ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and
Susie Gharib, brought to you in part by —
BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Firing on all
cylinders. The economy goes from a crawl to a Gallup, growing at its
fastest pace in two years — thanks to a ramp up in consumer spending. Can
the momentum continue and what does it mean for your money?
SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Sign-up surge.
President Obama says half a million people signed up for health insurance
on the federal exchange in the first three weeks of December. But there
are still many challenges.
GRIFFETH: Market monitor. Our guest tonight has a list of stocks
that she says will rise 15 percent or more in the New Year — and their
names you probably already know.
All that and more tonight on NIGHTLY BUSINESS REPORT for Friday,
December the 20th.
And we bid you good evening, everybody. I`m Bill Griffeth, in tonight
for Tyler Mathisen.
GHARIB: Nice to have you here, Bill.
I`m Susie Gharib. Good evening from me, as well.
Well, the economy is looking good and the strong numbers out today
surprised just about everyone. Gross domestic product, this is the sum of
all the goods and services made in the U.S. during the third quarter. It
rose a better than forecast 4.1 percent. That`s the fastest pace in nearly
two years and the economy got a big boost, not only from higher consumer
spending but business spending, as well.
The improving economy was one bright spot President Obama could rave
about in his end of the year news conference at the White House today.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: As we head into next
year, with an economy that`s stronger than it was when we started the year,
more Americans are finding work and experiencing the pride of a paycheck.
Our businesses are positioned for new growth and new jobs, and I firmly
believe that 2014 can be a bright year for America.
(END VIDEO CLIP)
GHARIB: Well, some breakthroughs on Wall Street as well today. The
major averages wrapped up one of the best weeks of the year with new all-
time highs in the Dow and the S&P.
Now, even though stocks sold off into the close, the Dow transports
and the Russell 2000 also closed at record highs.
Here is a look at the numbers: the Dow rose 42 points, the NASDAQ was
up 46, and the S&P added nine points.
GRIFFETH: Joining us right now to talk more about today`s strong GDP
report and what it says about the overall economy and the health of that
economy right now, Lindsey Piegza, chief economist at Sterne Agee.
Good to see you again, Lindsey.
LINDSEY PIEGZA, STERNE AGEE CHIEF ECONOMIST: Thanks for having me.
GRIFFETH: Is this growth sustainable, do you think?
PIEGZA: Well, you know, 3.6 percent, third quarter GDP was moderately
strong. At 4.1, it`s downright impressive and even the combination of
growth was much more balanced in the second revision, as we see
consumption, the key to the economy was actually revised up from 1.4
percent to 2 percent.
But the problem is, even at 2 percent this is really a far cry from
the gangbuster levels that we`d like to see and would like to see this
adjust that we will see above 2 percent growth as we head into 2014.
GHARIB: All right. But let`s just say, Lindsey, that this momentum
keeps going into the fourth quarter, into the first quarter of next year.
What does that mean for interest rates? Will we see them going higher
faster than we expected maybe?
PIEGZA: Well, you know, the first part of the question, are we going
to see the momentum carry over into the fourth quarter because remember,
still, a third of the growth that we saw in the third quarter was inventory
rebuilding. So, as retailers, as businesses struggle to get through that
inventory in the fourth, they will actually contract from what we see in
terms of growth at the end of 2013.
Now, going into 2014, again, I suspect given the tepid pace of labor
market recovery, we have seen the quantity of jobs increase, but the
quality of job has kept wages very benign at this point, and that will keep
growth at a very slow but positive pace and keep interest rates under
GRIFFETH: And, of course, this was the week the Fed announced they
would begin tapering the quantitative easing program in January. I guess
good timing, huh?
PIEGZA: Well, you know, what we saw in the third quarter GDP report
was actually very much in line with the Fed assessment of what we`re seeing
in the broader economy. The economy is on firmer footing. But it`s not on
strong enough footing to suggest that the Fed can begin to remove a
combination at a very robust pace. This was a very minimal reduction in
monthly bond purchases to the tune of $10 billion.
And again, during the press conference, Chairman Bernanke is very
clear that this should not be seen as a step away from accommodation and,
in fact, pledging that they will keep rates at a very accommodative level,
well through 2014, and well through that threshold of 6 1/2 percent on the
GHARIB: All right. So if you`re a home buyer, let`s say, and you
have to go get a mortgage, should you feel relaxed about how things are
going to look the next couple months based on what Ben Bernanke is saying,
and what your forecast is on interest rates?
PIEGZA: I certainly think so, although, it`s very likely we see a
very slow increase in rates over the next several years. The idea that
rates are going to shoot to the moon overnight really doesn`t jive with the
weakness that we`re seeing in the underlying fundamentals of the economy.
GRIFFETH: And the other shoe, of course, the jobs` growth, you
mentioned that. That`s something that`s job one for the Federal Reserve
right now for the kind of growth we`re seeing here. Is that the kind of
growth that will promote more job growth in 2014?
PIEGZA: You know, I certainly hope so. We`re not seeing it as of
yet. Now, of course, October, November, these were back to back plus
200,000 nonfarm payroll reports, but if you think back before the
recession, the borrower expectations was well above 200,000. We were
looking for 300,000, 400,000 on a monthly basis. So, first of all, the bar
of expectations has been lowered so precipitously.
Second of all, if we take a longer term view and look at the average
growth rate over six months, we`re 180,000. That`s the very same growth
rate that we`re at back in January. So, despite the fact we`re 11 months
forward and we saw the terrible weakness in the middle part of the year,
we`re no better off than we were in January.
GRIFFETH: Lindsey Piegza, chief economist at Sterne Agee, good to see
you. Thank you for joining us tonight.
PIEGZA: Thanks so much for having me.
GRIFFETH: You bet.
Speaking of jobs, there was more good news on the economy today, with
the Labor Department saying unemployment rates fell or were unchanged in
all 50 states in November, employers added jobs in 45 of the states and the
District of Columbia. Nevada had the highest jobless rate at 9 percent.
North Dakota has the lowest, thanks to all those Bakken shale energy jobs.
North Dakota`s unemployment rate right now is just 2.6 percent.
California, Texas and Indiana reported the largest job growth in the month
GHARIB: One person who`s going to have to wait to get a new job is
Janet Yellen. The Senate voted to move forward with her nomination to
become the next chair of the Federal Reserve but for the final vote,
Yellen, currently vice chair of the Central Bank will have to wait until
January 6th. That`s when the Senate returns from its holiday break.
Meanwhile, another embattled government entity. The Affordable Care
Act just reported a surge in signups. President Obama told reporters at
that same White House news conference that half a million more Americans
enroll in a new plan on the Healthcare.gov Web site over the first three
weeks of December.
(BEGIN VIDEO CLIP)
OBAMA: I now have a couple million people, maybe more, who are going
to have health care on January 1st, and that is a big deal. That`s why I
ran for this office.
(END VIDEO CLIP)
GHARIB: But that good news came after the government Web site was
shut down again today for about three hours, and there was another policy
change for people who had their current plans cancelled.
Bertha Coombs joins us now with more on all of today`s health care
A lot to talk —
GRIFFETH: There were many —
BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Yes, a lot of
It`s very interesting because the Health Department often holds the
numbers close to the vest, there are always discrepancies, we only report
them once a month and yet, here the president comes out and makes news and
said, you know, we had half a million on Healthcare.gov.
It is a big deal, certainly, a big improvement from what we`ve seen
from the first two months, but when you break it down, that amounts to
about 24,000 people a day on Healthcare.gov.
GHARIB: Is that good or bad?
COOMBS: For 36 states, California in the last couple of days has seen
over 20,000 people a day on their Web site alone. So comparatively, way
better than they have been doing but they are far behind on the sort of
projections that they had expected. They had expected by the end of
December to have over 3 million people have bought health plans through the
GRIFFETH: And in the meantime, a big deadline looms.
COOMBS: Big deadline looms on Monday. If you want coverage starting
on December 1st, or rather, January 1st, you have to sign up by midnight on
Now with the Web site having some problems, clearly, there is a lot of
volume on there. So, if you`re a procrastinator, you shouldn`t wait until
the last minute and if you want to make sure —
GRIFFETH: Do I go Christmas shopping or do I sign up on
COOMBS: Exactly. Well, sign up on Healthcare.gov, after you`ve done
Christmas shopping in the middle of the night when it`s likely to be a
GHARIB: You know, the one thing we keep hearing, the rules are
changing. The words you always use when you talk to us, it`s complicated
and a lot of people were hearing anecdotally are saying, I`m just not going
to deal with this. I had problems signing on, and they are opting out.
COOMBS: There are some people opting out for now, that`s right. I
think that`s one of the concerns that really this is the big surge for
people who want to make sure they have coverage on January 1st, the next
surge we`re likely to see is at the end of March when they open enrollment
and ends for the six months.
But it`s this time in between. They`re going to have to have a
challenge to continue to engage and get then to sign up.
COOMBS: There is within the law what`s called an exception that
people get, a hardship exception. And so, they are giving people whose
plans were cancelled and they have not been able to find an affordable plan
to replace it, a hardship exception so they won`t be subject to the
penalty. Of course, you have to fill out more paperwork to get that, and
if they want they can buy the bare bones plans that are only really offered
to people under 30.
But if that`s the only thing you can afford, they will let you buy
GRIFFETH: Bertha Coombs, always doing a great job covering it, thank
GRIFFETH: See you later.
Still ahead, BlackBerry still bleeding money and customers, but the
CEO has a plan and new vision. The question now is, will it work?
GHARIB: Verizon (NYSE:VZ) and now, AT&T (NYSE:T) both say they`re
coming clean, but the U.S. government might not be happy. The telecom
giants announced that starting next year they will publish semi-annual
reports on customer surveillance requests that they get from Washington`s
top spying group, the National Security Agency or NSA. Until now, most
telecom companies have kept that information private, but they`ve been
pressured by shareholders and privacy advocates to make those government
GRIFFETH: Well, lots of transparency at Blackberry, maybe too much.
The smart phone pioneer reported another massive loss last quarter, $4.4
billion as it continues to struggle to win back lost customers and cut
costs at the same time. But the company`s new CEO says he can turn things
So, what does Blackberry have in store?
Jon Fortt has our story tonight.
JON FORTT, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Times
are tough at Blackberry but hopes are still high. New CEO John Chen
delivered bad earnings news today with a big shortfall in phone calls.
(on camera): But he also said the company will take its medicine,
booking a big loss on unsold inventory and outsourcing future manufacturing
and design work to Foxconn to minimize future losses.
(voice-over): And that sent the stock soaring after the earnings
So, the question, can BlackBerry survive?
COLLIN GILLIS, BGC ANALYST: The key to this is, you know, Blackberry
will be a much smaller company under John Chen`s leadership. You know,
yes, the market that they are serving and the enterprise customer that is a
valid market, we can see if they can grow and have success there. But it`s
a much smaller market than what they were chasing after originally. But
again, they have to play to strengths and this is what`s left for them.
FORTT: Unlike its predecessors, Chen isn`t holding out hope new
BlackBerry phones will catch Apple (NASDAQ:AAPL) and Samsung in the
consumer marketplace any time soon. Instead, he told me in an exclusive
interview, he`s looking to contain the handset losses while focusing more
on BlackBerry`s enterprise security and device management business.
JOHN CHEN, BLACKBERRY CEO: The best way to do is offer end to end
security solution and communication productivity that is mobile based. And
that`s where we`re going to be at least for the foreseeable future, the
next couple years. I think we had some issues with the handset business in
terms of the consumer world. But the enterprise still loves us. So,
that`s where I`m going to be focusing in on.
FORTT: The key will be for Chen to convince enterprise customers that
Blackberry is here to stay, so they`ll hold onto BlackBerry server software
and maybe buy more.
For NIGHTLY BUSINESS REPORT, I`m Jon Fortt, in Waterloo, Ontario.
GHARIB: Boeing (NYSE:BA) won a big airplane order today. That`s
where we begin today`s market focus. Cathay Pacific Airways is paying $7.5
billion for 21 Boeing (NYSE:BA) 777X jets. Cathay is one fifth — is the
fifth customer, rather, to order the newest version the jumbo jet. Shares
of Boeing (NYSE:BA) rose 1 percent to $136.67.
Quarterly earning at Walgreens soared 68 percent as investments paid
off, but more promotions and a slowdown in new generic drugs pinched
profits. Still, the drugstore chain`s results were in line with estimates
and investors liked the news. Shares jumped to more than 3 1/2 percent, to
But shares of Car Max tumbled after the used car seller posted an
earnings miss. The company did see profits increase by 12 percent on
growth in the number of used cars sold and on financing income. Still, the
stock lost more than 9 percent to $48 and change.
GRIFFETH: And Navistar also saw its shares fall today on earnings.
The truck and engine maker posted a wider than expected loss as revenue
dipped on weakness in all of its business units. The company has been
struggling since its engine emission failed to comply with environmental
rules. The stock was down almost 6 percent today, closed to $37.16.
And Oracle (NASDAQ:ORCL) announced it`s going to buy software maker
Responsys for about $1.5 billion. Responsys helps brands market online
through email, mobile and social ads. This move is a sign that Oracle
(NASDAQ:ORCL) is strengthening its Cloud unit now. Shares of Oracle
(NASDAQ:ORCL) is slightly off at $36.37, while shares of Responsys soared
by 40 percent, closed at $27.40.
And DealerTrack (NASDAQ:TRAK) Technologies is going purchase
privately-held Dealer.com. They make software for the car dealer industry.
It`s an agreement worth about $1 billion. DealerTrack (NASDAQ:TRAK) helps
connect car leaders with lenders and credit rating agencies. The company
hopes the acquisition of Dealer.com will expand its offerings to car
Wonder what they will call the combined entity?
Shares surged 12.5 percent to close at $48.19.
Our market monitor guest predicts 2014 will move toward a, quote,
“more normal” market and interest rate environment.
Janelle Nelson is portfolio analyst at RBC Wealth Management.
Janelle, nice to have you back on the program.
JANELLE NELSON, RBC WEALTH MANAGEMENT: Great to be here. Thanks,
GHARIB: So, let`s talk about what is normal and what`s changed that
makes you see 2014 as a more normal market environment?
NELSON: Well, I think what changed is since the financial crisis in
`08 and `09 it`s been a risk off/risk on market. Is the Fed easing? Are
they going to do more quantitative easing? And now, we`re back to a point
where the Fed is beginning to taper, growth is coming back to the U.S. and
the rest of the world, and I think you`re seeing stocks respond to earnings
and stock picking once again, I think will be a good thing to have in the
GRIFFETH: What kind of stocks? What`s the theme you`re looking at?
I mean, do you go with what we would call an early cycle group of stocks
that usually do well as the economy begins to strengthen, or late cycle? I
mean, where are we right now, do you think?
NELSON: I think we`re probably in the third or fourth inning of a
nine-inning game. So, we have plenty of room to move. So much has moved
in 2013. This market was stronger than anyone would have really
That what I`m looking at for 2014 are stocks that are global in
nature. I like blue chips that have lost their luster. Ideally, I like a
few names that are trading below the peer group and if they are steady
dividend payers and/or repurchase candidates, even better.
GHARIB: OK. And let`s go down some of the stocks. You have Coca-
Cola (NYSE:KO) at the top of your list, which sounds like it sits some of
those criteria you just told us about.
Tell us why you like it, because here`s a stock that`s pretty much
trading where it was a year ago.
NELSON: Exactly. I think if you — if you`re in Coca-Cola (NYSE:KO)
or you looked at Coca-Cola (NYSE:KO), you can look at the sugar tax in
Mexico. You look at the cold weather. You look at the lower than average
It`s not been a great year for Coke. China and Brazil have been weak.
But we think a number of those considerations are going to turn in 2014.
We see a rebound in both China and Brazil. The GDP trends are trending
higher. We also think that volume growth will improve.
What drives consumption of soda, more often than not, is weather.
We`ve had cold, rainy weather the first half of 2013 and I think that — if
we get back to normal, I think helps. So if you see a rebound in volumes
for soda overall, typically Coca-Cola (NYSE:KO) does better than average.
GRIFFETH: Coach (NYSE:COH) fits the area, as well. We have a tough
year. Their CEO is retiring early next year. A lot of competition from
Michael Kors and companies like that. Why do you like Coach (NYSE:COH)
NELSON: I think it`s a global luxury brand that has not lost its
cache. I think the magic is a little warm, but it`s coming back. I`m very
excited about their Burl Brand, which give you a first glimpse at what the
turnaround could be on the creative side in the second half of 2014.
In addition to that, you have a stock with a steady repurchase plan,
2.4 percent dividend yield that`s trading a full four multiple points
trading below its luxury brand peer group.
NELSON: A lot of bad news is built in.
GHARIB: You have half a minute left. Can you squeeze in a quick
pitch why you like Royal Dutch Shell B share?
NELSON: Absolutely. What work in big energy in 2013 was
restructuring. We think that`s happening in Royal Dutch Shell in 2014.
Five percent yield while you wait, $7 billion of divestitures, we think the
GHARIB: OK, great. Thanks so much.
Any disclosures, Janelle?
NELSON: Yes, actually, my company makes a market in all three stocks.
Both Royal Dutch and Coca-Cola (NYSE:KO) are clients of the firm and a
member of my household owns Coca-Cola (NYSE:KO).
GHARIB: OK. Thanks so much for coming on. Happy holiday. Hope to
see you in the New Year.
NELSON: Thanks, Susie. You, too.
GHARIB: Janelle Nelson, she`s portfolio analyst at RBC Wealth
GRIFFETH: More now on that bipartisan federal budget that President
Obama is expected to sign into law. The bill includes a new tool in the
fight against identity theft. It limits access to a government database
that some say has turned into a treasure trove for a crook.
Scott Cohn has our story.
SCOTT COHN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Terry
and Stephanie McClung thought it couldn`t possibly get any worse. Still
mourning the death of their 5 month old daughter Caitlyn from sudden infant
death syndrome, they filed their tax return claiming her as a dependent.
But the IRS rejected the return.
TERRY MCCLUNG, FRAUD VICTIM: What the email did say that someone else
had already claimed your dependent.
COHN: Using Caitlyn`s Social Security number.
STEPHANIE MCCLUNG, FRAUD VICTIM: It was the very last time we had to
claim her as our own and somebody robbed us of that, as well.
COHN: All it takes a name and Social Security number to file a tax
return and collect a refund. And the Treasury estimates the IRS issued
$3.6 billion in fraudulent refunds last year alone. The McClungs think the
thieves got Caitlyn`s information from a government database that was set
up in part to prevent fraud.
(on camera): The Social Security Administration death master file is
exactly what the name suggests, a list of more than 85 million names and
Social Security numbers, every death reported since 1936. Genealogists use
it, investigators use it, so do insurance companies verifying a death.
(voice-over): But a quick-thinking identity thief can use it, too,
which McClungs think is what happened to them.
Terry McClung testified before the Senate Finance Committee.
T. MCCLUNG: In a second, anybody in the world can access Social
Security numbers and person information for anyone in their database.
COHN: Now, that`s about to change. Included in the new budget deal,
new limits on access to the file. Users will have to be certified.
Thieves will go up and so will penalties for fraud. But some warn of
unintended consequences. Background checks that won`t happen, research
that won`t get done.
Melinde Lutz Byrne is a leading genealogist.
MELINDE LUTZ BYRNE, BOSTON UNIVERSITY: The real issue here is to get
the IRS to use the death master file the way it was intended and to check
before issuing refunds to people who really don`t deserve them.
COHN: The IRS has been tightening security, but government audits as
recently as this year say more work needs to be done. Even proponents
admit the law will make only a small dent but the McClung say it gives them
a tiny bit of closure.
Scott Cohn, NIGHTLY BUSINESS REPORT.
GHARIB: Coming up on the program, activist investors were the biggest
thread to corporate boards this year. So, will companies embrace them in
2014 or pushback?
GHARIB: An update to a story we told you about yesterday following
the credit breach at Target (NYSE:TGT), the CEO tonight is extending an
apology to customers and offering a 10 percent discount on items purchased
in store this weekend.
GRIFFETH: Well, this past year, more corporate boards chose to make
room at the director`s tables for activist investors rather than getting
mixed-up in a public brawl.
Mary Thompson now takes a look why some of these boards are
increasingly embracing congeniality with those investors instead of
engaging in combat.
MARY THOMPSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
For tech giant Microsoft (NASDAQ:MSFT), it`s size offers no protection from
a proxy fight, so instead of battling the activist Value Act and risk their
own jobs, directors gave the hedge fund a seat at their table, ensuring
public peace during proxy season.
CLAUDIA ALLEN, KATTEN MUCHIN ROSENMANN LLP: They can express their
dissatisfaction at the ballot box, and it`s better to preemptively be
speaking with your shareholders to understand what they have to say.
THOMPSON: Increasingly, other shareholders listened to the activist
complaints. Their support helping activist to win or be given a board seat
by a company in 66 percent of the proxy fights they waged this year,
according to the proxy government firms ISS. No longer viewed commonly as
rabble-rousers or corporate raiders, activist support among big
institutional investors like the California Public Pension Fund, CalPERS,
is growing. But they realize not all activist want a quick change and a
quick gain but many are focusing instead of long-term returns.
Adding to the activist power: their big war chest. They manage a
hefty $89 billion in assets.
(on camera): Board adviser Claudia Allen says their money and
increased support from other investors is helping to change board`s
attitudes about activist. Directors are engaging them more frequently and
in a friendlier manner.
ALLEN: I think that type of outreach is trickling down to more
companies. And again, it`s a view to protectively understand what the
shareholder concerns may be and then figuring out what the board believes
is an appropriate response.
THOMPSON (voice-over): Not all boards are open to the openness of
activist. PWC`s annual director survey found that 39 percent did see more
engagement with big stakeholders, but a third of those directors say they
shouldn`t be communicating with them.
A strategy could prove dangerous for those directors, given activist
growing financial and reputational clout.
For NIGHTLY BUSINESS REPORT, I`m Mary Thompson.
GHARIB: And, finally tonight, Christmas came a little early for a 25-
year-old Pennsylvania man. Jeffrey Gonano who works at his family`s fire
sprinkler business bought a $138 raffle ticket to a charity that preserves
historic sites. He won the grand prize. And what was it? An original
Picasso from 1914 worth $1 million.
And Gonano doesn`t know what he`s going to do with it, but he says he
has to find out how much the taxes are.
GRIFFETH: I`ll give you a little clue, Jeffrey. Hang it up on the
wall and be very happy with it.
GHARIB: A million dollar Picasso.
That`s NIGHTLY BUSINESS REPORT for us. I`m Susie Gharib. Have a
GRIFFETH: I`m Bill Griffeth. Have a great weekend, everybody. We`ll
see you on Monday.
Nightly Business Report transcripts and video are available on-line post
broadcast at http://nbr.com. 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.