Transcript: Friday, March 7, 2014

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


was surprisingly strong in February. More jobs were created than expected.
Does this signal the economy`s not only growing but perhaps accelerating?

aviation firm needs them and has a unique plan to train them, to ensure it
can meet the demand of the fast-growing industry.

MATHISEN: And market monitor. Our guest tonight explains why buying
defensive stocks may be your best offense now. And he`s got some names to
invest in.

All that and more tonight on NIGHTLY BUSINESS REPORT for Friday, March

And good evening, everybody. I`m Tyler Mathisen.

HERERA: And I`m Sue Herera, filling in tonight for Susie Gharib.

Well, with the wicked winter weather still hanging in there, we got a
surprisingly strong report on the jobs picture from the Labor Department
today. The economy added 175,000 jobs last month, and previous months were
revised higher. But the unemployment rate ticked up to 6.7 percent from
6.6 percent as more people started to look for work. The report offers a
little more clarity about winter`s effect on work, wages and the economy.

Here`s Hampton Pearson.


Despite the harsh winter weather nationwide, that kept more than 7 million
workers at home for at least part of the month, employers stepped up
hiring. Job gains beat forecasts by 46,000, renewing hopes that jobs and
growth could accelerate this year.

JACK ABLIN: Obviously we were somewhat upset by the polar vortex.
But I think that this reaffirms that grow pattern, that in fact not only is
the economy growing but it`s accelerating.

PEARSON: For those with jobs, average hourly pay was up 9 cents to
just over $24 an hour. It`s the biggest monthly gain in eight months.
With hourly wages up 2.2 percent in the last 12 months, ahead of the
inflation rate.

But Labor Secretary Tom Perez says we can do better.

slightly. But way too many people are still working hard and falling
behind. We`ve seen productivity since — you know, the last — since 1980
or so has gone up over 90 percent. Real wages have gone up something like
3 percent.

PEARSON: Even the increase in the unemployment rate to 6.7 percent
was a good thing. It went up because more people began looking for work.

CarMax (NYSE:KMX), the nation`s largest used car dealer, is expanding
and hiring — 1,200 new jobs nation-wide, including 140 employees at this
brand-new facility in Frederick, Maryland.

DAMON DEVINS, CARMAX GENERAL MANAGER: We`re excited the fact that
we`re doing that type of growth, 10 to 15 stores in the next two fiscal
years each year. That`s a lot of excitement, the fact that we`re hiring
1,200 positions right now as a company to get ready for the busy spring and
summer car-buying seasons as well.

PEARSON: For Alice Fisher, it`s a fresh start. She`s been hired and
is getting training as a sales consultant. She`s been out of work for more
than 2 1/2 years. During that time, Ms. Fisher came face-to-face with what
it means to be a mature professional in today`s job market.

interviews and have even had some expressions of oh, my goodness, you know,
because they didn`t expect me to be of a certain age. And so I continue to
pursue employment very actively and did everything that I could to get a
job, everything that I could possibly do.

PEARSON (on camera): Not everyone is as fortunate as Ms. Fisher.
Last month, long-term unemployment increased by more than 200,000. So,
now, nearly 4 million people have been out of work for six months or

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


MATHISEN: But even with so many people looking desperately for jobs,
companies keep complaining that they just can`t find the right workers for
their open positions.

In our latest installment on the series “Where the Jobs Are”, Mary
Thompson takes us to TIMCO Aviation in Greensboro, North Carolina, to look
at the multipronged approach that company is taking to fill its skilled
jobs gap.


Business is booming at TIMCO Aviation. The Greensboro, North Carolina firm
provides FAA required maintenance to commercial cargo and military planes.
It`s benefitting from the strong growth in the aviation industry, growth
threatened by a lack of skilled workers.

capacity. And so, again, if we were to expand it could be an issue of
getting enough workforce in here to actually work those aircraft.

THOMPSON: Kip Blakely is TIMCO`s vice president of industry and
government relations. He says to meet demand and replace the 30 percent to
40 percent of its workforce nearing retirement they need to hire 350
workers a year for the next three.

(on camera): Replacing them isn`t easy. The workers who take apart,
inspect, prepare and then put planes like this 737 back together again need
to be FAA certified. And that`s a process that takes two years.

(voice-over): To ensure steady stream of workers for present and
future years, TIMCO`s partnered with Greensboro`s Guilford Community
College to get the word out about jobs in the industry, starting with talks
that are aimed at kids as young as fourth and fifth grade.

interest early when people are open to anything and haven`t been routed in
other directions.

THOMPSON: Audrey Floyd chairs the aviation program at Guilford.
Along with the elementary school outreach, Guilford and TIMCO support a
four-year aviation program at a local high school. One student, Junior
Bruno Cacace, interned at TIMCO last summer and is shadowing at TIMCO
engineer this year. The experience helped him to cement his decision to
become an aviation engineer.

that I`ve seen in depth and been in the cockpits of airplanes.

THOMPSON: A third way Guilford funnels workers to TIMCO, a two-year
program providing graduates like technician Daniel Wade with the FAA
certification they need to work on the planes.

DANIEL WADE, TIMCO TECHNICIAN: I`ve changed oil filters. I`ve
cleaned and lubed cables, removed and replaced parts. A little bit of
everything here.

THOMPSON: And for TIMCO, getting more people who can do everything is
the one thing it needs to keep growing.

In Greensboro, North Carolina, I`m Mary Thompson for NIGHTLY BUSINESS


HERERA: Well, the unexpected growth in overall job creation last
month didn`t do much for the stock market today, but for the week, all
three indexes are up. The benchmark Dow Jones industrial average gained 30
points. The NASDAQ fell 15 but the S&P 500 managed to eke out a new high
by rising one point.

Both the Dow and S&P have finished higher for two consecutive weeks.
The NASDAQ`s been up for five weeks in a row.

MATHISEN: Joining us now with his analysis on the jobs data and
markets is John Manley. He`s chief equity strategist at Wells Fargo
(NYSE:WFC) Funds Management.

John, welcome back. Good to have you with us.


MATHISEN: So, John, the jobs number was much better than most people
expected. Why wasn`t the response on behalf of stock investors much better
than most people expected?

MANLEY: Well, we`re a fickle bunch. Some of this may have been
anticipated although it was technically a surprise. There are other things
to worry about. The market`s at a high for all intents and purposes.
There are concerns about what`s happening in the Ukraine.

And what have you done for me lately? I think it was still a very,
very good number and you just can`t base any decision on what happens on a
given day.

HERERA: But, John, does it change the way that the Fed looks at the
economy? I mean, maybe we`re getting a little bit stronger, but as Hampton
Pearson pointed out in his serious earlier, there is still an awful lot of
people that are out of work.

MANLEY: I don`t think it really changes the way the Fed approaches
things. This is actually what the Fed wanted. The story you just ran must
be music to Dr. Bernanke`s ears. I mean, this is what the Fed tried to do,
to get the economy started.

The economy has a natural tendency to grow. America`s full of a lot
of people who want to work and want to do things and make money. They`ve
just got to clear the way. It looks like they have.

Now, the Fed is still going to be very, very slow to raise interest
rates. Very slow to tighten. So, I think you have a little bit of an
arbitrage. You have awhile here where the economy can grow, help earnings,
help employment, and the Fed isn`t going to do anything because they want
to err on the side of the angels.

MATHISEN: Do you think the market can move higher from here over the
next nine months?

MANLEY: Yes. I think it could move decisively higher. I don`t know
how much. Our target is 2,000 for the S&P at the end of 2014. But that`s
just a number.

The basic forces that were in place, the fundamental forces, the Fed,
the earnings, the valuations that were in place a year ago are still in
place. It`s still a pretty positive scenario.

HERERA: So, where would you be deploying cash if you`re a longer term
investor? Do you stick domestically or do you look overseas as Europe
continues its recovery and maybe some of the emerging markets are steadying
out a little bit?

MANLEY: Yes, yes and yes. I think they`re all pretty attractive.
I`m an American. I think the U.S. is attractive.

I think on a nine-month basis, Europe may be even more attractive. It
was cheaper. It was cheap for a reason.

That reason was the recession. That reason is going away. I think
that`s a wonderful reason to buy stocks.

Emerging markets is more of a sentiment play. I think people are so
concerned, people are so nervous right now about that area, that I think
there are probably really good opportunities. You have to be selective.
And that`s not my specialty. But I do think there`s a lot of potential.

It`s perfectly good to start nibbling right now.

MATHISEN: What about bonds?

MANLEY: You know, I`m glad I`m a stock strategist. I think I made a
right career decision.

Bonds will be OK. I see no reason for rates to go up. Inflation is
low. And the Fed`s going to try to keep rates low.

But it was a great — let`s put it this way, Tyler: I was 27 years old
when the bond market rally started. How much do you want?

MATHISEN: Yes, it`s been a nice, what, 30 years, right, John?

MANLEY: You`re very kind.

MATHISEN: Didn`t mean to date you there. John Manley, thank you very

MANLEY: Thank you.

MATHISEN: I got you by a couple of years, anyway.

Anyhow, John is with Wells Fargo (NYSE:WFC) Asset Management.

HERERA: Still ahead, it is five-year anniversary of the bull market.
But not all stocks have participated in the run up. So are these dead
money investments finally ready to turn?


MATHISEN: China`s financial markets are experiencing Western-style
growing pains now. In an update to a story we told you about earlier this
week, China`s onshore corporate bond market has been hit now with its first
default, a solar cell maker did not pay the full interest on its bond which
suggests the Chinese government will no longer routinely back stock
companies that have bad debt. The solar company says it is trying to sell
some overseas plants to repay that obligation.

HERERA: Well, back here on Wall Street, the bull market turns five
and the S&P 500 has nearly tripled since then. But the run up has not
treated all stocks equally. In fact, you could say the bulls just ran over
some of them and then kept going.

Dominic Chu takes a closer look at companies left behind.


you bought an index mutual fund or ETF, you`d have done pretty well. But
if you picked the wrong strong investments, it would be a very different

MIKE HOLLAND, HOLLAND & COMPANY CHAIRMAN: One of the wonderful things
about this stock market for the last five years, basically all financial
assets have appreciated. And the very few that have been left behind
usually are left behind for a good reason.

CHU: There are lots of reasons why some stocks grossly underperformed
the market. And each story is a little different than the next.

Take personal computer giant Hewlett-Packard (NYSE:HPQ), for instance.
Consumers are shifting more towards using tablet computers and smartphones,
HP is trying to become less reliant on PCs and printers. That`s one reason
why HP stock is up just 13 percent since the March 2009 lows.

Then, there`s Best Buy (NYSE:BBY). The retailer specializes in
selling not just computers and printers but televisions and appliances as
well. But there`s stiff competition from online competitors like Amazon
(NASDAQ:AMZN).com. That stock is up just 4 percent in the last five years.

And then there`s the for profit education stocks like Apollo
Education. It owns the University of Phoenix. There`s been a lot of
controversy about the types of educational programs offered and what the
affordability is to students who attend. Shares of Apollo have lost half
their value since March of 2009.

But just because a stock is down doesn`t necessarily mean you should
count it out.

management teams in place. They need to have the right capital structure.
And they have to have the right products and services. And when all three
of those things come together, there can oftentimes be a turnaround that
takes place.

CHU: Of course, the trick is figuring out if those or other traits
really signal a buying opportunity.



MATHISEN: Big lot shares rally big after an earnings beat. And that
is where we begin tonight`s “Market Focus”.

The retailer`s revenue topped expectations as it continues to focus on
its domestic business. The company also says the loss from winding down
its Canadian operations was lower than expected. The stocks surging 23
percent today to $35.97.

Foot Locker also reporting better than expected earnings. Revenues
were strong as vendors such as Nike (NYSE:NKE) and Adidas develop products
popular with customers. Same store sales also increased, continuing a
growth trend that has lasted now for a few years. Shares sprinted almost 9
percent today to $46.49.

HERERA: Bed, Bath and Beyond is lowering its earnings guidance. That
retailer is blaming the harsh winter weather which forced some of its
stores to close. The company reports final fourth quarter results in early
April. The shares finished the regular session up 1 percent to $69.16.

And late today, Boeing (NYSE:BA) said it will inspect the wings of its
Dreamliners for cracks. The company says that the planes to be inspected
have not yet been delivered to customers and that inspection will not
impact the deliveries scheduled for 2014. Shares of Boeing (NYSE:BA)
initially dropped on the news but they finished the regular session at

MATHISEN: And a recall to tell you about from the generic drugmaker
Ranbaxy Laboratories, it has to do with a potential dosage mix-up. Ranbaxy
is recalling more than 64,000 bottles of generic Lipitor with 10 milligram
tablets distributed in the U.S. The company says the bottles could contain
a tablet that`s twice as strong.

HERERA: Our market monitor this evening says concerns about the
economy and the market has him sticking with high quality defensive stocks.
He is Michael Farr, president of Farr, Miller and Washington.

Good to see you again, Michael. Welcome back.

Great to be here.

HERERA: So, you`re a little worried. What is it primarily that has
you worried? We just got a good jobs number or a relatively good jobs

FARR: Sue, I manage other people`s money, so I`m always worried.
We`ve known each other for a long time.

HERERA: Right.

FARR: I`m a guy who worries.

I think that stock prices are fully valued. I think they`re rather
high. Margins are very high — meaning that there are about 50 percent
higher than their average mean level for profit margins for the S&P. So, I
think stocks are kind of expensive. Most of the run up that we`ve seen
came from multiple expansion, not so much from earnings growth.

So, while I think the economy is recovering, I am encouraged by all of
the positive things I`m seeing, I`m just cautious out there with my money.
And I prefer more solid balance sheets, more experienced management, and
international exposure in the stocks that we`re buying.

MATHISEN: All right. Michael, if I`m lucky I`m going to get a tax
return here, refund here in the next few weeks. Tell me where to put that
money. Give me a couple of names here. I know you like defensives.

FARR: Well, I like defensive. And I`m not recommending to buy or
sell. These are names that I do hold.

I like Johnson & Johnson (NYSE:JNJ). I`ve liked it for years. The
company as at 16 times earnings. They for the last ten years have
increased earnings at a compounded rate of 10 percent.

With a 2.9 percent dividend, I think that this is a great solid
holding with an AAA balance sheet. The United States doesn`t have one.

HERERA: That`s a very good point.

Abbott Labs is also —

FARR: A sad point.

HERERA: Yes, it is a sad point. That`s very true, Michael.

Abbott Labs.

FARR: Abbott Labs is a diversified, again health care company. So,
two in health care and health care is doing well. Forty percent exposure
to emerging markets. They`ve got a neat nutritional business. It`s a
little more expensive, about 18 times next year`s earnings, again not
cheap, 2.2 percent dividend.

I think we could see earnings growth here of about 10 percent. You
add the dividend I`ve got a 12 percent return. I think again from a very
strong company with diagnostics and devices, too.

MATHISEN: And my favorite company name to pronounce is Schlumberger

FARR: How do you do it so well? You can laugh in French now, you

Sixteen times earnings — I`ll stop. I think that earnings here have
been underpriced. They`re really poised now to do very well. They`ll have
great exposure to all oil and gas exploration.

So, 16 times earnings, I think earnings could end up almost well into
the mid-teens here. I look — I think we could get 14 percent, 15 percent
in terms of return from Schlumberger (NYSE:SLB).

But two health care and an energy company if you want to play it a
little safe with that tax return money, Ty, I would like these three

HERERA: You know, how important is the management team at companies
that you vest invest in? I know you want a solid balance sheet. I know
you want a fair amount of cash. You look at the dividend yield.

But at the end of the day, management still has to be able to execute.

FARR: Has to be able to execute, Sue. And you want to take a look
not only at the — we take a look at 10 trailing years of earnings and
profit and loss and income statements. And we track all the numbers. But
we also track what management has said about what they`re going to do and
how going to do it.

You look at a company like Corning (NYSE:GLW) years ago when they were
making dishes and pots. That was a company that was a great company that
had great assets, but pretty much it was old hat. To turn that company
into a fiber-optic cable producer and wire and line and technology company
took fabulous management. It was in place for awhile.

We like strong management. Strong management can help a great company
through tough times.

HERERA: And I know, Michael, you mentioned this before but you own
the stocks that you recommended earlier?

FARR: I own all of the stocks that I recommended. My family owns
them. And our clients own them.

We might be selling at any time just as a disclaimer but I don`t like
to sell very much. Our turnover last year was somewhere around 15 percent.
So, we really do hold stocks for a long time. I`m an old school kind of

HERERA: All right. Michael, good to see you as always.

FARR: Nice to see you both. Thanks for having me.

HERERA: Michael Farr, president of Farr, Miller & Washington.

MATHISEN: And a clarification on a story we told you about yesterday
on Darden. The company is cancelling its analyst and investor meeting, not
its annual shareholder meeting.

And coming up, meet two guys who saw the future of television, left
their jobs and risked it all to be a part of that future and eventually
turn a profit. Our “Bright Ideas” series continues next.


MATHISEN: Finally tonight, we introduce you to two guys with vision,
television, video entertainment delivered where you want whenever you want
by the Internet. We`re already beginning to take it for granted. That`s
why these two guys got the bright idea to quit working for a Hollywood
studio and start their own.


UNIDENTIFIED MALE: We stand at the forefront of history.

MATHISEN (voice-over): Developed in part by basketball star LeBron
James, “The LeBrons” are a kind of modern day “Fat Albert”, except they`re
seen not on TV but online.

Season one drew more than 50 million views on YouTube.

LEBRON JAMES, NBA STAR: Each and every last episode has a message
behind it.

MATHISEN: That page view count is a number Dan Goodman and Bill
Masterson would never have believed when they started Believe Entertainment
Group back in 2010.

Their primary focus, producing video distributed on the Internet.

aren`t watching TV like we did — like it has been in the past.

MATHISEN: They met in 2007 while working at Media Rights Capital, the
independent studio in Los Angeles that produces “House of Cards.”

Goodman and Masterson were long gone before MRC made a deal to run the
show on Netflix (NASDAQ:NFLX). But while they were there, they helped
demonstrate that online video could attract advertising dollars.

MASTERSON: Seven years ago when we started this ride, TV execs vets
would have said you`re crazy. General advertising markets would have said,
I don`t know what you`re talking about.

MATHISEN: Now they know. In 2013, advertisers spent almost $2.5
billion on digital video. By 2017, that number may top 9 billion.

But seeing the future is one thing. Starting your own company and
being the future can be downright scary.

absolutely a risk. You ready to go put down hundreds of thousands of
dollars of your own money and raise millions of dollars of somebody else`s
money and place a bet on it right now today?

MATHISEN: They bet on a trend. U.S. online ad spending including
video is now bigger than every other category except TV.

an enormous evolution.

MATHISEN: Randall Rothenberg runs the Interactive Advertising Bureau
that noted in a poll last summer that three quarters of U.S. execs plan to
spend more on digital video ads and less on TV.

ROTHENBERG: Are you really paying attention to whether you`re
watching a broadcast network or a cable network or an IP-delivered piece of
content like “House of Card “on Netflix (NASDAQ:NFLX)? Not really.

MATHISEN: Rothenberg believes advertisers will reach a point where
they don`t care, either.

ROTHENBERG: The medium is global from the get-go so if you`re a
professional creator of contents that`s very tantalizing.

MATHISEN: Tantalizing and sometimes nerve-wracking.

UNIDENTIFIED MALE: I mean, there`s millions of dollars being invested
in original content in our shows and there`s millions of dollars coming out
of the show.

MATHISEN: Their formula — big stars with lots of social media
followers. It`s worked for projects with LeBron, Jennifer Lopez, and the
internationally acclaimed DJ Guesto (ph).

Their new show comedian Jay Mohr`s “Money Where Your Mouth Is” has
been a top performer on Hulu this winter, and another reason for Goodman
and Masterson to believe.

MASTERSON: It is a profitable business, where does it go from here?
And how does the business that we`re creating turn into a more mature
business that yields more volume?



MATHISEN: Wise up indeed.

Those characters in “The LeBrons” came from a series of Nike
(NYSE:NKE) commercials. That show had a single sponsor, Nike (NYSE:NKE),
which is like the early days of broadcast television.

HERERA: And that`s NIGHTLY BUSINESS REPORT for tonight. I`m Sue

We want to remind you this is the time of year your public television
station seeks your support to make programs like this one possible.

MATHISEN: Indeed. And I`m Tyler Mathisen, on behalf of your public
TV station. Thank you for your support. Have a good weekend, everybody.
We hope to see you back here Monday.


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