Time. Hes a tough dude and i think he is there because theres a knowledge that were going to have a lot of these debates for a while and we look forward to working with him. Reporter while lew is often called the smartest man in the room on the budget, he is a newcomer to Global Financial issues. One of his Biggest Challenges will be convincing other countries to cooperate as they seek to rein in their budget deficits. If the united states, germany, japan and the United Kingdom all cut spending at the same time, theyll all have less money to spend buying goods from each other. And then all of our tax revenues decline because economies are slower then nobody is meeting their budget targets and then somebody else says, oh well, i better tighten up further and then the cycle starts over again. And the point is we do have to pay our bills eventually, but all of us doing it too fast makes it harder for each one of us to pay our bills. And so you need some kind of coordination to keep from making life harder. Reporter but if hes confirmed by the senate, lews first crisis will be finding a way to work with republicans in congress to raise the nations debt ceiling. If he can survive that battle, Global Financial fights will probably seem pretty easy. Darren gersh, n. B. R. , washington. Susie also in washington today, new rules to protect consumers from risky home loans. The Consumer Financial Protection Bureau says the rules make sure home buyers understand exactly what theyre getting into, when they take out a loan. Lenders now have to determine the borrowers ability to repay the loan. Borrowers will have to prove they have a job, meet a minimum credit score, and can afford a loans Monthly Payments and related expenses like property taxes. The rules do away with those so called no doc loans where applicants didnt provide any personal financial information, and caused the mortgage mess in the financial crisis. Joining us now to talk more about the new mortgage rules, raj adabi, of the consumer Protection Bureau. Raj, key rates are gone, and fewer balloon payments. How do this change the kinds of mortgages people can get now. It is pretty simple. Going forward, lenders are going to have to make a reasonable, good faith determination that borrowers can actually repay loans. A return to pretty traditional and conservative underwriting practice. So hopefully the Mortgage Market can move ahead and return to a vibrant marketplace, as opposed to where we are today. Susie do you think it will be easier to get a mortgage . One complaint we always hear is how difficult it is to get a mortgage, even if you have a good Credit Rating . Well, almost everyone agrees that todays Mortgage Marketplace is tighter than it needs to be. This really is a pendulum, where credit was way too loose before the crisis, and now it is, by most estimates, way too tight. One of the things that the market needs in order to get to a more normalized place is some certainty around the rules of the road. Thats why this rule is so important. Some clear, sensible safeguards for costumers and clear rules of the road for lenders. Susie even with these rules, there are going to be some people who are going to get a loan who shouldnt, and there are going to be some who should get a mortgage and dont. How do you know youve got this rule right . Its a great question, and one that we take very seriously. Thats why we have done so much work in Empirical Research going in to finalize this rule, and why well continue to monitor the marketplace going forward. One of the things you want to see is whether or not the penetration of loans to creditworthy people reaches levels we saw before the great runup, but in normalized periods. And were not to that place yet. Mortgage levels are still tighter than really it should be. Susie that is one of the concerns that a lot of people have. There have been so many new rules and regulations put on banks and other lenders, and there are concerns it is going to make the credit market tighter, and more extensive, especially at a time when you need the economy to grow. What do you say to that . The reason why that credit market is tight is that the Financial System suffered a massive creditinduced trauma not too many years ago. To make sure that the credit markets and the Financial System work, we have to make reforms that actually make this marketplace work like any other marketplace. That means you have to have a marketplace that is fair, one that is transparent, and one that has sensible guard rails. Thats what this rule does, it is clear and transparent and puts clear rules in place. Susie we hope it will be a safer market. Thanks so much, raj, for joining us. Raj, of the consumer Protection Bureau. Tom chinas latest trade numbers, out today, suggest Global Growth is more robust than believed. Chinas export growth rebounded sharply, in december, hitting a seven month high. Here in the u. S. , new claims for Unemployment Insurance rose by 4,000 in the past week, to 371,000. But the number of continuing claims, fell to a fouranda half year low. That helped u. S. Stocks move higher, the dow rose 80 points, the nasdaq added 16, the s p up 11. January has historically been the best month to invest in small cap stocks. And this year is off to a strong start. The russell 2000 index of those Smaller Companies is up 7 in the past month, twice the return of the s p 500. Heres erika miller in new york. Reporter large caps tend to get most of the attention on wall street. And theyre doing well this year, thanks to the resolution of the fiscal cliff. But its the small caps that have quietly snuck up to all time highs. Theres been a lot of muscle in the russell lately. The index of small cap stocks is hovering at record levels. It gained 6 in the past month, double the increase in the s p 500. Small caps are loosely defined as companies with market caps between 300 million and 2 billion. And investors are flocking to those stocks because they do business mainly in the u. S. , unlike the large, multinational firms. Though the u. S. Economy is hardly on fire, its growing faster than most other countries in the developed world. We dont see a recession in the united states. Funding liquidity is still pretty strong from the federal reserve. So theres good reason to think that economically sensitive stocks, like small caps, could have a good run in 2013. Reporter Small Companies are also growing their earnings at a much faster rate than the big boys. For the Fourth Quarter, the s p 600 index of small caps is expected to post growth of over 7 , compared to just 2 for the s p 500. The gap is expected to widen in the First Quarter. But its not a given that small caps will continue to shine. If the federal government slashes spending to trim the deficit, the u. S. Economy could slip back into recession. And if that happens, investors could bail out of small caps when you do see volatility spike up. When you do see a lot of problems come into the market, investors tend to go to safe havens. And that would tend to favor larger cap, more household names. So, its really going to be a tug of war between small cap and large cap, in our opinion. Reporter if you do decide to invest in small caps, remember theyre riskier and more volatile than large caps. Its common for them to fluctuate 5 or more in a trading day, something many investors cant stomach. Erika miller, n. B. R. , new york. Susie nutritional Marketing Firm herbalife hit back today at claims its Business Model is a pyramid scheme. At an Analyst Meeting in new york, the company argued herbalifes directselling model is legit. Activist Hedge Fund Investor bill ackman accused the company of being a pyramid scheme, saying distributors earn more than 10 times as much from recruitment than they do from selling products. The Company Called that claim a misrepresentation. Herbalife sells its products like Nutritional Supplements and weight loss drinks, directly to consumers. In defending itself, the companys c. E. O. Noted today that girl scouts sell cookies directly to consumers. But given the spotlight on its Business Model, the criticism of herbalife has brought new scrutiny. The industry as a whole is going to have a difficult time in the next six months or so sorting out what they want to say publicly and what they dont thats going to affect their relationship with their banker say for a line of credit, its going to affect their relationship with their distributors and its really going to affect conversations inside the direct selling association. Susie herbalifes chief critic said the company today ignored his arguments. But herbalife said it is open to every means possible to protect the company from the accusations. The stock closed slightly lower, at about 39 a share. Come march 1st, 850 billion in Government Spending is still scheduled to be cut from the u. S. Budget this year. Half of the cuts are supposed to come from the defense department. It is the spending part of the fiscal cliff that aims to cut more a trillion dollars in Government Spending over the next decade. The c. I. A. Of keyw, a Cybersecurity Firm that does a lot of business with the government. Welcome to n. B. R. It is nice to see you. Thank you, tom. It is nice to be here. Tom most of your companys revenue is derived from the government, so what kind of risk does it present for you and your shareholders. I dont think you can judge the rest of the business by what we do or what our concerns are because the counterterrorism and cyberareas of the government, and particularly the intelligence business, which is our focus, are somewhat immune from those kind of cuts. They are the highest priority in the government. Of the president s budget, theyre the highest priority. So we havent seen any impact yet. And while we might see some in the future, were not going to see it nearly as much as the big guys with ships and tanks and those sorts of things. Tom youre talking about intel, which is a key spend, a lot of return on investment. With the drawdown expected of troops in afghanistan, how could that impact Government Spending on products like yours in the intel business . Will affect a number of companies in our business because of the number of employees they have deployed overseas. In our case, the things were doing overseas will be are missioncritical, and will remain important long after we have withdrawn our troops. So it wont have much impact on us, if any, but it will clearly effect a number of companies that have people and resources overseas. Tom do you see this as an opportunity for growth for keyw . Absolutely. The kind of mission and critical work were doing overseas is useful not only to our government, but to the local governments. Yes, we think it is an opportunity. Tom youve spent heavily, recently, to expand into that intelligence and defense contracting business, but also expanding into the commercial business. What are the opportunities there . Were going down what we call a horizontal path, taking the good work weve done for years in the intelligence business down to commercial costumers. Were doing that, i must say, not like many Defense Companies who say i have a brilliant idea, and let me go and try and sell it to the commercial. Were being drug down this path because of the offerings we have. The opportunities are very significant because everybody is aware of all of the cyberthreats and we have a very important solution. Tom where are the Profit Margins better, in the government business or the commercial business . I trust that is a good Straight Line because theyre clearly better in the commercial business. Tom keyw, noted for key west, you describe yourself as a Jimmy Buffett fan. That doesnt seem to go with government intel business, len. Were known to be a little weird, both in the company, as well as you have to be a little different to be successful in the intelligence business. I think it does fit. Tom leonard moodispaw, with keyw. Susie American Express to verizon investors, relieving its latest earnings about a week before they were due. The reason for that, a major restructuring. The company said it plans to cut 5400 jobs and take a 400 million charge in the Fourth Quarter. As for those earnings, here are what they are. Amex, 1. 09 a share, three cents better than estimates. Tom, the shares were trading slightly lower on the news, down about 1 , to around 60. But it was a surprise to get the earnings on the early side. Tom a full week early. And it announced a record amount of money paid out to card holders in rewards. The card spending continues, and the company has to respond with those rewards. Well take a look at a. X. P. , but lets get started with our market focus. And stocks higher overall. Today with more positive news on the u. S. Job market, and encouraging trade data from china. The s p 500 was in the green for the entire session, ending up 0. 8 , just shy of a five year high. Trading volume picked up to 726 million shares on the big board. Over 1. 7 billion shares on the nasdaq. All 10 of the major stock sectors were stronger. The Financial Sector led the gains, up 1. 4 . Energy was up 1 . And the Telecommunications Sector gained 0. 8 . After the closing bell, the focus remains on finance. American express released its Fourth Quarter earnings, announcing them a week earlier than expected. Earnings came in three Cents Per Share better than expected. But the firm will cut 5,400 jobs, reducing its employee count by 8. 5 . American express shares were up 0. 9 ending the regular session just below a new 52 week high. And the stock continued rallying in extended hours trading, up another 1 . If that holds through tomorrows opening bell, it would be a new 12 month high. Other financial stocks moving today included morgan stanley, up 3. 7 . It announced its own round of layoffs yesterday. Asset manager legg mason gaining 3. 2 . And bank of america was up 3. 1 . It led the gainers for the dow. Energy stocks were higher as Oil Prices Continue to heat up. Oil settled at 93. 82 per barrel, this is a five month high. Cell phone market nokias Fourth Quarter earnings will be stronger than expected thanks in part to its new lumia smart phone. Shares had a strong response, up 18. 7 . Volume exploded to almost 300 million shares. Nokia shipped 4. 4 million lumias in the Fourth Quarter. Still, thats not enough to prevent the company from reporting a drop in total device sales and shipments for the year. Ford was the only big american car maker not to take the government bailout at the height of the financial crisis. It issued bonds, revamped it auto lineup, and has profited as auto sales have come back. The company is confident enough in its future to double its dividend to a dime per share, paid quarterly investors and traders liked the confidence. Shares were up 2. 7 . Trading volume was heavier than usual with the stock at an 18 month high. All of the five most actively traded Exchange Traded products and that will hurt earnings. Shares of t. I. F. Fell 4. 5 , and volume was heavier than normal on the selloff. American e eagle outfitter described a look warm holiday, and shares falling 3. 3 . The softness in sales stretched to other retailer, including the senit group. It lowered its Quarterly Financial forecast to disappointing holiday sales. The company warned that markdowns will be coming as it tries to move merchandise. Shares falling 7 . All of the five most actively traded Exchange Traded products were higher with the Financial Fund leading the way, up 1. 3 . And thats tonights market focus. Tom americans will spend more than 20 billion this year for something many of them will ignore a membership to a gym. So while many of us resolve to exercise more in the new year, do fitness stocks fit into an investment portfolio . Debra, americans spend a lot of money trying to lose weight, but are there profits for shareholders in that kind of Consumer Spending . Well, thats really what is happening in the market right now. You see a lot of traders and investors thinking that theyre smart and theyre going to buy these stocks up now at the beginning of the year because people pass those new years resolutions theyre going to lose weight and get fit, and they think that will play out in the companys First Quarter profits and result in earnings. But when you start to dig a little deeper, it may not be the best strategy to employ. Tom talk to us about weightwatchers. The stock has been rising up to a seven month high. Thats exactly it. Youre seeing that happening. People thinking, wow, this is a great time to buy weightwatchers, arent i smart . But people are going to their smartphones to lose weight now. There are lots of free apps. Weightwatchers does have a mobile app, but they get less money off that mobile app than they do for the in meetings. The Big Ad Campaign was supposed to be jessica simpson, and she got pregnant. And she is now off the plan, and they dont have someone to bring right in to fill in for jessica simpson. It is terrible for them to lose her at this time. Tom such a key time for them and their shareholders. Meantime, the fitness clubs. The small one is town sports, and it owns Fitness Centers in the mid atlantic. Up 37 , but it has been trending lower. Compare that to the bigger one, lifetime fitness, which has been rallying, tonight at a ninemonth high. Town sports is known for new york sports clubs. They have quite a few of the big box sports clubs. The problems are that the rent is rising and their employees are costing more, and theyre not able to charge as much because theyre facing a lot of competition from the cheaper versions, like Planet Fitness and snap fitness. Whereas lifetime is a little nicer sports club, and theyre a healthlike, fitnesslike, in the sense they have dietitians, and they give it a little bit of a medical spin, and thats why people are flocking to livetime. It is more expensive. But some people feel like i want to pay more for this nicer club. And thats why they are doing much better. They have Food Products and supplement products that the new york clubs dont have. Tom you can get a bigger and a longer tail on the Profit Margins with your clients. Do you have any stock positions yourself . No, i dont. Tom weve got more from debra online at thestreet. Com, and a link to her full article on our website, youll find it at n. B. R. Com. Susie tomorrow on n. B. R. Did consumers showrooming instead of shopping at best buy hurt holiday sales . Well find out when the Electronics Retailer reports its sales numbers. Also well get a check on earnings at one of the nations biggest home lenders, as wells fargo reports quarterly results. And our Friday Market monitor guest is elaine garzarelli, president of garzarelli capital. With all of the budget battles in washington, its easy to get gloomy about americas economic prospects. Easy, but wrong says tonights commentator. Heres martin dickson, u. S. Managing editor of the financial times. Months of fiscal uncertainty, and the threat of recession, have hardly helped business confidence. And the sluggish u. S. Growth rate, of around 2 , is far from stellar. Demand is simply not Strong Enough to awaken industrys animal spirits but stand back from the fiscal crisis and a more positive picture emerges at least america is growing, unlike europe, which has been far slower to put its financial house in order. And the reforms to the us Financial System, and a gradually healing housing market, are helping lay the groundwork for a sustained recovery. So too are some big changes to the industrial landscape first, important sectors, notably autos, have been forced to become far more competitive. Second, labor costs have shrunk to the point where they make america much more competitive with other parts of the world. Productivity has been rising sharply. Third, the revolution in hydraulic fracking is leading to an oil and gas boom, with lower Natural Gas Prices that will boost many industries. Beyond the budget battles, theres a Bright Future out there. Im martin dickson. Tom finally tonight, flu season is in high gear, and experts warn it could be one of the worst in a decade. The city of boston has already declared a Public Health emergency. The centers for Disease Control and prevention says already over 22,000 cases have been reported. By the same time last flu season, just 849 cases had been reported. Health experts say we were spoiled by a milder flu season, and already susie, doctors are running short on a key treatment, the tamiflu vaccine. Cover your mouth, use kleenex and wash your hundrehands and get plenty of sleep. Susie and people arent coming to work. Tom a lot of lost productivity. That is our report for n. B. R. On this thursday, january 10th, stay healthy. Have a great evening everyone, and you too susie. Susie goodnight tom, thanks for watching everyone. Well see you online at www. Nbr. Com and back here tomorrow night. Captioning sponsored by wpbt captioned by Media Access Group at wgbh access. Wgbh. Org narrator explore new worlds and new ideas through programs like this, made available for everyone from contributions to your pbs stations from viewers like you, thank you. Next, music legend petula clark hosts an allstar reunion from the bands that made the british beat. [music playing]. Narrator travel back in time to the 60s with new live performances, reunions and archival classics from the vault. [music playing]. Narrator its my music the british beat right now on pbs. The beatles oh yea, ill tell you something
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