Transcript: Wednesday October 30, 2013

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



accountable for the debacle. I`m responsible.


The Health and Human Services chief accepts blame for the botched rollout
of the Obamacare Web site, as the president argues the law is really a good
thing. But what does the Affordable Care Act mean if you`re covered under
an employer plan?

Stocks, bonds, gold and the dollar all on the move after the Fed said it
will keep the stimulus in place. But is it what the Central Bank didn`t
say that really drove the market?

MATHISEN: Facebook (NASDAQ:FB) fever. The social network reports
strong profits and the stock jumps. What investors need to know about
Facebook`s financials?

All that and more tonight on NIGHTLY BUSINESS REPORT for Wednesday,
October 30th.

GHARIB: Good evening, everyone.

We begin tonight with President Obama on the defensive.

Speaking from Boston, the president tried to drum up support for his
troubled health care program. He chose to stand in front Faneuil Hall
where a Massachusetts health care plan was signed into law seven years ago,
and it`s considered a successful template for the president`s own
Affordable Care Act. He admitted to problems with his healthcare Web site
and that people are getting cancellations notices, but he said giving
people healthcare should be a no brainer, shifting blame for canceled
policies on private insurance companies.


right to health care coverage, and no insurance company will be able to
deny you coverage or drop you as a customer all together. Those days are
over, and that`s the truth.


OBAMA: That is the truth.


GHARIB: Well, despite the rocky start to the healthcare marketplace,
President Obama assured the crowd, quote, “We are going to see this

MATHISEN: Well, seeing it through is what the president had in mind
today. But it was very different on Capitol Hill. Grilled and drilled —
that`s what happened up there today as members of the House Energy and
Commerce Committee grilled Health and Human Services Secretary Kathleen
Sebelius over the bedeviled rollout of the Web site. The
drilling was over administration claims that insured people would get to
keep their present plans, basically no matter what.

The trouble is, many carriers are canceling low-cost, low-coverage
plans because they don`t compile with tougher insurance standards under the

Bertha Coombs has more on today`s contentious hearing.


Health Secretary Kathleen Sebelius seemed prepared for tough questioning
starting off with an apology to Americans for the rocky rollout of, the problem-plagued federal site which was down again

SEBELIUS: You deserve better. I apologize. I`m accountable to you
for fixing these problems, and I`m committed to earning your confidence

COOMBS: Republican members pressed Sebelius about health officials`
late changes to the system design and the lack of proper testing, which
last week contractors told the committee contributed to the site`s

SEBELIUS: No one indicated that this could possibly go this wrong. I
was always advised that there is always a risk with a new product and a new
site, but never suggested that we delay the launch of October 1st, nor did
our contracting partners ever suggest that to us.

COOMBS: A number of members held up letters from constituents whose
plans had been canceled in the individual market. Sebelius insisted
administration did not mislead Americans when the president said that they
could keep their plans.

SEBELIUS: Plans change so dramatically —

REP. GREG WALDEN (R), OREGON: Sure, every year.

SEBELIUS: — over time that the estimates —

WALDEN: But, so —

SEBELIUS: — was they wouldn`t be — not because of our rules but
because of insurance companies business —

WALDEN: Well, but you set up those market rules look like what they
have to compile with, correct?

SEBELIUS: Only if they chose not to grandfather the policy. That`s
the —

WALDEN: But that meant they couldn`t make any change —

SEBELIUS: Any grandfathered policy stayed in place, still would be in

WALDEN: Right, but if they made —

SEBELIUS: None of these rules apply.

WALDEN: But if they made any change —

SEBELIUS: No, they could make changes in pricing. They could make
changes in benefits.

COOMBS: And after saying for weeks that the Health Department was not
going to release enrollment data prematurely, today, the secretary
explained why.

REP. LEE TERRY (R), NEBRASKA: That data out there exists and you will
not let us —

SEBELIUS: Sir, I will tell you right now it`s not reliable data.
According to the insurance companies who are eager to have customers, they
are not getting reliable data all the way through the system.

COOMBS (on camera): Even as another outage involving Verizon`s
Terramark that hobbled for much of the day today, Secretary
Sebelius says she`s confident that the Web site will be up and fully up to
speed by November 30th, in time for people who want to enroll for coverage
starting on January 1st.

Bertha Coombs, NIGHTLY BUSINESS REPORT, Washington.


GHARIB: Most American workers don`t have to shop for a new insurance
plan on those government exchanges because millions get coverage through
their jobs. And with the annual open enrollment period approaching at
companies big and small, many employees are now wondering how the
Affordable Care will change things for them, and if that means big price
increases for their health insurance premiums.

Scott Cohn takes a closer look.


Burns from outside Philadelphia just got the news from his employer. His
health insurance premium for next year is going up.

LARRY BURNS, EMPLOYEE: Maybe 8 percent, 9 percent, something like

COHN: He`s not alone. Across the country, employers are sending out
annual enrollment materials with a bit a bitter pill — higher premiums, in
some cases double digits. And part of the blame — federally-mandated
health care changes, health care reform, the Affordable Care Act.

BURNS: It was just, here it is, pay it.

COHN: It`s not just higher premiums. Deductibles are rising, as
companies try to shift more of the risk and responsibility for health care
costs to their workers.

(on camera): Rising premiums at work are nothing new. In fact, they
have been going up for years. The Kaiser Family Foundation, which tracks
these things, says over the past 10 years, your cost of coverage at work
has gone up 89 percent.

(voice-over): The study says employers have been passing on their
added cost and then some, as insurers like Aetna (NYSE:AET) pass on their
cost. The company CEO says the Affordable Care Act is compounding the

pass through to its customers over $1 billion worth of taxes and fees
associated with the Affordable Care Act that need to go into pricing.

COHN: Divided among Aetna`s 22 million members, that`s not much. But
employers, like hospital operator Universal (NYSE:UVV) Health Services, say
there are other added costs. Children covered on their parents` plans
until they are 26 and the protections for preexisting conditions.

would be your house starts to burn. You call the insurance company
immediately and say I`d like household insurance. They say, OK, sure.

COHN: But even employers say much of the increases are simply the
result of rising health care costs and more people using health care —
factors that at least for now have nothing to do with Obamacare.



MATHISEN: And here to talk more about the changing landscape of
health insurance is Craig Garthwaite. He`s assistant professor of
management at Northwestern University`s Kellogg (NYSE:K) School of
Management, and he specializes in health care.

Craig, welcome. Good to have you with us.

I assume you heard Scott`s package there. I`d like to get your best
guess, your estimate of how much or what percentage of the premium increase
I may get next year in my company plan is attributable to the Affordable
Care Act. Is it 20 percent? Fifty percent? Eighty percent? What?

really don`t have an exact number for that, but I think what we are seeing
is that there`s going to be a mixture of two things that are causing
premiums to go up. One is that we`re coming out of recession, so
healthcare (ph) is going to start to increase again. We had relatively low
increases in healthcare over the past two years as a result of the

And the second is that a lot of company plans have to be more generous
to meet minimum standards under the Affordable Care Act, and those are the
primary drivers of increased premiums in the workplace.

GHARIB: The other thing that a lot of people are asking questions is,
you know, whether you work for a company, a big company, a small company,
or no company, that ultimately every American person is going to have to
sign up for these health care exchanges. Is that a good thing? What are
the pros and cons of that?

GARTHWAITE: So, I think certainly what we`ll see is that a lot more
people in employer coverage now are going to move into the exchanges and
that probably will be a good thing for them. These are going to be people
who are eligible for thousands of dollars in subsidies for the federal
government and now that they get their insurance not from their employer,
they`ll be free to move across employers, move from a large to small
employer, they`ll be lots of benefits there. The downside —

GHARIB: But aren`t there also some downsides — aren`t there also
some downsides to that, too?

GARTHWAITE: Yes. Well, the downside certainly at a minimum is going
to be the cost of this bill is going to end up being far greater than we
ever estimate and that`s going to come out of every individual American
taxpayer. We`re just not — we`re not I don`t think adequately preparing
for the increased cost of the ACA.

MATHISEN: So, is what you`re saying, Professor, that more and more
companies will get away from offering health insurance as a primary benefit
to their employees, big companies and small companies?

GARTHWAITE: Yes. I mean, I think what we`ll find is that if you have
a lot of low income employees, if you give them health benefits and they
are ineligible for all these subsidies that President Obama keeps talking
about, you know, for a family of four. You can be talking about a subsidy
that`s upwards of $13,000. And so, it`s going to be a change in the
paradigm of the employer that a lot of what we used to give as good
employers, it might be better for them to not offer insurance to their
employees and let them qualify for these federal subsidies.

GHARIB: Now, the whole premise of this Affordable Care Act is to get
healthy, young people to sign up for the program.

The way things are going, do you see that happening? And if it
doesn`t, what does that mean for the whole financial, you know, the
financial health of this health care plan?

GARTHWAITE: I mean, that`s all going to hinge on the Web site. And
that`s really from my view the primary reason why Sebelius should have been
apologizing today because if we don`t get that Web site working, if we
don`t make it easy for people to sign up, then the people who least want
health insurance are going to be the young healthy people that Susie is
talking about, those people are not going to sign up. And if we don`t get
them into the pools, then all we`re going to do is have a series of
exchanges that have relatively old and relatively sick people, and the
economics of the Affordable Care Act just don`t work without young, healthy
people being in the insurance pool.

MATHISEN: You`re very quick opinion, is disconnecting health
insurance from health employment a good ultimately?


MATHISEN: All right. That was quick answer there.

Craig, thank you very much. Craig Garthwaite, assistant professor of
management at the Kellogg (NYSE:K) School at Northwestern.

GHARIB: And a little later in the broadcast, a story about how the
changes and expenses in health coverage are turning many financial advisors
into health care advisors.

MATHISEN: Well, disappointing news in today`s ADP jobs report for
October. The payroll processor reported that private companies added just
130,000 jobs this month, fewer than forecast as the 16-day partial
government shutdown and debt limit stand off appeared to slow an already
weak labor market.

GHARIB: And that`s one reason that the Federal Reserve decided today
to continue its massive bond buying program to give the U.S. economy a

Wrapping up a two-day meeting, policymakers at the central bank
forecast weaker growth ahead and said the Fed will continue its stimulus
program and keep its key interest rate at zero percent. The Fed`s
statement signaled that the economy continues to improve but only modestly.

MATHISEN: Investors poured over the Fed`s policy statement and
seemingly didn`t find much to hold on to. Stocks, of course, set out a lot
of records yesterday, maybe they were just tired today and that`s why they
sold off — probably as good an explanation as any. The Dow was down 61
points, the NASDAQ off 21, and the S&P was lower by eight.

Prices on tenure U.S. Treasury notes were lower today. Yields spiked
higher to finish at 2.54 percent after the Federal Reserve wrapped up that
two-day meeting.

GHARIB: Joining us now to talk more about that Fed meeting and the
markets, David Kelly. He`s chief global strategist at J.P. Morgan Funds.

So, David, really no surprises on that Fed decision. Everybody was
kind of expecting it, but there was speculation that one of the reasons
that the markets stayed in the minus column was that there was speculation
that maybe Ben Bernanke will begin this whole tapering thing before he
steps down as Fed chief any time between December and January.

What do you think?

that`s possible. I don`t think anything in the statement would have said
that. I think that the only piece of news in the statement is that they
removed language which they put in the last time around which said that
they were worried about rising interest rates. If you recall back in
September, when they decided not to taper then, what they said is that they
were worried rising interest rates would actually slow the economy. They
remove that language.

Now, if you think about it back then, the 10-year treasury yield was
about 2.7 percent. As of this morning, it was 2.48 percent. So, what
they`re really saying is 2.7 percent we`re a little worried, 2.48 percent
we`re fine. But if the Fed`s fine at 2.48, then why should people buy a
bond at 2.48 expecting rates to go down any further?

So, I think that`s really why rates moved up a little bit. And I think
that probably hurt the stock market. But overall, there`s not a lot of
news in today`s statement.

MATHISEN: You know, six weeks ago, David, I can`t remember a more
eagerly anticipated Fed meeting. Today`s Fed meeting had none of that

Are you expecting that there will begin a pulling back of the bond
purchasing sometime over the next six months? And will it be —


MATHISEN: — by Ms. Yellen or Mr. Bernanke?

KELLY: Well, yes. And the second answer is it`s a close call.

But I think the — I think that the key trigger has to do with the
other side of Washington. I`m confident that the economy will pick up
enough. I`m confident the unemployment rate will come down enough to
justify the Fed tapering.

But the real issue is, will we have an extension of the debt ceiling,
will we deal with another potential government shutdown in January? If we
can have the government fully financed through 2014 with no issue on the
debt ceiling, that removes the last impediment to the Fed beginning to

They do need — you know, they`ve got a long, long way to go to get
back to normal and they really need to get going. So, if in January, in
the middle of January, we do come up with an agreement in Washington to
fund the government and to extend the debt ceiling, then I think it`s
possible that with Ben Bernanke`s last meeting at the end of January,
that`s when they will begin to taper.

GHARIB: And this question, turning back the stimulus, this massive
stimulus, it`s going to be tricky. I mean, it`s fraught with risks. So,
if it does fall in the lap of Janet Yellen for the most part, what are the
key things she has to do so that in no way do those actions disrupt the
markets and the economy?

KELLY: Well, the first thing, of course, they need to get started. I
think they shouldn`t overstate the value of Q.E. in helping this economy,
because this economy has not really been doing that well. I mean, it`s
still only growing by 2 percent since the start of this expansion and
removing all this Q.E. won`t really hurt the economy that much either.

So, I think the Federal Reserve needs to express confidence that the
economy can grow without the stimulus and just, you know, get going and
raise — allow us to get back to a clear path towards normal. If people
think the Federal Reserve is back to normal, they might get back to more
normal decisions on businesses and investing, which is actually be a good

MATHISEN: The S&P 500 is up 24-odd percent this year. How much of
the gain is directly attributable to what the Fed has been doing?

KELLY: I don`t really — I don`t think a lot of it is. We have seen
in the last few months more money going into equity funds presumably
because people feel there is no opportunity in fixed income. But for most
of this rally, money has been moving out of the equity mutual funds even as
the market goes up, and that suggests to me that the — that it`s not
really Q.E. that`s been pushing the market up, it`s just the market was too
cheap. And so, professional investors recognize some opportunity there.

I still believed the market is overvalued, but I think if you keep the
sea of liquidity growing here, eventually, the markets will become
overvalued and that`s one other reason why the Fed needs to get going right
now to make sure that this thing doesn`t get out of hand.

GHARIB: OK. We`re going to have to leave it there. David, thank you
so much.

KELLY: Thanks.

GHARIB: David Kelly, chief global strategist at J.P. Morgan Funds.

MATHISEN: And still ahead, what`s helping drive General Motors
(NYSE:GM) into its strong`s financial position in years? That story is


GHARIB: Earnings out after the closing bell from Facebook (NASDAQ:FB)
sending shares soaring after-hours. The social networking giant beating
Wall Street estimates last quarter on strong growth in mobile advertising,
which now accounts for half of its overall revenue. Facebook (NASDAQ:FB)
earned 17 cents a share, excluding certain items, with total revenue
topping $2 billion.

Seema Mody joins us now from the NASDAQ Exchange.

So, Seema, you`ve had a chance to look over the numbers. What`s the
one takeaway you see in Facebook`s third quarter numbers?


What`s getting investors really excited is the fact that Facebook
(NASDAQ:FB) is making more money on mobile, sales from mobile ads made up
49 percent of Facebook`s total ad revenue this quarter. Facebook
(NASDAQ:FB) also saw a jump in mobile monthly active users. So, it`s
driving more users to its Facebook (NASDAQ:FB) platform via a smartphone.
That`s what the street has been wanting, Facebook (NASDAQ:FB) strengthening
its mobile growth strategy and that`s what they really got this quarter.

MATHISEN: Seema, thank you very much.

Seema Mody reporting from NASDAQ for us.

Meanwhile, before the opening bell this morning, General Motors
(NYSE:GM) said its profits fell more than 50 percent. But the quarterly
number was still better than Wall Street estimated. The automaker reported
strong sales of pickup trucks and said its European operations are
improving but still posting heavy losses.

Phil LeBeau has more.


the assembly lines in Michigan, to the showrooms in China, General Motors
(NYSE:GM) is revving up profits. Excluding special items, GM made 96 cents
a share last quarter, 2 cents better than Wall Street was expecting.

DAN AMMANN, GENERAL MOTORS CEO: Market share was up, revenue up,
profits up, cash flow up, so really strong quarter across the board.

LEBEAU: GM is making most of its money more than $2.2 billion in
North America, where U.S. sales are being driven in part by new versions of
the Chevy Silverado and GMC Sierra pickup trucks. CEO Dan Akerson says the
launch on those trucks has been near textbook perfect. Those trucks have
helped GM hold onto the lead as the number one automaker in the U.S., ahead
of Ford, Toyota (NYSE:TM) and Chrysler.

Meanwhile, GM reported a 60 percent drop in earnings overseas. It cut
losses in Europe and sales in China remain strong.

With GM holding $26 billion, investors are asking when the automaker
will return some of that money to shareholders with a dividend.

AMMANN: Priority number one is reinvest in the business. Priority
number two is to maintain and strengthen a fortress balance sheet, which
we`ve been continuing to do, including activities through this quarter.
And priority three is to generate returns of cash to our shareholders, and
that`s something that we`ll continue to evaluate over time.

LEBEAU: Today`s earnings pushed GM shares close to their highest
price since the company`s IPO in 2009.

(on camera): With the U.S. Treasury scheduled to sell its remaining
stake in General Motors (NYSE:GM) over the next couple months, GM is hoping
the stigma of being bailed out by Uncle Sam will fade away. And with it,
any doubts the new GM will repeat the same mistakes that led the old GM to
file for bankruptcy.



MATHISEN: And to read more about General Motors (NYSE:GM) earnings
and its outlook, head to our Web site,

GHARIB: Visa (NYSE:V) shares drop after the bell, and that`s where we
begin tonight`s “Market Focus”.

The world`s largest credit card company reported a decline in the
quarterly profit in its report as a Dow component. Visa (NYSE:V) cited a
tax reserve as the reason for the fall, overshadowing an increase in the
payments processed. Shares fell a fraction in the regular session to
$203.82, and the extended — the decline continued after the close.

More people around the world are visiting Starbucks (NASDAQ:SBUX)
stores, which helped boost profits. The coffee giant saw a 34 percent rise
in earnings but revenues slightly lower than expected and its profit
forecast for next year was soft. Nonetheless, the CEO said he was proud of
the result.


HOWARD SCHULTZ, STARBUCKS CEO: This quarter is a stunning quarter,
which caps, as I said, the best performing financial and operating year in
the history of the company. For us to have 8 percent comps in America with
our store base and 7 percent globally, at a time in the world when the
consumer is still under pressure, is such a significant accomplishment.


GHARIB: Shares fell after hours on that forecast but finished the
regular session higher to $80.83.

MATHISEN: Shares of the fizzy drink machine maker SodaStream plunged
after the company reported results that missed estimates. Profits fell
slightly because of higher operating cost and revenue missed. But
SodaStream kept it full-year outlook. The stock down more than 10 percent,
though, $56.87, the close.

Comcast (NASDAQ:CMCSA) (NYSE:CCS), the nation`s largest cable
provider, reported earnings that beat estimates, as the company generated
more cash flow for its cable unit and media arm, NBC Universal (NYSE:UVV).
Revenue shy of estimates. Shares of the cable company, the parent of
NIGHTLY BUSINESS REPORT`s producer, fell more than 1 percent to $47.09.

GHARIB: And coming up, you go to a financial advisor, when it comes
to your budget and investments. But would you go to one for health care

But, first, here`s a look at commodities, treasuries and currencies.


GHARIB: If you`re confused by the new vocabulary of health insurance,
you`re not alone. So, it`s not a wonder many people are turning to their
financial advisors to help them figure out their healthcare options and
cost. And others are thinking about getting a health care advisor, too.

Sharon Epperson explains.


If it wasn`t already difficult, saving for retirement, uncertainty about
the cost of health care has become a major concern.

Would you turn to your financial advisor for guidance?

UNIDENTIFIED MALE: More than likely, I`d find someone like in an
insurance broker, someone that understands the insurance part of it. I
don`t rely on my financial advisor for health care.

UNIDENTIFIED MALE: I wouldn`t even ask him. His job is to handle
money that I have invested, not to take care of my health care.

UNIDENTIFIED MALE: I think they should be part of the process. I
mean, it`s a big part of your finances.

EPPERSON: Now, many financial advisers wear at least two hats, as
those who focus primarily on investments are tasked with helping clients
navigate the changing healthcare landscape.

(on camera): The Affordable Care Act has resulted in many new
developments in the delivery of health care, which is making retirement
planning even more challenging.

(voice-over): Especially as many employers are changing or plan to
change their coverage for retirees. A study this month by Towers Watson
(NYSE:TW) found that for those employers that sponsor a retiree health
plan, about 40 percent plan to discontinue it in 2015.

I find that most people are more comfortable talking about their health
care problems than they are about their financial issues, because health
problems aren`t under your control. So, if a planner becomes comfortable
just asking basic questions, like what medications are you on, have you
ever been in the hospital? Those are all things that clients when they
know what you`re planning for are happy to share with you.

EPPERSON: Financial advisors say the key for consumers is to find a
financial planner who takes a 360-degree view of health care choices, and
understands the risks and tax consequences.

that expertise or that knowledge of the actual health care options but you
need that peripheral vision of a certified financial planner to understand
that, you know, the tax impacts, the cash flow impacts, you know, all the
other ways in which your health care impacts your total financial picture.

EPPERSON: Someone with a CFP, the CFP board`s certified financial
planner designation, is required to complete training in comprehensive
financial training, not only in making investment decisions.



GHARIB: And for more on where to look for a health care advisor, log
on to our Web site,

MATHISEN: And finally tonight, “Forbes” magazine is out with the
world`s most powerful people. Here are the top three. See if you can

In third place, Xi Jinping. He`s the general secretary of China`s
communist party. In a surprise move, Barack Obama drops to number two on
the list this year from the stop spot. And taking his place, Russian
president, and apparently any other title he wants to hold, Vladimir Putin.

And recapping Facebook`s earnings for you, following an initial pop
after hours, the stock has reversed direction. One thing the market may be
focusing on, comments on a late-day conference call where the CFO said he
saw a decrease in daily users, specifically among younger teens.

GHARIB: Look at that drop.

MATHISEN: Look at that. That was a short-lived drop in Facebook
(NASDAQ:FB) stock.

GHARIB: That`s NIGHTLY BUSINESS REPORT for tonight. I`m Susie
Gharib. Thanks so much for watching.

MATHISEN: And thanks from me, as well. I`m Tyler Mathisen. Have a
great evening everybody. We`ll see you back here tomorrow night.


Nightly Business Report transcripts and video are available on-line post
broadcast at The program is transcribed by CQRC
Transcriptions, LLC. Updates may be posted at a later date. The views of
our guests and commentators are their own and do not necessarily represent
the views of Nightly Business Report, or CNBC, Inc. Information presented
on Nightly Business Report is not and should not be considered as
investment advice. (c) 2013 CNBC, Inc.

This entry was posted in Transcripts. Bookmark the permalink.

Leave a Reply