tv Nightly Business Report PBS December 31, 2013 1:00am-1:31am PST
this is "nightly business report" with tyler mathisen and susie gharib. >> brought to you by street.com, a stock market indepth analysis, we provide objective analysis, learn more at the stocks street.com nbr. the dow sets another record, not alone in flying high, many shares around the world say good-bye to 2013 with sizeable gains. missing the bull's eye, what target needs to do to repair the trust of its customers and rebuild its brand. and riding the bull, our market analyst says stocks that are a must have in the bull market. all this for monday, december
30th. good evening everyone, tyler is off tonight. well, there is still one more trading day until you can break over the bubbly, but investors around the world are already celebrating as 2013 comes to an end. global stock markets are up about 10% this year, the morgan stanley equity index is at its highest level since the financial crisis began back in 2007. when you break down the numbers, though, the statistics are amazing, japan was the best performing market, up a stunning 57%, the strongest increase since 1972, and stocks here in the u.s. performed remarkably well, as well, the dow is on track to post a gain of 25%, and the s&p did even better, up until 30%. as for today, the blue chip average hit another record and closed at another milestone,
16,504, the nasdaq lost two, and the s&p was down a fraction. in the bond market, the ten-year yield closed at 2.89%. david kelly is predicting another strong year for u.s. stocks but says the best opportunities will be in europe. he is chief global strategist at j.p. morgan. glad to be here. >> so david, tell us why europe? we still see headlines out of europe making investors concerned. why do you think it is where we can have the best opportunities? >> well, of course, that is the case, the best time to invest is when people are really worried. and people are still worried about europe, they have an unemployment in the eurozone of 12.1%. they are gradually pulling out of the long series of recessions that they have had. and if they could just get back to normal, even if it took a number of years, i mean, normal
for europe would be a 7 or 6% unemployment rate, pretty much the same as here. but we're quite close to that. they're not. so over a number of years if they can get back to full employment it means a lot of economic growth and stock market appreciation, so there is just a lot of room for them to improve. >> and we're hearing from a lot of experts that the merging markets are making a comeback, they had a really bad 2013. what do you think? >> will, there are a lot of minefields, i think as an investor you have to have a lot of merging markets in your portfolio. i do think it is an area where you need to have professional management. there are a lot of issues, there are issues with commodity markets and a whole issue with -- china is slowing down. can china manage its pace to slow down. because if it slows down too much, it affects the commodity exports like brazil and american markets, so there are plenty of
issues, so in the long run they have growth in their labor market, we don't have that in the developing world. they are cheap compared to developed markets right now. >> as you know, american investors, especially individual investors always feel comfortable investing right here in their own back yard. tell us how stocks will do this year, and what kind of balance should they have between u.s. stocks and stocks around the world? >> well, of course, i can't give you a straight answer to having them do this year. and i'll tell you why, if you look back over the last three years, two years ago the stock market gave you zero percent, last year, 16%, this year it will give you about 30% of the united states. now in this case we had an upward trend, but in the next five years you could expect to make 5 to 7% per year in u.s. stocks. so i think that is pretty good. but still there is better opportunity around the world. and particularly because over half the stock market opportunity in the world is
actually outside the united states. the u.s. accounts for about 48% of world stock market capitalization, there is more opportunity overseas, there is a time -- when the market has gone up this much people need to look around and think more broadly where the opportunities are in the next five years. >> all right, they have to sit down and do the math, thank you so much david for coming on the program. >> any time. >> david kelly, with j.p. morgan funds. and pending sales, the ones where contracts are signed but not closed edged up .2%, analysts say low inventory and higher interest rates are holding sales back, but the national association of realtors expect sales to be nearly 10% higher this year than last year. and the sales outlook for target, not as rosy, the sales are cut for the retail shopper as shoppers are still worried about the hacking in target.
they threatened to shop elsewhere, this comes on top of 11 class action lawsuits that have reportedly already been filed. our next guest says that target mishandled this crisis and it could take years for the company to rebuild its brand and trust with customers. the brand expert with the firm dean crutchfield associates. so dean, what do you think that target needs to do now to repair what it has done wrong? >> well, there are two areas they need to look at. first of all, target is a strong brand in many ways. what would the target brand do in this situation? number one, number two, where they're going to regain trust is with their consumer. and they need to do four things, the first is to have information that is trustworthy. emd that is a big problem, the second thing they need to do is
help the consumer simplify the decision-making process, especially given all the outrage. the third thing they need to do is simplify the customer's learning of what actually happened. it is still a mystery of what happened and what happens next. we don't really understand that. and then the final is to give consumers what they can weigh in on, they need to be able to get on line, go to target and change their pass words. >> and you know, dean, it seems also like we have not heard much from the ceo from target. in other crises, you see the ceo come out front and make a type of apology. how much would that help to make consumers feel better about targe target? >> i think it is too late. he should have been on the horn as soon as this broke out. and he has not been. there are many other examples, whether ceo is straight there, they have all lines of communication. i don't care target has done that.
they say the best position is take a defensive position, here target is just being defensive, not offensive. and what is the key lesson you would say in management crisis of how to handle this situation much better? >> well, i think first of all, look by example, look what happened to t.j.maxx? didn't anyone learn from that? and what is the actual brand position on this, it is obviously really important. but most importantly, the whole effort needs to be put onto the consumer so that they can actually leverage their understanding of what has gone on and target can regain that trust. this is the critical thing, how do you deal with your consumers? how do you provide upright and forthright information to consumers to enable them to make decisions. at the moment they just don't know what to do. >> so let's say the ceo of target did everything you
outlined tonight. what are the chances and how long might it take for the company to regain the trust? >> it could take months, perhaps years, most importantly it takes a strong strategy and leadership, including their agency support. but ultimately it is all about culture and customers. and that is what is key. for instance, are they communicating with their store owners, do they know how to prepare their stock? these are all things that target is failing to do. >> all right, dean, thank you, really appreciate you going on the program. >> thank you. >> dean crutchfield, brand expert with his own firm. well, fargo, the nation's largest mortgage lender is paying a huge settlement to fannie mae, more than half a billion in cash, the agreement, the final one settling claims over the defective home loans which helped to cause the housing crisis. fannie mae is the government entity which guaranteed bank mortgages now has reached
settlements worth half a billion dollars with eight banks. and something else settling down, this year the number of bank failures fell to levels not seen before the financial crisis, on the surface it suggests the nation's banks are healthy again, but on a closer look there are still troubles. >> reporter: only 24 u.s. banks failed in 2013, the most number in six years. according to the fdic. well off the peak of 157 during the financial crisis, 2013's failures represent a small 3/10 of 1% of the country's more than 68 hundred of the fdic insured institutions. a strong economy e and aggressi oversight helped to stem the failu failures. although it is early to say if they recovered from the financial crisis. consider this, the number of banks that are considered troubled are up to 7% of the nation's total. among the challenges all banks
face, the continued low interest rate environment. >> we have normal interest rate, which makes it impossible for banks to do lending. to get a yield on the loan versus the cost of funds. to produce an attractive return. >> this profitability problem especially acute among smaller banks. why? many operate in the regions where the recovery is slow, hurting their business. with the focus on customers, their lending portfolio is less diverse and they may have fewer clients as the banking experts push them to approve loan quality. it may make it harder to make a buck. >> it is a good business if you have got the scale, the first time the size does matter. >> with bigger being better in banking these days, industry experts are expecting a pickup in mergers and acquisitions in small banks, shrinking their
numbers could prove the cure for banks still ailing from the financial crisis. for nightly business report, i'm mary thompson. the obama administration is heralding a last-minute rush on the insurance sign ups on the healthcare.gov website. the white house says a little more than a million people enrolled on time in order to get coverage. but the official numbers are topping 2 million, the health insurance numbers are not available yet. the administration had hoped for nearly 3 million sign-ups by now, and there ares no demographic breakdowns at this point. congress is letting 55 popular and valuable tax breaks expire as the year ends. they include everything from billions for companies doing research and development to tax rebates for puerto rico and the virgin islands from a tax on imported rum. lawmakers let these taxes lapse every year and usually reinstate them when congress returns in
january. and coming up, three stocks that will do well for you as the economy gets stronger, according to our expert, coming up next. shares exploding today on news that blackstone is taking a look at the troubled shoe maker, the maker of the once colorful c clogs will get a $2 million investment from blackstone, giving the company a stake on the board. the news sends shares on a 21% run up to 16 dollars, 14 cents. and cracker barrel standing
up to the activist and rejecting demands to put the company up for sale. the company says they will stick with their business plan, they have a 20% stake in cracker barrel. he wants to oust the management because they claims they are not maximizing shares. and shares of apple in the red after news broke friday night that the company is pushing back against carl icahn. apple's board suggested they vote against the proposal that they buy back 50% of their shares in 2014. the company has already returned $43 billion to shareholders. the stocks fell a fraction to $54.52. and cooper tire and rub ircompany terminated their sales to apollo tires. cooper says they have not been able to find financing for the
deal. apollo will take legal action, saying the action is premature. shares of cooper jumped into the session up more than 5% to $24.20. and hertz announced late today it is adopting a poison pill or a shareholder right's plan. the car holder company took this defensive step saying it has seen quote unusual trading activity in the stock. the move is an effort by hertz of any person or group to gain control through the open market. shares initially spiked in the after hours session, but the stock ended up slightly to $25.91. and shares in genetics taking a big jump. medicare is slashing a big amount for tests, they can predict cancer risks, medicare is paying $2800 for the test,
but starting next year it will take only half. the stock went to $24.82. our market monitor guest tonight predicts the u.s. stock market could be up as much as 10% in the new year. but still, he says quote, a lot could go wrong. he is chairman of his own investment firm. nice to see you, hugh. >> nice to be with you. >> a lot could go wrong, you are making me nervous, what is on the top of your list? >> i think the number one thing is interest rates. if we start to see what the consensus currently expects which is a rise and a-year-old in -- ten-year yield. we may see the signs coming from the financial markets as well as the economy that the current cycle is over. we have to wait until it occurs. interest rates are probably at the top of my list. second on the list has always got to be that something unexpected, an event will come
along that will surprise us and create a real decline in the stock prices. other than that, i think everything looks okay for now. >> in that spirit you think there are a couple of stocks you think that are bull stocks, good in a bull market. let's go down the list. at the top of the list, jci trading on the new york stock exchange has gone from 30 to $50 this year. still a good idea to put fresh money in this? >> the way you ask the question is a good way to ask the questi question, you know, there may be a correction along the way so you might drag your feet, wait a little bit. in the case of johnson controls or any stock that i'm recommending, they are really all in the right sectors, bull market sectors are economically sensitive sectors, the kinds that perform well in a bull market, not the ones that perform well in a bear market. certainly cyclical and johnson control has the elite.
the other thing is their business is getting better, they're starting to do business to raise profit margins, going away from their traditional lines. and they do business in europe as the previous guests said and as i would say, europe looks great for 2014. >> okay, good to hear from you, as well. general electric, everybody knows this name, you have to be pretty patient with this stock but it did have a pretty decent year, why should investors buy it at $20. >> it has the same ingredients, the first, positive performance, it is an economically sensitive sector of the market. industrials, great job at shed ing some of the businesses, low margin businesses, moving into high margin benefits. it is global and will benefit from a recovery in europe. i would also include general electric. >> and you have checkpoint software, tell us the story on
this one. >> positive role of performance, bull market sector, great company in the security business target is focused, on their attention. the business they're in, to create the fire walls and prevent some of the violations that we saw at target. good management, great balance sheet, no debt, it has lots of cash. it can buy back lots of stock. this is a company well positioned for the future. again, right sector and positive performance, all the things you need in a bull market. >> okay, they all sound good, any disclosures to make? >> yes, all of my clients own them, i own all three, i cross my fingers, hope for the best, we could have a bit of a correction, wait a little on the balance. >> all right, that is a good idea. fair enough. >> hugh johnson, chairman of hugh johnson advisers. and coming up on nightly business report. you heard of smart cars, now automakers are teaming up to give car makers a brain boost,
next. ford motor says 2013 has been a great year, so much so the automaker says it is on track to top toyota for the fourth straight year for the title of best selling brand in north america. the final numbers won't be released until friday, but ford says sales rose 15% through november, with the most significant gains coming through the u.s. dominated coastal market, the best sales in six years. and cars are about to get a lot smarter, apple and google moving quickly to get their
technology into the cars of the future. josh lipton tells us how your driving experience could soon be changing. >> next week, at the electronics show, google and audi are expected to make a big announcement, the two are expected to make information systems based on google's android software, the point they say is to give drivers access to music, navigation and services available on google smartphons.s >> in-car technology, like that next front. and mostly the car companies have kind of led the way on their own by developing the technolo technologies. but now, the companies have been delivering the mobile experience to our hands, realize they don't want the connection to be broken when they get on the card. >> streaming apps, on-road navigation are already part of the high-tech experience, but expect more changes in the future. new cars from audi, mercedes,
gm, ford and honda are expected to have more sophisticated screens, and systems controlled by hands h hands-free, voice ac technology. google's rival, apple says they want to bring ios its operating system into the car, as well. the point is to integrate the ios device with your device system. apple already has the support of bmw. and it is not just google and apple that want a piece of the technology future. 4.5 million cars on the road are equipped with its processers. while sophisticated dash ford control panels and voice activated commands will keep improves, experts say it will sometime before your car is rolling down the highway fully equipped with some of this technology. >> what i think will be the limiting factor here is not technology and not even the car
manufacturer's ability to deliver the product quickly. it will be safety concerns. >> still, apple, google, and the chip companies all know they can't afford to miss out on the potential of the really smart car as our vehicles become the mobile devices of the future. josh lipton, silicon valley. and still as 2013 winds down we take a look at some of the most influential people of the year. julia borston has more. >> reporter: in 2013, reed hastings redefined television with exclusive shows streamed over the internet. starting with "house of cards" which debuted in february, and horror thriller, hemlock road,
and comedy drama, "orange is the new black". >> i'm scared i'm not myself. >> reporter: these are the very first shows made exclusively for internet distribution, to compete for critical acclaim and emmys to compete for showtime. >> this is how hbo started. 20 years ago, hbo was other people's movies. we really look at them for inspiration and say what can we do on the internet that is even more than hbo. >> reporter: growing to more than 40 million subscribers, up from 33 million at the end of 2012, sending thedi stocks soaring, well over 300% this year. quite the turnaround afters exe worst debacles, pushing back
investors. >> we want to do great things. and you know, occasionally if you swing from the fences you strike out. >> hastings has also overhauled corporate connections with shareholders, opting out of a call, and having reporters and yours truly ask questions, he even pushed for a regulatory call, after pushing for streaming for facebook followers, the view is social media counts. >> facebook has a public mode that i use that is going to hundreds of thousands of subscribers. it is very much in the interest of the little investor. >> reporter: now with plans to keep investing in original content and overseas expansion, we'll see if hastings continues
to deliver for investors. for nightly business report, i'm julia borston. >> i'm susie gharib, have a great evening, and we'll see you back here tonight. >> nightly business report has been brought to you in part by the street.com, up to the minute stock market news and indepth analysis. our quant rating services provides objective ratings daily on over 300 stocks, learn more at the street.com/nbr.