Nightly Business Report - Tuesday June 18 2013

7/28/2019 Nightly Business Report - Tuesday June 18 2013

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ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and SusieGharib, brought to you by --

(COMMERCIAL AD)

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: The markets have beenwhipsawed -- six straight days of triple digit moves all because of the Fed. So what should youwatch for when Ben Bernanke speaks tomorrow?


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TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: The hard sell. Theodds are everywhere for reverse mortgages, offering quick cash now for Americans 62 or older.What to know before you sign.

GHARIB: And healthy prognosis. Why healthcare costs long the culprit behind risinginflations are now showing signs of slowing.

All that and much more tonight on NIGHTLY BUSINESS REPORT for Tuesday, June 18th.

MATHISEN: Good evening, everyone. Welcome.

A triple digit move, of course, isn`t what it used to be, not when the Dow sits comfortablyabove 15,000. But it is still eye-catching, especially when it s the sixth in a row for the blue chipbarometer. In fact, today`s move carried stocks to their highest levels in three weeks, with thesmall company Russell 2000 Index rising to a record, up 1.2 percent on the day.

So why the big move today?

Well, for one thing, talk of the big taper tapered off just a bit. Investors ears tuned as alwaysto the Federal Reserve seem persuaded for the day at least at Ben Bernanke and his fellow Fedheads won`t nip or tuck their bond-buying program too much when they finish their two day-meeting tomorrow.

More on what to look for from the Fed in just a moment.

Today`s economic news, by the way, fairly benign. Housing starts in May up less thanexpected and inflation jumped a tenth of a point and last month also less than forecast.

Building on Monday`s gains, stocks started the day higher, stayed there all session long at theclose. The Dow was up 138 for a two-day gain of 1.6 percent. The NASDAQ ended 30 pointshigher, the S&P up 12.


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GHARIB: So what will the Federal Reserve policymakers do and how will traders andinvestor parse through every single word from Chairman Ben Bernanke in his press conferenceon Wednesday.

Kelly Evans takes a pulse of some Wall Streeters on what to look for from the Fed.

(BEGIN VIDEOTAPE)

KELLY EVANS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): It`s

the most important Fed meeting since -- well, the last Fed meeting. Anyone hoping trade metersmoved on from their obsession with Federal Reserve policy move must be sorely disappointed.

BEN WILLIS, NYSE TRADER: Ben Bernanke just has to open his mouth and say hello andthe government is going to move.

PAUL SCHATZ, HERITAGE CAPITAL PRES. & CO.: Everyone is looking for theslightest hint the Fed is going to change course.

ALEC YOUNG, S&P CAPITAL: I think this latest bounce back off the 50- day at 1,600 hasdefinitely been in anticipation of some dovishness from Ben Bernanke tomorrow. If we don`tget that, I think we sell off.

EVANS (on camera): What`s the one thing the Fed can do or say tomorrow that you thinkwill be a calming presence on the market?

WILLIS: I don`t think there is anything they can say that will be calming.


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EVANS (voice-over): For weeks now, markets have traded on speculation, rumors andreports about just what the Fed will decide to do when its two-day meeting concludes tomorrowafternoon.

It`s been a sea saw ride for Wall Street in the last few weeks. Stocks started selling off onMay 22nd when Fed Chair Ben Bernanke said continued improvement in the labor market couldprompt the Fed to pull back on stimulus within the next couple meetings. Then, stocksrebounded when "The Wall Street Journal" said the so-called tapering of bond businesses wasnot in the cards this time around.

Yesterday, it was back to selling off when "The Financial Times" on Monday said the Fed isat least likely to signal tapering is close.

WILLIS: My belief is tapering has begun because jawboning is a function of tapering.

EVANS: What`s telling about the market jitters on every rumor about the Fed is that itreflects a broader concern in the market that the U.S. recovery still isn`t broad-based enough tostand on it`s own two feet. The latest reminders of that, consumer price inflation last month rosejust 1.4 percent from a month earlier, the unemployment rate tick up to 7.6 percent in May.

Perhaps bond king Bill Gross put it best, in this tweet saying that for today at least, "All isquiet on the Eastern Front." But he cautioned Bernanke must be careful to keep it so.

For NIGHTLY BUSINESS REPORT, I`m Kelly Evans in New York.

(END VIDEOTAPE)

MATHISEN: While investors wonder about the Fed`s next move, President Obamaspeaking to Charlie Rose had to bit to say how long Fed Chairman Ben Bernanke may stay on ashead of the nation`s central bank.


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(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Well, I think Ben Bernankehas done on outstanding job. Ben Bernanke is a little bit like Bob Mueller, the head of the FBI,where he`s already stayed a lot longer than he wanted or he was supposed to.

(END VIDEO CLIP)

MATHISEN: Remarks were interpreted by some as a subtle indication that the presidentmay be readily to let Bernanke walk. He has been the head of the Feds since he was appointedby President George W. Bush in February of 2006, reappointed to the post by President Obama

in 2010, and his second four-year term ends on January 31st of next year.

GHARIB: Well, the New York Stock Exchange was in the spotlight today not just becausetraders were on Fed watch, but also on word that it was a target of a terror plot. An FBI officialtold lawmakers at a House hearing that the NSA`s controversial spying program at one timehelped stop a plan to bomb the NYSE.

(BEGIN VIDEO CLIP)

SEAN JOYCE, FBI DEPUTY DIRECTOR: NSA utilizing 702 authority was monitoring aknown extremist in Yemen. This individual was in contact with an individual in the UnitedStates named Khalid Ouazzani. Ouazzani and other individuals that we identified through aFISA that the FBI applied for through the FISC, were able to detect a nascent plotting to bombthe New York Stock Exchange.

(END VIDEO CLIP)

GHARIB: Intelligence officials also said that NYSE plot was among 50 potential terroristevents that were disrupted over the past 12 years, thanks to the government`s surveillanceprogram.


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MATHISEN: G8 leaders from the world`s top industrialized nations wrapped up a two-daysummit in Northern Ireland today. President Obama and other heads of state touched oneverything, from resolving the civil war in Syria, to vowing to close tax loop hopes around theglobe.

Steve Sedgwick has more now.

(BEGIN VIDEOTAPE)

STEVE SEDGWICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Here inNorthern Island, at the G8 Summit, David Cameron perhaps achieved a lot more than many had

expected. The official agenda was all about trade, tax and transparency. And on that front, hehad a very successful meeting, agreeing new rules for taxation on the global basis, includingautomatic sharing of company details that could have ramifications for the Amazons andStarbucks (NASDAQ:SBUX) of this world.

New trade deals potentially in the offing as well, $100 billion deal between U.E. and the U.S.could be on the cards as soon as the end of the 2014. And for the developing world, a deal ontransparency for those mining companies, as well.

But coming into this meeting, there were a lot of concerns of Syrian issues and the conflictthere would actually act as a deterrent, getting a deal done elsewhere. And despite resistancefrom the Russians and President Putin, especially we do appear to have a 7-point plan from theG8 as to sorting out the conflict in Syria including key point here about having a transitionalgovernment to pave the way to some form of consensus government and some form ofdemocratic institutions in Syria. So, very important there.

They also condemned the use of chemical weapons in Syria here at the

G8 and talked about $1.5 billion of new humanitarian aid.

For NIGHTLY BUSINESS REPORT, I`m Steve Sedgwick in Enniskillen.


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(END VIDEOTAPE)

GHARIB: More charges against a former trader at UBS who is still the first and so far onlyperson charged in a worldwide investigation into the manipulation of benchmarked interest ratesduring the height of the financial crisis. A year after U.S. prosecutors charged him of similarcrimes, British authorities have now charged former trader Tom Hayes with eight counts ofconspiracy to commit fraud for changing Libor figures. Those are the London interbank offeredrates which are used to set interest rates on mortgages and lots of other loans at banks around theworld.

MATHISEN: Well, the next time you hit a Starbucks (NASDAQ:SBUX), you may want tothink twice before ordering a large-sized peppermint white chocolate mocha with whipped creamwith its 22 grams of fats, its 95 grams of sugar, and 660 calories.

And starting next week you can, I`m not sure this is good news for me. That`s because theworld`s biggest coffee chain is going to begin posting calorie counts for all of its drinks at all ofits U.S. locations. Investors didn`t seem to mind, though. Shares of Starbucks(NASDAQ:SBUX) all-time high today closing at more than 1.5 percent higher level.

GHARIB: Well, too many high calorie coffees and you may need to see a doctor, if you canafford it. But a new study from accounting giant PricewaterhouseCooper is getting a lot ofattention after finding medical cost trans known as medical inflation is actually slowing downand consumers and companies keeping a close eye on healthcare cost is a big reason why.

Bertha Coombs has more.

(BEGIN VIDEOTAPE)

BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):Retail health clinics are relatively new in the U.S. Five years ago, fewer than one in tenAmericans used one.


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UNIDENTIFIED MALE: I go to Canada a lot and I see these all over the place and that`swhat people do in that kind of market.

COOMBS: But last year, one in four of us opted for a more affordable clinic at some pointinstead of our doctor`s office or an emergency room.

UNIDENTIFIED FEMALE: I wouldn`t use an emergency room other than absolutelynecessary because I know how expensive it is.

COOMBS: Those kind of cost conscious decisions are helping to drive down healthcareinflation, says PWC managing director Ceci Connolly.

CECI CONNOLLY, PWC HEALTH RESEARCH INSTITUTE MANAGING DIRECTOR:If you think back to say the early 1990s, the healthcare costs trajectory was straight up, doubledigit increases year after year. We`re now really coming down into the 4 percent, 5 percentrange.

COOMBS: In a new report, PWC projects medical costs for the nation`s largest employersand their workers will grow 6.5 percent next year, down a full point from their estimated 7.5

percent growth rate for 2013. Part of the reasons is workers like Deborah Flossen (ph) arefooting more of the bill.

UNIDENTIFIED FEMALE: Well, I feel like they keep taking more and more away frommy benefits, you know, more deductions, they are paying less and I`m paying more.

COOMBS: Employers are also pushing back at providers like hospitals. Lowe`s and others

are opting to send workers to high performance health networks like the Cleveland Clinic andMayo Clinic.

CONNOLLY: These are places employers are signing direct contracts with to do some ofthe most difficult cases that they might have. And because their outcomes are so solid, itactually brings down the cost.


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COOMBS (on camera): PWUC believes this cost-conscious trend among patients and payersis here to stay, and the taming of medical inflation will result in long-term savings.

For NIGHTLY BUSINESS REPORT, I`m Bertha Coombs.

(END VIDEOTAPE)

MATHISEN: And still ahead, the most important questions you need answered if you`reconsidering taking out a reverse mortgage.

But, first, a look at stocks hitting 52-week highs today.

(MUSIC)

MATHISEN: The automaker Chrysler reverted what could have been a public relations

disaster, finally agreeing not to fight a government request to recall 2.7 million older Jeeps.Safety officials say the vehicles are at risk of catching fire in a rear-end crash. For weeks,Chrysler insisted the Jeeps Cherokees and Liberties didn`t need a costly upgrade to reinforce ormove gas tanks, despite 51 deaths related to collisions from behind. Chrysler still says the Jeepsare safe but agreed to the recall to make sure Jeep owners feel the same way.

And for more on the recall, you can log on to our Web site, NBR.com.

GHARIB: Yahoo (NASDAQ:YHOO) has been trying to rebuild its brand by buying upsmall tech companies and start ups. But is the strategy working and what CEO Marissa Mayer`sreal goal for the company.

Jon Fortt has that story.


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(BEGIN VIDEOTAPE)

JON FORTT, NIGHTLY BUSINESS REPORT CORRESPONDENT: You might havenoticed, Yahoo (NASDAQ:YHOO) is buying a lot of companies lately. As CEO Marissa Mayerapproaches her one-year anniversary in less than a month, the company is clearly going intoexpansion mode. Just last month, there was Tumblr for just over $1 billion. Last week,GhostBird software. Now, there are rumors that Yahoo (NASDAQ:YHOO) is kicking the tiresof other companies like Hulu, Xobni and Qwiki.

What`s driving this buying spree? It`s not necessarily that Yahoo

(NASDAQ:YHOO) wants to own the products and services they make. Part of the reason whyYahoo (NASDAQ:YHOO) is buying these companies is for talented engineers who know how tobuild the kinds of mobile and web apps the new generation wants.

PETER MISEK, MANAGING DIRECTOR, JEFFRIES AND COMPANY: The talent side,some of these folks are so good, they really have such an impact that the only way you`re goingto ever be able to hire them is to buy the company that they basically founded. So it reallydepends on what your business strategy is and how critical software development is. And formany of them, especially as you`re developing web-based services, that`s absolutely critical.

FORTT: But it`s a risk strategy, engineers can be a pickled bunch. What if the cultural fitisn`t right and what if the people from the acquired company don`t stay?

ALEX DOUZET, THE LADDERS CEO: You have to come up with an incentive plan forthe employees to make it attractive to them to want to stay there. It`s not just bonuses. I thinkit`s also a promise they`re going to maintain the culture and environment the way it was before.

MARISSA MAYER, YAHOO COE: I like Yahoo (NASDAQ:YHOO), so do a lot of myfriends.

FORTT: Those kinds of concerns are what led Mayer to put out an unusual press releasewhen Yahoo (NASDAQ:YHOO) bought Tumblr last month, promising not to screw it up.


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Yahoo (NASDAQ:YHOO) is not alone in acquiring talent. Apple

(NASDAQ:AAPL) buys a lot of small companies and just doesn`t announce them unless it hasto. CEO Tim Cook says Apple (NASDAQ:AAPL) is buying more than usual, nine sinceOctober or about one a month. Google (NASDAQ:GOOG) and Facebook (NASDAQ:FB) havebought several, too.

The difference is that while the others are trying to buy startups quietly, maybe to keep theirmotive secret, Yahoo (NASDAQ:YHOO) is shouting from the rooftops because Mayer and herteam want us to think that they are becoming a cool place to work again.

For NIGHTLY BUSINESS REPORT, I`m Jon Fortt.

(END VIDEOTAPE)

MATHISEN: A lot of winners in today`s "Market Focus", beginning with General Electric(NYSE:GE), leading the Dow ahead of an analyst call tomorrow on its aviation leasing andaircraft engine businesses. G.E. also making news with Amazon (NASDAQ:AMZN), putting awide range of technical data for those engines and other products online. The so-called industrial

Internet, considered a multi billion-dollar growth engine in the decade ahead.

G.E. up more than 2 1/4 percent, to close at $24.33, a multiyear high there.

Hewlett-Packard (NYSE:HPQ) gained after a high level executive accepted a newassignment to manage HP`s growth initiative. Hewlett has led the Dow, this year, today.They`re up more than 78 percent. Today`s trading, shares were up more than 1 percent to close

at $25.44.

GHARIB: Sony (NYSE:SNE) jumped as the hedge man Dan Loeb s firm boosted its stake.The billionaire investor is also pushing for talks with Sony`s board so he can pitch his plan tospin off Sony`s music and film business. Shares of Sony (NYSE:SNE) gained more than 3percent to $21.40.


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Flir Systems, another big gainer today, the sensor and imaging maker was upgraded byRaymond James to strong buy, with a $33 target. The analyst says the company`s governmentbusiness is stable enough and won`t pull down the commercial side. Shares are up nearly 19percent year to date, and today surged more than 6 percent to $26.49.

And Adobe Systems (NASDAQ:ADBE) better than expected quarterly profits after themarket closed today, and solid revenues of more than $1 billion. The company`s Cloud servicebookings were up 25 percent as users make the move to Adobe`s cloud base programs.

Shares of Adobe traded in a narrow range during a regular session and then they spiked onearnings news despite softer guidance for the current quarter.

MATHISEN: On Capitol Hill today, the pros and cons of reverse mortgages. At a Senatecommittee hearing, lawmakers drilled down into the controversial and widely advertised loans,looking for ways to better protect consumers. In a reserve mortgage, a lender pays money to thehomeowner, a portion of his or her equity.

But the borrower has no monthly payment. The loan plus interest is paid back after the homeis sold or the homeowner dies or moves out.

Our guest tonight says there are risks and rewards to these special mortgages with a twist.

He`s Vern Hayden, founder and manager of his money management firm, Hayden WealthManagement.

Good to see you again, Vern.

VERN HAYDEN, HAYDEN WEALTH MANAGEMENT: Thanks, Tyler. Good to seeyou.


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MATHISEN: Now, these things are controversial. They are, as we mentioned, widelyadvertised to people age 62 and older. You are cautious about them. Let me put the questionthis way, who is the ideal candidate to take out one of these loans?

HAYDEN: I really have mixed emotions about this because you`re talking about olderpeople incurring debt at a really weird time in their life, and people have to keep in mind thatthere`s two kinds of debt, constructive and destructive. And reverse mortgages have thepotential for being each one of those -- very constructive if for people who need to close the gapon their income and supplement it -- supplement Social Security to add to it so they have adescent lifestyle.

So, I think it`s for those people who carefully plan to use something like a reverse mortgageand not turn into a destructive thing, which is like an ATM machine or like credit card because

reverse mortgage can be set up to just draw on it whenever you want with any amount of moneyup to the limit.

GHARIB: So, Vern, four people that do fit the profile that is right for them. How -- can yougive us two tips on what they should or shouldn`t do so that they don`t get burned? Because wedo see all those sales pitches on TV all the time.

HAYDEN: Well, there`s an old fashion statement that says short-term decisions have long-range consequences. And here, people have to be careful about who is the owner and theborrower on this debt because if it`s a husband and wife, and only one of them becomes thebarrower and that person dies, that loan has to be immediately paid off and that could leave theremaining spouse hanging out there without anything except Social Security.

MATHISEN: So you want to make sure if you have a surviving spouse that both of you areon the deed to the house and remain so and both of you are on the loan and if you -- if they tellyou to take one name off, then that other person may have to sell the House to repay the loan.What in terms of fees do you need to look at? And I gather these loans number one, have higher

interest rates or mortgage rates than conventional mortgages do and sometimes can be laden withfees.

HAYDEN: Yes, that`s exactly true. And it was terrible in the past where some of thesethings were created originally and it was like highway robbery the fees were so much. But thereis an origination fee and that fee has a broad range depending how you`re getting the loan.


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And then the interest rate. The interest rate is lower if somebody is older and if the house isvalued at a higher amount, but people have to be careful, those interest rates now can rangeanywhere from 5 percent to 7 percent and sometimes even higher. So people have to negotiateand so forth. I think the safest way for most people to take a look at this is to look at the federal -- the housing authorities where they insure the loans and they also make sure that every personconsidering this has a good counselor by their side before they commit to the loan.

GHARIB: That`s really good advice, Vern. You do give advice all the time to your clients.So, let`s say you have a baby boomer on the young side and needs to have some financial helpwith bills or debt or whatever. If not a reverse mortgage, what advice do you give?

HAYDEN: Well, in the first place, you got to be 62 in order to take it. I know that`s still inthe baby boomer range, but I think they still need to do everything possible before using thereverse mortgage at that stage of the game. And they should be working with somebody that willhelp them plan run-out scenarios, what if we do this and what will happen if we make thisdecision versus that decision.

They need some advice and some help from qualified people that may even charge them afee to do that. It`s well worth it if it s a good person.

MATHISEN: All right. Vern Hayden, thanks very much. Vern is founder and president ofHayden Wealth Management.

HAYDEN: Thank you.

GHARIB: And coming up on the program, how hummus once regulated to the health food

aisle is becoming big business in America.

But, first, let`s look at how commodities, treasuries, and currencies fared today.

(MUSIC)


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MATHISEN: Things just got a lot harder if you want to keep your elite status in the UnitedAirlines frequent flier program, especially if you`re a discount ticket buyer. The airline used torequire only 25,000 flight miles a year to stay in the elite mileage plus program. Now, aftermerging with Continental last year, you also have to spend at least $2,500 a year to get seatupgrades and perks and baggage and other fees don`t count toward that total.

GHARIB: A bold move by the U.S. government today to prop up sugar prices. TheDepartment of Agriculture will spend about $38 million to buy homegrown sugar for the firsttime in more than a decade. The government will make the sugar available to refiners. The goalis to cut into a surplus that sent sugar prices to four-year lows. It will remove 300 tons to themarket which could lift prices and help head off possible default of government loans byrefiners.

MATHISEN: Well, as Americans clamor for healthier foods, one company has beenbringing a bit of the Middle East here to the States, hummus. And the result, more than achickpeas worth of success.

Jane Wells explains.

(BEGIN VIDEOTAPE)

JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):Springtime and while other farmers debate whether to plant corn or soybeans, Frank Wolf hasbeen debating how much of his farm in Washington state to commit to chickpeas.

Chickpeas?

FRANK WOLF, CHICKPEA FARMER: In the future, we see a 10 percent increase ofproduction on our farm if pricing of chickpeas stays stable or increases with demand.


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WELLS: Why the increase in chickpea demand? They are the main ingredient in hummus, aMediterranean staple which has increasingly becoming the dip of choice in the U.S.

RONEN ZOHAR, SABRA CEO: It`s stuff on the chickpeas, that, you know, it`s -- this isthe ingredient (ph) that we`re using, OK.

WELLS: Ronen Zohar is CEO of Sabra, by far the dominant player with over half themarket. Sabra is a joint venture between Pepsi and Israeli- based Strauss. And in six years, thecompany says sales have grown from

$16 million to $800 million. And most Americans haven`t tried hummus yet.

ZOHAR: The penetration of hummus in the U.S. is a low number right now. It`s somethinglike around 20 percent of house of penetration. So, the opportunity is huge for us.

WELLS: Sabra is pouring some profits into a new R&D lab in Virginia to figure out newflavors Americans might like, and the best chickpeas to grow to improve yields. And to meetdemand, the company is also talking to Virginia tobacco farmers to see if they`ll maybe switch tochickpeas.

(on camera): Big picture Sabra hopes Americans won`t just be dipping hummus, they`ll bespreading it. Watch out peanut butter.

ZOHAR: It`s only the beginning. As I`ll say, it`s only the beginning.

WELLS (voice-over): Sabra`s success has not gone unnoticed in the Mideast whereapparently the Lebanese had complained that Israel has co- opted in terms of branding. Zoharhas said in essence that if they can reduce tensions in the Middle East to merely a food fight, thatwould be fine.

For NIGHTLY BUSINESS REPORT, I`m Jane Wells.


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(END VIDEOTAPE)

GHARIB: And finally tonight, two stories about dollar bills. The first, Ben Cohen, acofounder of ice cream maker Ben & Jerry`s was in Washington today, stamping dollar bills withthe slogan "not to be used for bribing politicians". It`s part of his push to get corporate moneyout of politics.

And then there`s Treasury Secretary Jack Lew`s signature which got a massive makeover justin time to appear on new U.S. currency.

Here is what Mr. Lew`s signature used to look like when he was nominated for the post back

in January. But after some needling by colleagues, including his boss, President Obama, here ishow his John Hancock will appear on new $5 bills that hit the presses this summer.

So, maybe you can use those $5 bills to buy some hummus.

MATHISEN: I like those little squiggles, the old Jake Lew signature. That was funny.

GHARIB: It doesn`t look like much of a signature.

MATHISEN: No.

GHARIB: That`s NIGHTLY BUSINESS REPORT tonight. Thanks for watching, everyone.I`m Susie Gharib.

MATHISEN: I`m Tyler Mathisen. Thanks for me as well. Have a great evening,everybody.

Be sure to log on to our Web site NBR.com. We hope to see you back here tomorrow night.


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END

Nightly Business Report transcripts and video are available on-line post broadcast athttp://nbr.com. The program is transcribed by CQRC Transcriptions, LLC. Updates may beposted at a later date. The views of our guests and commentators are their own and do notnecessarily represent the views of Nightly Business Report, or CNBC, Inc. Informationpresented on Nightly Business Report is not and should not be considered as investment advice.(c) 2013 CNBC, Inc.

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Nightly Business Report - Tuesday June 18 2013