Transcript: Thursday, November 14, 2013

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



BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The bottom line is insurers can extend current plans that would otherwise be canceled into 2014, and Americans whose plans have been canceled can choose to re-enroll in the same kind of plan.


President Obama says Americans can keep their canceled insurance policies, changing one of the key provisions in the new health law. But is it easier said than done?

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Cisco (NASDAQ:CSCO) skid. The stock tumbled, its worst dive in almost three years, after warning a softening demand. Does this tech bellwether help (ph) plan, though, to turn things around?

GHARIB: And Wal-Mart (NYSE:WMT) woes. The world`s largest retailer lowers its annual profit, offering a glimpse into how Americans feel about their economic well-being.

We have all that and more tonight on NIGHTLY BUSINESS REPORT for this Thursday, November 14th.

Good evening, everyone. I`m Susie Gharib.

GRIFFETH: And I`m Bill Griffeth, in for Tyler tonight.

President Obama again trying to fix the Affordable Care Act, bowing to mounting political pressure. The president said today he will now allow insurers to extend their canceled health care policies for one year, maybe even longer, even if the coverage falls short of the new federal minimum standards.

Now, speaking to reporters at the White House today, Mr. Obama admitted his administration had botched the rollout of the new health care law and he said he regretted that his assurances that Americans could keep their health insurance plans if they liked it, that turned out to be wrong.


OBAMA: I think it`s legitimate for them to expect me to have to win back some credibility on this health care law in particular and on a whole range of these issues in general. And, you know, that`s on me. I mean, we fumbled the rollout on this health care law.


GRIFFETH: And House Speaker John Boehner did not mince words on his prescription for the health care law.


REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: Promise after promise for this administration has turned out to be in the true. So when it comes to this health care law, the White House doesn`t have much credibility.
And let`s be clear: the only way to fully protect the American people is to scrap this law once and for all.


GHARIB: John Harwood joins us now from Washington with more on this.

You know, John, a lot of people wondering and questioning today, can President Obama make these rule changes? I mean, after all, the Affordable Care Act is the law. Does Congress at some point have to vote on this?

I mean, talk us through how the process will work.

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, first of all, Susie, I think the thing to remember about this is this is mostly about the president trying to provide political cover for Democrats and for himself to buy time until the exchanges are going to work, the Web site will be fixed.

He`s not compelling any changes, and he`s not giving a huge new grant of authority to states. What he`s doing is saying that if state insurance commissioners and insurance companies want to extend policies further, they can, but the reality is that most of them don`t want to because they want to move into the new world of insurance under the Affordable Care Act. So, it is not clear how much this will change.

It may extend some policies and at the very latest unless there`s an additional decision taken, some of those policies could go to the end of September 2015, but it is not likely so far as I can tell that this is going to make a whole sale change. What the president was trying to resist gutting of Obamacare and this is a minimum fix that he`s trying to offer.

GRIFFETH: Yes, as you mentioned, John, this is providing political cover for those Senate — Democrats on the House who face reelection next year, but the fact the White House acknowledges that this fix could extend beyond 2014, beyond that election year, that sounds ominous at this point for trying to fix this whole thing.

HARWOOD: It could, but I think that probably amounts to less than meets the eye, Bill, and the reason is that administration, they said that in their letter that was sent to state insurance commissioners earlier today. So, we`ve known that for most of the day, but what they are counting on is that the Web site will be working, people will see better options than the extension of these policies, and will be fine with moving over to the new system. That`s why I said they are trying to buy time and get over this rough period that they are in right now.

GRIFFETH: John Harwood in Washington. Thanks for the political angle of that.

Let`s talk about logistics, though. Many insurance companies said today they are worried about the president`s fixes, saying that it could destabilize the insurance market and result in higher premiums for consumers.

Let`s turn to Bertha Coombs, who`s been following this story all along.

What do these fixes mean for the insurance industry?

BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, because it`s voluntary, it`s something that they need to now take a look at. And essentially, the insurers turned a page on these plans. So, they haven`t priced what they would be for 2014. So, effectively, they now have a 30- day window that they would have to try to do this because people who want those plans that are expiring on December 31st, to be able to renew them for January 1st, they have to put their premiums in and pay them by the 15th of December.

So, here are the things they would need to do in the next 30 days, they would need to figure out what the price is on those plans. Calculate all that for 2014. They would need to get approval from state insurance and the state insurance commissioners. Washington state weighing this afternoon saying they don`t want to do this, and then they need to be able to get the plans out to their customers and collect their premiums, all in the next 30 days.

GHARIB: So, it sounds like you`re say thing is not feasible to do in
30 days. Will the insurance companies now fight back on this, or are they going to have to do what the White House wants them to do?

COOMBS: Well, essentially, what`s happened here is kind of like when you play your mom off your dad. Your dad kind of says, hey, it`s not up to me, ask your mother, she`ll make the decision. The president has now shifted the decision to the insurers and the state insurance commissioners.

Aetna (NYSE:AET) essentially says we can try to do this but we would have to get expedited reviews from all of these state commissioners in order to do that and it is a logistical hurdle for them to do that over the next 30 days.

Cigna says they are already working with a lot of their clients to try to figure out a way to extend these plans. So, they may be partly along the way. Some of these insurers have actually offered early renewals. One man who I talked whose plan was canceled, he had an early renewal that, in order to sort of skirt the ACA rules, went until December 1st, so that can probably be extended until the end of next year.

GRIFFETH: There is a bit of a catch-22, though, because the president said he hoped that those who had policies canceled would find a better policy under ACA. But if the Web site is not working, it`s tough to do that kind of comparison shopping.

COOMBS: Well, and it`s also tough for the insurers because these are people who already are good about paying their premiums. They already understand insurance and they`re already committed to buying insurance.
And if they`re not buying on the exchange, that really throws into question the viability of that marketplace.

GHARIB: Real quickly, in just a word or two, what does this mean for premiums if you have your old policy and you want to reinstall it, or new policies? Are they going up, prices?

COOMBS: I would imagine. I mean, the insurers have to figure out what the price is. They`ve already seen some prices trends in terms of medical cost going up. So, they would need to raise the plan rates.

GHARIB: OK. We`ll get back to you on that.

GRIFFETH: Thanks, Bertha.

GHARIB: Thanks so much, Bertha.

Well, despite all the changes to the new health law, health care stocks had a strong day, but the big talk on Wall Street was about Cisco
(NASDAQ:CSCO) and Wal-Mart (NYSE:WMT). Investors dumped Cisco
(NASDAQ:CSCO) shares, reacting to that bad earnings report we told you about last night and that shaved 15 points off the Dow.

And Wal-Mart`s earnings did little to inspire investors and that Dow stock rose just a bit and we`re going to have more analysis on both Wal- Mart (NYSE:WMT) and Cisco (NASDAQ:CSCO) in just a moment.

Still, though, the disappointments did not stop the market rally, and new highs for the record books. The Dow added 54 points to a fresh record.
The NASDAQ gained seven. And the S&P up 8 1/2 points. It also moved to a new high.

GRIFFETH: All right. Let`s talk about shares of Cisco (NASDAQ:CSCO) Systems. They were the biggest drag for the Dow today, also for the S&P and for the NASDAQ composite, with the stock tumbling 11 percent after forecasting the continued decline in sales for the rest of the year.

Jon Fortt has more on what`s driving Cisco (NASDAQ:CSCO) shares lower.


JON FORTT, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): After Cisco (NASDAQ:CSCO) reported a bad quarter last night and a dismal outlook, the stock had its worst day in almost three years.

(on camera): The culprit: emerging markets, countries like India, Brazil and Malaysia, that just a few months ago were bastions of growth are turning into a nightmare for big tech companies.

JOHN CHAMBERS, CISCO SYSTEM CEO: It isn`t just high tech. It`s the consumer companies of our customers, the people who sell in Brazil or sell in India, or manufacture who sells in those areas, what you`re seeing is the GDP slowed. And as they slowed, and you and others have talked about it for almost six months, then confidence began to drop. And if they`re looking for the U.S. to lead them out of this scenario, clearly, the last month or two has not instilled a lot of confidence.

FORTT (voice-over): At Cisco (NASDAQ:CSCO), sales from the top five emerging market countries fell 21 percent, and that`s on top of a rough sales environment in China that got worse because the NSA spying scandal has buyers favoring local Chinese suppliers.

All of that led Cisco (NASDAQ:CSCO) to forecast sales this quarter will be far lower than a year ago. Analysts have been hoping they`d be up.

And it`s not just Cisco (NASDAQ:CSCO). IBM cited major trouble in emerging markets during its quarterly report last month and Oracle
(NASDAQ:ORCL) has struggled in Asia, too. A small networking player, fast- growing F5, says it`s a regional issue.

JOHN MCADAM, F5 NETWORKS CEO: Asia has been reasonably tough for us.
South Asia, Vietnam, Australia, China was particularly tough last quarter and we told (ph) that in our conference call.

FORTT: Things aren`t likely to get better soon analysts fear. What Wall Street would like is a road map for how Cisco (NASDAQ:CSCO) will steer through this.

MARK SUE, RBC CAPITAL MARKETS MANAGING DIRECTOR: We do think it`s a several quarter issue. We think China I think could be longer than that.

The next thing to look for is Cisco`s analyst day, which comes up in three weeks, and they really have to have some crisp responses in what they`re going to do.

FORTT (on camera): One thing they`re probably going to do is keep CEO John Chambers around a little bit longer than some expect it. Chambers tells that he plans to retire sometime in 2016. The board has asked him to stick around and guide the company through this very rough patch.



GHARIB: Well, it looks like Wal-Mart (NYSE:WMT) is also going through a rough patch. It posted quarterly earnings that were a penny better than estimates for the third quarter but revenues were lower, and its outlook for sales for the all-important holiday shopping period don`t look to get much better.

Courtney Reagan has the story.


The magic of Macy`s appears to have been contained to just that retailer.
The confident telling (ph) Macy`s executive expressed going into the all- important holiday quarter was absent in Wal-Mart`s executive commentary in its earnings report. The world`s largest retailer did exceed expectations for earnings by one penny per share but sales fell short and the company`s forecast isn`t inspiring much confidence either.

DANA TELSEY, TELSEY ADVISORY GROUP CEO: I think it`s a very cautious tone. You go into a holiday season where six fewer days, the sense of urgency is greater and level of promotions feel like it`s going to be higher than ever.

REAGAN: Wal-Mart (NYSE:WMT) U.S. CEO Bill Simon says unemployment and job stability tops the list of consumer concerns and says that while gas prices have fallen, it`s still a big piece of the budget for shoppers.

(on camera): So, is Wal-Mart`s sale`s weakness due to poor execution by the company or results of the still pressured shopper? Likely, it`s a combination of both.

TELSEY: There is limited amount of dollars to go around. They now are competing as a consumables business in a bigger way, and that`s definitely a more competitive space. So, it`s the customer and the environment.

REAGAN (voice-over): However, Wal-Mart (NYSE:WMT) says the company
is encouraged by the momentum coming out of the third quarter, nothing same store sales and traffic improved throughout the quarter. The key now is making sure the trend continues.



GRIFFETH: And there was more discouraging results at another big discounter, this time, it`s Kohl`s (NYSE:KSS). Their profits declined by
18 percent last quarter, with fewer customers shopping at their stores.
Shares of Khol`s dropped sharply today, down 8 percent with the chain cutting its full year earning`s forecast as it predicts a pretty tough holiday shopping season.

GHARIB: And still ahead on the program, Janet Yellen, widely expected to be confirmed as the next Fed chair, breezed through questions from senators on Capitol Hill today. Did her testimony send a message to the stock market and investors?


GRIFFETH: Janet Yellen did take the first step in the confirmation process to become the next chair of the Federal Reserve. Current vice chair of the central bank sounded positively dovish about the Fed`s easy money stimulus plans. She said the U.S. economy still needs the Fed`s help and that helped stocks today, but will it win over the support of lawmakers? That`s the question.

Hampton Pearson has more tonight.


At a Senate Banking Committee on her nomination to become the first woman Fed president —


PEARSON: — Janet Yellen strongly defended the central bank`s economic stimulus policy but gave no hint of when tapering might begin.

YELLEN: While there is no set time, we will decide to reduce the pace of our purchases at each meeting, we are attempting to assess whether or not the outlook is meeting the criterion that we have set out to begin the pace of purchases.

PEARSON: As Fed vice chairman, Yellen has been a key ally of Bernanke in holding key short term interest rates near zero since late 2008 and quadrupling the Fed`s balance sheet to some $3.8 trillion done with massive monthly bond purchases.

The housing recovery and strong auto sales she says are prime examples of how the stimulus benefitted both Main Street and Wall Street.

YELLEN: We have seen interest rates fall very substantially. Lower interest rates, lower mortgage rates, particularly I think have been instrumental in — it`s not the only factor, but it has been the positive factor.

PEARSON: When asked about Fed regulation in the future of banks judged too big to fail, Yellen said, as chairman, one of her highest priorities would be to reduce any advantages enjoyed by the nation`s largest banks.

YELLEN: We have made progress in promoting a strong and stable financial system but here, too, important work lies ahead. I`m committed to using the Fed`s supervisory and regulatory role to reduce the threat of another financial crisis.

PEARSON (on camera): A senior aid tells me, Yellen`s strong performance today is paving the way for a full vote by the Senate Banking Committee early next week. The timetable for a full Senate confirmation is still up in the air.

For NIGHTLY BUSINESS REPORT, I`m Hampton Pearson on Capitol Hill.


GHARIB: So, what did investors learn about what a Janet Yellen Fed could mean for the stock market?

Joining us to talk about that, Jeff Kleintop, chief market strategist at LPL Financial.

So, Jeff, what was the takeaway for investors here? It was very civilized hearing. There was no fireworks. She gave assurances that the Fed is going to keep on stimulating the economy.

Is this a buy signal for the markets?

JEFF KLEINTOP, LPL FINANCIAL CHIEF MARKET STRATEGIST: Well, it`s certainly good news in the sense that she communicated that the Fed is going to remain friendly to the markets, meaning continuing this insurance policy the Fed has put in place through the bond-buying program at the same time she acknowledged better growth in the private sector. She said the best of both worlds, the Fed remaining in the background is ensure against anything going wrong and continuing that stimulus, but at the same time better economic momentum. It sounds like a recipe for continued gains in the stock market.

GRIFFETH: What about the bond market? Yields fell today. In fact, they fell last night when they first released her testimony to the Senate Banking Committee, and rates have been rising recently, expecting a tapering by the Fed sooner rather than later.

Do you see yields going even further lower?

KLEINTOP: You know, I think yields are in a range right now. I don`t think anything Janet said today is going to break them out of that.
Clearly, we were coming up on this December Fed meeting about a month from now, a little more than a month from now, where, you know, they will be deciding whether they`re going to taper. I don`t think they`ll have enough information to do that.

I think that`s what we heard from Janet today, very much walking the same line Ben has said, which is stayed independent and we`re not sure yet.
The bond market interestingly has not really — we haven`t seen a dramatically steeper yield curve on the idea that Janet would be much easier in terms of monetary policy risking longer term inflation in the bond market. Instead, we see more continuation of Ben`s policies.

GHARIB: But, you know, Jeff, at some point, this reducing the stimulus is going to happen, whether it`s in March or later than that, it`s going to happen and a lot of experts have said it`s going to be tricky.
And today, Alan Greenspan was quoted as saying for Yellen, she faces very daunting problems.

So, what could that mean for the markets? What could that mean for the economy in terms of something going wrong? It`s going to be tough, right?

KLEINTOP: Absolutely. Communication is going to key. And now that we know who the Fed chairman is going to be through the bulk of 2014, it lends more credibility to the Fed`s message on what they`re going to do on QE. And that should ease the transition.

Listen, you`re right, there is no surprise that this is coming — a slowing down of these bond purchases and as long as it`s accompanied by better growth, it should be good news for the stock market.

But we only have to look back to the end of QE1 and QE2 to remember the knee-jerk reactions in the stock market, decline between 15 percent and
20 percent that accompanied those. Now, there were other background factors involved. But that`s the knee-jerk reaction and we have to keep that in the back of our minds here, even though we`re much more braced and in a better position economically for this transition.

GRIFFETH: Very quickly —

KLEINTOP: So, expect some volatility, but ultimately, some gains for the year.

GRIFFETH: I`m going to try to pin you down a little more than that.
I mean, we`re sitting here at all time highs for the Dow and the S&P. Do you see us continuing higher even as the Fed continues to talk about no tapering right now?

KLEINTOP: Yes, I do. We believe here at LPL and the research department that we`re going to see substantial gains, maybe double digit gains next year. But, Bill, it comes with a lot more volatility than we saw this year.

Peak-to-trough decline this year, 5.7 percent, almost nothing. Expect double or triple that next year in terms of the peak-to-trough decline.
Those are great opportunities for individual investors who have yet to invest the stock market.

GHARIB: Well, that`s a bullish forecast.

Thanks a lot, Jeff, for coming on the program. Jeff Kleintop —

KLEINTOP: My pleasure.

GHARIB: — chief market strategist at LPL Financial — thanks again.

GRIFFETH: Meantime, Nordstrom`s profit slipped in the third quarter, and that`s where we begin tonight`s “Market Focus”. The high end retailer`s net income was down from last year because the company held its anniversary sale event earlier this year and overhead expenses increased.
The chain still topped estimates.

The stock initially fell on the results which came after the bell.
Shares ended the day slightly higher at $63.43.

Meantime, Viacom (NYSE:VIA) saw a fourth quarter profit jump by 24 percent, driven by strong growth in the advertising, and increased home entertainment revenue. They media giant beat on both the top and the bottom lines, but the company said it expects ad revenue to decelerate this quarter. The weak outlook worried investors, certainly, shares fell almost
3 percent, closed at $80.75.

And the world`s biggest burger chain is getting even better.
McDonald`s announced today that it plans to spend about $3 billion next year to open more than 1,500 new restaurants and remodeled 1,000 others.
The plan is roughly in line with the company`s spending forecast for the year. Micky D`s finished a fraction lower, though, at $97.56.

GHARIB: RE/MAX posted its first quarterly report since going public in October. And it wasn`t the kind of report that investors expected — a
38 percent drop in earnings. The real estate brokerage chain blamed higher interest expenses and IPO related costs for the profit missed. Shares tumbled almost 2 percent to $27.75.

Under Armour (NYSE:UA) is entering the tech world with its first ever acquisition. The sports apparel maker will pay $150 million to buy Map My Fitness. This is a fitness application company. The purchase is an effort to get in on the wearable technology game. As for the shares, Under Armour
(NYSE:UA) rose 1 percent to $83.53.

And Warren Buffett`s Berkshire Hathaway (NYSE:BRK.A) takes a big stake in ExxonMobil (NYSE:XOM). According to a piling with regulators, Buffett bought more than 40 million shares of the world`s largest publicly traded oil company. Investors brought up ExxonMobil (NYSE:XOM) shares on the news. Exxon finished the regular session up fractionally to $93.22.

GRIFFETH: Certainly, Washington budget cuts are having an impact on at least one big defense contractor. That would be Lockheed Martin (NYSE:LMT). They announced plans to cut 4,000 jobs over the next two years, placing the blames squarely on a sharp drop in spending at the Pentagon. About half those losses will come from attrition, the other half by closing Lockheed facilities in Pennsylvania, Ohio, Texas, Arizona and in California.

GHARIB: Still ahead on NIGHTLY BUSINESS REPORT: as many families begin their year-end tax planning, there are some strategies that could help you lower your tax bill.


GRIFFETH: Maybe hard to believe, but there are only six weeks left until the end of the year. So this may be a good time to start preparing for your 2013 taxes, just remember who reminded you of this — especially with new changes to the tax code that could mean you`re going to be paying more to Uncle Sam this next year.

So, what can you do now in the meantime?

Sharon Epperson has some answers tonight.


Most people don`t think about taxes in November, after all, tax returns aren`t due until next April.

UNIDENTIFIED MALE: I`m not even there yet. I`m usually not a last minute person, so it might be mid-March, and then I start to get my stuff together.

UNIDENTIFIED FEMALE: I usually do my taxes in February. So we`re — I`m more into the holidays right now, if anything, you know, like Thanksgiving around the corner.

EPPERSON: But if you`ve had big changes in work or at home in the past 12 months, some tax moves that`s made before the end of the year could result in big tax savings.

Real estate executive Linda Aronson meets regularly with her financial advisor to review tax-saving options, and make changes by December 31st that will allow her to make the most of her income.

LINDA ARONSON, TAXPAYER: The biggest change that I made this year was making sure that I was taking full advantage of every pretax opportunity that my firm offered, and trying to lower my taxes in that way.

EPPERSON: Financial advisor Rich Coppa suggests increasing pretax contributions to a 401(k) or another retire plan which lowers taxable income dollar for dollar.

RICHARD COPPA, WEALTH HEALTH MANAGING DIRECTOR: If your company is offering it, absolutely try to maximize your 401(k). This is an opportunity for you to reduce your taxes and have money growing for you for your retirement.

EPPERSON (on camera): It`s important to get a handle on your tax situation now, because what you may owe or the refund you may get back from the IRS could be very different this year, particularly for high-income taxpayers.

(voice-over): Individuals with incomes over $400,000 and couples over
$450,000 have been moved up to a 39.6 percent federal income tax bracket, up from 35 percent last year. And they have to pay the maximum 20 percent tax rate on long-term capital gains and qualifying dividends, up from 15 percent in 2012.

To cut down the tax bill, Coppa suggests deferring income and reviewing investments before the end of the year.

COPPA: We always look at any tax loss harvesting, which means that you would sell a position that would reduce — you know, fell in value, take that loss to offset capital gain.

EPPERSON: With Coppa`s guidance, Aronson says she`s following some of these strategies —

ARONSON: I do think that as I`ve been making these changes, I will see a lesser tax bill.

EPPERSON: — giving her some peace of mind.



GHARIB: And finally tonight, the cost of Thanksgiving dinner will be a little lower this year. The American Farm Bureau Federation says a classic turkey dinner will average $49.04 to feed 10 people. That`s down
44 cents from 2012 and still averages less than $5 a serving. The big driver for the decline: turkey prices.

I love Thanksgiving.

GRIFFETH: I do, too. And we don`t like cranberry sauce in my household, so it`s even cheaper —

GHARIB: Lucky you, Bill.


GHARIB: But keep the pumpkin pie.

GRIFFETH: Absolutely.

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

GRIFFETH: I`m Bill Griffeth. Have a great evening. 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) 2013 CNBC, Inc.

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