tv Nightly Business Report PBS March 22, 2013 4:30pm-5:00pm PDT
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water, water not everywhere. how the on going drought is hitting texas especially hard and how it may get worse. and too late or not? why there is still time to refinance your mortgage but you may not want toait much longer. all that and more coming up right now. welcome to our viewing. >> investors were back in the buying mood as stocks bounced back but still closed lower for the week. the dow snapped the streak of four straight winning weeks and the s&p 500 logging the second losing week in 2013. the markets got a lift on optimism out of cyprus combined with a batch o stronger tha expected earnings report. the dow shot up 90 points gaining back losses. the s&p added 11 points. the s&p ended the week with a
small loss. good news coming out of cyprus that the the nation may be edging towards a deal to avoid the banks from going bankrupt. they will meet tomorrow in order to beat a monday deadline. stocks have had a great quarter so far. the dow is up nearly 11%. in any yeart that would be a good return. our market guest says there may not be upside from here. he is steven wood. mr. wood, welcome. >> good to see you. how are you? >> i'm great. you have a year end target of 1505. that is lower than it is today. where do you see the trouble coming from or did we make all of the gains in the first ten weeks? >> i don't think it is a troublesome number. we have had a vy good year. markets tend to have very choppy
patterns of returns. some years you get a run up and a pullback. this year we had a very good first quarter. even if we hit the books and closed them right now it would still be a good year. we think it will be volatile between now and the end of the year. the fundamentals haven't changed a lot. sentiment, however, has. we are seeing investors become more confident in equities. our clients will have to set up the time horizon and hit a portfolio that really meets the goal that they are trying to accomplish. >> i didn't hear you mention the word cyprus once in that first paragraph or two of your thinking. do you think that the worries over cyprus are overblown? >> it is very small. it is .2% of the e.u. forget the global markets. it is very, very small. cyprus has the potential to
represent contagion. if cyprus like greece before, if that were to infect let's say spain or italy it would become an issue. if it doesn't it becomes localized. the big issue in cyprus that is troublesome is they have their version of the fdic which is deposit insurance. that is rule of law. if they were to break that for financing purposes that would be very, very different. cyprus when you compare that to the u.s. housing which is positive and may be offsetting in terms of what washington has taken away by tax increases and sequestration it is a small episode. >> let's dig deeper. do you think that the level of profit growth will not justify any real further expansion of the price earnings multiple or what? >> i would say the first part, yes. if you look at profits they are very, very strong and have been
for a while but it is a maturing earnings cycle. also in this environment the u.s. economy is growing more like 2% and a lot less like 4 in that environment pricing is going to be challenged and the top line sales is not going to be universal for all firms. it will be balance sheet by balance sheet and case by case. security collection becomes far more important. >> i was going to say as you point out the profit growth picture has been pretty good but we are getting at the mature point in that cycle and the forecast is about 1% or 2% overall growth. there are always ways to make more money than the index tracking would lead you to believe. where do you think the pockets of possible better than average profits would be? >> so we do like equities. when you compare that to fixed income certainly in government space so we like equities and we like global equities. it will have to be a multi asset
strategy which is kind of all of the above. looking at commodities and debt and equities and looking in companies in europe. there are good companies with strong balance sheets in europe, as well. looking into russia, indonesia, malaysia. so it is not so much a risk on/risk off. if i can jump off an earlier point which is fantastic which is the expansion we see the fundamentals have not changed a lot. that allows us to be a little more flat until the end of the year. sentiment is a very powerful thing. sentiment as momentum picks up people become more confident and like stocks that can be rather strong. we are looking at that right now. so bonds are being sold to finance equities that would change the dynamic and we have
to revisit our estimates. >> thanks so much. >> thank you. and coming up we will get more specific and find out which stocks this week's market monitor likes. more warnings that investors should get out of bonds. billionaire investor says it is too risky. >> not the long-term debt of any kind and we are urging our portfolio companies to borrow as much long-term fixed rate money as they can. >> many investors feel safer with bonds, not stocks, in their portfolios. now there is reason to think twice about bonds. here is why. buy low and sell high. sounds easy, right? but it is tricky if you own bonds. when interest rates go up the prices of your bonds go down. not good if you are trying to sell the rates on the t-year u.s. treasury at record lows last july are now up more than half a
point and are expected to go much higher driving prices much lower, a scary thought for bond holders. >> if the ten-year treasury reverts back just to its average yield from 2000 through 2010 it will go down 23%. >> what happens next with rates and bonds depends on the u.s. economy growing stronger and this man has been dropping hints on when that can happen. more improvement depends on the direction of unemployment and inflation. >> as we make progress towards our objective we may adjust the flow rate of purchases month to month. >> for now the fed chairman says interest rates will likely stay very low into next year. so the clock is ticking and many experts say it's time to move away from bonds especially the longer term ones because the
longer you hold them the more you stand to lose. and we know the interest rates are important not only for bonds but also for mortgage rates. >> that's exactly the case. falling interest rates for home mortgages has led to a recent boom in refinancing. with rates boosting many homeowners wondering if it is too late to get into the game. >> reporter: fed up with the amount of paperwork and time it can take to process an application to refinance a mortgage many homeowners don't even try and the federal reserve continued promise to keep short term rates near zero hasn't provided much incentive. >> why do i have to do it now and get the documentation together. if rates are going to stay flat i think there is an opportunity to refinance at a later date.
>> this may be part of the reason for the drop in the share of applications now at the lowest levels since last spring. many homeowners may not realize how much money they could save. homeowner whose could qualify are overpaying an average of $471 a month on their mortgages based on an analysis base by a consumer mortgage company. it is $56,000 in savings over ten years. >> our analysis shows that in 2013 over 17 million households would qualify for refinancing at a lower rate. over 4 million households are expected to refinance. that means one out of four people are going to miss out on refinancing opportunity. >> to find out if you can refinance check your credit score. if it has improved in the last three months you can qualify for a better interest rate
especially if your score is 740 or higher. even if you lost equity in your home you could be eligible for the refinance program as long as it is less than 80% of the value of your home. as long as you have some income and managed to stay current on your loan you may qualify. to be sure refinancing makes since you need to figure out how long it will take you to break even, how long it will take your total monthly savings to exceed the closing costs. if you plan to be in the house that long refinancing likely makes sense. turning to our market focus. we begin with black berry. despite all the hype consumers and investors didn't buy in. shares were up by 4%.
investors got word of no lines in at&t stores it broke. a much different day for nike. shares soared touching an all-time high. nike was the best performer in the s&p today. investor reacted to a 55% jump in n income. nike ended at $59.53 up more than 11%. after nike micron was the second best performer in the s&p. it reported a huge jump in the sales of memory chips. and the company is expecting another double digit revenue increase. micron shares closed at $10. and tiffany shares rose even though earnings grew modestly. tiffany maintained the full year guidance saying pace of growth would pick up with asia leading
the increases. shares closed up more than 1.5% at $69.23. at the other end darden restaurants reported earnings in line with analysts. darden operates olive garden, red lobster and said customers were impacted by higher gasoline prices. shares closed at a gain of about 1 1/3%. he says stocks will pick up in july. chief equity strategist. let's talk about july. what's the catalyst for a pickup in the market? >> well, from an economic standpoint the economy has been relatively shruggish. fourth quarter was barely positive. to some degree hurricane sandy has been taking half a percent
or so out of growth. as we get into the spring months that will result in an economic pick up based upon the rebuilding. we think a lot of the noise relating to washington is starting to fade, the fiscal cliff, sequester, the debt ceiling, all of those issues seem to be moving out later into the year. so as a result the impediments that were slowing the economy down over the last couple of quarters we think will result in better economic growth. the equity market is starting to sense that. i think to some degree that is some of the reasons why the markets ignored washington and ignored sandy so far this year and is up 10% or so. >> that is why you have such a bullish forecast for the s&p. you are calling for it to end the year at 16.60. it is all going to play out pretty strongly. >> we think corporate earnings
will chug along may increase about $108 full year for the s&p. we think we will get a little multiple expansion from 14 to 15 times as treasury yields continue to work higher. that will drive out of bounds and into stocks. we think the equity market ends up with a 15% to 20% positive return for the year. >> that is a good way to turn to stocks that are going to perform well. you have len on the big board as your top pick. you reported the blowout earnings this year. the stock has been on a tear. is there still room to grow? the sto has tripled over the last 18 months or so. we are in the early stages of a recovery of housing. we have a lot of ground to capture. we think it is one of the companies that is best positions. when it reported earnings they
reported an 80% back log for the next year. >> let's get you other picks. ford. tell us what is the attraction there? >> the auto market like the housing market has a lot of catch up to play. ford is an interesting play because not only is it going to recover based upon the rebuilding of the auto fleet in the country but also a housing play. the area that is most attractive within ford is the pick up division, the cars that the contractors are buying. if we are right that the housing market is going to do well and the auto market is going to recover then ford is going to work. let's get your next pick. oracle, a real surprise because that stock got hammered last week. you were buying shares yesterday. what are you seeing that other people are not? >> very controversial pick. the stock is down 10% or so since the earnings report. we think the software portion of the technology cycle is sound.
what is going on with oracle from a fundamental standpoint is fine as well. the issue exclusively was the fact that they missed on revenues. and the problem was that a lot of the sales that management expected to hit in the third quarter slipped into the fourth quarter. we think that they are going to get back on strength by the end of the fourth quarter. we are expecting a good quarter. as we look over the next year we think the stock is still going to trade into the upper 30s. we thought that was an atrackive entry spot. >> great information. any disclosures to make? >> we own all of the three stocks in our funds. >> phil orlando. and still ahead the fallout from the government's budget cuts could be coming to an airport near you. first take a look at how the international markets closed out the day.
today is world water day but you wouldn't know that in many parts of the u.s. the drought in the nation's mid section is entering its third year and more hotter and drier weather is expected this spring. one of the hardest hit states is expected to be texas where rice farmers who need a lot of water for their crops are feeling high and dry. >> reporter: spends more time
maintaining his combines than using it. rice farmers in texas aren't getting water from state reservoirs. >> for the first time in the 72 year history of our getting water from the colorado river we have been cut off and it is two years in a row. >> reporter: the lower colorado river authority has prioritized water for cities rather than heavy duty irrigation use. with the crippling drought in the third year it is a problem for farmers. >> these are heavily agricultural areas where water problems are growing and will only get worse especially when we have cities competing for the water. >> reporter: part of the reason farmers are lower in the order is that cities pay higher water rates. with 90% of the state in severe drought conditions the state says if there is no relief this summer other industries could feel the pain. >> most water supplies do not
have to go to really severe restrictions a couple of years ago during the drought because we started off with plenty of water. th time around we may be hitting some new territory where we see stage three or stage four restrictions which would mean only use water for the stuff you actually need water for. if a plant goes dormant let it go dormant. >> reporter: crop insurance should offset losses again this year. broker are warned this is the last year. >> we are praying. >> reporter: and not just for his farm. another crisis, a billion dollar budget short fall has forced chicago to shut down 54 public schools at the end of the school year. the closures save more than a half billion dollars over the next decade. a final vote by the school board will take place in may.
the chicago teacher's union is planning a protest march over the proposal next week. billions in automatic spending cuts approved by congress have prompted the federal aviation administration to cut funding to staff air traffic control towers. the cuts impact 149 local airports. hamptton pearson is live in maryland. >> reporter: you know it took fredrick, maryland about ten years to get federal money to build the brand new control tower behind me. now just ten months after it opened it is a budget cut casualty. less than a year after it opened the $85 million air traffic control tower at the fredrick, maryland airport is now a casualty of the automatic sequester budget cuts. >> in 2010 the federal government awarded us $5.3 million to construct the air
traffic control tower because it was needed for safety. and then fast forward to 2013 and now they are saying it is not needed for safety so it truly is the world of mixed messages. >> reporter: the faa announced it is closing 149 airport control towers as part of an overall plan to save $637 million. aviation advocates argue the faa is putting dollars ahead of safety. >> the reason the towers are here is safety and to help the efficiency of flight operations. >> reporter: airports like this one will remain open but without the air traffic controllers it will be up to the pilots themselves to sequence their takeoffs and landings. as for the controllers they are out of their jobs. >> i have been working on my resume. i'm looking at some schools to maybe get some va training. but to start out at the
beginning at 51 years old is daunting. it is scary. >> reporter: and todd johnson and controllers like him nationwide at the 149 facilities set for shut down have about three weeks to begin to adjust to their new reality. >> that is a big new reality. and if you want to find fought any airports in your area are on the list just head to our website. and coming up, could the minivan go the way of the dinosaur. first we take a look at where commodities, treasuries and currencies closed out the day.
the makers of minivans need to check their rear view mirror. cross over utility vehicles are in the passing lane and trying to overtake the family friendly minivan in sales. >> reporter: ron is the new face of america's growing love affair with cross over utility vehicles. >> my wife wants it because it gives her a much higher point of view. >> reporter: he recently bought a ford escape so his family will have more room and can carry more things. >> it has the ability to pull cargo. you can fold seats down. you can get whatever.
>> reporter: in the past others might have bought a minivan but buyers are turning tocrossovers as aller betteroptions. this year minivan sales are down 10% while overall industry sales are up 8.4%. and crossover sales are up 15.2%. why are the sales of crossovers and suvs continuing to increase in the united states? mainly because there are more choices than ever before so people who used to be in the market for a minivan have more options. >> people don't necessarily like the minivan stigma when in all reality theyan get a crossover that suits their needs cht. >> reporter: minivans have become niche vehicles. minivans made almost 8% of all auto sales. now mini vans make up 3% of the
market and just over a half million were sold last year. the big fall from the late 80s when america fell in love with the minivan. >> i think over the last decade we have really noticed the big change. minivans back in the day was the soccer mom. everybody had to have one. the minivan was such a large segment. >> it's not extinct yet but the minivan is no longer the only symbol of suburban america. "nightly business report," chicago. >> my wife, i proposed a minivan to her, i didn't propose with a minivan. she would have no part of it. >> i am with your wife. i like the crossovers. the ford escape i rented it. women like to feel like they are ruling the road. that's it for us. "nightly business report" for tonight. have a fabulous weekend,