essential assets. at the start of the year, most analysts expected the second quarter would be the toughest for corporate america, but now it's looking like the third will be even worse, with an expected 1.5% decline in profit growth. but get a load of the bullish outlook for the fourth quarter. hold the first graphic over this
line: >> we are still expecting a strong fourth quarter at about 10.3%. i think it's a little to early to tell what's going to happen in the fourth quarter. but i do expect that number to be drawn down as well. i really don't see how we get to 10.3% from where we are at now. especially if 3rd quarter does end up coming in negative. many of the headwinds for corporate america are well- known, like trouble in europe, a rising dollar, and a weak u.s. economy. but others are harder to predict. >> we also have to think about the fiscal cliff in the u.s. as well as the election in the u.s. as well as all the uncertainties related to the political climate come the first part of next year. >> reporter: against that backdrop it can be hard for investors to get excited about investing in stocks. colas recommends positioning your portfolio defensively: in real estate, utilities and consumer staple stocks. erika miller, "n.b.r.," new york.
>> susie: investors weren't too excited about buying stocks today. after five weeks of gains, the dow and s&p fell, following that report that japan's economicon growth slowed in the second quarter. as we mentioned earlier, japan's weakness is a reminder the world is still facing a global economic slowdown. the s&p 500 fell for the first time in seven days, ending its longest winning streak since december 2010. still, the index is up more than 9% since june, and it's within 24 points of a four-year high. material stocks were the hardest hit in today's trading, followed by the energy sector. this pair is also among the weakest in the s&p 500 so far this year. after the market close today, groupon surprised wall street and posted a second quarter profit, on strong sales growth. but, revenue for the daily deals company was hurt by foreign exchange rates, and groupon shares sold off in after hours trading, although the stock was up earlier in the day. groupon is trading about 70% below its november i.p.o. price. investors are concerned the company doesn't have a long-term business plan.
>> groupon is getting killed right now. even though they added a lot of customers that's great what's really hurting them is the average customer is spending 10% less with them than they did a year ago. that's really eating in revenue and the stock price. >> reporter: meanwhile, google >> susie: meanwhile, google said today it will cut 20% of its "motorola mobility" workforce, as it moves to make more smartphones and fewer simple cell phones. last year, google bought the money-losing cellphone maker, aiming to use its patents to help fend off android lawsuits. google shares rose nearly 3% on the layoff news, as well as, word of an upgrade from a morgan stanley analyst. the search giant also revealed today it's buying frommer's travel guide business, just a year after it acquired a similar operation from zagat's. the stock is now trading just below its highest level of the year. >> i like the frommers purchase, it's simple only $23 million google makes more than that in a day. it's a nice compliment to th maps offering for search and travel which google is trying to get bigger in.
>> susie: shares of tripadvisor slid on the google deal news, losing more than 4% on worries about the competitive threat. there was also a bit of deal- making in the energy sector: tesoro is paying $2.5 billion for b.p.'s carson refining plant. tesoro was the best performer in the s&p 500, as the purchase gives the company a total of six refining operations on the west coast. the stock rose over 9% to a four-and-a-half year high. sears was also a standout in today's trading, thanks to a positive story over the weekend in barron's. the article has sear's stock hitting $100 per share, and today the firm detailed plans to spin-off some of its hometown and outlet stores. the stock gained nearly 6% today. last year, sears was among the worst performing stocks in the s&p 500. here's a quick peak at some of today's analysts upgrades: campbell soup shares rose just over 3% to $34.35, after goldman sachs issued a "buy" and gave
the company high marks for its new marketing campaign. shares of salesforce.com jumped nearly 4% following word piper jaffray said the business software company scored its biggest contract ever with a mystery client. quarterly results are due on august 23. and, finally the ishares emerging market fund was the weakest among our e.t.f. most actives. and that's tonight's "market focus." >> susie: you've seen the ads, >> susie: you've seen the ads, it's back to school season for the nation's retailers. so tonight's word on the street: "back-to-school". we turn to james rogers,
technology editor at thestreet.com. so james what kind of trends are you seeing with back to school spending this time around? >> it's pretty interesting, susie, silicon valley has really felted strain of cautious enterprise spending recently but it seems like there's some strength in the consumer market. the national retail fed ways-- federation estimates that back to school spending could be worth a record $83.8 billion this year. that could be a massive potential revenue boost to am so of the tech companies that we're going to talk about today. >> well, and dow, you have three tech stocks that you're recommending. and all of them have been on the upswing recently. let's start off with apple. i guess you're going to see that it will sell more computers and ipads and iphones. is that the story behind apple for back to school? >> completely. you've nailed it. the two main reasons why apple makes it on to this list, number one is the ipad, schools have been buying ipads in vast quantities,
recently. and there's every indication that that trend will continue. also there's a lot of talk that apple may launch a cheaper, smaller version of the ipad minipossibly during the fall sthand that would really kppb the ipad's momentum. and then the iphone. ale is expected to launch its next generation iphone, the so-called iphone 5 possibly in mid-september. there's huge pent-up demand for that product and it's seen as being one of the major accounts that will move the stock beyond its current level that said,-- sor sorry? >> susie: go ahead, finish your thought and i will jump in with a quick question. >> now that said n terms of the full impact of that phone on apple's quarter may 23409 really be felt but investors really be unwise to underestimate the appeal to the college student it will be big for apple during the coming months. >> susie: quickly because i want to move to the other stocks. the apple stock was up sharply today, $630 a share a lot of talk about a stock split. what are you hearing, do you
think it will happen? wince don't think that's going to happen, you know. apple has already announced a dividend and share buyback which say very, very big deal for apple. we saw tim cook basically rethink the cash strategy. and stock buyback or stock split, he said it won't happen qz suses quickly, am sglons what is the deal there, why is this going to be a good back to school stock? >> you know, the third quarter is always a big one for amazon, valuable resource for students and their parents. you know, it's worked very hard to harness back to school spending. a lot of things around tax book rental, special membership program for students and also on the product side a lot of people say we may see a rebound which will be a big deal for it. >> let's squeeze in ebay what dow like about ebay. >> ebay is coming up a very strong second quarter. its sales have boosted by a mobile devices which say big deal for consumers. there's a lot of good turnaround stories within
its business. its margins look like it will get a boost and another firm that had a good fair quote the last year and i think we'll see the same this year. >> any disclosures, on these three stocks? >> no, none whatsoever. >> all right. thank you so much, great job. james rogers with thestreet.com. >> thank you >> susie: tomorrow on "n.b.r." a host of retailers release quarterly results, including, home depot, designer clothing company michael kors, and high end retailer saks. and get a check on the outlook for the markets, with global market strategist stu schweitzer of j.p. morgan private bank. >> susie: and finally tonight, in the money file, getting the most for your money when seeki most for your money when seeking investment advice. here's donna rosato, senior writer at money magazine. >> we all need help with our personal finances sometimes, but how do you find a financial adviser you can trust? it's not enough for an advisor to share his official credentials. you need to dig deeper to determine whether you can trust their advice.
first, make sure he is "clean" and hasn't had any violations or penalties for misconduct. you can do that by going to brokercheck at finra.org. next, find out what he can sell you. is the adviser free to suggest any investment or does he have to pick from a pre-approved set of options that will limit you? does he mainly recommend investments that earn him a hefty commission? if the broker looks good so far, then ask what you'll pay for his advice. get a detailed breakdown of what's going to the adviser, whether it's commissions or fees and the underlying costs of the investments. finally, ask upfront about potential conflicts of interest. when you're paying for someone's services, they aren't doing it out of the kindness of their heart. if an advisor says he's got no conflicts, he is either not being upfront or is just not thinking hard enough. either way, that's a bad sign. i'm donna rosato. >> susie: that's nightly business report for monday, august 13. we want to remind you this is the time of year your public television station seeks your support.