Transcripts For KQED Nightly Business Report 20141115 : vima

There are changes, challenges, and still some unanswered questions. All of that and more tonight on nightly Business Report for friday, november 14th. Good evening, everyone. Welcome. Im tyler mathisen. Susie gharib is off. Tonight, much of the country is seeing the first blast of winter and today stocks acted as if they were frozen in place. The dow, nasdaq and s p with little change but whos complaining . For the past four weeks, all winners felt like a month at the beach following an early autumn stretch. The dow down a modest 18 points but the nasdaq was up by 8 and s p 500 ended a fraction of a point higher but that was just enough to mark the indexs 41st record close this year. For the week, the dow rose a fraction and s p edged a little higher, as you can see there. Bob pisani with more on what has been dragging the markets higher since the lows just a month ago. Its been an up and down week for the stocks with only fractional gains with the major indices but were essentially back to historic highs. The market has been led back by sectors that had the biggest decline earlier in october. Health care and tech stocks had a great year going into october but they got hit between october 8th and the bottom on the 15th. Now, that made sense. In a broad market decline, the leadership stocks are the ones that get hit the most. Intel, for example, was up 34 going into october but it dropped 7 in the first half of that month. But since then, both tech and health care recovered all their losses in our essentially right back at historic highs. That period in early october corresponded to a big drop in oil so an additional 10 in october. That put pressure on Energy Stocks and heres where the story is different. Energy stocks have not recovered like the rest of the market has because oil took another leg down just as the rest of the market was bottoming in midoctober. That has limited the recovery in Energy Stocks. They are only up 5 since the bottom on october 15th. For nightly Business Report, im bob pisani at the new york stock exchange. A very important vote with the house overwhelming a bill that would resume construction of the longdelayed 8 billion Keystone Xl Oil pipeline. Supporters in the senate say they have enough votes to pass their own version of the bill o okaying the pipeline next week. The president has stopped short of issuing a veto threat, per se but today he opposed a bill that circumvents the approval process controlled, oddly enough, by the state department. The u. S. Is producing more oil at the same time Global Demand for crude is weakening. That led the International Energy agency to predict that oil prices, which tumbled 3 this week will fall even further. Today, domestic oil did spike. 1. 61 a barrel closing just below 67. This marks the seventh weekly loss in a row for west texas crude. Well, despite todays gains, oil prices were down about 3 this week with west texas intermediate even touching a fouryear low and trading under 75 a barrel for a time. Now, this steep price decline is spurring some interesting discussions within the industry. Jackie deangeles has more. Reporter oil prices in free fall. Down 30 year to date. The main issue, a global supply. Trying to gain market share and opec players are keeping production levels stable not wanting to lose shares. Some analysts and traders are predicting that prices could fall even further. Talk of 50 a barrel working its way through the pit. Realistically, i see it trading as low as 65. The reason i say 65, at that point banks will stop giving loans for new exploration and companies will find it hard to operate with those low prices. The s p 500 energy sector, the worst performer over the last three months, was a drop of more than 10 . Amidst this backdrop, Oil Service Companies halliburton are in merger talks, coinciding with costs and if prices go lower from here and stay there. Its an interesting time to try to put two of those companies together. Oil prices have been on the decline. I would have to imagine that halliburton is looking at this as an opportunity to consolidate at a time when Oil Field Service stock prices have declined about 25 to 30 . So maybe they are thinking they can get a better valuation opportunity here. Im sure some companies are finding it difficult to operate profitably with these prices and i would expect more m a if prices remain low. All bets could be off. For nightly Business Report, im jackie deangeles. A double shot of strong Economic Data out today. The commercial Department Says retail sales rose more than expected in october as americans have bought more cars and shopped for more items online. And a new reading on Consumer Sentiment in november is at the highest level since 2007. The news with a little less favorable across the pond, Gross Domestic Product in the 18 nation eurozone grew by twotenths of 1 . The countries hit hardest by the debt crisis are seeing the fastest growth, including greece and spain. And president obama is in australia at the kickoff of the g20 leader summit. Organizers are preparing for World Leaders and are bracing for protesters out in force today. Here is more from brisbane. Reporter there are a number of key issues here at the g20 in brisbane, tired Economic Growth and security. Thats after reports that there are Russian Troops moving into ukraine. Uk Prime Minister David Cameron talked about this in a press briefing early on on friday saying that sanctions are on the table if russia refuses to cooperate. Now, aside from security, tax evasion is also key. Very high up on the agenda but Climate Change tony abbott has said Economic Growth and Climate Change essentially go hand in hand. Tony abbott has conceded to have one paragraph on Climate Change in the final communique. The security for this event involves 5,000 police and 1,000 Australian Defense personnel. Back to you. And that was oriel morrison reporting from brisbane. Its that time of year again. Enrollment opens on the Affordable Care act. Bertha coombs has more. Reporter president obamas new hhs secretary, sylvia burwell, says that the online is ready. We have put in tests and contingency plans and tested everything from end to end. Reporter despite the disastrous launch of open enrollment a year ago clearly the endtoend testing was not sufficient. Reporter 8 million americans enrolled in plans for 2014 after a massive fix of healthcare. Gov. This year, the online application is shorter, theres more information up front. The Small Business shopping portal will launch after a oneyear delay and more insurers are offering plans. United health care is selling plans in 23 states this year, up from five a year ago. Certainly from everything weve heard from hhs, their expectations is that this would be a much simpler experience for consumers. The functionality seems to have worked well this week. Reporter and investors are confident they can make money on the exchanges even with older enrollees who use the services. Weve gotten to the point where they are signaling that this could be and is a profitable business. Reporter but new headwinds loom for aca. The Supreme Court is going to hear king versus burwell, a case challenging the plan subsidies in 36 states on health healthca and a new republican majority in congress is not likely to legislate a fix. I think both of the things coming together makes it challenging. Reporter but near term, the focus will be on enrollment numbers. Already, the Obama Administration has tempered growth expectations. Even if these exchanges work properly, there will be a challenge to get people to sign up during open enrollment which will be shorter this year, four months instead of six. According to the Kaiser Family foundation poll, 90 of young people surveyed were not aware that open enrollment was today. Bertha coombs, nightly Business Report, new york. And to talk more about what weve learned about the Affordable Care act and what you need to know is cici, managing director with pwc research institute. Good to have you with us. Is it going to work this time . Its going to be better. Better . Yes. Wont work necessarily for everybody but basically the shut down of the system that occurred last year wont occur . We feel much more con if i dent. The government feels much more confident. What is new or different this year . What should people expect when they logon . The best news for consumers this time around, tyler, is youre going to be able to window shop. They can logon to healthcare. Gov and they can start doing Comparison Shopping without putting in all of their information and starting to enroll. That was a big problem last year where people didnt really get to shop before they got locked into a choice. Thats right. I remember trying to logon and you had to log in and get all set up and some of that process was buggy, to put it mildly, before you could start to really go and look at different plans to see which one would work. What, if anything, do we know about pricing this year compared to last year. Our institute has tracked all prices in the 50 states. The average premium for individual plans is 5. 6 . But theres wide variations. You can actually get cheaper plans and you can see big increases. So people really need to shop around and thats most important, tyler, for the people that signed up last year because were noticing a trend where folks that bought the lowerpriced plans last year are seeing the biggest increases. The socalled silver plans . The silver plans. And what was it, gold, silver, bronze . Its like the olympics, bronze, silver, gold and platinum. And platinum being the highest priced one . Iuhhuh. Lets talk about the success and failure of the program so far. Are more people covered by insurance than a year ago and who are they . Yep. The young people that insurers wanted to make sure they were there to help them with their risk pool . We have about 10 Million People who have Health Insurance today who did not have it a year ago. A big jump. We also have a few million more that have gotten in prior to that if they were under 26 and signed up under their parents plans. So significant increase in terms of newly insured in this country. Young people did okay. Not fabulously. But they did okay. And thats pretty encouraging sign. The other big gap right now are hispanics. Who have not signed up that were expected . Uhhuh. Lets go back to the question of pricing and the point that was raised in berthas piece over the subsidies. How big of a threat to this entire Affordable Health care act is that Supreme Court case . If the subsidies are ruled unconstitutional, is the whole system going to collapse . Well, the fight in the Supreme Court is over just the federal exchange. So youre looking at about half of them in the court. But i think existential threat is absolutely correct, tyler. If you wipe these away, we have 85 of the people who enrolled a year ago qualified for subsidies. In most incidents, the people who got a subsidy paid 24 of the published premium price. So they were paying 80 a month as opposed to 400 a month . Very significant for the consumer and the insurer. Cici, thank you for coming in. Well check in with you as the system goes along, the year goes along. Great to have you with us. Still ahead, looking for stocks that could see double j doubledigit gains. Virgin america has really lifted off as a publicly traded company with shares soaring more than 30 in todays trading debut. The ipo marks the latest move by an airline to crash in on the sectors surging popularity with investors. But a Virgin America likely to fly high like other Airline Stocks have this year . Phil lebeau has our report. Reporter a soaring debut for Virgin America. A rousing opening passengers on Virgin America flights toasting champagne as they watch the ipo live on tv. Well come out of this with a very strong Balance Sheet and Liquidity Position and debt coverage position. An extremely day for our company. Reporter over the last eight years, Virgin Company has gone from losing money to turning a profit in 2013. Along the way, the airline based in San Francisco has primarily focused on Cross Country flights that emphasize passenger service. One example, on Virgin America, you order food and drinks from your seat instead of waiting for the drink cart to go down the aisle. Theres a niche for a carrier like virgin because, frankly, people out there are brand oriented. Reporter but they face stiff competition from established airlines, delta, american, united and even jetblue are pushing this on trans continental flights as they try to win over the most lucrative customer, business travelers who frequently fly from coasttocoast. Business flyers generate 40 of Virgin Americas revenue and the ceo believes he can keep those customers. If you look at our first class, for example, we have eight seats up there. Its a small cabin. Its an intimate cabin and a controlled cabin. Its more like a private flying experience than having 30 or 40 flights on united and american. Airlines are enjoying one of the most profitable years ever with some stocks, like southwest, more than doubling over the last 12 months. Well, Virgin America shares climb even higher . That depends on whether bookings remain solid. For now, Virgin America and investors are toasting a big day for the little airline. Phil lebeau, nightly Business Report, chicago. An activist Hedge Fund Takes a stake in mcdonalds sending shares higher. According to a filing out today, Jana Partners now holds the position in the purchaburger ch worth more than 81 million. Shares almost 1 higher today at 96. 21. The accounting issues at hertz are worse than originally thought. The car rental giant says it will restate its 2012 and 2013 earnings. This is in addition to restating its 2011 results which we already knew about. Shares tumbled to 21. 69. Shares of Graham Holdings went higher after the announcement of a separately traded company. Investors cheered the breakup of that company. It has, of course, sold its Washington Post newspaper unit last year to amazons ceo. Holding higher at 887. 87. Pandora surged. This is the first purchase by any pandora insider since its ipo more than three years ago. The stock was up 16. 5 . It closed at 21. 51. Its never too early to be thinking about stocks that will do well in a rising Interest Rate environment. Hes derek booten, ceo with lucilla capital. Good to have you with us. Do you think rates will go up any time soon and, if so, how much . I dont think so, tyler. I think were looking at mid to late 2015. Any type we see a hype we may see the fed off their dovish stance, we see more weakness in the gdp, whether its labor or housing. I dont think were going to see any moves until late 2015 or so. But these stocks that youre going to mention to us, beginning with mxp semiconductors you think would be good for the current environment and would benefit or withstand . Mxp is really about apple pay. I cant say enough about apple pay. All of the excitement of the iphone 6. I think its going to transform the world much the same way itunes did in the music world. What were seeing right now is the semiconductor provides the chips for the phone that communicates with the retailers. Should alibaba do anything with this, it will really take off. I think they are wellpositioned and have a lot of room to run here. Lets move on to another one that has been a hot company, gillead sciences. You have it priced at 140 over the next 12 months. Why do you love it . I love it because of the massive pipeline of drugs they have coming out under review right now, both hiv drugs, cardiovascular, theyve gotten a lot of talk right now about their hepatitis c drugs. They are leaders in the Industry First to market. Theres 11 million treatable patients with hepatitis c. I see this stock taking dominance in the market. Lets move on to number three and that would be dow chemical. Dow is more so than any of the competitors leveraging national gas and shale oil production. Its a gas rich company. You probably saw them increase the dividend by 14 . They are doing well and responded to criticism out there about being in unprofitable business lines. They are focusing on really strong, high value chemical and service sales. Overall, derek, do you like the market and think where it can turn higher . I absolutely do, tyler. We see the spottiness in the market like in gdp as i talked about but these are just opportunities to get the dollar back in the market. We sold in october with a 10 drop. I think were on the road with some bumpiness, 3 to 5 corrections depending on what