Transcript: Thursday, June 26, 2014

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

Earnings from Dow component Nike (NYSE:NKE) tops expectations. But there
are three things investors in that stock need to watch.

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Reverse Robin Hood? A former top Federal Reserve official says current monetary policy is benefitting the rich at the expense of all others. Is he right? And what should be done about it?

GRIFFETH: Road trip. It was hard hit during the downturn, so what`s driving Winnebago`s comeback?

We have all that and more for tonight on NIGHTLY BUSINESS REPORT for
this Thursday, June the 26th.

Good evening, everybody. I`m Bill Griffeth, in again tonight for
Tyler Mathisen.

GHARIB: And I`m Susie Gharib.

Well, with the U.S. and much of the rest of the globe in the grips of World Cup fever, we begin with a look at the company that`s outfitting the U.S. soccer team, Dow component Nike (NYSE:NKE). After the market closed today, the giant sneaker and apparel company posted quarterly earnings that jumped 5 percent and 3 cents per share more than analyst estimates.
Revenues also came in better than expected and that`s thanks to strong demand in the U.S. and several international markets.

And news that worldwide orders were up 12 percent lifted Nike
(NYSE:NKE) shares in after-hours trading.

Sara Eisen has more on what`s next for Nike (NYSE:NKE).


SARA EISEN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): For Nike (NYSE:NKE) investors, there are three areas to watch, big sporting events like the World Cup, China and technology.

Nike (NYSE:NKE) shares have fallen almost 3 percent this year, many making them one of the losers in the Dow in an up year. So, what are investors looking for to turn it around? A payoff in soccer sales.

Nike (NYSE:NKE) is spending big on World Cup marketing.

MARK PARKER, NIKE CEO: The World Cup is a big boost in sales, both in terms of performance product and also sportswear or lifestyle product.
We`re seeing our football category continue to grow. We are the number one football company in the world. Our market share in footwear is tops in almost every country around the world, and we feel that with the innovation that we`re introducing around this World Cup, that that`s only going to get
stronger and stronger.

EISEN: This year, Nike (NYSE:NKE) is sponsoring 10 teams in the World Cup, including marketable teams like the U.S. and Brazil.

Soccer, though less than 10 percent of total Nike (NYSE:NKE) sales is growing fast, thanks in part to growing interest in soccer in the United States.

But for Nike (NYSE:NKE), it`s not just about its home market.
Investors are also paying close attention to Nike (NYSE:NKE) footwear and apparel sales in China. Unlike fast growing competitors like Under Armour (NYSE:UA), Nike (NYSE:NKE) actually gets most of its sales outside the United States. And China is the key growth market.

Nike (NYSE:NKE) has struggled there because of local competition, merchandising issues and a weaker economy but recently has been addressing the challenges and investors are looking for proof of a solid turn around.
The other area of interest is technology. Nike (NYSE:NKE) has reportedly been scaling back its fuel band wrist band to focus instead on apps and software for tracking fitness. There is still a big mystery as to what Nike (NYSE:NKE) has planned for the brand and in wearable technology.

(on camera): Even though Nike (NYSE:NKE) shares have been under pressure, Sterne Agee analysts Sam Poser says the tide is set to turn because of what he calls an exceptionally good product pipeline, including some upcoming sneaker releases next year. There is also word that viewer ratings and sales have been strong in Brazil for the World Cup. Adidas expecting record soccer sales for 2014. Now, Adidas and Nike (NYSE:NKE) control about 70 percent of the global soccer market. That should bode well even if their sponsor teams do end up facing off for World Cup champion.



GRIFFETH: And we have late news from another Dow component, this time it`s DuPont. Shares dropping in late trade after the agricultural and chemical giant cut its second quarter and full year guidance, citing lower than expected corn seed and herbicide sales, along with higher than expected write downs due to a high inventory of seeds. Shares fell after- hours, the stock was only slightly lower in regular trade today.

GHARIB: Well, it was another down day on Wall Street. Despite some encouraging economic news, jobless claims dipped lower last week, and consumer spending and personal incomes both edged higher a little bit in May. But some economists were disappointed that spending rose by only half as much as forecast, and so, they lowered their growth forecast for the second quarter.

The Dow lost 21, but it did rebound from a triple digit decline in the morning. The NASDAQ fell by a fraction and S&P off by two points.

Now, Wall Street was also buzzing about provocative comments from former Federal Reserve board member Kevin Warsh. He described the Fed`s easy money policies as benefitting the rich at the expense of the poor.


KEVIN WARSH, FORMER FEDERAL RESERVE GOVERNOR: If you have access to credit, you`ve got a big balance sheet, the Fed has made you richer. And so, I would say this has been in some sense reverse Robin Hood. This is a way to make the well-to-do even more well-to-do because that`s what the
Federal Reserve can do.


GHARIB: And Warsh suggested that raising the benchmark interest rates would help jumpstart business investment and speed up economic growth.

GRIFFETH: So, is Kevin Warsh right?

Our next two guests have opposing views on that.

Gus Faucher agrees with him. He`s senior economist at PNC.

Brian Wesbury disagrees. He`s chief economist at First Trust (NYSE:FFA).

Gentlemen, welcome.

Gus, why do you agree? Why is this a reverse Robin Hood situation here?

GUS FAUCHER, PNC SENIOR ECONOMIST: Well, the Fed policies certainly are making the well-off even wealthier. We`ve seen big gains in stock prices. We`ve been seeing big gains in home values and those have benefitted wealthy households.

But that`s a side effect. That`s not the goal. That`s not what the Fed is trying to do. They are trying to support economic growth that
benefits everyone and the side effect is to make households wealthier.

GHARIB: All right. So, Brian, your turn. Make the case of the
opposite argument.

BRIAN WESBURY, FIRST TRUST CHIEF ECONOMIST: Sure. Well, first of all, if you borrow a lot of money with low interest rates that the Fed is providing or if you`re going to benefit more than if you lend money, right, with low interest rates.

So, if you want to try to separate the high income and the low income by how much — whether they borrow or lend, then you might be able to make that case. But I don`t believe that quantitative easing and low interest rates and Fed activity is why the stock market is up.

You know, you just reported Nike (NYSE:NKE) or think of Apple (NASDAQ:AAPL). I mean, these companies are making new products. They are selling them. They are helping their customers. It`s not because of what the Fed is doing, and those companies that are doing this, are getting wealthy.

And so, to blame it all on the Fed, I just think is a mistake.

GRIFFETH: Gus, what about that? There might be those who would argue that fiscal policy, tax policy out of Washington has as much to do with that as separation of the wealthy from the middle class these days as monetary policy?

FAUCHER: Oh, absolutely. It`s not just a monetary policy story. You know, certainly, what`s going on with taxes, what`s going on with spending, we seen benefit cuts, spending cuts at the federal level. And so, that has hurt low and middle income households. That`s part of the story. But I think the Federal Reserve has played a role as well, not deliberately, not trying to benefit the wealthy, but as a side effect of trying to get
economic growth re-started.

GHARIB: Brian, I want to pick up on what you were talking about investment approaches. I mean, if low interest rates have been good for the stock market and if you`re an investor, whether it`s your mutual fund or your pension fund or your 401k, you benefitted. Isn`t that a good thing?

WESBURY: Yes — well, it is. But we — there is a couple of points here I`d like to make. Number one, it`s not low interest rates that are boosting stocks. It`s earnings that are boosting stocks.

We`re at record corporate earnings right now. We — our companies in the United States have never made this much money, and they`re making this much money because they`re more productive, more efficient, we have fracking, 3D printing, robotics, the Cloud, smartphone, tablet, apps — all of these things are making us more productive, more efficient, more profitable. That`s why stocks are up. Not because of what the Fed is doing.

And my second point to go to what we just heard, the government has not cut spending. It`s not cut redistribution to individuals. To say that is just not true.

In fact, I believe the bigger the government is, the more taxes we
have, the more we try to help people, the worse we make the middle class.

GRIFFETH: All right. Well, let`s reverse this then, Gus. Let`s say when interest rates start to rise. Does that then disproportionally hurt the wealthy who benefitted to this point?

FAUCHER: No, I think if interest rates are rising, that`s because the Federal Reserve thinks that the economy is doing better and can withstand higher interest rates. I think what the Federal Reserve is trying to do is trying to lift all boats. We want a stronger labor market that benefits workers, so they can see wage gains, they can see more jobs. And if the Fed is raising rates, that`s a signal that they think this is occurring.

So, it`s not a question of who winds or loses. It`s a question of how do we all benefit from stronger economic growth?

GHARIB: Well, so, Gus, how do we fix this income inequality situation?


FAUCHER: How much time do you have? I mean, you know, that`s a huge issue and obviously, we have the answers I wouldn`t be here today.

You know, there are a whole bunch of issues that need to be resolved but the question is, workers are more productive. We`re absolutely right about that. The question is, how do workers benefit from the productivity gains? Right now, those gains are going primarily to holders of capital to business owners and not to the workers, who we want to have an economy
where prosperity is broadly shared.

GRIFFETH: And, Brian, by disagreeing with Kevin Warsh, are you suggesting there isn`t an income disparity in the United States right now?

WESBURY: Oh, there is an income disparity. The question is, where does it come from? And my belief is that during times of technological advance.

So, think about this — Michael Jordan made way more inflation adjusted than Babe Ruth ever made. You can say they dominated the sports in equal fashion. Why did Michael Jordan make so much more than everybody else?

Well, it`s because of TV. He was a worldwide sports star, and that`s the same with technology. Microsoft (NASDAQ:MSFT) sells their software to
6 billion people in the world, not just to 3 million people in Chicago, let`s say.

And so, as the global market opens up and as technology broadens things out, there`s going to be people that benefit massively compared to
the average.

GHARIB: All right. Let me ask real quickly from both of you, how long is it going to take for the middle class to feel good again? Maybe not as good as Michael Jordan, but to feel better than the way the situation is now?

Gus, you first.

FAUCHER: I think in about a year. I think we`ll see contestant job growth of 200,000 per month. We`ll see the unemployment rate continue to fall that will lead to a tighter labor market and acceleration in wage
growth and households will be feeling better by this time next year.

GHARIB: Brian?

WESBURY: Sure, I won`t disagree with that. I think households are feeling better today than they did a year ago or, say, three years ago. We can see it in consumer confidence data, but to really get back to the `80s, and `90s, or `50s and `60s, when most people felt good about the future, we have to cut the size of government. We can`t have taxes this high and spending this high and ever hope to achieve that level of prosperity that
we got used to in the `80s, and `90s.

GRIFFETH: Good conversation. Gus, Brian, good to see you both.
Thanks for joining us tonight.

FAUCHER: Thank you.

WESBURY: You`re welcome. Thank you.

GHARIB: So, when you think about big recreational vehicles, you think Winnebago, and you think big. Now, the latest quarterly report was big as well. Earnings topped Wall Street expectations and the CEO said third quarter revenues was the strongest since 2005. That`s a dramatic change from just a few years ago when consumers pulled back on big ticket purchases during the recession.

Morgan Brennan has more on what`s driving Winnebago`s rebound.


You`ve seen them at camp sites and maybe you`ve driven one on family vacation. Winnebago is hit hard in the downturn. The U.S. motor home manufacture just reported quarterly earnings, showing the company is
experiencing a comeback.

DAVID WHISTON, MORNINGSTAR SR. EQUITY ANALYST: I think it`s another solid, impressive quarter for the company. The recovery in motor homes in the U.S. is well underway and has been for awhile after bottoming out
during the crisis a few years back, at around 13,000 units.

BRENNAN: Winnebago`s quarterly revenue was the highest since 2005, and earnings jumped nearly 50 percent, that thanks to increased demand for new models less that are expensive and more family-oriented. RV retailers say despite the tough winter weather, more consumers are making these big
ticket purchases.

FRANK DAVIS, CAMPING WORLD MANAGER: Activity is better than its ever been. I`ve been selling Winnebago for 28 years. They are opening new
plants just to accommodate the amount of sales that are coming.

BRENNAN: Analysts say baby boomers are the biggest buyers, with folks ages 55 and over accounting for 60 percent of U.S. motor home sales.
Winnebago is a small cap stock, but experts watch its performance with interest, because motor homes are closely correlated with consumer confidence, as well as the housing market.

As the economy continues to recover and as long as the housing rebound keeps course, companies like Winnebago could continue to see strong sales.

(on camera): Still, there are headwinds to watch for, rising interest rates and rising gas prices. As motor homes may have all the comforts of home but lack in fuel efficiency.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan in Lakewood, New Jersey.


GRIFFETH: And coming up, arts and crafts chain Michaels is getting ready to return to Wall Street, but there are things investors should keep in mind before diving into that stock.


GHARIB: Well, it`s official now, Alibaba is headed to the New York Stock Exchange. The Chinese e-commerce giant, which is partly owned by Yahoo (NASDAQ:YHOO), has chosen to list shares on the NYSE under the ticker symbol “BABA”. And when Alibaba makes its trading debut perhaps later this summer, it could be the largest technology IPO in U.S. history, even bigger than Facebook`s $15 billion initial public stock offering. That was two years ago.

GRIFFETH: In the meantime, investors don`t have to wait too long to buy shares of Michaels. That`s the big arts and crafts chain which is expected to begin trading again tomorrow, following eight years of private ownership.

Courtney Reagan now has more on how Michaels has crafted its come back
to the equities market and the challenges it faces.


The nation`s largest arts and crafts retailer is sewing up the final details for its Wall Street comeback. Michaels Company is relisting its shares tomorrow, trading under the stock symbol “MIK”, after being taken private in 2006. In that time sales, Michaels` sales have grown 18 percent, with a store base that`s steadily grown to more than 1,142 stores today. Plus, it`s profitable.

When it comes to the product mix, a little over half of its sales come from general crafts, home decor and seasonal items make up another 20 percent, framing and scrapbooking make up the rest.

Michaels is a market leader in the arts and crafts space, outselling competitors, Jo-Ann Stores (NYSE:JAS) and Hobby Lobby. The recently launched e-commerce platform and expanding store base are both expected to continue to contribute to increasing sales.

Those following Michaels` progress say it`s a well-run business but question how much growth there really is in the arts and crafts retail

JAN KNIFFEN, J. ROGERS KNIFFEN WORLDWIDE ENTERPRISE CEO: Crafts are back. It`s starting to grow again and went through a period of growth, kind of retrenchment and growth again. But this company itself has to fight the battle with two really tough competitors in Wal-Mart (NYSE:WMT) and the Internet.

REAGAN: The crafts retailer struck gold as one of two retailers offering the Rainbow Loom, the 2014 Toy of the Year. Michaels says the success of the Rainbow Loom is the primary reason sales increased for the past fiscal year, but there`s concern the trend could ease.

Other risks to Michaels` growth include a fairly substantial debt load and still unknown costs related to a data breach that took place over a period of nine months from June 2013 to February 2014.

(on camera): It`s been a difficult year for retailers, and consumer- related initial public offerings have been received with mixed results.
While Michaels` business model and positioning are strong, the concern about the sector`s growth may keep investors on the sidelines.



GHARIB: Wall Street got in on the action, buying up shares of GoPro today. That`s where we begin tonight`s “Market Focus”.

Shares of the company that makes wearable cameras used by skydivers and surfers surged in its trading debut. GoPro offered nearly 18 million shares. They were priced at $24 a piece. Valuing the company at about $3 billion, making it the biggest initial public offering of a consumer electronics company in more than 20 years.

And CEO Nick Woodman says GoPro aren`t just a fad.


NICK WOODMAN, GOPRO FOUNDER & CEO: If GoPro can make it easier than any company in the world, make it easier for our customers to share professional quality personal content, that`s an opportunity that`s never
going to go away.


GHARIB: And the stock jumped 30 percent to $31.34.

Now, Lennar (NYSE:LEN) posted earnings that beat on both the top and bottom line. The home builder sold more homes at higher prices with new orders and deliveries increasing from last year. It`s average selling price was also higher due to a tighter supply of homes. But despite that
good report, shares were off a fraction to $41.32.

ConAgra Food shares benefited from solid quarterly earnings and a better-than-expected increase in revenues. The food company is also forecasting a modest recovery and is underperforming private brands unit, and is expecting that it`s healthier options will help its consumer brands this year. Shares rose a fraction to $28.97.

Spice maker McCormick (NYSE:MKC) saw its revenue come in slightly below forecast that sent shares lower. The company is seeing stronger international performance because of its acquisition of an overseas condiment maker last year. But results in its Americas region have been
weak. The stock fell more than 1 percent as a result to $70.27.

Alcoa (NYSE:AA) is taking a plunge into the aerospace industry with a new merger that it announced today. The steel giant is spending almost more than $3 million to buy the British jet engine company Firth Rixson.
That deal will up Alcoa`s aerospace revenue by about 20 percent, which CEO Klaus Kleinfeld says is good news for investors. Shares popped on Alcoa (NYSE:AA), up more than 2.5 percent to $14.94.

And shares of Elizabeth Arden (NASDAQ:RDEN) plunged on news that South Korea`s LG Household is no longer interested in buying the cosmetics. This comes just days after Elizabeth Arden (NASDAQ:RDEN) announced a sweeping restructuring due to mounting losses. That stock fell 17 percent today to $22.41.

GHARIB: Reenrolling for a federal health care plan next year just got a lot easier. The Obama administration will now allow automatic renewals in the affordable health care plan for 2015 for 95 percent of the people currently signed up in a federal exchange plan.

And coming up on the program, just as Germany beat the U.S. in today`s World Cup match, will Siemens top General Electric (NYSE:GE) in the next round of NBR`s ultimate stock cup? The two industrial titans go head to head, next.


GRIFFETH: In case you missed it, today`s highly anticipated World Cup soccer match between the U.S. and Germany ended with a 1-0 victory for the German team. But despite that loss, the U.S. was still able to advance to the next round of 16 teams.

In the next round of NBR`s only — our own ultimate stock cup, we pit two of the world`s biggest industrials against each other, namely — we want to see who`s going to come out on the global marketplace on top, Germany`s Siemens or the U.S. General Electric (NYSE:GE). Watch.


GRIFFETH (voice-over): GE`s roots go back inventor to Thomas Edison.
His Edison Electric Light Company merged with Thompson Houston Electric to form General Electric (NYSE:GE) in 1892. Headquarters, Fairfield, Connecticut.

2013 revenue, just above $146 billion. GE is the last of the original
12 companies in the Dow Jones Industrial Average still listed. Long gone are the days known mostly for light bulbs. GE now makes trains, jet engines, power turbines and medical devices.

But in recent years, its finance company, GE Capital, has made up more than half its business.

GE`s German counterpart Siemens trades mostly in the German markets.
Founded in 1847, it is headquartered in Munich, Germany. 2013 revenues, more than $109 billion.

Siemens and GE compete in many of the same fields but Siemens is more of a global player, which is what makes their intense rivalry to buy French power company Alstom so interesting. Alstom is well-connected to emerging markets like China and it`s the kind of company that can make GE more of an
international powerhouse.


GHARIB: Peter Sorrentino joins us with his play-by-play of GE and Siemens. He`s senior portfolio manager of Huntington Asset Advisers.

So, Peter, your portfolio has a lot more shares of General Electric
(NYSE:GE) than Siemens. But you`re saying that Siemens is your choice in this competition.

A bit of a contradiction there it is, Susie.

Our view in at least in the next 12 months, Siemens has got a clear road map. We`re seeing a build out globally for world power grids and a need to improve the efficiencies of those grids. Siemens has a great deal of presence, about 30 percent of their business overall is in that area.
And so, they`ve got a well-established footprint there and as you pointed out, they are well-established in a number of outside of their domestic markets right now.

That said, GE has been growing faster in those markets and so I can see why the deal made sense for Siemens to go after Alstom was this was an ability for them to jumpstart what has been rather anemic growth in those markets for their products. For GE, it`s basically extending their footprint out. It makes sense but Siemens, in a masterful bit of political daring do forced GE to accept terms on the deal that are going to make it much more complex to execute.


SORRENTINO: It`s going to bring a lot of other players in.

And so, this is why we think in the near term, Siemens is the stock to own because for them, it`s clear sailing ahead. They`ve got have a better revenue visibility going.

For GE, there is a lot of execution risk in here and we think that
will distract the stock for awhile.

GRIFFETH: Yes. I mean, GE has portrayed the Alstom victory as just that, as a victory over Siemens and so forth. But you are saying, thing is not exactly a slam dunk for Jeff Immelt, GE, is it?

SORRENTINO: No, it`s not. For anyone who`s been in the stock for as long as we have, which is well over a decade now, the Amersham deal which was also supposed to be one that made huge synergies sense for GE medical equipment has really been a bit of a disappointment and we`ve struggled every quarter with something that`s kept that from firing.

And so, if you`re a GE shareholder over the last 10 years, you get a little deja vu here and you start to get nervous that we`ve heard this song before and you worry about, gee, what`s my return going to be in the next
10 years?

GHARIB: So for investors, if they want to put new money in, you`re saying put it into Siemens. The stock is around $100 right now.

How much can they expect on the upside if they do that today?

SORRENTINO: Really, I think in the next 12 months, if everything goes as we`re forecasting, I think you can see a 10 percent run in Siemens share price. That doesn`t include effectively a comparable dividend of 3 percent. So, a fairly nice return.

We think the dollar is expensive relative to the euro right now, so a good time to be buying. And we don`t think in the next 12 months, you`re going to get that price performance out of GE. Too many investors are going to sit on the sidelines and not race to own it.

GHARIB: All right. Well, thanks a lot, Peter. Peter Sorrentino of Huntington Funds.

GRIFFETH: So, you just heard our guest. He prefers Siemens over GE.
We want to hear from you do at the same time. Who do you prefer right now
on the global stage? GE or Siemens. Vote on our Web site at

GHARIB: And now for the results from Tuesday`s global rivals challenge where we asked you to choose between McDonald`s and Yum Brands (NYSE:YUM). Well, the winner is McDonald`s, but it was pretty close.
Forty-nine percent of you voted for Yum, 51 percent for Mickey D`s.

GRIFFETH: And we have late-breaking news tonight. GM is reportedly recalling about 29,000 2013 and `14 Chevy Cruze vehicles due to an airbag issue. Yesterday, GM told dealers to stop selling about 33,000 of those Cruzes.

That`s it for NIGHTLY BUSINESS REPORT, I`m Bill Griffeth, thanks for
watching, everybody.

GHARIB: And I`m Susie Gharib. Have a great evening, everyone. We`ll see you tomorrow.


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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