To grow the economy, especially as they struggle with less take home pay, and worries about their jobs. While there are signs of improvement in the economy, the Unemployment Rate rose in january to 7. 9 . So what is the current state of the economy . Erika miller talked to two experts with different views. Reporter it may seem strange to many investors that the stock market can be hovering at five year highs, when the economy is so weak. But whats fueling the rally is not the current situation, its hope. Weve taken out some of the downside tail risks. So, were feeling like although its not going to be a boomy year, at least it will be a year where we can reasonably expect that the economy will continue to, you know, make progress. Reporter he expects there will be a continued slow, but steady, fall in the Unemployment Rate. In addition, the Housing Market recovery is spreading. Weve seen a pickup in household formation. So, more people are moving out of homes, starting new families and so forth. And so that creates underlying demand for housing units. And the second thing is, weve seen those inventories of excess unsold homes has been gradually whittled away. So now were at a more normal inventory situation. Reporter and dont forget the psychological boost of a rising stock market, which makes people feel wealthier and more inclined to spend. But this is still the weakest economic rebound since world war two. And there are still plenty of hurdles to faster growth. When i look at how the economy is performing, i look at export and import growth and they raise alarm bells. I look at the big change in the trade deficit in one month, and that raises alarm bells. I look at the sharp drop in Consumer Confidence and consumer sentiment. That raises alarm bells. Reporter another immediate concern is the impact of higher payroll taxes, which could force some households to cutback spending. In addition, gasoline prices are rising. And if they hit the psychologically important 4 a gallon mark, many consumers could also pull back on shopping. And long term, federal budget problems remain one of the biggest hurdles to growth. The u. S. Is running an annual deficit of 1. 1 trillion. We still have some fiscal speed bumps coming. And then we have the question of what they actually do on the fiscal side. So, right now, the economy and the fiscal situation are wrapped up into one really nasty ball of wax. Reporter keep in mind that many of the International Problems that have existed for more than a year havent gone away. Slowing economies in europe and china could slow global growth. And conflict with iran could push up energy prices. Erika miller, n. B. R. , new york. Susie joining us now with more on what to expect from president obamas state of the Union Address, david gordon, head of research at the Eurasia Group in washington d. C. So if you heard from our report, david, its all about the economy. Thats the big interest for most americans. What can the president propose tomorrow that will get the economy moving without some kind of big stimulus plan . So i think that the president s going to try to do a couple of things. First hes going to call on others to help him. First es he going to call on the congress to do two things. One, avoid the sequester, avoid the job cuts that will come from the sequester. And come to a balanced program on putting budget issues on the sidelines for the rest of this year. Two, pass Immigration Reform so people have confidence, Migrant Workers have confidence, or security improves, so ess going to ask the congress. Second hes going call on business whose Balance Sheets are in very good shape. Hes going to say now is the time to invest in america. You have waited. Youve improved your standing. We need to create jobs, only business can do that. Then he but how is he really going to propose a way of creating growth, creating an environment where those businesses that you talk about feel comfortable about hiring out of work americanses especially given 4loerjudis budget talk and everything, what you can really do . Yeah, i think hes going to focus his attention on two areas. The first is energy development. I think hes going to make a big pitch for the u. S. As the energy power of the future, both in terms of renewable energies, green energy, and in terms of traditional energy, unconventional energy. So i think one of his themes is going to be energy. The second is i think hes going to push two very big trade bills, one the Transpacific Partnership with asia and the second the Transatlantic Partnership with the european union, both of those to create confidence that those economies are going to recover and to insurance that the United States is right in the middle serving consumers in both those countries through creating jobs, creating employment, and agricultural output here at home. Susie the president is also expected to talk about shoring up middleclass families. Not sure quite what that means. Is that just another way of saying that hes going to be calling for higher taxes . I think hes going to continue to seek higher revenue in whatever kind of fiscal deals he gets with the republicans. But i think hes going to try to use the state of the Union Address to begin to put fiscal issues behind him. I think thats his goal for 2013, is not to play into constantly having to fight the fiscal battles. I think hes going to cite data saying that the deficit is actually improving and that we can get to the end of the road with some fairly short steps. Do you think hes going to say anything that will resonate with republicans . Well, thats the question. And i think how far will he go in putting into play some of the big entitlement programs or cutting expenditures out of the current budget. And thats the questions thats pretty unknown here. If he doesnt, i think the republicans are going to make it virtually impossible for him to get past these constant fiscal battles. All right, david, thanks for coming on the program. David gordon with the euruasia group. Reporter im suzanne pratt, still ahead, we take you to the toy industrys big show and show you what might be hot this fall. Susie on wall street today, a slight pullback for stocks after six straight weeks to the upside. Investors hit pause ahead of the state of the Union Address and a bunch of economic reports due out later this week. The dow fell 21 points, the nasdaq lost about two, the s p down nearly a point. Susie there is now growing concern in washington that banks are still not safe enough and may still be too big. A new book on the Banking Industry says bankers try to make their business more complicated than it is. The book is called the bankers new clothes, Washington Bureau chief darren gersh spoke with one of the authors, stanford finance professor anat admati and asked her why shes trying to demystify banking. I think people give exceptions to banks that are completely unwarranted. In other words, they somehow get to do what they want to do, even though it only works for them and not for the economy. But they kind of make you think that they must be like that. Because theyre saying their business is so complicated. Theyre saying its complicated, its different from everybody else. So then the kind of things they say are just completely make no sense sometimes. Like, for example,. Well, they say they must reason a certain amount return on equity to their investors. Nobody is entitled to give a particular return. You earn your return and the investors require the return according to the risk that they think. So theres no fake return you have to return to your shareholders. You have to do a good job to the shareholders relative to the risk tas that are there. One thing we are hearing in washington right now is that banks are big, should they be smaller. My take on that is that one of the reasons the banks are so big is that they have to be subsidized age the bigger they are, more sub sids. The too big to fail banks have an advantage over the others in the economy in a sense it that they can borrow subsidized rights. The arguments bankers make is we need to be big, it is a big world. We have to do business all over the world, lend money all over the world it takes a big institution, its also a big country. Thats fine. I just want them to be funded differently. They can be big, maybe, but what about if they fund themselves with 30 equity and not 5 equity. Then they, their business might not be so scary because they will be able to absorb more losses on their own without taking down the system and the american country. But if theyre going to get up to 30 , the argument the bankers make is were going to be spending a lot of our retained earnings, raising money and its going to go to this capital. Were not going to be able to put it to work in the economy. This is false. The capital is just unborrowed money. They can use it, nobody told them not to use it. If they have equity, money, lots of companies have equity and thrive, apple has no debt at all. So if equity was so expensive, then why is apple thriving on 100 equity. If people read this book, are they going to come to the conclusions dow that the political will is what is lacking here in terms of actually take on the banks . Well, yeah, there is the good news, bad news good news bad new comes. The bad news in the end is its very hard to do financial reforms. Theres Major Political problems. Dodd frank, massive. Lot os of requirements that banks become safer, not enough . Why not . Because what dodd frank did mainly is give regulators a lot of authority, so theres nothing that they cannot do. The problem is they just dont do it. Thats you have the political robb right there. They wont do it, and you can blame the regulators, you can blame the politicians that press the regulators or you can, in this town, it was senator durbin that says they own the place. The book is the bankers new clothes, anat admati, thank you for your team. Glad to be here. Susie today was one of the lightest trading days of the year, party because the northeast is still shoveling out from under the weekend blizzard. One sector that posted slight gains was financials, up almost 0. 5 . But there was a pull back in energy stocks, one of the strongestperforming sectors this year. Also moving lower gold prices. They tumbled on word that World Finance officials might issue a statement this week aimed at cooling what many are calling a currency war. Gold fell nearly 18 to 1,649 an ounce, a five week low. Gold stocks also took a hit. Barrick gold and Newmont Mining were each off about 1 . A big blow to diabetes drug maker novo nordisk. The food and Drug Administration says it needs more trial data on potential heart risks before it will approve the drug makers new insulin drug. Novo nordisk plunged 14 . It is recognized around the world as treatment for type2 diabaetes. A different story for regeneron pharmaceuticals. The Biotech Company says drug maker sanofi is buying shares to boost its stake in the company. Sanofi already owns about 17 of the company. Shares were up nearly 3 to 170. Theyve seen a nice runup since last february. Colgatepalmolive says it expects to incur a onetime loss of 120 million this quarter because of the devaluation of the venezuelan currency. Venezuela accounts for about 5 of colgates total sales. But colgate shares were little changed. So far this year the stock has surged about 20 . Surged about 3. 5 . A big blow to the maker of the blackberry. Home depot says it is switching 10,000 of its managerial and corporate employees to iphones. Blackberry shares fell almost 5 on the news. Meanhwhile, apple shares got a boost today on two developments, a possible boost in its dividend, and reports the tech giant is working on a wrist watch that could function as a smartphone. C. E. O. Tim cook is scheduled to speak at the Goldman SachsTechnology Conference tomorrow in san francisco. Then hell join First Lady Michelle Obama for the state of the Union Address. Apple shares up 1 to just under 480. Shares of microsoft rose a fraction on reports that its surface x pro Tablet Computers sold out over the weekend. Microsoft advanced 1 . Shares have climbed more than 4 since the start of the year. Shares of tesla hit a speed bump after a negative review of its model s sedan. The s is the first car the automaker designed completely. Tesla is expected to announce the release date of its Quarterly Report this week. Tesla shares dropped 2 . But despite that, shares are still trading near their 52week highs. And starz says it has extended its agreement with sonys film business. The deal gives starz exclusive premium paytv rights to Sony Pictures entertainment movie releases through 2021. Starz shares were shining up over 7 . Sony shares pretty much flat. Three of the five most actively traded Exchange Traded products were lower. The s p 500 vix Exchange Traded note was the weakest. And thats tonights market focus. Susie merger talks between susie merger talks between the parent of american airlines, and u. S. Airways continued today, and there are reports an announcement could be made this week. Reportedly the new company would be called american airlines. So tonight our word on the street airlines. With us now, lindsay bell of the street. Hi, lindsey, so now there are only three, three Major Airlines am weve got united continental, delta, and if this deal goes through, u. S. Air, american, american airlines, so each of these airlines has been bankrupt at one point or another. So are we done now with bankruptcies and mergers . Is this it . I certainly hope so, that were done with bankruptcies. Theyve all been through the process just like you mentioned and through the process theyve been able to drill down and examine their expenses. And right size things like pension, labor, and leasing costs. And theyve been able to emerge leaner and stronger, theyve also gotten smarter about charging for baggage fees, charging for food and charging to get on the plane earlier is so i think theyre all getting to a better point. But a lot, they all have room to grow. Well, you know, american was fighting this merger all along. And we still dont know if its going to go through. But it wanted to stay independent. From what you have been reporting, do you think that american is better off being part of u. S. Air or would it have done okay on its own . I think its better off as part of u. S. Airwaveways. It just kind much has an inadequate infrastructure, theyre a little bit too small to compete with the bigger guys in the Business Travel space. And theyre too big to compete with the lowcost providers. So theyre in this weird spot. And i think a lot of analysts and Industry Experts out there have been calling for this merger since amrs been in bankruptcy. Uhhuh. Lets take a look at the stocks of these three big players, so how investors might want to play this. You know, whether you are looking at u. S. Airways which has been going, the shares have been going up a little bit. United continental also on the upside. Delta nice move there on delta shares. As you assess these three companies, whoses the best, its strongest play frere the point of view of an investment. As i look at all three of these stocks, i like delta the best. Right here i know as you mentioned this stock has been up 50 since the beginning of december, thats a big move. They just reported earnings that were soiled. They have a cost advantage versus the other guy. And also given their cash flow we could see a buy back from them as soon as june of this year. Theyre also trading at a discount to the group is so this is where i find the most value. United continental has been a more volatile stock. Theyre still working through the merger of those two companies. Theyre working on bringing costs down. They have a lot further to go. U. S. Airways, the stock has been up a little bit on this news of this potential merger, which could be a great neerterm catalyst but just remember, i just talked about united p if it goes through, they could have these integration concerns. And if it doesnt, the stock could go down. So im sticking with delta. Okay. All right. A lot of good information. Lindsey, any disclosures that you want to make about thesefully stocks it, dow own them . I do not own any of them. All right. Have a nice night. Lindsey bell of the street. Com. We continue our monday series with some of the nations top universities, we call it nbr u. Our partners from harvard, stanford, wharton and vanderbilt, bring us vast knowledge about business issues. And you can read indepth articles at www. Nbr. Com, just look for the nbru tab. Tonight, depression babies and how our economic experiences affect investment behavior heres tom hudson and stefan nagel, professor at the Stanford Graduate School of business. When people have lived through periods where it is very well, you see that people are more willing to invest in stocks, people are more opposite about the rates of returns from stocks and what you basically see are longterm cycles where in the stock market basically induce people to invest more in stocks. Tom is the inverse true, in other words, if you happen to live through a bear market in stocks you are less likely to put your money there . Precisely. And actually what we find is also that the effect is stronger for younger people. So if you look at the young generation for example in the early 1980s, and you look at the stock returns that the young generation at that point had experienced, it is very poor. The 1970s the yields were pretty poor stock return. And in the early 80s it was particularly young people that tended to stay away from stock market investing. And that expressed very pessimistic opinions about the rates of return you can earn in the stock markets. How long do these economic experiences stay with us. How long if we live through a bear market, how long do we stay concerned or away from stocks . Its a pretty long list. Even after 15, 20 years they are still a substantial affect on peoples behavior. You looked at stock investing specifically, but does this, do you think, hold true across other types of investments, even real estate, like housing . It looks like you find similar patterns there, that when we go through periods when the Housing Market is booming, it tend to its make people more optimistic and again its particularly younger people. What is an investor to take away from your research, the experience that theyve had over the past decade and put forward as a future strategy. You can clearly see that the last ten years of poor returns in the stock market have left their mark, left the portfolios and also their belief about the future so people tend to be more optimistic than they were maj 10, 123, year ago, about how much you can earn in the stock market in terms of the rate of return. And i think you know, for an investor, a useful lesson to take away if this is that most people tend to have beliefs that why go in the wrong directionment they tend to be most pessimistic, but if you look at historical evidence, you know, these tended to be actually the best periods to be invested in the stock market. Yeah. Right after a crash, right at a point in time when the valuation of the stock market was actually right below relative to fundamentals. Certainly that has held true since that stock market bottom back in march of 2009 moving forward to ted. Professor stefan nagel with the Standford Graduate School of business. Susie the Holiday Shopping season is more than ten months away. But, already retailers are planning, and kids are dreaming. So, which toys will top christmas lists in 2013 . Suzanne pratt visited the toy industrys big show in new york today, and has some ideas. Reporter this is zoomer by spinmaster. Starting in august, you can be his master. And, he just might be this years big hit. Or maybe it will be beanie ballz, brought to you by the makers of superhot beanie babies. As it turns out, the toy industry could really use a new blockbuster. Thats after a hohum year, when manufacturers got distracted by socalled appcessories, and kids by their parents playthings. I think the message is even where the economy is coming back and the consumer is feeling better, toys are not really the area of growth, certainly tablets are huge growth. I think 2013 is probably going to see that same kind of thing, maybe slightly up, maybe slightly down. Reporter so many toymakers are trying to hit the jackpot desperate for the next lego or skylanders. Others are going retro, thinking this years hot toy might a bestseller from decades ago. Remember simon from the 80s . Its back in a supped up version. So, is viewmaster. There are even record players for toddlers, that is if he or she knows what a record does. One thing thats really fun for kids. Its really hard for them to imagine mom or dad as kids who were playing with toys. To be able to play with something that mom or dad played with when they were young, it captures their attention. Reporter hopefully it captures their parents wallets, too. Thats one thing lego has mastered. The Dutch Company had a banner year in 2012, after it finally got little girls hooked on legos with friends. Weve tripled the number of girls in one year that are building with lego bricks in the u. S. So, when you think about it from a business perspective, tripling the number of girls now is sort of adding new users to the brand and thats where our growth is coming from. Reporter lego might have another big seller this year, thanks to its new legends of chima. Its an early favorite, and might even rival legos popular star wars line. Still, predicting what will be a winner with kids can be nearly impossible. That is unless youre able willing to get out and do some playing of your own. Suzanne pratt, n. B. R. , new york. Susie and finally, all things slithery could be a slippery slope for the stock market. Its the year of the snake, and if history is right, it could leave investors snake bitten. According to standard and poors, the year of the snake is the only Chinese Lunar year that has a losing record for the s p 500. Down nearly 3 on average, going back to the year 1900. Meanwhile, the best performing Chinese Lunar symbol, the year of the pig, gains there averaged nearly 13 . And the just wrapped year of the dragon, was good for a 10 market gain. Susie thats nightly Business Report for monday, february 11. Have a great evening everyone, 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