Transcript: Friday, October 11, 2013

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


critical few days ahead for investors as Washington tries to end the
standoff. There`s no deal yet. We`ll tell you what the market pros are
doing ahead of Monday`s opening bell.

That`s the hit the nation`s retirement savings could take if no deal is
reached and the U.S. defaults. So, what can you do to lessen the risk?

MATHISEN: And bank on the banks? The financial sector makes up a
large portion of the U.S. economy, but are the big banks a good place for
your investment dollars now? A top bank analyst gives his view and names

All that and more tonight on NIGHTLY BUSINESS REPORT for Friday,
October 11th.

GHARIB: Good evening, everyone.

Lawmakers are talking in Washington, and on Wall Street stocks are
rallying. More strong gains in the markets today on renewed signs of
optimism that Congress and the White House are working on a compromised
deal to extend the nation`s borrowing limit and to begin negotiating a
resolution to reopen the government and get furloughed workers back on the

To be clear, though, there is no deal yet, and large parts of the
government are still shut down. But Democrats and Republicans are at least
talking for a second consecutive day giving the markets hope that a
solution is close at hand.

Eamon Javers joins us now from Washington with the latest.

So, Eamon, how close do you think we are to some kind of a deal, maybe
by Monday?

might be a good target day to start looking at here and there is a lot of
movement here in Washington, but it`s not exactly clear where we`re going.

We begun the day with Senate Republicans going to the White House to
meet with President Barack Obama, including Ted Cruz, the president`s chief
antagonist in all of this, he was in that meeting today. We didn`t get a
readout from the White House on what happened inside that meeting.

Later in the day, we know that the president called the Speaker of the
House John Boehner for conversation. We didn`t get a readout on that one,

And then we saw that throughout the day, the White House continued to
postpone its typical daily press briefing hour after hour after hour. We
finally got that briefing late in the day and the White House didn`t say
all that much, either.

That`s generally a good sign. When they are actually negotiating they
don`t say a lot. When it`s total stalemate, that`s when they come out to
the microphones and denounce each other. We did not see that today.

So, maybe an encouraging dynamic here in Washington.

MATHISEN: You just answered my question. I was going to ask whether
we should infer anything from the fact that it was a pretty silent day on

What would be the timeline of a deal or a frame work for a deal over
the next few days? What could we expect?

JAVERS: Well, we know the House of Representatives is coming in
tomorrow. They`ll be here at 9:00 a.m. Congressmen hate to workweek ends,
so they`re going to want to work this as quickly as possible and we know
the deadline is Thursday next week. That`s the day the Treasury has said
it`s going to run out of money and we`ll hit the debt ceiling limit.

So, presumably, between Monday and Thursday is the sweet spot for
getting a deal done if they`re going to get one. And it looks like, you
know, all the dynamic is they are actually talking to one another, although
the White House is bending over backwards to avoid saying that they are
negotiating because of course, the president promised he wasn`t going to

But nonetheless, he was in a room with Republicans talking about
something today, whether it was negotiation or not. You know, that`s up to
you to decide.

GHARIB: Eamon, what do you think about the impacts of these Wall
Street rallies are having on the negotiations? We`ve had two back to back
days of triple digit gains on the Dow. To what extent does that giving
them the feeling that they`ve got to come up with a deal because it`s going
to look bad if on Monday and Tuesday we have big sale offs.

JAVERS: Yes. You know, I had a chance to ask a United States senator
about that yesterday, as we saw that mega rally on Wall Street and he said
that the senators are watching that as they, you know, go through
deliberations. But, you know, it might not be enough to change the minds of
those people who are pretty much set on a course of action.

So, they are paying attention. They are feeling the push from Wall
Street, but it might not be enough to make them change their mind if they
feel strongly. These are very core political values that are being debated
right here.

MATHISEN: All right. Eamon Javers, just north of the Capitol for us
tonight, have a great weekend.

JAVERS: You, too.

MATTHEWS: The fact there were no negative headlines out of Washington
kept stocks in rally mode today. In fact, the gains today, combined with
yesterday`s, made for the best two-day return for the Dow, NASDAQ and S&P
since January. The Dow and S&P both scored gains for the week, up about a
percent. But NASDAQ finished the week with a loss, less than a percent,
for the first time in the past six weeks.

Today, just one day after its largest point increase in nearly two
years, the Dow close at the high of the session up 111, the NASDAQ was up
31 and the S&P gained 10.

GHARIB: So, what do you do with your portfolio while Congress still
tries to hammer out a debt deal? We`ll tell you what some market pros are
doing. That`s coming up a little later in the program.

MATHISEN: Well, the markets move on date, of course, and today, the
U.S. Energy (NASDAQ:USEG) Information Administration announced that it
won`t publish its weekly crude and gasoline inventory levels, along with
other data until its government funding is restored. The agency asked
energy companies to continue submitting their figures to the EIA, which
will be processed after furloughed workers return.

GHARIB: One well-known corporate executive is fed up with the
deadlock in Washington. And he`s urging his customers to do something.
Starbucks (NASDAQ:SBUX) CEO Howard Schultz is asking customers to sign
petitions directed at Congress and the president inside his coffee shops
over the next three days. He`s also taken out full-page ads in major
newspapers that readers can bring into Starbucks (NASDAQ:SBUX) stores.

Schultz explained his frustration over the budget impasse and what it
means for businesses and for the U.S.


HOWARD SCHULTZ, STARBUCKS CEO: The polarization in Washington is
affecting our standing in the world, consumer confidence, consumer
behavior, small and large businesses across the country are going to be
affected dramatically, and this is no way to run a country.


MATHISEN: So, how concerned are you about the debt ceiling and
government shutdown? We went outside and tried to find out.


UNIDENTIFIED FEMALE: What I`m most concerned about is that the
government is not functioning right now.

UNIDENTIFIED MALE: I`m concerned about the stock market. I`m
concerned about banking.

UNIDENTIFIED MALE: You see, politicians, which they don`t care about
us, they care about agendas.

UNIDENTIFIED FEMALE: The whole damned thing is a joke, bunch of
crooks trying to con us out of the little bit of money we make.

UNIDENTIFIED MALE: They spent the money, you have to pay your bills.

UNIDENTIFIED MALE: I just think they`ve got to do their job and
they`re not serving our population.


GHARIB: Well, a top Federal Reserve official is doing his job by
defending the Central Bank`s decision to maintain its massive stimulus
plans instead of tapering back those measures. Speaking in New York today,
Eric Rosengren, he`s the president of the Boston Federal Reserve Bank, said
that the decision not to pull back on bond buying was fully warranted
because of weak economic data and a steady rise in interest rates.

MATHISEN: Well, two of the nation`s biggest banks reported third
quarter results today. The numbers are closely watched in part because the
financials are the second biggest component of the S&P 500. The Dow
component, JPMorgan (NYSE:JPM), posted its first loss ever under CEO Jamie
Dimon. It lost $380 million as the bank set aside more than $9 billion to
cover legal cost. Strip out those charges and the bank actually beat Wall
Street predictions with a profit of $1.42 a share or $5.8 billion.

Wells Fargo (NYSE:WFC) also posted a profit, 99 cents a share or $5.6
billion. That was 2 cents ahead of expectations.

Here with more analysis on the banks is Brad Hintz, equity research
analyst at Sanford C. Bernstein.

Mr. Hintz, welcome. Good to see you.

Let`s talk a little bit here, if we might, about JPMorgan (NYSE:JPM).

Nine-point-two billion charged in this quarter. The company told the
market that they have $23 billion in total legal reserves and it`s possible
they could exceed that amount by nearly $7 billion.

That`s stunning, isn`t it?

think what you have here is a bank that is attempting to tell the market
we`re well-reserved. The $9 billion we put away today puts us in a good
position for whatever happens going forward and trying to settle with the
government. You can hear it from the tonality that in terms of what — how
the CEO spoke when asked about regulation. He said, “We will comply.”

So to me, this is JPMorgan (NYSE:JPM) saying let`s negotiate, let`s
get this behind us and that`s really one of the — one of the positives on
JPM. JPM is actually under performed if you look relative to the other
banks over — over the last — over the last six months or so.

A lot of this is the regulatory over hang. So what JPM`s management
is doing is saying, you know, here is the number analysts. You don`t have
to worry about it now.

GHARIB: So, really two related questions, first on JPMorgan
(NYSE:JPM), are you recommending the stock? Would you buy it at $52?

HINTZ: I think the issue — we have out-perform on JPM. The — to
me, from a timing point of view, the issue is this is a stock that will do
extremely well once the settlement is behind it.


HINTZ: You know, the over hang of the regulatory charges, the concern
about them from a litigation point of view has really pushed down the
stock. This is a leading investment bank and a recovering economy. So,
you know, extremely well run place.

GHARIB: What I wanted to ask you, Brad, the follow-up is this
conversation around JPMorgan (NYSE:JPM) reminds me a lot about all the
litigation problems that was going on with Bank of America (NYSE:BAC) even
recently and people were fleeing from that stock.

So, is JPMorgan (NYSE:JPM) still a buy or is Bank of America
(NYSE:BAC) a better one? Because it`s legal problems are pretty much
behind it.

HINTZ: JPM has certainly been hurt worse, so it strikes me as JPM and
actually the analogy that I would use is Goldman Sachs (NYSE:GS). Both JPM
and Goldman Sachs (NYSE:GS) were really the leading banks.

And as the leading banks, unfortunately, you`re the one who gets shot
at by the regulators. In terms of regulation, the issue here is to make
sure that Wall Street finds out who is in control. And that`s very much
what is going on here.

Yes, yes, there were — there were problems in terms of the mortgage-
backed business, but, you know, JPM, the well-run firm, is the one that`s
being focused here.

MATHISEN: Talk to us a little bit about the changing sort of
environment in which banks are doing business today. Interest rates have
been rising. The other bank that came out with numbers today, Wells Fargo
(NYSE:WFC), the largest mortgage originator, with Chase, the two largest.
How is that changing their business?

And when you look into their segments — fixed income, commodities and
currencies, that wasn`t doing that well. Trading wasn`t doing well.
Investment banking wasn`t doing all that well.

Are we looking at a changing environment for the big banks?

HINTZ: Well, certainly on the trading side you are. On the trading
side, what you`re seeing is less risk, more capital. That brings the ROEs
of the businesses down. Higher — much tighter risk management culture.
This slows down decision-making.

Now, we are in a transition stage and that transition stage is we`re
trying to learn how to live in that environment, and what will happen is
bid offer spreads will open up. In other words, the cost of doing trades
will become more expensive. The markets will become somewhat less liquid.
The street will learn to operate with less capital.

But this transition phase means that you`re generating very relatively
returns on the trading business. There are two — there are two banks in
the world tat are beating their cost of capital in terms of trading.
That`s Goldman Sachs (NYSE:GS) and JPM. The rest are still in this
learning stage and it could be 18 months.

MATHISEN: Very interesting time for the banks.

Mr. Hintz, thank you very much.

HINTZ: Pleasure.

MATHISEN: Brad Hintz is equity research analyst at Sanford C.

GHARIB: And still ahead on the program, how could U.S. debt default
impact your retirement nest egg? Coming up, we`ll have the answer and how
you can protect yourself.

But, first, how the international markets closed today.


GHARIB: Some good news for a change for Motor City. Barclays Bank
will provide the cash-strapped city of Detroit with up to $350 million.
It`s earmarked to financing to help Detroit state-appointed emergency
manager make investments in infrastructure and end some interest rate swap
at a discount.

MATHISEN: Long wait times, error messages and technical glitches have
stymied millions of Americans from shopping for new health insurance plans
on, the federally run online exchange, part of the
Affordable Care Act. And now, experts say administration has more little
more than a month to fix the woes or risk jeopardizing the goal of signing
up millions of Americans in the 36 states that don`t offer their own online

GHARIB: Well, we`ve been reporting all week about the impact of the
Washington stalemate on the markets, economy and American businesses. But
here is another worry: your retirement savings. Even though lawmakers are
negotiating to reach a deal to avert a U.S. debt default, new figures show
the staggering toll of default would take on retirement savings accounts.

Sharon Epperson has more on the sobering figures.


her 50s assumed she would work for 10 more years. Now, the fight in
Washington over the U.S. debt has this New Jersey podiatrist worried that
retirement could be decades away.

DR. JILL HAGEN, PODIATRIST: It concerns me that when I retire, that I
may not have enough money in my retirement fund to live the life I`ve been
living, mainly because who knows what`s going to happen, with the
government in debt and the deficits.

EPPERSON: Even if lawmakers come to a short-term agreement on the
United States borrowing limit, many investors like Hagen, troubled by the
debt debate fear that it could have a devastating impact on the economy,
financial markets and their retirement savings.

UNIDENTIFIED MALE: I`m not investing now because of the situation
we`re in. I`m just on hold with my investments.

UNIDENTIFIED FEMALE: We don`t really feel like we need to make more
money. We just like to not lose the money we currently have.

UNIDENTIFIED MALE: Yes, I`m concerned you pay all your money and you
hope one day to be able to see the benefits of all the money you

EPPERSON: There is reason to be concerned. According to a new report
from the American Society of Pension Professionals and Actuaries, private
pension assets including 401(k)s and IRAs could suffer losses in excess of
20 percent. That`s over $2.4 trillion.

They base this assertation on what happened in 2011. That summer, the
Federal Reserve`s second asset purchase program expired. The U.S. debt
negotiations went to the 11th hour and just days after the debt limit was
raised, the United States credit rating was downgraded.

There was immediate sell off and the S&P 500 plunged 17 percent and
took nearly seven months to recover.

While most investors follow stock market performance, if a deal isn`t
reached soon, interest rates could spike and the value of bonds considered
a safer investment may plunge. That`s a major worry for retirees and baby
boomers nearing retirement, who are counting on stability and a steady
stream of income.

HAGEN: Most of patients tell me when I sit and talk to them that
they`re not going to be able to retire because they didn`t have the savings
and they didn`t have the retirement funds.

EPPERSON: For now, some financial advisors suggest shifting some
assets to short-term bonds and cash. Others advise adding alternative
investments to help weather the storm. While some investors may see a
short-term slide in retirement savings, most advisers say account balances
should recover over time.



MATHISEN: Two major drug companies get downgraded and that is where
we begin tonight`s “Market Focus”.

Jefferies cutting Merck (NYSE:MRK) to a hold and Eli Lilly (NYSE:LLY)
to underperform from buy. The firm says Merck`s cost cutting efforts have
been less than hopeful, and that Eli Lilly`s research and development
pipeline is weak. Both stacks down on this up day. Merck (NYSE:MRK) off
less than 1 percent to $47.29, Eli Lily off fractionally to $48.88.

Micron Technology (NASDAQ:MU) getting hit after reporting earnings
below estimates. One analyst says the company`s guidance is not as great
as some had hoped, and that the term near term supply-demand balance is
less favorable. Another analyst downgraded the stock to underperform for
market-perform, citing the valuation there. Now, don`t lose sight of the
fact that Micron shares soared 165 percent this year, but they did fall to
more 8 percent today to $16.84.

GHARIB: Safeway (NYSE:SWY) was the best performing stock on the S&P
500 and that`s despite reporting earnings below analyst estimates.
Investors instead focused on the supermarket chain`s strong revenues and
its plan to exit the Chicago market, something an activist investor has
been pushing the company to do. The stock ran up almost 7 percent to

A warning today from Silicon Graphics slammed its stock. The company
said its earnings could come in below analysts` estimates because some of
its IT projects that are funded by the government have been put on hold.
Silicon Graphics provides computer servers to large-scale data centers and
some of its biggest names in tech include Facebook (NASDAQ:FB) and Yahoo
(NASDAQ:YHOO). Shares plunged more than 9 percent on the news to $14.75.

And Solar City soaring on a sunny forecast. It expects instillation
of its rooftop solar panels to rise about 90 percent next year. The
company allowed homeowners to lease solar panels and that means a very
small up front cost to customers. The stock rose 23 percent to $47.18.

Well, the market monitor tonight says his stock picking strategy has
less to do with the skirmishes going on in Washington, and more to do with
the fundamentals of individual companies. So far, that strategy seems to
be working for him. The fund he manages, the Chase Mid-Cap Growth Fund, is
up more than 25 percent this year.

Joining us now, Brian Lazorishak, he`s portfolio manager with Chase
Investment Counsel.

Brian, nice to have you back on the program.

I want to ask you a little bit about your strategy. Are you saying
that these triple digit gains that we`ve been getting on the Dow or if we
get big sharp declines next week, you`re not paying attention to them, it`s
just sort of noise in the background and you`re going about business as

for having me, Susie.

I wouldn`t say we`re not paying attention to them. However, we`re
trying to lean against some of that volatility a little. You`ve certainly
seen the volatility over the last couple of weeks, both to the downside
previously and then the upside over the last couple days and for the most
part we`re trying to use that as opportunity to add to either add to
positions we like in our portfolio or sometimes on those good days take a
little off the table.

MATHISEN: Brian, nice to have a stock picker from my home state of
Virginia, first off. Let`s get to some picks here because that`s what
people really want to know. And your first one is Harley Davidson.
They`ve had a rough patch, but I guess they`re coming back.

LAZORISHAK: Sure, Tyler. You know, Harley Davidson is a very long-
term, people thought of it as a growth company. But as you said, they went
through a difficult couple of years, really seem to be getting things back
on track, and one of the things we favor in our process is earnings

And to use a little bit of a pun, earnings are really accelerating for
Harley Davidson right now. They really have some strong improvements for
the 2014 model year. People are getting excited about and we think it has
a pretty good going forward.

GHARIB: Your next pick is ticker symbol JAH, this is Jarden
(NYSE:JAH) Corporation. People might not know what this is, but they know
the brands, right?

LAZORISHAK: Yes, Susie. Jarden (NYSE:JAH) is conglomerate of
household brands. So, while most people don`t know Jarden (NYSE:JAH),
everybody`s heard of some of their brands like Coleman and Crock-Pot,
Rawlings sporting goods, K2 skis. And recently the company acquired Yankee
Candles, a rather significant acquisition for them. It`s going to push
earnings this year on top of what we`re already good earnings profile.

So, we`re looking at a company growing in the teens and trading for
about 12 times next year`s earnings, pretty attractive valuation to us.

MATHISEN: And you like Dollar Tree (NASDAQ:DLTR)?

LAZORISHAK: Yes, Dollar Tree (NASDAQ:DLTR) is kind of classic
conservative growth and consistency of growth story. That`s one of the
things we really favor in our process, Dollar Tree (NASDAQ:DLTR) really
grew earnings through the last two recessions without a hiccup. Certainly,
the stock underperformed some of the more exciting when people get really
excited about the market, but it is a very good long-term story and we like
it here.

GHARIB: One thing I notice with stock picks you`re giving us, Brian,
is that they really had a great run-up over the past year. I don`t know if
there is still upsides to address, but also tell us about your last pick,
Euronet Worldwide (NASDAQ:EEFT), EEFT, and this one trades on the NASDAQ.

LAZORISHAK: Yes, of those, Euronet Worldwide (NASDAQ:EEFT), over the
last year or so, has been the best performer, actually that good
performance is something we look for in our process. We favor strong
relative price performance. But at the same time we pay attention to

So, a stock like Euronet can do well but as long as earnings are good
and earnings continue to grow, we`ll still invest in it. Euronet is in
several businesses. They offer ATM networks in Europe. They do gift cards
and prepaid phone calls, as well as money transfers. So, a really
interesting collection of businesses and a good investment opportunity to
our eye.

GHARIB: All right. All sounds good.

Any disclosures to make, Brian?

LAZORISHAK: I own all four of those stocks through my holdings at the
Chase Mid-Cap Growth Fund.

GHARIB: All right. Thank you so much. Have a great weekend.

Brian Lazorishak — sorry about that, Brian — with Chase Investment

LAZORISHAK: No worries.

MATHISEN: And still ahead, investors will be focused on debt talks,
of course. So, we will get some advice from market pros what could happen
next week and what to do to get ready for it.

But, first, how commodities, treasuries and currencies performed


GHARIB: Gold lost a bit of luster today, falling more than 2 percent
in value and closing at a three-month low, $1,268 an ounce. Investors
cashed out of the safe haven heavy metal today, as lawmakers appear closer
to reaching a deal on the debt ceiling. Sharp declines earlier in the
trading sessions forced a 10-second halt in gold`s trading, to prevent what
NIMEX officials called, quote, “excessive price volatility”.


MATHISEN: And, Susie while members of Congress and the White House
plan to work through the weekend hammering out a deal to raise the debt
limit, investors may want to use the weekend to prepare their portfolios
for whatever kind of plan or non-plan lawmakers come up with, or if they
fail to reach a deal.

Dominic Chu is taking a look now at what the experts say to do with
your money now.

What are you finding, Dom?

interesting because there is a debate in Washington but there`s a huge
debate going in the market. There is undercurrent, there`s a lot of push
and pull, a lot of buyers, a lot of sellers.

Now, obviously, the last two days, the buyers have won. But there are
three different schools of thought. One is maybe run for the hills but not
all the way. So, they are saying, you know, Miller (INAUDIBLE), equity
strategist, Matt Nelly (ph), says, hey, you know, take some of those
profits. If you`ve made money in the market, why not sell some of that off
and reap some of those benefits.

Now, there is also those who say, hey, you know what, stay bullish,
all right? Stay right where you are, and jump right in, buy more stocks.

In fact, the pull back is huge. I was speaking to Alan Knuckman at
Trading Advantage. He says, if there`s a pull back, I want to buy big blue
chip names. Jump right now.

He likes Coca-Cola (NYSE:KO). He likes Microsoft (NASDAQ:MSFT). So,
these big, big blue chip, blue cap names that pay a dividend.

But then there is those who say, you know what? Stay put, don`t
worry. It`s not going to have a long-term effect, a lingering long term
effect. These guys in Washington are going to figure this out. So stay
put, this should not affect your long-term portfolio plans.

Sarat Sethi, he`s a top performing portfolio manager at Douglas C.
Lane. That`s what he says.

MATHISEN: Are your sources telling you that this market is
vulnerable, vulnerable to headline risk, most especially because if
headlines come out over the weekend that the talks are stalemated or
breaking down and, boy, we`re going to have a lot of the Sunday talk shows
focused on this, I would think Monday morning`s open could be a rough one.

CHU: So, here`s the thing, it can be a rough one to the upside or the


CHU: If we think downside, we say, hey, if there`s no deal done,
maybe the market sells off but you should position for that before hand.
It could be on Sunday morning we get a great grand bargain and everything
goes higher. No matter what, you`ve got to pick a path and that`s what
traders have been doing over the course of the past week.

GHARIB: Do you think this Monday partial holiday for — you know,
banks are closed, markets are open, some business are closed, could work
for or against the market? What did you hear?

CHU: Well, it`s interesting because liquidity won`t be a concern.
Stock markets stay open. So, that will be interesting. We already had two
good up days for the Dow. We`ll see if it continues on Monday.

GHARIB: That will be nice.

MATHISEN: Dom, have a great weekend.

GHARIB: And finally tonight — oh, I think we`re going to wrap up.
We have to say good night.

That`s NIGHTLY BUSINESS REPORT for tonight. I`m Susie Gharib for more
on the stories we covered, join us on our Web site, Thanks for

MATHISEN: Twenty pounds of potatoes in a 10-pound bag tonight.

Thanks for watching. I`m Tyler Mathisen. Have a great weekend.
We`ll see you here Monday, deal or no deal.


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