nightly business report - thursday may 30 2013

7/28/2019 Nightly Business Report - Thursday May 30 2013

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ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen andSusie Gharib, brought to you by --

(COMMERCIAL AD)

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Turning point. Thebulls say more gains ahead, the bears say brace for a pullback. So, what should you do with yourmoney? We`ll ask the CEO of Charles Schwab, Walt Bettinger.


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SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Food fight. Now that aChinese company is buying America s biggest pork producer, should the deal be blocked? We`lldebate it.

MATHISEN: And gaining interest. Looking for a little extra cash -- of interest on yourcash? We found a way to do it, but it`s not as easy as it used to be.

All that and more tonight on NIGHTLY BUSINESS REPORT for Thursday, May 30th.

GHARIB: Good evening, everyone.

Big ups and big downs. That defined the market recently, and today was an up day.Investors brushed aside another sharp drop in Japan`s stock market and focused on economicreports here at home. The economy grew at a slightly slower pace than initially estimated. Andjobless claims ticked slightly higher.

But that tepid news is being interpreted as good news, easing concerns the FederalReserve will gradually pull back on its policies to stimulate growth.

MATHISEN: Stocks did lose some altitude into the close, though. In the end, the Dowgained 21 points to 15,324, the S&P up six to 1,654, and the NASDAQ up 23 points to 3,491.

So, as the market searches for direction, is it time to get in? Time to get out? That`s thequestion everyone`s asking.

(BEGIN VIDEOTAPE)

MATHISEN (voice-over): It`s the debate of the summer. No, not "Iron Man" versus"Superman," it`s bull versus bear, buy versus sell. And right in the middle of it all is this man,Fed Chairman Ben Bernanke.


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Will he or won`t he moderate the market methadone the Fed has been supplying in theform of $85 billion a month in bond purchases? Bulls like Federated`s Stephen Auth say itwon`t happen soon, and if it does, it will be a positive sign.

STEPHEN AUTH, FEDERATED EVPO & CIO EQUITIES: We`re not going to starttightening until the economy really starts to get airborne.

MATHISEN: Today`s report on economic growth, a tepid 2.4 percent pace in the firstquarter suggests the economy has left the gate but is still taxiing.

The bulls` conclusion: the Fed -- not to mention central banks in Europe and Japan -- willkeep pumping cash through the summer and stocks already up 16 percent this year move higherfrom here.

The bears say not so fast. Bond yields are moving up, reflecting not only inflation fearsbut growing Fed chatter suggesting that the money spigot may tighten sooner rather than later.

Philadelphia Fed President Plosser said two weeks ago he`d like to see it scale back assoon as June.

Add to that concerns that stock prices are anticipating faster growth than seems probable,and you see why some of the world`s most respected investors like PIMCO`s Mohamed El-Erianare taking a cautious stance.

EL-ERIAN, PIMCO CEO & CO-CIO: At these level of prices, we are walking awayfrom risk. We`re not running away. We`re not sprinting away because central banks arecommitted, but we`re walking away. So we`re taking money off the table.

MATHISEN: Remember, market timing is a fool`s game. But no one ever went broketaking profits.


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(END VIDEOTAPE)

GHARIB: So how do individual investors feel about the stock market, and what are theydoing with their money?

Let`s find out now from a man who is in close touch with them, Walter Bettinger, CEOof Charles Schwab Corporation.

Walt, nice to have you back on the program.

Let me begin by asking you, how would you describe investor sentiment right now?Optimistic? Pessimistic? Are individuals feeling that they miss out on the rally? Are theyparticipating? What are you finding?

WALTER BETTINGER, CHARLES SCHWAB CORP. PRESIDENT & CEO: Well,Susie, thanks first for the invitation to be here. It`s great to be back.

I think most of our investors at Schwab are feeling pretty good. As you know, we`re notadvocates of market timing. And what we recommend to our clients is develop an investmentplan that is going to have them taking a long-term perspective, understanding their risk tolerance,making sure they diversify from the downside standpoint, staying invested, not trying to guessthe market and keeping expenses low.

So, the investors who follow our advice at Schwab have done quite well. They`ve caughta very, very nice run in the last three-plus years.

GHARIB: All right. So, you say have a plan, but, you know, this is a very confusingtime. There are a lot of choices out there.


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People aren`t sure, should I buy individual stocks? Should I turn to an index fund or anETF? U.S. stocks versus international? A lot of confusing decisions to make.

What do you tell Schwab clients should be at the core of every single portfolio?

BETTINGER: Well, I think every portfolio has to have a waiting in U.S. stocks. We`restill the strongest, largest economy in the world. Our stock market is the most liquid. I believeit`s the most trustworthy market out there and core U.S. stocks should be at the heart of everyportfolio.

But I guess what I would add is maybe even more important than that is understand your

own risk tolerance. In volatile periods like we experienced during the financial crisis, made a lotof people sit up and take notice that maybe their risk tolerance was a little bit less than they hadbeen investing at. And so, understating that risk tolerance as I indicated, protecting yourdownside with diversification. That`s maybe even more important than what you put at thecenter of that portfolio.

GHARIB: Walt, you heard Mohamed El-Erian that Tyler just did, saying that he`swalking away from risk. But do you find as the market keeps going up on, that investors aretaking on more risk, or are they becoming more cautious?

BETTINGER: Well, I think investors have moved more into the market.

Mutual fund inflows show that. In recent times, they have moved more into the market. Franklyjust the market going up, of course, is an indicator, as we know, that there are more buyers thansellers. But I think that the timing is less the issue than the realization of people that being in themarket for a long time is the only winning strategy.

Guessing the market is just so difficult. I like to say that even that broken watch is righttwice a day, but that`s no way to invest. When you time the market, all you end up doing istiming losses.

Now, professionals like Mohamed or others, they might be able to make small moves --and he even indicated, I think, in his interview that he was only walking away from risk --


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GHARIB: Right.

BETTINGER: -- as opposed to moving aggressively away. That`s not necessarily a badstrategy for someone who follows the markets every day.

GHARIB: All right.

BETTINGER: For the average investor, you`ve got to stay invested, you`ve got to livewith some of the ups and downs. And in the long run, history shows you`re going to come out

ahead.

GHARIB: All right. Lots of good advice.

Walt, thank you so much for coming on the program. Walter Bettinger, CEO of CharlesSchwab.

MATHISEN: And now to housing news. Pending home sales, a forward- lookingindicator based on contract signings rose 0.3 percent in April and continued to be well abovelevels a year ago. This as RealtyTrac reports that sales of bank-owned homes fell to a five-yearlow in the first quarter.

Meantime, the Obama administration is extending its home loan modification programcalled HAMP for two more years. The program was set to expire at the end of the year.

And don`t look now, with the 30-year fixed-rate mortgage is inching higher, now at aone-year high of 3.81 percent. That according to Freddie Mac.

GHARIB: Turning now to market focus.


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We begin with developments in the deal derby between Clearwire (NASDAQ:CLWR),Sprint and DISH Network (NASDAQ:DISH). Clearwire

(NASDAQ:CLWR) has postponed a shareholder vote scheduled for tomorrow on Sprint`stakeover bid because now DISH Network (NASDAQ:DISH) made a new higher counterbid forClearwire (NASDAQ:CLWR). Clearwire (NASDAQ:CLWR) jumped 29 percent on DISH`snew offer. DISH and Sprint each gained less than a percent.

Facebook (NASDAQ:FB) gained on a pair of upgrades as analysts took a look at theimpact of mobile video ads expected to launch as early as July.

Jefferies said that the video ads could be Facebook`s next billion-dollar business. Investorspushed Facebook (NASDAQ:FB) shares to $24.55. That`s a jump of more than 5 percent.

CIT Group (NYSE:CIT) announced a $200 million share repurchase after the marketclosed today, hours after the New York Fed ended its oversight arrangement with the company.John Thain, who you remember, used to run the New York Stock Exchange is CEO at CIT.

Investors piled into the stock more than six times usual volume. And the share set a newfive-year high, closing at $46.90. That`s up nearly

5.5 percent before gaining some more on the buyback news.

MATHISEN: Costco (NASDAQ:COST) reported 19 percent jump in profits, but an 8percent gain in revenue was below estimates. Costco`s revenue for memberships was higher by12 percent. The company said it plans to open an additional nine warehouse stores bySeptember. Busy summer there.

Costco (NASDAQ:COST) shares up 32 percent over the past year were off about apercent today on that revenue miss. They closed at $111.88.

CNBC is reporting that Sony (NYSE:SNE) has hired Morgan Stanley

(NASDAQ:NBXH) (NYSE:MS) and Citigroup (NYSE:C) to review hedge operator Dan Loeb`sproposal to spin off Sony`s entertainment business through an IPO.


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Loeb`s Third Point Fund is the largest holder of Sony (NYSE:SNE) shares with a $1.1 billionstake. Sony (NYSE:SNE) CEO Kaz Hirai said the company`s new board will meet on Loeb`sideas later in June.

(BEGIN VIDEO CLIP)

KAZ HIRAI, SONY CEO: The proposal is that we look to spin off about

15 percent to 20 percent of our entertainment assets. And we want to make sure that we have athorough discussion of the merits of the proposal before we come to any conclusion.

(END VIDEO CLIP)

MATHISEN: Sony (NYSE:SNE) shares jumped when word of the review leaked, Sony(NYSE:SNE) closed at $20.84, up more than 3.5 percent.

And still ahead, want to earn a little interest on your cash, your checking account? Wefound some safe ways to do it. They`re getting harder to come by.

First, though, how the international markets closed today.

(MUSIC)

MATHISEN: As the pros debate whether stocks will move higher or pull back, somearen`t willing to take the risk that goes along with putting money in the market. So what`s the

alternative for your cash? Our Kayla Tausche found one that`s risk-free, liquid and even earns alittle interest.

(BEGIN VIDEOTAPE)


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KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT: For everyinvestor in the stock market, there`s another who likes their money right where they can see it --in their checking account, insured and in a perfect world, earning interest.

With that last detail hard to come by, experts say a high-yield checking account might bethe answer. A high-yield checking account, on average, returned 1.64 percent according to aBankrate survey out Thursday.

That`s an average of $280 per accountholder per year. Leaps and bounds beyond money marketaccounts or certificates of deposit.

GREG MCBRIDE, BANKRATE.COM, SENIOR FINANCIAL ANALYST: And a low-rate environment where people are looking for yield, these accounts give you the opportunity to

earn a higher yield on a portion of your savings without sacrificing either the safety or theliquidity of the money.

TAUSCHE: More so (ph) if you can stomach the requirements. High- yield checkingaccounts commonly require at least 10 debit transactions a month to earn the highest rate, andthey only let you earn the highest interest up to a certain balance. With yields continuing to fall,the costs may soon outweigh the benefits. The $280 earned was an average of

$400 last year and experts say the numbers could keep going down since consumer interest rateslag the general market.

Financial planner Derrick Kinney says consumers should be realistic.

DERRICK KINNEY, DERRICK KINNEY & ASSOC., PERSONAL FINANCIALADVISOR:

The biggest risk to a consumer is how much interest will they earn on the account? Keep in

mind CD rates are almost at an all-time low, savings rates aren`t paying much more.

Consumers who are expecting too much may be very disappointed by what a high-yieldchecking account or savings account pays. Use this clearly for flexibility and liquidity. Use theaccount as a way to save money and keep it liquid.


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One of the best ways is if you need the money in the next six to 12 months. Let`s sayyou`re a business owner who may pay taxes on some things a year from now. An account likethis, liquid, pays a higher return than checking, could be a great alternative. Let`s say it s ashort-terms savings goal, you got -- your son or daughter going to college in a year, park themoney in this type of account.

TAUSCHE: To find one, look local, at employee credit unions and regional banks.Internet Bank Ally and brokerage Charles Schwab are two of the few companies that offer theseaccounts nationally and just one high mark from Pew Charitable Trust for checking transparency.

Kayla Tausche, NIGHTLY BUSINESS REPORT, New York.

(END VIDEOTAPE)

MATHISEN: And for those with a bit more patience, perhaps keep an eye on wheninterest rates might go up a little bit.

GHARIB: Well, no surprise in this new study. Wealthy Americans benefit much morethan low-wage earners from big tax breaks. That report from the Congressional Budget Office

also finds that the top 10 tax breaks like deductions for mortgage interest and charitable givingwill also keep

$12 trillion out of government coffers over the next decade. The top 20 percent will receivemore than half of those tax benefits.

But not everyone is feeling wealthy these days. A report from the Federal Reserve Bankof St. Louis says the recovery has been uneven and that the average American household has along way to go to recover the wealth lost during the financial crisis. The study took into account

inflation rates and population growth and concluded that the typical household has regained lessthan half of its lost wealth, that`s far below what other reports have stated.

MATHISEN: Well, Susie, that $4.7 billion takeover of the pork giant Smithfield Foods(NYSE:SFD) by China`s Shuanghui is generating a lot of buzz. The proposed deal faces


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regulatory scrutiny and some consumer groups are not, shall we say, hog wild about the dealamid what they say are food safety concerns.

And here to debate the topic is Patty Lovera. She`s the assistant director of Food andWater Watch, a consumer advocate group.

And Rick Quinn is a principal at FDAImports.com, which advises Chinese companieslooking to export to the U.S. and also works with American importers.

Folks, welcome. Good to have you here.

Patty, you say we think the deal should not be approved. What`s worrying you?

PATTY LOVERA, FOOD AND WATER WATCH: So, in the short term, anytime what-- I mean, Smithfield is the largest pork producer in the U.S. Any news that`s going to makethem bigger we think is worrisome for consumers and for U.S. farmers.

Very short term, if they do as much exporting to China as they say they want to do, we`reworried that prices could go up for consumers here.

Longer term, we`re worried about imports from China and China is a country with areally very troubling food safety track record. And we`re concerned that this is leading towardsthat eventual step.

MATHISEN: And this company, Rick, in particular, has -- she characterizes it as atroubling track record. They were sanctioned some years ago for using a known carcinogen aspart of their pork feed.

Should we be worried? How do you respond to what Patty just said?


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RICK QUINN, FDAIMPORTS.COM: Thank you for the opportunity to be with you.It`s a good question. The answer is that Shuanghui is buying quality, and that`s why they rebuying Smithfield. If you read the reports in the Chinese press, the CEO is clear he`s buyingsupply chain management, integrity, technology and scale.

As to whether we should be worried about Chinese pork in general, I would simply saythat 90 percent of the last 10 to 15 food recalls that represented significant health risk or death tohumans in the United States came from domestic food production. So, the Chinese food importbusiness is certainly subject to bad PR, some of which is warranted, but most of which is not.

MATHISEN: Some people, Patty, say that this is a national security issue, that this isgoing obviously not to secure defense technologies or telecommunications technologies, but to atruly important national asset.

It`s easy to poke fun if they`re just buying some pigs, but really they`re buying agriculturalproduction here. Are you worried about it as a national security issue?

LOVERA: Sure. I mean, I think we think the definition of national security shouldinclude how a country feeds itself, and this could lead to radical changes in the structure of, youknow, our food system. So we already have other meat companies that are owned by foreigncompanies.

This is not the first one. This would be the first one where we have this Chinesepresence, and there`s been lots of evidence that this is not a place where our businessrelationships are always on equal footing, as they should be. And we are very worried.

I mean, the poultry industry already wants to import chicken from China. The cost ofdoing things there are so much lower, and we have to assume -- we think it`s a safe assumptionthey`ll eventually get to that point with pork, and that is very worrisome if you`ve replaced thatkind of production and put it in a foreign country, what are you missing if that production was

cut off?

MATHISEN: Patty seems worried, Rick, that Chinese product -- Chinese pork mightwork its way into the United States. You work with Chinese companies. My assumption is thatChinese food that comes into the United States would be subject to exactly the same standards ofquality as the domestically produced stuff.


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And we already get shrimp, tilapia, other kinds of products from foreign sources -- and Iassume that they have to meet our standards, too.

QUINN: Well, it`s true, but it`s also true that foreign product is subject to higherstandards importantly from the standpoint of enforcement resource allocation at the ports ofentry, only about 1.7 percent of products offered for import are subject to examination. So, evenif you multiplied that by a factor of 10, you would have four entries getting without exam forevery one that is examined. So, single out the Chinese is unfair.

But from the standpoint of national security, it`s certainly true that food infrastructure hasan impact potentially on national security and the congressional review that will ensue under the

Foreign Investment National Security Act could, on the floor debate, use a populist approach tothe definition of national security in a way to clog the proposed merger.

But what I would simply say is this. You have a company in China with

$100 billion in revenue last year, buying a U.S. company with $5 billion in revenue. TheChinese firm is trying to recover the brand equity from issues they had previously, and they`reusing Smithfield to do it.

MATHISEN: All right.

QUINN: The idea -- the idea that they would sacrifice that equity for short-term profit isnonsense because the acquisition is relatively small compared to Shuanghui`s market size.

MATHISEN: All right. Folks, we have to leave it there.

Patty Lovera of Food and Water Watch, thank you. And Rick Quinn ofFDAImports.com.


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In a statement issued yesterday, we should point out, the company said, "Shuanghui willcontinue its long-term strategy and vision to become a global leader with strict adherence to thehighest standards of quality control and safety compliance. Its agreement to acquire Smithfieldis fully aligned with this focus."

GHARIB: And coming up a little later on the program, cameras and screen you canwear. Will the next new thing be wearable technology?

We`ll take a peek into the future.

First, a look at how commodities, currencies and treasuries fared today.

(MUSIC)

GHARIB: Amazon (NASDAQ:AMZN) is going after Netflix (NASDAQ:NFLX).

The online retailer plans to produce five new television shows following Netflix(NASDAQ:NFLX) deeper into the world of original content delivered over the Internet. Thenew series will be shown exclusively on Amazon`s prime instant video service that comes outlater this year and in early 2014.

Amazon (NASDAQ:AMZN) rose slightly to $267 and Netflix (NASDAQ:NFLX)jumped more than 3 percent to $222 a share. This stock has more than doubled this year.

MATHISEN: As technology companies battle for dominance, the next big thing may notbe the newest and coolest device but how you wear it.

Jon Fortt takes a look at whether wearable technology is about to be a big part of yourfuture.

(BEGIN VIDEOTAPE)


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JON FORTT, NIGHTLY BUSINESS REPORT CORRESPONDENT: We`ve had techon desks, on laps, and lately in pockets. But the latest buzz, cameras, sensors and screens youcan wear.

GoPro, Nike (NYSE:NKE) and others have been doing it for sports. With sensors onyour wrist and cameras you connect to a phone. The next step is smarter technology you canwear all day. Google`s first bid in that market is Glass, which goes on your face. Not clearwhether people would wear something like that.

UNIDENTIFIED FEMALE: I`d have to, like, try them out, though. I don`t know if I`dwear them in public while talking to somebody.

UNIDENTIFIED MALE: If they had sunglasses with TV, I`d like that so I could walkaround and watch TV while walking.

UNIDENTIFIED MALE: You can`t resist technology. That`s the mainstream wheresociety is heading. That`s just the y that you go.

FORTT: At the D-11 conference outside L.A., Twitter CEO Dick Costolo weighed in.

UNIDENTIFIED FEMALE: Do you wear Google (NASDAQ:GOOG) Glass?

DICK COSTOLO, TWITTER CEO: No.

UNIDENTIFIED MALE: No? Because?

COSTOLO: I have these glasses.

UNIDENTIFIED FEMALE: But you could wear them on top of it.


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COSTOLO: I could wear them on top of these?

UNIDENTIFIED FEMALE: Yes.

COSTOLO: I don`t wear Google (NASDAQ:GOOG) Glass. I wear these glasses.

FORTT: Apple (NASDAQ:AAPL) CEO Tim Cook was in the same camp, saying hedoesn`t think tech in glasses will catch on soon.

Most people only wear glasses if they have to. But he called the wrist intriguing.

COOK: I think for something to work here, you first have to convince people it`s soincredible that they want to wear it because where you two guys are wearing watches, if we hada roomful of 10 to 20-year-olds and we said, everybody stand up that has a watch on --

UNIDENTIFIED MALE: Just a time --

COOK: I`m not sure anybody would stand up. I don`t see it.

FORTT: The market could be huge. Cook said smartphones ignited the post-PCrevolution. Tablets accelerated it, and wearables could push things even further.

But first, these companies have to figure out where on our bodies we`re willing to wearthis stuff and how it could be really useful.

For NIGHTLY BUSINESS REPORT, I`m Jon Fortt.


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(END VIDEOTAPE)

GHARIB: And finally tonight, with all the focus on technology these days, one of ourcore building blocks seems to be getting neglected. We`re talking about spelling. But severalhundred students from across the nation are proving all is not lost.

Jane Wells explains.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Longlove (ph).

UNIDENTIFIED BOY: Longlove?

UNIDENTIFIED MALE: Longlove.

JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):Yes, I don`t know it either. But nearly 300 of America`s best and brightest are giving it a shotthis week in the 86th Annual Scripps National Spelling Bee.

UNIDENTIFIED MALE: Ext (ph).

UNIDENTIFIED BOY: Can I please have the definition?

WELLS: Does spelling even matter anymore? In an age of spell check and textingshorthand, who cares?


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MIGNON FOGARTY, "GRAMMAR GIRL": Today`s spelling matters especiallybecause it`s the first impression you`re often making on people. You know, whereas 30 yearsago, we might pick up the phone and call someone for business. Now, we`re much more likelyto send an e-mail or even a text message.

WELLS: Mignon Fogarty, aka "Grammar Girl", warns to be careful relying on softwareto fix your mistakes. Many of these spelling bee words weren`t even recognized by autocorrect.

UNIDENTIFIED MALE: Nenuphar.

UNIDENTIFIED GIRL: Nenuphar?

UNIDENTIFIED MALE: Also nenuphar.

WELLS: Take nenuphar or nenuphar, a water lily.

UNIDENTIFIED GIRL: N-e-n-u-p-h-a-r. Nenuphar.

WELLS: Autocorrect turns it into menu phase.

(on camera): This year`s spelling bee has an added twist.

Contestants also had to define vocabulary words, a completely different skill.

FOGARTY: It would be almost as if you were having a Sudoku competition andsuddenly you told people they had to do multiplication tables to qualify.


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WELLS (voice-over): And isn`t the spelling part hard enough already?

UNIDENTIFIED MALE: Bacciferous.

UNIDENTIFIED BOY: Bacciferous -- could I get everything, please?

UNIDENTIFIED MALE: Sure.

(LAUGHTER)

WELLS: Type in bacciferous and autocorrect turns it into vaccine toys.

FOGARTY: None of those programs are foolproof and I`ve seen too many people doubtthemselves.

WELLS: Sometimes you just have to trust your gut.

UNIDENTIFIED BOY: B-a-c-c-i-f-e-r-o-u-s? Bacciferous?

UNIDENTIFIED MALE: Yes.

(APPLAUSE)

WELL: And nothing can be as eudemonic as when you elucubrate for months for amoment like this.


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For NIGHTLY BUSINESS REPORT, I`m Jane Wells.

(END VIDEOTAPE)

MATHISEN: I would have spelled bacciferous as machine toy or whatever it was,vaccine toy.

The finals are tonight and the winner gets $30,000 in cash, a $2,500 savings bond and abig reference library digital, of course.

GHARIB: Next, they`ll be wearing those glasses that will tell you how to spell the word.

MATHISEN: It will spell check for you.

GHARIB: Yes. That`s NIGHTLY BUSINESS REPORT for tonight. I`m Susie Gharib.Thanks so much for joining us.

MATHISEN: I`m Tyler Mathisen. Thanks from me as well. We`ll see you back heretomorrow night.

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 beposted at a later date. The views of our guests and commentators are their own and do notnecessarily represent the views of Nightly Business Report, or CNBC, Inc. Informationpresented on Nightly Business Report is not and should not be considered as investment advice.(c) 2013 CNBC, Inc.


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nightly business report - thursday may 30 2013

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