tv Nightly Business Report PBS August 24, 2011 7:00pm-7:30pm PDT
>> susie: losing its luster. gold prices tumble over $100 just one day after setting a new price record. >> tom: is this the buying opportunity some have been waiting for or a bigger turn in what has been a shining investment? it's "nightly business report" for wednesday, august 24. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
this program is made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt >> tom: good evening everyone. are the golden days over for gold? gold prices plunged over $100 today while stocks rallied for the third straight day. >> susie: tom, it was a dramatic reversal for gold. it's been steadily hitting new record highs. >> tom: susie, gold surely lost some of its lustre today. gold futures lost $104 for the biggest one-day slide in more than 20 years.
gold closed at $1,757.30 an ounce. the past year for gold has seen prices rally from $1,200 to a record just yesterday. even with today's selling, gold is up almost 9% this month alone. >> susie: one of the reasons for that gold sell off, tom, investors are feeling better about stocks and were reassured by today's economic report showing strong orders for durable goods. the dow rose 143 points, the nasdaq added 21 and the s&p added 15. joining us now to talk more about the outlook for gold, joe foster, the portfolio manager of the van eck international investors gold fund. it's a $1.8 billion mutual fund. joe, thank you for joining us. >> good afternoon, susie. >> susie: so pretty intensive selling today. why today?
>> well, i think the market was looking for a reason to sell. we had a heck of a move up to $1900 an ounce, and the last couple of days i think we're just seeing profit taking. the durable goods numbers that came out today, they were good, but i think the underlying numbers were not that spectacular. but it gave the market a reason to think the economy might be get egg better and to sell off the gold positions to take profit. >> susie: i want to take you up on that thought, because we've seen people, investors going to gold as a save haven because they've been fearful of recession and fearful of inflation, they've been fearful about stock market volatility. are those fears over? >> i don't think so, not at all. i think the bull market for gold is still intact. i think we're just seeing some consolidation. once this consolidation runs its course i think gold can trend higher. if you look at all the problems around the
let's talk about what your outlook for gold is, so you're pretty bullish on the direction of gold, you say it's going to go higher. how much higher? where will it be let's say by the end of this year? >> well, it's difficult to tell whether we've moved into a new higher trading range or whether we'll consolidate back to the long-term trend in gold. i mean the long-term trend would have us up around $2,000 an ounce in two years time. if we are at a new higher trading range i could sigh $2,000 in the next six months.
>> susie: i have lost him. okay. let me just ask you this. people are expecting ben bernanke to make some kind of rescue plan on friday. you're saying that that could be bullish for gold. tell us why. >> an indication that there could be further quantitative easing would involve the fed printing more money. essentially devaluing the dollar. and gold is a form of sound currency. so when people lose faith in the dollar, they move into gold. so any indication that further q. e. is coming down the road i think would be good for gold. >> susie: so let me talk a little bit about specifics on gold. your fund invests in gold mining stocks, and you have three of your favorite. let's take a look at them, coming up here on the screen. gold corp., ticker symbol gg, ran gold, ticker gold, and
eagle mines aem. why do you like these stocks and why should investors take a fresh look? >> one of the things that we look for in a gold company is growth. growing production. gold production globally has stagnated over the last decade. so companies that didn't provide growth generally see much better share price performance. and all three of those companies that you mentioned have a strong element of growth in their production profile that we like. and they also have management that we think can deliver that growth on time and on budget. >> susie: all right, you've given us a lot to think about. thank you so much, joe, for coming on the program. one last thing before we go, i need disclosures, do you own any of those stocks we just talked about? >> i own them through the international investors gold fund, which i manage. >> susie: all right, thank you again for coming on the program. >> thank you. >> susie: we've been speaking with joe foster of the van eck investors gold fund.
>> tom: stock investors are pinning their hopes on ben bernanke. the federal reserve chairman makes a highly anticipated speech in jackson hole, wyoming, friday. the big question is whether he'll signal new action to help the faltering economy. as erika miller reports, there may be some unconventional tools still left for the central bank. >> reporter: what does chubby checker have to do with fed chairman ben bernanke? the dance craze was the inspiration for a monetary policy tool called "operation twist" last used in the '60s. fed chairman ben bernanke is expected to discuss a new version friday, as a way to revive the economy. basically, the fed would buy long term treasury bonds, which it has done before. but this time, it would also sell an equal amount of short- term securities. barclay's michael gapen explains. >> so, what it's doing is changing the composition of securities that it holds in favor of long-term securities without changing the overall size of the portfolio.
what that will do, is on balance, put downward pressure on longer term rates. >> reporter: here's the twist. the strategy also puts upward pressure on short term rates. fortunately, most economists don't think that's much of a concern this time, because the fed has pledged to keep short term rates low through mid-2013. there are other options the fed chief is likely to spell out, including the possibility of more bond purchases. but u.b.s.'s thomas berner points out the downsides. >> the more assets they buy now, if the economy starts to grow more quickly, and they want to unwind it, the longer it will take to unwind it and the more you have for inflationary risks down the road. >> reporter: bernanke is also expected to talk about the possibility of lowering short- term interest rates on bank deposits held at the fed. but economists think it's the least appealing option. >> if short-term rates fall even lower, we think there would also be some pressure for even some short-term rates to go negative. so, the money market industry
may experience much more significant outflows than they are, and the fed does not want to take an action that destabilizes financial markets. >> reporter: it was at the same jackson hole conference a year ago that bernanke laid the groundwork for buying treasury bonds, known as qe2. that helped ignite an eight- month stock market rally. many investors are hoping for the same boost to confidence this time around. >> throughout this whole financial crisis, the only institution in my mind that actually surprised markets by doing more than what's expected regarding monetary policy response has been the fed. if you compare that to european central bankers have done, or what politicians have done, most of the time they've actually disappointed. in terms of the magnitude of the steps they've taken. >> reporter: given the volatility in the stock market lately, a lot is riding on bernanke's speech. investors are eager hear more about the twist friday, and not the same old tune. erika miller, "nightly business report," new york. >> susie: japan promised bold action today to stem the rise of a super-strong yen.
it's launching a $100 billion fund to help japanese companies operating overseas deal with a strong yen environment. the move comes on the heels of a moody's downgrade of that nation's credit rating last night. moody's cut japan by one notch to double a3, noting a big buildup in debt over the past two years and the country's revolving door politics. >> tom: from asia to europe, france slashed its economic outlook today and rolled out a host of new austerity measures, hoping to keep its triple-a credit rating. france cut its growth forecast from 2% to 1.75% this year and predicts much the same next year. it also unveiled 12 billion euros in new budget cuts and a temporary 3% tax on households making more than 500,000 euros a year. >> susie: speaking of europe, still ahead, our "street critique" heads across the pond for two pharmaceutical stocks with healthy dividends. our guest? hilary kramer of gamechangerstocks.com.
>> tom: for the first time in six years, a major hurricane has america in its sights. irene threatens a broad swath of the atlantic coast at a time when the economy is having trouble staying afloat. irene is a category three hurricane, making it a very serious storm with winds of 120 miles per hour. the last time americans saw a storm of this size was wilma in 2005. she hit south florida, doing more than $21 billion in damage. and direct hit or not, hurricanes can devastate the local economy, so says nicki grossman, president, greater fort lauderdale tourism office. >> a lot of times, the weather forecasters talk about a cone of influence. a cone of influence? it's a cone of hell. there's no question about it, for local community, until you're out of that cone, you're out of business, and you're out of luck. >> reporter: while irene has been hammering the bahamas today, it's north carolina where she may first make landfall in the u.s. this weekend.
it's been more than a decade since the carolinas were hit by a big storm. hurricane floyd was a category two storm in 1999, costing almost $7 billion. jeanne salvatore of the insurance information institute says insurers have the money to pay claims and are preparing for the aftermath. >> we have nearly half a trillion dollars of claims paying capital so we are ready for the storm. and as we speak, insurance companies are looking at the storm and trying to think of the best place to get their adjusters in. >> reporter: even though the insurance industry, its customers and shareholders have gone a few years since a hurricane struck the mainland u.s., this year has been a record year for tornadoes, including the deadliest single tornado on record in may, cutting through joplin, missouri. >> this year we've had a lot of tornadoes. we've paid out billions of dollars, and while this is the first major hurricane we've had in a while, if we have another one later this season we do have
the capital to pay claims. >> tom: this storm comes at the end of tourism season for the mid-atlantic and during the back-to-school shopping season. it also could be the first hurricane since 1991 to hit new england. in all, some 80 million americans may be in its path. >> susie: president obama today using his vacation to work on his big september speech on the economy and jobs. he strategized via conference call with the cochairs of his competitiveness council, general electric's jeff immelt and american express' ken chenault. the white house says ideas ranged from adding green construction jobs to increasing the number of u.s. engineering graduates. google will pay half a billion dollars to settle a dispute with the justice department over online pharmacy advertisements. the deal means the web search giant will avoid criminal prosecution for accepting hundreds of millions of dollars in illegal ads from canadian online pharmacies.
>> susie: google banned those ads last year and says it should not have allowed canadian pharmacies to market to u.s. consumers. >> tom: apple's c.e.o. steve jobs will resign from that position effective immediately, of course he has been battling health problems. we'll have more on this coming up later on in the program. meantime let's get to tonight's market focus. >> tom: we've seen a two-day, triple-digit rally for the blue chips and three straight days of gains for the major indices. the financial sector led the way today, and bank of america again continues to see plenty of wild swings and huge trading volumes. b-a-c jumped 11% after hitting a new low yesterday. the bank has been fighting back against market concerns regarding its capital position. it maintains it has enough money at its disposal. an analyst at raymond james
calls the rumors of capital trouble absurd. here's b. of a. since the spring of 2009, the last time the stock was in the $6 dollar range. one uncertainty that continues to hang over the bank are lawsuits over mortgages gone bad. other leading financial stocks today include life insurer genworth, jumping almost 7%. and dow stocks american express and j.p. morgan up at least 3% each. utility stocks also found plenty of buyers today. this exchange-traded fund follows the s&p utilities sector. it rallied 2% today. this chart shows the fund since the beginning of the month. since this august 8 low, utility stocks have outpaced the rest of the market as investors look to buying dividend-paying stocks and look for some protection against the volatility. here are the top three highest dividend-yielding utilities. pepco is in the mid-atlantic. integrys is in the midwest. and duke in the south-east.
all are electric utilities paying shareholders over 5% dividends. we mentioned dominion resources as one to watch today. yesterday's east coast earthquake forced it to shut down one of the virginia nuclear power plants. despite that, shares rallied 2% along with its sector. also yesterday, we reported on back-to-school sales, both for retailers and technology firms. computer memory maker micron today warned demand for computer memory may continue to drop. volume almost doubled while the stock fell more than 6%. the sell-off takes micron to a new 52-week low. speaking of technology, semiconductor equipment maker applied materials turned a better-than-expected quarter after the close today. it beat estimates by two cents per share. shares have been trending lower since the springtime.
here it is. they were down a fraction before the news and fell another 4% after the close. the c.e.o. warned he sees the chip cycle beginning to turn down. and a couple of clothing and that's tonight's "market focus." >> tom: the european economy may barely be moving, but tonight's "street critique" guest isn't shying away from the continent. she's hilary kramer, editor of gamechangerstocks.com.
nice to see you, welcome back. specifically you're looking at a couple of european foofl companies. we'll begin with glaxosmithkline, gfk the ticker symbol, waysed in the u. k., makes the asthma drug advair and aquafresh toothpaste. what makes you like this in the mid 40s? >> what i like is the dividend yield. we're all chasing dividend yields right now, in a diversified pipeline, new drugs coming out. this is really a great company to own, and of course even though it's on the higher end of its 52-week on the chart, it still makes sense to buy european companies. >> tom: you still like value there. that's kind of a broad health care. nordisk, the danish company, focuses on diabetes care, and its share prices really droped off reasonly, trading just above 100 per share. >> this is about picking up a stock that has really been hit
hard with european concerns. even though it's a danish company. what people don't know about novo nordifb is they invented the -- it's the worlds largest inlynn producer. and so it saw a 13% increase in operating profit, they're in the right area in terms of growth in medical therapy. >> tom: you've been known to go overseas looking for health care companies. mike sent us this question on our e-mail. hillary recommended teva some months back and the stock has dropped, but the fundamentals look good. what's your latest view? it was back in 2009 you first mentioned this stock. >> teva has been such a disappointment for me and those of us that are looking ought a solid diversified company that has premium drugs as well as generic. stick by it, eventually they'll reward, a lot of it is being based in israel and
concerns about their m. s. drug going off pack. >> tom: and a big buyout with cephalon? >> that's correct. >> tom: roy send us this note, asking us about another one of your picks. with massive job cuts in cisco this would seem to be a bad projection for future sales. what are its prospects with him cisco has been a dog for the better part of a couple years with earnings warnings continuing to take it down. you mentioned it back in april when it was 19.5. >> cisco is obviously the most days pointing tech stock out there, but over the long run it should come back up. i know a lot of insiders in this company and it's just been hit hard every quarter. let's see some turn around come, the market in yen is down. >> tom: question about fundamentals at sinclair broadcasting from owen, writing:
you mentioned this back on august 17 at 8.20, now it's 7.5. does that negative equity ratio bother you? >> it doesn't bother me with sinclair in particular because i have adversity in my portfolio. i have these big large caps like pharmaceuticals and then these small caps i love small caps like the win with sinclair. what i'm looking for are revenues to increase as we go into a political election season, it's all cyclical, and sales very important for sinclair because they do a lot of advertising. it's not a stock for everyone, but can you get some dividends here. >> tom: do you own everything we mentioned tonight? >> yes, i do, i own all of these stocks. glaxo i don't own right now, but i intend to buy it for my portfolio. >> tom: there you go. you can send us your e-mail street critique at nbr.com.
we'll feature some of your questions next wednesday. our guest this evening "street critique," it's hilary kramer with gamechangerstocks.com. >> susie: here's what we're watching for tomorrow: we'll see the latest weekly jobless claims numbers, earnings from big lots and krispy kreme, and the kansas city federal reseve bank kicks off its annual symposium in jackson hole wyoming. also tomorrow, our "planet forward" segment turns to floating houses-- a unique green solution to flood-prone areas. rock-bottom interest rates aren't boosting mortgage applications. the mortgage bankers association says applications fell last week to their lowest pace in 15 years, with refinancings accounting for 80% of the market. the problem? the lousy economy, high unemployment and tough credit standards making it difficult for buyers to qualify for a mortgage. economists think the housing market won't rebound until the job market picks up. >> tom: apple continues to drive growth in the tablet computer
market. we'll have more on our breaking news on apple in a couple of moments. in the meantime the research firm upped its forecast for tablet sales. 60 million this year, 275 million in four years. apple's i pad dominates the market and that dominance has knocked out one competitor, hewlett-packard abandoned its touch tablet last week.
>> susie: super-low savings rates got you down? tonight's "money file" has some thoughts on pumping up your savings. here's donna rosato, senior writer at "money magazine." >> the federal reserve recently pledged to keep interest rates low the next two years, which means most banks will continue to offer paltry interest rates of about 0.5%. still, there are ways you can find higher yields and pump up your savings. online savings accounts are a quick way to earn more interest. most accounts have no minimum, no monthly fees and are f.d.i.c. insured. ally bank, for example, is paying 1% and has no fees. ally also has a five-year c.d. which is paying 2.24% interest rate and has an early withdrawal fee of just 60 days interest. another way to offset low rates is to use a rewards checking account, which average about a 2.5% rate. just be aware you'll have to
meet some requirements to get that rate, such as using your debit card 10 times a month. finally, you can wring more value out of your savings by moving your money to a community bank or credit union. while rates aren't significantly higher, you'll find fewer fees and penalties, which means more money in your pocket. the majority of credit unions offer free checking accounts with no strings attached. that's a good deal any time. i'm donna rosato. >> tom: we have for on the breaking news from apple. steve jobs has resigned effective immediately. jobs of course has been out on medical leave since mid january. in a letter to apple's board, jobs see he can no longer meet the duties and expectations as chief executive officer. he's 55 years old, the co-founder of apple. he was elected chairman of the board. the current number two at apple, tim cook, will take over as c.e.o., and of course we'll have under on this story tomorrow. that is "nightly business report" for this wednesday night, august 24. i'm tom hudson. have a great evening, suzive. >> susie: same to you tom.