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7/28/2019 Nightly Business Report - Tuesday, April 16, 2013
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ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and
Susie Gharib, brought to you by --
(COMMERCIAL AD)
BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Stocks rebound. The
market bounces back from the worst one-day decline and now our attention
turns to technology, as Intel (NASDAQ:INTC) and Yahoo (NASDAQ:YHOO) both
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report earnings after the bill.
SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Strong foundation.
Housing starts jump dramatically. But are red flags being raised on one
part of the recovery.
GRIFFETH: And gold rush. What are individuals doing now with the
precious metal as prices fluctuate sharply?
All that and more coming on the NIGHTLY BUSINESS REPORT for Tuesday,
April 16th.
Good evening, everybody. I`m Bill Griffeth, in for Tyler Mathisen all
this week.
Susie Gharib, another big day for he markets. But now, we have two
numbers out today that probably will set the tone for tomorrow.
GHARIB: And we are talking technology now for a change.
Two tech titan with a tale of two different earnings stories tonight.
Yahoo`s first quarter earnings surged 36 percent but an Intel (NASDAQ:INTC)
profit fell 26 percent. They are the first batch of technology companies
reporting this week and could set the tone for trading in tech stocks
tomorrow.
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First, let`s look at Intel (NASDAQ:INTC). The world`s biggest
computer chip company earned 40 percent a share. It was a penny below
analysts estimate. Revenues fell 2 percent to $12.6 billion, slightly
better than expected. But the company said revenues in the current quarter
will come in higher than forecast, and so, Intel (NASDAQ:INTC) shares
jumped as much as 2 percent after hours trading before pulling back.
Meanwhile, Yahoo (NASDAQ:YHOO) earned a 38 percent a share. That was
14 cents more than analysts expected, but revenues came in below estimates
at $1 billion and the company reported a drop in display advertising,
disappointing investors. Yahoo (NASDAQ:YHOO) shares tumbled more than 4
percent in after hours trading.
GRIFFETH: And on the heels of Intel`s and Yahoo`s mixed results,
there`s another technology giant set to report next week which may reveal
about the shift by consumers to mobile computing and the health of the tech
sector as a whole, than any other company.
In tonight`s installment of our series "Earnings Spotlight," Jon Fortt
tells us what investors are expecting and hoping to hear from Apple
(NASDAQ:AAPL).
(BEGIN VIDEOTAPE)
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JON FORTT, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): If
there`s one tech company to focus on this earnings season, it`s Apple
(NASDAQ:AAPL).
(on camera): It`s an important quarter for the iPhone and iPad maker.
Of course, investors would like an increase to the dividend. Now, it`s at
around 2.5 percent yield. They`d like something closer to 4 percent.
(voice-over): The stock is trading near its lowest level since the
early days of 2012 because of worries that the days of dizzying sales
growth and profitability of the company are over.
COLIN GILLIS, PARTNERS TECH SPOTLIGHT: Expectations for the March
quarter keep ratcheting down, because we are in the middle of a product
refresh vacuum, right? But it`s not only the March quarter that investors
are concerned about. They are concerned about the June quarter which may
show more signs of a slow-down as existing, iPhone 5 and iPad start to show
age and in front of the next launch of those products.
FORTT: Apple (NASDAQ:AAPL) has already poured cold water on Wall
Street`s hopes for surprise up side, saying that sales will be up 5 percent
to 10 percent, to around $42 billion. Margins will be down and unlike in
the past, this time management promises those projections will prove
accurate.
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A key storyline to watch with the stock, PC versus mobile. PCs are
under plenty of pressure with shipments down nearly 14 percent in the first
quarter, according to IDC, as consumers opt for phones and tablets instead.
Just ask people how often they are buying a new home computer.
UNIDENTIFIED FEMALE: Never because I have a Mac. So, as far as my
Mac goes, I mean, I have iPad and a lot of tablet handheld devices. So,
those, I mean, we get new rounds of those every couple years. But no PC
except at work.
UNIDENTIFIED MALE: I think I use my iPad more than I use my computer
to where it`s almost obsolete in a way. I`ve never even touched it. It`s
almost pointless to have one almost at this point.
FORTT (on camera): Bottom line, investors are looking for a reason to
continue believing in the surprising market rally we`ve seen so far this
year. Optimism from Apple (NASDAQ:AAPL) would go a long way.
For NIGHTLY BUSINESS REPORT, I`m Jon Fortt in Cupertino.
(END VIDEOTAPE)
GHARIB: Joining us now to talk more about those earnings from Intel
(NASDAQ:INTC) and Yahoo (NASDAQ:YHOO) and the out look for the technology
sector, Josh Spencer. He`s portfolio manager of the T-Rowe Price Global
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Technology Fund.
You know, Josh, looking at Intel (NASDAQ:INTC) and Yahoo
(NASDAQ:YHOO), the one thing that ties them together, these are about
companies trying to reinvent themselves. So, I have two questions for you.
In the case of Intel (NASDAQ:INTC), does it have what it takes to reinvent
itself, to jumpstart the company? And in the case of Yahoo (NASDAQ:YHOO),
is Marissa Mayer`s turnaround strategy working?
JOSH SPENCER, T. ROWE PRICE GLOBAL TECHNOLOGY FUND: Well, thanksfor
having me on. It`s nice to be with you.
And you hit the nail on the head, both are reinvention stories. In
the case of Intel (NASDAQ:INTC), they start with a strong suit with
manufacturing. They`re actually, you know, a world class manufacturer of
semiconductor chips. However, the segment that they sell into, the PCs, is
under a lot of pressure.
I smiled in the interviews in the Apple (NASDAQ:AAPL) segment leading
into this. People just aren`t using their PCs as much as they did in the
past. So, I think Intel (NASDAQ:INTC) does have what it takes to turn
around eventually but it will be a slow process to establish themselves in
the smartphone and tablet market.
Yahoo (NASDAQ:YHOO) is also going through a turn around and what we
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saw this quarter was not much evidence of a fundamental turn around in
Yahoo`s business with revenues actually down a little bit year on year. So
that one is still on the come as well.
GRIFFETH: Are we really going to get to a time where we do not use
PCs anymore. I mean, I know we`re migrating to these mobile technologies
that we all use. But will we come to day when we don`t use PCs? And who,
in your opinion, is better positioned in that regard, Intel (NASDAQ:INTC)
or Yahoo (NASDAQ:YHOO)?
SPENCER: Well, in that regard, Yahoo (NASDAQ:YHOO) is better
positioned. I think it`s an exaggeration to say we won`t use PCs. But
we`ll use them for a lot narrower applications. So, we might use them at
work for spreadsheets. But at home, we`ll pull out that tablet or that
smartphone if we want to check the Internet, or stay up with video or news.
We just will PCs less and less in our daily life.
Yahoo (NASDAQ:YHOO) has a better chance to make that transition.
Intel (NASDAQ:INTC) is establishing themselves into a whole new realm.
GHARIB: Josh, I want to ask you about Apple (NASDAQ:AAPL). You heard
Jon Fortt`s report on it. Everybody is looking forward to that report,
earnings report next week.
I know that you are a believer in Apple (NASDAQ:AAPL). But make a
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case, why investor who have lost some faith in this company should take a
fresh look at Apple (NASDAQ:AAPL)?
SPENCER: Well, we all love Apple (NASDAQ:AAPL) products. The
customer that you interviewed, that sounds like my house at home. We have
Macs, we have iPads, iPhones. We have a 2-year-old and a 5-year-old who
love using those iPads. So, may be too much.
The products are very intuitive. They have a great software
ecosystem, we have come to expect innovation from Apple (NASDAQ:AAPL) and I
think we will continue to see it in the future.
You know, just because they have gone through a bit of a lull here
let`s not throw the baby out with the bath water. It`s easy to forget that
Apple (NASDAQ:AAPL) has been generating tremendous profits and has over
$130 billion of cash on their balance sheets today.
GRIFFETH: Right. It feels though that the innovation has been more
incremental than transformational, as we saw during the Steve Jobs era.
What do you think the next big thing is from Apple (NASDAQ:AAPL)?
SPENCER: Well, it`s hard to say. I think they`re going to continue
to innovate around the iPhone and iPad products. I think we`ll see thinner
iPads. And I think we`ll see larger screen iPhones and new features like
fingerprint sensors.
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Of course, we`ve all heard the talk about Apple (NASDAQ:AAPL) working
on watches and TVs. I think I would buy an Apple (NASDAQ:AAPL) watch if
one came out. I think there`s a lot of people into fitness who would use
it in the gym or while they`re jogging outside. And, of course, there`s
many people who would buy an Apple (NASDAQ:AAPL) TV to solve the nightmare
problems that we have with our cable box.
GHARIB: OK. Josh, do you any disclosures to make on Apple
(NASDAQ:AAPL), Intel (NASDAQ:INTC), or Yahoo (NASDAQ:YHOO)? Do you own any
of these stocks?
SPENCER: Apple (NASDAQ:AAPL) is the largest position in the fund that
I manage and we do own Apple (NASDAQ:AAPL) personally in our family as
well.
GHARIB: All right. Thanks so much. Josh Spencer, portfolio manager
at T. Rowe Price Global Technology Fund.
Bill?
GRIFFETH: Well, the markets rose sharply today, gaining back more
than half of Monday`s big losses. The Dow was up 157 points when all was
said and done, ending the session at 14,756. NASDAQ up 48, the S&P 500
added 22 points.
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Stocks got a big boost from a round of solid economic data reports and
stronger than expected earnings before the bell from Dow components, Coca-
Cola (NYSE:KO) and Johnson & Johnson (NYSE:JNJ).
As for that data, inflation is still in check. Consumer prices fell
more than expected last month, driven lower by a 4 percent decline in
prices at the gas pump.
Also, helping, industrial production was higher than forecast in
March. With U.S. automakers churning out more new cars and trucks and
utilities generating more heat to combat a nationwide cold snap that we all
suffered from last month.
And there was more good news in housing. Construction of new homes
shot up by 7 percent in March, enough to reach an adjusted annual rate of 1
million housing units for the month, something we have not seen in five
years.
GHARIB: Well, Bill, that jump in new home building that you just
talked about help sent shares of the nation`s biggest home builders higher
today. Pulte Homes rose more than 4 percent. Ryland up 3 1/2 percent.
D.R. Horton (NYSE:DHI), Toll Brother and Hovnanian all seen gains.
Now, much of the surge in construction was not single family homes
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however, but multi-family rental apartments. It`s a sector that`s been
growing rapidly over the past few years and now, there`s concern about a
backlash in all those rental units that are hitting the market all at once.
Diana Olick explains.
(BEGIN VIDEOTAPE)
DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):As
the market for single family homes recovers, a curious contradiction wings
overhead, crane high above construction sites of multifamily rental
apartments buildings. Thousands of new units are going up just as demand
for rental apartments could soon be coming down.
Multifamily starts rose 27 percent month to month in March, and are up
82 percent from a year ago, running at an annualized pace of 392,000.
Compare that to the 10-year historical average of 238,000.
DAVID TOTI, CANTOR FITZGERALD: A year from now, we will be seeing
much stronger headwinds for this space potentially. The supply trajectory
clearly is changing, mortgage credit is clearly loosening. If we stay in
the current pathway, I would expect that demand will be diminished
somewhat.
OLICK: The numbers don`t show it yet. Apartment vacancies fell in
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the first quarter of this year to 4.2 percent nationally, from 5 percent a
year ago. That pushed rents higher by 3 percent. Despite sluggish job and
wage growth, renters are still willing to pay these higher rates.
But the question is, for how long? Especially as confidence comes
back to single family?
(on camera): It takes about two to three years to put up an apartment
building. So, with all these new starts over the past couple of years,
we`re about to see a big surge in supply. And just adds to investor fears
already weighing on apartment rent (ph).
TOTI: What we have seen in the multifamily rent space for the last
couple of years, certainly last year and this year, has been relative
underperformance to the rest of the rent market. A big part of that has
been fear around supply. There`s a bigger concern around rental growth as
well. Supply ties to that.
OLICK (voice-over): But real estate is all about location. And
developers in prime, urban areas claim the market is hot but not
overheated.
JOHN TSCHIDERER, FEDERAL REALTY INVESTMENT TRUST: No, we`re not
concerned about any of that. I think the market is ripe for us to take
advantages of the locations we are.
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OLICK: More than 100,000 new apartment units are set to open in a
latter half this year, with an even stronger surge set for 2014.
For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.
(END VIDEOTAPE)
GRIFFETH: And that`s how our system works, where there`s one area
that suffers, like the housing market, the rental market is very hot right
now and that`s not lost in these builders.
GHARIB: Remember the whole American dream of owning a home. That
maybe changing, too. Just psychologically, Americans want to rent. It`s
easier.
GRIFFETH: And they are doing it in big droves right now.
Still ahead on the program, the gold rush. Is all the volatility
causing individuals to hoard or unload precious metals?
But, first, let`s take a look at how the international markets closed
today.
(MUSIC)
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GHARIB: As we mentioned earlier in the program, strong earnings from
two Dow components helped to set the table for today`s market rally. Coca-
Cola`s earnings and revenues topped estimates, thanks to strong sales
volume in the U.S. and worldwide.
And Johnson & Johnson (NYSE:JNJ) also reported better than expected
earnings on sales of newer medicines.
Investors bid up Coke more than 5 1/2 percent to $42, and it was
leading the Dow gainers. Johnson & Johnson (NYSE:JNJ) gained more than 2
percent to $83 a share.
GRIFFETH: Meanwhile, two financial services giants, Goldman Sachs
(NYSE:GS) and Blackrock reported strong quarters. Goldman`s profit was up
more than 7 percent, while Blackrock`s was up 10 percent.
Goldman`s chief financial officer said that their clients were more
cautious in March because of Cyprus and other uncertainties. While
Blackrock`s chief executive officer said new business during the quarter
was indicative of positive momentum.
Blackrock gained more than 1 percent, while Goldman Sachs (NYSE:GS)
lost nearly 2 percent.
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GHARIB: Shares at JCPenney jumped 5 1/2 percent today on a report
that the troubled retailer is considering ways to borrow against its real
estate by issuing debt. Besides its retail stores, Penney owns warehouses,
distribution centers and other real estate. JCP closed at $15.19 a share.
GRIFFETH: And Whirlpool (NYSE:WHR) announced a 25 percent dividend
increase, saying that it expects to sustain growth. As housing recovers,
all those new homes, of course, are going to need appliances. Whirlpool
(NYSE:WHR) also sells kitchen-aid and Maytag products.
Whirlpool (NYSE:WHR) shares have gained almost 65 percent of the past
year and they were up better than 3 percent today alone.
GHARIB: And one of the stars of today`s market was WW Grainger. It
sells equipment and supplies to other companies and institutions.
Grainger`s first quarter profit improved by 13 percent and that`s thanks to
strong sales growth in the U.S.
Grainger led the S&P 500, gaining 7 1/2 percent. That works out to
$16 to $241 a share.
And gold prices regained a bit of their glitter today, up $26 an ounce
but that`s coming off the biggest one day drop in prices in 33 years on
Monday, with prices falling $140. So, if you own gold, even some old
jewelry that you are thinking of selling for cash, you may be wondering if
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now is the time to sell.
Jane Wells takes us to a California company, where volatile prices for
gold and silver are creating a rush of customers.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: We have 23 kilos and 165 eagles.
JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):It`s
late afternoon at California Numismatic Investments where customers are
furiously buying or selling gold and silver. There`s a line out the door.
KEN EDWARDS, CALIFORNIA NUMISMATIC INVESTMENTS: Volatility brings
them in because they need to act now.
WELLS: Ken Edwards is a partner in the gold dealer, just down the
road from LAX. Business is up as gold and silver prices are down.
EDWARDS: Up until the recent drop, that was the end of last week,
beginning of this week, I would say that we were selling more, especially
silver.
WELLS (on camera): You were selling.
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EDWARDS: We were selling more. OK? Now that`s really balanced out.
We have seen more sellers come in the market in the past couple of days.
WELLS (voice-over): One man who did not want to talk on camera was
selling more than 1,600 ounces of gold while we were there. But most of
the people were buying.
John Garton is buying silver at the moment and is waiting to buy more
gold.
JOHN GARTON, SILVER/GOLD BUYER: Obviously, it will go down another
$100 and then it will start its way back up.
WELLS (on camera): At this facility, they will buy American gold
eagles for about $25 above the market price for gold. They`ll sell them
for about $75 over. As for silver, they buy at $1.25 above the spot
market, and they sell for $3.25 over, but they don`t have much silver to
sell at the moment.
(voice-over): Most of the business here is done through the mail.
About 20 percent is conducted in person. And CNI`s 18 employees are busier
than normal.
EDWARDS: When there`s big moves, lots of volatility, that tends to
get people to act right away. They don`t want to wait until Friday because
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the market might be completely different.
WELLS: And here, no matter what`s happening with the price of gold.
They are making money.
For NIGHTLY BUSINESS REPORT, Jane Wells, Inglewood, California.
(END VIDEOTAPE)
GHARIB: The tricky thing about selling jewelry is that it s just for
its weight not for the design or any special stones, it is a gold rush.
GRIFFETH: That numismatic quality. Exactly. I mean, we definitely
in the midst of the gold rush again. That`s for sure.
All right. Coming up, the business of protecting big events and the
cost to keep you safe.
But, first, more on how the commodities and treasuries and currency
fared today.
(MUSIC)
GHARIB: Brace yourself for even slower growth around the world, 3.3
percent is the new global economic growth number from the International
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Monetary Fund. It lowered its outlook by 0.2 of a percent today, blaming
steep federal spending cuts in the U.S. and the deepening debt crisis in
Europe.
The IMF also trimmed its growth forecast for emerging markets and cut
China`s growth to 8 percent from 8.2 percent.
GRIFFETH: Well, certainly, a slow down in GDP in China got the blame
from Monday`s selloff on Wall Street. But Ford does not see it that way.
The automaker is predicting that 40 percent of its global sales will come
from China by the end of this decade.
The company as a result has doubled its capacity there, scrambling to
keep up with demand in the world`s largest automatic.
Phil LeBeau is in Chongqing with a closer look at Ford`s rapid
expansion there and the challenges it still faces.
(BEGIN VIDEOTAPE)
PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
Shouguo Li is part of the new wave in China. Car buyers turning the
western part of the country into one of the hottest auto markets in the
world.
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SHOUGUO LIO, BUYER (through translator): In his mind, he feels that
the car, the brand is good. And the service is also excellent. So this is
why he trusts this brand.
LEBEAU (on camera): Here in Chongqing, the gateway to western China,
growth in auto sales is particularly good news for Ford. At this plant, a
new Focus or Cougar rolls off this assembly line every single minute. And
within two years, Ford will be doubling capacity in this area.
XU BINGHUA, CHANGAN FORD PLANT MANAGER: This year, the total volume
of the Ford (INAUDIBLE), we achieved almost 600,000. So it`s a big, big
key (ph).
LEBEAU (voice-over): Growing sales in China have been one of Alan
Mulally`s top goals since he took over Ford in 2006. At the time, Ford had
a small presence in China. While its rival G.M. led the market, thanks to
Chinese buyers loving Buicks.
Mulally immediately began investing billions in China, quickly ramping
production. China now generates 11 percent of Ford`s global sales with the
Focus leading the way.
ALAN MULALLY, FORD MOTOR COMPANY PRESIDENT & CEO: They have theFocus
being announced as the number one selling vehicle in the world, and the
number one selling vehicle in China. What a proof point about the Ford
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strategy.
LEBEAU: While Ford is surging in China, it is still barely a blip in
the rear view mirror of the market leaders.
JAMES CHAO, IHS (NYSE:IHS) AUTOMOTIVE: The dominant players here are,
of course, Volkswagen, General Motors (NYSE:GM). Hyundai is a story as
well in terms of how well they have done. So, Ford is still behind but
coming on strong.
LEBEAU: Running hot in the world`s hottest auto market, where buyers
are embracing the blue oval.
Phil LeBeau, NIGHTLY BUSINESS REPORT, Chongqing, China.
(END VIDEOTAPE)
GRIFFETH: In many ways, China is about 50 to 60 years behind us in
that they have this very large growing middle class in their country and it
is a sweet spot for companies like Ford and General Motors (NYSE:GM).
GHARIB: They`re going to turn in their bicycles for cars.
GRIFFETH: Yes, ma`am, they are.
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GHARIB: And a lot of them.
GRIFFETH: Yes.
GHARIB: Our series from China continues tomorrow with a report on
what doing business in inner China is really like for American companies.
GRIFFETH: In the meantime, from expansion on the roads, to trouble in
the skies. American Airlines and its regional carrier American Eagle
grounded all flights today after a computer outage at its reservation
system. About 900 flights were impacted and another 800 were affected by
planes and crews not making their destination.
American now says that its computer problems have been fixed and all
flights will resume this evening. But to expect a lot of delays before
things get back to normal.
GHARIB: And speaking to getting back to normal. Finally, tonight,
after the deadly bombings at the Boston marathon on Monday, many Americans
are worried about enhancing security measures at any public event. At
what`s likely the first high profile gathering since the Boston tragedy,
officials acted quickly to insure the safety of a concerned public despite
the cost.
Eamon Javers has more from Washington.
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(BEGIN VIDEOTAPE)
EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
There were marching bands, colonial pipers, and soldiers on parade instead
of on patrol. It hardly seems like a day after a major terrorist attack,
but the Emancipation Day parade continued as planned right down
Pennsylvania Avenue today.
(on camera): Officials said they were going to maintain a very heavy
security presence here at the Emancipation Day parade in Washington, D.C.
There`s not a lot of visible security, the normal police presence is out
and about here in Washington, but the folks we talked to here today said
this was an important day to come out the and they were not going to be
afraid.
UNIDENTIFIED FEMALE: It`s pretty safe place to be at this point.
JAVERS: How did it feel today?
UNIDENTIFIED FEMALE: I feel pretty safe. I do.
UNIDENTIFIED MALE: A hundred and fifty-first signing of the
Emancipation Proclamation. And times were a lot scarier and tougher back
then and people, you know, stood for what they believed in. I thought it
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was an important gesture to come out here and support this.
JAVERS (voice-over): These spectators were determined to go on with
life in America today, even as the Senate Republican leader warned that
Americans had let security go lax.
SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: The complacency that
prevailed prior to September the 11th has actually returned. And so, we
are newly reminded that serious threats to our way of life remain.
JAVERS: But securing the big events that America loves is an
extremely expensive to do, whether it`s in Times Square or New Orleans.
The NFL spent $6 million on security for the Super Bowl this year, and
President Obama`s first inauguration came with a $124 million security
price tag and there`s no guarantee that it will always work.
STEWART BAKER, FORMER HOMELAND SECURITY OFFICIAL: My sense is,for
something like this, you could not possibly have frisked everybody in
Boston before the marathon or looked in every trash can everywhere.
JAVERS: No matter what security officials do, life and the parade
will go on.
For NIGHTLY BUSINESS REPORT, I`m Eamon Javers.
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(END VIDEOTAPE)
GHARIB: And that`s it for us, NIGHTLY BUSINESS REPORT for tonight.
I`m Susie Gharib. Thanks so much.
GRIFFETH: I`m Bill Griffeth. Have a great evening, everybody. We`ll
see you tomorrow.
END
Nightly Business Report transcripts and video are available on-line post
broadcast at http://nbr.com. The program is transcribed by CQRC
Transcriptions, LLC. Updates may be posted at a later date. The views of
our guests and commentators are their own and do not necessarily represent
the views of Nightly Business Report, or CNBC, Inc. Information presented
on Nightly Business Report is not and should not be considered as
investment advice. (c) 2013 CNBC, Inc.
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