Transcripts For WHYY Nightly Business Report 20141001

Is suddenly hot. We have all that and more tonight on nightly Business Report for wednesday, october 1st. Well, good evening, everyone, and welcome, the markets kicking off the month of october and the final quarter of the year with a massive selloff today sparked by worries mostly about global growth. Not helping . Some disappointing Economic Data out today showing a slow down in u. S. Manufacturing and construction growth in august. Not even good news about private sector hiring and strong auto sales last month could blunt todays big decline. So major averages are now at their lowest averages since midaugust, and the index officially dipped into correction territory down 10 from its july 3rd high. Here is a look at the damage from the closing bell, blue chip off the lows but closing well below the 17,000 market, the nasdaq lower by 71, the s p 500 lost 26 points, the utilities the only sector in the green today. The new quarter off to a dismal start. What do traders and investors have on their agenda for the markets and the rest of the year, dominic chu has more. It is a period of the year where many experts believe is the more positive for stocks, this time around the investors will be tuned into a number of different items on the agenda. First of all, the Economic Data painted a mixed picture as of late. Some of the most important data will be on the jobs front as well as Consumer Spend can as we head to the allimportant Holiday Shopping season. Secondly, were getting ready to kick off an earning seasons. Many investors are looking to justify the markets that still hangs towards record highs, corporate records and sales could go a long way in setting the trend for the next few months, our nations central bank has slowly reduced the amount of stimulus in the system, and some say there is no telling how it will react to the fed taper, after all weve never seen anything like it in the past or what happens when you tried to unwind it. When it comes towards trading in the stock market, many say look to the banks. I would like to see some stuff come out of the financials that are better, both in materials, i would like to see lending pick up, the regulatory safeguards put in, are sand in the wheels. I think if the financials picked up i would feel a little bit better about it. Lets not forget there could be a huge shift in the Political Landscape in america with midterm elections just a little over a month away. All of these things could be potential catalysts for the overall market so investors are going to want to stay vigilant. For nightly Business Report, im dominic chu for the Stock Exchange. So where do the markets go from here . We look at a twopart discussion in the International Markets as well as forecasts for bonds and commodities. Our guests tonight look at u. S. International investing, we have the chief International Investment strategist, and seth masters chief investment officers at Global Wealth management. Thank you for joining us. Gentlemen. Thank you. Let me begin with you, seth and the u. S. Markets, why did we get this big selloff today . Is this the beginning of the big correction that everybody has been talking about . Quite frankly i dont know, but i think over time well see that the Market Trends upward, we have a fair amount of volatility. Because the markets are growing, the companies are growing at strong levels and we believe it is a way that will be sustainable in the next few years. All right, paul, do you like International Markets, which do you think will perform better over the next 12 months . Well take the u. S. This time, were overweight, u. S. Large caps at this particular time. We believe the trend will be higher over time. We do think that maybe international is getting a little bit too pessimistic in terms of the outlook that investors have. I think europe turned a corner, it will be slow, it will always be slow, next year i would look for opportunities to buy into undervalued stocks at that time. And you know, paul we talk about geographies, can you be a little more specific . I mean, europe versus china, lets say versus brazil, which the stock market was down 2 today. Any specific ones to invest in and what companies to avoid . First of all, we like the European Companies to improve, we would take a core approach to europe, we like germany, switzerland, the u. K. And in terms of the second market, go with countries that demonstrate a willingness and ability to do economic structural reforms, we put mexico, taiwan, korea and we would put china. We would put the underperformers, the underachievers, brazil, and also we would put indonesia and turkey in that group. You know, i guess i hear you saying the bull market is in tact, but i guess you dont rule out the possibility of a correction, when the interests rates go up, which we know they will, who knows okays if it is june or august, will it automatically mean the beginning of the death noll for the market . While there may be shortterm jitters when the fed begins to lift off from the zero Interest Rates that tied off in the past few years actually it will probably be a good thing for stocks over time. And the reason why is, when Interest Rates are rising, especially from very low levels as would be the case next year the reason is that the economy is improving. Which means that companies are actually growing, and that generally is good for stockholders. All right, so let me ask you paul, what you think of what seth just said. So the fed ends the stimulus program, that might be good for u. S. Stocks. But is that good or bad for some of the International Markets . It is initially going to be a head wind for International Markets insofar as the dollar is strong, putting foreign currencies under pressure, so if youre an investor you want the fortune currency to have an appreciatie ining currency, not depreciation. We could even find that International Markets will give investors a boost in the portfolios even as the s p eventually gets to its top. Seth why have the Company Shares sold off so much smaller . I think the reason is people really dont like volatility at the moment. They have gotten used to very low complacent levels of volatility. When you look at small caps the thing you think about is they are riskier, the other thing is they were quite expensive when they were at their peaks in march of this year, trading around 20 times their earnings. Today theyre back at Something Like 18, closer to the broad market. I think were closer to where things will move together as opposed to the big difference between smaller and larger markets. Seth masters at bernstein Global Wealth management. Tomorrow well take a look at bonds and commodities. More now on the solid jobs data from the payroll firm adp, private employers added 213,000 workers, a bit more than forecasted across the sectors. The adp report is a forerunner, sometimes, not always a predictor of the official jobs tally, that comes out on friday. The holidead of the worlds Biggest Hedge Fund has a look at the economy. He says the economy and current Market Conditions are actually in good shape. Well, the conditions are good. Corporatewise, balance sheets, everythingwise, that should continue to have a momentum, i see no real reason for a problem in the United States now other than too tight a monetary policy. And i dont think you will go to too tight a monetary policy. He did say he is concerned about another possible downturn but says that is months away. And the ceo sounding confident about the future, mary barra told investors she expects gm to reap its first profits in europe in more than ten years in 2016 and expects them to hit the operating targets. The same year gm increases production in china and gives money back to shareholders. From a shareholder return perspective as we deliver results our plan is to continue to flow the cash through stock showe stockholders. Not only here but the strength of the underlying balance sheet. Gm up 2 . And General Motors one of the big winners in the september sweepstakes for auto sales, september was also a profitable month for the entire industry. Sales up 9 from the same month last year with an annual selling pace of nearly 16. 5 vehicles. Sales at both gm and chrysler jumped to 19 year over year, ford sales down over 3 but the drop was better than forecast. Phil lebeau joins us from chicago with more on the strong numbers. Phil, no question about it, september numbers very impressive. But is it being of incentive . Is that how dealers are closing out deals and is that good or bad . Well, the incentives are up just a bit, i wouldnt call it a month where you drove by a dealership and there are signs saying you get 6,000 to buy a new car. We didnt see that, but we did see juice spread on the models that are struggling a bit. But overall the incentive was generally kept in check. What are lower gas prices meaning for the bigger sales of suvs, the trucks, the f150 that you showed us last night . Oh, youre seeing people buying the big suvs, no doubt about that. Here is the thing about gas prices, people pull back, when they come down it takes a while for people to realize hey, i can get a bit more for the suv and i wont feel it in the wallet when i go to the gas pumps. All of the suvs are far more efficient than they used to be. Phil tell us about chrysler, they sold more vehicles last month. Theyre in the sweet spot with two brands, jeeps and ram trucks because pickups are in demand. When you look at the ram trucks, especially the diesel option or the lineup fresh across the board theyre selling right now because they have fresh product. That is the bottom line in the industry. Okay, thanks, phil, phil lebeau, reporting from chicago. And pimco tells investors just how much money fled from the flagship total fund after bill gross walked out the door. More evidence today of how much the sudden resignation of of bond king bill gross from pimco shook up the fixed income market. Today, pimco released data for september, outflows for the month at the signature total return fund were nearly 24 billion, huge, the largest withdrawal was on friday alone, the day that gross resigned. The market plunge today is not the only worry on the minds of investors after officials in texas confirmed the first case of the ebola virus diagnosed here in the u. S. So could the fear factor surrounding ebola hurt the u. S. Economy . Steve liesman has more. We do not believe there is any risk to anyone who was on the flight at that time. Health officials may say that, but i didnt stop wall street today from selling off airline stocks. One index posted 3 on fears of reduced Airline Traffic after the announcement of the first eb case in the United States. Given the recent developments of the ebola cases, hitting the shores, people are concerned about air travel and Airline Investors are dumping the stocks thinking the airlines will be down. Were watching other stocks that may be impacted by this. The hospitality, they could be impacted by this until the situation clears up. Health officials insist they can contain the virus in the United States but the impact on Airlines Just one potential fear regarding investors. One study showed back in 2003, sars cost the Global Economy 3 billion, retail sales plunged, Airline Travel to hong kong fell 77 . Assuming as many experts do that an outbreak never happens in the u. S. Or is contained, the broader impact is that officials must respond to fears and restrict travel. Or if people voluntarily decide it is just safer to stay home. All of that pales against the far deeper impact in the western african nations suffering from the ebola outbreak, beyond the horrific crisis and lives, they face a difficult battle, with trade and transit, making it even more difficult to fight the deadly disease. The differing responses in the u. S. And western african nations highlights the biggest economic issue of all, one the world will deal with for decades, and that is the economic equality that enables a wealthy country to escape the effects of the deadly disease, and the poor country dealing with the fallout that the deadly disease gives out. A federal judge has certified a Class Action Lawsuit by investors who claim j. P. Morgan misled them about the quality and risk of 10 billion of mortgagebacked securities it sold just ahead of the financial crisis. This comes a year after the bank reached a 13 billion settlement with the u. S. Government and several states over the same allegations. And a judge throws out a fannie mae and freddie mac lawsuit against the government and that is where we begin tonights focus. A group of investors in fannie mae and freddie mac sought to stop the government from seizing most of the profits from the mortgage companies. The hedge funds here argue they have been short changed as fannie mae and freddy return to profitability. They saw shares spike and the rights to those earnings could be restored. Tell it to the judge, shares of fannie mae and freddie mac both down more than 35 today. Coke bowing to pressure from warren buffet announced plans to scale back its executive Compensation Plan into the plan was to go into effect next year. Shareholders continued to criticize the beverage giant saying the awards were excessive, saying they limited the stock compensation and improved transparency. Coke bubbled up a little bit to 72. 74. And cutting jobs as advertising revenue from the print business has gone down and as it tries to focus more of its resources on digital operation. Shares of the old gray lady up 9. 5 at 12. 30. Solar making its trading debut on the Stock Exchange today, the company the second biggest installer of solar panels for residents in the u. S. The ceo says there is enormous potential for the solar panel industry. Right now were saving customers 15 to 30 on the utility rate that is generated by fossil fuel. If you look historically in the seven states where we average, the utility increase is 6 , so given the fact that the utility rates historically continued to rise, nationally 4 , we think that there is a huge opportunity to provide clean power at a lower price. Shares closed just a penny higher at 16. 01. Shares of angies list jumped on reports the company is exploring a sale, they hired bankers to search for Strategic Options but theyre not committed to a definite sale. Shares surged to 17. 59. And directtv reaching a multiyear contract with the nfl, being able to continue to sell its sunday ticket packages of nfl gamings and the agreement expanded its rights to stream games on live mobile phones and over the internet. Shares spiked initially after hours. During the regular trading day the stock was up a little to 86. 59. And why is Cyber Security so important today . Just how difficult is it to recruit employees, especially when you compete against the likes of google and facebook for some of the same individuals, pretty much. Eamon javers has more. Facing stiff competition from toppaying Silicon Valley firms the nations spying agency is looking to recruit college hackers. And through one program, garnering students as young as in the eighth grade. Steven fountainebleu is recruiting them for middle school and high school students. He sat down and told me the nsa works hard to lure top talent. Clearly we lose a lot of incredibly talented people to google and facebook and microsoft and all the other places but we also get a lot of very, very smart people as well. Because some people just have this motivation to do what they believe is right to work for the government. And lefountain insists the students he is bringing to the spy agency simply are not bothered by the Edward Snowden disclosures. Actually, i dont think it has been damaging to our ability to recruit talent in that many of the students that i talk to and interact with, theyre interested in the tech. You know, theyre not bothered by lets say the politics of things like that. Theyre interested in the technology. Lefountain said that new nsa employees need to know that even though theyre trained to steal foreign data when theyre at work they cant hack when theyre at home. You cant do that in your personal life or against family and friends and neighbors. You have to be still a model citizen in cyber space. Eamon javers, for nightly Business Report. And coming up, the big business that is being done behind bars. And whether it is right to profit from prisoners. The now closed down rebel casino hotel in atlantic city, new jersey, has a new owner tonight, canada brookfield that has a casino in las vegas, was the top rival for an offer of 110 million. Get this, the twoyearold casino which shut its doors last month, cost more than 2. 5 million to build. The United States is home to 25 of the worlds prisoners and it has become lucrative for some. Cnbc, which produces this program and through a joint partnership took a look at the big money behind bars. The United States has the highest incarceration rate in the world. Over 2 Million People behind bars. Which provides ample opportunity for some to be on the front lines of profiting from prisons. Brian shapiro is one of those people, he runs a Company Called jay pay that took in about 50 million in revenue last year from a captive, literally, market. The bulk of the business is providing electronic money transfers for corrections facilities. The pitch is that this is more convenient for you. Loved ones can put money into an inmates account without ever leaving the house. Each time the Family Member transfers the money, jay pay charges a fee ranging from about 1. 45 to more a transfer. One they get the money set up in prisons they can use it to buy other services that jay pays provides. Like email and video visitation, 12. 95 per 30minute session, even tablets for inmates. Like this. How much did that cost you . It was 59. 99. The tablet holds music to inmates can download from yet another jay pay service, similar to itunes, but it is not just jay pay that is profiting. The Company Operates in over 1200 facilities in 32 states. And there is a Profit Sharing agreement with each state. Government agencies can and will accept a portion of the revenue as an incentive to put the program in. But those like jack johnson who worked at the federal bureau of prisons for decades has a problem with anyone making money on the backs of prisoners. I felt like it was more of the government bureaucracies that were profiting from this, as well. The sentence is the punishment. Inmates are not put in prison to be punished, theyre put in prison as punishment. Keith miller is doing two and a half years for armed robbery. It is not right, my family has to be paid for money to be sent to me. Critics argue this leads to gouging, and investors and regulators have already gone after some companies especially those who provide phone services for prisoners, like pay tell. And the reason were in this mess right now on my side my industry has abused the public and im willing to admit that. We have abused the public. The fcc had to step in and cap rates for prison phone calls. But the jay pay ceo ryan shapiro says regardless of the flaws in the system he is providing valuable systems to those behind bars. Before jay pay came around that type of Customer Service didnt exist in corrections, period. It is unfortunate nobody has come up with a better model and if somebody did that would be fantastic, but nobody has yet. For nightly Business Report in bismarck, north dakota. And that is nightly Business Report for tonight, im susie gharib, thank you for joining us. And im tyler mathisen, thank you for me, as well. Have a great evening, we hope to see you right back here tomorrow night. Nightly Business Report has been brought to you in part by the street. Com featuring stephanie link who shares her investment strategy, stock picks and market strategies, the multimillion dollar portfolio she manages with jim cramer. You can learn more at the street. Com nbr. This is bbc world news america. 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