Transcript: Friday, December 20, 2013

ANNOUNCER:  This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and

Susie Gharib, brought to you in part by — 

                (COMMERCIAL AD)


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

unemployment rates.

                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

of November.

                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 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 — 



                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

                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

                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, after you`ve done

Christmas shopping in the middle of the night when it`s likely to be a

quieter, actually.

                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.

                (AUDIO GAP)

                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

into that.

                GRIFFETH:  Bertha Coombs, always doing a great job covering it, thank


                COOMBS:  Thanks.

                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

requests public.

                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.

                (BEGIN VIDEOTAPE)


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.

                (END VIDEOTAPE)

                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  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 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.

                GHARIB:  OK.

                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

stock works.

                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.

                (BEGIN VIDEOTAPE)


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.

                (END VIDEOTAPE)

                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.

                (BEGIN VIDEOTAPE)


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.

                (END VIDEOTAPE)

                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

great weekend.

                GRIFFETH:  I`m Bill Griffeth.  Have a great weekend, everybody.  We`ll

see you on Monday.



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