tv Nightly Business Report PBS April 11, 2014 6:30pm-7:01pm PDT
this is "nightly business report" with tyler mathisen and susie gharib. bad end to a rough week, the nasdaq closes below the key 4,000 level. and the s&p has its worst weekly drop since january 2012. leaving many investors wondering whether the bull market is still intact. big miss, j.p. morgan the first major bank to report earnings, what hurt the bottom line into the first quarter and will it continue into the second? and the crisis widens, new general motors raising questions about what ceo mary barra may have known about the recalled cars, this is "nightly business report," april 11. good evening everyone, and
welcome to the support group, we invite you to sit down have a shoplifter drink soft drink or maybe something a little stronger, what has happened to the stocks that went up last year, why have the shares that loved you so much in 2013, facebook and amazon, turned cold? i can't promise any definitive answers, a few weeks ago at least we had crimea or china or yellen to point to. but in the past few weeks including this one the worst for the nasdaq and s&p, including this one, maybe it is just momentum in reverse, the stocks went up for seemingly little reason when they rose, now they're fallen just because they can. you are forgiven if you want to avert your eyes, the dow falling, suffering its first weekly loss in four. the nasdaq, which is actually higher shortly after the opening bell fell hard down 54 today,
closing below 4,000, tech-heavy nasdaq now down 6 and a half percent since three weeks, biggest decline, and s&p seeing the biggest drop since june 2012. well, our market is calm, and investors say you shouldn't be scared off, he advises you should buy high stocks, the chief investment strategist with raymond james. we're so happy you're on set to talk with tyler and me on this stuff. you're in new york talking with clients, you tell me they are pretty anxious about everything that is going on. you're so upbeat, what is the disconnect? >> well, it depends on who you talk to, if you talk to the portfolio managers who are playing the netflix and high beta stocks. there is high angst on that. but i spoke at the tiberon conference on tuesday, and i
rode back, and ron baron was in a car with me for an hour and a half trying to get back to mid-town in the rain. he was like warren buffet in '74, a kid in the candy store, a lot of stocks have come down. >> high caliber -- stocks, i feel more like a high caliber weapon. there has been a move from some of the high beta stocks into let's just say some of the bigger blue chip stocks, microsoft had a high year, intel, cisco, is that what you're suggesting, some of those kind of the companies? >> i think some of those are okay, some of those are value trap over the long cycle. but in a low growth environment wall street will pay up for true growth. and some stocks that came down for 40 and 50% that are true stocks i think will come back
in. >> like what? the comeback, 30 or 40% -- >> in the health care group there is a company called dexcom, that makes the best wireless glucose blood monitoring system on the market. now it is trading around 35, 36 right now, they just got approved for their infant product to monitor infant's blood glucose. and let's talk about other stocks, johnson & johnson, what you like, what is the attraction there? >> in a low growth environment, and the gdp will be somewhere between 3 and 4% in the next few years, wall street will pay up. they tend to cluster in technology and health care, both trading one standard below the deviation numbers. a name like johnson & johnson has a decent dividend. you have a triple balance sheet.
they have a nice portfolio. and i think at this time next year you will have a 9% free cash flow on j & j. >> and a quick follow-up. we saw the health care stock, follow-up companies, byiotech being sold off. >> if you're looking at a biotech play, look at brist bristolmeyers, it is a lower conservative way to get into pretty good biotech -- >> you like a couple of mobile phone tower operators or builders, too? >> yes, again, this is the technology thing, they have a 20% roe, whereas there is a ten or 15% return, mobile computing, in the divergence of devices, you can see it every year in
your mobile connection. and if you don't have the tower it doesn't work, so the stocks depend on the mobile computing and the divergence of devices. >> real quick, any mention of the stocks? >> i own dexcom. >> i think you're building into a selling climax, i think it probably happens next week. >> all right, thank you so much, jeff fox, chief investment strategist. and j.p. morgan schas was the first to report first quarter earnings today, and them came wells fargo. profits at jp fell by a fifth, sending shares down 3 and a half percent, making it the biggest decliner in the dow. and shares rose nearly a percent on a very down day in the markets. more on what is behind the earnings results. >> j.p. morgan chase, the biggest u.s. bank by as sets
first entered the gate with earnings, and the model showing some cracks, the bank had two distinct problems, a sharp slowdown in under writing and trading, those issues adding insult to injury in an economy with weak loan growth and less corporate activity than expected. eventually loans will grow and yields will rise, strengthening the financial's foundation. but they say they counted that income too soon. >> we were afraid a lot of the banks were running up on expectations of a great economy and higher rates, now you're seeing rates drop. >> wells fargo, one of j.p. morgan's fierce's rivals, the san francisco based lender relies less on trading than peers. they have double digit earnings growth. a tough feat, wells fargo aims
to grow its mortgage business by lending credit and higher yield on borrowers, the market has fewer options for home buyers without the support or credit. >> a lot are being tougher than required by fha, i don't know when it is going to go away. it is not getting worse, just kind of sitting there and probably holding back a little. >> j.p. morgan's risk aversion has affected other lines of business, as well. the clearing house failed to process the housing in kazakhstan, and guarding -- all of that just in the first quarter. the banks clearly sacrificing growth for its long-term reputation. for "nightly business report," in new york. today we discuss the bank earnings and what we can expect when other big banks report next week, senior banking analyst at
hamilton. good to have you with us, let's start with j.p. morgan and wells fargo, the two banks out today, what did you make of the results, are they buy, sell holds in your book? >> thank you, i do have ratings on wells fargo and j.p. morgan. what we saw today was a little bit of money flow out of j.p. morgan and into wells fargo, simply because wells fargo reported better than consensus estimates and j.p. morgan fell a little bit short. they're both very good banks and are certainly making a lot of money. they're both in great capital positions. i think to some extent the first quarter is viewed as a bit of a symbol of what the run rate of earnings will be for the rest of the year. i think you will see on monday that some of the annual estimates for j.p. morgan will come down as people think more about a run rate for the rest of the year in the 130 to 140
range, whereas at wells fargo, wells reported a dollar five up from a dollar in the first quarter. and i think that estimates will go up for the remainder of the year at wells. >> can i jump ahead because we have city reporting and also bank of america. both of these banks have legal and other issues for different reasons and you're recommending that both of these banks as well, and tell us why. and what are you expecting in their quarterly number? >> my estimate for city is a dollar 15, that excludes the most recent mortgage settlement. my estimate for bank of america is 25 cents, that is a little bit below the consensus, i'm being a little more conservative on bank of america again because of some of the trading issues that we saw at j.p. morgan. again, i think over time the big four banks, city, bank of america, wells fargo and j.p. morgan are slowly but surely going to take market share from smaller banks as they have national scale, a diversity of
businesses and a diversity of risk. i think city at the moment is probably the most attractive stock in the group, simply because it is trading at about a 20% discount to tangible book value. and i think city will over the course of the year be able to resolve the capital plan that the feds had a few weeks ago and will be able to increase both its dividend and purchase activity. >> so fundamentally, you don't think city's problems will be n insurmountable. >> look, i was at a conference this week with a number of players in a variety of financial businesses and the one thing that they all said was that their -- their relationships with their regulators are very tense, almost hostile. so i think it is very clear that
ignition switch crisis at general motors. internal documents revealed an e-mail from the ceo in 2011 that detailed the steering problems in cars that can now be recalled. phil lebeau joining us now, how damaging, phil, are the documents especially for ceo mary barra? on the surface it doesn't seem to be as damaging. but the e-mail indicates there was discussion about the steering issues that were at least e-mailed to mary barra, now whether she saw them, responded, didn't respond, there were no e-mails from her. and here is what the e-mail says, there was a response from one engineer outlining the document in the "the new york times." in the e-mail, he writes, mary, during the initial cobalt case, and that may be separate from the current one, he writes,
during the cobalt case, this situation has been evolving, we'll meet and understand the latest data. now this afternoon, general motors has come out with a response, tweeting a response about what mary barra may have known, general motors says the e-mail dated on october 2011, references a saturn ion steering issue which is completely separate from the ignition-related recall. so that is general motors' response to this. so tyler look, you have to see a lot more documents in terms of what mary may have known. but she has said, and stands by the fact she didn't know about this before january of this year. >> all right, phil, thank you very much, have a great weekend. and more on general motors, they are urging the justice department to intervene, calling on the agency to require gm to establish a victim's fund and
oppose the automaker to deny any responsibility for the damages. shares dropping, ten-month low now, closing now, the ip price of gm of $33 a share. and here is good news for the bankrupt city of detroit. a federal judge approved the latest attempt to pry itself free from long-term financial contracts known as interest rate swaps. they cost the city tens of millions to ubs and bank of america merrill lynch unit. the two banks will now be paid $85 million to terminate the deal which was used to boost municipal pension plans. president obama wasted no time to replace the health and human services secretary kathleen sebelius who took a lot of heat for the botched rollout of the affordable care act. sylvia burrell will be the next secretary of hhs, he touted her as somebody who can handle even
the toughest challenges. just four days before your taxes are due, but the commander and chief and first lady reported a total income of $481,000. they paid $98,000 in total for taxes for an effective tax rate of just over 20%, the obamas donated $59,000 to charity and paid $29,000 to illinois where they still own a home. and earlier this week, we talked about big bug chaos, exposing users to hackers, now the infection has gotten worse jumping from software to gadgets we use to the internet. josh lipton has more on what is at risk and what it means. it started with yahoo!. okay, cupid, and tumbler, now it is threatening tech bellweathers and possibly even our banks. it is called "heartbleed bug,"
an encryption flaw in the website, that means user cards, pa pass words and credit cards are at risk. >> they can compromise the keys which basically give them unlimited access to sensitive communication between banks and other companies and their clients. so i think it is extremely dangerous, vulnerability out there. >> cisco and juniper say their products now are exposed to "heartbleed bug." this is a real concern as they track data across the internet. but the danger doesn't stop in silicon valley, banks are also potentially exposed to the threat. the question for consumer is how safe it is to continue on-line banking right now. smaller banks that don't spend time and money on security are a real worry. >> they may have one i.t. person
who does all their i.t. and security. they rely on third-party processers to provide secure. and that has not worked very well. >> analysts say consumers who use small banks for on-line banking should call the bank and find out if it is vulnerable to "heartbleed bug" and if so how they will address the threat. once they do, consumers should change their pass words, "heartbleed bug" is a security issue but each manager needs to update the threat, alert consumers and work on it. whether the companies can work fast enough is the question. josh lipton, silicon valley. tonight's market focus, the mediterranean-themed restaurant offered 5.8 million of its shares at $15 each. that was at the upward numbers.
the stocks surge at 65% to $24.72. china's largest ecommerce company, ali baba buying navi, shares popped up almost 3% to 20.612. ali baba is not a public company in the u.s. yet but is expected to debut later this year. and the times report that the justice department and the fbi are investigating the multi-level marketing company. herbalife has been accused of operating a pyramid scheme. the operator denies allegations that it is a pyramid scheme, shares fell to 51.48. and sony warning customers to
stop using some of its vio laptops saying it is possible that the battery pack could overheat and catch fire. the japanese electronics maker says it is in the process of creating a program to repair or replace the products. despite that, shares of sony were up more than a percent today in a down day to 801839. and there is a push by the u.s. government to get more people interested in farming and ranching, especially young people. jane wells explains. >> reporter: for a time, 33-year-old daniel fenton left the farm. >> i graduated from stanford in 2002 and most of my friends were going into high tech and things like that. so i spent a couple of years doing that. >> reporter: but he has returned to the 18,000 acres his family has had for five generations in california. his father and grandfather were
afraid he might not. >> yeah, sure. it is always a concern. you -- time runs out and you don't know what is going to happen if somebody doesn't step in as i did with my dad. and he has now done with me. and he will have the same worry in 30 or 40 years, as well. >> reporter: it is a worry not just here. the average age of the american farmer is 58 and rising. >> if you take a look at the numbers of recent ag census, there are tens of thousands under the age of 35. they are trying to attract new blood with training. but it is a hard road to hoe if you don't have land in the family. ryan kerby was a petroleum engineer in houston but he, too, has come home to join the family farm. >> i love what i would do, i would never do anything else
unless i absolutely had to. >> reporter: in atlanta, 35-year-old jake carter uses agriculture to teach a new generation about farming. >> even what we're doing here, teaching small children, most of the time they're pre-k through second grade about farming, you can just see the light come on in their heads, that may be something they want to do one day. >> farmers may be disappearing but farmings are not. this land here could be managed by outsiders who don't live in the community. this could be the farm of the future unless a new generation can figure out how to buy land and can afford to do it. >> why do it? >> you know, the love of the land, it is the right thing to do. it is a wonderful thing to do. >> for "nightly business report," california. and for what is being done the attract the next generation of farmers go to our website at nbr.com. and still ahead, a look at
the high tech lab that is creating the next generation of golf balls. can the company really break through in this billion dollar business. and finally tonight, it is a huge weekend for golf fans, that is because the 78th annual master's golf tournament is under way in augusta, georgia, and with millions tuning in to watch their pros hit the links, we took a look. morgan brennan has more on what makes a golf ball. >> reporter: they call it the oven west. nike's standing arm dedicated solely to golf balls, here, the
engineers work on the golf balls used by pros like tiger woods and rory mcilroy. new designs are shot from golf ball canons, even rolled around for two days to see how they weather the elements. >> this is the place where 40 engineers get together and talk about the next great innovation to make the offers better. so they hatch the idea and test the performance of these ideas and ultimately they bring products like the new resin golf ball to light. >> reporter: this new golf ball has a resin core, weighing less than the traditional rubber. this adds more energy to impact, nike has high hopes for the golf balls and not just for sales. but while nike has dominated the apparel and foot wear, the golf balls have not been easy, they are a $1.2 billion business. the space is crowded.
more than 1300 designs were tested in 2013. from 73 different companies. in fact, each year enough golf balls are produced to circumstancircle the entire earth. >> you want to be seen not just as the nike brand, we want to be seen as a golf equipment company. and it is very difficult, i think in this industry to be seen as a golf equipment manufacturer, per se, unless you have got the full line. >> competitors have been around for decades, and golfers tend to be loyal. not to bridmention bridgestone callaway. nike golf means more to the larger business. >> in 2013, 791 million, tonight's business overall, for them it is not -- you know, they have a $27 billion business. so it is a good business but
doesn't move the needle very much. >> still, the division is growing. albeit slowly, nike golf believes the key to unlocking more market share ultimately lies in innovation, and that comes from the oven. for "nightly business report," i'm morgan brennan. beaverton. thank you for joining us, i'm susie gharib. and i'm tyler mathisen, thank you for joining us, we'll see you on monday, have a great weekend.
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