Transcript: Tuesday, December 31, 2013

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

(COMMERCIAL AD)

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR:  On a high note.
Stocks rally into the close, ending at record highs on the Dow and the S&P,
putting a capper on 2013 and huge gains for investors.

The NASDAQ up nearly 40 percent.  The S&P, its best year since 1997.
And the Dow, the best since 1995.

The January effect.  Old man winter may be rough on us, but the first
month of the year tends to be kind to investors.  Will the same hold true
in 2014?

And, big payoffs?  Our market monitor says he has three stocks that
could get you at least 20 percent in the year ahead.

All that and more for this final day of 2013, December 31st.

Good evening, and happy New Year, everyone.  Tyler`s off tonight.

Well, champagne on Wall Street was flowing today as the Dow and S&P
500 ended the year with another round of new record highs.  2013 will be
remembered as the longest bull market winning streak since the 1990`s.

The Dow posted 52 record closes, and the S&P tacked on 45 new highs.
Here`s a look at the scorecard for the major averages for this last day of
2013 and for the year.

The blue chips jumped 72 points today, reaching 16,576.  That`s a new
milestone.  The NASDAQ added 22, closing at a fresh 13-year high.  And the
S&P rose seven points to 1,848.

For the year, the Dow surged 26.5 percent, the NASDAQ skyrocketed 38
percent.  And the S&P soared almost 30 percent, its best year since 1995.

Looking at the sectors of the S&P, all 10 rose in the past year.
Consumer discretionary stocks did the best.  They were up an amazing 41
percent.

Now, the biggest winner on the S&P was Netflix (NASDAQ:NFLX).  Its
stock almost quadrupled, rising 297 percent.

The biggest loser, Newmont Mining (NYSE:NEM).  It plunged 50 percent.

Over in the commodities markets, gold lost its glitter in 2013.  The
precious metal tumbled 28 percent for the year, closing at $1,201 an ounce.
That`s its worse year in more than three decades.  But oil prices rose 7
percent this year, closing at $98.62 a barrel.

So, now that we`ve closed the books on such a sensational year,
what`s in store as the calendar turns the page to January?

As Dominic Chu reports, Wall Street history shows January is usually
a good month for the markets.

(BEGIN VIDEOTAPE)

DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
2013 was a great year for stocks.  And if history is any guide, 2014 could
at least start off with more positive momentum.  The number crunchers at
Bespoke Investment Group found that over the last 100 years, the Dow has
averaged a gain of over 1 percent in January and has positive nearly two of
out of every three years.

Paul Hickey of Bespoke says the numbers are even more positive if you
look at a broader measure of stock performance like the S&P 500.

PAUL HICKEY, BESPOKE INVESTMENT GROUP CO-FOUNDER:  January is
typically a seasonally strong month of the year.  In the last 20 years, it
hasn`t been as positive.  But when you look at strong years like we`ve had,
a 25 percent gain in prior years where we`ve seen that, the S&P has
actually averaged a gain of about 2.5 percent with positive returns over 80
percent of the time.

CHU:  So, stock bulls like the odds of a positive January.

Now, speaking of the S&P 500, we took a look at what sectors tend to
have good January runs.  During the most recent bull run over the last
three years, investors have liked the cyclicals — the stocks that are more
tied to the ups and downs of the overall economy.

On average, over the last three Januarys, industrial, financials, and
energy stocks have done the best as investors have bet on a recovering U.S.
economy.  They`re all up around 5 1/2 percent for the month on average
during that time frame.

The worst performing sector has been telecom, down around 2 percent.

The question becomes whether investors should even worry about
details like this.

JORDAN POSNER, MARKET ASSET ADVISORS MANAGING DIRECTOR:  We`re long-
term investors, so what goes on in any particular week or month is
difficult for us to extrapolate from.  It probably is a valid trading
mechanism.  As any momentum-type strategy becomes.  And that`s really what
I think the January effect is about.

CHU (on camera):  In the end, no one really knows what the future
holds for stocks.  But the bulls are hoping historical patterns repeat
themselves this time around.

For NIGHTLY BUSINESS REPORT, I`m Dominic Chu.

(END VIDEOTAPE)

GHARIB:  Another positive for the markets in 2014, the world is
getting back to normal, so says Patricia Edward.  She`s managing director
of investments at U.S. Bank Wealth Management.

Patty, we have not heard the word “normal” in a long time.  It`s been
anything about that.  Tell us what you mean by this.

PATRICIA EDWARDS, U.S. BANK WEALTH MANAGEMENT:  Well, I think if you
look at what`s been happening the past five years, there`s been a heck of a
lot of intervention on the parts of governments.  We`ve had overhang from
things like the health care initiative, and so it really hasn`t been a
market that`s been based necessarily on the fundamentals of the underlying
companies.  It`s been more of a market that`s been based on the global
macro outlook.

And that we think is going to be changed as we go into 2014.

GHARIB:  All right.  How should investors look at this new normal
world that you`re talking about?  What should they be doing differently,
what should they be doing the same?

EDWARDS:  Well, we`re looking at the market for next year, and we`re
thinking it`s going to be a little like a B student in an overachieving
family.  It`s going to be a perfectly nice return in the United States, but
it`s not going to be anything to write home about.

2013`s probably going to have been better.

So what we`re doing is we are making some tilts within our asset
allocation.  We`re doing some things like overemphasizing international
equities and, merging markets` equities over U.S. equities.  But beyond
that, also emphasizing equities in general over fixed income because fixed
income has had a 30-year bull market.

GHARIB:  All right.  We`ve been hearing this a lot from many
strategists saying time to look outside the United States.  As you look at
international emerging markets, how should investors get into these areas?
Is this go into ETFs?  Should they go into mutual funds?

EDWARDS:  Well, it`s one of those things where it`s very, very
difficult to go in and buy individual stocks.  So, what I think you want to
be looking toward especially in the emerging markets is someone who has got
their hand on the market and is looking over it for you.

Certainly, you can use the exchange traded funds which are usually
based on an index, but in a market like this, I think that one of the
things you`ll really wanted to consider is having a professional manager
who can overemphasize Asia if they think Asia is going to be better than
Latin America or if they think that Turkey is going to be the next hottest
market, that they can make those adjustments for you.

GHARIB:  You know, some of the things that we`ve seen over this past
year that were so successful were big blue chips, you know, large cap
stocks, many of the multinationals that did have a little bit of
international exposure.  What are going to be the themes for 2014?

EDWARDS:  Well, I think that you need to be looking at companies that
have got that multinational exposure because that`s where the greater
growth is.

U.S. is growing at about 3 percent, we think emerging markets.  China
is going to be growing greater than that.

And so, you want exposure to those emerging markets.  You also want
to be looking at companies that do well in an environment where you`re in
low growth and low inflation.  Companies that have good, strong fortress-
like balance sheets with lots of cash on them.  That cash can be used not
only for growth, but also for dividends and for stock buybacks.

GHARIB:  You mentioned that you`re overweight stocks and underweight
fixed income.  Some people still like to have some bonds in their
portfolio.  What are you recommending?

EDWARDS:  Absolutely.  For most of our investors, we are always going
to have some sort of piece of fixed income in the portfolios.  We would be
looking toward taking more credit risk and being neutral in terms of
duration on the portfolio, really kind of having a moderate length of time
that the bonds mature in.

GHARIB:  All right.  Patty, thank you so much.  Happy New Year.  Hope
to see you in the New Year.

EDWARDS:  Happy New Year.

GHARIB:  Patricia Edwards from U.S. Bank Wealth Management.

Well, investors got their last batch of economic reports for the
year, and they were kind of disappointing.

First up, housing news.  Prices of single family homes rose in
October.  The S&P/Case-Shiller Index of 20 metro areas gained 13.6 percent
year over year.  But on a monthly basis, prices rose less than expected,
just a fraction of a percent over the strong September gain.

This suggests that higher mortgage rates have slowed home sales.

Also slowing, business activity this month in the manufacturing heavy
Midwest.  The closely watched Chicago purchasing managers index fell to 63
in November.  That still indicates some growth, but the new order segment
plunged.

But in the same time frame, consumer confident rose.  This is after
two months of pessimism triggered by the government shutdown.  The
conference board`s consumer confidence index notched up six points.

Well, that shutdown didn`t stop new laws from getting passed.  So, at
the stroke of midnight, just like every New Year, many of them will go into
effect.  And in 2014, many of those laws, both state and federal, will have
a major effect on low wage workers and on the individuals and businesses
which employ them.

Jane Wells explains.

(BEGIN VIDEOTAPE)

JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT:  New Year, new
laws.

(CHANTING)

WELLS:  And beating back the boss attack is at the top of the list.

2014 will see the minimum wage rise in more than a dozen states led
by Washington, Oregon, and California, all at $9 an hour or higher.  It
will hit the restaurant industry hard.

ALDEN PARKER, WEINTRAUB TOBIN LABOR ATTORNEY:  We`ve seen things like
dollar menus going away by and large or other increased pressure on the
price that the consumer actually is going to end up paying.

WELLS:  Another new law will affect restaurant workers in a different
way.  Tips which are often automatically added to the bills of large
parties could disappear because the IRS says if someone is forced to pay a
tip it`s not a tip, it`s a service charge and should be counted as wages.

Restaurants which stick with the practice will have to deduct income
taxes, adding to paperwork.

So, chains like Darden Restaurants (NYSE:DRI (NASDAQ:TBUS)) are
phasing out the forced tipping, instead providing a suggested gratuity, not
on the tip line of the bill.

PARKER:  It came out of a concern that servers in the restaurant
industry weren`t accurately reporting all of their tips.  But instead of
the IRS going and dealing with it directly to the servers, they ended up
putting this burden on the employer, the restaurant itself.

WELLS:  When it comes to new laws, California always takes the cake,
and in 2014, the Golden State is ushering laws that include things like
mandatory overtime pay for many live-in nannies and maids, or extending
paid family leave to include taking care of a sick grandparent or
grandchild, sibling or in-law.

Finally, back to food.

California will up its farm worker protections.  One new law will
punish employers who threaten to report a worker to immigration authorities
for complaining about substandard pay.  And while farm workers already have
state mandated meal and rest periods, they will now also have heat recovery
periods of at least five minutes as needed in the shade.

Add it all up, and 2014 will make life better for those at the
bottom, but as always at a price.

For NIGHTLY BUSINESS REPORT, Jane Wells, Los Angeles.

(END VIDEOTAPE)

GHARIB:  More headaches for Target (NYSE:TGT).  The retailer still
reeling from the massive holiday hack of credit and debit cards, confirmed
today that some of its gift card were not fully activated and contain no
value.  Target (NYSE:TGT) hasn`t said how many gift cards were involved,
but a spokeswoman says it`s less than 0.1 percent of the holiday total.
Target (NYSE:TGT) says all the cards will still be honored.

And coming up, our market monitor has three dividends plays he says
you should have in your portfolio in 2014.

But, first, here`s a look at how some of the international markets
fared today and for the year.

(MUSIC)

GHARIB:  2014 is shaping up to be a big year for tech hiring.  Global
IT spending will grow 5 percent next year to more than $2 trillion, that`s
according to IDC.

Here`s Josh Lipton with a look at the high-tech jobs forecast.

(BEGIN VIDEOTAPE)

JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT:  If you have a
degree in computer science or electrical engineering, then there might be a
job waiting for you in the New Year.  Tech employers are feeling more
confident about adding new employees to their payrolls in competition for
the top engineers is intense.

Dice.com, a tech job site, recently conducted a survey of tech-
focused hiring managers and recruiters.  Three out of four said they plan
to hire more tech pros in the six months ahead.

And there seems to be more security in the workplace when it comes to
tech.  Most hiring managers aren`t planning on any new layoffs.

Kathryn Ullrich, an executive recruiter specializing in Silicon
Valley, expects a lot of demand for those with expertise in Cloud computing
and data analytics.

KATHRYN ULLRICH, KATHRYN ULLRICH ASSOCIATES INC:  Everybody needs to
figure out what`s their strategy for putting data and applications in the
Cloud.  And how do we use big data and data analytics, how do we figure
this out, do we need to do hiring in that space.

LIPTON:  Ullrich says demand is also coming from Asian-based
companies, Chinese, Japanese, and Korean firms, setting up in Silicon
Valley and looking for new sales and marketing talent.

If you do get hired in tech, then you can expect to get paid
relatively well, according to Robert Half, the staffing firm.  U.S.
starting salaries are projected to increase an average of more than 3 1/2
percent next year for professional jobs.  But technology positions are
expected to see the largest gains with about a 5 1/2 percent increase in
the average salary for newly hired workers.

Technical engineers, software developers, and mobile application
developers could also see big bumps in their paychecks.

And at the top tech companies like Apple (NASDAQ:AAPL), Google
(NASDAQ:GOOG), and Facebook (NASDAQ:FB), bonuses are being paid to the best
and brightest.  And that`s pushing salaries at startup ventures even
higher.

Josh Lipton, NIGHTLY BUSINESS REPORT, Silicon Valley.

(END VIDEOTAPE)

GHARIB:  Netflix (NASDAQ:NFLX) is ending its big year by giving CEO
Reed Hastings a fat raise and possibly upping prices.  That`s where we
begin tonight`s “Market Focus.”

Netflix (NASDAQ:NFLX) shares almost quadrupled for this year, making
it the top performing stock in the S&P 500 index.  That performance landed
Hastings a 50 percent salary increase for 2014, according to an SEC filing.

Now, the video streaming service is also experimenting with a new
model that makes you pay more depending on how many screens you watch on.

On top of that, Netflix (NASDAQ:NFLX) is ending its poison pill or
shareholder rights plan two years early.  It adopted the plan to protect
itself from a takeover when activist investor Carl Icahn took a huge
position in the company.

Today, the stock was up a fraction, to $368.17.

Now, last night, we told you that Hertz adopted a shareholder rights
plan to protect itself from a possible takeover.  Today, activist investor
Dan Loeb`s Third Point Capital revealed that it has taken a stake of about
5 percent in the car rental company.

Now, the shareholder right plan at Hertz will only be activated if a
person or group acquires 10 percent or more of the company`s stock.  Hertz
also said it`s held discussions with other investors including Corvex about
enhancing shareholder value.

That news sent shares up almost 10 1/2 percent to $28.62.

Some merger buzz about Marvel Technology as well today.  Private
equity firm KKR (NYSE:KKR) has reported a 6.8 percent stake in the
chipmaker.  The firm said it may talk to Marvel about a potential merger or
reorganization of its business.  The stock jumped 4 1/2 percent to $14.38.

Warren Buffett`s Berkshire Hathaway (NYSE:BRK.A) is swapping around
$1.4 billion in shares of Phillips 66 for ownership of one of Phillips`
businesses.  The unit Berkshire is acquiring make chemicals designed to
increase flow in energy pipelines.

Shares of Phillips 66 rose 3 percent to $77 and change.  Shares of
Berkshire Hathaway (NYSE:BRK.A) were also up a fraction to $118.56.

Hewlett Packard is cutting 34,000 jobs by the end of next year.
That`s 5,000 more than the company originally estimated when H.P. first
announced the layoff plan in 2013.  The company did say the cuts could
increase.  Shares were off a fraction to $27.98.

And Revlon (NYSE:REV) also cutting costs.  The cosmetics company is
leaving China and reducing its workforce by 20 percent.  It`s all part of a
plan to slash costs by about $11 million a year.  The move comes as Revlon
(NYSE:REV) sales have dropped in the Asia Pacific market.  Shares rose
today, though, more than 1 1/2 percent, to $24.96.

Our market monitor guest says investors shouldn`t assume that stocks
will be just so-so in the New Year just because 2013 was such a phenomenal
year.

He`s Chuck Carlson, CEO at Horizon Investment Services.

Chuck, happy New Year.  Thanks for joining us.

CHUCK CARLSON, HORIZON INVESTMENT SERVICES:  Thank you for having me.

GHARIB:  All right.  So, you say that there are some bullish factors
that investors should consider so that they realize that this could be a
pretty good year, 2014.  Tell us what they are.

CARLSON:  Well, first off, our firm looks at a tool called the Dow
Theory to discern the market`s primary trend.  The Dow Theory is firmly in
the bullish camp.  We`ve had a continued series of new highs in both the
Dow Industrials and the Dow Transport which is perfect under the Dow
Theory.  So, that`s bullish.

Second, the three major engines of the stock market in my opinion are
interest rates, inflation, corporate profits.  And I think all three of
those things remain net bullish for stocks in 2014.

And then, finally, while people are getting interested in the stock
market again, we still don`t see the type of over-the-top enthusiasm for
stocks that you typically see at market tops.  People are still fairly
skittish, and you`ll see that skittishness on any type of decline in the
markets.

So, those things add up to a pretty good year in 2014.  It probably
not as good as 2013, but, you know, it wouldn`t be surprising to see a 12
percent to 15 percent gain in the major averages in 2014.

GHARIB:  All right.  And you`ve given us a couple of stocks that you
think will do.  Maybe up by 20 percent or more than investors that they put
new money in now.  Let`s go down your list.

And you have Apple (NASDAQ:AAPL) at the very top.  This is always a
controversial stock in terms of the bulls and bears.

Why do you like it?

CARLSON:  Well, we like it because it fits the theme of where you can
buy growth and buy it at reasonable prices.  And Apple (NASDAQ:AAPL) really
fits that.  They`re going to have easier comps in 2014 in terms of their
earnings.  So, their earnings are going to grow.

We`re seeing, you know, better business now as they`re expanding in
China.  You can buy that growth at less than 13 times the 2014 estimate.
Plus, you get a kicker in a 2.2 percent dividend yield.  Apple
(NASDAQ:AAPL) boosted its dividend 15 percent this year, and I think you`ll
see at least that in 2014.

GHARIB:  All right.  So, it`s at $560 now.  Do you have a target on
it?

CARLSON:  Well, we typically don`t do targets, but I wouldn`t be
surprised to see the stock move at around $650, $660 in 2014.

GHARIB:  Your next stock is benefitting from the boom in energy,
Helmerich & Payne (NYSE:HP).  It`s trading around $83.  Why do you like
this one?

CARLSON:  You know, they have a nice technological advantage in terms
of horizontal drilling.  They have about 300-plus land drilling rigs that
are in high demand right now.  Also, a nice dividend kicker, 3 percent
dividend yield, they`ve rapidly increased their dividend.  It`s gone from 7
cents per share per quarter up to 62.5 cents in about 12 months` time.  And
I think you`ll see the dividend continue to grow.  Again, I can buy that
growth at less than 15 times earnings.

So, again, a good story, growth at a reasonable price.

GHARIB:  And your third pick is in the financials, Capital One.  Tell
us about that.

CARLSON:  Yes, I like the stock.  Most people know it for its credit
card business.  The reality is Capital One is one of the 10 largest banks
in the U.S., and I like that blend of banking with other financial
services.

I can buy the stock at 11 times 2014 earnings estimates.  So, it`s
certainly cheap.  I got the dividend yield.  It`s 1.6 percent.  The
dividend has grown in 2013 from five cents per share quarterly up to 30
cents.

So, you`re going to see that dividend continue to grow at a rapid
rate in 2014.

GHARIB:  All right.  Terrific.

Any disclosures to make, Chuck?

CARLSON:  Yes.  Our clients own them as well as I own the stocks,
too.

GHARIB:  OK.  Well, happy New Year again.  Thanks for coming on the
program.

CARLSON:  Happy New Year to you.

GHARIB:  Chuck Carlson, CEO at Horizon Investment Services.

And coming up, arguably, the biggest difference maker this year to
the financial market.  One guess.

(MUSIC)

GHARIB:  And, finally tonight, we`ve been profiling all week some of
the people who were the difference-makers in the world of business and
finance.  It`s safe to say no individual had more influence on the stock
and bond markets than Ben Bernanke.

And the Federal Reserve chairman kept market mavens guessing all year
on when he would begin tapering the bond buying which helped fuel the bull
market.

Here`s Steve Liesman with more on Ben Bernanke.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
For most of the second half of 2013, Fed Chairman Ben Bernanke sang a
single tune.  Don`t fear the taper.

But it wasn`t always well-received on Wall Street.  He first warned
in May of a possible reduction to the Fed`s bond-buying program known as
quantitative easing or Q.E.

BEN BERNANKE, FEDERAL RESERVE CHAIRMAN:  If we see continued
improvement and we have confidence that that is going to be sustained, then
we could — in the next few meetings, we could take a step down in our pace
of purchases.

LIESMAN:  The Dow Jones Industrial Average would lose 90 points over
the next two days.  And 400 points over the next week.

In June, Bernanke spelled out a schedule for ending Q.E.

BERNANKE:  We would continue to reduce the pace of purchases in
measured steps through the first half of next year, ending purchases around
mid year.

LIESMAN:  The Dow would shed another 500 points over just two days.

But after a weak August jobs report and the government on the verge
of a shutdown, Bernanke would reverse course.

BERNANKE:  The committee concluded that the economic data do not yet
provide sufficient confirmation of its baseline outlook to warrant such a
reduction.

LIESMAN:  The Dow up 20 percent on the year, would raise a percentage
point on the day.

And then in December, after working all summer and fall to convince
markets that tapering wasn`t a tightening of interest rates, Bernanke took
it the podium for his last press conference as chairman.

BERNANKE:  Starting in January we will be purchasing $75 billion of
securities a month, reducing purchases of treasuries and mortgage-back
securities by $5 million each.

LIESMAN:  The result?  The market surged 300 points, and Bernanke
finally got his taper in a way that did not spook markets.

Over the year, Bernanke and the Federal Open Market Committee
ballooned the Fed`s balance sheet by more than $1 trillion and helped push
up growth from 2 percent in 2012, to an estimated 2.5 percent this year.
The 10-year benchmark Treasury bond would rise by more than a percentage
point.

Unemployment would decline by 0.8 percent to 7 percent, and inflation
would remain quiet.

What`s clear is that Bernanke`s decisions made a huge difference this
year and will for many years to come, as the effects of current policy play
out.  Perhaps through higher growth and lower unemployment, or perhaps
also, as some fear, through inflation and a more difficult exit strategy
being left to his successor, Janet Yellen.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.

(END VIDEOTAPE)

GHARIB:  And that is NIGHTLY BUSINESS REPORT for tonight.  I`m Susie
Gharib.

Make sure you tune in tomorrow for our special report, “Predictions
2014.”  But as we go, we want to take you around the globe as the world
rings in the New Year.

And from all of you here at NBR, we want to wish you a very happy New
Year.

(MUSIC)

END

Nightly Business Report transcripts and video are available on-line post
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