tv Nightly Business Report PBS October 13, 2015 6:30pm-7:01pm PDT
this is "nightly business report." with tyler mathisen and sue herara. >> one beat, one miss. earnings season is here and late today, two dow components reported results that could impact trading tomorrow. >> it's the economy. where the democratic presidential hopefuls stand on issues important to your money. the smart money. but how much of an advantage to investors have by putting their cash with hedge funds? all that and more tonight on "nightly business report" for tuesday, october 13. >> good evening, everyone. welcome. glad you could join us. ready or not, folks, it is earnings season big-time, the time of the year when companies tell investors how much money they made or didn't. the two dow components that reported today two of the biggest, jpmorgan and intel. we begin with morgan which saw
its quarterly profit jump more than 20%. that's the good news. but the biggest bank in the u.s. by as sets missed wall street's earnings estimates. by comparatively five cents. reporting profits of $1.32 a share. revenues 6% lower than a year ago at $23.5 billion hit by volatile markets and continued low interest rates. they missed estimates, too. shares were initially lower after the report as you see right there on that graphic. we take a look now at some of the big issues the country's biggest banks are facing this quart. >> reporter: jpmorgan the first of the financials to report and with a miss to beat not a way to kick off a busy week of earnings. bank of america, citigroup, wells fargo and goldman sachs out with their earnings in the coming days. all banks are likely to feel the effects of the macro headwinds we saw in the third quarter and those that affected jpmorgan, as well. first low rates, likely to
squeeze margins even if they cause a short term uptick in loans like mortgages. then there's low oil prices meaning there could be more money reserved for potential energy loan losses. jn morgan saw credit costs in its investment bank go up $232 million largely reserving for oil and gas loans. and then there's volatile markets meaning lower trading revenues overall. morgan's fixed income trading revenues fell 11%. because wells fargo has the least exposure to trading, it's the only bank that wall street analysts expect to see overall revenues rise. to combat that revenue weakness, cost cuts will be front and center. jpmorgan has cut 5,000 people from its headcount this year. it's cut real estate, it's even cut employees' voice mail lines. bank of america has been in a year's long process of getting rid of bad loans and the workers that have been servicing them. the question now is where organic growth will come from
with the economy growing only moderately. the big boone to be banks was supposed to be that elusive rise in interest rates but yet again, the banks will have to show investors their big supermarket business models are working even without it. for "nightly business report," i'm kayla to you she. >> now to intel which beat expectations despite a 6% fall in quarterly profits dragged down by weak demand for personal computer chips. the world's largest chipmaker earned 64 cents per share. 5 cents better than estimates. revenue decreased slightly. and that weak demand for pc chips was offset by sales growth of 8% at intel's data center business. that segment has been growing faster than revenue overall for the chipmaker, a trend many expect will continue. and as josh lipton explains, it's now the key metric that wall street uses when evaluating
this company. >> the pc industry was always intel's bread and butter. but now the company sees that changing. in fact, ceo brian krzanich says he's not expecting that much from that part of his business. he has said his strategy is to try and hold sales in that business as flat as possible. so instead, investors and financial analysts are now more focused on the company's other big business, chips for data centers. >> we're very focused on the data center market because of the profitability that it can drive which is able to offset the declines that we're seeing in pc. so we look at the data center business as being the real engine of profit growth for intel. >> chips in data centers handle the work loads for mobile apps. in other words, when users open a facebook app, it's likely that intel is providing the processing power displaying all those pictures and videos. intel is doubling down on this technology.
the company announced a deal to buy ultimate tara for $17 billion which could provide the company with moral specialized chips for data centers. that data center the business now accounts for some 30% of intel's revenue and freedman argues that the business should keep growing strongly though he also acknowledges the risks such as competition from rivals like arm holdings. as for the pc industry, it remains under real pressure as consumers make the switch to mobile devices such as smart phones and tablet. os. there's some hope the pc market could get a much need boost from the from windows 10, most's new operating system as well as the new sky lake chip which triples the battery life of a pc. for now, times are tough in the pc industry. research firm idc says that pc shipments in the third quarter fell 11%. investors though are well aware of those headwinds. the challenges plaguing pcs have
been going on for some time. intel is a 55 [$]millionpowerhouse so the big friends in computers and data centers will take quarts, even years to play out. the debate between the bulls and bears the tra zwrekt tryst c market and momentum in that increasingly critical data center business. i'm josh lipton in san francisco for "nightly business report." >> johnson & johnson's results were hit by the stronger dollar. they beat earnings expectations but missed revenue forecasts because the of currency headwinds and plunging sales of its leptitis medicine, hepatitis c that is. johnson and johnson announced it will buy back up to $10 billion in stock and on the conference call, the chief financial officer said the company was looking at potential acquisition. shares fell fractionally today. >> and hauser busch has agreed to bide miller making this the biggest beer deal ever with a price tag of more than $100
billion. yesterday we told you ab inbev sweetened its offer for the company and overnight that bid was accepted. the combined company will own nine of the world's top 20 beers. but now that deal must be approved by regulators. on wall street, the dow jones industrial average snapped its seven-day win streak because of a slight decline in oil prices and weakness out of china overnight. the blue chip dow index off 49 to the 17,081. nasdaq dropped 42 and s&p 500 lost 13. oil prices closed lower after the international energy agency raised supply concerns by saying a lot of crude remain on the market. a prominent federal reserve official said he does not think a rate hike should come this year. in an interviewable with steve liesman, daniel turillo said the economy may not be strong enough to handle it. >> right now, my expectation is given where i think the economy would go. i wouldn't expect it would be
appropriate to raise rates. but i would haston to add that that is an outlook that changes based on developments in the economy and our being forward looking about it. i do think there's been too much focus on a particular meetingen a particular date and not enough on the overall conditions can of the economy. >> mr. turillo acknowledged that the economy has made progress but that there's a lot of -- not a lot of momentum. >> tonight the democratic presidential candidates will get their chance to tell the american public where they stand on important economic issues during the first democratic debate tonight in las vegas. john harwood is there. john what, does hillary clinton need to do tonight and what might she say about the economy? >> reporter: tyler, we know that the clinton brand in democratic politics is strong. a lot of democrats have gotten nervous about the state of her campaign, the struggles with the e-mail, questions about her trustworthiness. so the burd on hillary clinton tonight is not to go after any
opponent, not even necessarily to go after republicans but to look commanding, to look fluid, to look even tempered on the stage, not testy. lay out her plans for helping everyday day americans as she calls them. if she can do that, she's in good shape in this race. >> what about bernie sanders? is he expected to attack her positions? >> reporter: he says he won't. bernie sanders has been disciplined about not going after hillary clinton, relying on the contrast that is always out there. he says he is a political revolutionary. he wants a revolution. he's a democratic socialist, not a traditional democrat. he's going to offer the straightup solutions that he's been advocating, count on that, but he does need to try to show people, since he's done unexpectedly well so far, that he could be a potential president. so a little changing in bearing perhaps from bernie sanderses. >> what about the other three candidates on the stage? start by telling us who they are
and where is the latest thinking on joe biden? >> reporter: that totally your question, tyler, shows the predicament for martin o'malley, jim webb, lincoln chafee. they're all pretty much nowhere in the race. o'malley is the closest thing to a conventional candidate. he had a solid run as governor of maryland. hasn't made an impact financially or in the polls so far. chafee and jim webb are both former republicans. lincoln as governor and senator from rhode island, webb as the senator from virginia. they're both to the left of hillary clinton on foreign policy. they oppose the intervention in iraq. they're going to try to make an impression on people but don't seem to have too much potential for winning the nomination. biden would be a serious challenge to hillary clinton. i still think in the end that biden who has not declared so far, yog expect him to enter this race. >> john harwood in las vegas. and now to russia where
president vladimir put sin said the committee is stabilizing. the russian economy has been wrestling with the sharp fall in oil prices, of course, that's mayor that inexport. jeff cutmore was at putin's speech in moscow. >> the message from president putin, the west doesn't have a clear idea of exactly what is going on inside syria. i asked mr. putin to be respond to president obama's remarks over the weekend saying, mr. putin lacks leadership. >> mr. president, over the weekend, u.s. president obama called into question your leadership over syria. he said that you are propping up an ally rather than going after isis. he also said you're running down the economy here. can i ask you, how do you respond to president obama's comments? and what would you say to international investors who are
dissuaded from putting money into the russian economy because of such remarks? thank you. >> translator: as we said, you've mixed apples and oranges together. at the military level, we asked them to give us the information regarding the target. they believe are 100% belonging to terrorists and what we received as an answer was that they won't do that. then the second question was asked, please tell us which targets should not be attacked by us. no answer received. what should we do then? >> this latest row with washington over syria comes as the russian economy is still grapplinging with sanctions as a result of the campaign. ukraine. i spoke to mr. sillian nof, the finance minister and asked him whether he thought the russian economy was now turning a corner. >> translator: we experienced a slowdown in growth this year. we estimate it to be minus 3.8%
in 2015, but the third quarter and the end of the year are proof that we are turning the corner. in many 2016, we expect positive growth of around 0.7%. the economy has starteded to adapt to the new economic conditions. >> that view on the economy was also shared bid president putin who feels that the bottom may now be in here in russia. this is jeff cutmore, the "nightly business report" in moscow. still ahead, just how smart is the so-called smart money? we'll talk about that coming up.
volkswagen plans to cut its annual investment by more than $1 billion following the emissions scandal. it will step up cost cutting as its vw division which is its largest by revenue and change the diesel engine technology as part of the company's strategic overhaul. car sales? china climbed for the first time in six months in september prompting china's main auto association to reiterate its earlier forecast of 3% growth, an about face from last month when if warned slowing economic growth meant sales could decline and during an interview from fortune's most powerful women's summit, mary barra talked about that key market for the auto market. >> china we've had record years of growth and driving growth for the globe, but now, we still think there will be significant growth over the next 10 to 15 years, about 10 million units
when you put that on top of already large market of 24, 24.5 units, china volume, it's very important that we have the right product portfolio, but we also have a business that can respond quickly from you know, taking the ups and downs and still driving the right margining. > shares of gm rose slightly today. csx posts late results that beat estimates where we begin the market focus. the company said profit fell slightly on slumping coal volumes and warned coal headwinds continue into 2016. still did beat the forecasts while revenue came in just shy of the consensus. shares popped in initial after-hours trading. during the regular session, it was more more than 2% at 27.71. twitter says it will lay off up to 8% of its workforce, part of restructure touring plan than jack dorsey says will put the company on a stronger path for growth. the stock rose 1% to 29.05.
and pepsico and coca-cola reportedly in talks to buy a stake in the greek yogurt company chobani. according to reuters, the potential deals could value the firm as high as $3 billion. pepsico fell 1% to 97.92. coca-cola off a fraction, it finished at 41.65. fmc corporation saw shares fall after lowering its outlook and announcing layoffs. the chemical manufacturing company cited the devaluation of the brazilian real. shares tumbled to 36.35. sandisk saw shares pop right after the close on reports that that company is exploring a sale. according to bloomberg, can the computer memory firm is working with a banker on a possible deal and both micron and western digital expressed interest. shares rose initially after the close during the regular session, the stock off nearly 2% to 61.77. fortress investment group plans to wind down dits flagship
hedge fund returning capital to investors by the end of the year. the move comes after a challenging two-year stritch which resulted in losses and redemptions. michael know vo grats will leave at the end of the year. shares on that news moving higher by 7.5%. >> fortress is the latest example of hedge fund pain. according to data from hedge fund research and morning star, since 2009, hedge funds up an annualized 7% while actively managed u.s. stock funds up 14% prompting us to ask the question, are hedge funds worth the high fees they charge. here to discuss this and more is greg zuckerman. he writes for the "wall street journal" and also a noted author of several books. good to see you. >> great to be here. >> let's start first of all with that fundamental question. given the fact that hedge funds vin underperformed for the last few years, can they really justify the types of fees they're charging? >> it's much harder than ever.
you know, for a long time, sue the average investor started himself or herself, i wish i could be in a hedge fund. over the past decade, they've underperformed. it's not just stocks. they've underperformed i like to look at it a 60/406r7b fund like vanguard and under performed that, as well. >> i think a lot of us are prone to what i call financial envy. his money manager is better than mine. his house went up in value more than mine did. you seem to be saying the so-called smart money ain't all that smart after all. >> it's ironic, a lot of big pension funds, institutions they all piled into hedge funds in 2009. and in subsequent years. and that was exactly the wrong time to be in hedge funds. you want to be in them when the stock market is expensive. that was the time to get out of hedge funds and into the stocks. now you could argue that stocks are a little more expensive. it's not a bad idea to have alternatives as they call them,
hedge funds, private equity, but yet smart money has looked pretty dumb the last few years. >> how much of that has to do with the fact in some cases not all do this, but in some cases they take outside positions either in a deal or in a commodity, for instance, you know, if you were on the wrong side of oil for the last year, it's been very painful. they tend to place larger bets and therefore, when they win, they win really big but when they lose, they lose really big. >> i'm going to make a counterintuitive argument. i would argue that hedge funds don't take enough risks today, they're very much like mutual funds. they manage so much money their goal is not to blow up. they charge so much so as a result, they're not taking these big positions. of course, there are some, we write about them. the average hedge fund is more boring than ever and doesn't do a great job of investing like it used to. have you outliers of course, but the average guy is much more boring and isn't performing quite as well. >> boring, expensive and they
underperform. that's a real strong sales pitch, greg. i thought hedge funds the appeal of them was that because of their flexibility and because of the genius of the managers, they were supposed to be able to make money by hedging and other things. no matter the market condition. >> yeah, that is the goal. and let's be clear. these are the best and the brightest of wall street because they charge the most. they can recruit. they can lure the best and the brightest. these are the smartest individual traders, investors, portfolio managers, et cetera. but it's hard to beat the market. it's a relatively efficient market. you have inefficiencies. there are some that do a great job. i can name a few. the but the average fund has had problems for several years. their clients are institutions, pension funds. if they get them 7,% with low volatility, they're pretty happy. they haven't been able to do that the last few years. >> if you're the average investor in an actively managed
mutual fund and doing okay, it sounds like stick to your knitting and that's the way to go. >> or explore sort of a cheap index type fund like a vanguard 60/40. i don't want to do an advertisement for them. cheaper the funds, the better the long-term performance. >> greg zuckerman with the "wall street journal." coming up, the big challenges and opportunities for the internet industry as seen through the eyes of those trying to shape it. here's what to watch for tomorrow. the producer price index is out, an important read on inflation.
retail sales numbers are also out with a look at how consumers are faring. and the fed relations its beige book, the report of economic conditions that the central bank uses at its policy meet packages. and that is what to watch for wednesday. some of the nation's biggest internet companies are meeting today to discuss policy issues and new regulations that could shape the future of the industry. julia boorstein was at the gathering of the internal association in men low park, california. >> reporter: google, amazon, facebook, twitter, they're among the 36 internet giants represented by the internet association. gathering here in menlo park to talk about their biggest challenges and how to tackle them, like the eu's ruling on safe harbor raising questions about the new lack of protection for small and medium sized companies sending data. >> the biggest issue in terms of global scale is the possible threat of fragmentation on the internet. i think it's extremely important the u.s. you know do such things
as judicial act. and other things to say look, for example, europeans have key privacy and other kinds of protections under u.s. law. just like u.s. citizens. i think that's important in order to have a global internet. >> reporter: i'm very helpful a new mechanism will be put in place to allow the federal trade commission to engage in strong enforcement so everyone can sealing which companies are claiming to an beside by it and which ones are not in it. those are goals we need to achieve. >> reporter: another big topic is the sharing economy and how workers should be categorized as employees or contractors. that regulatory uncertainty raising big questions for many of the startups here and invests are in the sector. >> the thing that regulators and policymakers is need to recognize, there's incredible flexibility. it's nothing new with uber or lyft. this is going on for a long time when you had the yellow pages and you could call the dprimpz
people want to work for themselves and that's what they're doing. >> he says he's focused on making sure that regulate serious understand the value that the companies he can represents are creating. that companies like uber and airbnb are creating jobs not just here in the u.s. but all over the world. i'm julia boorstin in men low park. >> just today, three media titans discussed the future of the industry one undergoing tremendous change at a very fast pace. in an interview on cnbc, cbs ceo les moonves and barry diller shared their vision of the future. >> at the end of the day, it is still about the content, the content is still the thing. obviously, there's been great changes in how people receive their content, how this watch their content. there's going to be a box in a room. it's going to be a large box. it's going to be very efficient. you can receive your content in
a variety of different ways. but essentially, content's not going to look that different than it looked 20 years ago. the words we use now, broadcast, cable programming, over the top, they'll all be gone. because now, where everything is going to be distributed without question through essentially a data pipe, not a broadcast pipe, not a cable pipe, but a data pipe. so over time, are these definitions will no longer be in use. i don't think there will be anything called broadcast television or cable television. they'll be brands if people are good enough to have as much differentiation as they can conceive or they'll be programs. >> we need to focus on how is our content shown. if you go to netflix, there's no brands or commercials. that may be a good thing. is that asus attainable business model for content. >> despite all the changes, les moonves says he thinks this is the golden age of television in
the sense that there are great shows available to watch. and finally, one more look at the day on wall street. the dow dropped 49 points to 17,081. nasdaq down 42, and the s&p 500 was off 13. and that is "nightly business report" for tonight. i'm sue herara. thanks for joining us. >> thanks from me, as well. i'm tyler mathison. have a great evening everybody. and we will see you ba can here tomorrow night.
you know, it's the ambition. you have a great team of people. it's just enthralling. ♪ >> people who tour these galleries often say, wow, i had no idea. many think computing is about scientists, engineers and math me ti ma -- in the 1980s, computing became personal. it moved from the kit builder's garage to hundreds of millions of desk tops. much of the fuel was software, created by a small start-up called