tv Nightly Business Report PBS March 21, 2013 4:30pm-5:00pm PDT
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cbs, the company, asking for more medical information from employees. how much should your employer really know about you? >> and a tough decision. the housing market seems to be on the mend. so it's time to ask the age-old question. should you rent or buy? all that and more coming up. good evening, everyone. well, tyler, a down day on wall street and it seems like investors are starting to pay attention to bad news. >> certainly this week, and certainly again today, after spending much of the day blissfully gliding over whatever oubling news there was. stocks today succumbed to a dose of reality. it came in two forms. earnings worries and cyprus, where a banking crisis shows few signs of abating and the country's credit rating was cut. the dow, though closing well off the lows of the session, nevertheless ended 90 points lower at 14421, the nasdaq down, and the s&p 100 falling from its record high off 14 points today. stocks got little help from more
good news about housing. sales of existing homes last month hit a three-year high, while average home prices in january shot up 6.5% from a year ago. on the labor front, first time jobless claims rose by only 2,000 last week. but it was enough to send the monthly average to a fresh five-year low. no matter. today stock investors did what they haven't done much of this year at all. find trouble in the news. until this week, stocks have led a charmed life in 2013. day after day, the dow played past the headlines. its worst losing streak of the year, two. and it's closed higher seven out of every ten trading days this year. but this week after nearly three months of gains that would make for a pretty good year of returns, investors woke up. those banking woes in cyprus were a first jolt, a reminder that europe's problems are far from solved. then came earnings issues at
three bellwethers, fedex, and oracle. >> this is not ready to take off. the economy is not ready to take off. it does give us pause, maybe across the bod. economy is slowing down, at least temporarily. >> ben bernanke did calm the markets yesterday. >> at this meeting, the committee judge says no adjustment. >> today, though, as investors look east to europe and ahead to an earnings season promising little profit growth, 2013's charmed life for stocks seems so yesterday. >> more now on the financial troubles in cyprus where the government is trying to come up with a plan to reorganize its banks by monday. that's the deadline set by the european union officials. if they don't, it could mean collapse of the entire banking sector. as michelle caruso-cabrera tells us, that fear is being felt on the streets. >> reporter: cyprus yet another country in europe where the devastation from the financial crisis is being felt throughout
the population. throughout cyprus lines could be seen at the atms of the country's weakest bank, people desperate to take out cash because they're on the verge of failure. >> we're being treated like third-class citizens and we're very, very angry. >> reporter: how much money did you take out? >> i just took $1,000. i've been taking $1,000 every day. and personally, i'm taking this money and cash with me to the u.k. tonight. >> reporter: because? >> because we don't know what the future of our country holds. >> reporter: the reason they're using the atm? the banks have been closed nearly a week and won't open until tuesday, earliest. business owners deeply affected by the bank closures. the head of this fruit import business is worried about making payroll. >> we are doing our best to expedite the cash collecting process in order to be able to pay our employees next week. most shipping lines require that you pay in cash. so if you want to get some
important goods, you have to pay in cash. >> reporter: bank employees likely to be on the losing end as well, and they know it, showing up in front of parliament to protest in fear their bank will be shut down. >> it's not the eu. it's germany and other countries. they are not our friends. because their members of family don't do this. >> reporter: many people here are so angry, they feel they have been treated unfairly by the europeans, particularly the germans and they're deeply angry with the politicians they say have led them astray. for "nightly business report," i'm michelle caruso-cabrera, cyprus. >> investors should be concerned about cyprus' impact on europe. global market strategist at jpmorgan funds. andress, tell us why we should be concerned about cyprus. a lot of people think there is
no spillover effect here. >> right. i think it's really important to look at cyprus and not blow it out of proportion, but at the same time, don't underestimate its risk. and its risk is that it does create question marks around the safety of deposits around the european union. the whole point of creating a banking union is that a cyprus bank is as safe as a german bank and does create a question mark. >> andress, is europe for investors simply too hot to touch right now? >> i think if you look at individual companies, if you look at their balance sheets and try to understand what is their drivers of growth, there are still opportunities, especially large corporations that have access to the emerging markets, and that's really where their growth is coming from. but overall, at the macro level, i do expect some headlines -- some headline risks this year. tlets let's not forget, this is a german election year. september. merkel has to convince her voters she should be re-elected. and i wouldn't put that past what's happening in cyprus and what other headlines we come up during the duration of this
year. >> let's talk about things closer to home, earnings. you heard in tyler's report we've had disappointing earnings recently. we're going to get a lot of reports over the next couple weeks. are they going to shape the direction of the markets? >> well, first off, we had a weak market today and i think it's important to take it in stride. we had a great run, but it is concerning when the markets move up in a straight line up or down. so some consolidation is actually healthy. two, when it comes to earnings, we do expect earnings not to be too strong in the second quarter. let's remember what just happened. the payroll tax going away, the sequester that's really going to start hitting in april. therefore the second quarter. so earnings in the short term might seem weak, but we do believe over the next couple years, the earnings story could be strong, especially when you look at the economy and the fundamental story what's happening with housing and slowly what's happening to jobs. >> so where should i put my money, andress? if i want to be a broadly diversified global investor, what percentage of it right now
of my equity holdings should be in the u.s. market and what percentage in foreign markets, what percentage in emerging markets? >> so first off, we are overweight in the u.s. equity markets over, for instance, other developed economies like europe. i think a lot of the headline risk is going to actually send a lot of dollars back into the united states. and fundamentally, the u.s. economic story is improving. but just a comment on emerging markets. you hit on something that i think is important. i think most investors globally are structurally underweight emerging markets. they might hold maybe 4 or 5% of emerging markets throughout the whole portfolio. yet if you look at this share out of whole world market cap, 13%. so i do believe that people structurally are underweight and need more exposure to emerging markets which right now there's a loof volatility there, but also a lot of upside. >> andress, you used to always hear buy on the dips. i don't know if this is one of those times. should people start picking up stocks if they haven't been involved in this market rally or is a serious bull pullback close
by? >> i think if you have to look at your options. if you have a new dollar, what are you going to do with it, put it on fixed income or cash or equities? even at these levels, equities still look appealing than the other options. so i would put that new dollar into equities. why? because everything else just looks so expensive. >> all right. lots of good information. thank you so much, andress. global market strategist at jpmorgan funds. first the senate voted for it and now the house, a stopgap spending bill with bipartisan support and sending it to the president's desk for his signature. the measure will keep the federal government up and running until the end of september. while lawmakers get back to work on a more comprehensive long-term budget for fiscal 2014 and beyond. after the bell earnings surprise starts us off in market focus tonight. nike reported a 55% jump in quarterly net income to 73 cents a share. that was 6 cents more than analysts' estimates.
nike said worldwide future demand for its apparel and shoes rose 6% compared to the same period last year. looking at the stock, it closed at 53.60, down more than 2%. that was during the regular session, and then it surged in after hours. fiscal systems was the biggest loser in the dow. shares fell on an analyst downgrade from a market perform to underperform. the analyst predicts a decline in routers, and cisco could be challenged to transition to a software andervice busess model. cisco lost almost 4%, closing at $20.84. and oracle was the biggest nasdaq loser. investors reacted to the warning we told you about last night that oracle's hardware revenue would shrink. the company also said on its earnings called today that its sales staff didn't do a good job on selling on the software side. oracle shares have fell on heavy volume, closing at 32.30, down more than 9.5%. and salesforce.com, on oracle competitor in cloud computing and customer
relationship services announced a four for one stock split after the close today. you don't see that very often. sales force was up on the day, ending at $172.73. before it spiked after hours on the news of that split. and air gas, a company that makes industrial gases that other manufacturers use in their processes warned it may fall short in the current quarter because sales fell in february in a key division and didn't recover in march. air gas down over 5%, closing at $97.96. one bright spot today was ross stores, the discount retailer said its latest quarterly income jumped 23% on higher demand from bargain hunting shoppers. ross says revenue stores at least a year up 5%. ross was up 3.35 -- 3.35% to 58.05 at the close. another bright spot. this year's corn crop, especially in the wake of last year's devastating midwest drought. corn planting this year are
expected to be the highest in decades, and jane wells tells us what that means for farmers and consumers. >> reporter: farming is like housing. it's all about location, location, location. >> i'm a bit nervous. >> nebraska corn farmer jason kohls should be. he's coming off a horrible 2012 due to the drought. >> i expected around 150 bushels average year going into the year. and i ended up with 75 bushel on my corn. >> reporter: curt mallory's texas operation could not have been more different. >> our 2012 corn crop was excellent. it's probably the best corn crop we've ever raised down here. >> reporter: mallory already has corn coming out of the ground and he's optimistic about 2013. farmers are expected to plant the most acres of corn in 77 years. and if the crop is good -- corn prices could fall as much as 40% and bring down the cost of everything else, especially beef. america's cattle herd is the smallest it's been in decades. ranchers have been getting rid of animals because it costs too
much to feed them. texas rancher bob mccann says his herd is smaller than it used to be. >> it's going to be hard to rebuild the herd. >> reporter: curt mallory says it won't just impact american food costs but global supply. >> if anybody has a marginal or total crop failure, it's going to start impacting worldwide the availability of those commodities on the food shelf. it's that critical. i've never seen it in my lifetime. >> reporter: the national weather service isn't providing much hope. its new spring forecast calls for warmer than normal temperatures with little relief from the drought. for "nightly business report," jane wells, moore park, california. and coming up, first smoking, then cholesterol levels. now one company is asking employees to weigh in. or pay up for health insurance. is it a motivation to get healthy or an invasion of privacy? first, though, let's attack a look at how the international markets finished the day.
we don't have to tell you the cost of health care is skyrocketing, especially for big companies providing coverage for thousands of workers. but there's a growing controversy about just how involved employers should get in the lives and personal information of those workers. hampton pearson explains. >> reporter: the cvs drugstore chain, one of the nation's
largest, is taking a hard line on weight control in the workplace, telling its 200,000 employees to participate in the company's health insurance they must reveal health information, including weight, body fat and blood pressure levels or pay a $50 a month fine. that's $600 a year. >> it's a $600 fine. yeah, that seems pretty unreasonable. >> reporter: the chief medical officer for the rhode island-based firm says it's not an invasn of privacy, but an incentive to improve employee health and reduce health care costs. >> it's an incentive one way or the other. the way we see it, the company contributes a good deal to people's health insurance, and people can get an additional contribution if they undertake this. seems to make common sense to us. >> reporter: worker rights advocates say there is nothing really voluntary about asking workers to pay what could be a $600 a year penalty. >> if you're looking at cvs, you're looking at a company that has a lot of low-wage workers,
where $50 a month could make a significant difference. >> reporter: a kaiser family foundation survey finds 94% of large businesses now offer some kind of wellnesses program. things like free health club memberships, nutrition counseling, even stop smoking campaigns. what's accelerating is the use of financial penalties to motivate behavior. workers are adjusting. >> my job required it, and i needed my job, yeah, i would do it. i've got nothing to hide. >> reporter: in a 2009 survey of 500 companies, 8%sed financial penalties to motivate healthy behavior. last year, that number jumped to 30%. according to towers watson, a risk management consulting firm. health care experts also say draft regulations tied to implementing the affordable care act increased dramatically financial incentives tied to wellness programs. >> there really isn't anything else that the insurance industry or the employee benefits industry has shown they can do to control health care costs.
>> reporter: cvs say using what some might consider the stick approach tied to penalties. what's not yet aprent is how many firms will follow that trend. for "nightly business report," i'm hampton pearson in washington. we have two different points of view on this subject. dep deborah peel is the founder of the rights foundation and tracy burns director of northeast human resources association. i would like to ask both of you this question. we all want a healthier work force. how do we get there? is it through rewards or is it through penalties? deborah, why don't you start us off? >> well, penalties, of course. and these penalties in particular are very coercive, they're very hurtful. and most of the people working there are probably working a second job already. so it's cruel. it's cruel and it's an insult to dignity. but worse than that, there are serious privacy problems. first of all, americans have the right to health information privacy.
the reason is, this is very sensitive information, and it's been clear for decades that employers and insurers use this information to make decisions about hiring, firing and promotions. so the privacy of health information and the lack of control of data in electronic systems and wellness programs require the collection of lots of sensitive data. >> let's get tracy in on this. >> okay. >> rewards or penalties, tracy? >> well, i think it depends on the individual. i think, as you know, health risk assessments have been around since the '80s so this is really nothing new. it's really just how it's being packaged. so it comes down to the individual and how they're motivated and what their financial motivation works for some people, and coercion is going to work -- will be the proof in the pudding. i think, like with a lot of wellness programs, it takes a long time for us to see the fruits of the labor, but i
commend cvs for being willing to implement a wellness program, because it's really not just about the bottom line. it's about overall well-being. and when we come to work, we don't just bring ourselves, our work selves, we bring our entire selves and proven that healthy employees equal productive ployees. >> ms. peel, i'm curious why you think the practice of supplying or having to submit to a test where you would be weighed, have your body mass index measured, presumably your blood sugar taken and cholesterol taken is a cruel procedure. i believe that was your word. i'm not sure i understand. why you perceive that to be cruel, and why, on the other hand, someone might not see that as, that's information i could use, perhaps, if i didn't have it already, to live a more healthy lifestyle. >> the cruelty is about the financial penalties that most people can't afford. the problem with the blood tests are when you get blood tests,
they're collected by a lab, data is collected about you, personal data about your body and mind. the public is very sensitive about this. they know that employers and insurers and wellness plans and labs and electronic data about health is not secure, and it's not private. they believe that these systems are not ready for prime time. they know that we have no data map of where all this data goes, who uses it, and what for. but it's very clear that this information is used to discriminate against people. the most important thing i like to say, though, about health plans is this month's health affairs did a very careful study, and they found that wellness programs basically don't work. they're one-size-fits-all. these illnesses that we are having, the epidemics of, are happening because not just of factors within the person, but there are social factors, cultural factors and corporate factors as well, such as very
addictive, terrible, cheap food. >> all right. can we just get maybe a short explanation from you -- >> sure. >> what's the alternative? the status quo in our country right now is not working. we have an obesity -- >> you are right. >> epidemic, heart disease epidemic and health care cost epidemic. so what do we do? >> well, first of all, the alternatives are to find the solutions not only in the individual, by working with individuals, but by looking at the larger factors in society. we don't have epidemics because suddenly a whole bunch of people in this nation are not responsible. these are compl problems. so we have to find the problems in the individuals, but in our culture, in our food chain, in our workplaces, to fix this. because wellness programs don't work. >> tracy, my employer requires me to submit that i haven't used tobacco products over the past year or pay a penalty. and that feels like a reasonable -- to me, a reasonable use of the expression of the employer's interest here. my question for you, though, are
we going to a system where individuals' health care costs will pay more for insurance if they have certain personal attributes or certain behaviors or certain habits than somebody else? variable pricing? >> well, potentially so. and it's not much different than what's been happening for quite some time with the incentives plan. so i think we have to be very careful about what we're penalizing people for and what's preventative. and a lot of the wellness programs that corporations have been involved in for quite some time are based on preventative measures. and lifestyle things that you can change. things in your control. >> all right. we have to leave it there. this is obviously a topic that as a country we're going to continue to be in a conversation. thank you both, deborah peel, founder of patient privacy rights foundation and tracy burns, director of northeast human resources association. >> this one really did hit a nerve in lots of people around the country. our special series on
housing continues with a look at renting versus buying a home. which could be best for you in today's economy. but first, let's take a look at what treasuries were up today. insurances and commodities closed. with home prices on the rise and mortgage rates still near historic lows, a lot of would-be home buyers are looking to jump in while others remain cautious. today's housing market, is it wiser to rent or own your home?
diana olick looks for answers. >> so this is the place. >> reporter: newlyweds brian and ally earl are ready to buy their first home together. while owning a home seems daunting, renting just doesn't add up anymore. >> to be honest, it keeps going up. i think we've seen our rent go up over 20% in the last two years. and you don't rely ve ntrol over your property. >> reporter: rents are rising at an annual rate of 3.5%. but home prices are rising faster. so should you buy or rent? analysts say it's 44% cheaper to buy, but only if you stay in your home for seven years, itemize your deductions and get a 3.5% mortgage rate. >> right now, with how interest rates are, below 4% in this area so it's the perfect time for us to do it, especially for our future. >> reporter: still, rental buildings are largely full, partially because so many potential home buyers now have damaged credit, but also because many younger americans want neither the hassle nor the risk.
>> it's low-maintenance. that's the best thing. >> reporter: suze has been renting in d.c. for six years and admits she would pay more to rent than own. >> i have a lot of friends who purchase and they thought it was a great deal and then ended up losing tens of thousands of dollars just in a few years. >> reporter: another barrier to home ownership is lack of supplies. realtors today reported a small increase in the number of homes for sale, but it's just not enough. especially given the competition from cash-heavy investors. >> everywhere we've looked, there's at least five or six offers going in within 48 hour period. >> reporter: that's why now even some home builders like lenar are getting into the multifamily apartment business. >> we're bullish both on the rental side of the business and on the single family side of the business. we have underserved production for probably seven years now, and as we look ahead, both on the multifamily side and on the single family side, we're going to need a lot more production. >> this is actually pretty
spacious. >> reporter: because at this point in the housing recovery, the rent versus buy debate still has no winner. for "nightly business report," i'm diana olick in washington. >> my husband and i just went through this process with our adult children who were going to be in these training programs for three years, four years, decided to rent rather than buy. because it's that seven year rule. >> more likely to stay there that long. my rule is whenever mathisen buys, you sell. because i've managed to top the real estate market i've ever been in. i'll tell you. i'm not moving any time soon. >> that's it for us. "nightly business report" for tonight. thanks so much for watching. >> i'm tyler "time the market" mathisen. have a great evening. see you back here tomorrow night.