Transcript: Monday, December 16, 2013

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


TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Markets rally. The economy showing signs of strength and that put investors in a buying mood, one day before the start of a critical Fed meeting and a budget vote in Washington.

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: What a difference a year makes. Growth in the economy, agreement in Washington. But are investors really out of the woods?

MATHISEN: And losing focus. Google (NASDAQ:GOOG) buys another robotics company. So, why is the king of search diving head first into an industry that seems so far removed from what it does best?

All that and more tonight on NIGHTLY BUSINESS REPORT for Monday, December 16th.

GHARIB: Good evening, everyone.

Investors kicked off the new week on Wall Street in a buying mood. Stocks rose sharply thanks to a string of positive economic reports. Industrial production came in stronger than expected. Worker productivity during the summer quarter rose to a four-year high and manufacturing in New York state unexpectedly rose this month.

Now, all of this comes just a day ahead of the Federal Reserve`s final and crucial policy meeting of the year. Policymakers could decide it could wind down the Fed`s stimulus measures because economic data like today`s batch continue to improve.

Chairman Bernanke will announce the Fed`s decision on Wednesday.

Now, ahead of all of that, here`s a look at the market`s closing numbers today. The Dow jumped almost 130 points. All, but three of its 30 Dow components were in the green today.

The NASDAQ rose 28 and the S&P added 11 points, breaking a four-day losing streak.

MATHISEN: Well, another reason for today`s rally beyond those improving economic fundamentals could be the likelihood that tomorrow the Senate would follow the House and pass a two-year budget agreement. What a change that would signal from holiday time just a year ago. That was when the so-called fiscal cliff was on everybody`s lips. Remember that one?

Washington was squabbling over the prospect of big automatic budget cuts and the simultaneous expiration of the so-called Bush era tax cut, a double whammy that many thought would send the economy into recession.

John Harwood joins us now from Washington.

Let`s start, John, by talking about the vote tomorrow in the Senate. Will it pass, by what margin, could there be any snags?

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: I do think it will pass, probably with just barely over the 60 votes needed to end debate. It`s not the final passage vote, that could be different from the vote tomorrow. The vote tomorrow is the one to stop a potential filibuster to invoke what they call cloture on the debate.

Nearly all of the Democrats and a small slug of Republicans are going to make up that majority. The vote will probably happen between 10:30 and 11:00, and that will set the stage for a vote on the final passage, probably late on Wednesday.

GHARIB: So, John, what are the chances for compromise on other issues that are facing Washington lawmakers and could we still see a big debt ceiling fight down the road?

HARWOOD: Probably not too great are the chances that this is going to lead to other compromises. Really what you had were Democrats and Republicans agreeing not to do anything big, produce the most modest agreement possible and then see if they can get the votes for it. They did get the votes overwhelmingly in the House and there`s been nervousness in the Senate. I don`t think this will necessarily make them feel like they can tackle big challenges. But you do have the issue of immigration hanging out there, and both parties political have reasons to move forward on that, and we`ll see whether they can get that done.

GHARIB: OK. John, just stay with us because we`re going to continue this conversation. But we want you to join our next guest as we talk more about how and how much the political and economic climates have changed since this time a year ago, and whether the positive momentum can continue into 2014.

And to do that, we welcome Josh Feinman. He`s chief economist at Deutsch Asset and Wealth Management.

So, Josh, you heard what John was just saying. How much better off are we and is the economy doing better and will it continue into the New Year?

JOSH FEINMAN, DEUTSCHE ASSET AND WEALTH MANAGEMENT: I think we`re doing quite a bit better and I think the contrast is pretty substantial, particularly in Washington. As you mentioned earlier, you know, we were heading into 2013 with a big fiscal headwind. Substantially weakened growth this year, heading into 2014 is very different. The fiscal drag from Washington is going to be significantly attenuated. And when you combine that with diminishing headwinds in the private sector, a lot of things have been holding us back in this recovery seem to be diminish asking that should pave the way for stronger growth ahead.

MATHISEN: You know, John, Josh seems to be suggesting that the economy is healing just a bit. Is the political climate in Washington healing or is it a bit of a mirage?

HARWOOD: Only a little bit, Tyler. You know, I think the biggest difference between last year and this year is that the economy and the labor market are recovering more substantially than they were then.

Remember, the only reason they got a deal to resolve the fiscal cliff to raise taxes on people with incomes over $400,000 was because you had the sword of Damocles hanging over the Congress in the form of tax cuts that were going to expire for everyone, and that`s what forced the limited action they did there.

Congress isn`t doing all that much right now, but you can`t deny the fact that by simply getting out of the way, by not putting more drag on the economy either through crisis or through fiscal drag, Washington is at least letting the economy heal itself and not interfering.

GHARIB: Well, you know, Josh, I mean, this whole thing about having the fiscal problems somewhat stabilized now raises the question of what happens when the Federal Reserve begins this taper process. Could that interrupt this healing process?

FEINMAN: I don`t think so.

I just want to echo, I think that`s exactly rid about Washington. I mean, just them getting out of the way and stop being a drag on the economy is a major plus. You know, less of a negative is a positive.

As far as the Fed is concerned, look, I think if the economy continues to improve, I do think they`re going to be slowly stepping back from their bond-buying purchases and I would emphasize the word “slowly” and I think they`ll be re-emphasizing while they scale back asset purchases and I think they`ll be re-emphasizing that this is not a tightening of monetary policy. They`re still going to keep rates short term for a long time. They`re not going do anything to get in the way of this recovery. On the contrary, they`ll want to do everything they can to encourage the recovery, so that they can get back to the dual mandate to get employment and inflation back up to levels that are consistent with their targets.

MATHISEN: John, let`s talk a little bit about the next chairman of the Federal Reserve. Presumably that will be Janet Yellen. There`s going to be a vote after the first of the year, you tell me. Is that likely to be an acrimonious vote? And are there any hitches in the process with respect to Ms. Yellen or eventually to the nomination of a vice chair, whom we think might will be Mr. Fisher?

HARWOOD: Nothing, Tyler, is without acrimony in Washington these days, but I do think it will be relatively small with Janet Yellen. She is a popular choice. I think you will see her confirmed for the chairmanship of the Federal Reserve, probably the end of this week. It may come — I was told the vote might come on Saturday. I think they would like to get that done before the end of the year as part of a feel good push at end to get a few things accomplished.

And because of what we know about Janet Yellen and her tenure at the Fed as vice chair, I think she can expect that she will continue in the vein of Ben Bernanke in ways the market would like.

GHARIB: Josh, let me just throw the last question to you, from what you and John are talking about. It sounds like the stars are aligned for us to have a good 2014. I know you`re an economist and not a market strategist. What do you think is going to happen in the stock market?

FEINMAN: I think the economic backdrop is improving and I think we have the best chance since the first cracks began to appear in the foundation back in 2007. Our best chance of shifting into higher gear in terms of growth and that should create a positive backdrop for financial markets.

GHARIB: All right. That`s a good conversation with both of you. Thank you so much.

Josh Feinman, chief economist at Deutsch Asset Wealth Management and to our John Harwood from Washington — thank you, gentlemen.

MATHISEN: As the Federal Reserve gears up for the final policy meeting of the year, the central bankers will celebrate a milestone, the Fed`s 100th anniversary. Ben Bernanke along with Alan Greenspan and Paul Volcker took time today to reflect on their terms leading the central bank.


BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: Improved communication can help our policies work better whether through the disclosure of the stress test results, and by helping the public and the market better understand how monetary policy is likely to evolve.


MATHISEN: President Woodrow Wilson signed the Federal Reserve Act into law a century ago this coming week, but it took another 11 months for all 12 Federal Reserve banks to open their doors.

GHARIB: J.P. Morgan Chase may number some hot water again, just as the bank is finalizing a $2 billion settlement for turning a blind eye to obvious signs of fraud in Bernie Madoff`s massive Ponzi scheme. Federal authorities are now looking into whether the bank tried to impede the Treasury Department`s investigation into Madoff`s misdeeds. The treasury`s inspector general`s office says J.P. Morgan is contesting a subpoena that was issued earlier this year.

MATHISEN: The U.S. appears to be flushed with crude. A new forecast from the Energy Information Administration expects domestic oil output to surge to nearly 10 million barrels a day by the year 2016. That would be an historic high thanks to the sharp rise in shale oil extraction. But it`s not just oil coming out of that shale boom.

So, is natural gas and the supply could last for decades?

Sharon Epperson has the story.


SHARON EPPERSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): After reaching a near-record level, a new government report shows U.S. oil production may start to plateau in a few years, while the rise in natural gas output will continue for decades. U.S. oil production is expected to level off and start to decline after 2020, according to the U.S. Energy (NASDAQ:USEG) Information Administration, the natural gas output will steadily increase through 2040. Many analysts agree the nat gas surge is here to stay.

ADDISON ARMSTRONG, TRADITION ENERGY DIR. OF MARKET RESEARCH: There`s no reason to believe given what we think will be the improvements in inefficiencies in drilling and extraction that we`re going to see a big slowdown in production of either natural gas or oil any time soon.

EPPERSON (on camera): It turns out it`s easier to get natural gas molecules to squeeze through fractured cracks and tight shale formations than it is oil.

(voice-over): which is helping to fuel the gains in production. Gains that are needed to meet the increase in demand. Demand from electricity.

The Energy Department says the main source of power generation in the country will shift from coal to natural gas by 2040. And the demand in export, the U.S. will become a net exporter of natural gas in 2018, two years earlier than the government`s previous forecast.

Driven by gas transported by pipeline to Canada and Mexico, as well as liquefied natural gas exports.

So, does more supply mean lower prices? Not necessarily. The Energy Department says natural gas prices will continue to climb in the coming decades. But as the growth in net exports slows, so will the rise in prices.



GHARIB: And still ahead on NIGHTLY BUSINESS REPORT: a sprint to the finish. Americans have one more week to sign up for health plans on the insurance exchanges. But are the numbers meeting expectations as the deadline nears?


GHARIB: General Motors (NYSE:GM) is pumping money into some of its U.S. factories, something the automaker says wouldn`t have been possible without Uncle Sam`s bailout. Outgoing G.M. CEO Dan Akerson announced plans to invest more than $1 billion in several U.S. assembly plants, protecting or creating up to 1,000 jobs.


DAN AKERSON, G.M. OUTGOING CEO: This will bring our four-year total of announced investments in the U.S. plants to more than $10 billion. We`re investing it — that will keep paying dividends to the Americans, to the American public that supported this company in its darkest hour.


GHARIB: Now, the plants are in Flint and Romulus, Michigan, Toledo, Ohio, and Bedford, Indiana.

MATHISEN: Google (NASDAQ:GOOG) is pumping a lot of money into its businesses, but it`s not for its search engine or YouTube or the self-driving cars it`s working on. Instead, Google (NASDAQ:GOOG) just bought a company that makes robots for the military and it`s not Google`s first foray into robotics.

So, what is the Internet search giant searching for and is the company potentially losing focus on what it does best?

Josh Lipton has more.


JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Fast, agile and lifelike, these are robots that can scale hills, gallop through parking lots and run like cheetahs. And now, they`re owned by Google (NASDAQ:GOOG), which bought Boston Dynamics, an engineering company in Massachusetts that makes the robots.

The robots have become Internet sensations. The Big Dog, which is the size of a small mule, can climb muddy trials and carry 340-pound loads and a YouTube video of big dog has been watched 15 million times.

And then there`s Cheetah, which is shown running on the treadmill at 29 miles per hour and that`s faster than Olympian Usain Bolt.

“The New York Times (NYSE:NYT)” first reported the acquisition noting that it is the eighth robotics company Google (NASDAQ:GOOG) has bought in just the last six months. Its robotics efforts are being led by Andy Rubin, the executive who led the development of Android, Google`s operating system.

Google (NASDAQ:GOOG) isn`t talking about the acquisition or its purpose, but reports suggest that the robotics efforts are aimed at manufacturing like electronics assembly.

BEN SCHACHTER, MACQUARIE: This is not just a small side project for them anymore.

LIPTON: Ben Schachter, an analyst at Macquarie, says the Internet giant is trying to take advantage of the long-term opportunity of the robotics industry.

SCHACHTER: I think that all of the things we saw as kids in the movies is what they`re trying to make become a reality now. The fact that they put Andy Rubin in charge of this, a man that has had a very, very successful path at Google (NASDAQ:GOOG) thus far with Android really means a lot. It means they`ll invest heavily in this and I think they`re going to take a very long-term track, and they believe it`s a very real business.

LIPTON: Google`s rivals see the benefits of the technology. Amazon`s rollout of 1,400 robots at its warehouses from the company it bought last year called Kiva Systems could save it $900 million a year, according to analysts at Janney Capital Markets.

Google (NASDAQ:GOOG) is certainly steering far and wide from its focus search, but Larry Paige, its CEO, has talked about the importance of what he calls moon shot, big, bold ideas that can seem like sci-fi thrillers. Analysts also point out that Google (NASDAQ:GOOG) only puts money to work in businesses that it thinks can be profitable and generate at least $5 billion in revenue in a reasonable amount of time.



GHARIB: We begin tonight`s “Market Focus” with a big buyback.

Boeing (NYSE:BA) announced a $10 billion share repurchased and a 50 percent increase in its quarterly dividend. After today`s closing bell, the company said the move came because of strong operational performance and an increase in cash flow and confidence in the future. Shares popped initially in after hour, but the stock ended the day slightly higher to $134.72.

Pfizer (NYSE:PFE) is hiking its quarterly dividend by 8 percent, which will be payable to shareholders in March. Also, word of a collaboration with Siemens created buzz around the drug maker today. Siemens will develop diagnostic tests for Pfizer (NYSE:PFE) in an effort to sell medicine to patients who are most likely to benefit. Shares of Pfizer (NYSE:PFE) closed unchanged at $30.25.

Archer Daniels Midland is lifting its dividend by 26 percent and buying back 18 million of its shares. The company cited strong cash flow and expected earnings improvement in 2014 as reasons for the change. The stock rose a fraction to $40.66.

MATHISEN: AIG is selling its aircraft leasing unit in an effort to focus on its core business, insurance, air cap share holdings. The Dutch company will buy the aircraft unit called International Leased Finance Corporation for $5.4 million. AIG has been trying to shed the unit since 2008, and today, CEO Robert Benmosche said he`s happy with the deal.


ROBERT BENMOSCHE, AIG CEO: They paid us in cash and in stock. So, therefore, we wound up owning 46 percent, but what you actually accomplished here was an IPO and a merger all at once and you get the accounting treatment so that we can write the assets (ph) down once to market which is very important.


MATHISEN: Shares of AIG up 1 percent to $50.28. A $6.8 million deal to tell you about in the semiconductor industry. The chipmaker Avago Technologies (NASDAQ:AVGO) will buy LSI Corporation. The deal helps Avago get into the storage business and create a company with about $5 billion of annual revenue. That sent shares of LSI up 38 1/2 percent to $10.96.

Avago also popped up almost 10 percent to $50.10. Internal re-audit of more than three years` worth of Herbalife`s financial results found no material changes and that sent shares of the supplement maker much higher. This is good news for the company which has faced criticism over its business structure and its leadership. The stock today up 9 1/2 percent to $74.83.

And shares of Cubist Pharmaceuticals (NASDAQ:CBST) surged after the positive result surfaced for the company`s next generation antibiotic. The drug, which treats abdominal infections in late-stage trials and based on the success, Cubist said it will file a new drug application with the FDA next year. The stock up about 6 percent to 66.51.

GHARIB: President Obama is turning to some of the biggest names in tech to assess the problems and progress already made at the Website.

Among the bold faced names heading to the White House tomorrow, Apple (NASDAQ:AAPL) CEO Tim Cook, Marisa Mayer of Yahoo (NASDAQ:YHOO), Twitter CEO Dick Costolo, Sheryl Sandberg of Facebook (NASDAQ:FB), and Google (NASDAQ:GOOG) executive chairman, Eric Schmidt.

Meantime, Americans have one more week to sign up for a new health insurance plan on those online exchanges. One more week, that is, if you want coverage to start January 1st and new numbers from federal and state authorities now point to a big surge in new members as we approached that deadline.

Bertha Coombs has more.


BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT: From day one of open enrollment, New York`s exchange has seen strong interest in Affordable Care Act plans, with more than 45,000 enrollments in the first two months. But in the first two weeks of December, enrollees in the New York state of health has already more than doubled with roughly 3,300 people a day, signing up for coverage. That`s well ahead of projections.

Covered California has been signing up residents at a pace of 7,100 a day this month, reporting more than 156,000 planned elections through the first week of December. That`s 46 percent higher than its combined total for October and November.

Kentucky, the only southern state operating its own exchange, saw its plan section number jump 35 percent for its totals for the first two months. Putting together the latest figures from the state-operated exchanges and the ones you see in blue, it now appears that national enrollment is close to 540,000. Now, that`s not including December enrollment numbers for the 36 states operating on, the red ones that you see here.

The Obama administration won`t release December data until next month. But with the front-end projects, health officials are focused now in making sure that the back end enrollment data transfer insurers happens more smoothly. This weekend, they said the error rate on those transfer forms is now under 1 percent.

On Friday, HHS Secretary Kathleen Sebelius said they are working closely to make sure those transfers are all correct.

KATHLEEN SEBELIUS, HHS SECRETARY: We have a very system with insurers that they again feel that she so-called the H34s, the end information to insurance companies is working extremely well right now. We are going to go again doubly check and match because we want to make sure everybody is connected.

COOMBS: Still, even with the massive surge in enrollment this month, the numbers are still likely to run well below the original projections of 3.3 million enrolled by the end of the year. PWC Health Research Institute Ceci Connolly says the more important number now is the demographic mix. They need to make sure that they have a lot of young, healthy people enrolling.



GHARIB: Do those antibacterial soaps we all use really work? Maybe not. Federal regulators say antibacterial soaps don`t appear to have any germ-killing powers and may even have health risks. So the agency is proposing a new rule giving the soap and body wash-makers one year to prove claims that their antibacterial products are safe to use and actually kill germs.

MATHISEN: And coming up, who is the most highly compensated private university president? Harvard? Yale? The answer and that person`s total pay may surprise you.


MATHISEN: Well, it`s no wonder the price of college keeps going higher. A new study from the Chronicle for Higher Education shows how much some private university presidents are taking home. The numbers may really, really rock you. A record 42 private college presidents saw their total earnings top $1 million in 2011, the most recent year available. Median total compensation was more than $410,000.

So, who made the most?

Well, let`s give you the top three. In third place, Marist College president, Dennis Murray, who took in $2.7 million. Next was the president of Northeastern University, Joseph Aoun who made $3.1 million. And topping the list, the head of the University of Chicago, Robert Zimmer whose salary, deferred compensation for staying on the job and one-time payments, totaled $3.4 million.

GHARIB: And finally tonight, with just over a week to go before Christmas, a lot of Americans are getting back to nature. Real Christmas trees are making a comeback, not only against artificial ones, but also against the economic downturn.

Jane Wells has the story.


JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): It`s been oh, canon bummer for Christmas tree sales in recent years, but in 2013, Santa may have come early.

UNIDENTIFIED FEMALE: Thank you. Have a good day.

WELLS: Tree sales are up after falling 20 percent last year. The ISI Group says tree sales jumped 16 percent the weekend after thanksgiving and while winter storms slowed things down, overall December sales are up 7 percent from a year ago.

LISA GAVER, CHRISTMAS TREE GROWER: The fact that they have a real tree and you can`t replace having that fresh aroma in your house.

WELLS: Perhaps it`s a sign of economic improvement.

For Joe Lee, it`s just a good excuse for a family outing.

JOE LEE, CHRISTMAS TREE BUYER: We cut down the tree and then my wife makes special cookies that we only eat once a year while putting the ornaments on the tree.

WELLS (on camera): The jump in sales comes at a time when the industry is pushing for a self-funded, government-run check-off program to fund a promotional campaign. Past check off programs include “Got Milk” and “Beef — It`s what`s for dinner.”

If approved by the USDA, the check off program would force growers to pay 15 cents per tree sold into the fund. Why do it? Well, apparently, buying one of these is not most consumers` first choice.

(voice-over): A Harris (NYSE:HRS) poll showed last year 56 percent of Americans bought fake trees, usually plastic ones from China. Only 17 percent bought real ones. But check-off program was stalled after being called a tax and then it was stuck in the farm bill, which isn`t going anywhere. Growers have been complaining about delays since last May, long before Christmas.

BETTY MALONE, CHRISTMAS TREE GROWER: It just seems incredible that we`ve gone through the process and have done everything right, and we still don`t have a program. So, yes, that`s very frustrating.

WELLS: Frustrating, but maybe not so urgent now as more Americans are apparently returning to rituals of Christmas past, realizing that nothing can stand in for the real thing.



GHARIB: Love the real tree.

MATHISEN: I love the real tree. And I went and cut one a couple of years ago. This year, I got lazy and just bought one.

GHARIB: That`s good. Now, you just have to decorate it.

MATHISEN: Yes, right.

GHARIB: That`s NIGHTLY BUSINESS REPORT for tonight. I`m Susie Gharib, thanks so much for joining us.

MATHISEN: And thanks to me as well. I`m Tyler Mathisen. Have a great evening, everybody. We hope to see you back 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.


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