nightly business report - friday may 3 2013

7/30/2019 Nightly Business Report - Friday May 3 2013

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ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and

Susie Gharib, brought to you by --

(COMMERCIAL AD)

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: An historic day.The

bulls charge ahead as stocks rally to all-time highs. Where to put your


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money now? We`ll get stock picks for this lofty market with top money

manager Mario Gabelli.

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Stocks were so hot and

so was hiring, a better than expected jobs report fueling the game. So,

the economy healthier than many think?

MATHISEN: And tonight, we`ll meet the man who solved the riddle of

how to take a simple idea and turn it into a very successful business.

All that and more tonight on NIGHTLY BUSINESS REPORT for Friday, May

3rd.

Good evening, everyone.

Susie, stocks soared at the outset and kept on going pretty much right

up until the close. A perfect day for you to be at one of the biggest

investor events of the year.

GHARIB: You`re absolutely right, Tyler.

Good evening, everyone.

I`m here in Omaha for Warren Buffett`s Berkshire Hathaway (NYSE:BRK.A)

shareholder meeting, and he`s sure to get lots of questions tomorrow about


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the outlook for American businesses and for the markets.

Well, stocks powered, the Dow and S&P 500 to record highs on positive

news about the labor market. For the first time ever, the Dow traded above

15,000, and the S&P closed above 1,600.

And for the S&P, this was a long-time coming. The index first closed

above 1,500 in March of 2000. So, it took 13 years for the benchmark to

crack this new psychologically important level.

And here are the numbers. The Dow surged 142 points today. But

closed just below the 15,000 mark. The NASDAQ jumped 38. The S&P rose 16

points, closing at 1,614 -- a new record high.

MATHISEN: Well, Susie, investors snapped up stocks on news that

American businesses added more jobs than expected in April -- 165,000, to

be precise, with the unemployment rate falling to 7.5 percent. Average

hourly earnings up 0.2 of a percent, and job numbers for February and March

were revised sharply higher.

We have two reports looking more closely at that surprising jobs

report, and today`s reaction on Wall Street.

We begin with Bob Pisani at the New York Stock Exchange.


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(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): It

was the shock heard round the world. Traders had convinced themselves that

the April jobs report would come in well below even lowered expectations.

And when the report came in stronger than expected, with prior months also

revised upward, the markets reacted immediately. S&P futures moved up more

than 10 points in a couple minutes. Seconds after the open, the Dow and

the S&P were both at historic highs.

Over in Europe, the German stock market moved over 100 points on the

news. That`s about 1.25 percent and closed at its high a couple hours

later.

Stocks opened up and stayed near their highs throughout the day, with

volume above normal, and three stocks advancing for each one declining.

Traders especially bought economically sensitive stocks like U.S. Steel,

truck-maker Cummins (NYSE:CMI), Beazer Homes and Caterpillar (NYSE:CAT).

Techs also shined with big moves up in semiconductor stocks like AMD,

Micron and Teradyne (NYSE:TER). Storage device maker Seagate closed at an

historic high after a strong earnings report Wednesday.

Copper, a critical component of the global economy, was up over 6

percent, its best showing in 18 months.


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(on camera): Can we go any further?

Well, the bulls note this is not 2007. Stocks are not overvalued as

they were then. And the markets have two things going for it that it

didn`t have in 2007. First, the Federal Reserve, and second, an investing

public that simply does not believe that this rally is real. And that

skepticism maybe the best friend the market can have.

For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock

Exchange.

And now, for more on the jobs report, let`s go to Hampton Pearson in

Washington.

(END VIDEOTAPE)

(BEGIN VIDEOTAPE)

HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):

The April government employment report paints a picture of a job market

that has been improving more than most economists thought. At 7.5 percent,

the unemployment rate is now at a four-year low, that`s because total

employment is measured by the government`s household survey increased by

293,000 last month.


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MARK ZANDI, MOODY`S ANALYTICS: We saw that decline in the

unemployment rate and this time it happened because of stronger job growth.

So all in all, I think a lot of optimism away from it.

PEARSON: The big winners, restaurants and hotels, adding 45,000 new

employees in the past two months. Places like Osteria Elisir, where Genard

Crawford (NYSE:CRD.A) just got a job this month.

GENARD CRAWFORD, RESTAURANT WORKER: I`d been unemployed for a while

and, you know, heard the economy is catching back up. So, yes, it feels

really good. I have two kids. So, really important for me.

PEARSON: Today at a Washington, D.C. employment office, we found job-

seekers checking out prospects online. Some 210,000 people nationwide went

back into the labor force in April. People like Quenton Gordon, out of

work since the first of the year, but still optimistic.

QUENTON GORDON, LOOKING FOR WORK: Before this month is out, I`m sure

I`ll be employed and working.

PEARSON: The economy has been creating an average of 208,000 jobs a

month for the last six months. But top Obama administration officials

worry the sequester will reverse that trend.


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ALAN KRUEGER, COUNCIL OF ECONOMIC ADVISORS: While we continue to see

an expansion of the economy, continue to see private sector job growth, I

think if it weren`t for the sequester, the economy would be in even a

stronger position.

PEARSON (on camera): That increase consumer spending produced April

hiring that was broad-based. Only construction in the government were

sectors where we lost jobs.

For NIGHTLY BUSINESS REPORT, Hampton Pearson, in Washington.

(END VIDEOTAPE)

MATHISEN: Who better to tell us what all this means, but Mario

Gabelli, the CEO of Gabelli Funds. And Diane Swonk, chief economist at

Mesirow Financial.

Sorry, Mario, ladies first.

Diane, you get the first question.

In all of the job numbers today, were there any soft spots? Were

there any signs of weakness in there that you could point to?

DIANE SWONK, MESIROW FINANCIAL: Well, you know, as good as the


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numbers were, and I certainly celebrate, especially the backward revisions,

the composition of job growth is still very heavily weighted towards low-

wage jobs. And we`d like to see a reversal in that because we lost a lot

of high-wage jobs to the great recession. And not see that yet.

Three quarters of the jobs created since the recovery began have been

in retail, manual labor, food preparation where we saw a lot of the jobs

created today. In-home health care where we also saw jobs created today.

So, you know, although we`re grateful for those jobs, a lot of them are

part time.

There were long-term workers coming off long-term unemployment. That

was great, but then we saw a surge in the number of workers having to

accept part-time instead of full-time employment for economic reasons.

MATHISEN: So these are sort of the partly employed workers.

SWONK: Exactly.

MATHISEN: We also see a fair number of discouraged workers. People

still staying out of the workforce, not jumping in, right?

SWONK: Exactly. There still is a large number of discouraged workers

down from a year ago. That`s the right kind of trend to see. And this was

a good reason to have a fall in the unemployment rate, a real improvement


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in the unemployment rate so that`s good news. But, you know, this

composition and the part time nature is something we worry about.

And, you know, I think this is something we have to be concerned about

going forward, because longer people are out of the workforce, we`re seeing

the really long-term unemployed are unable to rejoin. And there`s a lot of

collateral damage that goes into.

MATHISEN: The revisions for the February -- the March and February

numbers were significant, 114,000.

SWONK: Unbelievable. I have a month over 300,000. I mean,

hallelujah.

MATHISEN: I don`t mean to nerd out here, but how to you miss 114,000

people?

SWONK: Especially when a lot of them work for the government. I

mean, I`m sorry, that is really hard. And, you know, it really gets to the

issue of how much of a margin of error we`re dealing with here with these

jobs numbers.

And, you know, that`s part of the problem, is, you know, fool me once

shame on you, fool me twice, shame on me. Well, shame on me now because

these numbers have fooled us more than once. The good news is, the


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revisions are on the up side now. We`d much rather have them on the up

side than down.

The other part of the numbers I think we need to point out is that

they decelerated. Even though March is a great month -- February was a

great month. March and April did decelerate.

MATHISEN: From there, from the winter pace.

SWONK: They absolutely did.

And April seasonal is kind of a favorite on some of those gains, as

well.

MATHISEN: There were a lot of economic numbers that came out this

week, and, of course, the Fed met and said --

SWONK: And don`t like the Fed (ph).

MATHISEN: We stand ready either to add to our bond purchases or

constrict those bond purchases. Sum up the week`s economic data for us.

SWONK: You know, we`re still at an uneven recovery and that`s why the

Federal Reserve stands ready to do something. And, you know, they would do

less if they had complimentary fiscal policy that was helping the economy


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right now. And we don t have that. And so, without that, they`re willing

to do more.

But they are limited in what they can do and they`re starting to

discuss that. Are they being effective at what they`re doing? That said,

they`re going to keep the pedal to the metal right through June and right

through the summer, we`re going to see this Federal Reserve with low

interest rates for a long time to come.

MATHISEN: The job numbers that we came out today, let`s circle back

to where we begun. Give it a final grade. Is it an A? Is it B-plus? Is

it a B? What is it?

SWONK: It`s probably a B, which is better than what we have been. We

have been on sort of C, C-minus economy, but I never got a B when I was in

school.

MATHISEN: Diane Swonk, thank you very much. Great to have you in the

studio tonight for us.

SWONK: Thanks to you again.

MATHISEN: Susie, out to you.

GHARIB: Thanks a lot.


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So, let`s turn now to Super Mario, Mario Gabelli.

Mario, you`re our value investor. Is it getting harder for you to

find value in a market like this?

MARIO GABELLI, GABELLI FUNDS CHAIRMAN & CEO: Well, you know, we

constantly look at annual reports, visit a lot of companies and there is

always something happening, particularly in the small and midsize

companies.

So, it`s exciting, good times, deals, mergers, financial engineering.

GHARIB: But by contrast, you`re here in Omaha because of Warren

Buffett`s Berkshire Hathaway (NYSE:BRK.A) annual shareholders meeting. And

this is a huge company.

A short while ago, reported earnings, shareholders will be happy, the

numbers came in way bigger than expected, both on the earnings and the

revenue side. The stock today is hitting an all-time high. It is now at

$162,000. It`s up 21 percent, so far, year-to-date.

Would you tell investors to put new money into Berkshire Hathaway

(NYSE:BRK.A) at this level?


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GABELLI: Susie, when I started Gabelli Asset Fund, first opened

mutual funds. We bought it, it`s probably less than 3,000 share. And

during that last 25 years, you`d had ups and downs in the world. At

$162,000, I probably would want to own it. I would want to keep it the

next five years, but I may not buy my entire position today.

Book is $120,000. They`re going to make 10,000 a year for the next

three or four years. Book will grow. And I think it will do OK over the

next 10 years.

GHARIB: All right. There are some other value stocks you wanted to

tell us about. Top of your list is Viacom (NYSE:VIA), reported earnings

this week, not so good. Why do you like it?

GABELLI: Well this is -- this is an entertainment company. You know,

it as Nickelodeon. You know it as MTV. They own the Paramount Studios.

Great cash generator, very little capital expenditures, they take the cash

and buy back stock.

And over the next three or four years, I think will make 50 percent-

plus, 17 percent a year. That`s quite good.

GHARIB: So, it`s $67 now.

GABELLI: Yes, the VIA, the voting stock is $67, $68, and I think it


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will be $100 in three or four years.

GHARIB: All right. Tell us about the next one, Mondelez --

GABELLI: Oh.

GHARIB: -- ticker symbol MDLZ, interesting back story on this one.

Why do you like it?

GABELLI: Well, Mondelez was a spinoff from Kraft (NYSE:KFT).

Financial engineering, Irene Rosenfeld went out and bought Cadbury, which

is chocolate. She put it together with their products, global products.

Now, she has a global company. Stock is around $31. Earnings will

grow in double-digits over the next five years and will capture -- and,

Susie, will capture the growing middle class in both India and China. A

great global plate.

GHARIB: And it has a lot of the basic things people always want. You

said chewing gum, chocolates --

GABELLI: Well, biscuits, confectionary and chewing gum. Those are

very large categories, growing very nicely and have very good positions

globally. And plus, you have Nelson Peltz buying some stock and maybe that

they`ll merge.


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GHARIB: That always helps.

GABELLI: And maybe. And maybe they`ll merge. So the stock has not

lost sight of this.

GHARIB: All right. Let`s talk a little bit more about Berkshire

Hathaway (NYSE:BRK.A).

So, you have been coming 10, 12 years. What do you want to hear from

Warren Buffett tomorrow?

GABELLI: Well, it`s basically reinforcing the notion how capital is

allocated. Concepts like, where is he looking to put money? Why does he

like companies like Heinz? Why did he put $12 billion, $8 billion in a

preferred, $4 billion in equity?

And not complicated. He has made 20 percent K (ph) for 40 years. So

if he only does compound annual growth rate on book, if he only earns 10

percent over the next 10 years, our clients will continue to double their

money. Plus, (INAUDIBLE)

GHARIB: So what do you think he`s going to say? What do you think is

going to be the big headline from Warren Buffett tomorrow, whether it`s

about the markets, or the economy?


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GABELLI: Well, you know, warren always likes to tweak something,

whether its the notion of the flavor of the day, which is dividends, why

not pay a dividend, why not split the stock, what is he going to do with

his $56 billion that he personally owns of the stock? And where is he

going to make acquisitions? And what is he going to do with records to the

operating earnings?

The housing market is booming. He`s going to benefit.

GHARIB: There`s going to be 35,000 people here hanging on his every

word. We`ll see you tomorrow.

GABELLI: We`ll be delighted to do that. And we`ll do the same.

GHARIB: Thank you so much. Mario Gabelli, CEO of Gabelli Funds.

MATHISEN: Well, Susie, you think of them as patrolling the skies in

Afghanistan or Iraq, but unmanned aerial vehicles, better known as drones,

may soon be coming to the skies above you and in a good way.

The Federal Aviation Administration is opening American air space to

more drones in 2015, and they`ll be commercial. Not military. And with

that increase, Jon Fortt tells us the industry is looking at not only

creating more drones, but more jobs.


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(BEGIN VIDEOTAPE)

CHRIS ANDERSON, 3D ROBOTICS CEO: First, you screw the motor on here.

JON FORTT, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):Chris

Anderson left his job as editor of "Wired" magazine last year to chase what

he calls a huge idea -- planes that fly themselves. You and I call them

drones. And in a struggling economy, they`re a type of fresh idea that

might provide a nice lift.

The industry claims it could create as many as 100,000 jobs, adding

$82 billion to GDP in the next 12 years. Anderson`s company has gone from

zero to nearly 100 employees and he`s not alone.

AeroVironment (NASDAQ:AVAV), a drone maker based outside L.A., has

seen its sales grow tenfold.

STEVE GITLIN, AEROVIRONMENT VP MARKETING STRATEGY: About 10years

ago, we had between 200 and 300 people. Today, we`ve got somewhere around

750 people. So, it`s been a significant growth period over the last

decade.

FORTT: The key growth market for drones, farms. It turns out self-


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flying planes are an ideal way to it check for diseased plants or even do

some crop dusting.

Outside of privately owned farmland, there are limits to how quickly

the business can grow from here. There is public perception, which pegs

drones as military tools or privacy violators, and then regulators who have

a little over two years to draw up rules governing how they`re used.

Before they can do that, they`ve got to run tests, and a key deadline to

apply as a drone test site is coming up Monday.

(on camera): But the drone industry isn`t just targeting farmers and

big business. Start-ups like 3D Robotics have personalized models that a

hop hobbyist can get for less than 1,000 bucks.

(voice-over): Anderson believes it`s going to be creative users of

low-cost drones that defined the market, like mainstream users of personal

computers did a generation ago.

ANDERSON: We put advanced technology in the hands of regular people.

They figured out what it`s for.

FORTT: For NIGHTLY BUSINESS REPORT, I`m John Fortt.

(END VIDEOTAPE)


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MATHISEN: Even the FAA acknowledges the growth potential in drones,

it projects that in the next five years, we could see as many as 7,500

small UAVs in commercial use. But with 34 states currently trying to pass

some form of anti-drone legislation, both the industry and the FAA could

face an uphill battle.

Well, still ahead, meet the man who quit his job, risked it all, and

became eventually America`s wordsmith.

But, first, on this record-breaking day for stocks, a look at the top-

performing S&P stocks year to date.

(MUSIC)

GHARIB: On Wall Street today, most of the Dow stocks, not

surprisingly, were in the green. But JPMorgan (NYSE:JPM) was one of the

exceptions and that`s where we begin our "Market Focus".

The giant bank was down on reports that regulators have found that one

of its units manipulated trading in the electricity markets. JPMorgan

(NYSE:JPM) denied its employees did anything wrong. Shares of JPMorgan

(NYSE:JPM) lost more than 1 percent to $47.57.

Moody`s (NYSE:MCO) Corporation reported quarterly profits that were

way above expectations. And the firm raised its full year outlook, thanks


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to a pickup in corporate bond offerings and that means more demand for

credit ratings. Shares touched a six-year high before closing up more than

3 1/2 percent to $62 and change.

Shares of discount brokers did well today. As investors bet that

companies like Schwab could benefit from a surge in trading season

commissions. Schwab itself traded near the top of the S&P 500, gaining

more than 6 percent.

And in a rare move today, shareholders of Occidental Petroleum

(NYSE:OXY) voted out long-time chairman, Ray Irani, at the annual meeting.

Irani ran Occidental for more than 20 years. But his lavish pay packages

angered investors. Shares gained more than 3 percent on the news, closing

at $90.76.

MATHISEN: On this jobs Friday, a story about someone who chucked it

all, quitting a good job because he wanted to create games, word games.

And he has done so well, making well into six figures these days, that

there`s a good chance you`re familiar with his work. In fact, it might not

be too much of a stretch to call him America`s wordsmith.

(BEGIN VIDEOTAPE)

DAVID HOYT, PUZZLE CREATOR: If that s the way -- if everyone agrees,

everyone has to agree. OK.


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MATHISEN (voice-over): Who looks more puzzled, David Hoyt or these

fifth graders? If your answer is David, that`s OK. His specialty isn`t

solving puzzles. It`s making them.

HOYT: I have become the most syndicated puzzle creator in the world.

Let`s see if I move the B.

MATHISEN: In the basement of his Chicago home, starting about 4:00

a.m. every day, he masterminds Jumble, that icon of word puzzles,

syndicated in more than 600 newspapers, reaching about 32 million people

every single day. When he`s done, there are about 13 others to piece

together.

HOYT: I have Word Roundup, that`s in "USA Today," Up and Down Words

that`s in "USA Today."

MATHISEN: Not bad for a high school dropout who never went to

college. He`s starting traded options in Chicago, and he did well but it

left him puzzled about his future.

He noticed a friend was inventing games and making money from it.

HOYT: I decided that I`m going to quit my job, I`m going to save up a


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a single word puzzle jumble as he has.

MATHISEN: He kept at the various jumbles for 15 years, until, in

2011, he took over the original when his predecessor retired. Teaming with

cartoonist, Jeff Kanurik (ph) to breathe new life into a brand around since

the `50s.

Hoyt also developed word games for Pat Sajak`s brand and now Word

Winder, where players aim to string words all the way across the board.

Over beers at an English pub on Chicago`s north side, Hoyt and several

friends polished a game they say has sold in the tens of thousands since it

came out just last year, at about 20 bucks each.

HOYT: People have to work together.

MATHISEN: The classroom version? That bright idea belongs to an

Illinois school teacher who saw their demo at the Chicago toy and game fair

last fall.

Now, Hoyt and his team are obsessed with finding a way to manufacture

it at a cost schools can afford. It`s a puzzle yet to be solved.

HOYT: It cost $800 to make. Teachers have basically demanded we do

this, because they`re not taking no for an answer. And the kids just love

it. So now we have to do this.


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(END VIDEOTAPE)

MATHISEN: Next week, in fact, Hoyt and company plan to begin a

Kickstarter campaign to help fund production of the giant-sized Word

Winder. They hope to raise enough cash to get the price down to around

$225 for schools.

And coming up, the big business behind the most exciting two minutes

in sports.

But, first, here`s our commodities, treasuries and currencies fared

today.

(MUSIC)

MATHISEN: Tomorrow is the running of the 139th Kentucky Derby. The

event, complete with the pageantry, the hats, mint juleps -- it`s much more

than a horse race, of course. It`s a cultural event.

As Brian Shactman tells us, it`s big business, too.

(BEGIN VIDEOTAPE)

BRIAN SHACTMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):


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Everything about the Kentucky Derby is big. Big economic impact, more than

$300 million just at Churchill Downs (NASDAQ:CHDN). Big crowds, 160,000-

strong on race day, big hats, and big price tags.

Beyond the $2 million purse for the race itself, there is immense cost

-- from the optional luxuries of attendance to the necessities of racing.

(on camera): Let`s start with luxury. This just open area is called

the Mansion. It has all the amenities you might imagine from the name,

including your own personal butler service, and the best view of the track.

(voice-over): Prices to get into the Mansion range from $7,000 to

$12,500.

How about this mint julep?

(on camera): Mint leaves dusted with gold, Woodford Reserve bourbon

at a price at $1,000.

As for the taste -- well, you`re going to have to buy one for

yourself.

(voice-over): Horse racing itself is incredibly expensive. Just

getting the horses to Louisville can cost hundreds of thousands of dollars.

Lines of Battle came from Ireland in the horse version of first class.


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MATT HAUG, INTERNATIONAL RACEHORSE TRANSPORT: In this particular

situation, you know, the horse has made over $100 million on the race

tracks, so the clients are willing to take and reinvest that money and a

significant amount of money to win a race like the Kentucky Derby.

SHACTMAN: That cost about a quarter million dollars, but a derby win

would triple that in prize money and millions more in breeding when he goes

out to pasture.

For NIGHTLY BUSINESS REPORT, Brian Shactman, Louisville, Kentucky.

(END VIDEOTAPE)

GHARIB: Coming up on Monday, we`ll have my interview with Warren

Buffett, and Saturday, I`ll also be tweeting what the Oracle (NASDAQ:ORCL)

of Omaha says on a wide variety of topics at the Berkshire meeting.

And as we saw yesterday, Tyler, Buffett might be doing some tweets

himself. I understand he already has more than 300,000 followers. So, it

will be very interesting to see what he`s going to be tweeting.

MATHISEN: If there is another 82-year-old guy who has 300,000 Twitter

followers, I`d like to meet him. He is a guy who stays hip beyond his

years.


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I`ve never been out there to Omaha for this event, Susie. Give us

some sense of the color and what your day will be like tomorrow.

GHARIB: Well, for starters, I`ll start at 5:15 in the morning,

because Warren Buffett starts that early in the morning. And there are

going to be something like 35,000 people who are coming from all over the

world to hear everything that he has to say, and his sidekick, vice

chairman of Berkshire, Charlie Munger. He`s 89 years old.

MATHISEN: Wow, what a day it will be.

GHARIB: Exactly. It is going to be interesting.

That`s NIGHTLY BUSINESS REPORT for tonight. Thanks for watching.

MATHISEN: And I`m Tyler Mathisen. You all have a great evening and

fabulous weekend. We`ll see you back here Monday with Warren Buffett.

END

Nightly Business Report transcripts and video are available on-line post

broadcast at http://nbr.com. The program is transcribed by CQRC

Transcriptions, LLC. Updates may be posted at a later date. The views of

our guests and commentators are their own and do not necessarily represent


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the views of Nightly Business Report, or CNBC, Inc. Information presented

on Nightly Business Report is not and should not be considered as

investment advice. (c) 2013 CNBC, Inc.

nightly business report - friday may 3 2013

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