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tv   Nightly Business Report  PBS  January 2, 2014 7:00pm-7:31pm PST

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. this is "nightly business report" with tyler mathisen and susie gharib brought to you in part by. >> thestreet.com. up to the minute stock market news and in depth analysis. our raunt ratings service provides objective independent ratings daily on over 4300 stocks. learn more at the street.com/nbr. weak start, stocks begin the new year with a thud. the dow logging the worst day in nearly two months. many professionals are betting on another big year for the market. which sectors are worth your money now? >> virtue or vice, 'tis the season to make resolutions, good for your health. >> high alert, a warning from the government. crude may be more flammable than conventional oil, and as more
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gets shipped via rail, will the focus return to building out pipelines? all that and more tonight on "nightly business report" for thursday, january 2nd. good evening and happy new year everyone. well, a winter storm whipped through the northeast on this first business day of 2014 and on wall street stocks turned icy cold coming off a banner year. some say investors were booking profits after the runup and others are blaming a downgrade of apple for weakness in the tech sector that affected a range of other companies whatever the reasons, all ten ended lower and the first time in five years the first trading session of the new year ended to the downside. here is how the major averages closed. the dow tumbled 135 points, the s&p lost 16 points but gold rallied today after tumbling 28%
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in 2013, the worst annual decline in more than three decades. prices of the precious metal rose $23 an ounce today. crude prices fell ending at a five-week low at $95.44. today may have been an ice patch. the 29% gain for example was 12% greater than the europe 600 index return and stocks that generated 90% of the sales here in the united states, the average gain was a whopping 33%. so will that trend continue in 2014, or should you broaden out globally? seema mody takes a look. >> reporter: they say home is where the heart is, but in 2013, home is where the money was. 1/3rd of all companies that made 90% or more sales in the u.s. beat the s&p 500 thanks to an
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improving economy and stronger dollar but this year investors may be wise to expand horizons. strategist advice to buy multi-nationals in 2014 because better economic data is likely to come outside the u.s. in the coming year. john says if you're going to take a global approach in investing in 2014, stick with consumer discretionary stocks. >> because we're beginning see around the world a development of culture that mimics the u.s. consumer, and just as the consumer led the u.s. markets back, we would expect that will happen both in europe, as well as in asia. >> reporter: which consumer focus companies look attractive? he says nike, mattel, harley davidson and tiffany are some stocks to consider, but be
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forewarned, several experts caution any type of distress like political dysfunction or security concerns overseas could send investors right back home. for "nightly business report", i'm seema mody. our first market guest for 2014 says there are lots of reasons for investors to be optimistic for stocks this year. chief investment strategist for charles swab and company. move away from u.s. centric stocks and embrace a global market strategy. do you agree with that? >> well, if the call is to eliminate u.s. stocks in favor of all international stocks, i would say no. i think investors should be diversified where correlations are coming down and diversification matters again. i think the developed markets will out perform the emerging markets, but i think there will be bigger diversing. i still think the u.s. market
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will do well. the spread, though, may be a bit different than it's been in the past year, so. >> how worried, liz ann, should americans be about the fed tapering? >> i don't think terribly worried. the market gave permission for the fed to taper, and when you listen to investors weigh in on fed tapering or lack thereof, when you talk to business leaders, it had gotten to the point where if anything it was holding back confidence and business. i think a lot of folks felt it was time to rip the band-aid off. they suggest the market is ready for this, we moved into the expansion face of the economy and it's time to move toward more normal monetary policy. >> liz ann, tell us about the themes and strategies you're advising clients of swab -- >> well, one of the reasons why i'm optimistic about the u.s. economy is i think there is a transition happening over the
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past few years in favor of manufacturing in the u.s., we have improved global competitiveness for manufacturers. one of the tag lines are middle americans favor emerging markets. we see them coming back particularly in china. the wage gap is narrowing and nice to think of the economy as being productive again, export or getted again. the last two expansions were more about paper wealth than anything else. i think that feeds into the industrial part of the economy and consumer part of the economy and boosts middle incomes. all of which i think are good long-term stories for the u.s. it's not something that solves all of our problems immediately. it's a slow-turning ship but a very optimistic story for the next five to ten years. >> take me very quickly through three other markets, one, europe, two, china, three, japan. >> we're positive on all three.
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in the case of china, that's a turn in the last few months for us, because we had a fairly negative view in china up until the recent period where we forms were. not because they will have an immediate effect on the chinese economy but the inflection point that turns psychology and gets investors to realize they are very true about their desires to move the economy away from credit led growth. we are still believers in the turn that's happen income japan, the desire to weaken the currency and the positive impact on the market, and europe we think hit an infliction point in 2013 where manage manufacturing started to turn and that's all you need for equity markets is to hit the inflection point because markets look ahead. >> confusing times. great to have you on the program. liz ann saunders, chief investment strategist. it's a new year we make resolutions to lose weight, eat
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better and exercise more often. why am i reading this? do shares usually rise along with those hopes in january? dominic chu takes a look. >> reporter: 'tis the season for new years resolutions. so, can the idea of new year's resolutions turn into new year's investing ideas? over the past few years a few themes stod out. first physical fitness, eat better, exercise more. on the diet front, there is weight watchers international. during the last three januarys, shares of the company posted healthy gains but they seem to fizzle out by the end of each full year along with those diets. it's a different story for the gym rats. talent sports international that owns new york, boston and washington sports clubs, among others, post healthy gains in january and gain more steam as the year progressed. second, getting your finances and investments in order. take a look at shares of morgan
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stanley. it posted strange gains over the last three januarys but that's about it. shares were relatively flat for the rest of the year. different story for personal finance software company that posted more modest gains for the month but got stronger to finish out each year and third, for education stocks like devry, it's mixed. some understand the thinking behind consumer hands to make investing decisions but caution against relying on them solely. >> forget the fact we doubt those making the resolution, but what would it do for the earnings potential throughout the remainder of the year and for the stock to deappreciate. it's not going to be in the analysis and strategy. >> the bottom line is, take a moment before buying the stock because the company plays a role in your new years resolution.
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now to the flip side of the resolution-related companies to so-called sin stocks, companies behind things like cigarettes, booze and fatty fast foots. how these stocks performed at the start of the new year. >> reporter: they are certainly not good for your health but may be good for your investment portfolio, these publicly traded companies that specialize in tobacco, alcohol, gambling and fast food. the negative stick has attached caused traditional investors to steer clear but those willing have reaped sinful returns over the past decade and when the economy is bad, they have done even better. >> take a mutual fund with holds like mgm resorts. the fund returned more than the s&p 500 in 201 and in the last five years, beat it by ten
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percent. here is where the stocks get more interesting. with the exception of gambling, they typically suffer a post-holiday hang over perhaps due to the new years resolutions. nearly all of the major multi billion-dollar companies of tobacco, alcohol and fast food industries have under performed the s&p 500 over the past three years in january. but it doesn't seem to last. investors relapse eventually pushing the same stocks to out perform the s&p during the rest of the year. the only vice that seems to be immune to new years resolutions, gambling as operators have been out performing regardless of the season. so while it may feel better to choose the responsible stocks or stick to the ones that don't celebrate bad habits, it may pay to invest in vices because the january hang over doesn't always last. so what are some of the investment themes that hedge fund managers are favoring in the new year? cape kelly will join us in a few
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minutes with their strategies. today was a huge day for fiat. shares soared more than 16% on kpt change after announcing plans to buy up all the remaining shares of chrysler that fiat didn't own. the 4.35 billion-dollar deal is due to close late they are month making it the seventh largest auto maker. phil lebeau has more on what this deal means for chrysler, fiat and investors. welcome and happy new year. will this change the face of chrysler in any measurable way or fiat here in the u.s.? >> no, not in a measurable way. look, what we see from chrysler day in, day out here in the u.s. is not going to change. this does give chrysler and fiat more sinner gee. this gives fiat the bankroll, the cash flow it needs to restructure the european operations, and that's really crucial here. >> phil, over the years, it
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looks like chrysler is like a cat with nine lives, so many different configure rations and you sort of answered this, but i want to get more how critical is this arrangement for fiat to own all of chrysler? >> very critical. it has access to cash on hand at chrysler and using some of that to pay the 41.5% steak. it can invest in the two lines where it really wants to expand. first of all, chrysler and other overseas market, primarily a regional out toe maker and two, the luxury lines for fiat and talking about mazaraddi. they think they can have great growth. that's what they are looking to do over the next year or two. >> alfred was here a few years ago, hasn't been a major player in, you tell me, decades, will
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we see e more of them in the u.s.? >> not since 1995 but the first to go on sale will be the 4 c and an expansion. why is this important? keep in mind, tyler, the u.s. is still the number one market in the world when it comes to luxury auto sales. sergio is saying i want a piece of that, that's where the profits are and that's why they want it to expand and bring alfa to the u.s. still ahead on the program, could a number of rail accidents involving balk and crude impact the price of oil? that answer coming up.
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senate democrats are looking to fast track legislation to extend jobless benefits to the more than million americans that saw benefits expire five days ago. jean the assistant to the president for economic policy says ending the benefits right now is bad for the economy. >> we as a country have never cut off emergency unemployment benefits when long-term unemployment was this high. to simply allow 1.3 million workers and families to lose benefits between christmas and new years doesn't reflect economic common sense or our values. over the course of the year, it will be 4.9 million people who will be affected. >> senate majority leader harry reid is looking to put a bill up for a vote as soon as this monday. transporting crude via rail
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and not by pipeline has been gaining traction recently but now several rail accidents involving oil being moved from the rocken region of north dakota have thrown that into question. rail transport for crude supply, a big theme in 2014 as estimates indicate rail capacity could grow enough to handle 750,000 barrels of crude a day. monday's train derailment and explosion in north dakota. the third such accident have many on high alert. why unrefined crude supplies are exploding, which is typically more of a threat after crude is refined. today a government agency issuing an alert the type of crude being transported from the balken region may be more flammable than traditional crude oil. the accidents raise a bigger question. should the focus be on building
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out pipelines, which are cheaper and perhaps safer means of transport and if so, how quickly can pipelines be built to handle the increased production out of the u.s. and canada? the national transportation safety board leading the investigation into the accidents in north dakota but energy tradering watching to see how the accidents could potentially impact prices. >> it appears traders are anticipating oil prices will continue to move lower through the next few years. certainly, if there were to be some limitations on crude by rail as a result of these safety issues, we could see the back end of the curve move higher. >> as we await a decision and the rail investigation continues, the energy industry grappling with important issues. more domestic supply is good and it can reduce our dependence on foreign oil but we have to figure out how to safely and e
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fe officially transport the product. >> continental resources, took a hit on that government safety alert that balken crude may be more flammable than first thought. shares dropped more than 4%. good news for drivers. aaa says it will cost less this year to fill up your tank. the automobile association of america predicts prices at the pump will fall by a nickel to $3.40 a gallon thanked to increas increased domestic production but as always, remifinery issue and storms remain a threat. a downgrade and that's where we begin tonight's market focus. wells fargo lowered the rating on apple to market perform to out perform based on fears the profit margin will come under fire.
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shares of the tech giant fell to $553 and change. it was a different story for bank of america. shares popped on an upgrade from city. they lifted the rating to a buy from neutral and said the company is no longer impacted by legacy issues. city expect the bank will be able to manage cost and grow revenue. shares jumped about 3.5% to $16.10. at macy's and martha student living on the media have settled their legal battle on the breach of contract. the dispute began when steward started selling at macy's. the shares surged to $4.57 but macy's ended slightly lower to $53.39. urban outfitters upped the rating by from whole saying the chain has done well in a tough environment. the analyst predicting urban
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will get back on track. shares popped 2% on this down day closing at $37.78. another upgrade, for u.s. steel. key bank gave the rating saying the stock has room to run based on the firm's positive pricing model for carbon hot-rolled steel. $38.28. warren buffet's brooke shire, the bet on the housing rebound and has positions in mortgage lenders and home builders. usg stock up a fraction. $21.41 and fell to $117.50. this was not the way samsung, the world's biggest smart phone maker wanted to kick off the new year. shares of the electronics giant
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that don't share in the u.s. knocked more than $8 billion off the market value. investo investo investors dumped the stock. coming up, which sectors of the market will hedge fund managers be focused on this year? is hot and who is not for the swankiest investors from 2013. a couple of online security breaches to fill you in on. snapchat, the temporary photo and messages service has been struck by hackers. they published 4.5 million user
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names and phone numbers on a public website that's since been taken down. headaches from the syrian electronic army have claimed responsibility for hacking into skype. both the twitter account and facebook page, the company owned by microsoft has since retaken control of all accounts. 2013 may have been a banner year for stocks but the biggest fund, the total return suffered the biggest annual loss since way back in 1994. the 244 billion-dollar fund lost more than 1.9% last year. meanwhile, just two days into the new year, some big hedge fund managers are focussing in on investment themes for 2014. kate kelly has a closer look at where some big investors will put the money this year. i know, kate, you've been going around and talking to your contacts in the hedge fund world. what are they telling you? are their strategies?
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>> it's a surprise after we saw the s&p stock market indicator up nearly 30% last year but people are bullish on stocks i have to say and looking at some specific things, which i can talk about but dividend stocks for example continue to be popular and event driven. mergers and acquisitions that may occur, that may create rise in value. there are focal points but stocks are a favorable area. >> how did they do as a group in 2013? would i have been better off in an index fund? >> good question, tyler. you would and always would be to be honest. if you look at the chart of the s&p 500 versus the average hedge fund, the hedge fund always under performs the market. a defender would say that's the point. you don't want your whole portfolio into the hedge fund. it's a way to kind of diversify your portfolio. but really, unless you're with one of the super star hedge funds that charge enormous fees in some cases, you're probably unlikely to beat the market.
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>> tell us what some of these superstar are doing. we look at hedge funds doing things the average investors doesn't do. is there anything that surprises you? >> there was a hedge fund manage there sold gold puts. they were bear ish on gold and made a forturn. they are going to pick specific names and do their homework. perhaps of mexico and argentina where they see government debt they ma be attractive and give you a nice return on your coupon. in the u.s., corporate debt and other bonds are not attractive. they don't think the rate of return is worth the effort. you're going to see better returns they believe out of stocks and i think that's the focus, that and these niche areas it's touch for the average investors to get into. >> you answered my question, at a lower price, too, by the way
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but that doesn't mean you want to put your money in there. 2013 was the investors, lobe, icon and on and on. do you expect that will be the way it will be in 2014? >> do with a twist. people are trying to soften the rhetoric. they are -- >> love that. >> a shakeup of company management. i think they are doing that because it's becoming so popular and they don't want companies to fear them and fend them off. >> kate, thank you so much. 70 million americans, including the three people at this table are feeling the blunt of or getting ready for the first nor'easter of the year. it's expected to dump upwards of 18 inches of snow. if you're a business traveler or you know someone who is traveling today, tonight, tomorrow. be prepared for big delays and have patience. go to flight aware.com. more than 5,000 flights within or coming into or out of the
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u.s. were delayed today and another 1900 cancelled. let's hope things get better. >> glad we're not traveling. for those of you that are, be safe. i'm susie gharib, thanks for joining us. >> thanks from me as well. see you tomorrow. "nightly business report" has been brought to you in part by. >> thestreet.com, up to the minute stock market news and in depth analysis, our quant rating service provides objective independent ratings daily on over 4300 stocks. learn more at the street.com/nbr.
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>> the following kqed production was produced in high definition. [ ♪music ] >> yes, check, please! people. >> no! >> it's all about licking your plate. >> the food is just fabulous. >> i should be in psychoanalysis for the amount of money i spend in restaurants. >> i had a horrible experience. >> i don't even think we were at the same restaurant. >> and everybody, i'm sure, saved room for those desserts.

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