Nightly Business Report - Tuesday March 26 2013

7/29/2019 Nightly Business Report - Tuesday March 26 2013

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ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and

Susie Gharib.

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Housing goes boom.

The

prices rise by the most in nearly seven years. And stocks take the good

news and run with it. We talk with economist Robert Shiller about what`s

next.


2/27

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Two techs go bust.

Well, not exactly, but Dell (NASDAQ:DELL) and BlackBerry, former tech

titans, are in a fight for their lives. Can they come back?

GHARIB: And courtroom drama. The Supreme Court hears the first of

two cases on same-sex marriage. What are the stakes for business?

We`ll have all that, plus the simplest trading strategy you`ve ever

heard of tonight on NIGHTLY BUSINESS REPORT.

Good evening, everyone.

And, Tyler, you know, we had a lot of positives today about the stock

market and also about the economy.

MATHISEN: And those economic numbers really did drive stock prices

higher today. The Dow has done it again, climbing to a record close,

rebounding from Monday`s losses.

Investors shook off concerns about the debt and banking crisis over in

Europe and focused instead on higher home prices in January, in the U.S.,

which rose at the fastest pace in almost seven years and on a sizeable jump

in factory orders for big-ticket durable goods in February.

When all was said and done, the Dow was higher by 112 points, closing


3/27

at a fresh all-time high of 14,559. The NASDAQ was up 17, and the broader

S&P 500 added 12 points, now just a point and a half away from its own

record high close.

GHARIB: Well, as Tyler just said home prices went through the roof in

January, up more than 8 percent year over year and this is in the nation`s

largest cities. It`s the biggest jump in prices since the summer of 2006.

And that`s according to the latest S&P Case-Shiller home price index.

Now, some of the cities that took the hardest hits during the housing

collapse saw some of the biggest gains, including Phoenix, Las Vegas and

San Francisco, all with double-digit price gains.

And joining us now, the co-founder of the Case-Shiller Index, Robert

Shiller. He`s also economics professor at Yale University.

You know, Robert, a lot of people are looking at these statistics if

you`re a home buyer or home seller. You`ll come away with conclusions and

if you`re a home buyer, you`re saying maybe this is the time to buy that

house I`ve been wanting to get because prices are going go up, and if

you`re a home seller, maybe rethink holding off before selling because you

might get a better price.

So how should people strategize through this?


4/27

ROBERT SHILLER, YALE UNIVERSITY PROF. OF ECONOMICS: Well, it`s very

important to keep a distinction between the housing market and the stock

market. Momentum is much, much stronger in the housing market. So the

fact that we just set a record on the Dow means very little about the

outlook for the stock market. But the increases we see in the housing

market mean a lot. It`s not as efficient a market.

So this might be a time to accelerate a purchase of a home to get the

increases that are likely over the next year.

MATHISEN: Are you at all worried that there might be a repeat of the

so-called bubble of the mid last decade?

SHILLER: Well, I don`t think it s going to be as momentous as that

one. That was the biggest bubble in the history of the United States. So

we don`t expect that to happen again.

And in fact, in history when we`ve seen big booms regionally in the

United States, they`ve often not repeated for another half century. So I

don`t expect that, but it does seem possible that it would be substantial

and it depends on a lot of things, including political factors.

GHARIB: You know, Robert, we`ve been hearing anecdotally stories that

a lot of people investing in real estate is a good way to make some fast

money -- buying properties and then flipping them. Does that strategy make


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sense to you?

SHILLER: For people who know what they`re doing, I think it naturally

does. One thing that`s changing is, I don`t know about flipping. I think

buying and holding it as a rental or selling it to someone who wants to be

a landlord, we need to see some of our properties converted to rentals

because that seems to be a shift for now, at least, in public demand.

So I think it`s a natural, economic thing to be doing right now.

MATHISEN: As you take apart the housing market or you analyze it,

what`s making prices go up so much?

SHILLER: You know, usually, we don`t know the answer to that, even

after the fact.

But I`ll give you the most -- first thing that comes to mind: the Fed,

OK? Very low interest rates. In fact, in December, we set an all-time

record low mortgage rate. It was 3.35 percent and it`s not up much from

that today.

That matter -- you know, that is -- for buying a house, it`s that low

mortgage rate that might be the more important factor than the outlook for

home. That`s big, to be able to borrow so cheaply and lock it in for 30

years.


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GHARIB: That is pretty incredible.

Can you talk us through a little bit in some of the numbers, as you

look at the metro areas of the cities on your list? I mean -- they`ll pull

up a graphic here. Phoenix was up year over year, 23 percent; San

Francisco, 17.5 percent.

And then, you look at the bottom of the list -- New York City up just

half a percent.

SHILLER: Yes.

GHARIB: What kind of conclusion should we draw from looking at these

numbers and what`s the story behind the numbers?

SHILLER: Short run, go for Phoenix.

(LAUGHTER)

SHILLER: Long run -- long run, go for New York.

By the way, the financial sector is very low priced now, too. New

York is the world`s financial sector and it looks beaten down right now,

but my feeling is that has a good, strong future.


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MATHISEN: Let me -- let me get you, as a student of value, to comment

if you would on the values of the stock market today. Do you think the

market is priced too high for the economic underpinnings?

SHILLER: It is priced highly. I have my own CAPE -- or cyclically

adjusted price-earnings ratio, which uses a longer (ph) average of

earnings. And that ratio now is about 23, which is high. But then you got

to remember that interest rates are very low.

So, it`s not unnatural for them to be high. So what I`m thinking --

based on just the CAPE ratio, the real return on the stock market for the

next 10 years might be something like 3 percent a year, which isn`t bad in

the current environment. That`s way better than your 10-year treasury.

GHARIB: All right. We`ll leave that for another conversation. But

thank you so much.

Robert Shiller, co-founder of the Case-Shiller index, also economics

professor at Yale University.

MATHISEN: Well, today`s Case-Shiller house price report confirms why

Americans are once again bullish on real estate. According to the latest

CNBC all-America survey, 33 percent believe their home prices will rise

during the next year.


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runs high, gold has run even higher. One recent example, the summer of

2011, when Washington gridlock prompted the S&P to downgrade the debt

rating of the United States, gold hit an intraday high of $1,923 an ounce.

Gold has also managed to rally alongside the markets. For example,

when the Fed announced several rounds of monetary stimulus, bouillon moved

higher as an inflation hedge. In the past few months, though, gold hasn`t

managed to move much. The range-bound metal wasn t where investors flocked

when they were worried about the fiscal cliff and it certainly hasn`t been

where they turned as the markets have climbed higher.

Traders say gold`s behavior is odd, but explainable. For one thing,

it`s been held back by the dollar`s strain.

PAUL SACKS, AURUM OPTIONS PRINCIPAL GOLD TRADER: Well, gold, like

many other things, has been denominated in U.S. dollars, right? So when

the strength -- when there is strength in the U.S. dollar, that implies

there`s weakness in a foreign currency. So there is less gold that can be

purchased per euro, per yen, per Swiss.

DEANGELIS: In addition, there has been evidence that funds are

selling gold as they rotate into equities.

SACKS: There have been outflows in terms of the GOB for the funds to

participate and initiate some gold exposure. So, the open interest has


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come off substantially in the GOB.

DEANGELIS: And even when gold does seem to catch a bid, it tends to

be short covering, not necessarily new buying.

(on camera): But still, experts say that all signs indicate that gold

is headed higher. Here at home, fears of the impact of sequestration and

new debt ceiling deadlines are a cause for concern. Abroad, the eurozone

debt crisis is far from over as highlighted from recent events in Cyprus.

SACKS: When we have the crisis out of Cyprus, so there is a demand.

This is the definition of headline risk. So we have this demand for safe

haven.

DEANGELIS (voice-over): For NIGHTLY BUSINESS REPORT, I`m Jackie

DeAngelis.

(END VIDEOTAPE)

MATHISEN: Two blue chips in the Dow hitting all-time highs today and

that is where we begin our "Market Focus" tonight.

American Express (NYSE:EXPR) (NYSE:AXP) and Johnson & Johnson

(NYSE:JNJ) both hit as the market gained. AmEx on the $150 million a share

buyback plan announced yesterday. And J & J after UBS raised its price


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target on the stock to $87 a share from $81.

Johnson & Johnson (NYSE:JNJ) also part of the NYSE pharma index and

that index hit its highest level in almost 12 years today.

Here are some other top performers in that group: Bristol-Myers Squibb

(NYSE:BMY) leading the way. up almost 25 percent year to date, followed by

Eli Lilly (NYSE:LLY), Pfizer (NYSE:PFE), Amgen (NASDAQ:AMGN) and Merck

(NYSE:MRK).

GHARIB: Warren Buffett`s Berkshire Hathaway (NYSE:BRK.A) is set to

become one of the 10 largest shareholders in Goldman Sachs (NYSE:GS). The

move comes as Goldman gives Berkshire millions of shares in place of

warrants dating back to the depths of the financial crisis. That`s when

Buffett came to the rescue of the Wall Street firm by investing $5 billion.

Goldman stock was almost flat on the day, closing at $146. At that

price, Berkshire would receive more 9.5 million shares.

And Netflix (NASDAQ:NFLX) was the biggest gainer in the S&P 500 today,

after an analyst boosted the company`s price target to $225. He says the

company`s streaming video business has the potential of drawing in more

subscribers. Netflix (NASDAQ:NFLX) shares have doubled this year and they

rose almost $10 today, to $190. That`s a gain of 5.5 percent.


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MATHISEN: A historic hearing of the U.S. Supreme Court today on

whether same-sex couples have the right to marry. And any potential ruling

would have enormous implications for businesses.

John Harwood joins us now from outside the Supreme Court in

Washington.

John, what did -- what did the justices hear today?

JOHN HARWOOD, NIGHTLY BUSINESS CORRESPONDENT: It`s a two-day set of

arguments on same-sex marriage, Tyler. Tonight, the arguments were about

California`s Proposition 8, the ballot measure a few years ago that ban gay

marriage after earlier that right had been conferred in California.

Justices are going to have to decide whether the stake can take a right

after having granted it.

The arguments tomorrow are going to be about the Defense of Marriage

Act which was signed by Bill Clinton in 1996. Even Bill Clinton has said

that it`s unconstitutional, but we`ll see whether the justices agree.

There was some caution expressed in their questioning to the lawyers today.

GHARIB: While we`re waiting, John, to hear on from the Supreme Court

on this historic case, and many businesses are already providing benefits

from gay couples. They`re already gotten kind of ahead of the law and the

culture. Why the disconnect?


13/27

HARWOOD: Well, business executives worked on a different metric than

politician-seeking votes. Business executives have approached this issue

as a bottom line issue of making their employees happy. So, if you look at

numbers like these compiled by the Human Rights Campaign, you`ve got 99

percent of businesses that already have anti-discrimination policies on the

basis of sexual orientation, 89 percent say they provide domestic partner

benefits to same-sex couples. You also got 13 out of the 20 biggest

companies on the Fortune 500 list that got a perfect score on those sorts

of issues.

So the business community is ahead. The politicians are catching up,

and we`ll see what the Supreme Court justices decide a couple of months.

MATHISEN: John Harwood, we have to leave it there. Thank you very

much.

John Harwood reporting.

GHARIB: And coming up on the program, Dell (NASDAQ:DELL) and

BlackBerry, two iconic American brands, at a crossroads. We`ll look at

what happens when technology kings get beaten at their own game.

But, first, here`s a look at how international markets closed out the

day.


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(MUSIC)

MATHISEN: Apple (NASDAQ:AAPL) shares in a serious swoon since

September were off slightly today, this despite positive comments from an

influential tech analyst and a fund manager. The analyst Gene Munster of

Piper Jaffray reiterated his $767 price target on the stock, more than $300

above today`s close. He said the next two quarters for the company would

come in below consensus estimates as iPhone sales slow. But then he thinks

new product launches will power demand and the stock.

Fund manager Channing Smith of Capital Advisers Growth basically makes

the same argument. His forecast, $600 a share by New Year`s.

GHARIB: Well, before shares of Apple (NASDAQ:AAPL) climb any higher,

the company has to battle concerns about declining sales of its signature

products: iPhones and iPads. At China`s Foxconn, this is a major supplier

to Apple (NASDAQ:AAPL) and where many of those Apple (NASDAQ:AAPL) gadgets

are made, those fears may be real, as workers describe a slowdown in

production.

Eunice Yoon has more.

(BEGIN VIDEOTAPE)


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EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):What

happens at Foxconn is see as a barometer for the tech industry. We heard

orders at the Shenzhen factor had slowed. So, we headed to the notoriously

secretive manufacturer to find what`s happening behind the heavily guarded

gates.

Outside the factory, we spoke to a half dozen Foxconn workers, only

one would talk to us on camera. But they all said the same thing. There

are no orders, he says. Generally, there`s nothing to do.

Like migrants at Foxconn, the worker moved from the countryside to

make big bucks in the big city. He like the others we spoke to say Foxconn

pays the best. Big clients like Apple (NASDAQ:AAPL) and Dell (NASDAQ:DELL)

mean steady orders. To the workers that means a chance to work longer

hours and get better pay, but not since February.

The worker who inspects iPad normally rakes in $480 a month. Now, he

says he`ll be lucky to earn two-thirds that. Sometimes, he says, they

don`t do much at all.

"There`s no overtime," he says. "A lot of people have left."

(on camera): Foxconn employs over 1.5 million people in China. But

these days, the company isn`t hiring as much as before.


16/27

(voice-over): In a statement, Foxconn says 97 percent of employees

returned after the lunar holiday and adds, this period has always been

considered low season for the industry.

But all of the workers who have been at the factory for over three

years said the slowdown is more pronounced this year. What the workers

tell us could be a sign of weaker sales -- something we`ll know for certain

this earnings season.

But this worker may not stick around until then.

"Killing time is pointless," he says. "I might as well check out

other jobs."

For NIGHTLY BUSINESS REPORT, Eunice Yoon, Shenzhen.

(END VIDEOTAPE)

MATHISEN: Also, if you think Apple (NASDAQ:AAPL) is facing

challenges, get a load at this: it`s nothing to what`s been happening at

Dell (NASDAQ:DELL) and BlackBerry. Not long ago, both firms were product

and stock market kings and must-haves in many portfolios. Today, Dell

(NASDAQ:DELL) is in the middle of a buyout battle and BlackBerry is

battling for its survival as an independent company.


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cheap why should I sell it to him?

And Leon Black -- I`m sorry, Leon Cooperman, who was quoted in the

piece, said this is the equivalent of insider trading and he knows

something that other shareholders don`t, and to some extent, you could

argue that now that we have a separate offer from Blackstone, which has

come with a bid of $14.25, against, by the way, Michael Dell`s bid with

Silver Lake of $13.65 and an additional bid by Mr. Icahn of $15, you could

say that perhaps the original bid was too low.

GHARIB: You know, Jon, Dell (NASDAQ:DELL) was once considered one of

these tech darlings that could do no wrong, and it seems like the issue

here -- whether it`s a private company or a public company -- its business

model is out of date. How do they survive and how do they make that

changeover?

JON FORTT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, they got so

big and so popular making PCs more efficiently than anybody could at the

time. And what happened is everybody else got better at making PCs and

now, PCs are just less popular than they used to be as people use

smartphones and tablets.

So, really, what they need to do is one of two things: either figure

out how to be a great mobile player. They tried a couple of times and

haven`t figured that out. Or push into the cloud and enterprise services.


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They`re doing a bit better at that, but meanwhile, this big PC weight is

just dragging them --

MATHISEN: They missed the move in the mobile big time. That was

really one of the big issues here, right?

FORTT: That`s part of it, but they tried some mobile products, but

the problem was, they were depending on software from Microsoft

(NASDAQ:MSFT) or from Google (NASDAQ:GOOG). They were depending on other

companies to figure out how to put the objects, the products together.

They couldn`t compete as much with Apple (NASDAQ:AAPL), which designs the

whole widget (ph).

MATHISEN: So, Andrew, speaking of a company that sort of missed a big

move, BlackBerry, another company that we`re talking about in this segment

tonight, it missed the move to sort of touchscreens and multi-function

devices. Can this company come back?

SORKIN: It`s going to be a struggle. I hate to say it because I`m a

BlackBerry user and I have loved my keyboard from the absolute very

beginning like so many people out there, but I also carry around an iPhone

these day, and I think that`s become indicative of what you`re seeing, by

the way, on Wall Street, you`re seeing it in the government, you`re seeing

it even the Defense Department and others who have taken up other devices.


20/27

It`s very difficult once you start looking at the ecosystem that is

the Apple (NASDAQ:AAPL) OS, the operating system, and all of the apps that

are around that to think that BlackBerry will ever be able to be what it

used to be.

Having said that, if BlackBerry can just eke out small, little gains,

they can make big wins for the company and for the stock. And so, I

wouldn`t count them out just yet.

GHARIB: Let me ask both of you this, Andrew and Jon.

But let me start with you, Jon, is that -- when you look at these

companies and others of this ilk, is it a technology problem that got them

here or is it a management problem, or is it both?

FORTT: It really is both. I mean, in both cases, management was

maybe a little too proud of what they had already accomplished, didn`t look

around the corner and see what was coming. On the technology side, both

had a similar problem. BlackBerry didn`t really design a great operating

system, an OS that could do web surfing, that can handle apps. Apple

(NASDAQ:AAPL) had that already.

And when they saw Apple (NASDAQ:AAPL) doing it, they figured they were

fine ruling email and messaging just like they had done before. They need

to now figure out what the next big thing is going to be. Don`t just match


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iOS and Android, but get to where the pack (ph) is going to be.

MATHISEN: The early word on the BlackBerry 10 is not all that

favorable in the U.S.

FORTT: Well, the word is a lot better than the early sales. So, it

got some decent reviews. People said, yes, this does some things that

other phones do and some things that they can`t do. But it hasn`t

translated into sales because they haven`t communicated to people why buy

this instead of the stuff like your friends have.

GHARIB: Andrew, what is your thoughts of all this? What`s the lesson

here? It sounds look a Harvard Business School case study.

SORKIN: And the lesson is that both of these companies need to be in

turn around and it`s a real gamble either way which way they go. You know,

some people look at this Dell (NASDAQ:DELL) transaction and the

shareholders say they`re not getting enough money, pay me more. But, you

know, there`s just -- it`s just as possible that in five years from now,

Michael Dell (NASDAQ:DELL) makes a fortune as he loses a fortune, and

that`s the thing I think we all have to remember.

MATHISEN: Andrew Ross Sorkin, thanks very much.

Jon Fortt, great to be with you.


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FORTT: Thank you.

MATHISEN: And still ahead, why it`s more important to teach children

about the value of a buck.

But, first, a look at how commodities, treasuries and currencies fared

today.

(MUSIC)

GHARIB: Teaching children about money is an issue every parent

struggles with. Now, schools are also focusing on this. And some students

in the country are already required to study personal finance.

As we continue our series, "Hitting the Book," Sharon Epperson reports

that the push to spread that knowledge and make it mandatory is growing.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: One big thing we went over, how to form a

budget.

SHARON EPPERSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):

Financial lessons become life lessons for students at Reading High School,


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in Ohio.

UNIDENTIFIED FEMALE: I actually worked with my mom and we formed a

budget that we still use and it`s helped us tremendously.

EPPERSON: Since U.S. economic crisis, many schools and teachers have

been searching for strategies to help students deal with the real-world

economy.

BRIAN PAGE, READING HIGH SCHOOL, TEACHER: As our financial industry

continues to get more complicated the lessons are becoming more and more

painful. So, it`s time that our legislators recognize that we need to

evolve, our education system needs to evolve and we need to prepare our

children to be able to manage their money in a much more complicated

financial society.

EPPERSON: Brian Page`s class is an example of what many would like to

see become law, a requirement that all high schools in the state offer a

personal finance course.

STATE SEN. WILLIAM COLEY (R), OHIO: It`s our hope that people learn

that at an early age and then carry that through throughout their lives.

EPPERSON (on camera): Ohio is one of 46 states that includes personal

finance education in standard curriculum for kindergarten through 12th


24/27

grades. But there`s no mandate to teach it yet. According to the Council

for Economic Education, only 13 states require high school students to take

a personal finance course to graduate.

(voice-over): There`s a national push to grow those numbers and

expand requirements starting in elementary school.

DR. JULIE HEATH, UNIVERSITY OF CINCINNATI DIR. OF ECONOMICSCENTER:

It`s great that that more and more states are adopting a mandatory

financial education course, but waiting until high school is too late. It

needs to start in kindergarten and there needs to be a foundation laid

every single year.

EPPERSON: In the next few months, the Treasury Department is expected

to launch a Web site offering teachers ready-made personal finance lessons

that can be incorporated instead standards for math and English in schools

across the nation.

HEATH: We need to know that a student in Michigan in the fourth grade

is learning what a student in New York in the fourth grade is learning. It

is so far beyond how to write a check. It`s tremendously empowering to

teach children -- you have control over your own life.

PAGE: This course is more than just about how to become rich. It`s

about leading a rich life.


25/27

When they come back and they tell me that they have opened a savings

account, or they tell me that they have a high credit score, or they tell

me they have a direct deposit into the 401(k), which they`re fully

matching. That`s how I measure my impact on them.

EPPERSON: That`s the real world test of lessons that can help them

throughout their financial lives.

For NIGHTLY BUSINESS REPORT, I`m Sharon Epperson.

(END VIDEOTAPE)

MATHISEN: We asked on NBR.com what you thought about teaching

financial literacy to younger students.

Kersi Billimoria said, "Very important, especially since it appears

that parents have abrogated their responsibility in this area."

And Steve Silva said, "Extremely important, and I applaud this long,

overdue move."

And, finally tonight, do you want to make money in the stock market?

Well, the answer may be as easy as invest on a sunny day. According to a

new book by Adam Alter, an assistant professor at NYU`s Stern Business


26/27

School, researchers studying trading patterns across 26 world markets found

that between 1982 and 1987, stocks rose more on sunny days than on cloudy,

snow, or rainy ones.

Or you just go with simple-sounding names. Alter and a colleague at

NYU found after studying hundreds of U.S. stocks that those with easy to

pronounce names outperformed the tongue twisters. And as Warren Buffett

says, simpler is better.

It was a sunny day here, Susie, and stocks moved higher. It was

cloudy and stocks went down.

GHARIB: Do we have to start doing a weather report? Tomorrow is

supposed to be partly sunny. So, we`ll see what that does to the market.

MATHISEN: Mixed day for the market.

GHARIB: That`s NIGHTLY BUSINESS REPORT for tonight. I`m Susie

Gharib. Thanks for watching.

MATHISEN: And I m Tyler Mathisen. Have a great evening. We`ll see

you back here tomorrow night.

END


27/27

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

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.

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Nightly Business Report - Tuesday March 26 2013

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