tv Nightly Business Report PBS January 25, 2012 1:00am-1:30am PST
>> tom: apple's earnings blow past wall street expectations. the tech giant sees record profits on staggering quarterly sales-- 37 million iphones and 15 million ipads. >> susie: in washington, the president heads to capitol hill to deliver his state of the union address. his focus tonight: economic fairness. it's "nightly business report" for tuesday, january 24. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
captioning sponsored by wpbt >> susie: good evening, everyone. explosive earnings from one tech titan tonight, and a whimper from another. apple and yahoo post very different quarterly results after the market close. tom, apple surpassed expectations by a wide margin, and yahoo just came right in line. susie, investor reaction in after-hours trading also played out differently for the two companies. apple skyrocketed, rising roughly $40, or almost 10%, while yahoo was flat. let's begin with those robust numbers from apple.
it earned $13.87 a share in its fiscal first quarter, almost $4 more than estimates. revenues surged 73% to $46 billion. that's about $8 billion more than expected. and that's thanks to very strong sales of ipads and iphones. yahoo's earnings were in line with analyst estimates-- 24 cents a share in its fiscal fourth quarter. revenues came in at $1.7 billion, down from last year and slightly below expectations. >> susie: joining us now for more analysis on these numbers, david garrity, tech analyst at his own firm, gva research. hi, david. what is your take on these huge numbers from apple? >> i think what we saw in the december quarter from apple was obviously a very strong outpouring of sympathy from apple owners from steve jobs passing away, but also very enthusiastic response with respect to the iphone 4s. >> susie: the question now is can apple top that performance? apple is expected to come out with a new version of its ipad and iphone this year. will those still be big growth
drivers? >> it's going to be a big growth driver in terms of apple, the iphone 4s being introduced in china in january 2012. the march quarter will see the benefit of that. obviously, china is the 20% market for apple. >> susie: you have a hold on the stock, and tom reported the stock after hours hit a new record high, $460, up 10%. is it that you feel that there's not much more upside here? what's your take on the stock? >> our thinking is that the december quarter was to some extent baked in the cake, obviously, by what jobs had done at the company during the first half-- first three-quarters of 2011. certainly, the big test for the new management team will be seen more in the second half. we have to see how well their new product, apple tv, does. obviously we're not going to see that until late third quarter, early fourth quarter, 2012. >> susie: investors are waiting for the new apple tv and
consumers. what about dividends? there has been a lot of thoughts about dividends. apple is sitting on a lot of cash. what do you think? is that going to happen this year? >> certainly apple has the ability and resources to do just that. i don't think apple is going to break from practice any time soon. if there is going to be a dividend it's probably not until later in the year in 2012. >> susie: let's talk about can yahoo! it had a flat quarter, the founder has now left. what do you see as the future for yahoo!? is it going to make it? >> i mean, yahoo! is very clouded, and their core business, which they're likely to retain, which is online display advertising, they're losing share steadily. obviously, what's going to be driving value for yahoo! investors is more what are they going to do in terms of their asian assetes, which are expected to be sold, and how large will the special dividend and buyback be be with the
proceeds from that sale. scott thompson has a hard road to hoe, and given he doesn't come from a digital background-- granted he ran paypal ask was more of a technologist-- he's not really a digital marketing person and his benefit, we're not going to see the gains of what he does probably until 2013. >> susie: david, what should investors do with the stock? should they hold on or let it go? >> i think with respect to yahoo!, unless you have conviction that there's going to be a near-term yield, which would probably drive the stock up over 18, you might be inclined to sell it on these negative results. obviously, apple is something that has more of a runway to it, certainly a stronger franchise. of the two we would still be owners of apple over yahoo! >> susie: david, any disclosures? do you own yahoo! or apple. >> don't own yahoo!, do own apple. >> susie: thanks so much for coming on the program. appreciate it. >> good evening. >> susie: we have been
speaking with david garrity of gva research. you can find more apple analysis on our web site, nbc.com. >> tom: republican presidential hopeful mitt romney released his tax returns today, adding fuel to the debate over the fairness and economic impact of the tax code. romney immediately went on the offensive, charging president obama's policies on taxes and the economy would lead to more debt, decline and disappointment. for his part, president obama will argue in tonight's state of the union address the tax system is stacked against middle class americans. and to make his point, mr. obama is bringing along a special guest. darren gersh reports. >> reporter: debbie bosanek is about to become berkshire hathaway's second-most famous employee. the reason? she is the new face of the "buffett rule," which holds a billionaire like warren buffett should not pay a lower tax rate than his secretary, debbie bosanek. to drive the point home, bosanek
will be sitting in a place of honor with the first lady at tonight's state of the union speech. >> the president believes it is not fair, inherently not fair that those who are millionaires and billionaires pay at a lower rate than average americans who are struggling to get by. >> reporter: the issue took on new urgency as mitt romney released his tax returns. showing he earned more than $42 million over the last two years- - almost all of it from investments-- and paid more than $6 million in taxes, for an effective tax rate of 14%. romney did not mention his tax rate or the buffett rule today, but he vowed to lower taxes on the middle class, and attacked the president for using what he called "divisive" language. >> we don't demonize prosperity. we celebrate success. that the difference between our party and the president. >> reporter: many economists say it makes sense to tax the kind of investment income romney reported at a lower tax rate than the wages earned by someone like warren buffett's secretary. >> cutting taxes on capital attracts capital and creates jobs, and so president obama might want to run on something
like the buffett rule. but if he were to enact it, it would be disastrous for the country. >> reporter: but the economy still grew after 1986, when ronald reagan set the top rate on income and capital gains at 28%. the goal then was to reduce the incentive for accountants and tax lawyers to find creative ways to turn higher taxed income into lower-taxed capital gains. economist bill gale says there is also not much evidence that lowering that tax, first by president bush and extended by president obama, has made much of a difference. >> you don't hear anybody arguing that they raised economic growth or increased the rate of expansion over the last decade. instead, all the expansion came in housing. >> reporter: tonight's speech and romney's taxes make it pretty clear tax reform and tax fairness will be central issues in the presidential campaign, tom. >> to the point of fairness, what kind of green do you think in the chamber's tonight of the
president's endorsement of the so-called buffet rule. >> we're in the age of the prebuttal, which means you don't wait to hear the speech pup rebut beforehand, and republicans have dismissed it as class warfare. democrats say it's the right thing to do. it will restore tax fairness. >> tom: what about the payroll tax due to expire at the end of february? this is not something that can wait for a lame duck conference. >> no, it can't opinion upon conferees met again today and even republicans are saying there's some optimism. it looks like that is moving along. of course, congress always gets to the bitter end so we'll see. >> tom: we have excerpts from the speech and i want to pressas the next question with this quote. "an economy built on american manufacturing, american energy, skills for american workers and a renewal of american values." do we anticipate any kinds of new jobs package or stimulus idea in tonight's comments? there may be some things we've already heard about--
infrastructure, thing likes that. but mainly the way to read that is more of a theme attic speech. the president is talking about an economy built to last where everybody gets a fair shot. those are longer term themes he can talk about during the campaign. that's the focus. >> tom: we appreciate the insights tonight from washington, d.c., it is our bureau chief, darren gersh. >> thanks. >> susie: u.s. stocks were in the red today on worries about an impasse in the greek debt talks. investors were also busy digesting a batch of mixed earnings from some big blue chip companies. the dow fell 33 points, while the nasdaq rose slightly, tacking on 2.5 points, and the s&p 500 lost just over a point. but the primary concern for investors continues to be europe. meeting in brussels today, european union finance ministers were pressuring greece and its creditors to support a deal to restructure that country's private sector debt. the move comes as the international monetary fund warned today more preparations
are needed to protect against a greek default. it wants europe to double the size of its bailout funds, so any potential default can be contained. as international markets continue to twist and turn, u.s. investors are wondering if they should keep their money closer to home. suzanne pratt reports. >> reporter: for many americans, dining in a french restaurant is the only foreign exposure they'll ever get. but even if you never travel abroad, investment pros say a big chunk of your stock portfolio should go international. that may be hard advice to swallow, given the recent pictures and headlines coming out of europe. on top of that, the poor performance of international stocks last year left a bad taste with many u.s. investors. the e.a.f.e. index shows foreign markets dropped 12% in 2011, compared to a 2% gain in u.s. stocks. many experts predict the volatility will continue in most global stock markets this year. still, vanguard's joe davis says
stay the course when it comes to investing overseas. >> we keep reminding investors that you want to embrace the world and own the global equity market, despite all of its warts. i think, at any point in time, we're going to have weakness and concerns. currently, they're in europe, but tomorrow may be china. >> reporter: most financial experts say anywhere from 20% to 40% of your stock portfolio should be committed to international equities. and most experts like to see an even split between emerging markets and developed country markets. and despite the unfolding drama in europe, strategist scott wren says it would be unwise to avoid the region entirely. >> i don't think you can expect a lot out of europe, but i still think that you probably need some sort of exposure there. but you certainly don't want to bet the farm on it, and you certainly don't want to be overweight europe. >> reporter: financial planner cary carbanaro says that hasn't stopped her clients from
worrying endlessly about european stocks. >> i've had people say to me, "i don't want to be in anything international." but the problem is that asset classes rotate. they rotate every year in and out of favor, and you never know when that asset class is going to recover. and you don't want to be completely out of the asset class, because you don't know how market time. >> reporter: so no matter how you may feel about going overseas, it's important to remember to put your money where your mouth might be. suzanne pratt, "nightly business report," new york. >> unless some miracle happens and we get some sound economic policies out of washington and europe, i just don't see how we avoid the upcoming train wreck. >> tom: still ahead, find out why this stock market expert thinks the market is headed for a big drop. the major indices tried to dig >> tom: before the big numbers out from apple, the major indices tried to dig themselves out of a hole.
let's get to it tonight with market focus. the major indices tried to dig themselves out of an early hole, ending the day mixed. thanks to the discouraging news out of greece, u.s. stocks were hit from the opening bell. but the market was able to trend up from that deficit, but remained in negative territory for the entire session. leading the market lower was the telecom services sector, down more than 1%. utilities and consumer staples-- each traditionally defensive sectors-- dropped. sprint led the losers in telecom, sliding 3.5%. j.p. morgan cut its forecast for sprint over worries iphone promotions from sprint's competitors led to lower customer growth at sprint. one of those competitors is verizon. shares fell more than 1.5%, down to its lowest prince since last november. fourth quarter results came in a penny shy of expectations.
verizon wireless added more than one million new subscribers, thanks to its iphone business. but selling the iphone comes at a high price for the company to pay apple for the devices. that hurt margins at verizon. verizon was among a handful of dow industrial companies turning in results, including insurance giant travelers. results were a nickel below expectations, hurt by disappointing returns of its investment portfolio and a drop in underwriting income. travelers' 4% decline was the worst among dow stocks. despite the disappointment last quarter, travelers says its pushing through price increases for auto and home insurance. speaking of price hikes, mcdonald's has been successful raising prices over the past year. today, mcdonald's shares fell 2%. they continue to see some profit-taking after hitting an all-time high last week.
earnings were better than anticipated. mcdonald's is one of those companies that has benefited from a weaker dollar as 70 cents of every dollar in sales comes from overseas. the strong apple earnings tonight will bring back the focus to technology after buying today of some storage and software shares. vm ware and emc rallied more than 7% each. both had strong quarterly results. disc drive maker western digital's earnings were more than twice what wall street expected. shares jumped more than 6%. consumers weren't just buying apple products last quarter. luxury goods retailer coach had earnings three cents over estimates, something it credited to more men shopping at coach. shares shot up almost 6%, pushing the stock to a new 52- week high. the company forecasts double digit same-store sales growth. railroad stocks saw some selling, thanks to disappointing results from kansas southern and csx.
shares of those two fell almost 8% and 3% today, respectively. after the close tonight, norfolk southern turned in better than expected profits, but shares were down another 3% from this closing number. and that's tonight's "market focus". >> tom: even though the stock market is close to six-month highs, many investors continue avoiding stocks. last year, while stock exchange traded funds attracted
$39 billion, investors pulled $121 billion out of stock mutual funds. we spoke with charles biderman, c.e.o. at trim tabs, which tracks money going into and out of stocks, and began by asking him about investor confidence. >> the retail investor is scared that individuals have been selling for four years. hedge funds have had net reductions for fours years. there have been only two sources of money for the stock market. the u.s. government has been printing $100 billion a month of new money and some of that is finding its way into stocks, and companies have a huge amount of cash on their balance sheets, so that has created an environment where there's no volume because there are no buyers. >> tom: so what are some of the economic implication, let alone the societal implications of this. >> more money has been made in investing in stocks than creating companies to invest in,
and that can't keep going. the real bubble is the equity market. and unless the u.s. economy starts to grow at a very rapid pace, we see that there's going to be a lot of unemployed, formerly rich portfolio manageres, looking for a new career. >> tom: folks on main street may not be so concerned with that. >> people on main street would probably applaud initially if the market collapsed. however, the wealth of the nation, a good portion of it, was in real estate and now the only portion that's been holding up is the stock market. ben bernanke said the purpose of qe1 and qe2 was to keep asset prices higher so that has created a fall sense of confidence among those with wealth in the stock market. it created, also, a boon in high-end retailers. if that goes away, the sole source of improved economy is going to disappear. >> tom: sounds clearly like you're very pessimistic. >> we're actually neutral now
because at some point in the future i expect qe3 to be announced, another bout of printing new money, which will support equity prices. however, longer term, unless some miracle happens and we get some sound economic policies out of washington and europe-- a miracle happens in europe, i just don't see how we avoid the upcoming train wreck gloom how bad could it be? >> it's not going to be a huge disaster, however, if you're long and in the market, it will be. >> tom: what's the longer term mean, 24 months, 36 months, four years? >> more than a year. >> tom: does the world look worse today than it did three years ago? >> absolutely. medicare, social security, government pensions, government health care benefits, both state, local, and federal, is over $50 trillion. how does $6 trillion in income support all that debt. i have no idea. it's impossible. >> tom: charles thank you.
charles biderman. >> thank you. >> susie: tomorrow, we continue our interviews from the e.t.f. universe conference. we talk about the psychology of gold funds. also tomorrow, december's pending home sales. and the federal reserve wraps up its two-day policy meeting. it's followed by a news conference with chairman ben bernanke. he's expected to deliver the outlook for interest rate changes. as american airlines continues its flight through bankruptcy, parent company a.m.r. today warned of more job cuts among its executive ranks. in a letter to employees, the carrier said the restructuring starts at the top, but it didn't say how many managers will be cut. meanwhile, progressive corp, the auto and home insurer, is hanging out the "help wanted" sign. it plans to hire 1,100 workers across the u.s., boosting its head count by about 1%. >> tom: some crop prices may have hit record highs last year, but so did crop losses. crop insurance pay-outs could
top $10 billion for last year. so far, a record $9.1 billion has been paid out for 2011, covering losses tied to everything from droughts in the plains to midwest flooding and freezing cold weather in the south. crop insurance is subsidized by the agriculture department and serves as a backstop for the nation's farmers.
the countdown is on to the biggest day in the tv business, the super bowl. while the giants and the patriots gear up for a super bowl rematch on february 5, tonight's "beyond the scoreboard" looks at the financial winners and losers for what will be one of the biggest television events of the year. here's rick horrow. >> the biggest winner is nbc and parent company comcast, which sold out of its ad inventory for the game broadcast, averaging a record $3.5 million per 30-second spot. some commercials sold for as much as $4 million. another score is for verizon. this will be the first super bowl to be streamed, available on verizon mobile devices. also happy with the match-up are corporate sponsors, as the game's two quarterbacks are amongst the most prominent product spokesmen in all of sports. tom brady endorses under armour, audi and movado, while eli manning pitches rivals reebok, toyota and citizen watches. unfortunately, not everyone can be a winner.
the organization that manages lucas oil stadium in indianapolis expects to lose money from hosting the super bowl. indianapolis's capital improvement board is budgeting for $7.2 million in revenues against expenses of $8 million. the biggest expense is $4 million for extra police. as for concerns of an east coast tv bias, the game itself is bigger than the teams that play in it. don't be surprised when patriots-giants tops last year's packers-steelers game as the most watched super bowl ever. i'm rick horrow. >> susie: and finally tonight, when todd buchholz thinks of watching the super bowl, china is what comes to mind. he's author of "rush: why you need and love the rat race." >> what does china make for americans? china makes g.i. joes, china makes some gap jeans, and china makes flat-screen tvs so we can watch the super bowl. china makes something else, too. china makes bubbles. no, not bubble gum bubbles, but financial bubbles.
and they are far more dangerous when they pop. china loves to export. and why not, since exports have lifted 200 million chinese out of poverty? but to keep its exports attractive, china stomps on the value of its own currency. what's the outcome? we end up with lower interest rates; they end up buying less from us. we end up buying cheaper gap jeans and g.i. joes; they end up with our money. now, low rates, cheap clothing and cheap toys are good, but when they are artificially low, it messes up our spending priorities. americans end up going on borrowing binges because the money looks free. then, we go on buying binges at the stores because all the stuff coming off the ships from china looks so cheap. i'm all for china making tvs, toys and blue jeans, but we should worry when these trinkets come hitched to bubbles that keep popping in our faces and blowing up our portfolios. i'm todd buchholz. >> susie: that's "nightly business report" for tuesday, january 24. i'm susie gharib. good night, everyone, and good
night to you, too, tom. >> tom: good night, susie. good night, everyone. we'll see you online and back here tomorrow night. "nightly business report" is made possible by: captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org you'll find complete show transcripts and all the market stats on our facebook page at bizrpt. and don't forget to follow us on twitter @bizrpt.