Transcript: Thursday, June 5, 2014

NBR ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Susie Gharib.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Uncharted territory.
Stocks propelled to new highs after the European Central Bank acts aggressively, doing something never done before.

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Incompetence and neglect. That`s what a massive investigation by General Motors says led to the delayed ignition switch recall.

MATHISEN: The million-dollar retirement question, will a seven-figure nest egg be enough? All that and more tonight on NIGHTLY BUSINESS REPORT for Thursday, June 5th.

GHARIB: Good evening, everyone. You can thank Mario Draghi for today`s stock market records. Investors bought up stocks after European Central Bank President Mario Draghi announced early this morning a batch of stimulus measures to boost Europe`s economy and to encourage banks to lend more in the Eurozone.

That led to market rallies here on Wall Street and all around the globe. The Dow rose almost 100 points, closing at a fresh record of 16,836. The NASDAQ gained 45 points, and the S&P 500 added 12.5 points to the new record of 1,940.

Geoff Cutmore is in Frankfurt, Germany, and has more on those moves by Draghi.

GEOFF CUTMORE, NIGHTLY BUSINESS REPORT CORRESPONDENT: What we saw today was classic Draghi at the ECB. A little bit of jam today and a lot of jam tomorrow. So let`s talk about the details today. The key moves were in the interest rates. That ultimately now sees a negative deposit rate here in Europe.

The other big announcement was related to what they call LTROs. These are longer-term funding programs. It`s a way of squeezing money into the banks to try to encourage them to lend into the real economy. And credit expansion is the real issue when it comes to Europe at the moment.

So those were the two major points. The jam tomorrow really relates to full-blown QE, or some kind of bond-buying program. Mr. Draghi didn`t have much new news on that. He effectively said they are still working on a program.

But we know given the European Central Bank`s mandate, deciding which bonds to buy is the real dilemma. So work currently being done. As far as the package is concerned, Mr. Draghi said this is not it, there is the potential for more to be done.

MARIO DRAGHI, PRESIDENT, EUROPEAN CENTRAL BANK: We think it`s a significant package. Are we finished? The answer is no. We aren`t finished here.

CUTMORE: So for the time being, the markets seem prepared to take the announcement. We got a spike higher in the German exchange, the DAX, and an initial selloff in the euro. Both of those moves will be something that Mr. Draghi was pleased to see.

For NIGHTLY BUSINESS REPORT, I`m Geoff Cutmore, in Frankfurt.

MATHISEN: And Nick Colas joins us now, he is chief market strategist with Convergex.

Nick, welcome. We heard Geoff Cutmore say that the idea here is to get money into the real economy. Will it work, and why should I care if I`m an American consumer and an American investor?

NICK COLAS, CHIEF MARKET STRATEGIST, CONVERGEX: Well, the answer to the first part is, it should work over time, as you heard from that segment. We`re looking for not just this package but a lot more along the way. Europe faces two critical challenges, a very slow economy but also deflation and deflationary threats. These programs are meant to alleviate those risks.

As far as why we should care, I think we saw that in the stock market here in the U.S. today. It does improve stock prices here in the U.S., as well as those in Europe, and that`s beneficial for our economy as well.

GHARIB: You know, Nick, we just heard Mario Draghi saying that he`s not finished yet here, referring that they`re going to be doing — preparing for some asset purchases down the road. Why didn`t they just do that today? What are they waiting for?

COLAS: Well, as we heard, there really is a challenge in the ECB about which bonds do you buy? Do you buy Italian bonds? Spanish bonds?
German bonds? And what effect does that have on the local economies.
They`ve still got to work through those issues.

So what we heard today is that it`s basically a work in progress.
Very good program today and hopefully more to come.

MATHISEN: Why, Nick, did stock prices go up here in the U.S. in response to this? I hate to be a little thick here, but I assume it`s because if the European economy is stimulated, that means Europeans will buy more American products.

COLAS: That`s right. If you look at the average large-cap U.S.
stock, the kind of stocks that are in the Dow or the S&P 500, on average, about 20 to 25 percent of their revenues come from the European market. So anything that stimulates that market from the depths of what is still a very sluggish recovery does benefit U.S. earnings as well.

GHARIB: I hate to sound any, you know, warning signs here, but what are the risks here? Is it possible that this whole European plan can turn out to be like what happened in Japan, the lost decade, no growth? And what would that mean for us?

COLAS: That really is the risk here. You put your finger on it exactly. The risk is that even with the best efforts of a central bank, you still face a lot of headwinds in Europe, from everything from labor regulation to an aging demographic, just as you did in Japan.

So the risk here is that even though the central banks of the world are doing their level best, there`s still a lot of headwinds even on top of the good news we got today.

MATHISEN: Nick Colas, thanks very much. Nick is with.

COLAS: Thank you.

MATHISEN: . Convergex.

GHARIB: General Motors doing damage control today. The automaker released the results of an internal investigation into the decade-long delay in recalling millions of cars with defective ignition switches.
Those defects have been linked to at least 13 crash-related deaths.

Phil LeBeau has more on GM`s report, the role of embattled CEO Mary Barra, and what`s next for the automaker.

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: After a three- month investigation into what went wrong with 1.3 million vehicles with faulty ignition switches, General Motors has released that investigation, and it is massive.

The fallout from that investigation, announced today by CEO Mary Barra, in which she said 15 employees have been released by the company.
At least half of them were senior executives. Five others have been disciplined.

The reason, incompetency and negligence when it came to identifying the faulty ignition switch.

MARY BARRA, CEO, GENERAL MOTORS: Valukas found in this situation was a pattern of incompetence and neglect. Repeatedly individuals failed to disclose critical pieces of information that could have fundamentally changed the lives of those impacted by the faulty ignition switch.

LEBEAU: GM says 13 fatalities and 54 crashes are now linked with the defective ignition switches. By the way, GM has retained Ken Feinberg to determine if the number of fatalities linked with the defects rises over the next couple of months.

He`ll be doing that as he sets forth the criteria for a victim compensation fund. That should be in place by August 1st. Once that fund has been established, General Motors will have a better sense of exactly how many people were killed or injured due to faulty ignition switches.

In Warren, Michigan, Phil LeBeau, NIGHTLY BUSINESS REPORT.

GHARIB: So could General Motors be charged with murder? That`s the provocative headline of a Fortune magazine story that was posted today.
The author is Ben Geier, and he`s with us now.

So, Ben, answer the question to your headline. Could GM face murder charges?

BEN GEIER, REPORTER, FORTUNE.COM: Well, no, but they could in theory be charged with manslaughter.

MATHISEN: What would have to take place for that company to be charged with manslaughter, which, of course, BP pleaded guilty to after the Deepwater Horizon explosion back a few years ago? What has to take place?

GEIER: So basically for them to be charged with manslaughter, you have to find that someone at the company took an action that they knew could kill people, and they were doing it for the company while they were in a sound state of mind.

GHARIB: All right. So it really had to be some kind of deliberate thought process, which may not be the case here. But are some kind of charges likely in this whole case?

GEIER: Well, it`s always possible that we`ll see criminal charges.
What`s probably more likely is that the Department of Justice is going to go the civil route, levy some fines against GM, which could be fairly significant, much larger than the 35 million that the Department of Transportation and NHTSA levied against them last month.

MATHISEN: This whole question about whether the company could be charged with murder arises in part from the legal theory that corporations are actually persons under the law.

GEIER: Mm-hmm.

MATHISEN: As in the political funding case. Am I right about that, Ben?

GEIER: Yes. So if corporations are people under one circumstance, you know, are they under another? And that`s the question that has to be answered in terms of whether or not they can be charged with a crime like manslaughter.

GHARIB: So this would be unprecedented, then, if something like this were to really happen, aside from what we were just talking about with the BP thing. It`s, you know, very rarely do you hear of a corporation being charged, or even senior executives.

GEIER: Yes, it`s definitely very rare because, like I said, there`s sort of a very specific set of facts they have to find. And that can be difficult to prove.

MATHISEN: Ben Geier, thank you very much for being with us tonight.
Ben Geier is a fortune.com reporter.

GEIER: Thanks for having me.

MATHISEN: You bet.

Wall Street regulators plan to crack down on high-frequency computer- based stock trading. It makes up a huge share of stock market volume. And now the Securities and Exchange Commission will explore new rules to make sure traders with the best, fastest computers and fiber lines don`t have unfair advantages.

MARY JO WHITE, CHAIRWOMAN, SECURITIES & EXCHANGE COMMISSION: The clear message is the markets aren`t rigged, we have the strongest, most resilient markets in the world. Again, it doesn`t mean they`re perfect, and we obviously are constantly working on them to make them fairer and to better serve all investors and companies, trying to raise capital.

MATHISEN: Among the proposed rules, White wants to see private high- frequency traders registered as dealers, a change that would put them under SEC oversight.

GHARIB: And still ahead on the program, how much money do you need to retire? Is a million dollars enough? Some answers coming up.

MATHISEN: As we told you yesterday, two giants of the telecom industry, Sprint and T-Mobile, now edging closer to merging, which, if approved, would leave consumers with fewer choices when selecting a wireless carrier.

Morgan Brennan has more on the proposed deal and whether one fewer player could mean you`ll pay more.

MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s not official yet, but Sprint and T-Mobile are moving closer to a merger, one that could be announced this summer. Sprint would pay about $40 a share for T-Mobile U.S., valuing the wireless provider at roughly $32 billion.

For the country`s third- and fourth-largest carriers, such a deal could be a matter of survival.

KEVIN SMITHEN, SENIOR TELECOM ANALYST, MACQUARIE SECURITIES: These companies need to invest to stay competitive, invest in spectrum, invest in towers, invest in backhaul. That requires profitability.

BRENNAN: Sprint and T-Mobile are competing against two behemoths, Verizon and AT&T, which together account for an estimated two-thirds of subscribers and roughly 85 percent of the entire industry`s earnings.

Other proposed high-profile communications mergers like AT&T`s bid for DirecTV and Comcast-Time Warner cable deal are already driving a sweeping reshaping of the industry.

Sprint and T-Mobile don`t want to get left behind.

AMIR ROZWADOWSKI, TELECOM ANALYST, BARCLAYS: The telecommunications industry has always been a scale game. And so the larger the scale, the better the potential value proposition of that company is to the general public.

And largely that`s because the business itself is a very high fixed- cost business, and if you have broader scale, what you can inevitably do is drive down prices profitably and also develop a larger cash flow in order to invest in innovation.

BRENNAN: Sprint Chairman Masayoshi Son believes a merger will allow Sprint to do just that, improving its network to raise data fees and lower prices for consumers. In other words, increase competition.

But will regulators agree? The FCC has expressed a preference for four carriers in the market, an argument cited when regulators shot down AT&T`s bid for T-Mobile in 2011. A merger would leave consumers with less choices, something already taking place as the number of smaller regional providers dwindles amid fiercer competition.

But one thing is certain, consumers` dramatic shift to mobile, increasingly using smartphones and tablets for data consumption like video streaming, is what`s driving consolidation, as wireless carriers, cable companies, and satellite TV providers all scramble to build out their networks.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan.

GHARIB: Shares of Ciena surged today thanks to a strong earnings report. And that`s where we begin tonight`s “Market Focus.”

The network equipment-maker beat on both the top and bottom lines. It also says it expects results to improve in the second half of the year driven by a widening customer base. The stock popped more than 18 percent to $22.48.

Shares of Vera Bradley tumbled after the handbag designer said its first-quarter sales fell almost 30 percent. Its outlook for the current quarter is also below analysts` estimates. The company`s CEO says traditional products aren`t attracting enough new customers. The stock fell more than 5 percent to $23.89.

MATHISEN: And a feud flared up between Netflix and Verizon today. In a cease and desist letter, Verizon demanded that Netflix stop displaying messages to customers that place blame on its broadband service for slow delivery or buffering of Netflix`s content.

Netflix responded saying the messages were simply meant to provide transparency to customers.

Shares of Netflix up 1 percent to $428.35. Verizon also rose slightly, it finished the day at $49.28.

Samsung is teaming up with Barnes & Noble to revive its Nook business.
The tablet will combine Samsung`s hardware with Nook`s software and give customers access to the book retailer`s digital collection.

The new device is expected to be launched in early August. And that drove shares of Barnes & Noble 3.5 percent higher to $19.57.

Rite-Aid offered investors a downbeat outlook for its current quarter and fiscal 2015. Blaming higher drug costs, the drugstore operator also says it expects a bigger fall in reimbursement rate, and that sent shares down more than 7 percent to $7.87.

GHARIB: Do you feel any richer these days? The Federal Reserve seems to think so. It says thanks to the recent rise in home prices and all-time closing highs in the stock market, U.S. household net worth is now the highest it has ever been, a total of nearly $82 trillion. That`s trillion with a “T.”

They say money can`t buy happiness, but how much money does it take to be happy? A new poll says just over half of those surveyed say it would take less than $100,000 in income a year. And nearly a quarter of Americans polled said between $50,000 and $75,000 would be enough.

So how much would you need to be happy? Take a listen.

UNIDENTIFIED MALE: I`m not, like, $35,000 a year?

UNIDENTIFIED MALE: Looking at today`s economy, I would say probably
$75,000 would be a good number for me.

UNIDENTIFIED FEMALE: Five hundred thousand.

UNIDENTIFIED MALE: Anything over $100,000 because that would allow me to support a family.

UNIDENTIFIED MALE: I`d say about $50,000.

UNIDENTIFIED MALE: As long as I`m doing what I love to do, there`s not really a number I could put to it, $100 million would be great.

UNIDENTIFIED FEMALE: Unlimited.

MATHISEN: Unlimited or just do what you love. That`s the best answer.

So how much is enough to set aside for retirement? A million dollars?
Lots of people think so. But what if that`s not enough? And do you need even more heading into those golden years?

Sharon Epperson has the story.

SHARON EPPERSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: For Ralph and Karen Jones, making the most out of their money meant making a big move.

KAREN JONES, RETIREE: Yes, I didn`t think that we could maintain the lifestyle that we wanted if we stayed in New York after retiring. And coming down here was just amazing to see the difference in what your money would buy, how much you could get for your money.

EPPERSON: Concern that even a million-dollar nest egg wasn`t going to go far in suburban New York, the Joneses relocated to Myrtle Beach, South Carolina. They bought a new house and now pay a fraction of the property taxes they once did, freeing up funds to vacation frequently and make big- ticket purchases when they want.

The Joneses aren`t your typical retirees. U.S. Census Bureau data shows less than 8 percent of the U.S. population has $1 million. Yet many financial advisers warn even a seven-figure sum may not be enough to retire.

BRUCE ALLEN, BRUCE G. ALLEN INVESTMENTS: If they want to retire with an income and be financially independent, not dependent on anybody else, and to be able to have an income of $40,000, then it`s likely that they`re going to need $1 million to retire.

EPPERSON: Living comfortably on $40,000 a year in retirement, requiring $1 million nest egg, will depend on your expenses, investment returns, health care costs. And this figure does not factor in other benefits such as pensions and Social Security, which can greatly boost your retirement income.

Many retirees make it work with less. Census Bureau data shows the median household income for those 65 and older is $34,000. But that`s down from $66,000 for those 55 to 64 years old.

In order to preserve that pre-retirement standard of living, financial experts say you may need more than $1 million.

JEANNE THOMPSON, VP, FIDELITY INVESTMENTS: A million dollars, it could be enough. It might not be enough. It really depends upon sort of what you anticipate your retirement to be, and what you were earning before retirement.

EPPERSON: That`s the million-dollar question.

For NIGHTLY BUSINESS REPORT, I`m Sharon Epperson.

GHARIB: So how much of a nest egg do you really need to retire?
Let`s get some answers from Tim Maurer, he`s director of personal financial at BAM Alliance.

So, Tim, let me just pose this to you. Is a million enough? How much is enough?

TIM MAURER, DIRECTOR OF PERSONAL FINANCE, BAM ALLIANCE: Susie, the answer, of course, is that a million absolutely can be enough. Believe it or not, I have clients with half that much who have a very solid standard of living, even in retirement, because they also have Social Security and pensions.

And obviously these are not particularly big spenders. I loved Sharon`s number. She said take 4 percent, multiply that million dollars or whatever your retirement nest egg is by 0.04, and that gives you just a starting point for how much income you could expect to derive from that.

If that falls short when added to your Social Security and any pensions of your actual retirement income needs, then you`ve got some work to do.

MATHISEN: Let`s talk a little about regional differences. Obviously, there are major differences in expenses in different parts of the country.
How do you adjust for that, Tim?

MAURER: Well, I`ll tell you, Tyler, what the best scenario is that when someone is saving in a relatively high cost of living area and then they move, as the Joneses did in Sharon`s story, to a lower cost of living area — love the Carolinas myself, in fact, moving to Charleston, South Carolina, this weekend.

So I`m getting a little ahead of the curve. But I do think that is one of the most powerful and positively impactful ways that someone can take a retirement situation that may look quite bleak and improve it drastically.

The main reason for that is because they can sell the house in a higher cost of living area, buy a much less expensive house that could be just as nice or even nicer, and pocket the difference, adding it to their retirement funds.

GHARIB: All right. So let`s say somebody came to you. They`re in their, let`s say, late 50s. They really haven`t done much. They`re just beginning to think about all this. What are the one or two things that you suggest they do right off the bat?

And should they think about moving to a less expensive city? I mean, is that just like one of those things you`ve got to do?

MATHISEN: Susie is describing me here, Tim, by the way.

(LAUGHTER)

MAURER: Tyler, I hope not.

GHARIB: Tim, Tyler has it all figured out.

MATHISEN: Yes.

MAURER: Yes, yes. So I think, Susie, one of the things at that stage of the game, especially in the mid-50s, we`re really talking about crunch time for retirement savings. Those folks are typically getting to that stage in life where the biggest expenses that they had, like, putting their children through college and high school, are gone, and now they also are at their peak income earning years.

So one of the first things you need to do is max out that 401(k), that Roth IRA, every single year to the greatest ability you have. And that is what`s going to give you that boost hopefully over the course of the next
10 to 15 years that positions you in good stead for retirement.

MATHISEN: Are there exercises, Web sites, I don`t mean physical exercises, but financial exercises, Web sites, things that will tell me what the odds are that I might outlive my money, because that`s, I think, the biggest fear that a lot of us have?

MAURER: Sure, Tyler, once you`re glimpsing say that three to five years from retirement, I significantly recommend that you do a Monte Carlo analysis. This is something that a number of certified financial planners do where they run the probability effectively of your portfolio surviving over 3,000 different market scenarios that have occurred in the past.

This probability we have to put in quotes because, of course, we don`t know exactly what the market is going to do in the future. But this type of more intensive retirement analysis goes a little beyond that 4 percent rule, and it will give someone more confidence or it might tell them, hey, I`ve got some work to do still.

GHARIB: Yes, we`ve got to keep working. Let me just put it that way.

(LAUGHTER)

GHARIB: Tim, thank you so much. Lots of really good information.
Tim Maurer with BAM Alliance.

MAURER: Thank you.

GHARIB: And to read more about how much money you need to retire, go to our Web site, nbr.com.

MATHISEN: Coming up, will tomorrow`s employment report show the economic recovery is still on track? What you need to watch for in those numbers next.

GHARIB: The Vatican is cleaning house. Pope Francis named four international experts to the board of the Holy See`s financial watchdog agency, including the first woman and the first American. They replace an all-Italian panel that has been embroiled in financial scandals, including hundreds of suspicious money transfers at the Vatican Bank.

MATHISEN: Finally tonight, with all of Wall Street waiting for Friday`s May jobs report, Steve Liesman has a preview of what economists expect tomorrow and what it may mean for all of us.

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Expectations are high tomorrow for the government to report a solid jobs report for the month of May, even while the data this week suggested the number won`t be quite as stellar as last month`s.

Wall Street expects non-farm payrolls to come in at 210,000, that`s down from the blowout 288,000 that was reported in the month of April. The unemployment rate is seen ticking up to 6.4 percent after the big decline to 6.3 in April.

Average hourly wages is something to watch closely to see how much money Americans have in their pocket, it`s seen rising a modest 0.2 percent. It had been unchanged in the prior month.

So far this week an indicator of employment in the service sector and jobless claims along with small business all improved relative to the prior month, but ADP weakened along with an indicator of employment in the manufacturing sector. Now none of these indicators were particularly high level suggesting a blowout number.

Three-month average job growth after the big number in May surging to nearly 240,000. That was one of the best since the recession ended. In recent years, those surges have often been followed by more modest numbers.

And while other economic data has been helped by a rebound from severe winter weather, the outsized increase in April, that could have been the bounce for jobs.

But weaker doesn`t mean bad overall. The economy should still be creating jobs at around 200,000 on an average month, enough to lower the unemployment rate. But unfortunately, not enough to put tens of millions of un- and underemployed Americans back to work.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.

GHARIB: So 210,000 is the average consensus. Do you think it`s going to come above or below?

MATHISEN: Steve said earlier today he wouldn`t be shocked if it was about 150,000.

GHARIB: Oh, that`s much lower.

MATHISEN: That`s very low.

GHARIB: We need more jobs.

That`s NIGHTLY BUSINESS REPORT for us. 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 NIGHTLY BUSINESS REPORT possible.

MATHISEN: I`m Tyler Mathisen, on behalf of your public television station, thank you for your support, and we`ll hope to see you back here tomorrow.

END

Nightly Business Report transcripts and video are available on-line post broadcast at http://nbr.com. 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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