tv Nightly Business Report PBS October 12, 2010 6:30pm-7:00pm PDT
>> jeff: the obama administration lifts the ban on deepwater oil drilling in the gulf of mexico. but don't expect business as usual right away. >> suzanne: we'll have reaction to today's decision from the oil industry, environmentalists, and wall street. you're watching "nightly business report" for tuesday, october 12. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
gulf of mexico. and jeff, secretary of interior ken salazar ended the nearly five-month moratorium a month earlier than planned, saying "we are open for business." >> jeff: suzanne, the obama administration put the ban in place after the blowout of b.p.'s mocondo well back in april. that dumped an estimated 200 million gallons of oil in the gulf and led regulators to impose new rules to prevent another disaster. >> suzanne: but, as stephanie dhue reports, it may take months before deep drilling operations actually start back up. >> reporter: while the ban on new drilling is lifted, the administration made clear it will take some time before deepwater drilling resumes. >> somebody can drill only when they satisfy the government that they have a process in place to deal with a worst-case scenario. until that time, drilling can't happen. >> reporter: to get the green light, companies must meet stricter guidelines. the c.e.o. must certify their companies comply with regulations, third parties must inspect blow-out preventers, and
companies must prove they can respond to a worst-case spill. hornbeck offshore services, which challenged the moratorium in court, says the government still has to spell out the details. >> we're still very unclear on how much response equipment the government is going to require to engage in deepwater drilling that we should have on hand in the event of future spills. >> reporter: the oil and gas industry is worried that uncertainty will keep rigs idle. the ban on new shallow water drilling was lifted in june, but few new permits have been granted. energy analyst thomas pritchard expects investment in the gulf will dry up without more clarity. >> until those guidelines are thrown out there and we know what the competitive landscape is going to be-- who can drill, who can't drill, what you're potential liability cap is out there-- you're not going to have anybody betting the ranch on drilling in the gulf. >> reporter: while the industry pushes for new drilling to
resume, environmental groups are pushing back. elgie holstein of the environmental defense fund says oil and gas companies have a lot of work to do. >> they have a long way to go to demonstrate that they can meet the much tougher safety requirements that the government has now put in place. >> reporter: the interior department says the new rules will add an extra $1.5 million in costs for each new deepwater well. that doesn't include the cost of staying idle. regulators say it probably will be the end of the year before any new deepwater permits are issued. stephanie dhue, "nightly business report," washington. >> jeff: earnings in the tech sector got off to a good start this afternoon with intel. the chipmaker's third quarter results came in better than expected. intel earned nearly $3 billion-- 52 cents a share-- for the period, beating estimates by two cents. the results were driven by demand from emerging markets and corporations upgrading their i.t. systems. intel c.f.o. stacy smith expects corporate demand to stay strong in the fourth quarter.
>> what we're seeing is that, with the technology we're bringing into the server segment, chief information officers can get a very fast payback on upgrading their infrastructure. we're seeing that, as content is moving to the cloud, as content is increasingly high-def video content, companies are investing in their storage and server infrastructure to host that content. >> jeff: smith says consumers in the u.s. aren't buying as many p.c.s as they used to, but he expects corporate and overseas customers to take up the slack. >> suzanne: here are the stories in tonight's "n.b.r. newswheel." stocks closed flat for a second day. the dow added ten points, the nasdaq was up 15.5, and the s&p 500 rose four. big board volume picked up from yesterday's light session with 922 million shares trading today. nasdaq saw nearly two billion shares change hands. it seems as though it's no longer a matter of if but when--
exactly when will the federal reserve act to boost the economy? minutes from the fed's september meeting show policymakers are considering taking action soon. and they appear focused on buying additional longer-term treasuries. more banks are taking a closer look at how they foreclosed on homes. wells fargo has started reviewing pending home foreclosures where affidavits are required. and ally financial's gmac mortgage unit has hired legal and accounting firms to figure out if foreclosures in all 50 states were handled according to state law. ally will also review sales of foreclosed homes to be sure they were legal. >> jeff: still ahead: can the chevy volt get consumers charged up about electric cars? diane eastabrook takes it for a spin. >> suzanne: google is adding offshore wind farms to its online business. the company said today its investing in a multi-billion dollar project to transmit power through an underwater transmission line. the line could move energy from
future wind farms off the atlantic coast from new jersey to virginia. the wind farm would look something like this one run by siemens. google says this is an attractive investment that could help the bottom line. >> google views this as a way of helping to deploy more renewable energy, and as a company, we think that's important to do. it just so happens that, by helping deploy more renewable energy, you can make money doing that as well. >> suzanne: the project faces many regulatory hurdles. developers say it will need approval from 13 federal agencies, as well as permits from the involved states. if approved, construction is expected to begin in early 2013. >> jeff: european central bank president jean claude trichet says the underlying economic recovery is in place in his region. but in a speech to the new york economic club, he admitted there's more work to be done. so, is now a good time for investors to put more money into the region? erika miller asked the pros.
>> reporter: with images like these, it's no wonder many americans are wary of investing in europe. in recent weeks, workers have been striking in france, greece, spain, belgium, portugal, poland, and other countries. the issue-- their governments' austerity measures. at the new york economic club today, the president of the european central bank, jean- claude trichet, warned growth in the region will slow in the second half. >> we have to remain very cautious, very prudent, and continue to do the hard work, particularly the hard work of structural reforms, to elevate our growth potential. >> reporter: optimism about reform is driving gains in exchange traded funds that invest in european stocks. the dow jones euro stoxx 50-- the euro zone's blue chip index- - has risen 17% in the past six weeks, soundly beating the s&p 500. investment strategist doug roberts expects european stocks to continue to outperform, with
some help from a falling u.s. dollar. >> liquidity tends to go where it finds the best returns, so if you have a falling dollar, that's almost a tax on a u.s. investment, so there are preferences to really go overseas. >> reporter: he recommends individual investors buy e.t.f.s or mutual funds, because they provide diversification. but other strategists like art steinmetz think the key is being selective. >> we think the companies that are world class companies doing a lot of exports, have customers all over the world-- and there are many of them in europe-- will be comparatively less affected by the challenges that a tighter fiscal policy in europe has for domestic demand. >> reporter: most experts think it's a mistake for americans to shy away from investing in europe simply because of what they see on tv. instead, investors should focus on the region's economic outlook, the currency impact, and a company's particular growth prospects. erika miller, "nightly business report," new york.
>> suzanne: general motors took another step today toward shedding its "government motors" nickname. c.e.o. dan akerson met with treasury secretary tim geitner to discuss the auto maker's upcoming stock offering targeted for next month. the government hopes to sell part of its 61% stake in g.m. sales of g.m.'s chevy volt could help drive interest in the company's stock. the electric vehicle with a backup gasoline engine rolls into showrooms in a few weeks.
diane eastabrook test drove the volt and weighs in on whether the car lives up to the hype. >> reporter: before i got behind the wheel of the $40,000 electric battery-powered volt, tony posawatz, who heads chevrolet's electric vehicle program, showed me how to charge the car. >> you can't open up your charging port until you hit the button inside the car, and we'll do that as we speak. and there it is. >> reporter: after plugging it in, we slid inside so i could get acquainted with the cockpit. >> the first thing you notice is the car welcomes you. >> reporter: it does. >> it tells you how much battery range you have. >> reporter: so how do we start it? >> put on the brake, okay, and hit power. did you feel a little pulsation? >> reporter: a little bit. >> you're on. >> reporter: after my primer, i hit the road. i drove the volt around the streets of suburban detroit. i was impressed with the car's smooth and quiet ride. still, there was one thing that felt odd. the brakes are a little grabby. i think that'll take some getting used to.
out on the highway, the volt easily accelerated to 60 miles an hour. g.m. says the car can travel between 30 and 50 miles on a single battery charge. i asked posawatz what might affect the range. >> depending on the temperature outside, the terrain you're driving-- if you're going up and down hills-- and the technique of the driver, your performance and efficiency will vary. >> reporter: i got just under 39 miles on the battery. then, the backup 1.4-liter gasoline engine seamlessly took over. with a full tank, the volt will go another 300 miles. during my test drive, i stopped by j.d. power and associates, and let the senior manager of global power trains check out the volt. >> i think it's an attractive car. the styling is futuristic without being too far out there. >> reporter: still, mike omotoso is skeptical about the reliability of the lithium-ion battery, and if consumers will buy electric cars. >> whether it's a plug-in hybrid vehicles or fully electric
vehicles, we're still not sure whether consumers will embrace them like they have hybrids over the last ten years, or if consumers will think they are too expensive, if the up-front costs is too much to justify the savings on fuel. >> reporter: when we took the volt to an area gas station, it attracted a lot of gawkers. one bmw owner was impressed. >> i like having a performance car and having another car that gets mileage. it's something that i would think about, that's for sure. >> reporter: but a mechanic was a harder sell. for $40,000, is it something you would buy? >> i don't know, it's kind of expensive. >> reporter: tax rebates of up to $7,500 make the volt more affordable. g.m. hopes to sell 10,000 of the cars in its first year, and another 45,000 the next. so, would i buy a volt? maybe, as long as i'm certain the electric battery will hold a charge in a midwest cold snap. diane eastabrook, nightly business report," rochester, michigan. >> jeff: the stock
market continues to hold its charge in a sense. in a holding pattern, awaiting the flood of earnings reports due out from wall street. let's take a look at tonight's "market focus." add third quarter earnings to anticipation about the fed's here is a quick check of the top three financial related dow components. bank of america up nearly 3%. j.p. morgan chase advancing almost 2%. analysts are expecting q-3 earnings of 90 cents per share tomorrow when final results come out. american express picked up 60 cents on an upgrade from analysts who think the justice department's lawsuit is a buying opportunity. turning to another dow stock, chevron. late today, the energy giant issued a third-quarter warning. results will be sequentially lower on higher costs, mixed margins and the lower u.s. dollar. the stocks was down about 1% in after hours. pfizer added another notch to
its buyout belt; this time, adding king pharmaceuticals. king's specialty is pain medicine. pfizer will pay $3.6 billion, or $14.25 per share, for king, which raked in just under $2 billion in sales last year. pfizer believes cost savings will more than make up for the $1 billion premium paid for king. here's the reaction in king shares, bolting to a three-year high. pfizer investors seem to like the deal, too. the company is under pressure to backfill a potential $11.5 billion hole in yearly sales, when the patent for lipitor-- its best-selling cholesterol drug-- goes generic next yea when it comes to the shares of avon products, a buyout opportunity may be calling. and the company ringing the doorbell may be l'oreal. avon shares made a nice move, up nearly 4% on the report from britain's "daily mail" newspaper. the story suggested a $44-a- share bid. the news report put shares of estee lauder in motion, as well.
shares in another potential takeover target was piping hot. rumors resurfacing that a union between nestle and green mountain coffee would be an ideal fit, pairing green mountain's success with filtered coffee in the u.s. with nestle's mark with espresso in europe. green mountain shares advanced more than 7%, while famed swiss firm nestle showed a modest gain. here in the states, you cant think coffee without thinking starbucks. analysts at credit suisse, impressed with the household name, upgraded the stock ahead of next month's earnings report. results are expected to showcase just how well products are selling outside of its crowded coffee shops. shares recovering nicely from august lows, and within a $1 of a three-year high. a value fund manager today had four words for michael dell-- "show us the money." lee ainsley, at maverick capital, called for dell to either take his company private or pay out a big special dividend-- something, anything, besides just sitting on $13 billion in cash. dell's investors were paying attention, because the stock,
after ainsley made his call, jumped to its highest price since july. the obama administration's decision to lift the deepwater drilling moratorium put most of the big drilling and oil-service stocks in motion. diamond offshore and transocean each logging gains of almost 5%. noble rose 3%. these stocks are still way below their levels prior to the gulf spill. as you heard, getting these rigs back online is a slow process. and that's tonight's "market focus." >> jeff: with three weeks to go
until election day, the floodgates are open for spending on political advertisements. so how can investors benefit? tonight's word on the street is "elections." kevin baker is senior financial analyst for thestreet.com ratings. kevin, welcome to "nightly business report." >> thank you. >> jeff: give us a sense of just how much spending is going on as we hit this final home stretch into election day? >> well, so far candidates like rick scott, who is running for governor of florida, and mec whitman, who is running for governor of california. meg whitman has dipped into her pockets for another $140 million from the money she made at ebay. >> jeff: there is obviously a lot of spending going on in this department. we had the citizens united versus the federal election cases. the supreme court eliminating any spending from corporations and other corporate-type entities. you believe eventually
there might be a supreme court case that would also remove personal limits on personal giving to compaigns? >> well, eventually they're going to have to level the playing field. under the 14th amendment, the u.s. constitution, the equal protection clause, individuals should have just as much right to spend money as corporations. and that would be a result in even more money coming into the political process. >> jeff: with that in mind, what kind of companies would somebody want to buy here as we hit this home stretch? cbs being one of the first, i get? >> c.v.s. is a great one. it has half a million outdoor media displays, and 100,000 billboards, another 200 affiliates, and 130 radio stations. >> jeff: and what else after that? >> i like the walt disney company with their abc network. they have 10-owned, and 233 affiliates, and 36
radio stations. >> jeff: do you have a third one for us? >> sure. news corporation. they've got 27 tv stations, plus another 203 affiliates. and the beauty of the fox news model is that candidates can go on to fox news and they can raise money and then bring that back to their district and use it to buy air time under local fox stations. >> jeff: and msnbc could do it similarly with democratic candidates. you had a final one, a little off the beaten path. >> there is also google which is a great election play because candidates can go directly to voters and post videos on youtube, which is a google site. if they like what they see, they can click on a banner add that goes through google's double click system. so google collects money every time a person clicks on there and gives money to a candidate. >> jeff: kevin, any
disclosures to make for us? >> google is a holding in one of the mutual funds in one of my requirement accounts. >> jeff: you could read kevin's article on thestreet.com. kevin baker, senior financial analyst at the street ratings. thank you. >> thank you. >> suzanne: here's what we're watching for tomorrow: quarterly results from j.p. morgan chase and apollo group, along with september import prices. also, is the run-up in oil, gold and corn prices about more than the falling dollar? we'll ask our "street critique" guest. he's lincoln ellis, chief investment officer at strategic financial group. wal-mart, meet the ipad. the world's largest retailer will begin selling the tablet computer on friday. the ipad is one of apple's most popular items, and is already carried at best buy and target. but don't look for wal-mart's famous price rollbacks to extend to the ipad. the computers will sell for apple's suggested retail price starting at 500 bucks apiece.
>> jeff: the i.r.s. is having i.t. issues. the tax agency says a server shutdown over the weekend did not go as planned, and its modern e-file system is offline. so far, this is not a huge problem, and only involves one part of the i.r.s.' computer systems. but it comes at a bad time. there are just four days left until the deadline to file, for people who got an extension back in april on their 2009 federal income tax return. euqutuuuu
>> suzanne: federal and state officials continue to dig for solutions to keep the hudson river tunnel on track. last week, new jersey's governor scrapped what was the biggest public works project in the u.s. due to its high price tag. tonight's commentator says the tunnel has more at stake than connecting new york and new jersey. he's dan gross, economics editor and columnist at yahoo finance. >> amid all the problems-- the foreclosure mess, continuing high unemployment, the falling dollar-- the most distressing piece of news to hit the tape the past week was governor chris christie of new jersey opting to stop work on a new rail tunnel underneath the hudson. the huge public works project, to be funded by the federal government, new york, and new jersey, would have put thousands of people to work.
but that's not why its apparent spiking was so distressing. rather, the decision typifies the short-sighted attitude we have in this country toward infrastructure spending. ambitious, controversial infrastructure projects-- cutting a canal across upstate new york, or laying down railroad tracks through the rockies-- have frequently paid huge dividends. the erie canal opened the midwest for settlement, and made new york a center of trade, yielding incalculable returns on the state's $7 million investment. in an era of permanent budget crises, its difficult to justify big-ticket items. still, it's troubling that many officials take the attitude that hundreds of billions of dollars can be added to the deficit for the sake of keeping income tax rates at present levels, but not, apparently, for shortening commutes or improving the quality of air or life. there's some hope, though. governor christie has said he's reconsidering his opposition to the tunnel. and on monday in washington, president obama met with a bipartisan group of governors and mayors to discuss plans for
infrastructure spending. remember "drill, baby, drill"? how about "dig, baby, dig"? i'm dan gross. >> jeff: finally tonight, it's pretty typical-- your kid refuses to eat the fruits and veggies in his school lunch. what's a parent to do? the answer may be, get help from uncle sam. the agriculture department is ponying up $2 million so behavioral scientists can figure out how to get your children to choose healthy options in the cafeteria. among the tactics that apparently work well-- placing fruit in pretty baskets, putting the salad bar near the checkout, and hiding the chocolate milk behind the plain milk, suzanne. my son would probably see through that trick in a heartbeat. i suspect yours, would, too. >> if it looks like a vegetable, smells like a vegetable, guess what? they're not fooled. >> jeff: going the other way. that's "nightly business report" for >> suzanne: that's "nightly business report" for tuesday, october 12.
i'm suzanne pratt. good night, everyone, and good night to you, too, jeff. >> jeff: good night, suzanne. i'm jeff yastine. good night, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: this program was made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org