Transcript: Wednesday, March 12, 2014

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


SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Working overtime and getting paid for it. President Obama wants employers to pay millions of salaried workers overtime for their extra hours. But is it smart business?

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Tarnished copper. What the recent slide in prices says about the global economy, and why smart investors pay close attention?

GHARIB: And slow money. Why does it take days for checks to clear or for money to transfer between some accounts in a world where everything is instantaneous? What’s being done to get you your money sooner?

We have all that and more tonight on NIGHTLY BUSINESS REPORT for Wednesday, March 12th.

MATHISEN: Good evening, everyone, and welcome.

It is a simple equation — you work, you get paid. And if you get paid by the hour, you get paid overtime, time and a half for extra work you do. But it’s not always that simple.

Today, the White House announced a new initiative to boost overtime pay protections for millions of salaried workers who don’t get paid for that extra work. But should the government be involved in determining what managers and other private employees get paid?

Hampton Pearson has more on the controversial proposal.


HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): President Obama wants the Labor Department to revamp regulations to require overtime pay for the millions of fast food supervisors and convenience store managers and others who routinely work 50 to 60 hours a week without getting overtime pay. Right now, if you make $455 a week, roughly $24,000 a year, your employer does not have to pay you overtime over that threshold.

The Labor Department benchmark hasn’t changed since 2004.

BETSEY STEVENSON, WHITE HOUSE COUNCIL OF ECONOMIC ADVISERS: The president believes that if you’re making $25,000 a year and you’re working 60 hours a week you should be getting paid for the extra hours you work. And that’s what this is about.

PEARSON: The administration has not said where it wants to set the new threshold, but the Economic Policy Institute, a progressive Washington think tank wants to double the benchmark to $954 a week. It estimates an additional 5 million to 10 million workers might then become eligible for overtime.

ROSS EISENBREY, ECONOMIC POLICY INSTITUTE: The whole purpose of this really is to make sure that people are better paid, that workers have more money in their pocket. We’ve gotten to the point where the labor share of the economy is being squeezed down, more and more is being kept by employers in profits. And it’s out of balance.

PEARSON: The president’s decision to use his executive authority to change the nation’s overtime rules sets up another clash with congressional Republicans, already on record against his proposal to raise the minimum wage to just over $10 an hour.
REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: Well, there’s all kinds of rumors about what the president may or may not do with regard to overtime pay and reclassifying some jobs for overtime. But if you don’t have a job, you don’t qualify for overtime. So what do you get out of it? You get nothing.

PEARSON (on camera): Late this afternoon, the National Retail Federation said the overtime overhaul, if implemented, would have, quote, “a significant job-killing effect.” A preview of the coming clash between business and labor during a rule-making process that could last well over a year.

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


GHARIB: Our guest tonight have opposing views on the overtime issue.

Daniel Mitchell is senior fellow at the Cato (NYSE:CATO) Institute. And Ross Eisenbrey is vice president of the Economic Policy Institute.

Dan, let me start with you, because you are opposed to this proposal. Tell us. I mean, why what are the drawbacks of getting people who are working extra long hours some more money?

DANIEL MITCHELL, CATO INSTITUTE SENIOR FELLOW: First, I have a philosophical objection. I don’t think that the government, politicians or bureaucrats, should interfere between consenting adults who want to have an employment contract.

Now, that being said, I wish there was some magic fairy who could sprinkle down pay raise dust on all of us. The reality is, if government is going to impose a cost, somebody’s going to bear that cost. Now, a lot of people in the administration and elsewhere seem to think that businesses are some never-ending well of money that can be tapped, whether it’s Obamacare premiums, whether it’s a higher minimum wages or whether it’s now this overtime initiative.

The reality is, when you make it more expensive to hire workers, you’re going to get fewer workers hired. And when you make it more costly to have certain workers in a category where they are subjected to overtime, guess what? Their base pay may go down, fewer then may be in that category.

There are going to be real world consequences because there is no magic fairy up there who sprinkles money on us.

MATHISEN: You know, Mr. Eisenbrey, fairies or not, Dan makes some very interesting points here. I mean, number one, why should the government be involved in setting the rates of pay, if as you say, the share of the national income going to labor is 42 percent? That suggests that labor is willing to take that amount of pay. And secondly, Dan makes the point that if you charge more for something, you get less bought of it.

Answer it.

EISENBREY: Well, one thing you’ll get less of, if you don’t — if you don’t pay for it you’ll get workers working more overtime. That’s clear. And that leads to hardship on them and their families. It leads to, you know, a lot of stress in people’s lives.

So if employers are going to make people work extra long hours, they should pay for it. And the workers obviously are going to benefit from that.

The notion that we can’t have the government involved in this is crazy. The government has been setting overtime rules since 1938. And back in the days when we had the strongest economy, fast-growing incomes across the board, not just for the 1 percent or the very top of the income scale, we had strong regulation of overtime rules.

And what I’m proposing is we go back to the Ford and Nixon administration, you know, and look at what they did. The economy was good back then, and there’s no reason that we can’t have those rules again.

GHARIB: So, Dan, we like you react to what Ross is saying. Should we go back to the era of past times to make this a little bit more of a robust economy by paying people more?

MITCHELL: Wow. I’ve never heard somebody say we should go back to those boom years of the 1970s.

Here’s where I think Ross and I might have some common ground. There’s no question that the best thing we can do for workers, whether they’re the lowest paid or for that matter middle class or above, the best thing is good economic growth.

But here’s where we’ll have the difference. I don’t think making our economy more like France, more like Italy, more like Greece, with more regulation, more government mandates, higher taxes, more spending — I don’t think that’s the recipe to get faster growth.

If we want more job creation, if we want higher pay, we need a tight labor market. That means more growth. And I think you get that by reducing the burden of government. So, I think we should be going in the opposite direction.

Yes, let’s go back to the era when we had fast growth but it wasn’t the 1970s. It was the 1980s and ’90s under Reagan and Clinton. And that’s when the burden of government was falling, not rising.

MATHISEN: Mr. Eisenbrey, we’ve got about 30 seconds here. Why don’t you answer what Dan says? I think what you were saying there was to go back to the levels or the thresholds of the 1970s.

EISENBREY: That’s right.

MATHISEN: Not necessary — when inflation adjusted terms the overtime threshold was closer to $1,000.

But, you know, people who work overtime do get paid for the extra work. It’s a question of whether they get paid that shift differential of time and a half, right?

EISENBREY: That’s right. They should be paid time and a half for their overtime. I did interviews today with workers who have worked 20 and 30 extra hours in a week and hadn’t gotten paid for it. They said what’s obvious. If they had been paid, if they’d had the extra at the end of the year, $5,000 or $10,000 in their paycheck, they would have been able to spend that money on car payments, on putting money aside for a home mortgage. They would have done things that would spur the economy, which is slow not because of the capital doesn’t get its share, it’s because workers don’t have enough money to spend.

GHARIB: All right. Ross, we’re going to have to leave it there. You get the last word.

Sorry, Dan.

But thank you gentlemen both for coming on the program. Daniel Mitchell of the Cato (NYSE:CATO) Institute and Ross Eisenbrey from the Economic Policy Institute.


MATHISEN: Well, stocks end the day mixed and little change. No major economic data to speak of today. No big earnings reports out. Tensions between Russia and Ukraine seem to ease a bit on a ramp up of diplomatic efforts.

The Dow lost 11 points, the NASDAQ, though, gained 14, snapping a losing streak. And the S&P 500 closed a fraction higher.

GHARIB: Copper prices ended the day slightly higher, up one penny a pound that. Brought an end to a sharp three-day slide and a 12 percent tumble in prices this year. That’s reverberated through the commodity trading floors everywhere.

Bertha Coombs tells us why the falling price for copper matters to all investors.


BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): The copper trade is all about China. The country’s massive build-out over the last decade has driven global prices. But China’s recent slow down has triggered investor concerns about the outlook for copper demand.

Concerns economist Zach Karabell calls overblown.

ZACHARY KARABELL, RIVER TWICE RESEARCH PRESIDENT: It’s not as if the overall activity within China has gone from massive to minimal. It’s that the pace has changed.

COOMBS: But it’s more than just the slowdown. Copper has become a major source of collateral for cash in China, and that’s led to speculative buying. Some analysts estimate 60 to 80 percent of copper imports in China have been tied to corporate borrowing. Then last week, solar panel maker Chaori became the first one of those companies to default on a corporate debt payment.

SARAT SETHI, DOUGLAS C. LANE ASSOCIATES MANAGING DIRECTOR: What’s happened is people have been using copper to finance, and with the demand coming down and really more financial instruments than really supply and demand, the price of copper is falling much faster than people expected.

COOMBS: Copper prices plunged nearly 10 percent over three days, following Chaori’s default.

(on camera): The worry is if more Chinese companies default and are forced to liquidate their cooper holdings, it could flood the market and trigger a financial crisis in China. But analysts at TD Security say Beijing has shown a willingness to step in and help troubled firms in the past. And likely will again.

SETHI: We don’t think China is going to blow up, just going to slow down. And I think investors in companies that are well diversified will be OK except those that are just completely focused on infrastructure and building in China might get hurt more than some of the others.

COOMBS (voice-over): For consumer-oriented firms, a slowdown in China’s building boom could be good news.

KARABELL: If they’re shifting to more of a consumer-oriented economy that can help the United States. One of the fastest-growing export markets for American goods is China.

COOMBS: Near-term for electronics makers and manufacturers, lower copper prices could also be a boon.



MATHISEN: The latest now on that General Motors (NYSE:GM) recall. U.S. Transportation Secretary Anthony Foxx made his first comments on the situation, was asked if owners of the cars now being recalled should feel safe.


ANTHONY FOXX, U.S. TRANSPORTATION SECRETARY: They should follow the recommendations of G.M. G.M. has issued a call and asked people to do thing. For instance, taking keys off the keychain and using a single key, and I think folks should just follow the protocol.


MATHISEN: G.M. is offering free loaner cars and $500 toward a new vehicle to more than 1 million owners of those recalled compact cars.

GHARIB: Still ahead on the program, a peek behind the curtain of one of Silicon Valley’s most secretive firms, where business is booming and buzz about its future is swirling.


MATHISEN: New worries for the vitamin and supplement company Herbalife (NYSE:HLF). The federal trade commission announced it is launching an inquiry into how the company conducts sales and pays its dealer force. This comes after repeated attacks by well-known hedge fund manager Bill Ackman who contends that Herbalife (NYSE:HLF) operates like a pyramid scheme. Herbalife (NYSE:HLF) says it’s done nothing wrong and welcomes the FTC inquiry.

After the New York Stock Exchange halted shares of Herbalife (NYSE:HLF) ahead of the news about that inquiry, shares took a steep tumble before ending the session down by more than 7 percent. And some big-name mutual funds that you may own also own Herbalife (NYSE:HLF) shares. The top holders include some Fidelity Funds, Vanguard and American Funds.

Well, every day, trillions of dollars get tied up in the nation’s antiquated banking system. But now, the Federal Reserve is behind a big push to speed up that system so that you can move money and receive money quicker.

Steve Liesman has more.


STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Almost everything in the world today is traveling faster and faster, that’s not necessarily true with your money. You may not notice it, but it can take as many as three days for you to get your direct deposit check from your employer. When you make a purchase, retailers can wait just as long before they get paid.

Why is money so slow? Regulations are a part of it. New regulations require banks to know their customers more than ever. And there’s batch processing where banks process millions of transactions all together rather than one by one, along with an antiquated banking system that’s geared towards processing paper checks more than electronic payments. And there are toll takers along the way where different companies are involved in authorizing payment and guarding against fraud.

But the payment system is seen as a vital part of national infrastructure like highways in the power grid. That’s why the Federal Reserve is reviewing ways to speed up the flow of money, especially since the U.S. is falling behind other countries like the U.K. and Sweden which are moving rapidly towards real-time payments.

Meanwhile, leading financial companies are rolling out new technologies that could enable people to send money directly to each other and bring down costs dramatically. Among them, PayPal is rocking the world’s payment system. And ACI, whose software handles $13 trillion in transactions every day, introduced a new system that could cut out middlemen and also reduce fraud, because there would be fewer companies handling transactions.

PHILIP HEASLEY, ACI PRSIDENT & CEO: If money makes three or four stops on its way to getting completed. That means it has three or four different locations of them being stolen. If it goes point to point to get cleared, you’ve eliminated places it can be stolen.

LIESMAN: Experts say faster money could mean more economic growth as dollars that are being transferred remain in limbo. What’s clear is that in this day of instant everything, it makes little sense that you can buy a sweater online and get it the next day. But you can be wearing that sweater for two more days before the money shows up in the retailer’s bank account.



GHARIB: And speaking of retailers, shoppers stayed away from Target (NYSE:TGT) in January, still nervous about that recent credit card data breach at the retailer. And that may have hurt sales. Researcher Kantar Retail says that only 33 percent of U.S. households reported shopping at Target (NYSE:TGT) during the month of January. That’s the fewest number of shoppers in three years.

But the company has also said sales began to improve in February.

MATHISEN: Shares of the apparel retailer Express (NYSE:EXPR) slide on a weak outlook. That is where we begin tonight’s “Market Focus”. The chain saying it expects profit to drop by more than half because of deep discounts and a decline in store traffic. Earnings and revenue for the current quarter they also missed estimates. The stock fell 12 percent today to $16.05.

And CSX (NYSE:CSX) warns that severe weather will weigh on earnings. The rail operator says harsh conditions have challenged its operations and volume, and it expects earnings to be lower by 10 cents a share. Still shares of CSX (NYSE:CSX) were up a fraction today.

Shares of Pulte Group and Toll Brothers (NYSE:TOL) fell after Credit Suisse downgraded the home builders. The firm cuts its rating on both stocks to neutral from outperform, because of lackluster demand heading into the spring selling season. Shares of Pulte down more than 1 percent to $19.67. Toll brothers off to $37.77.

GHARIB: An update on a story that we told you about yet. Shares of Zogenix (NASDAQ:ZGNX), this is the maker of that controversial painkiller Zohydro, it plunged on news that Purdue Pharma is moving ahead with an abused resistant rival to that painkiller. Zohydro has faced heavy opposition from experts who say the drug is too powerful and potentially addictive. The stock tumbled about 23 percent to $3.51.

And Krispy Kreme results also out after the market close today. The donut maker said profit more than tripled on improved sales. It also boosted its earnings forecast and increased its share buy back program. Shares rose right after the report. The stock ended the regular session up almost 2.5 percent to $19.88.

And a company that might be gearing up to go public is a little-known data security firm with a growing roster of big-name clients. It’s already getting a lot of attention from investors.

Josh Lipton has more.


JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): There’s always buzz in Silicon Valley about what company could be the next hot IPO. A name that’s often mentioned, Palantir.

The case is easy to make. Palantir’s specialty is crunching massive amounts of data so that organizations can make sense of it. Its clients include the Department of Defense, the Los Angeles Police Department, and big banks such as JPMorgan (NYSE:JPM) and Morgan Stanley (NASDAQ:NBXH) (NYSE:MS).

Palantir has already raised close to $1 billion. Its revenues are estimated to be close to $500 million. And analysts peg its valuation at more than $9 billion.

AVIVAH LITAN, GARTNER ANALYST: They’ve made it really easy for enterprises to get their arms around all this information, whether it’s structured data and columns and rows, or unstructured information, e-mails, memos, voice, video. And it’s very simple for a company just to get their arms around their information and put it all together.

LIPTON: Palantir has attracted prominent Silicon Valley players such as Peter Thiel, whose stake in the company is said to be worth almost $1 billion as well as famed investor Stanley Druckenmiller and CIA’s In-Q-Tel venture fund.

But the rest of us might have to wait before becoming investors. Sources close to the company say that it has no plans to go public anytime soon. Part of the reason Palantir might not be in any rush, business is booming.

LITAN: They have plenty of money, plenty of revenue, and why go through all the scrutiny that comes with the public company? They’ve got very sensitive projects as well for the government and commercial sectors. And they’re not beholden to shareholders. So, they have really no need to go public.

LIPTON: Palantir says it has doubled in size every year since its founding in 2004. Not many companies can make that claim. And it keeps attracting new, powerful clients, recently inking a deal with the SEC to provide software that can detect insider trading.

Gartner’s Litan attributes Palantir’s success in part to what she calls its unique corporate culture.

(on camera): She says it’s a group of very well-paid smart employees who work strange hours, and are part of a, quote, “an odd Kool-Aid culture.”

Josh Lipton, NIGHTLY BUSINESS REPORT, Palo Alto, California.


MATHISEN: Coming up, homeowners saw a shocking spike in their utility bills this winter. But even as the weather warms up and spring turns to summer, there may be little relief in sight. We’ll tell you why next.


MATHISEN: 2013 turned out to be a pretty good year to be a Wall Street banker. New York City’s comptroller reports that bonuses rose 15 percent last year hitting a post-financial crisis high. And the average cash bonus was a whopping $164,000.

GHARIB: Winter may be drawing to a close, but there may be no relief in sight for your utility bill.

Jackie DeAngelis explains.


JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): As if anyone needed a reminder —

UNIDENTIFIED MALE: We’re right off Lake Ontario on western New York. Some spots will get a foot, maybe a foot and a half of snow —

DEANGELIS: — winter isn’t finished with us just yet. Officially, there are nine days to go. Snow is falling, breaking snow snowfall records in some places. Can you say cabin fever?

UNIDENTIFIED MALE: Too cold. Too much snow.

UNIDENTIFIED FEMALE: I haven’t been able to take all the long walks I usually do.

UNIDENTIFIED MALE: Golf. I like golf and I can’t golf.

DEANGELIS: Stuck indoors, you know that keeping the cabin warm comes at a price. Heating bills are up 10 percent from a year ago in the 58 million plus U.S. homes that use natural gas.

UNIDENTIFIED FEMALE: We just got our bill yesterday. And we were all just talking about our bill. It’s extremely high.

UNIDENTIFIED FEMALE: It’s been so cold. We’ve got the furnace turns on by itself because it’s cold.

UNIDENTIFIED MALE: Colder means higher gas bills. It’s been brutal this winter.

UNIDENTIFIED MALE: That’s my wife turning it on. I’d leave it off if it were up to me.

DEANGELIS: Other fuel sources are costing more, too. Electricity is used to heat more than 46 millions homes. The Department of Energy says electricity costs are up about 1 percent. But many of those homes used more electricity.

So, the bills are actually up about 5 percent. A lot less people using heating oil and propane, but they’re feeling it, too. Oil costs are up more than 7 percent, and propane a whopping 65 percent.

(on camera): So what happens next? The weather will get warmer, but traders say no relief for prices in sight. Supply is very low and some forecasters already calling for record heat in some places this summer, which means that the air conditioners will be clicking on sooner rather than later.

ANTHONY GRISANTI, GRZ ENERGY PRESIDENT: The damage to the supply was so severe this winter that producers will take awhile to get supplies back up to the normal levels that we’ve seen in the past. And in fact, the $2, $3 natural gas that we saw just a year ago is out of the question in the near future.

DEANGELIS: Higher prices are something we all may need to get used to, which only complicates the monthly balancing act that we have to do with our household budget.



MATHISEN: And finally tonight, a birthday to celebrate. It was 25 years ago today that a British scientist named Tim Berners-Lee invented the World Wide Web. And in just one generation, he’s given any computer user with an Internet browser, the power to surf Web site, gather information (AUDIO GAP) watch videos, photos, share them with anyone else anywhere in the world, all within seconds.

An estimated 87 percent of Americans now use the web.

So, happy birthday to the World Wide Web. And I’m sure there are going to be many, many more.

GHARIB: Only 87 percent? I thought everybody was using it. I can’t live without it, right?


GHARIB: That’s NIGHTLY BUSINESS REPORT for tonight. I’m Susie Gharib.

And we want to remind you that this is the time of year your public television station seeks 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 great evening. See you 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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