Transcript: Friday, October 10, 2014

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


2014`s gains erased. The Dow turns negative for the year. The NASDAQ drops triple digits. And the S&P 500 logs its worst week in two years.

What`s the best way to protect your portfolio now?

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Searching for stability in this uncertain market. Our market monitor guest says he has a list of stocks that can help you find it.

MATHISEN: All that and more tonight on NIGHTLY BUSINESS REPORT for Friday, October 10th.

GHARIB: Good evening, everyone.

Another brutal day of selling on Wall Street. Not only did the Dow turn negative for the year and suffer its third triple digit loss of this week, the NASDAQ also had a rare triple digit decline.

The main reason here? Semiconductor stocks, Microchip Technology
(NASDAQ:MCHP) tumbled the most in almost six years, after the company warned of a possible correction in the industry, triggering a selloff in other chip names like Freescale, Intel (NASDAQ:INTC) and Texas Instruments (NYSE:TXN). Stocks sold off into the closing bell after another up and down session. The Dow lost 115 points, the NASDAQ tumbled 102 points posting its first back-to-back 2 percent decline in three years. And the S&P down 22 points.

So far this month, the Dow has moved more than 2,000 points just in the last eight trading days. And for the week, the major averages each ended lower third week in a row. The Dow down nearly 3 percent, the NASDAQ off by 4 1/2 percent and the S&P slipped more than 3 percent.

MATHISEN: So, what should investors like you do to protect your portfolio in these volatile markets?

Sharon Epperson has advice from the experts.

Hi, Sharon.


It`s certainly been a rough week for many investors, but there are defensive moves that you can take to protect your portfolio. Start by reviewing your time horizon and risk portfolio.

Short term investors may find themselves out of luck in a volatile market, but taking a longer term view, the stock market`s recovery over the past five years has seen a 70 percent to 80 percent return in many portfolios. This week`s 2 percent to 3 percent loss is small in comparison.

And if you`re a long-term investor, financial advisers agree that it`s important not to panic, even if there is a broader correction. That said, now may be a good time to sell your big winners and lock in some gains.
You can reinvest the proceeds in more conservative investments.

Another option is to use a stop loss order to protect gains and minimize losses, that`s an order to sell a stock that is triggered when the share price reaches a certain level.

And, finally, you may want to consider your asset allocation, and ensure that it`s balanced, including not just stocks and bonds and risk profile, but also alternative investment such as managed futures or long short funds which can reduce the volatility in the portfolio while delivering solid returns.

Now, every investor should keep in mind that the stock market often experiences at least one pullback a year, but pullbacks always do come to an end.

GHARIB: That`s a really good point.


GHARIB: Sharon, stay with us.

And let`s bring in Ron Carson. He manages portfolios totaling more than $4 billion at his firm Carson Wealth Management where he is the founder and CEO.

Ron, welcome to the program. Let me just pick up on something that Sharon —


GHARIB: Great to have you here.

Sharon just said a moment ago, and I think this is something that people lose sight of that over the last five years, the S&P turned around
80 percent after a big correction. Is it sometimes better to do nothing and just ride it out or should you really be making changes in your portfolio? What are your thoughts and what are you telling your clients?

CARSON: Well, I think it makes sense most of the time to do nothing.
I mean, we had a 7 percent drawdown in January. April, we had four, August, we had four, I think we`re down 5 1/2, maybe 6 percent on this current selloff.

And most of the time, you know, the market tends to do whatever it needs to do to prove the largest number of people wrong in any given moment. And a lot has not changed. I certainly wouldn`t panic. Investor behavior is the most important factor in how someone`s going to do long term. So, if you have an appropriate allocation, then I would not do anything.

MATHISEN: I gather you`re saying more investors hurt themselves more by doing something than by doing nothing, right?

CARSON: Yes. I mean, this is a hated bull market, really, when you think about off the lows of January, because most people have not entered it. You know, the retail investments just started to tip toe back. There is still a lot of worry out there.

And, you know, there are other factors going on. But you know, my friend Bob Doll says we`re an 8 to 10 year bull market. I don`t know if we have that long left. But I don`t think this is anything to worry about —

MATHISEN: But what about Sharon`s point? I`m sorry to interrupt about taking profits. Nobody ever lost money taking profits, Ron.

CARSON: I agree, you do pay tax on taking profits. And all the studies I have seen and I see it firsthand, that people that make shorthand reactions, they take profits, typically, those positions are higher. Now, we have trim positions. We do — you know, the dollar was up in the third quarter versus euro, 8 percent. We think that`s going to continue.

So, if you`re owning big multinationals that are getting at least 40 percent to 50 percent of their earnings overseas, I think that`s going to be a big headwind. We definitely trimmed profits in those areas.

EPPERSON: I mean, now, I think it is a good time for people to use it as a wake-up call. If you are at all worried about the volatility, that you`ve seen in the market, just take the time to assess where you are.
Make sure that you can tolerate this kind of correction if it`s even — if there is a broader correction and make sure that what you`ve allocated, because you probably have seen some really big gains, is what your allocation should be. So, if you`re going to be 60/40 stocks and bonds, and now, you`re 70/30, you need to do what Ron said and trim some of those profits, and reallocate so that you`re invested properly.

GHARIB: Let me also ask this and we also ask Ron, too, you said don`t panic. I mean, obviously take the emotion out of it. What is the most common mistake people make in these volatile trading sessions?

EPPERSON: I think it is being too emotional, saying this went down, and saying just get me out of it, rather than realizing that you`re in those positions, whether it`s Europe, whether it`s large cap multinational companies, for a reason. And if it`s the reason is to get to a certain financial goal, you need to stay there if you want to reach that goal.

GHARIB: And, Ron, what do you think? Do you agree with Sharon saying or there is something else?

CARSON: I really agree with what she says. I think a lot of people invest — I mean, people spend more time picking out a car than they will a financial adviser for any investment they`re going to make. And you really need to understand that your own volatility will either be a curse or a gift. If you really understand why you own what you own, how it fits into your long-term objective, this is a gift you can add to high-quality companies. If you`re guessing you`re going to panic and you`re going to destroy long-term value in the portfolio.

MATHISEN: Is it too late to hedge now, Ron? And give me a very quick answer, what`s the best way to hedge?

CARSON: We believe in irreplaceable capital strategies. You hedge with using some of the derivatives. You need to understand how much you can afford to lose and hedge the rest of it out of the market.

GHARIB: All right. Ron —

CARSON: But it`s not too late.

GHARIB: All right, thanks, Ron, and Sharon, both of you. Have a great weekend. Ron Carson with Carson Wealth Management. And Sharon is going to be back a little later in the program with a look at millennials and their money and why this demographic is actually better off financially than you might think.

MATHISEN: Oil prices stopped the recent slide today but just barely after the news that OPEC`s oil supply last month was the highest in more than a year, with top producer Saudi Arabia raising production in September. Domestic crude closed 5 cents a barrel higher today after being down as much a buck and a half early in the session. Brent Crude, the international variety, touched a four-year low before rising in the day and closing above $90 a barrel.

GHARIB: With oil prices down more than $20 a barrel just since the end of June, what`s the impact of lower energy cost on the U.S. economy and for consumers?

Steve Liesman takes a look.


Lower gas prices arriving for consumers just at the right time as Americans start thinking about holiday spending but get a welcome gift at the pump as gas prices hold down toward the $3 a gallon level.

UNIDENTIFIED MALE: The gas that my car uses premium gas, so I see a big difference in the price of gas.

LIESMAN: The general rule, every $10 a barrel of decline in the price of oil adds a quarter point to growth. Bring that down to the consumer level, and Deloitte retail analyst Allison Paul says the recent trend if it continues could put about $260 in the pocket of the average consumer.

DREW MAUTS: Typically, Steve, lower gas prices are good for the U.S.
economy. When you have a drop in gas prices, consumers see more disposable income. They can spend things on other things than filling up their car, and that usually supports overall levels of growth.

LIESMAN: One thing to look at, why are the oil prices falling? If they`re down because demand is lower, that could signal weaker growth ahead. But the U.S. Energy (NASDAQ:USEG) Information Administration sees demand growing by about 2.2 million barrels this year and next, but mostly because of growth in American production, supply is forecast to rise by 2.5 million barrels.

So, the price decline looks more about extra supply than it does weak demand.

(on camera): While the vast majority of U.S. consumers will benefit from oil prices, now that the U.S. has become such a major oil producer, there is a potential downside if prices get too low. Over the past 10 years, the oil and gas industry has grown at twice the rate of the overall economy and some boom towns have cropped that benefit from the production.

But experts say the price has to fall further, below $70 a barrel, to make the new U.S. production unprofitable.

(voice-over): So, for now, it could be the best of both worlds — lower oil prices and considerable economic growth in oil production.



MATHISEN: More trouble today for the struggling eurozone economies.
The S&P rating service lowered its outlook for France from stable to negative today, saying a robust recovery in the French economy could prove elusive and that its public finances could deteriorate beyond this year.
S&P did affirm France`s AA long-term credit rating.

GHARIB: Leaders of West African nations hit hard by the Ebola outbreak have been pleading for help in dealing with the crisis.

And now, the World Bank is calling for the creation of an international emergency fund to quickly distribute money to countries affected by the disease outbreak and other health emergencies.

And still ahead on the program, combined casual gaining with casual dining and you get the latest offering to hit Wall Street, Dave and Buster`s. But did it score with investors? The answer, coming up.


GHARIB: There is new stock that begun trading today on the NASDAQ, Dave and Buster`s. This is the restaurant and arcade chain which uses the ticker symbol PLAY.

After pricing nearly 6 million shares at $16 apiece, shares rose 18 percent, really impressive on a nasty day of selling for the rest of the stocks on the NASDAQ.

Morgan Brennan has more on what`s ahead for the company.


It`s the company known for ski balls, cocktails and a mountain of nachos.
And after leading the company to its IPO, Dave and Buster`s CEO, Stephen King, says there`s room for more.

STEPHEN KING, DAVE & BUSTER`S CEO: On store sales are really strong, kind of leading the way in casual dining. The margins are better and our pipeline for new store growth at about 10 percent a year is really on track and well-established.

BRENNAN (on camera): Dave and Buster`s had 70 locations across the U.S. and Canada, and it breaks its business down into two parts — dining, food and alcohol, and amusement. Arcade games like this one, that customers play for prices. These games account for more than 50 percent of the company`s $636 million in revenues and it helps to offset the volatile commodity prices associated with restaurant and is much less expensive to run.

(voice-over): Although most analysts have not yet officially begin covering the stock, many say this company will fall under casual dining, an industry that`s underperforms the broader the S&P 500 this year.

But the amusement segment will mean comparisons to movie theater and theme park operators as well.

CHRIS O`CULL: It`s not that common. Most of the restaurant companies are primarily serving food, and that`s — there is not much entertainment within the restaurant space in terms of dine in and flow of entertainment.
So, Dave and Buster`s is fairly unique in that standpoint.

BRENNAN: Even so, Dave and Buster`s is going public at a rocky time for restaurant chains. El Pollo Loco and Zoe`s Kitchen have doubled in value this year since their IPOs, but others like Papa Murphy`s and Potbelly are trading below their initial price tag.

O`CULL: The past four years have been very strong for restaurants.
So, we have seen a nice healthy IPO cycle. The IPOs that have come out have been a mixed bag. You have some that have performed extremely well, and some that have disappointed.

BRENNAN: This first day of trading marks the end of an era for D and B, as well. The company had been taken private in 2006, to then be sold to current owner Oak Hill Capital, a private equity firm that sold none of its shares today. Oak Hill tried to take Dave and Buster`s public two years ago before pulling the offer last minute, citing market conditions.

Today`s opening comes amid a volatile week, but for investors, Dave and Buster`s served up something they like.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan, in New York City.


MATHISEN: And next week, look for Fiat Chrysler to start trading on the New York Stock Exchange under the ticker symbol FCA. But this listing is different. It`s not considered an IPO. There will be no new stock initially offered, just shares of the Fiat SPA that will be transferred from the Italian stock market. Those shares can then be traded, bought and sold in New York.

Some analysts say the company could execute a secondary offering, sometime down the road. The listing is another step in the company`s five- year growth plan.

GHARIB: Meanwhile, the expected IPO of another company has been market, Box. This Cloud storage provider is officially delaying plans to go public until January, citing volatile market conditions and a fresh injection of private equity money.

MATHISEN: Activist shareholders managed to throw out the entire board at the parent company of Olive Garden, and that`s where we begin our focus for a Friday.

Darden Restaurants (NYSE:DRI (NASDAQ:TBUS)) lost a standoff which ended with Starboard Value at its annual meeting today, which ended with Starboard`s 12-person slate getting elected to the board of directors in one fell swoop. Shares of Darden, the nation`s largest operator of full service restaurants fell nearly 2 percent. It closed the day at $48.37.

After a surprise decline in sales in China in September, its first monthly dip this year, Ford Motors predicts a big boost in sales once new Ford assembly plants come on line there and some new models hit Chinese show rooms in the coming months. Ford shares, though, down a nickel a piece today, they finished at $13.79.

Sticking with automobiles, Tesla unveiled a new version of its electric Model S sedan. The new model called the D includes all-wheel drive and dual engines. CEO Elon Musk said they have improved everything about the car, including its speed and it has a longer range on one charge.
Investors did not care, though, hoping to see a new SUV or a lower priced electric model. Shares fell nearly 8 percent in Tesla today.

GHARIB: Hedge fund manager David Einhorn is pushing for a big changes at Civeo, after disclosing an almost 10 percent stake in the company.
Einhorn said he wants the CEO out and wants to convert the firm to a real estate company. Civeo provides housing for workers in the Canadian oil sands and Australian natural resource sector. The company said last month it plans to move its headquarters from Dallas to Canada.

Shares ended 20 cents higher, closing at $12.46.

The Food and Drug Administration has approved a daily pill that can cure the most common form of hepatitis C. The once a day pill is the first treatment that promises to cure most patients without requiring other medications. And it builds on Gilead`s blockbuster Sovaldi drug. The
cost: $94,500 for a 12-week treatment, $63,000 for eight weeks. Shares of Gilead, though, fell 2 percent, ending at $103.73.

And shares of Exact Sciences soared after Medicare recommended a higher than expected reimbursement for its colon cancer screening test.
The recommendation comes as the bio tech company moves to commercialize that non-invasive test. Shares shot up nearly 6 percent.

MATHISEN: Our market monitor today has a few stocks he says he will hold up in both good times and bad times in the stock market. That sounds like a pretty good recipe tonight.

He`s Jim Awad, the chairman of Plimsoll Mark Capital.

Mr. Awad, always good to see you.


MATHISEN: I see that you say you`re leaning towards large conservative stocks with low investor expectations. Trouble is, sometimes these kinds of stocks live down to those expectations.

AWAD: Well, that`s the key. You got to be right on the fundamentals.
But I think it is very important in this environment to sort of lower your risk profile, given the fact that we`re at a point where the market could go either way.

So, yes, you`re right. Sometimes they just keep going down, but in these three cases, I don`t think that`s going to be the case.

GHARIB: Well, let`s talk about them, Jim. You have IBM at the top of your list, and this is the stock that is very controversial. Investors have been so frustrated. The stock jus has been going up and down and all over the place. Are you recommending it now?

AWAD: Well, it`s misperceived. It`s viewed as an old-line company that the world has passed by and the bad rap is that its revenues have not been growing the last four quarters.

Yet if you really drill down on it, first of all, its P/E ratio just a little over half of the stock market. It`s got a dividend yield of 2 1/2 percent. Their record over the last ten years has been to grow operating earnings at about 12 percent and increase the dividends at a rate of about
13 percent. And they are buying back stock, increasing margins, and they`re rapidly transitioning to the Cloud and the new business lines. In fact, their cloud business has doubled since 2012.

So, I think you`re in a situation where you will start to see the revenues accelerate along with the earnings.

MATHISEN: So when you see the numbers you describe, it`s got to be misperception there, because if you`re growing earnings and you`re going the dividends, you ought to see some payoff for that.

Let`s move to another one that has really been become over the past decade, and that`s General Electric (NYSE:GE).

AWAD: Yes. Now, there is a stock that is down 9 percent this year versus a 4 percent increase in the S&P. And I think it`s just misunderstood because it`s very complicated and they have been going through a series of restructurings. And people haven`t taken the time to understand what they`re doing — they`re moving to the higher part of the business, which is the industrial side, deemphasizing the consumer and the financial side.

And again, here`s a country that`s been growing organically. Revenues at about 6 percent, increasing margins so that operating earnings are growing at 8 percent, plus you get a 3.5 percent dividend and they`re buying back the stock, disciplined financial management. And so — and it is selling at a ratio of about 13 times versus 16 times for the market.

So, it`s growing, operating earnings faster than the S&P and its P/E ratio is lower and its dividend is higher.

GHARIB: OK. Let`s round it out with JPMorgan (NYSE:JPM). CEO Jamie Dimon back at work after his cancer diagnosis. Tell us what is going on, your outlook for this company.

AWAD: OK. So, the wrap on this company and the industry is that the government has regulated them so much and constrained them so much as a result of the financial crisis, that there is basically no growth and just utilities. Yet, if you look at JPMorgan (NYSE:JPM), obviously, among the best management or among the best management in the industry, a fortress balance sheet, loans are starting to grow as the economy improves. Legal expenses are declining, and again, you`re going to have a situation where margins are going up and they`re buying back stock and dividends at the rate of $3 billion a quarter, the real value.

MATHISEN: Jim, it`s great to see you as always. Thanks for joining us tonight.

AWAD: Thank you.

MATHISEN: Jim Awad with Plimsoll Mark Capital.

Still ahead, lazy, entitled and living in their parents` basement — that`s how some define the millennial generation. But a new study about this demographic and their money — well, it paints a very different picture.


GHARIB: We have word tonight that there was another security breach, this time at retailer Kmart. The company says the breach started in early September and it was detected on October 9th. Its parent company Sears
(NASDAQ:SHLD) says it`s working with law enforcement authorities and that its payment systems have been breached by malware.

MATHISEN: And speaking of malware, another big retailer hacked. Ice cold cyber thieves have gotten hold of customer names, credit card, debit card info from nearly 400 Dairy Queens, of all places. Computers at about a tenth of the ice cream and burger chain`s 4,500 locations were infected with malware called Backoff. That`s the same software that struck a number of U.S. retailers over the past year. The queen is owned by the king of investing, Warren Buffet and Berkshire Hathaway (NYSE:BRK.A).

GHARIB: A new study out this week by Fidelity on the money habits of millennials. It found that nearly four in 10 do worry about their financial futures, at least once a week. No surprise considering that many are burdened with student loans. They`ve seen their parents bear the brunt of the housing downturn and recession.

But as Sharon Epperson reports, Fidelity`s research has also refuted some common misconceptions about the millennial generation.


EPPERSON (voice-over): Twenty-three-year-old administrative assistant Christina Audi (ph) knows all too well some of the common beliefs about her generation.

CHRISTINA AUDI: Pretty familiar with them. We do hear a lot. They think that we`re lazy and entitled. I definitely don`t think that you can say our whole generation is lazy. I`m sure there are people out there.

EPPERSON: But millennials are much more than the sum of their stereotypes.

AUDI: I do live on my own. I don`t feel entitled at all. I pay for my expenses. And I am not lazy. I`m definitely a hard worker.

EPPERSON: Millennials whose numbers now exceed baby boomers have become a closely examined group. But a new study by Fidelity reveals some discrepancy between their reputation and the realities of how they spend and save.

(on camera): Part of the mystery in defining the money habits of millennials has to do with their age. Millennials can range in age from roughly 19 to 32. From college students to recent grads entering their first jobs, to young moms and dads juggling kids, careers, a home and their own retirement.

(voice-over): In Fidelity`s first ever millineal money study, the average age IS 30, 80 percent of them do not live at home with mom and dad and they pay all of their expenses, many are also serious about saving.
Nearly half have started to save for retirement, four in 10 participate in a 401(k) plan, and one in five has an IRA. A significant number of millennials could also be called super savers.

JEANNE THOMPSON: We found that there`s a population of millennials that are saving 15 percent or more for retirement. And while many think that they`re not interested in retirement, they actually are, because they know it`s their responsibility. There`s not going to be any sort of safety net there for them.

EPPERSON: Money means security for many millennials. Fidelity found more than 2/3 in their study are working, their average is $64,000 and average savings is $37,000.

AUDI: I think savings is very important. I never want to live paycheck to paycheck. I really want to be able to have money in case of emergencies and just for things that I want, especially as I`m getting older.

EPPERSON: Like Christina Audi, more than half of the millennials in the Fidelity study said accumulating savings is their top financial goal.



MATHISEN: And finally tonight, some advice you may want to pass along to anyone currently in college or plan to attend. A survey by a Toronto- based staffing company found that engineering and engineering technologies top the list of the best college majors to have for securing a job after graduation. Business majors were next, followed by marketing, health professions, computer and information sciences and science technologies.

Art history, anyone?

GHARIB: You better start getting Mackie into the math and science.

MATHISEN: Math, baby, math.

GHARIB: That`s NIGHTLY BUSINESS REPORT for tonight. I`m Susie Gharib. Thanks for watching. Have a great weekend.

MATHISEN: And thanks from me, as well. You have a great weekend.
We`ll see you back here on Monday.


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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