tv Nightly Business Report PBS April 13, 2017 4:59pm-5:29pm PDT
>> announcer: this is "nightly business report" with tyler math stocks slide. more geopolitical concerns erupt, and the dow turns in its second worst week of the year. active versus passive. the debate rages on. and there's new fuel to add to the fire. and how to turn life lessons into success on and off the fields. new england patriots coach bill belichick shares his wisdom. those stories and more on tonight's "nightly business report." good evening, everyone, i'm contessa brewer in for sue herera. >> welcome, everybody, i'm tyler mathisen. it was a short week but a tough one for stocks. second worst week of the year, second weekly slide in a row.
the declines were mild early in the session but steepened midday, as the mother of all bombs, the country's largest non-nuclear explosive, was dropped on a suspected isis tunnel complex in afghanistan. the dow and s&p closed at the lowest levels in two months. the dow index lost 138 points. nasdaq was down 31 points. s&p 500 fell nearly 16. for the week, the dow was down nearly 1%. the nasdaq off by more than 1.2%. and the s&p 500 also fell a little more than 1%. the result put the markets back at levels last seen during the beginning of the president's term. now to today's top corporate story. financials. it's report card time for the world's biggest companies, the big banks kicking off earnings season with their results released before the opening bell. first, jp morgan chase beat on both the top and bottom lines.
earnings coming in at $1.65 a share and revenue at more than $25 billion, up 6% when compared with the same period last year. wells fargo's results were mixed. earnings beat at $1 a share while revenue missed slightly. and earnings came in at $1.35, an increase of 17%. pnc financial also beat on the top and bottom lines, earnings were at $1.96 a share, well above estimates. wilford frost digs deeper into those reports for us. >> reporter: banks earnings initially looked positive across the board, with eps beats for all the big names. there were hidden issues, most notably for wells fargo, whose expenses rose more than expected in part because of distractions from dealing with the sales scandal. ceo tim sloan addressed how the scandal has impacted the
company. >> of course it's having an impact on the performance of the company. i mean, i think that when you step back and you look at how serious the retail sales practices issues were, and the reputational impact on the company, you can only reach that conclusion. >> loan growth was a little soft. wells fargo did not have much investment banking exposure to offset it. both citi and jpmorgan saw strong bond issuance balance it out as well as strong credit numbers. following march's rate hike, all banks were expected to see net interest income improve, although jpmorgan and regional learned pnc were the only ones to meaningfully deliver. for "nightly business report," i'm wilford frost. a new study out today by s&p dow jones indices, shedding new
light on an issue we frequently talk about here on "nightly business report," which investment strategy is more effective -- active or passive management? before today, s&p never released data over a 15-year period on the two strategies. as dominic chu reports, it may make you reconsider how you invest. >> reporter: over the course of the last decade plus index fund averaging has been the best option. 92% of domestic large cap fund managers did not manage to outperform the benchmark s&p 500 index. 95% of domestic mid-cap fund managers failed to beat their benchmark. and 93% of the domestic small cap managers underperformed as well. >> passive is a very valuable way of investing. but it's not the only way of
investing. there are a number of issues around passive indexes, they have particular ways of being built, which create opportunity for active management. they have biases in them that creates opportunity. >> reporter: a strong case can be made for why investors should aspire to be average when it comes to investing. if you have a long time horizon, you'll benefit from owning stocks in the index, and in many cases index funds have very low management fees compared to funds run by stock pickers. but many proponents of active management say smart and insightful research could be poised for a come back in the coming months and years. >> the more change there is going on in the global economy, the domestic economy, changes in regulation, changes in opportunity, creation of new technologies, those are all things which create opportunity for active managers. >> reporter: index investing has been championed by the likes of industry legends like jack fogle of the vanguard group and
billionaire investor warren buffett. but a case can be made for using a bit of both, active and passive fund management. for "nightly business report," i'm dominic chu. >> despite the information today's report provided, we're still left with crucial questions. are there pockets of the market where active management is worth paying for? if so, which ones? joining us now to shed some light on the issue is ben johnson, director of global etf research at morningstar. ben, good to have you with us tonight. i have to get to the big question. based on that report, there any role in investment? why would you ever go with an actively managed fund? >> thank you for having me. it's a terrific question. certainly the odds don't lie. the odds are stacked against active managers. but that's not to say there aren't pockets of the market where active managers have better odds of adding value relative to their benchmark. it's also not to say there are
certain shortcuts that can boost the probability that active managers will be able to pick a winner. >> let's cut to the chase, benefit. you mentioned the opening for me. are there pockets of the market where my odds of beaditing the benchmark, if not underperforming it, better than others? if so, which ones? >> if you look outside u.s. equities, beyond u.s. mid-and large and small caps, the world is flat, it's hotly competitive. you've got some of the best analysts ever. they're so highly skilled that the information that they're using is so advanced, so broadly available, that it's become exceedingly difficult to develop any sort of sustainable edge. if you go outside of u.s. equities into developed international equities, into emerging markets equities, and in particular into the bond space and look at fixed income funds, what we've seen in our
morningstar active/passive barometer is that success rates amongst active managers in those categories are markedly higher than those of their peers who are managing passively. >> is their performance just markedly higher than the ones in the study that showed that 92% failed, 95% failed, 93% failed? you get my point. >> i get your point, tyler, and it's a good point. the majority still fall short over most time periods. your odds of picking a winner are still, if you were to select one at random, worse than a coin flip. you can improve those odds, i should stress, by selecting from amongst the lowest cost managers, the lowest cost funds, in all of those categories. and in all cases, what we've seen is that funds that have the lowest cost relative to their peers have above-average odds of success. >> so, ben, are we going to see because of this report some competitive pressure for the active managers to reduce their
fees, becoming more competitive with their benchmarks? >> i absolutely expect that pressure, which also exists on active managers to reduce their fees, to become more active, quite frankly. what you're seeing in terms of the washout, the mass exodus from certain u.s. equity funds isn't so much people leaving active fund, it's people leaving high priced closet indexers, so prices for index-like are even worse performance. it will force active fees to come down and force active managers to be more truly active. >> ben johnson with morningstar, thanks, ben. >> thank you. coming up, the come back in steel jobs. >> the trump administration has promised a steel revival in the united states. it all starts here. coming up on "nightly business
an update now on united airlines. the lawyer for david dao, the passenger dragged out of the flight on sunday, spoke out for him, listing his injuries, including a broken nose, concussion, two knocked-out teeth and sinus problems that may require reconstructive surgery. dao's lawyer blamed his client's injury on a culture of disrespect at united airlines. so much for the friendly skies. and overly aggressive tactics from the chicago aviation police. when asked if there will be a lawsuit, dao's lawyer said, most likely. following the press conference united issued yet another statement on the matter, saying, quote, we continue to express our sincerest apology to dr. dao. we cannot stress enough that we remain steadfast in our commitment to make this right.
today's shares of united off more than 1%. apple is reportedly developing technology for treating diabetes. that's where we begin tonight's market focus. according to cnbc, the tech giant has quietly assembled a team of biomedical engineers who have been working for years on creating noninvasive sensors to monitor blood sugar levels. the motivation is said to have come from apple's co-founder, steve jobs. shares were off a fraction to 141.05. jcpenney is pushing back the closure date for the 140 stores it plans to shut down. the reason? better than expected foot traffic lately. it said it would postpone its liquidation sale. shares of jcp fell more than 1.5% to $5.91. tesla's elon musk said today
the automaker will unveil a semi truck in september. it called the vehicle, quote, seriously next level. he also said the company will unveil a pickup truck in 18 to 24 months. tesla's shares rose more than 2% to $304. president trump has promised to make americans feel great again. and steel manufacturers are ready. jackie deangelis has the story from mountain iron, minnesota. >> reporter: in northern minnesota, they're blasting. digging. and trucking towards an american infrastructure revival by mining for a key component of steel. >> it all starts here with the iron ore production. >> reporter: larry sutherland is general manager of u.s. steel's mining solutions. >> we produce approximately 25 million net tons annually of
iron ore pellets. >> reporter: it's shipped off to gary, indiana, where it's melted, mixed, and formed into some 300 or more types of steel, which is then trucked off in massive coils to be cut into parts for products from ovens to cars to buildings and bridges. >> it's impressive, the products that we make here that helps support american families. and the things that they use. >> reporter: the steel industry has faced its share of competition from overseas manufacturers. among the challenges, what it says are anticompetitive trade policies and foreign government subsidies, which makes some grades of steel cheaper. but all that could change. >> steel made in this country and pipelines made in this country. >> reporter: president trump has asked for pipelines to be made in the usa. u.s. steel says that's bullish for its business. >> we have all the necessary high cost materials that would
go into making steel. but we've got to have a level playing field to compete. >> reporter: the company and the industry are preparing to make more steel at home. and they're excited about the prospects. according to doug matthews, vice president of mining solutions for u.s. steel. >> we just did an investment here last month, as a matter of fact, we did some upgrades to the equipment and even expanded our capability. >> reporter: industry officials say increased business means more jobs, better morale, and hope for an industry of multigenerational workers that have invested their heart and soul in america. >> make america great again. make steel great again. these are all connecting parts of our tissue here. people are hoping better times are coming. >> reporter: back here is where american-made steel truly starts. with these iron ore pellets, there's no shortage of product. and there's no shortage of hope that president trump's policies will create incentives to not just make pipelines made in america but nearly all other
products and projects that require steel. for "nightly business report," i'm jackie deangelis, mountain iron, minnesota. and back to the broader markets we go. our market monitor says this stage of what he describes as a tired bull market. investors showed focus on companies with strong earnings growth. this is his first time on the program, we promise to be gentle, good to have you with us. >> thank you. >> you're one of these brave active stock pickers, we've been talking about active versus passive and here you are. give us stocks that outperform the media beginning with bce media. >> think of it as the verizon and at&t of canada. solid footprint in the residential market, solid footprint in wireless. and now making great inroads in kind of the small-middle market companies out there, on the commercial side. there's tremendous growth, solid dividend, great balance sheet. if you're looking to be defensive in a marketed that's
likely to go sideways and face a correction over eight years into the bull markets, this is a great core holding. >> you also are looking at a defensive utility investment as well. >> yes. strong balance sheet. early cycle of interest rate hikes, utilities do very, very well. and so they do well from an earnings front. they have the power to raise their dividend if they have a strong balance sheet. ppl is an example of this. again, it's about being defensive in this type of market. you're 8 1/2 years in on economic rote that's going to be circa 2% or so. you have to be more careful as an investor. >> and another one you could call defensive would be abvi pharmaceutical. >> it's a pharmaceutical biotech company, great product line, great research out of the company. lots of attractive things. it's a little bit more growth oriented than the other two stocks that we mentioned. but certainly still within that overall space, somewhat conservative. our approach is very simple. given two companies that are alike and two investment choices
that are alike, we'll go with the more conservative approach each time. >> oliver, there's been so much optimistic about this so-called trump rally. what are the geopolitical realities now doing to that optimism? >> i think it's dampening a little bit. i think president trump is finding out what investors are finding out, that we were bullish about after his election, is these things don't happen overnight. just because you have a breath of fresh air if you want to call it that or somebody in you in the white house, doesn't mean he gets to do what he wants, when he wants, as quickly as he wants it. tax reform may still happen. there's a certainly been a lot of things that have occurred in the last few months that many thought were going to take a lot longer. but it's still a long-drawn-out process. the political reality, the greatest one, is that he's facing a very combative democratic caucus and that's going to slow things down further. >> and a fractious republican caucus as well. thank you, we appreciate it. >> thank you. still ahead, the battle of the brews.
coming up on "nightly business report," why are mega brewers so thirsty to get in? a look at what to watch tomorrow. markets will be closed of course because it's good friday. there is still plenty of good data coming up. consumer price index will be released in the morning, plus a read on business inventories. that's what to watch for good friday. you might argue a successful football coach is more than a little bit like a successful ceo. they have to manage different units, different personalities. and they have to take risks. with more than four decades of coaching experience and five super bowl championships, bill
belichick, head coach of the new england patriots, is widely considered one of the best coaches in football history. quite possibly the best. he learned plenty along the way. in an exclusive and rare interview with suzy welch, he shares his lessons. >> what would you call your most defining moment? >> 1975, i took a job, was given a job with the colts. and i didn't have any experience. and they were very understaffed. i wasn't getting paid anything. but i had a lot of responsibility for that position. and so i was able to learn a lot. it was like having two or three graduate courses in one year. after that year, when i went to detroit, we were one and four. we were playing the patriots. they were four and one. we had a great team. i went back to the experience i had in baltimore. i talked to our offensive coordinator at that time and said, look, i know we haven't used this formation but i
studied it while i was at baltimore last year, i think this is really going to give the patriots a problem, can we take a look at this? so so we went through it and won the game by three touchdowns, a huge upset. that was one of those where i was, okay, i can coach in this league. >> what did you take away from that? >> don't be afraid to use a good idea, if it's unconventional, if nobody has done it, don't be afraid to use it. i took the job with the patriots in 2000. the first meeting we had in the spring, this is back in the old foxborough stadium, a small room, we're squeezing the whole team in there. here comes the first round draft pick from the prior year, he walks into the front, not the back, sits down. i've already started the meeting. i had three, four minutes into it. and i just look at him like, what are you doing? he said, sorry, coach.
sorry? get out of here. we're not going to start this program off with you walking in whenever you feel like walking in, whether you're a number one draft choice or not. we're not going to run a team like this. >> suzy joins us now with more on what bill belichick had to say. how does his view of leadership, focusing on the dependable players rather than the star player, line up with what you know about leadership? >> it's so different from, a, what you're taught, and what managers end up doing in real life. in real life, you're the manager and you count on your stars to hit the ball out of the park to impress your boss. you want your stars to outperform. he says he learned the hard way that's not the way to do it. he will take a dependable, consistent, reliable player over talent any day. it made me wonder in my own management career, did i really count on those stars or did i give enough credit to the people
who have always delivered for me when i needed them? >> my sense of him is that not so much that he is a control freak and he's probably less so than he was when he was a younger guy but that he's a process freak, that there's a certain way that he does it every year, and he replicates that and that's part of the magic. >> you're very close. it's a preparation. his process is preparation for every scenario. so that everybody knows anything they can play, they're going to run this formation, this is all the things that could happen, what will we do. then to have such incredible teamwork built, all sorts of exercises from trivia nights to training with the seals. if they have to adjust on the field instantly, they can do it wordlessly, they can do it seamlessly. they don't have to have somebody tell them how to do it. that preparation plus teamwork, that's their process. >> i've been reading a lot of research recently that indicates that the real key to success is grit, the stick-to-it-iveness,
the ability to overcome obstacles. is he passing that along to his players? tom brady, star quarterback, is he a guy using grit to get where he wants to be? >> grit is exactly what he admires in a player. he actually thinks it's more important than talent, this working on yourself. he says tom brady is not a great natural athlete, he says it very bluntly in the interview, i was taken aback. he had the tenacity to keep working on himself and the self awareness that that working on himself could never stop. and he said, even after all the super bowls, tom brady works every single day on himself. i think it's very encouraging for people who don't have natural talent. >> for all of us. >> i would love to be as unnatural a talent as tom brady. suzy, really fun. you did something i didn't think was possible, made me like bill belichick, as a new yorker. from football to beer, and i
don't know why contessa brewer isn't reading this, but if you've been shopping for beer, the shelves are stocked with brands you never heard of. craft brewers are producing less than 6 million barrels of the foamy stuff a year. that's not stopping the big firms from getting in on the action. landon dowdy has the story from washington, d.c. >> released this double ita. >> reporter: brandon scull is a craft brewer making his name for himself in dc. his plans are growing, from the 15,000 barrels he produces a year. while overall beer sales are dead on flat, last year craft brewers posted 6% volume growth. and big beer is getting in on the action. take ab.
miller coors. what's in it for the craft brewers? >> when a company like ab inbev or coors purchases it, it creates challenges particularly for regional craft brewers who are going head to head in the same channels as those larger brewers. >> reporter: how does the consumer feel when their small, independent, often local and usually cool craft brand cashes in by selling to a macro brewer? >> it would hurt their image a little bit, as a craft brewery that has sold out to a larger brewery. overall, the beer speaks volumes to what they're doing. i think it's still good beer. >> reporter: consolidating by buying up craft brewers is one way big beer companies eliminate competition. scull says the craft companies aren't going head to head. >> it's a little different industry from most. our direct competitor is not necessarily our craft brewery
friends down the street. it's more the big mac rro. it's rising tide lifting all ships. >> reporter: competition for tap and shelf space is fierce. while big brewers have a lot to offer, the question becomes one of priorities. and for now, scull is staying true to his craft. i'm landon dowdy for "nightly business report" in washington. >> you've got to love a good brewer. that's "nightly business report." i'm cont brewer. >> i'm tyler mathisen. i like a good brewer too. see you tomorrow.