Transcript: Friday, February 7, 2014

NBR ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Susie Gharib, brought to you in part by —


BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Silver lining. Not as many jobs were created in January as hoped, but the unemployment rate dropped, and experts are saying that trends are actually encouraging.

Why are Californians thousands of miles from the harsh East Coast winter also feeling the chill?

GRIFFETH: And high risk, high reward. If you`re looking to invest in companies with big growth potential, our market monitor guest tonight has a list of stocks that are relatively young and newly public.

All that and more tonight on NIGHTLY BUSINESS REPORT for Friday, February 7th.

And good evening, everybody. I`m Bill Griffeth. Tyler Mathisen is off again tonight.

GHARIB: Good evening from me as well. I`m Susie Gharib.

American businesses didn`t do much hiring in January, only 113,000 new jobs were added to payrolls. The words used to describe today`s jobs report, “disappointing”, “anemic”, and even “awful”.

But Wall Street saw a brighter side saying it wasn`t so terrible.
After all, the unemployment rate fell one notch to 6.6 percent.
Surprisingly, stocks rallied, closing positive on a week that started with the Dow plunging 300 points on Monday.

Here`s a look at today`s closing digits. The Dow shot up 165 points, NASDAQ surged by 68 and the S&P added 23.

Hampton Pearson takes a closer look at this latest jobs report and some encouraging trends behind the numbers.


For a second straight month, leading economists and market analysts didn`t know what to make of a government report, telling two different stories about the job market. Employers added fewer workers to payrolls than expected, but the unemployment rate dropped again.

MARK ZANDI, MOODY`S ANALYTICS: I think it`s a lot of weather still in this number. In the 30,000 decline in government, something odd is going on there.

AUSTAN GOOLSBEE, COUNCIL OF ECONOMIC ADVISERS FORMER CHAIR: I think the thing to keep in mind is this divergence where you`re getting plus
600,000 employment on the household survey and getting only plus 100,000 on the establishment survey is going to be a big problem.

PEARSON: While the January headline number of just 113,000 jobs is weak, trend underlying the employment rate decline are encouraging. In January, the number of people with jobs increased by 638,000. The labor force increased by nearly 500,000. And the number of people out of work six months or longer fell by 232,000.

All are indicators, economists say, of new businesses and jobs being created but not yet reflected in surveys of employers.

DIANE SWONK, MESIROW FINANCIAL: What we could be seeing is new business formation beginning to start to gain some momentum, which has been really absent much of this recovery. We don`t know that for sure yet, but there`s an inkling that it could happen.

PEARSON: Part of the new business and job creation story that is going below the radar, job incubators like 1776 in Washington, D.C. Formed less than a year ago with private funding, corporate partnerships, and a boost from the D.C. government, it`s been a launching pad for more than 200 new businesses.

DONNA HARRIS, 1776 CO-FOUNDER: There are a lot of people who have lost their jobs or their jobs are at risk that are looking at entrepreneurship. Entrepreneurship really crosses any sort of economic situation, whether you`ve got an up economy or a down economy.

PEARSON: One of the success stories is Ridescout, a technology platform that tells you not only how to get around, but what modes of transportation are best. Its target audience are millennials, one of the fastest-growing population groups in the nation`s capital, many of whom don`t have cars.

In just six months, they`ve hired 20 full and part-time employees and expect to double that workforce in the near future.

CRAIG CUMMINGS, RIDESCOUT CO-FOUNDER: This company could scale very quickly. And we believe it will. And some of the older employees really love the opportunity to be part of a team that`s going to scale and be explosive in its growth.

PEARSON (on camera): Make no mistake, doing a start-up in today`s tough job market is risky. But creating new jobs and new businesses has always been the key to taking any economic recovery to the next level.

For NIGHTLY BUSINESS REPORT, I`m Hampton Pearson in Washington.


GRIFFETH: And for some companies looking to hire more employees, a big challenge to growth and profitability is finding the right workers, like skilled welders or machinists.

Mary Thompson reports tonight on the efforts by one company Freedman Seating in Chicago on where the jobs are.


One hundred twenty year old Freedman Seating is growing like an adolescent.

CRAIG FREEDMAN, FREEDMAN SEATING COMPANY PRESIDENT: Over the past 10 years, we`ve averaged about 10 percent compounded growth per year.

THOMPSON: As with the teenager, the growth spurt for the maker of seats for buses and delivery trucks brings some unwelcome problems. After adding 100 workers last year, president Craig Freedman wants to hire another 35 skilled workers this year if he can find them.

FREEDMAN: There`s been a bidding war for these workers.

THOMPSON: Those workers include welders and people trained to operate computer-guided machines. Freedman says smaller manufacturers along with richer Chicago-based multinationals sometimes poach these employees.

So the shortage of workers for these high-paying jobs which could fetch up to $12 to $25 an hour is squeezing Freedman`s bottom line.

FREEDMAN: We have to use a lot of overtime to get the work done. We have to outsource a fair amount of work that we don`t have the capacity to do because we don`t have the skilled labor to do it.

THOMPSON (on camera): To find needed workers, Freedman`s tapping two sources, a local high school and a Chicago-based nonprofit called the Jane Adams Resource Corporation.

(voice-over): JARC as it`s known trains displaced adults for industries offering living wages and upward mobility. Here`s executive Guy Loudon.

GUY LOUDON, JANE ADAMS RESOURCE CORP. EXECUTIVE DIRECTOR : We don`t run it like a traditional school where people are sitting in classrooms working out of books. It`s a job. Our lead instructor functions more like a plant manager.

THOMPSON: Welder Valerie Galvan trained at JARC, and after just eight months with Freedman Seating sees a future after years of dead end jobs.

VALERIE GALVAN, FREEDMAN SEATING EMPLOYEE: I actually feel like I`m on a career path. I`m still in the entry level welding position, but I have the skills that I need to improve and move forward with that.

THOMPSON: Freedman Seating also moving forward with other local manufacturers to address the shortage of skilled workers. It`s part of a group overseeing Austin Polytechnical Academy, a Chicago high school (AUDIO
GAP) job-ready manufacturing skill.

Nineteen-year-old brake press operator Torres Hughes is one of the two Austin graduates Freedman has hired.

TORRES HUGHES, FREEDMAN SEATING EMPLOYEE: I feel like I was introduced to something that can change my life in the future as well, can really mean something to me and my family. And I love what I do.

THOMPSON: Freedman making seats that transport passengers and their employees, too.

For NIGHTLY BUSINESS REPORT, I`m Mary Thompson in Chicago.


GHARIB: Joe Davis says today`s jobs report was bad, but not so bad.
And he`s hopeful about the outlook for the U.S. economy. He`s the chief economist at Vanguard. This is a giant mutual fund company.

So, Joe, you sound like you`re a glass half full kind of guy. But tell it to us straight, because we`ve gotten so many mixed signals on the economy. And everyone wants to know is the economy getting better or worse?

JOE DAVIS, VANGUARD CHIEF ECONOMIST: Well, I think Susie, Hampton really hit it just the nail on the head. I think it`s marginally improving. We`re confident in the trend, the underlying trend in the economy, which is modestly stronger growth, as we continue to proceed into 2014. There were some disappointments today in the number, in the business survey, a little weaker than expected and maybe some weather distortions at play.

But nevertheless, I think we continue to see a gradual tightening of the labor market despite a significant slack. I think the progress is good. I would like to have seen stronger job growth today.

GRIFFETH: More than one person today, Joe, said to me we need to get used to these lower job growth numbers. This is the new normal in this economy. Do you agree?

DAVIS: I think generally speaking, yes. We`ve been of the view that trend growth, Bill, is closer to 2 percent and job growth around 100,000 to
150,000 jobs per month. In other words, to make a dent in the so-called slack or gap in the economy. And so, I think we have to look at a lower barometer or speed limit for the economy.

So I think that said, she these numbers are better than trend growth but it certainly pales in comparison to what we may have seen 20 to 30 years ago.

GHARIB: So, what do you think Janet Yellen, the new Fed chair, is going to say all of these trends going on, with job growth? She`s going to be testifying in front of Congress next week.


GHARIB: And everybody is wondering — is she going to stay on track with what the Fed has been saying or are we going to hear something different given what`s going on in the job market and stock market?

DAVIS: Well, I think, Susie, it`s a great question. I think we will see more of the same in terms of the recent communications. I mean, I think the Federal Reserve has done a good job of trying to communicate to the market that they are looking, for example, well beyond the 6.5 unemployment rate which we are close to now in terms of thinking about tightening.

I mean, we mentioned the last time I was on this show, Susie, that the Fed was going to be very slow and deliberate in their tapering program. So I think that still is the case. I think to deviate from current policy is high. I think today`s numbers may raise an eyebrow. But nevertheless, they would have to see corroborating evidence both anecdotal and in data for them to deviate from the present course.

GRIFFETH: I know you`re an economist but everybody has an opinion about the stock market. If the —


GRIFFETH: — if the jobs number was not as good as expected, why in the world did the stock market rally as much as it did today, do you think?

DAVIS: I think part of that is really the association in some invest ors` mind between the potential to slow the rate of asset purchases by the Federal Reserve and just global monetary liquidity with formative stock market. We went into the year more guarded than in the past several years with respect to our long-term equity outlook that. That still remains the case.

But any day, it is ironic. We`re in an environment that seems to be the word weaker than expected growth numbers can be associated with stronger equity returns.

GHARIB: All right. Well, we`re going to see what happens next week.
Thank you so much, Joe.

GRIFFETH: Thanks, Joe.

GHARIB: Joe Davis, chief economist at Vanguard. Have a great weekend.

GRIFFETH: Still ahead, why Californians who are thousands of miles from the harsh winter weather in the east are now also starting to feel the chill of their own.


GRIFFETH: The White House today warned Congress that the government could start missing payments on its bills soon after February 27th. That is if lawmakers fail to raise the limit on public borrowing. Back in October, Congress suspended the cap on borrowing until today, February 7th.

Now, the Treasury is taking extraordinary measures to save money and avoid breaching the debt ceiling. Starting today, Uncle Sam suspended sales of U.S. treasury bonds to state and local governments.

GHARIB: Well, another kind of limit is affecting residents of California. They`re being asked to power down on their use of electricity.

Jackie DeAngelis explains.


JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT: More trouble for California, not just short on water at the moment but also low on natural gas. In California, you typically see this in the summer when air conditioners are running on high. But right now, it`s happening because of unseasonably cold temperatures across the country.

In fact, residents have been urged to voluntarily cut their electricity use to help out. That means turning off lights and electrically-powered heaters. The alert expired last night, but it`s not clear on whether more usage orders will come.

All this coming after California has increased its nat gas usage since the decision last year to close a key nuclear facility. According to a
2010 report, 53 percent of California`s power comes from natural gas.
Nationwide, natural gas production has dropped, roughly 1 percent last month according to research firm Ben Tech Energy. But experts say that nationwide, supplies are still fairly robust.

Part of the production slump can be attributed to the cold itself.
Chesapeake Energy, the U.S.`s number two nat gas producer has said that unusually cold temps have hurt output. That as demand surges.

But after hitting a four-year high recently, natural gas futures have declined slightly today. Now just under $4. Still, experts say that the forecasts are calling for the cold weather to last and that will keep demand high.

So, for right now, Mother Nature still supporting these natural gas prices.

For NIGHTLY BUSINESS REPORT, I`m Jackie DeAngelis, reporting from the NYMEX.


GRIFFETH: Elsewhere, Apple purchases $14 billion of its own shares.
That`s where we begin tonight`s market focus.

CEO Tim Cook told “The Wall Street Journal” that Apple initiated that buy back in the two weeks after its quarterly earnings report, taking advantage of the stock`s drop the day after those results.

Activist investor Carl Icahn weighed in on that repurchase. He took to Twitter writing “Google at 19 times 14 estimated operating profit. At the same multiple, Apple equals $1,245 per share. Ridiculous. Keep buying, Tim,” says Carl Icahn. “You still have $145 billion in cash.”

Shares rose more than 1 percent to close at $519.68.

And Cigna was one of the day`s biggest losers after the insurer posted weak quarterly earnings and a disappointing outlook. That company said that costs in its private Medicare businesses were higher which might continue into this year. And that pressured the stock. Those shares tumbled by 9 percent, closing at $77.47.

GHARIB: Shares of IBM rose on reports that it might be selling its semiconductor business. Big Blue has been spinning off some business units. It`s part of its push into Cloud technologies. Just two weeks ago, IBM agreed to sell its low-end server division to Chinese PC maker Lenovo.
The stock closed at $177.25 today, a gain of 1 1/2 percent.

Expedia was the biggest gainer in the S&P, a day after posting better than expected earnings. The travel site operator reported a 21 percent jump in gross bookings. Its deal with rival Travelocity also helped boost hotel room sales.

Other online travel agencies including Trip Adviser, Priceline and Orbitz also rose of lot on that report from Expedia. Expedia was the big winner, though, gaining 14 percent to $74.45.

GRIFFETH: GoPro has filed for an IPO. The maker of those tiny high- definition video cameras that a lot of skiers and hikers attach to their helmets to record a first person look at the action has filed paperwork to begin selling stock to the public. Here comes GoPro.

GHARIB: And maybe one day, GoPro will grow up to be a big player like Google. The search giant became the second most valuable company in the S&P today, passing ExxonMobil for a market cap of just under $400 billion.
Still, Apple is the biggest, worth nearly $460 billion.

GRIFFETH: Just amazing.

Well, our market monitor guest tonight likes to buy stocks that are the innovative part of the stock market, the high growth companies but also high risk to some degree.

Mark Lehmann is president of JMP Securities, an investment bank based in San Francisco.

Mark, how are you doing?

MARK LEHMANN, JMP SECURITIES PRESIDENT: Good. Thanks for having me on the show, Bill. I appreciate it.

GRIFFETH: You — an individual stock picker. But overall, do you see this market going higher? What did you make of the volatility this week?

LEHMANN: I thought it was an interesting bit of action this week.
Clearly, we had a tough January, which surprised a lot of investors. I think the consensus obviously going into 2014 was that bonds would be weak and stocks would probably continue to be higher. And that`s obviously not what happened in the first part of the year.

But fundamentals were somewhat decent this week. I think investors really saw opportunities for some equities in some of the high-growth companies we`re about to talk really put up stellar fourth quarters and really are the shining stars of the market. And we see that continuing through 2014.

GHARIB: I think it`s really interesting your list of companies you`re going to talk about, Mark, because most of them have gone public a year ago or less, and you already are raving about them.

So, let`s go down your list. The first one is Tableau. The ticker symbol here is DATA. And it`s trading on the New York Stock Exchange. It went public a year ago.

Tell us why you like this and why investors should put money in it.

LEHMANN: Well, it`s playing in a huge market, data and data analytics. It`s a market that really hasn`t had a lot of innovation over the last few decades. It`s a terrific product. It`s a large-growing market. We see that as about a $13 billion market now growing to about a low $20 billion market in the next five to six years.

They have a very small market share. They`re growing it very, very rapidly. If they get their natural market share, this stock which albeit being expensive and you can see has done quite well since it`s been public, will continue to do well, gain market share, and we think will be a winner.

GRIFFETH: Here`s another one, Workday. They`re in the human resources and finance business. That`s a pretty competitive field.

LEHMANN: It`s a big field. And the European market is one that has a lot of incumbent players. The management team, Dave Duffield, was a big executive at PeopleSoft, which we all know. And in five years there, he grew the company to get 5 percent market share.

If he does the same thing here, he`s competing with incumbent players like Oracle and SAP who combined have a $250 billion dollar market cap in all the businesses they have. And if they get their natural market share, as they are also growing about 100 percent this could be an extraordinary company. It already is. But be it an expensive company, they gain that kind of market share. This stock is going to keep going higher.

GHARIB: As you have been saying, if this, if that. These are risky stocks and they`re not for people who like to sleep at night easily. Let`s talk about your next one, Aratana — I hope I`m pronouncing that right — Therapeutics.

LEHMANN: You are.

GHARIB: Right.

LEHMANN: You are.

GHARIB: It`s a company that`s dealing with healthy pets, right?

LEHMANN: Well, healthy pets, and as we all know pets aren`t always healthy. We also know that people are going to extraordinary lengths to make sure their pets stay healthy, if they do get sick they`re going to some other lengths to make sure they get back to being healthy.

That is a market that has grown absolutely in recession in good times in bad. The pet market has never stopped growing in the last 30 years.

The management team is stellar. They`ve got an ample capital to grow the company. They also — something we really should pay attention to is if when you take a life sciences company that`s focused on the human market, the product to get to market takes hundreds of millions of dollars to get to market. When this company takes products that are going to go to the pet market, it takes tens of millions of dollars to get to market.

So, the cost to market is lower. You have a very, very wide open playing field. They are the number one player in that market. I think great things are headed to this company.

GRIFFETH: Quickly, all three have done very well in the last year.
Are they vulnerable, though, if there is a definite market downturn?

LEHMANN: There`s risk and there`s reward, Bill, as you know. These stocks have done extremely well and they`re also trading at premiums to the market.

But with their growth, I think buying a full share today, putting all your dollars to work tomorrow, probably not a good idea. But these are the winners. These are the companies that we think are going to do extremely well.


LEHMANN: JMP has followed these companies obviously since they`ve been public and they`ve done nothing but exceed their expectations since they`ve been public.

GRIFFETH: Any disclosures on your part?

LEHMANN: We`ve done investment banking work for all three companies proudly. And I don`t own the stock personally but I do think these stocks are going higher.

GRIFFETH: Mark Lehmann, president of JMP Securities — thanks for joining us tonight.

LEHMANN: Thank you both.

GHARIB: And coming up on the program, meet the man who had a craving and used his hunger, hard work and a little bit of luck to turn a small chocolate shop into a sweet success story.


GHARIB: We aim to end this jobs Friday in good taste. The kind a chef would appreciate. With a week to go until Valentine`s Day, the Godivas, Lindts and Ghirardellis of the world no business will take up.
But one small company, Bridgewater Chocolate, is hoping to take a bite to.
It`s the bright idea of a Swedish chef who makes it his business to cater to the American palate.


UNIDENTIFIED MALE: For this, the world was open.

GHARIB (voice-over): Welcome to Erik Landegren`s world. Hand-crafted peanut butter patties, turtles, toffees and caramels. Just the kind of American-style treats you`d expect a European chef to sniff at.

ERIK LANDEGREN, BRIDGEWATER CHOCOLATES FOUNDER: We love to come here and tell the American public what they should like. Well, if 300 million Americans will like to eat peanuts, I`m going to work with peanuts.

GHARIB: Landegren`s Bridgewater Chocolates were more of a local curiosity when he began selling them at the village store in tiny Bridgewater, Connecticut, back in 1995. The chef came to New York from Sweden in the 1980s.

LANDEGREN: Very first machine I ever had.

GHARIB: He had never dabbled in chocolate until he moved to Bridgewater, where he worked as a personal chef for one of Wall Street`s best-known deal makes, Peter May.

When his boss bought his store, rescuing it from bankruptcy, Landegren`s suggested chocolate, high quality chocolate could bring in new customers.

LANDEGREN: Superb business concept yet it failed miserably.

GHARIB: The confections were considered a little pricey. But things changed after a New York radio host called to ask if Bridgewater shipped boxed chocolates.

LANDEGREN: What I wanted to do send more chocolate. And then, of course, I immediately said, yes, we do, in fact.

GHARIB: Little did he know she would rave about Bridgewater Chocolates on the air.

LANDEGREN: We got slammed and got about 100 phone calls that afternoon. I had no idea how to go about it.

UNIDENTIFIED MALE: Everything`s packed on ice.

GHARIB: Andrew Blauner, Peter May`s son-in-law, developed a craving for the chocolate.

ANDREW BLAUNER, BRIDGEWATER CHOCOLATES CO-OWNER: I`d bring it to work and we`d put it on the conference room table. It would be devoured in 30 seconds. And then, I`d look at my bill from my credit card, it was never charged. So, I said this is not a good business situation.

GHARIB: In 1999, Blauner teamed up with Landegren, transforming the company into a serious business.

One key change: marketing the chocolates in their handsome hinged boxes to corporate customers.

BLAUNER: We can customize the inside lid.

GHARIB: And Blauner moved the operations from the cramped basement of the Bridgewater store, to a big warehouse in an industrial park nearby.

BLAUNER: He brought this machine that was 55 feet long. And you cannot put this anywhere. You need to have a facility. Where are you going to put it? He said, I was going to put it in my basement.

LANDEGREN: It`s absolutely true everything he says, because — because when I am just me, it`s pretty hard to be me. And he makes it really easy for me to be me.

BLAUNER: Which makes it very hard to be me.


GHARIB: The duo have turned Bridgewater Chocolates into a multimillion dollar business — sweet success in a crowded, competitive field.

BLAUNER: We have always made money. And the goal has always been to be America`s chocolate. We want to have a box of Bridgewater Chocolate on everybody`s dinner table for every special occasion.


GHARIB: And more than 60 percent of sales are holiday gifts for those special occasions, most of it ordered online or by phone. Valentine`s Day is their next busiest time, accounting for more than 10 percent of his business.

GRIFFETH: Great story.

Well, she`s only been on the job for three weeks, but already, the new chief executive of G.M. is getting a lot of attention. Mary Barra, the CEO of G.M., the first woman to ever head up a major automaker, has just been named the world`s most powerful woman in business by “Fortune” magazine.

Coming in number two, IBM CEO Ginni Rometty. And third was PepsiCo`s Indra Nooyi.

GHARIB: And finally tonight, the 2014 Winter Olympic Games in Sochi, Russia, have already begun. This year`s gold medals will be among the largest in Olympic`s history. But not the most expensive. A gold medal from this year`s games is worth about $581, down from the record value of
$706 for a gold medal back in the 2012 London Olympics, due in part to the decline in gold prices.

GRIFFETH: But make no mistake. To all those athletes, a gold medal, priceless.

GHARIB: Priceless.


GHARIB: You`re absolutely right.

That`s NIGHTLY BUSINESS REPORT for tonight. I`m Susie Gharib. Thanks for joining us. Have a great weekend.

GRIFFETH: I`m Bill Griffeth. Do indeed have a great weekend, everybody. We`ll see you again on Monday.


Nightly Business Report transcripts and video are available on-line post broadcast at The program is transcribed by CQRC Transcriptions, LLC. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Nightly Business Report, or CNBC, Inc. Information presented on Nightly Business Report is not and should not be considered as investment advice. (c) 2014 CNBC, Inc.

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