Transcript: Thursday, March 6, 2014

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


SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Stop me if you heard this before. The S&P closes at an all-time high. Its 50th record close in the past 12 months. What`s driving it and which sectors should you invest in for the long haul?

Think your employer will offer a health plan 10 years from now? Why you might want think again.

HERERA: What`s your broker hiding? A personal bankruptcy? Criminal charges? And is a Wall Street regulator routinely deleting key information about the person you`re trusting with your money?

All that and more tonight on NIGHTLY BUSINESS REPORT for Thursday, March 6th.

Good evening, everybody. I`m Sue Herera, in for Susie Gharib, who has the evening off.

MATHISEN: And I`m Tyler Mathisen. Welcome, everyone.

It was another record seeking day on Wall Street, with investors getting a boost from some good news about jobs. Just one day ahead from the jobless report, probably the best measure of economic growth and stability, first time jobless claims tumbled by 26,000 last week. They fell to a 3-month. And outplacement firm reported that planned corporate layoffs declined by 24 percent from February of last year. Not even a dip in factory orders last month, or a slow down in fourth quarter worker productivity that could really derail today`s rally, at least not much today.

On Wall Street, the Dow finished 61 points higher, the NASDAQ did stumbled slightly after spending much of the day in the black. It ended down 5 points. And S&P 500 edged just 3 points higher today, but that was enough to end the session at a fresh all-time closing high of 1,877.

HERERA: All right. Joining us now to talk more about the markets is Kate Warne. She`s investment strategist at Edward Jones.

Good to see, Kate. Welcome back.


HERERA: Let`s start first of all with what you`re expecting in the jobs report tomorrow. Where is your number and specifically what in the report is going to be the most important for you?

WARNE: Well, we`re certainly looking for a total job creation around
145,000 and unemployment rate to stay at 6.6 percent. But the things we`re really going to be watching, in addition to that headline number, which I think will be what everybody is watching, are what happens to part-time workers, what happens to wages, with the idea being it`s the details that are also giving us some comfort that the economy is continuing to improve, even though the headline number the last couple of months has been pretty weak.

MATHISEN: You know, Kate, there are always plenty of things to worry about, whether it`s the economy or unemployment number or Ukraine or emerging markets or whatever, but what is your outlook for the U.S. stock market in 2014? And what would you be advising investors to do?

WARNE: Well, our outlook is pretty positive. We think volatility will increase, so that we`ll see more fluctuations. But we think the trend is higher because we do think the economy is improving, although not dramatically, just somewhat. We think that earnings will continue to rise in mid-single digits, and we think the global economy is improving as well.
That synchronized global rebound actually gave a boost to U.S. markets.

So we think stocks will move higher. That means we think investors should be adding stocks, if they need to in their portfolio. But the most important thing to do right now is to be sure you`ve got the right mix of stocks and bonds. If you had the right mix a year ago today, after a 30 percent rise in U.S. stocks, you may actually need to be adding fixed income even though we think stocks will continue to go higher and are good investments today.

HERERA: Are there specific stocks you think might be still a very good value in this market?

WARNE: Yes. We think investors need to be more selective and that a good place to look are companies that are benefitting from the stronger
economic growth. In that, we`d be looking at companies in the technology
area, in industrials, and we`d be looking at companies and in energy, and we`d be looking at companies specifically like Damen (ph) or EMC (NYSE:EMC) (ph), companies that basically are going to benefit from that stronger growth.

MATHISEN: Let`s talk a little bit about the global situation right now. How do you filter into your outlook what`s going on in Ukraine and the particular issues that have been confronting several of the emerging markets whether it`s Turkey, Brazil, or others?

WARNE: Certainly to start more broadly with emerging markets in general. Many countries have specific problems. They have large current account deficits. They`re importing more than they`re exporting. They have budget deficits and they have falling currencies partly due to the fact that China`s growth has slowed and in many cases, they`re commodity producers and they are selling less.

So, we think across the board, emerging markets look pretty risky.
And we`d be keeping those less than 5 percent of your portfolio.

Ukraine in particular is sort of a different issue because it`s really been a concern because people are worried that we`ll see a military escalation. We don`t think that`s likely to occur but could certainly roil markets again. And that`s what we saw Monday.

We think that`s calmed down a lot and it`s probably going to stay clam even though the politics are unstable, and we don`t really know what`s going to happen diplomatically or whether it could turn into a military situation again.

HERERA: Kate Warne, thank you.

Before we let you go any disclosures about the stocks that you mentioned to us?

WARNE: I have a family member that owns EMC (NYSE:EMC).

HERERA: All right. Thank you, Kate. Good to see you again.

WARNE: Thank you. Nice to see you again.

HERERA: Investment strategist over at Edward Jones.

MATHISEN: Well, one important member of the Fed is sounding upbeat about the economy and the central bank`s tapering plans. Federal Reserve of New York President William Dudley says the threshold to change the current reduction plans for the Fed`s bond-buying stimulus measures is quote pretty high.

Dudley says that for the Fed to deviate from the steady pace of cutting its bond purchases, economic conditions would have to change in big way.

HERERA: Do you feel any richer? The Federal Reserve reports that thanks to soaring home prices and the surging stock market, household net worth rose to a record high last year. The collective net worth of U.S.
households shot up another $3 trillion in the final quarter of 2013, to a total of nearly $81 trillion.

MATHISEN: Big name retailers out with disappointing earnings last quarter. Profits fell 15 percent at the warehouse chain Costco
(NASDAQ:COST) after it slashed prices on food to be competitive with Walmart and Target (NYSE:TGT).

And the office supply giant Staples (NASDAQ:SPLS) missed earnings forecast too after sales tumbled 10 percent. Now, the chain plans to save a half billion a year by shutting 225 stores, that`s 1/10th of its footprint. Shares of Staples (NASDAQ:SPLS) got — well, let`s go with pin
(ph) today, while Costco (NASDAQ:COST) shares were down about 3 percent.

HERERA: Well, although Nike (NYSE:NKE) may be the most recognized name in athletic footwear and apparel in the world, it`s fighting off some tough competition from Under Armour (NYSE:UA), Lululemon and others as it makes a big push ahead of the World Cup soccer tournament, which is taking place in Brazil, it starts in just three months.

So how does the company hope to outrun the competition?

Sara Eisen spoke with Nike (NYSE:NKE) CEO.


SARA EISEN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): It`s officially the kickoff to the World Cup, at least for Nike (NYSE:NKE), which doesn`t sponsor the tournament like Adidas but is going all out on products, technology and innovation for the event and for its team, the excitement began today when Nike (NYSE:NKE) unveiled a knitted football boot or cleat, made of its signature Flyknit technology. The company calls it revolutionary.

MARK PARKER, NIKE CEO: This has been four years in the making. The intricacies of the design, the level of performance with the Nike
(NYSE:NKE) Flyknit technology in this new shoe, we call them Magista, is actually above and beyond anything we`ve ever done certainly, and I think the players have actually voted with tremendous feedback.

EISEN: Adidas recently launched a similar knitted cleat for the world cup as well, because when it comes to capturing a global audience for sporting consumer companies, there`s nothing like the World Cup — 3.2 billion people watched it the 2010 tournament in South Africa. That`s 30 times the Super Bowl audience. The competition is fierce.

PARKER: Innovation for the World Cup this year is more than we`ve ever produced for any major event certainly in the sport of football ever.
This is the Magista boot here. It`s just the start. You`ll see more innovation coming between now and the World Cup, and we think the impact we`ll have on Nike (NYSE:NKE) is not just in terms of football and what we do, but to reinforce our position as a leader in sports shoe and apparel innovation.

EISEN (on camera): JPMorgan (NYSE:JPM) analysts say both Nike
(NYSE:NKE) and Adidas should see a sales boom from the upcoming World Cup, something both companies are relying on during what`s been an uncertain global economic environment or as Parker calls it, macroeconomic volatility.

And a more competitive one, too, with newer companies like Under Armour (NYSE:UA), posting sales momentum and getting in on those high profile sponsorships.



MATHISEN: Still ahead, what are your chances that your employer will offer health benefits a decade from now? We`ll take that one apart, next.


MATHISEN: The latest now on the crisis in Ukraine in the White House press room today, President Obama set a referendum by voters in Ukraine`s Crimea region to become part of Russia scheduled to take place on March 16th would violate international law and Ukraine`s constitution.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Any discussion about the future of Ukraine must include the legitimate government of Ukraine.
In 2014, we are well beyond the days when borders can be redrawn over the heads of democratic leaders.


MATHISEN: Meantime, the House of Representatives overwhelmingly passed a bill that would fast track loan guarantees for Ukraine. That measure now heads to the Senate for approval, but it`s unclear when the Senate will vote on it.

HERERA: Some big changes are coming to retirees at Boeing (NYSE:BA).
Starting in two years, the aerospace giant will end pension plans for all nonunion workers, even CEO and other top executives. Instead, Boeing
(NYSE:BA) will offer those 68,000 employees what`s called a defined contribution plan like a 401(k) retirement savings account. Some union workers will still receive a pension from the company.

MATHISEN: Well, besides salaries, pensions and savings contributions, the cost of providing health care coverage to employees is one of if not the biggest expense for a company. And the cost keeps rising.

Now, a new survey says that more larger businesses are uncertain whether they`ll even offer their workers health insurance plans a decade from now.

Bertha Coombs joins us now with more.

Bertha, who conducted this survey? And what does it tell us about what companies` intentions are and the rising cost of healthcare coverage?

BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT: It talks a lot about the uncertainty in the healthcare landscape right now. It`s Towers Watson (NYSE:TW). They are benefit consultants in conjunction with the National Business Groups on Health. They surveyed all large employers.
It`s the 19th year they`ve done this.

And 95 percent of them say they`re very committed to providing benefits, because they think that this is an important recruitment tool, particularly in some of the higher-paying industries. And most of them say they think that`s going to continue over the next few years. But when they asked them what about ten years from now, only about a quarter of them said they thought they would still be committed to that. And that`s the lowest reading they`ve gotten in 19 years.

MATHISEN: But doesn`t the Affordable Care Act tell these large companies that they must provide insurance options or pay a penalty?

COOMBS: It does. But one of things that has a lot of large employers concerned is the Affordable Care Act. It has this thing that has been called the Cadillac Tax. They said part of the Affordable Care Act is to try to bring costs down by getting people to use more cost-effective health care plans.

So, they set this limit above $10,000. And you have to pay an excise tax of about 40 percent on how richer your plans are above that $10,002 threshold.

MATHISEN: Who pays it, the provider?

COOMBS: Well, it would be the employers and probably employees. So take a look at some of the industries where the plans are very rich, health care, very rich. On average, the median in 2013 was $12,800. In high tech, it was about $12,600.

Those plans would be deemed for an excise tax of about $1,000 a piece.
In financial services, their costs were a little bit lower. They might be paying about $250 excise tax for each plan. And they would probably split that with their employees.

So, they are worried about this. This goes into effect in 2018, and that`s what has employers scrambling to figure out how to bring down their costs so that they don`t hit that threshold.

HERERA: And a lot of us are going to be wondering, I would think, how we`re going to navigate all of this. I mean, we just talked about the fact that pensions are going away so now you have to do a defined plan or a 401(k). And people have trouble navigating that.

COOMBS: Exactly.

HERERA: I can`t imagine navigating the health care exchanges.

COOMBS: Well, that is one of the things that people have done.
They`ve actually worked very well in terms of the private exchanges when it comes to Medicare. A lot of retirees from companies have been doing that.
But now, more companies are starting to look at that sort of benefit plan when it comes to health care.

So, last year, we saw Darden and Sears (NASDAQ:SHLD), in particular, go on the Aon (NYSE:AON) Hewitt plan. And they are essentially what they said was Aon (NYSE:AON) Hewitt, you handle it, and now, all of the insurers on that exchange are competing for workers to select their plans.

And an interesting thing has happened when they re up — 80 percent of folks were happy with their plans and kept them, but a lot of them started to shift to lower cost plans. You know those metal levels that we talk about, the platinum and gold saw a little bit of shift down, people moving down into the bronze, into the silver, because they themselves now want to make sure that they save money.

MATHISEN: All right, Bertha Coombs, thank you very much. Much could change over the next few years, I suppose, particularly between now and
2018 when that Cadillac tax goes into effect.

Bertha Coombs, thank you.

To read more about how companies are trying to navigate the new health law, head to our Web site,

HERERA: Some encouraging news for men who elect to have prostate surgery soon after being diagnosed with cancer. A new study out of Sweden finds that men with early stage prostate cancer who had their prostates surgically removed were significantly more likely to be alive nearly two decades later than men who did not have surgery and instead opted for so- called “watchful waiting until further treatment.”

MATHISEN: Well, Disney (NYSE:DIS) cuts one quarter of its workforce in its interactive division. That`s where we begin tonight`s “Market Focus”.

Seven hundred jobs will be eliminated from the unit, which houses its video games and online properties. Disney (NYSE:DIS) Interactive has suffered more than a billion dollars in losses in recent years. And the move is an effort to buy Disney (NYSE:DIS) to focus more on mobile and social games. Shares of Disney (NYSE:DIS) up a little bit to $83.34.

And Disney`s talks with DirecTV also making news today. The media giant discussing a deal with the satellite TV provider to license its shows and channels to the company as part of an internet-based TV product. This comes just a few days after Disney (NYSE:DIS) announced a similar carriage agreement with the Dish Network.

Shares of DirecTV up about 2 1/2 percent today to $79.99.

And the private equity firm Cerberus Capital Management reaching a deal apparently to buy the supermarket chain Safeway (NYSE:SWY) for more than $9 billion. Yesterday, there was a rumor that the grocery store owner Kroger (NYSE:KR) wanted to make a bid for Safeway (NYSE:SWY), but Cerberus has apparently scored the deal now, which was announced after the closing bell. Shares of Safeway (NYSE:SWY) off a bit to $39.47.

HERERA: Winter weather actually helped Kroger (NYSE:KR) posts an earnings beat. Customers horded those groceries before storms and the chain had the shelves stocked in preparation which drove sales higher.
Kroger (NYSE:KR) also forecast a higher full-year profit partly because of its acquisition of Harris (NYSE:HRS) Teeter, which is a local food chain.
Shares still fell a little bit today down almost three quarters of a percent to $43.37.

And Darden Restaurants (NYSE:DRI (NASDAQ:TBUS)) cancels its annual shareholder meeting and will meet with investors one-on-one instead. This as activists have been pushing for the company to make bold moves to increase value aside from its plan to spin off its Red Lobster chain. The company believes the small meetings will be more productive. Shares rose 2 percent to $48.91.

MATHISEN: How much should you trust your stock broker? According to a “Wall Street Journal” analysis, more than 1,600 stock brokers have bankruptcy filings, criminal charges and other flags that were not disclosed in public records and have (AUDIO GAP) gone unnoticed by regulators, (AUDIO GAP) concerns about who has access to your money and how you should protect yourself.

Joining us now to talk more about these findings is Michael Siconolfi.
He`s investigative editor at “The Wall Street Journal”.

Michael, welcome.

What`s going on here?


MATHISEN: What`s going on?

SICONOLFI: Well, there`s a pretty big problem in terms of investors` ability to be able to track what their stock broker`s records are. And so, you know, first off, I think most of the nation`s 635,000 stock brokers are honest. But I think that we were surprised at the number of stock brokers who had black marks on their record that weren`t reported to investors as they should have been. And it really raises a huge hole in the regulatory foundation of Wall Street and the protection for American investors.

HERERA: So, Michael, what did you find through this investigation?
And it was a very broad investigation. What things do not need to be reported or can easily be deleted?

SICONOLFI: Right. First of all, talk a little bit about how we got into it. We were a little frustrated the fact that we knew that there were brokers out there with checkered pasts that we weren`t able to get adequate information from FINRA, which is the major Wall Street regulator.

So, we did a unique database of the records. We found that there were a number of instances where bankruptcies, tax liens, securities fraud, filings and the like were not being reported as they should have been.
Investors have the right to know about black marks and on brokers` records going back 10 years and often cases that wasn`t being reported.

MATHISEN: So who`s at fault here, Michael? Is it the broker who is trying to sneakily cover up for something in their past? Is it the employer of that broker who as I understand it is the ultimate party responsible for reporting that information into FINRA, which is the industry`s own watchdog group?

SICONOLFI: Yes. I think there are problems at all those levels.
Ultimately, FINRA is responsible for overseeing all the brokers.

But it`s really been an honor system. So, brokers were expected to fully report any past problems to their employers or brokerage firms. The brokerage firms were supposed to track that and supposed to report back to FINRA. And there were break downs really at all levels. And that`s part of the problem because people really weren`t focusing on it until we did our reporting.

HERERA: So what are the dos and don`ts? If you`re considering entrusting your money to a broker, how do you protect yourself? What can you find out and what can`t you find out?

SICONOLFI: Well, I think investors in general have to be a lot more active. I think the first thing they should do is to check with FINRA which has a site called broker check and they can look at the basic history of their brokers.

I think you may have to go and do forensic investigation of your own and go to your state securities commissioner, for instance, and ask for information about your broker. And also just look to Google (NASDAQ:GOOG) in other areas to see if there`s anything out there that you find as a potential problem.

Look, there are a lot of great brokers out there. If there are any issues you`ve got or any concerns you have with any past problems they`ve had, you really should look elsewhere.

MATHISEN: Michael Siconolfi, thanks very much.

Michael is investigative editor at the “Wall Street Journal” and a heck of a softball player, too. Mike, good to see you.

SICONOLFI: Thanks. But I`ll keep my day job.

MATHISEN: All right.


HERERA: Coming up as we continue, can entrepreneurship be taught?
Well, professors at Stanford think it can and their mission is to help develop the next big Silicon Valley tech titan.


MATHISEN: With virtually everyone looking forward to tomorrow`s February jobs report, we took a look at some Stanford University students who are enrolled in a special program teaching them how to become high tech entrepreneurs.

Josh Lipton has more on what`s being learned and what those students hope to accomplish.


Instagram`s founder Kevin Systrom sold his company to Facebook (NASDAQ:FB) for $1 billion. As students at Stanford University now prepare for graduation, many dream of creating the next Instagram, so they do what Systrom did, enroll in the Stanford technology ventures program, or STVP as it`s called.

The program started in 1988. Its mission is to teach students how to succeed as high tech entrepreneurs. Its alumni have worked all over Silicon Valley from Google (NASDAQ:GOOG) to Silver Lake Partners.

Every year, about 2,000 students take part in the program where they study entrepreneurship, finance and business strategy. Many create their own business ideas which they then present to a panel of Sand Hill Road venture capitalists, Stanford`s own version of the popular television program “Shark Tank.”

ANSHUMAN SAHOO, STANFORD UNIVERSITY STUDENT: If I want to take somebody`s ideas and turn them into reality, it would be very helpful to have the support of STVP and to learn how to sell my ideas to the investment community.

LIPTON: Professors at the school say part of the program involves toughening up these students so they can compete in the real world.

MICHAEL LYONS, STANFORD UNIVERSITY: And students at this level who have gone through multiple years of very tough selection processes are not used to being told they`re wrong, OK? But that they`re just perfect, OK?

Well, we don`t do that. We tell them that, oh, oh, you might, you know, smell a little bit.

LIPTON: Professors say the students who choose to enroll in these courses are natural born entrepreneurs. They tend to be optimists, risk takers and hard workers. Right after graduation, some students work for tech titans in the valley, others start their own companies.

One success story, Skybox Imaging, which builds satellites. The company was created in this program five years ago and has since raised $91 million in funding.

(on camera): One thing is clear. After these students earn their degrees this spring, they`re likely to be some of the people behind the products and companies transforming your future.

Josh Lipton, NIGHTLY BUSINESS REPORT, Stanford, California.


HERERA: I hope my kids were watching that report.

MATHISEN: Yes. Just take a class to become a gazillionaire. Love it.

HERERA: Support mom and dad.

That`s it for NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera, in for Susie Gharib.

And we want to remind you that this is the time of year that your public television station needs your support to make programs like this one possible.

MATHISEN: And I`m Tyler Mathisen. On behalf of your public TV station, thank you for your support.

Have a good evening, everybody. And we hope to see you back here tomorrow night.


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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