Transcripts For KQED Nightly Business Report 20180120 : vima

KQED Nightly Business Report January 20, 2018

Again today, and even though the plot is familiar, the drama is always captivating. Hours ahead of a midnight deadline, sen minuterity leader Chuck Schumer met with the president a white house. The senator said progress was made, but disagreements remain. Well, the drama in d. C. May hav it was naptivating. Investors yawned and put on a drauzy smile today the dow jones lost 53 points to 26 ab 571. Nasdaq gained 40. And the s p 500 added 12. If a possible Government Shutdown wasnt top of mind for investors, what the heck is . Reporter stock rose fractional today. The markets hav already had a banner start to the year but many are concern had the prospects of a Government Shutdown could derail the rally. Well, maybe, but based on history, its highly unlikely. In last few decades, stocks have barely budged in the days during a Government Shutdown. Beyond the shutdown, really, there is plenty of other forces that are driving the markets and may be affecting the markets this week. Remember, we essentially we. A big concern for the market right now is the bond marc market. The tenyear test reyield road to a three year high and there doesnt appear to be a lot slowing it down. If rates continue to rise that could be a major problem for stock mark investors. Also, there energy market. Crude oil prices are up 10 over the last month. But this talk of Oil Beginning to up to out. So u. S. Oil output is expected to break through 10 Million Barrels a day and u. S. Production is expected to overtake russian and Saudi Arabian production. It is good news but putting a lid on the gains this year. Energy stocks, have had been moving up, were all down the week. Reporting from the new york stock exchange. Seconders within the market respond differently during Government Shutdowns. On average, the Energy Sector is up 2 during a sheetdown making it the best performing group. On the flip side, the informatio technol sector is the worst performing, falling nearly 2 . But big gains come after the government reopens because two weeks afte the government is back in business, the dow and the s p 500 have seen gains than 3 , with the dow trading positively 100 of the time. Despite the back and forth in washington money flowed into the stock ma at the fastest pace every during the past four weeks. Acco to the latest survey from bank of America Merrill lync mutual funds and efts that focus on equity saw 58 billion of fresh money flowing in. The survey sites investor fear of missing out, a phenomenon weve reported on. New money didnt just go into Exchange Traded funds that passively track the market but also into actively run funds which have seen outflows over the past couple of years. Investor enthusiasm is indeed high. But is it too high . Next week mark as big test for the market. Earnings come out. Here to ta the markets should be watching is kevin koran. Welcome back, kevin. Good the see you, as always. Good to be here. You know, the issues that may be affecting the market, bob poe sanny mentioned rising bond yields. But they are rising from historical low levels. Are you worried abo the increase in interes rates . We are matching it but we are not particularly worrd because if you look at where its coming from, its coming from a much better economy. We are seeing investment spen picking up very strongly. And this is a big thing because for four years before this, before lets say the milled part of 2017, investment spending was really quite weak and the economy was weak. We are seeing that pick up thats actually good for growth. And the reason that the rates are rising is because we are seeing firmer prices. This is somethi that the fed has been looking to achieve for a long time. And now we are getting inflation back up to about 2 . So everything looks fairly good. And bond yields have been very low for a long time. So we just see this as a readjustment of those yields to place where is they maybe should n all along. You know, kevin, i want to talk about something else. That is the pass an of the tax bill. The biggest tax bill since 1986. We all remember what happened then a year later in 1987. There was a big crash. Tell me why you think this time may be different and we are probably to the going to have a crash. Or tell me why you might worry a little bit that things are getting a little going too far too high too fast. Although the data is signaling good things in the economy, we do have to worry about valuations. Global equities has advanced very sharply in the last year, and u. S. Equities are worth about 32 trillion. To put that in perspective, the economy is only around about 19 trillion. So the stock market, which tends to eventually square up with the economy, looks relatively rich compared to the underlying economy. If its exuberance gets to be too much, to use Alan Greenspans words, that eventually could end up forcing some kind of correction. We do need to be mindful of that. Where would you put money to work in this market given the level of valuing as that you just mentioned. We do like the United States from a global perspective. We think that ultimately the dollar begins to strengthen here somewhat particularly as the fed begins to raise Interest Rates or continues to raise somewhere rates. We think that the sectors statee consumer staples, Health Care Sectors are places that have good Balance Sheets are places t toant to focus because we are own companies that have good Balance Sheets and consistent cash flow asks we like the companies that e raising their dividend consistently. Those are the kind of things we are always looking for. Kevin, thank you so much. You are a trooper, you are always the last one there. Turn off the lights as you leave. You a the last one there on friday nights. Thats what founders do. Thats what they do. As bob reported, treasury yiel rising and there are no signs of them slowing down that means higher rates for those who want to borrow money. Not necessarily for those who want to deposit it. And the timing for the Housing Market and borrowers couldnt be worse. Diana olick explains. R there i still snow on the ground in much of the nation, but the spring Housing Market is right around the corner. And this year it will be more competitive than ever. Theres auls already a supply crisis. Not enough homes for sale. And rigzing Mortgage Rates could make that even worse. Rates were stuck near record lows for the bulk of last year but they are suddenly breaking out. The average rate on the 30year fixed is up nearly a quart to 4 sell of in the bond market. Rates loosely follow the yields on the tenyear treasury. Three bedrooms, right. Yes. Report higher rates could keep potential move up sellers were listing their homes because they dent want to lose the rock bottom rate they locked in a couple of years ago. That reduces the rate further. It could cause buyers especially those on the margins to jump in faster now before rates rise even further and price them out. One of the things i think is going to happen, and my realitior friends tell me too, they are concern people wont sell their home and just stay in it. If there are fewer sellers there is going to be fewer home on the market and home prices go up. Reporte they ha already been going up accelerating their gains as demand rises and supply false. Higher Interest Rates usually cause home prices to cool off giving purchasing power. But given how tight the market is nationwide that is unlikely to happen. Switching gears to a story that is also everywhere, the flu. The illness is widespread, stressing hospitals, impacting schools, some of which are closing and pressuring workplaces. E est puts the n 1 million. As we told you earlier, that could cost employers 9 billion in lost productivity. Here to offer his comments on this flu season is dr. William schaffner. Ativ University School of medicine and one of the clearest spoken physicians i no. Good to be with you. Wor at alt we hear of episodic short ans of tam flu and other antivirals . They are providing local tifts which we ho are temporary because the company is hope to get it out. These are what we call spot shortages. But with the rapped districts that we now have in this country of pharmaceuticals that should be solved pret quickly. How do you rate this flu season, doctor . I mean we are hearing it is tea worst in nine or ten its the worst in nine or ten years . Due agree . What do you se on the front line . Its pretty bad. No doubt about imt we are seeing hospitalized cases in abundance in our neck of the woods. And in my colleagues reports around the country, hospitals, doctorss offices, minute kellyanne conways, e departments, are all stretched in caring for patients at the presentime. And we have got a pretty serious virus out there causing you it. Its called 43 n 2. Makes you very sick. A lot of people, or i certainly have read that the vaccine that was administered through the fall and into the winter didnt really target h 3 n 2. And so i wonder if a lot of people just say, hey, if they cant pick which flu is going to come, why should i bother getting the vaccination . Well, let me provide some good news. H 3 n 2 was indeed in the vaccine. We have a good match with what is circulating out there. However, the vaccine never works as well as we would like against h 3 n 2, and that causes distress. Even if you get flu when you have the vaccine you are less likely to have familiaria, hospitalizat and dying. Ill take that any time. Yeah. Do you have a sense of where we are in terms of the cycle . Have we peaked, do you think . Is it going to be a longer flu season . We are still going up. So i dont know that weve peaked yet. So there is lots more flu to come im afraid. One very quick question. I was on an airplane flight earlier this week. I saw several people wearing surgical masks. Is that a good idea . Does it protect me at all . No evidence that it works conclusive and thats why its not universally recommended. Doctor schaffner, always great the hear with you, with vander built school of medicine. Still ahead, as goes netflix so goes big tech. Netflix reports on monday. And heres how the major indexes fared it was a rough week for General Electric shareholders. You could say that again. The conglomerate, once the worlds most valuable company, stumbled for a fifth straight session, capping its biggest weekly percentage drop since the financial crisis. As we have reported, the dow component announced a larger than expected impairment charge early in the week and the ceo suggested that he is considering a possible breakup of that once mitty company. Amazon is raising the price of its prime monthly membership by nearly 20 dollar. The fee is increasing to 12. 99 a month from 10. 99. It comes less than two years after amazon announced the moneyly payment optn as a way to attract new members. There is no price change if you pay annually. Amazon rose in trading today. Netflix shares finished 2017 up more than 25 . The tear has continued into 2018. Since january 1 the stock has gained another 14 , easily outpacing the s p 500. On monday, shareholders will get a sense of whether the run can continue whe the streaming Video Company reports its profits. Julia boor citizen tells us what to expect. Reporter when netflix reports earnings its the companys subscriber number that draws the most interest, the key indicator of how fast the company is growing with investors hoping the company will top its own forecast of 6. 3 million new subscribers in the fourth quarter. Over 5 million of those from weve thought that they would have peaked out in the united stat a while ago. And they grow faster than we would have anticipated. Internationas still very early days. So they are still many years until saturation. The pressure is on for netflix to keep up its growth. With analysts projecting revenue will grow nearly one third from the prior year while earnings are expected to grow 175 over the same period. A on the call, they will be looking for guidance in terms of growth, both in users and irnl mos in the year to come. And whether the Company Plans to invest even more in content than the up to 8 billion it already announced it will spend this year. Wha is happening is their origin ares, the netflix originals are what are now driving the growth in the service. And that is making it such that the competition that netflix is facing, the growing competition, isnt really mattering. Sp netflix is facing more competition than ever as amazon continues t in content. Jeff base owes is focused on finding the amazon equivalent of game of thr d disney is expected the ramp up investment in hulu once it gains a majority stake through its fox acquisition raising the bar even higher for netflix. For nightly business julia boor citizen. Adp has an alarming wall street view. Shares opened at 12 . 65 there and fell from there. The lowest expected to open in the 17 to 19 range but the companys ceo wasnt phased. We had a chance the meet all of the investors, all new for me. Grew up working with my parents so the chance to represent adp is a great opportunity. Performance matters. I think afte we put a few quarters under our belt the people will like what they see. Shares dropped 11 on the day finishing at 12. 39. The rating on nike was raised to outperform. That was enough to kick the sneaker makers stock into high gear. They are set to grow north amer sales as it debuts new products this year. Nike sha jumped almost 5 on the upgrade news to 67. 21. An experimental drug aimed at treating cancer of the bile conduct achieved promising results in scotland. That helped drive up shares of e drug maker. It is a small cap stock. It rose 6, 41 to 21. 20. Kansas city southern beat expectations though revenue came up short. The stock was up 6 since the start of the year. Today, shares down to 110. And one of the worlds biggest traders of crops like soy beans and corn reportedly being eyed by a take over by Archer Daniels midland, but they may fine themselves in a bidding war because they were approached by a mining conglomerate last may. The shares were higher in afterhours trading ended the regular day to 76. 56 adm shares unchanged in the session following a percent gain today. Shares closed at 40. 96. Tonights market monitor is betting on the power of Smart Technology. Last time he was on in august he liked mgm resorts, which up is 15 . Act vision blizzards, which is up 15 . And the emcorps he merging markets etf, which is also up. Joining us is rob gerber. Welcome back. Thanks for having me. Your first pick is tesla. You think they have caught up with some of the issues that were plaguing the company for a while . Absolutely. They had to get the model 3s out the door. I think they pretty much dealt with the battery issues that were preventing them from reaching t goals. And we are seeing the cars coming off. More importantly, the car is amazing and its probably the best automobile ever made that combines technology, Smart Technology like autonomous driving as well as it willing an electric car so it doesnt use any gas. So the cost of operation is very, very low relative to a gas car. So we are very pullish on the future of tesla . Your second pick is a Small Cap Company called control four. What do they do and why do you like it. Its a smart home product. In the higher end homes control four kind of dominates. Its really a combination of hardware and software in your home to run your speaker at the samee systems, lighting, security, and everything else. Control four is a dominant player in the high end market. We think google or amazon which has been focused on the lower end of the market will go up market a layer. You still hold mgm, which we mentioned p considerably. You think it has more room to run. Absolutely. It just recently broke out from a 34 price range here. Its moving higher now. They have got so much going for them. Their play is Online Gambling for Sports Betting being approved by the Supreme Court y and all the sports teams coming to vegas driving new inkrental revenue in vegas for on line and off line betting object sports. They are opening up another casino in china. China is hot. Its growing faster than what people realize. And that Gaming Company has been a wonderful source of income for them. We expect that to continue. On that note, thanks ross, good the see you again. Ross gerbshgerber. Coming up, why marijuana isnt quite the cash crop some ca test. Heres a look at what to wi. On tuesday a number of dow components repor earnings. J j, p and g, travelers and verizon. Al on tuesday the World Economic forum in davos gets underway bringing together leaders and heads of state to discuss the global economy. On wednesday we will find out if there was a rush to buy homes at the end of the year with the release of existing home sales. Tomorrow is the one year ext anniversary of president trumps inauguration. Its been an eventful year in washingt of co on wall street. Duri the past year the s p 500 index returned more than 25 and according to market watch, more than half of the indexs 500 stocks have seen gains of 20 or more. The fast growing Marijuana Industry is facing a growing number of challenges, even in states where recreational pot is legal. Take california for instance. Legalized reation creational marijuana went into effect at the start of the year. And many thought business would with boom. But as adee dee roy reports, thats not necessarily the case. Reporter this is a 34yearold mom of two. She s in upscale marin, california, owns a business, and consumes marijuanalaced products almost every day. When the kids are home and were having maybe a little bit of a rough patch, i might use a little bit just to ground myself and i just feel like im a much better parent. Rs exactly the type of customer Marijuana Comp

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