Transcript: Friday, August 30, 2013

ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and
Susie Gharib, brought to you by —



obligation to make sure that we maintain the norm against the use of
chemical weapons. Now, I have not made a final decision about various
actions that might be taken to help enforce that norm. But as I`ve already
said, I have had my military and our team look at a wide range of options.


The White House lays the ground work for a strike on Syria, leaving Wall
Street and the world waiting on tenterhook.

This is NIGHTLY BUSINESS REPORT for Friday, August 30th.

Good evening, everyone, and welcome. I`m Susie Gharib.

in for Tyler tonight.

A determined President Obama today making the case to justify a U.S.
military strike against Syria over its use of chemical weapons but no
decisions have been made when and how the U.S. will respond, only
affirmations that no U.S. troops will be sent on the ground.

Earlier, Secretary of State John Kerry said administration has
evidence that the Assad regime used chemical weapons which killed more than
1,000 Syrians, including hundreds of children. Kerry also said being war
weary does not allow us to turn the other cheek.


JOHN KERRY, SECRETARY OF STATE: We know that after a decade of
conflict, the American people are tired of war. Believe me, I am, too.
But fatigue does not absolve us of our responsibility. Just longing for
peace does not necessarily bring it about.


GHARIB: With more on the Syrian crisis, how it`s playing out in
Washington, and what might happen next — we turn now to John Harwood.
He`s at the White House.

John, a lot of words out today. What more can we gleam about the
timing of a possible strike against Syria? Basically, what happens now?

signaled the timing, Susie, but it looks like a very strong probably that
we will, in fact, strike Syria. And outside, foreign policy experts that
I`ve talked to think that it`s more likely to come sooner rather than
later. The president leaves for St. Petersburg on Tuesday, the meeting at
the G-20 and Congress comes back on the 9th of September. I would be
surprised if the strike has not happened by — before both of those things
take place.

GRIFFETH: And what do you expect the president to hear from the G-20
people if it hasn`t happened by that time. I mean, you`ve got a lot of the
world community that they talked about today that has been very silent
throughout all of this — John.

HARWOOD: They have been silent. Of course, the British House of
Commons voted down an authorization of force yesterday. The president got
a call from Prime Minister Hollande of France and has the idea that the
French are supporting the possibility of a U.S. action. I just got off the
phone with a conference call at the White House was conducting. They said
Syria will come up at the G-20, not a subject of formal meetings, and I
think the president will get no shortage of advice, if in fact, it`s not
taken place by then.

GHARIB: John, a lot of the conversation so far has been on what the
U.S. will or won`t do. But what if Syria or its allies really retaliate —
I mean, what are you secondary consequences we might face?

HARWOOD: That`s are unknowable effects of striking military and why
so many people are nervous about this prospect but when they look at all
the options, every one of them is bad. Which is the least bad option? And
because the United States does have an interest in reinforcing it`s own
credibility, having said that chemical weapons is a red line and
reinforcing the worldwide norm against the use of chemical weapons, the
White House seems strongly on a path to deciding that the least bad option
is in fact to use military force.

GRIFFETH: John Harwood at the White House — thanks, John.

On Wall Street the threat of U.S. military action against Syria
weighed on the markets. The major averages ended lower for the first time
in three sessions, but the final trading day of the month of August closed
out another down week and the biggest monthly decline for the Dow and S&P
since we saw last May of last year. Also hitting the markets today,
disappointing consumer spending and personal income figures for the month
of July, both rising just 1/10th of 1 percent last month, signaling a
possible slow down in growth.

The Dow when all is said and done and NASDAQ today both down about 30
points. The S&P lost five. And for the month, the Dow is down 4.5
percent. The NASDAQ dropped by one percent and the S&P 500, that was down
by 3 percent.

GHARIB: Well, for Wall Street, the volatile month of August is now
over, but starting on Tuesday, September is chockfull of data releases and
events that could influence the Federal Reserve`s assets buying stimulus
plans and have already traders bracing for more wild swings in the markets.

Steve Liesman has more on the crucial week ahead.



It`s a big week for economic data and that means it`s a big for the
Federal Reserve to figure out if it`s going to taper at its September
meeting. That makes it a huge week for markets to watch the data.

Tuesday, we get the Institute for Supply Managements` manufacturing
report. Just expected to be 53.8, down a little from the prior month but
still at a healthy level, suggesting growth. Auto sales in the U.S.
expected at 15.7 million.

The ADP jobs report, which tries to forecast the government jobs, it
comes out Thursday. Economists looking for 170,000 jobs created in August,
and then the government jobs report, 173,000 expected for the month of
August, with the unemployment rate unchanged at 7.4 percent.

On top of that, we`ll have five public appearances from four Fed
presidents, two of them voters the September 17th, 18th meeting. Data that
is OK to strong could be enough to prompt the Fed to reduce its
quantitative easing to try and stimulate the economy.

But the economy has to show a pickup from here. A report this morning
showed consumer spending in July rose less than expected, 0.1 percent,
getting the third quarter off to a weak start. The key, listen to Fed
officials and what they think of the new economic reports, and whether they
lean towards tapering or not. And, we wait from Fed Chairman Ben Bernanke.
His absence from Jackson Hole means he hasn`t made a major speech on the
economy since mid-July.



GRIFFETH: So, we hit the ground running next week.

Joining us to talk more about the market, Joe Tanious, global markets
strategist at JPMorgan (NYSE:JPM) Asset Management. Joe, always good to
see you.

JOE TANIOUS, GLOBAL MARKET STRATEGIST: Always good to see you, too.

GRIFFETH: Tough month for August, but September is typically the
worst month for the stock market. Do you expect another tough month for
the markets?

TANIOUS: Yes, I`m expecting a busy month for the market, and as Steve
just pointed out, it`s going to will start off with a bang really. We`ve
got a short week next week but it`s going to be very, very filled with
economic data not only from here in the U.S. but also from abroad. And I
think as people returning back from vacation, there`s going to be quite a
bit to chew on.

GHARIB: Joe, you heard our report from John Harwood in Washington
talking about options that the U.S. military may take over the next couple
of days. Let`s say something does happen this weekend — what kind of
market reaction are you expecting on Tuesday?

TANIOUS: You know, honestly, I think the initial knee-jerk reaction
is probably going to be a little bit negative. Despite, you know, all
these reports that I`ve read and that, you know, this effort is going to be
targeted. It`s going to be very measured. It`s going to be very brief.
It`s hard to imagine or envision a scenario in which U.S. action doesn`t
have greater implications on the entire region.

Of course, you have to worry, what does it mean for tension with Iran?
What does it mean as far as what`s going on in Egypt? Is it going to have
impact there, of course? Not only just what`s going on in Middle East, but
also what about relationships outside the Middle East and relationships
with Russia?

I think, you know, you may very well see oil prices start to pick up
again. And as a result of that, I think there may be a pull back in the

GRIFFETH: Last spring, Fed Chairman Bernanke threw out there that
there was a possibility they began tapering in September. September is
upon us. A lot has happened since he made that statement, though. Do you
think they are likely to begin tapering or not?

TANIOUS: I do think they are likely to begin tapering this September.
You know, a lot has happened, but it`s important to remember, you know, how
the Fed is looking at this. It`s really a cost benefit analysis. What are
the benefits of additional asset purchase from this point relative to the
potential cost? And it should be pretty clear the economic backdrop has
been improving.

It`s not perfect but things are getting better, and I just don`t think
additional asset purchase from this point makes any sense. And for that
reason, I suspect you probably are going to hear of the fed tapering later
next month.

GHARIB: All right. So, this is an extremely complicated and tricky
time for investors. What have you been telling your clients at JPMorgan
(NYSE:JPM) about what they should do to prepare for whether it`s about
Syria or the Fed or, you know, the jobs report next week? What should they
be doing with their portfolios next week?

TANIOUS: I think, first and foremost, it`s to keep an eye on the
fundamentals. In the near term, there`s always going to be noise. And, of
course, any international action on behalf of the U.S. going into Syria or
invading in the Middle East in any fashion is clearly going to have an
impact on the capital markets in the near term.

But focus on fundamentals because in the long run, stock markets tend
to fall in the fundamentals and that should tell you that things are, in
fact, improving. That having been said, we are expecting a little bit of
noise in the markets next week and clearly what`s going on in Syria only
complicates things. I think you need to have a very disciplined approach
to risk-taking, and, of course, that means the right exposure to those
stocks and risk assets and the right exposure to safe assets such as bonds,
despite the fact that rates maybe rising.

GHARIB: And that`s Joe Tanious, a global market strategist at
JPMorgan (NYSE:JPM) Asset Management. Thanks a lot, Joe.

TANIOUS: Thank you.

GHARIB: A federal judge is speeding up a trial, objecting to a huge
airline merger. The Justice Department`s lawsuit challenging the proposed
merger of American Airlines and U.S. Airways will now start on November
25th. That`s good news for the two carriers since the Justice Department
wanted the trial to start next March, saying it needed more time to prepare
its anti-trust case.

GRIFFETH: It`s called a black budget and no one is supported to know
what is in it, however, top secret documents disclosed by NSA leaker Edward
Snowden show a massive amount of money set aside for U.S. spying operations
outside the CIA or the NSA.

Eamon Javers joins us now with more on what`s on those files, what it
pays for and where all that money is going to.

It sounds like a John le Carre spy novel here, Eamon.

You know — I mean, this is one of the most closely held secrets of the
U.S. intelligence community. It`s exactly how much does it spend on all
the things that it does, how many employees does the United States
intelligence community actually have? They want to keep that secret
because they don`t want our enemies around the world to be able to sort of
reverse-engineer and figure out what we`re up to.

But thanks to this leak from Edward Snowden, “The Washington Post
(NYSE:WPO)” was able to break a blockbuster story and detailed for the
first time what exactly is in the $52.6 billion budget for the intelligence
committee, including more than 21,000 employees at the CIA. It`s the first
time we`ve seen this level of detail for all of 16 different components of
the intelligence itself, guys.

GHARIB: Really fascinating reading that story, Eamon. And I know
you`ve looked over it. What stood out most for you? What do we know now
that we didn`t know before?

JAVERS: Well, one of the things is the amazing resurgence of the CIA
in this era of drone warfare and clandestine warfare around the world, the
CIA reporting a $14.7 billion budget for itself. That makes it the biggest
component of the intelligence community for a long time. A lot of folks
have thought that maybe the CIA was no longer the dominant player in U.S.
intelligence, maybe it was the National Geospatial Intelligence Agency,
which flies satellites. Maybe the NSA was spending more money.

But, in fact, we now know, $14.7 billion going to the CIA every year.

GRIFFETH: Of course, everybody is going to ask: how much damage does
this leak do to U.S. intelligence?

JAVERS: Well, there are two camps. U.S. intelligence officials hate
the fact this information is out there in the public domain, and there are
other people who say, you know, if the United States taxpayer is going to
spend $52.6 billion on anything, they should at least be able to have some
sense of what they are spending it on, and whether it`s getting any

And that`s exactly what this report details, including some of the
U.S. intelligence community`s blind spots like whether or not we know how
safe Pakistan`s nuclear weapons are, or whether or not we know anything
about how capable the Chinese new advanced fighter jet actually is.

So, some strengths and weaknesses revealed in this report.

GRIFFETH: Put this in perspective in terms of budget numbers — how
does it compare to what the U.S. spends on intelligence a couple of years

JAVERS: Well, “The Washington Post (NYSE:WPO)” calculated as best
they could. It`s very difficult to do because we don`t really have
historical information, either, just as we didn`t have this information in
the present day. But their best guess is this makes U.S. spending on
intelligence now higher than it was even at the height of the Cold War by,
you know, $10 billion or so in current dollars.

GHARIB: It really adds up when you put it together. Thank you so
much, Eamon. Really appreciate it.

Eamon Javers reporting from Washington.

And coming up on the program, we know the price tag for higher
education is costly, but now, some alumni are helping current students make
college pay off, and we`ll show you how.

But, first, let`s take a look how the international markets closed


GHARIB: Apple (NASDAQ:AAPL) has a brand-new way to get you excited
about the newest iPhone being unveiled in less than two weeks. Starting
today, Apple (NASDAQ:AAPL) stores all across the country will allow current
iPhone owners to trade in their working older models in exchange for a
credit that you can use towards the purchase of a brand-new phone.

GRIFFETH: Tonight we begin “Market Focus” with Dow component, General
Electric (NYSE:GE). That company now planning to spin off the consumer
lending unit of its G.E. Capital Division, which issues store credit cards
to more than 55 million Americans as it focuses on its core industrial

G.E. is also citing concerns about its exposure to the banking
industry, according to “The Wall Street Journal”. At the close, shares of
G.E. were up fractionally on an otherwise down day. They close at $23.14 a

A big jump in shares of Big Lots (NYSE:BIG), on news of positive
quarterly earnings as well. The discount retailer beat analyst estimates
but despite that good report, the company is lowering its full year
earnings outlook because of weaker sales. But the news did not seem to
discourage investors from bidding up the stock. Shares of Big Lots
(NYSE:BIG) rose more than 2 percent, closed at $35.42.

GHARIB: But it wasn`t a sweet quarter for Krispy Kreme. The donut
chain didn`t satisfy the street`s sweet tooth, after it reported a
disappointing profits and a weak outlook on Thursday, after the market
closed. Krispy Kreme shares tumbled 15 percent but as you can see on the
screen, the stock has more than doubled so far this year.

And Cumulus Media (NASDAQ:CMLS) is stepping up to compete against
giants in the radio industry. The radio broadcaster is paying $260 million
in cash to acquire Dial Global, one of the largest producers and operators
of radio stations in the U.S. Cumulus Media (NASDAQ:CMLS) is selling 53
radio stations for $238 million in cash so it can finance the deal.

Cumulus Media (NASDAQ:CMLS) stock rose 2 percent on the news, while
Dial Global, it doesn`t trade on any major stock exchanges, tumbled 48

GRIFFETH: Our market monitor guest tonight says he`s buying stocks
now, even with all the concerns about Syria hanging over investors.

He`s Kevin Caron. He`s market strategist at Stifel Private Client

Kevin, always good to see you.


GRIFFETH: I assume you`re investing for the long term, but you`re not
concerned about the short-term headwinds, both political and economic?

CARON: Well, we`re focused on fundamentals and we are long term. And
what we do is look at opportunities in the marketplace. So, we have seen
over the last year a 20 percent plus rise in the equity markets, not driven
so much by earnings, which were only up 3 percent, but really investor who
have become more comfortable with taking on risks. So, prices moved higher
last year and this is really the first time we had any pull back.

We had the Dow off 4.5 percent in the month of August. You have to go
to the spring of 2012 to find a pull back, which would have given a value
investor like us an opportunity to evaluate stocks in more favorable

GHARIB: Kevin, you have given us the name of three stocks you`re
recommending to your clients and also to our viewers tonight. Let`s go
down the list.

You start with Anheuser-Busch, BUD trading. What`s your take on this?
Why do you like it?

CARON: Well, we like Budweiser for a variety of reasons, not the
least is its international scope, the fact that it`s got a very well-
positioned international brand. We think it`s tied to consumer trends,
which we find to be particularly stable. We think the stock is undervalued
here. It has pulled back. We think the stock could be worth of north of

So, we like the stock for a total return play, especially given the
fact that there is a descent 2 percent plus dividend yield on the stocks.

GRIFFETH: You also like Walmart, the number one retailer, even though
lately we heard some anecdotal evidence about softness among consumers in
this economy.

CARON: Yes, again, these are consumer stocks tied to trends and you
can point out rightly that lately the consumer has been a little weaker.
But a lot of what has happened with these companies relates to global
weakness. Europe being soft, attack is coming true. We think in time that
rolls up the improvement in the employment picture eventually feed into

And while the current income spending patterns for the last month has
been somewhat weak, over time, you find that the consumer has been very

So, we like Walmart, we think the stock can trade up north of $80 and
provide a very nice total return.

GHARIB: Right. Your third stock is not in the consumer area,
Accenture, ticker symbol ACN. What`s the story here?

CARON: Yes, very consistent company, great balance sheet. This is a
company that is position to provide consulting services to companies all
around the world, very big company with a tremendous depth of resources.

Its stock has pulled back here. IT spending has been somewhat weak.
Overall investment spending is somewhat weak but it`s a great franchise.
And as companies are pressured to deliver a profit growth and a slowing
profit environment, I think it makes all the sense in the world for
companies to drive profitability to turn to a company like Accenture over
the long term.

So we like all three of these companies because they provide good
value, given the fact that these markets have pulled back in here.

GRIFFETH: Fair enough. Any disclosures on either of those three
stocks, either privately or for your company?

CARON: Stifel makes a market on all three of those stocks. We have a
business relationship with Budweiser and Anheuser-Busch and that stock is
also part of our analyst select list.

GRIFFETH: Very good. Kevin Caron, market strategist at Stifel
Private Client Group — always good to see you. Thanks.

CARON: Good to be here. Thank you.

GHARIB: The college football season officially kicked off last night,
bringing many alumni back to campuses to root for their alma maters. But
these days, some of those graduates are not only looking for a victory on
the field, they might be scouting for investment opportunities through the
current students.

In the final installment of our series, new ways of paying for college
and making it pay off, Mary Thompson looks at alumni angels giving wings to
new businesses.


For students, college is a big investment. For alumni, college may be the
place to find them.

PAVAN NIGAM, WEBMD CO-FOUNDER: If you go to college campuses
nowadays, it is remarkable to see the level of entrepreneur activity there.

THOMPSON: Pavan Nigam is co-founder of WebMD Inspovation, a proud
graduate of the University of Wisconsin and founder of Silicon Valley
Badgers. It`s one of the growing number of alumni groups putting money in
companies founded by students of their alma maters. The common college
experience, a selling point for investors.

NIGAM: Investors generally like to invest in people who are like
maybe one or two degrees separation max away from them. Automatically,
there is this bond and loyalty which kind of develops, which is essential
for any start up.

THOMPSON: The Angel Capital Corporation estimates there are about 50
Angel alumni group, from schools including Harvard, Marquette, and the
University of Missouri, the school sharing a strong sense of spirit and
strong entrepreneurial, computer, math and science programs.

One of those schools, Baylor University. Graduate David Grubbs
turning to the Baylor Angel network to provide a critical round of funding
for his company.

DAVID GRUBBS: We`re one of three selected at the angel breakfast and
after the presentation, we had about six weeks of due diligence, where they
would go through and interview us and really kind of try to poke holes in
the business to make sure that we have a viable investment.

THOMPSON: A plug-in and payment processing platform for various fees,
Grubbs firm, Vendevor, lets small and medium businesses set up Web sites.

(on camera): Grubbs e plans to use the funds raised through the Angel
network to hire more workers and increase marketing, moves he sees
translating into higher revenue.

GRUBBS: Right now, we`re planning on closing out the end of the year
around six figures and next week, we`ll be in the low seven figures, and
that`s the goal.

THOMPSON (voice-over): A goal that`s a score for the students, school
and alumni.



GRIFFETH: Well, coming up, summer may officially have a few more
weeks left but the summer box office is closing, but a record bounty is in
sight for studios it turns out. More on that in just a moment.

First, though, how commodities, currencies and treasuries fared today.


GHARIB: Seen any good movies lately? Well, theater chain AMC
Entertainment is counting on it. It filed paperwork today to begin selling
its stock to the public for the first time ever. AMC is the nation`s
second largest movie theater chain and its` now owned by China`s Dalian
Wanda Group. It`s hoping to raise $400 million and it might use the
proceeds to pay for acquisitions and pay down debt.

GRIFFETH: Well, a story of one institution of higher learning just
passed a major milestone at the box office, Disney (NYSE:DIS) Pixar`s
“Monsters University” has now surpassed $700 million at the global box
office, landing that film just behind the same studio`s other animated
hits, “Toy Story 3,” “Finding Nemo” and “Up.”

“Monsters University” is also expected to become Disney`s highest
grossing animated film in China, taking in about $19 million in ticket

GHARIB: Despite the success of those educated monsters, Hollywood
actually had a weak start of the year here in the U.S. But then things
really rebounded for the studios with some big hits over the summer. Julia
Boorstin breaks down the winners and the losers on the silver screen.


of superheroes “Iron Man” and “The Man of Steel,” the all important box
office season is on pace to beat the summer of 2011`s record $4.4 billion-
dollar revenue.

ERIC HANDLER, MKM PARTNERS: Right, we`ve had 15 films that have done
over $100 million this summer. It was a deeper slate than last year.

BOORSTIN: This record, despite some massive bombs, most notably
Disney`s “The Lone Ranger”. It fell so far short of expectations, Disney
(NYSE:DIS) says it will take it down for as much as $190 million. But even
with “The Lone Ranger`s” massive disappointment, Disney (NYSE:DIS) is still
the big winner of the summer.

“Iron Man 3” and “Monsters University” are the first and fourth
biggest films of the year, together grossing more than $2 billion

The top six films this summer were all sequels, franchises or reboots,
proving it makes sense for Hollywood to double down its investments in
brand names.

UNIDENTIFIED FEMALE: Well, I have seen “The Fast and Furious 6”.

UNIDENTIFIED MALE: The most recent was “Wolverine”, though.

UNIDENTIFIED MALE: “Star Trek Into the Darkness”.

UNIDENTIFIED MALE: What did you like about it?

UNIDENTIFIED FEMALE: All men (ph), a lot of things.

benefited from two of those sequels, “Despicable Me 2” and “Fast and
Furious 6”, the second and fifth biggest films of the year.

And Viacom`s Paramount cashed in on “Star Trek” franchise. Meanwhile,
Warner Brother`s “Man of Steel” successful brought that franchise back to

The losers this summer: Sony (NYSE:SNE). Not a single one of its
films breaking into the summer`s top 10.

And all of the studios are increasingly relying on the international
box office to drive profit.

HANDLER: If you`re not going to have a big success internationally,
you need to keep the budget small.

BOORSTIN: International ticket sales will continue to push the
studios to make bigger budget films based on establish brands.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin, in Los Angeles.


GRIFFETH: That`s NIGHTLY BUSINESS REPORT for tonight. Thanks for
joining us. I`m Bill Griffeth.

GHARIB: And, Bill, it`s great having you here.

GRIFFETH: I always enjoy it.

GHARIB: Have a great weekend, everyone. See you on Monday.


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