tv Nightly Business Report PBS July 7, 2014 6:30pm-7:01pm PDT
. this is "nightly business report" with tyler mathieson and susie garin. >> now what with dow 17,000 in the rear view mirror, one long-time market watcher says there is very little that can prevent stocks from going higher. summer stock sale. how and where bargain hunters are finding value now even at these lofty levels. missing the bulls eye, three things retirement savers into ed to know about those popular target funds that most don't. we have all that and more on a monday business report for monday, july 37th. >> good evening, everyone, welcome, thursday came the fireworks. today it was the fizzle that followed last week's sizzle. stocks sold off mildly after the pre4th of july parade the record
high, yes, the dow did stay above 17,000 for a second day and the s&p did remain a day or two's rally from the 2,000 mark, this summer day on wall street was one for reflection and maybe taking chips off the board t. dow lost 34 points to finish at 17,024 t. nasdaq was down 34, its biggest one-day drop in a month and the s&p 500 slid 7 or about .4 of a percent. some consider whether the average is too high and tthe da modest decline can be what bearish market watchers are expecting. they expregs pressed discomfort with current sky high stock, rather. >> these very strong stockmarket prices are in a sense a victim of the weak economy, not a sense we are about to have a strong recovery to our real economy.
>> he pointed to the nation's growing income inequality as another reason for a weak economic recovery. byron weeks sees things differently. he says all the commission around the world are doing well. that's why he is very bullish on stocks right now. he is chairman. it's so nice to have you on the program again, it's been a while sense we talked to you. so, you know, so many people came back to work today with second thoughts ability investing in stocks. but you are very bullish. you also say stocks are very cheap right now. tell us your thinking. >> well, i don't think i said they're cheap. i said they're fairly valued and can go higher. the market is a selling at a reasonable multiple. a little above the long-term median and earnings estimates are $115 of the s&p 500, which is the index i watch. they i think earnings co go to
20 times the multiple can go to 20. >> that would put the market at 2,300. so i think we could reach that sometime this year early next year. >> the first half has been pleasant, not blockbuster. you think the second half will be better? >> i do. the first half wasn't bad. for all, for a negative 23.9% first quarter to have the first half up 37% on the s&p 3500. i think we can do better than that. that would be 15 percent on the year. that would be terrific after 16% year and a 29% year. >> so, byron, i found that your asset allocations very intrigueing. you said that 45%. we will go through this quickly. 45% of long equities in the u.s. and fawn u.s., 30% in alternatives like hedge funds, private equities, things like that. you have some ifled go, some if
agriculture commodities. no treasury, no traditional corporate bonds, which you are in very high yield debt. tell us quickly what you are thinking. >> i think the equity market is reasonably priced and can go higher. i think the band market is overpriced, especially quality bonds and treasuries. so i think yields are probably going to rise there. and that would cause a loss in whatever assets you have in quality fixed income and i think that valuations arise for equities. i think you can make money in equities and lose money in bonds and that's why i have a virtually all equity portfolio. >> you are a fearless predictor, most of the time seven or ache of ten predictions come true. what would cause you now to change your rather rosey view of the stockmarket? >> okay. well, first of all, tyler, you give me more credit than i deserve. there's usually five or six of them that work out. they are surprises, not
predictions. they are events i think that have a probability of happening but they're not a sure thing. i think what would unsettle me is if the geopolitical framework we are operating in really heated up. i think iraq is going to be divided into three parts. i think iran is going to move away from its nuclear development weapons development program. i don't think china is going to go to war in the south china sea. i think putin is going to be patient in ukraine and so, you know, that's a pretty thing when viewed of the four major geopolitical events take place around the world. if i were dead wrong about that and one of them interrupted into a major conflagration, then i'd have to think about my view. >> it's very reassuring to hear those global hot spots, are you not so worried about them. what about them here in the u.s.? a lot of people are skeptical about the u.s. economy, we get
good data, bad data, disappointing data, what is your view on the economy here? >> i this i the economy is doing well. you know, almost every parameterer alook at i listen to the comments, you know, your bank roll is up. you have over $2 twl worth of deals announced. both of those indicate business confidence the purchasing manager indexs are headed higher, consumer confidence is improving, vehicle sales are strong. i think capital expenditures are going to improve. so i think a whole panoply of economic indicators that suggest to me that we're going to be headed towards a 3% growth. i don't think that's what we're going to have. i do agree with joe that the inequality problem is a problem, is serious. i also think that median family income hasn't risen, but i thil think the u.s. economy is going to do much better in the second half hasn't in the first. >> well, fascinating insights.
thank you so much, byron, always a pleasure to have you with us. >> thank you for having me. >> byron dean, with blockstone partners. where can you find value with the market near record highs? here's what we found. >> reporter: hunting for discounts in the stockmarket for many investors comes down to one important measure. price-to-earnings for p.e. ratio. simply put, it tells you how much you pay in stock price for every dollar of earnings that a company jen rates. some sectors are getting more attention and value plays if you look at price-to-earnings ratio. >> first of all, you look at the financial sectors of the market. that's probably got the lowest pricings earnings multiple. quite frankly, if earnings turn out to be as good as analysts are expecting, that's probably the cheapest. >> they are a big part of the s&p 3500. but is p.e. the best way to
value a stock? >> in simple terms, is there a better way if no, the p.ism multiple is the best way. you always have to factor if growth. >> reporter: among the top picks are gulf port energy and bank corps south. so you can't just look at a price-to-earnings ratio and mable i make any kind of a judgment. you have to put that number no context to see if investors are willing to pay higher prices for stocks. >> clearly, if the prospects for the growth rate of earnings for a company are very, very bright, it justifies a high price earnings multiple. when prospects for earnings are not particularly priced the multiple is very low. >> earnings season kicks off this week and corporate profits and growth rates will be a huge focus for investors. >> that could help determine whether the market goes higher from here or takes a bit of a pause. for "nightly business report," i'm domenic chu. some economists are debating whether job growth or economic
growth is a more important number to keep an eye on. steve least liesman explains. >> 1.23 million americans found jobs in 2014 one of the best six month period since the recession ended. what has economists scratching their heads is the economy didn't grow at all. we know shrank in the first quarter. net growth zero. how could so many jobs be created if there was no growth? the severe weather remains a prime suspect. under this theory of the case, even though business was hurt by the heavy snows and cold weather, employers were confident enough in future business to add new staff. another suspect, weak global economy. in the first quarter, a decline in exports was responsible for half of the economy's extraction. some could have been weather-related too. several economists on wall street with the upbeat jobs
number is the more believable witness for the economy. they point to americans buying nearly 17 million cars if june. the most since twoikts. manufacturing and services have been strong and the housing market show clear signs of a bounce back, all evidence in favor of the jobs report. in fact, the strong jobs have some thinking it can hike southeastern than the current consensus, which is next year. the jobs or the growth data could be revised in the future, that might whittle away the gap or the mystery remains unsolved, which won't trouble anyone too much as long as the case is decided in favor of strong job growth and not the shrinking economy. for "nightly business report," i'm steve liesman. goldman sacks has revised within they think interest rates will rise. they expect the feds to make the third fed hike in the third quarter of 2016, fully six months sooner than his earlier
forecast for the first quarter of 2016. the reason for the change? the recent good news in the job market as steve talked about as well as improving inflation or financial conditions. not everyone is a big fan of the federal reserve. now some law makers are looking to reform the central bank, which is celebrating its 1300 year anniversary. the republican run house financial services committee will hold a hearing this thursday on reforming the fed. but did not disclose any specific legislation on the agenda. >> and things may be getting a little tougher for banks. regulators from the swiss banking supervisors are considering new measures to make it harder for lenders to understate the rickness of their assets, including government bonds and may require them to increase the capital on hand by billions more dollars. still ahead, target beat funds, they're very popular, low maintenance and easy to understand. but we'll tell you about some hidden risks that retirement
savers, you need to know. that's next. . there is nothing hindering the sale of recreational marijuana in the state of washington. state regulators issued 24 licenses to retail shops throughout the statement today, allowing them to begin legally selling pot for the first time ever on tuesday morning. from high times in washington state to hard times in new jersey, where an oversaturation of casinos in atlantic city and surrounding states has led to a dire outlook for the resort town. morgan brennan halls more. >> reporter: once the east coast schemeing mecca, atlantic city has fallen on hard times.
>> it's a scene of a lot of changes. i have seen a lot less people come down here. >> reporter: by the end of summer, the seaside city could have 25% fewer casinos than it started the year with. as the showboat gets ready to close next month and the rebel heads to auction, in bankruptcy for the second time in two years. >> five years ago that monopoly ended. we didn't act quick enough to realize we needed to invent ourselves. there 23450edz to be a transition period and having a lot more venue itself and activities to give people reason to come to atlantic city. >> reporter: atlantic city's main source of income, gaming revenue, has tumbled 45% since 2006 as states that once provided atlantic city's gambleers now compete for them. pennsylvania now claims the most casinos in the region and new projects are slated or opening in others like new york and maryland. experts say this is a part of a larger industry trend, casino
saturation. in 1988, only two u.s. states actually allowed gambling. today 39, local governments seek out new sources of ref few. that's created a glut of casinos, especially in traditional gauge communities where impacts have weighed on state coiffeurs. they say casino close years in atlantic city may not be a bad thing. >> it's a legacy market that has too much supply relative to demand. some of the other markets that are newer are still ramping up and there is at least some for sight as to not oversupplying the market. so i think the brunt of the closures will be felt in atlantic city. >> as atlantic city struggles to reinvent itself, some businesses are already thriving. like the borgato hotel casino. revenues here have been increasing this year, despite the overall industry's decline. as more competitors close, casinos like this only stand to gain. for "nightly business report,"
i'm morgan brennan in atlantic city, new jersey. archer daniels midland announces its biggest acquisition ever. the green giant is paying for wire flavors the swiss food investor. they will protect itself from vol time crop prices and to benefit from the consumer appetite for natural foods. the deal needs the okay from regulators. it is expected to close by the end of the year. shares rose 1.35%. expedia is buying an online travel company. it's a largest travel agencies in australia. it will help expedia expand its presence in the asia-pacific region. despite that, though, expedia shares lost more than 1.35% from $80 to $85. shares have a lift after good fuse about a treatment a.
new drug to treat severe pain performed well in late stage trials, taking it one step closer to market approval. so that resulted in another $10 million milestone pavement from endo international which has a licensing agreement for developing that drug. shares popped almost 39% to $13 and change. apple has nabbed the vice president of sales for the luxury watch brand tag hoyer. this comes as many expect the tech company to launch an iwatch, wearable technology device this fall. shares higher by 23% to $95.97 for apple. a train derailment in montana damaged boeing aircraft components, specifically fuselage. beau's production depends on a complex supply chain that delivers many parts just in time for assembly. it hasn't been determined if the incident will impact plane production from falling. shares were up slightly to
$13..309. not that it's good news for united. continental, american, delta, they were down today continuing a sell-off from last week. the transportation security administration announced new security measures that would impact international flights coming into the united states. the new procedures include the requirement that some passengers power on their electronic devices before they board the plane to prove that they aren't exposed to devices. shares of delta were off almost 34.5 cents. american airlines dropped. 40.130 was the close there. you nieltd down 3%. it looks like cloud storage startup of box inc. is waiting for the time for its initial public stock offering. it announced putting off the ipo when investors lost interest. now they have raised $150 million in funding that was to
help from a private equity firm and a hedge fund. they expect to go public, not until after the summer when trading usually picks up. target date funds have become all the rage for retirement savers. they like mutual funds. they make investments that get more conservative as they get closer to the so-called target day of an investor's retirement. still there are risks of having your money in a target date fund. here to talk about it, we talk about target datebook. he's a personal finance director. tim, it's good to have you back. my concern is target date funds are two things. they're very different. some are more conservatively run than others. the other is i think there is an implicit promise in there. when that fund says i am a target 2030 fuvenltd you want to retire, your money will be here. that's not true, is it? >> there is no question that is one of the biggest problems. there certainly is an implicit
promise of sorts that seems to imply that that money will be there and as much money as you hope will be there, when you need it, tyler, we saw this in 2008 when across the board funds of all varieties suffered significant losses, especially in the equity side, even on the fixed income side. that was the first glimpse that we got into how target date funds can fail investors. this is the type of investments that appears to be extremely simplistic but there are complexities to it that are important to understand. >> you said that there are some other risks, three in particular. let's go down the list for our viewer's sake. the first is about the performance and kind of a secure hard-to-know since these are fund-to-funds, exactly how well they perform. talk to us about. sure. a talk date fund picture it as a wrapper around a basket of mutual funds that has a prescribed allocation. so it's really a good deal of complexity that is under the
cover of the target date fund and if you haven't had the opportunity to rip that cover off and see what's inside, you might not know exactly what you are dealing with. some fund families that have target date funds are offered target date fun funds, for example, might be good large cap managers. they might suffer in the large cap the international to fixed income space. you might not know exactly how each slice of that pie is performing. >> what about the fees in these funds, tim, that something i need to be concerned about when i buy fund-to-fund, am i not only paying for the underlying fees the constituents of it or what? >> i'm concerned about it, tyler, especially considering that fees, expenses and costs are one of the few factors we can control in dealing with market dynamics. it is true that many target date fund have above average expense ratios and it makes perfect sense. again, because they're fund-to-funds, there are different layers of expense ratios on top of one another that key factor is very
important. so both of these first two risks that we have discussed can be reduced pretty substantially if you are working with a more passively oriented target date fund setup. for example, vanguard is obviously the most notable monster in the rings here. they do focus on having extremely low expense ratios and a more predictable index space strategy. so both of these risks, these first two we have discussed can be reviewed. >> the third one, you say people should by a ware of is the investment risk. some of these funds are a little more volatile and if you don't have the appetite for that, you might not know about. what are the things to watch for there? >> i think this is the biggest risk of the three. we are talking about individual risk tolerance here a. target date fund presumes the only factor that makes any difference in someone's tolerance for risk is the time horizon. of course, we know there is a lot more than that. tyler alluded to it in the intro. i personally think an investor's
willingness to accept risks is the number one factor not taken into account. it's very possible that target date set in the future might actually create a prescription or a pumped of funds that is either too aggressive or too conservative based on the individual's unique characteristics. >> tim, always great to see you, you relocated from baltimore to south carolina. >> charleston, kout carolina. coming up, box office bust. why fewer people are going to the movies? could it have anything to do with the movies? and what could turn a financial horror show in the right way to hype?
. the world's sending largest economy keeps getting stronger. economic growth picks up in the just completed second quarter to around 7.35% according to china's premier. he also said the economy still faces downward pressure so beijing plans on increasing stimulus measures to boost growth. now to drones the faa is working on new rulings to govern their commercial use. right now, it's technically ill local to use drones for commercial purposes, but the small remote controlled aircraft are being used more frequently now by real estate agents, film-makers, journalists. the faa is looking to ease regulation. >> tyler, you didn't need odrone to see people are lined up outside a theater for the completed 4th of july weekend some what happened around what are people do figure they're not going to the movies? >> reporter: while summer sizzles, the july 4th box office fizzled. down 44% from a year ago weekend. with no megahits on last year os
block busters and the fact the fireworks landed on a friday didn't help. "transformers age of extinction" topped the box office for the second consecutive week. the doctor 36 million growth declined substantially from the prior weekend. >> the movies in the marketplace have to be profounding compelling to get people to move away from their on demand the internet, all the different services that allow people and potential movie-goers to get filmed entertainment on their devices at home and other places. so the bar has been raised incredibly high. >> this summer's box office is down almost 20% compared to last year and total u.s. box office this year is down nearly 4%. hollywood is struggling to get audiences to drive to theaters and pay higher ticket prices with the world cup on tv and limitless content available online and on demand. fact the average adult spends
record time on entertainment other than going to the movies. over five hours watching live tv around three hours listening to the radio according to nielsen. >> i am seeing more moifls on demand, less movies in the theater. >> i have netflix and amazon prime. that pretty much covers everything. >> i spend $75 each time i go to the movies. it's ridiculous. >> there is hope for this weekend's "dawn of the planet of the apes" and marvel's "the galaxy" oversea, hollywood is on fire. >> the international backs office is the savior. no matter what films do in north america. if you look at the bottom line for a film like "edge of tomorrow, request itself the tom cruise movie, it didn't open that big if americaf overseas, it was a massive hit. this is a global marketplace. >> so far, "transformers 34" grossed $35 million more in
china than in the u.s. . >> any good movies lately? >> i saw "the chef" over the weekend. i still like going to movies. it's grit to have you. >> it's nice to be back, two weeks of vacation in italy. it was beautiful. >> it looks like from your tan, too, are you relaxed. at least for now. welcome back. we missed you. >> that's the "nightly business report." >> i'm tyler mathieson back from vacation. have a great evening. see you tomorrow, if i come back. '03
♪ the law ♪ the law for the good ♪ ♪ the law for the ugly ♪ detective inspector poole. i take it you're here for me. very good. what gave us away? unless you're on some weird stag do... vincent carter. this is the prisoner, leon hamilton. he is officially now in your custody. but i've been given orders to escort you to saint-marie. thank you, vincent. mr. hamilton, you understand that, on arrival, we will take you directly to saint-marie jail where you'll serve the remainder of your sentence. carter: pardon.