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tv   Nightly Business Report  PBS  April 10, 2019 5:00pm-5:31pm PDT

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this is "nightly business report" withill griffeth and sue . ceos go to washington. the heads of the country's largest banks appear before congress for the first time since the financial crisis. year of patience. the fed sees little need to change interest rates in 2019, but the door is open to hikes if needed. tension pain. someublic pla are so underfunded that not even the decade-long bull market has provided a fix thosetories and much more tonight on "nightly business report" for this wednesday, april 10th. and we do bid you a good evening, everybody, and welcome sue is off tonight. you know, it's not often that country's f the biggest banks are called before congress. the last time it happened was
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during the financial crisis roughly ten years ago, but it happened again today. the chi executives were back together on capitol hill testifying in front of the house financial servicesommittee. as a group, they defended a financial system that they say is more resilient today than it was a decade ago. some of the questions theyreaced focused on the industry's new challenges like cybersecurity and slowing global growth. other questions were politically charged. >> what do you think the biggest risk to our financial system is today? our ability to talk ourselves into the next recession. >> i think i --robly the cyber that we mentioned that is the biggest. i think the growingnk non- segment, i don't think it's systemic yet, but i think it is growing very rapidly and should be closely monitored. >> global growth is slowing and u.s. growth is slowing a little bit and global growth is slowing and ultimately that will have the impact on t ability to serve as credit around the world
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and that impacts the financial system. >> cyber, certainly first. i'd also say slowing growth around the world, but in rticular the difficulties between the u.s. and china. >> i'm just asking that if it seems fair to you, the ratio of the amount of money that you're making compared to the49,000 averagemployees is making. my compensation is voted onouy board and voted on by shareholders. >> unbelievable. ow can we make america competitive when there are a large number of people graduating and they see nore fu >> this group pays all their employees quite wlul ing medical and minimum wage at $37,000 a year or something like that. compveitive business will d wages and jobs over time. >> would you say, mr. dimon, that we're a leader in global finance? >> i think america is a leader
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in global finance, and i hope to god we remain that for the foreseeable future. >>o is the u.s. banking system better and safer than it was ten years ago? joining us tonight is david ellison, portfolio manager of the hennessy large cap financial fund. david, good to see you. thank you for bng here tonight. >> good to see you. it has been a while. >> they are certainly bter capitalized than ten years ago, but do you think they'll be to weather another financial downturn should there be one? >> i think some of w what heard today was kind of rear-view mirror. i think clearly to handle aredit cycle a they're ready to handle a liquidity cycle and to some degree a rise in rate cycle and the one thing they didn't mentionoday at all was the real damaging impact that lower rates has done to their business and what rates, if they go lower, whaul it do to their business. so i'm surprised. they're fightinghe old warf credit and liquidity and capital
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is over. if we end up like japan, their margins are going to get hurt pretty badly and that,o me, is the biggest risk. if rates go down too much, d lending wil up and that will be the problem. >> jamie dimon mentioned the d so-cal non-bank industry where a lot of highlyeveraged loans are being made these days and they're not regulated. how troublesome is that in your eyes fors t industry? >> well,t we had that l time and that wasn't the problem. you know, it was bear stearns and lehman and everybody so these -these shadow banks didn't create the problem. i don't think it's a problem today. they're big and they're evered, but that's not the issu the issue, i think and i'll come back to it is what are rates going to do the next five or ten year we need them to stay here or go higher. they can't go much lower. >> another issue they brought up a lot, cybersecurity. how big of a challenge is that
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or a threat to our financial system? >> well, it certainly is, and i don't know enough about it, and the disc icerting thingthat we have very few people in the country or in the world thatug know e about it, so we have to hope that they are on top of yes, the talking about spending a lot of money, but i don't know how effective it is, but so far so good. they're paying attention to it which is the most important thing. before you go. nevorite bank right now or is there just >> well, i think the big banks are in the best position to spend the money to stay competitive and to continue t in asense, invest in their future. the smaller banks, you know -- you know, they're stuck and being competed out of business and low rates are much more damaging to them and to beco ervative you clip the dividend and hope that they can change their businesses for the better as we g forward.
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>> david ellison with the ennessy large cap financial fund thanks for joining us tonight, david. >> you're welcome. and onet wall sttocks finished slightly higher as investors weighed new edanomic showing moderate inflation and affirm egg from the federal reserve that interest rates would likely remain unchanged this year. the dow when all was said and done rose s points and the nasdaq gained 55 points and the s&p added ten. steve liesman takes a closer look at e fed and what er policymakers w thinking at the central bank last meeting. >> minutes from the federal reserve's march meeting say a majority on the fed think the economy is likely to warra change in interest rates for the remainder of the year and several members of the fed the current level of interest rates are close to what they call neutral and that is where the benchmark rate doesn't stimulate or slow the economy. several, mostly global uncertaiies and fed officials warn that their views on the right level of rates could
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change in either direction. that is up or down. one smaller group inside the fex cts growth to rebound from the current bout of weakness if they're right. they say that w canrant a rate hike later this year. it was no explicit comment in the minutes around any group or utdividual expecting rate cuts later this year, there was broad agreement on the uncertainties faced in the u.s. economy and they include brexit and the waning effects of the fiscal stimulus and tax cuts and trade tensions and president trump's recent threats of new tariffs and saying just the threats undermine the gy.bal econ >> even the fact that these threats are seen with some frequency certainly undermined the sgeneral confidence? depending on how the u.s. economy a evolv how these big global issues resolved themselves, the march minut may clear and the fed is firmly
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on hold. for "nightly business rert," i'm steve liesman in washington. nowo that inflation report which poefed the biggest increase in 14 months inch m the consumer price index rose by cost of food, gasoline and rent, but o, inflation still does remn benign and global economic growth continues to slow. elsewhereur tre secretary steven mnuchin said thein u.s. d are making progress on trade and they have the deal forcementechanism which should be a key sticking point. >> we pretty much agreed on the enforcement mechanism. we've agreed that both sides ll establish enforcement offices that will deal with the ongoing matter. so this is something that both sides are taking very seriously. >> secretary mnuchin also described the economic outlook as robust and he said tariff issues should not get the blame foslowing global growth ri with stocks up double digits so
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fas year and the s&p closing in on an all-time high, e thing that could derail the run right now is earnings and don't look now, but here they come. bob pisani tells us what t look for. >> earnings season officially kicks off on friday and right now first quarter earnings are expected to go negative down 2.5% froea last now this will be the first earnings decline we've seen since the secd quarter of 2016, but the s&p 500 is still less than 2% from his historic high. wait a minute, stocks are rising even with lower earnings forecasting? at's going on? investors are focused on the future. that's what's happening. they're not focused on theast. remember the stock market is a discounting mechanism for a future stream of earnings and right now the bull narrative is winning out on wall street. what's that? the bull narrative is that china and europe are both bottoming s and thathould lend some stability to the global markets.
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the markets have gone from pricing in negative growth in the first half toly rap re-accelerating growth in the fourth quarter and in the beginning of 2020. a lot ofha industries were under pressure in the fourth quarter, for example, think semiconductors. they snapped back big time this year all on this bottoming growth story. so kla tencor, for example, and samsung, a major chip supplier erid in january that demand would recn the second half of the year and essentially wall street has bought into that story and that's why the market keeps going up, and by the way, flat or declining earnings don't necessarilyn m that the stock market is in trouble. first of all, there's a very od chance earnings for the first quarter will, in fact, rn positive a won't be negative. second, declining earnings do not necessarily correlate with a decline in the stock market. there have been many times in the past where earnings have been flat ornd declined even
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when the market declined, they quickly bounced back because there was no recession that followed, and that's the key. if you believe that there will be a recession in 2020, then earnings will certainly decline an go negative along with the stock market, but it's not allr clhat that's going to happen. for "nightlyusiness report." i'm bob pisani at the new york stock exchange. >> the wall street journal e reported than after one of the longest equity bull markets in u.s. history, many public pension funds around the country are eill underfunded, s dangerously so, and because the stock market returns are projected to be below historic levels for the foreseeable future, theroblem of underfunded public pensions is not expected to be solved a s timen. joining us tonight to explore this issue further is chris , ailmhe chief investment officer of the california state teachers'etement system or calsters. it is the largest public
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thacher's pension fund i country. chris, always good to see you. thanks for joining utonight. >> good evening, bill. the problem is for the whole industry is that the number of people that areeting and the rate of retirements are growing faster than the returns you can get on yo investments right now among other things. >> the babyre boomers retiring and that's not a headline, yes they are, so we're seeing an increasing amount, and it's expected, but this dwaographic needs to work through all the pension plans. >> and every time we seeig decline in the market like we did after the financial crisis of three years ago, that's monet f your fund and we have to play catch-up ove those years. so as the journal pointed out, even this great bull market that we've had for the past ten yeart hasrought you back to full funding because of that, right? >> that's corrt, bill, but i want everybody to back up and think about the longer term picture. a pension plan funding it is like climbing a hill, just like
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a 401(k). you're climbing slowly over time. w '0 a drop and we are back to where we would be with the pattern of ascent and we're still not at the summit, but it takes 30 years to fly fund a pension. >> you are only 70% or a little bit below at, right? >> that's correct. we are basically right where we were in the late 1980s or early 1990 and the one thing as the article pointed outpp that ed to us in that time period, investments genhtated the return and people are living longer and longevity is a chhalenge and w to have the pension for a longer period. i was reading, how manyer tea are now over the age of 100 around the country? >> well, inn our p alone in california, 364 teachers are over 100 years old and stillin recea pension. >> they won the pension lottery, in that case. dides, they >> is there a temptation on your
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part or anybody who is managing these funds to tak a little more risk otherwise to play some catch-up as youo try reach full funding? >> i think that's an active debate that retirement boards face onar a reg basis because there's only two ways to fund a t'tirement, whethera defined benefit plan or a 401(k)ib that's conions or investment return. so when you don't put enough ntributions you feel that pressure on that investment return, but the markets are going to give you a very decent rate of return and you can't outinvest your way out of a problem. it really has to come from steady contribution so i think the board feels that tension and i feel in the case of our board in california make very reasonable decisions to diversify and invest for the longerm. >> do you agree, by the way, very quickly that the returnse for foreseeable future will be below historic levels? >> well, wre at verate stage in
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historically, you would expect to see the market fade out, but fs we said, bill, bull markets don't die old age and they can grow long in the tooth as bob pisani had pointed out there may be recession in the future and we'll see choppy returns and slow growth. again, iooat ten and 20-year time periods and it is easonable that we'll get a fairly decent return and i can't say where we'll go in the next hrx months or next year. >> c ailman from calpers, good to see you. thank you for joining us tonight. >> thank you. > time to look at today's upgrades and downgrades and apple was down to reduce from hold at hsbc. the analyst cited concerns over its new serviceshe including potential for lower margins. the price target $180 and today's shares closed at $200.62. disney was upgraded from market perform at bmo capital markets
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and the analyst there cited disney's streaming service twoch and the opening o new star wars attractions at disneyland and at disney price target now $140. disney finished up slightly at 117.16. nordstrom was downgraded from overweight at sector w key bank. the analyst cited opportunities for key growth in severaliari a of the rendiler's business nordstrom ended at 44.94 and unde armour was upgraded to buy from neutral at city. the company's renewed focus profitability and the return on interest -- or invested capital. price target $29. under armour closed up at $19.32. coming up, if you're an investor in airlines or tnking about getting in, is the group ready for takeoff or landing? ♪ ♪ ♪
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sanofee has cut it to $99 a month and hours after one of its executives testified before the congressional committee on the rising price of the medicine and duri that hearing, she described the new pricing plan. as we've been reporting,co the of insulin for treating type 1 diabetes has nearly oubled over the past five year a boeing shareholder has now filed lawsuit against the company accusing it of covering up safety problems with itsx737 jet. the shareholder claims that boeing put profitability andhe growth of airplane safety and honesty, and that's just one of the challenges boeing faces right now. several lawsuits have alrea b
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been fil victims' families who called boeing negligent and one of china's state-owned airlines is nowooking for compensation from boeing over the prolonged grounding of the max fleet worldwide. boeing shares lost 1% on the delta reported a solid quarter this morning and the airline posted better than expeed profits and record revenue. the carrier plans to keep capacity consisten into the summer months which will alleviate investor concern that too many flights during peak travel season could lead to loesr f and when asked about the impact of the grounding of 737 max jets by boeing. the ceo ed bastion says he has complete confidence in boeing. >> i'm confident boeing will get to the rht answer wit respect to the fix and we're all cheering for h hoping to get the product up in the sky as quickly as possible. >> we should pnt out del does not have any 737 max jets in its fleet any it closed
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higher by more than 1.. so, you know, it's good to be delta these day, but now that may not behe case for the rest of the airline industry with some of its rivals lowering earnings projections right now for various reasons. is now the time to consider airline stocks? joining us tonight to talk about that, david vernon, senior transportation analyst at ernestine. >> thank you vmuch. even with the decline for the month of march, overall the xil, and the new york stock exchange airline is up 13% this year so it's had a pretty good year overall so far. >> i to nk coming ie year there was a sell off in the equity market and we started from a fairly low base and what we learned was more confidence inooheng environment and the execution and particularly carries like delta strong earnings today. >> but how much an impact do y see of the max jet grounding having on the industry at this point? >> near-term it's very
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disr if you take these planes out your pilots have bid and yous crre ready to fly and it's hard to take cost out very quickly. they're ratcheting down your schedules and you will see less capacity coming into the marketplace and some in the low single-digit range of capacity coming out and as the airlines get better at scheduling down the staffing resources and the other costs that are required to run the operation and you wilse the financial turbulence settle down a little bit and earnings aually get a little bit stronger. >> delta seeps to be doing so weha these days and are they doing that others aren't doing right now? >> i think one of the key things that they have going for them is their parership with american express and that rewards program and as far as an affinity group of flyers that the credit card company want to target is travelers with a lot of expense goin over the car unless it's a very, very attractive market and delta has renewed their
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partnership with amex a couple of years early and tt's adding a point to revenue and that's accretive for them in the near-term and one of the thing is delta isn rangement and the other thing date is doing well is understanding how to monetize it better? >> i'm running out of timeibut ant to ask you late today jetblue announced they are going to begin transatlantic flights in 2021 from new york and boston. will that have an impact on that will it be an airfare war? what do you think will happen? >> it's a margin as delta tries to carve out some share and you should see weakness ane and the things, and they don't have the same eccovity in another end of the network and they don't have the same capability that the airlinese as far as the distribution channel in europe and thera confion of the aircraft goes, we will have to see how they come out andow they will market that aircraft and it will be smaller than
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competing aircraft and the price point and they'll be able to make the operationje work. lue certainly has an opportunity to come into that as an attractive marketing to goes and we'll have to see how that plays out. >> david vernon with bernstein, good. >> elsewhere, tesla and general motors get a boost and that's where we issbegin tonight's mar focus planning to introduce a bill to expandax federal credits for buyers of electric vehicles. as you know, the existing $7500 tax credit phases out over 15 months after they have 200,000 electric vehicles. >> this expanding will have tesla and gm bh of which ros 1% in today's trade. archer danielsmidland said it will open a voluntary retirement in north america and it may cut jobs as part of the restructuring and the moves will strengthen the company's core business and shares rose 1% to
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43.24. beh & beyond reported better than expected earnings while they were in line with expectations. the retailer said some growth came o from itsine sales. the board authorized a dividend increase and said a governance review is the stock volatile in the after-hours trading tonight ande finished regular session up 5% to 19.41. ing come up, what's white house ising to do to try and lower energy ♪ ♪ as it prepares to start selling shares to the public, uber is aiming for a valuation of amuch as $100 billion.
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according to the wall street journal the ride hailing company plans to price shares at 48 and $55 a share for its upcoming ipo. that valuation, by the way is below the ha20 billionthe lead underwriters have been pitching last year. azon's cashless stores will soon start accepting cash. the retailer did not that's going to happen, only that it is planned. critics of the automated amazon go stores said they were discriminating against so-called unbanked consumers who don't have credit or debit cards and typically pay with cash. me cities like philadelphia are enacting legislation that would banashless stores. oil inventory surged last week. energy department reported an increase of 7 million barrels making this the stockpiled bills and there was a big drawdown in gasoli the price of domestic crude rose by 1% to a ve-month high and it all comes down on the same day the
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lowerent made a push to energy prices. kayla tausche has details. >> the white house wants to bring down energy prices by bringing pipelines and natural gas to new england that currently have lower supply. it on do that, predent trump rolling out two executive orders to spur more constructiot and transpon of energy. >> my action today will cut through destructive, permitting delays and denials. do you know about that? you know aboutay d where it takes you 20 years to set a permit? those d are gone. >> the executive orders themselves and gater authority to green light new projects to approve cross-border pipeline like the keystone xl from the permitting back to the federal government for the state. there's one i proje particular serving as motivation. the 125-mile constition pipeline which would bring natural gas from pennsylvania through new york to new england. the state of new york is
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overriding a federal permit on water safety grounds and a legal battle has ensued. governors are expected to challenge this white house order, too. senior administration officials say the end owal, prices for customers. for "nightly businessre rt" i'm kayla tausche in washington? before we go. e final day on wall street and the nasdaq gained 5. the s&p was up ten as we get ready for the flood of earnings. that is "nightly business report for tonight. i'm bill griffeth. see you tomorr. ♪ ♪
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>> this is "bbc world news america." >> fundingf this presentation is made possible by the freeman fountion, and judy and peter blum-kovler foundation, pursuing solutions for america's neglected needs. >> wow, that is unbelievable. ♪ >> i'm flying! ♪ >> stay curious. ♪


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