Theyve given ground in previous budget battles. Thats one reason they are holding firm on higher taxes now. 1. 6 trillion in cuts. Where are the cuts . They are in bills that you, mr. Speaker, have voted for. Reporter and there were new calls for more tax revenue today. Warren buffett, vanguard founder john bogle, and financier george soros were among the famous names to call for a tougher estate tax. Their proposal would exempt couples with up to 4 million in assets from the estate tax. Above that level, estates would pay a 45 tax rate, rising to 50 or more on very large estates. Supporters say that would both bring in badly needed revenue and help protect our democracy. It works to reduce concentrations of economic and political power across generations, and those concentrations are antithetical to the basic premise, if you will, of the founding of our republic, which was that it was a land of opportunity. And i think that those concentrations also can play a significant role, concentrations of economic and political power across generations, in distorting the functioning of our Democratic Political system. Reporter but raising the estate tax is unpopular even among Many Democrats who worry it will hit farmers and Small Businesses. And tax analysts say the estate tax is just too complicated to tackle in the fiscal cliff negotiations. If we get to a comprehensive reform of the tax system and we say, okay, here is the income tax. This is what we are going to do. Now, we need an estate tax to back it up, maybe you could change the estate tax in that setting. But just one off, i think thats hard to do. Reporter if congress doesnt act soon, the current 5 million estate Tax Exemption will fall to 1 million on january 1, though it is unlikely to stay there for long. Darren gersh, nbr, washington. Susie the fiscal cliff was certainly one topic on the agenda of the Federal Reserve today as policymakers kicked off their twoday meeting. Tomorrow, the world will be waiting to see whether the central bank will do more to prop up the u. S. Economy. The big question is whether the fed will stick with its so called operation twist bond buying program, or will it announce something new . Erika miller takes a closer look at whats expected. Reporter the fed may announce a new twist in its bond buying plans, but that doesnt necessarily mean the stock market will shout. At its final meeting of the year, the central bank is not expected to simply extend its operation twist program. Thats the nickname for the feds strategy of buying long term treasuries and, at the same time, selling an equal amount of shorterdated bonds. Thats important because it keeps the banks Balance Sheet the same size. Now, the fed may be ready to do a new stimulus dance. Under twist, theyve been purchasing 45 billion longer term treasuries while at the same time selling 45 billion short term. Theyve pretty much run out of shortterm stuff to sell, so i think theyll be continuing to purchase the long term, but purchasing outright, expanding their Balance Sheet. Reporter and that would be on top of 40 billion a month already committed to buy mortgagebacked securities. Some experts worry that 85 billion a month in spending will escalate inflation and, eventually, it could cause market disruption. At some point, theyre going to run into issues of market liquidity, with holding such a large share of the outstanding treasury notes and bonds. So, they run the risk of market dysfunction by trying to stimulate policy further. Reporter but he and others think its a risk worth taking, particularly with no agreement to avoid the fiscal cliff. Economists warn that if higher taxes and Less Government spending go into effect for many months next year, the u. S. Could sink back into recession. So expect reporter questions on that topic at the feds question and answer session after the policy announcement. Hes going to reiterate to politicians to get their acts together for some sort of longterm deficit reduction plan. Reporter the stock market often rises when the fed announces economic stimulus measures. But that may not happen tomorrow. Some experts think the overhang of the fiscal cliff will likely dampen investor enthusiasm. Erika miller, nbr, new york. Tom the latest Economic Statistics the Federal Reserve can consider is the october trade balance, with american importing a record amount of stuff from china. That increased our trade deficit to 42. 2 billion. U. S. Exports fell 3. 6 , the biggest drop in almost four years. Imports also fell, down 2. 1 to the lowest in 20 months. On wall street, the dow gained 78, the nasdaq rose 44, the s up nine. Susie our next guest says the feds stimulus policies have been good for the u. S. Economy and the markets. Hes mike holland, chairman of his Money Management firm, holland and company. Susie mike, you heard ericas report. Which do you think is more important for investors, fed policy action tor the scal cliff talks . Right now, susie, the fiscal cliff talks are clearly the item dejure for the stock market. I think most people expect exactly what eric miller was talking about from the fed. And bern bueno ben bernanke hasn transparent and telling people well in advance what he is going to do. The 85 billion should continue building up for our taxpayers Balance Sheet. Susie how does all of this play out in the markets. All of the bond buying, companies are Still Holding off from hiring and spending, and now the risk, possibly of a recession. How does it play out in the markets for 2013 . What has happened, with all of this cash going into the market into the economy, not only from the u. S. Fed, but from europe, from the central bank there, as well as from china, dont forget, so weve had this liquidity which has taken asset prices with the stock market and the bond markets, pricing it way up, it is actually helping housing after a long wait. Moving into the future, there will be some reduction in really the fear that people have. It is not only a lack of confidence, but it is a fear of things going wrong. As we get day to day, i think the fed has been the only place in town to inject some optimism or feeling somewhat better in the general public, as well as in business. Until we get through this silliness in washington, i think people will continue to be cautious. Susie speaking of that caution and fear, what should investors be doing with their money. So many of them, not only individual investors, but professional investors are sitting on a pile of crash. Hold off or invest . What is your Investment Strategy . People, the viewers right now, many of them have been out of the stock market for an extended period of time, because of all of the craziness of the last decade. I think some of them should consider taking a little bit of their money, and putting into good things that are getting very good dividend yields. So stocks around the world, not just in the u. S. , are yielding more than they have ever. Asia, some good yields over there. If you look at apples stock, well down from over 700 to 500, yielding 2 . The 10year treasury is yielding less than that. So looking at stocks makes some sense. Fixed income markets actually scare me a little bit, the bond markets because it is so low yield and highpriced. Susie mike, can we squeeze in a chetio question about china. A lot of investors are wondering about the investment in china. A lot of American Companies saying theyre seeing a real slowdown. What is your take on china . There is no question they had a slowdown engineered by the government. They did a slowdown in 2008 and 2010, and they said theyre going to stop that. And business has bottomed out and is in fact, turning up. It is interesting, susie, in the last week, december 3rd, the most recent bottom in the shanghai market, which has been a being downer, does pit the market going up 6. 5 , and the market is up 6. 5 . So the markets beginning to believe it is Getting Better as well. Susie thank you very much, mike, mike holland and holland and company. And tomorrow tonight, well have more analysis on the fed decision. Mohamed elerian joins us. Hes the c. E. O. Of pimco. Tom still head, british bank hsbc agrees to pay a record fine for laundering mexico drug money. Susie its a major hit to organized labor michigan approved legislation today that would greatly limit labor rights. Protestors swarmed the state capital as lawmakers passed a bill prohibiting unions from requiring employees to join and pay dues. The move would make michigan, one of the most unionfriendly states, the 24th right to work state, where union dues are voluntary. Tom more bumpy skies for boeings 787 dreamliner. Boeings much anticipated and highprofile plane was grounded last week, according to the new york times. The federal Aviation Administration also has ordered that fuel line connectors on all 787s be inspected. Analysts call these problems minor hiccups. But as sylvia hall reports, the dreamliners profitability to boeing right now is raising bigger concerns. Reporter boeings 787 dreamliner promises to use about 20 less fuel than other planes. Thats a big deal for an Airline Industry struggling with fuel costs. So far, boeings sold more than 800 of its dreamliners, but the project has been plagued with three years of costly production delays. The company is ramping up production on the planes, but some analysts dont expect the company to see a profit from the line until at least 2020. The reason . The dreamliners are probably sold at discounts, which is normal in this industry, but boeings production costs arent going down fast enough to match. Assuming a 30 discount, boeing would have to deliver at 10 operating margin on the 787, which seems highly unlikely. That would take them through the next seven years of production. Reporter Analysts Expect the 787 to be a drag on boeings earnings for at least three more years, but think the dreamliner will deliver in the long run. If we get beyond that and say, you know what . Boeing 787 is a pretty good product, and customers really like it, and airlines can charge a premium for that type of product. But in the future, beyond these 850odd orders, theyre going to make pretty good money on this product. Reporter a boeing spokesperson told me today the company has reduced the cost of making each plane by 50 from the first one to the 66th, and overall, boeing is very pleased with the dreamliners progress. Sylvia hall, nbr, washington. Tom britishbased bank hsbc will pay a record fine to settle allegations it laundered hundreds of millions of dollars in illegal drug money. U. S. Prosecutors say mexican drug cartels used europes biggest bank to wash their profits, transferring billions of dollars with little compliance oversight by the bank. Hsbc also was accused of allowing 660 million in transactions to be done in violation of u. S. Financial sanctions against countries like iran, cuba and libya. Hsbc will pay fines totaling 1. 9 billion. It also will beef up its monitoring of suspicious financial activity. In august, a different british bank, Standard Chartered, paid 340 million to new york state, settling claims it laundered hundreds of billions of dollars for iran. Sarah jane hughes is a law professor at indiana university. She joins us from bloomington. Tom professor, does this punishment for hsbc fit the crime . Well, the parties clearly think that it does. Tom at 2 billion almost, it is certainly significant larger than the Standard Charter settlement from earlier this year. Why the big difference . The duration, the number of individual violations, the number of countries involved, the fact that mexico is also involved. Many factors. Tom lets talk about the Global Nature of this. To put it frankly, is Money Laundering a Business Model for Global Banking . Well, Money Laundering is certainly a Business Model. And the United States has sent clear signals this year and before that it does not want it to be a Business Model for Global Banking. Tom but yet we still have two banks here that have paid the fines to settle the claims. How profitable is this kind of Money Laundering . I think we have to assume that the profits are huge and that thats a reason why the banks have been willing to run the risks of being caught. Tom is there more attention being paid to Money Laundering, or is it more prevalent letein leading to these kinds of settlements . I think the United States has a record now of paying attention to Money Laundering and violations of trade sanctions with governments like those you mentioned. These have come after 9 11, and recently the degree of effort by the federal government to signal clearly that they do not want global banks to launder money or to transfer funds for rogue governments, like iran, sudan, and libya or syria, is very clear. Tom so do these kinds of settlements make the Money Laundering business that much more unpalatable for public companies, like these big global banks . In other words, is it going to deter future dealings . The cynic in me says they may face pressure from shareholders to produce profits, and these are very profitable lines of business because they may involve some risks to individuals, so until people really pay attention, and the government shows how serious it is about enforcing its laws, i dont think we can conclude that this is over. Tom among those people, shareholders, but also costumers. What do you think these kinds of Business Practices say about the Global Banking business. I think we have giant costumers and small costumers. And most of the people involved at this level are giant costumers. They are states and american businesses and banks are not supposed to do business with. The europeans have similar attitudes about this. They are large corporations, and also some Smaller Companies that may or may not know the transactions theyre engaged involved some of these other governments or they represent mexican drug cartels. We have money banking, Sarah Jane Hughes with us. Susie in a separate banking scandal, three british men were arrested today in london for their involvement in a global Interest Rate rigging scandal. International prosecutors have been investigating banks for manipulating a key Interest Rate called libor thats used to set borrowing rates on everything from mortgages to credit cards. Todays arrests are the first after a fouryear investigation. Tom lets get going with tonights market focus. The stock market took its cues once again from washington and the rhetoric over the fiscal cliff. It was the fifth straight session of gains, with the buyers out at the opening bell. The index lost some momentum around 2 30 eastern time, something traders blame on comments from Senate Majority leader harry reid. Reid said it would be extremely difficult to get legislation averting the fiscal cliff through the senate before christmas. With todays seventenths of a percent gain, it brings the index back to a level last seen on election day. For the year, its up 13. 5 . Trading volume increased to 691 million shares; just over 1. 9 billion shares on the nasdaq. The Technology Sector was back in the leader position, up 1. 4 . Health care and telecommunications were up 1 . With the tech sector up, apple was helping out as it rebounded a little from its recent sell off, but on lighter volume. Shares rose 2. 1 . Piper jaffrays apple analyst predicts a more steady stock rally next year, and hes sticking with his 900 price target. It was a pair of Business Software firms that had the best percentage gains inside the tech sector. Citrix systems jumped 4. 8 , closing at a twomonth high. Salesforce. Com gained 4. 2 to close at a new high. Meantime, two Big Semiconductor makers were in focus as they work to meet the competition intel gained 2. 8 to a onemonth high. It said it is on track to launch a new generation of semiconductors for smart phones and tablets, a market where intel has been lagging. Texas instruments gained 4 after it pushed up the high end of its profit forecast for this quarter. With the government pricing its sale at 32. 50 per share, the stock rallied close to that price. Shares gained 5. 7 on very heavy volume. With this sale, the government bailout of a. I. G. At the depth of the credit crisis will now turn a profit. We have a closer look at a. I. G. s stock chart on our web site, nbr. Com. Click on the blogs tab and look for michael kahn. All five of the most actively traded Exchange Traded products were up. The biggest gains in the nasdaq 100 tracking fund, up 1. 3 . And thats tonights market focus. Susie this is the time of year when Many Companies ring up most of their annual profits. But some companies are finding ways to boost the bottom line yearround. Diane eastabrook tells us about one Chicago Business thats making money by refusing to get boxed in by tradition. Reporter this is the unglamorous side of chicagos ideal box company. Its where workers and machines convert paper into corrugated boxes. This is the glamorous side. Its where graphic artists design cardboard store displays by computer. Then, industrial designers fashion them into Something Like this. Its a bit of a corn stalk, and so the wood crates sort of show that Farmers Market look. Reporter ideal president scott eisen says thinking outside the box is keeping his familys 92yearold corrugated box factory relevant in the 21st century. Displays are not only a better margin, but its the reason customers will come to us, because we have to conceptualize and do the renderings and come up with the innovations of how do i sell my product at retail . Thats where were really good. Reporter eisen and his brother yale say they turned ideal into a sort of boutique manufacturer a decade ago because the box business had become so cutthroat. It wasnt really a choice. It was either not be around or completely change how we did Business Reporter the eisens great grandfather started this company back in the 1920s making wooden crates. One of his customers was al capone. The Company Began making corrugated boxes in the 1950s, but by the 1990s, that business had gotten very crowded and the margins were extremely thin. Its a very competitive market because you are competing against the publicly traded guys that have their own box plants, and youre competing against hundreds of other converters to win business. And the way to really differentiate yourself in that business is to focus on timely deliveries, design, and Customer Service is the main differentiator. Reporter while the eisens still call ideal a manufacturer at heart, the company derives most of its volume and revenue from the displays it designs. The company made about 100 million in revenues last year, and has been growing sales between 15 and 18 annually over the past few years. Eisen thinks u. S. Factories like his can continue to thrive if they listen to their customers and stay nimble. You know, we could decide to make something completely different tomorrow if we felt thats where the market is. Reporter diane eastabrook, nbr, chicago. Susie tomorrow on nbr, diane will have more Small Business coverage and will look at how some companies are preparing for the new health care rules that are coming soon. Plus, both colorado and Washington State voters have okayed marijuana. We talk with one Company Already profiting from medical marijuana products. Tom the College Football bowl season is a lesson in supply and demand economics, showing how the market economy works for the same seat in the same stadium for two different games. Heres rick horrow with tonights beyond the scoreboard. Reporter theyre two of the biggest games of the College Football season, but despite being played in the same stadium just six nights apart, interest in the discover orange bowl and the b. C. S. National championship game couldnt be more different. The average ticket price for the title game between traditional powers alabama and notre dame is a whopping 2,400, which is more expensive than two of the last three super bowls. The game likely will be the mostwatched event in cable tv history, with more than 30 Million People expected to tune in. Both alabama and notre dame will pocket 22 million for the appearance. For the orange bowl, Florida State and Northern Illinois will receive the same payouts, but the similarities between the two games end there. Orange bowl tickets average 100, but start as low as 8. On tv, the matchup could struggle to get seven million viewers, and may end up the leastwatched b. C. S. Game ever. So while the payouts to schools may be the same, clearly, all b. C. S. Games arent created equal. Im rick horrow. Susie thats nightly Business Report for tuesday, december 11. Have a great evening, everyone, and you, too, tom. Tom good night, susie. Well see you online at nbr. Com, and back here tomorrow night. Captioning sponsored by wpbt captioned by Media Access Group at wgbh access. Wgbh. Org join us anytime at nbr. Com. There, youll find full episodes of the program, complete show transcripts and all the market stats. Also follow us on our Facebook Page bizrpt. And on twitter bizrpt. Tonight on spark , theyre young and restless and ready to make their mark. Teenage performers and artists who will wow you with their talent and their dedication. In our first story, each year, hundreds try out, but only a handful are chosen for the regions premiere High School Jazz ensemble, the s. F. Jazz allstars. I didnt play like that and i tell them that all the time. I say, you know what, im just going to be honest with you i couldnt play like you do when i was your age. I just couldnt
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