Transcript: Wednesday, January 29, 2014

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


market goes from bad to worse after the Federal Reserve decides to stick
with its strategy to wind down its stimulus, despite the recent emerging
market turmoil.

but not strong enough, as Turkey`s massive rate hike fails to stabilize its
currency. Now, the business community in Istanbul is frustrated and
looking for answers.

GHARIB: And, losing altitude. Boeing (NYSE:BA), the world`s largest
plane maker, says profits this year won`t be as strong as expected. Why,
and should investors be concerned?

We have all that and more tonight on NIGHTLY BUSINESS REPORT for
Wednesday, January 29th.

MATHISEN: Good evening, everyone, and welcome.

The weather outside continues to feel like — well, January. And, why
not? It is January.

But inside in trading rooms and on computer screens all across the
country, it feels more like November. Specifically, today`s closing stock
market numbers do.

The Dow had its lowest close since November 7th. The S&P 500 since
November 12th. Trading was choppy, volatility high.

Ongoing worries about emerging market economies and currencies
contributed to the slide but so did a downbeat outlook from the Dow
component Boeing (NYSE:BA).

But the third part of the triple whammy came from the Federal Reserve.
Its policy setters announced a further $10 billion reduction in its
stimulus bond buying stimulus program. On the day the Dow fell more than 1
percent to 15,738. The NASDAQ also tumbled 1 percent to 4,051, and S&P
said, me too, count me in — for 1 percent, finishing at 1,774.

Moving the other way, though, natural gas, it finished at a four-year
high, up 10 percent.

GHARIB: As Tyler just said, the Federal Reserve stuck to its plan to
trim back its bond-buying program. Wrapping up a two-day policy meeting
and Ben Bernanke`s lasts one as chairman of the Fed, the Central Bank
seemed unfazed in the recent upheaval in emerging markets, and the stocks
selloffs on Wall Street.

Hampton Pearson reports.


Neither recent emerging market currency turmoil in Turkey and elsewhere,
nor the disappointing December jobs report was enough to get the Federal
Reserve to change its mind about trimming its bond buying program. At Ben
Bernanke`s last meeting as chairman of the Federal Reserve, monetary
policymakers were unanimous to reduce purchases by northerly $10 billion to
$65 billion per month starting in February.

Leading analysts were not surprised.

BARRY KNAPP, BARCLAYS: We couldn`t see any real way that they would
have stopped the process because of some increased volatility in E.M. and
recent selling in the S&P. It just didn`t make a lot of sense.

PEARSON: The economy appears to be a mixed bag for monetary
policymakers. On the positive side, growth in economic activity picked up
in recent quarters with both business investment and household spending
improving. But there are notes of caution about the mixed job market
indicators, and the housing recovery that has slowed somewhat in the Fed`s

JACK ALBIN, BMD PRIVATE BANK: This is more of a macro strategy the
Fed is trying to employ. I think they`re just trying to get out of the
center stage here with quantitative easing and go back to their traditional
monetary policy.

PEARSON (on camera): Monetary policymakers say they won`t make big
moves until there`s economic data there to back them up. Janet Yellen
officially becomes Fed chair this weekend. The next meeting of the open
market committee happens in mid-March.

For NIGHTLY BUSINESS REPORT, I`m Hampton Pearson, in Washington.


MATHISEN: Joining us now to talk more about what`s next for the Fed
and the U.S. economy is Alan Blinder. He`s former vice-chairman of the
board of governors at the Federal Reserve and is now a professor of
economics and public affairs at Princeton.

Mr. Blinder, welcome, and welcome back.


MATHISEN: Is the Fed doing the right thing at the right pace? And
can the economy continue to expand even as the stimulus recedes?

BLINDER: Let me take the second question first. The economy can
continue to expand. I mean, the Fed is doing what it can with quantitative
easing, but nobody including the Fed thinks this is a first order
importance in how fast the economy is growing. We`re talking, you know,
the decimal point or beyond the decimal point.

So, yes, it can keep growing with the Fed withdrawing stimulus. Is it
doing it exactly the right time and exactly the right pace? Nobody knows
the answer to that. I have to admit some sympathies with Eric Rosengren
who dissented last time when the Fed started, on the grounds they were
starting too easy.

But this is a close call. It`s not a very big difference one way or

GHARIB: So, Alan, the Fed tapers, which is pretty much what the
markets were expecting. And we see the bond prices go up and the stock
market goes down. What is that telling us?

BLINDER: It tells me this is not because of a surprise at the Fed. I
think everybody on the planet that follows the Fed was expecting the Fed to
say and do more or less exactly what it said and did.

So, you didn`t get any surprise from Constitution Avenue. There is
negative economic news if you interpret it the right way coming out of the
emerging markets. Frankly, as I look at it, and I think as the Fed looks
at it, it`s hard to see what`s going on in Turkey and Argentina and
elsewhere damaging the growth prospects of the United States in serious way
or affecting U.S. inflation in any serious way.

So, you know, the Fed looks at that and thinks it`s too bad for these
countries, it would be nice fit was better, but it`s not really that
relevant to the United States.

MATHISEN: I was going to ask you about the emerging markets but
you`ve already answered it. So, I`ll turn to the question of inflation
versus deflation. Which is a bigger risk right now?

BLINDER: Probably inflation by a very narrow margin. I don`t think
we`re much — we have had some episodes in the last several years where
deflation started looking like the real worry. Maybe that will come back.
But it doesn`t look that way now.

On the other hand, inflation is running below the Fed`s target. So, I
don`t think we`re very worried about — when we say inflation we usually
mean inflation that goes too high. I don`t think they`re very worried
about that right now, at least most of them.

The Fed super hawks are always worried about inflation.

GHARIB: Alan, let me ask you that question a different way because
some people have been saying that Janet Yellen will have to focus more on
inflation than jobs. What is your thought on that?

BLINDER: I don`t agree with that. That could come true if inflation
starts rising, right? So, inflation has been in the ones. The Fed`s
target is two. And the Fed has warned that if it gets over two and a half,
kind of all bets are off.

But that seems remote. Look, it`s not impossible. It could happen.
But it seems remote.

So, I don`t think at least early in Janet Yellen`s tenure as Fed
chair, she`s going to be worried about combating inflation. I think she`s
going to be more worried about a kind of a soggy labor market despite the
fact that the unemployment rate keeps going down.

MATHISEN: Give me a final thought if you wouldn`t mind on the tenure
of Ben Bernanke. What will his legacy be? How will he be remembered?

BLINDER: I think he`s going to be remembered for several things.
First, saving the economy from oblivion. Now, it got really bad, but it
could have been a lot worse without a lot of the creative and imaginative
things that the Bernanke Fed did.

Secondly, with continuing that imagination, that creativity, you might
even call it bravery because he was getting a lot of criticism, into the
recovery period because it was such a weak recovery and trying to do very
unusual, let`s say, and unprecedented things like QE-2, QE-3, Operation
Twists —


BLINDER: — to try to give the economy some life.

MATHISEN: Alan Blinder, thank you. As always, great to see you.

BLINDER: Glad to be here.

MATHISEN: Former chairman, vice-chairman, excuse me, of the board of
governors at the Federal Reserve.

GHARIB: More now on the crisis in Turkey. Despite a massive hike in
interest rates that we told you about last night, the struggling Turkish
lira failed to make sizable gains today. Business owners are now hoping
for some stability in the Turkish economy.

Michelle Caruso-Cabrera has more from Istanbul.


over): Adnan Dalgakiran sold $150 million worth of industrial air
conditioners last year. He imports the parts for those air conditioners
from all over the world.

He`s frustrated, though, because his overseas parts are costing him
more nearly every single day. His country`s currency, the Turkish lira, in
a steady decline since May, and now down 30 percent.

Eren Kilic who runs a textile business is in the same boat. His most
trusted work tool lately, an app on his phone which helps him monitor the

currencies. Going up. Two hours, you come here, it was 217 (ph) now 221.

CARUSO-CABRERA (on camera): How often are you checking the currency?

KILIC: For the last month, every hour.


KILIC: Every hour.

CARUSO-CABRERA: Wow, that big an impact.

(voice-over): The Turkish lira initially got strong after Turkey`s
central bank held an emergency meeting late in the night and raised
interest rates by as much as 5 percentage points. A huge move in a world
accustomed to central banks moving by a quarter of a percent or half a
percent at most.

The country`s finance minister appeared on national television to say
the hike in interest rates wouldn`t necessarily hurt the economy and that
it was important for the central bank to act independently.

The hike in rates came despite pressure from the country`s prime
minister, Recep Erdogan, who fears the rise in rates will hurt the economy
before key elections in March. Today, he blamed an international
conspiracy of bankers and the media for the country`s current financial

Back at his textile plant, Eren Kilic doesn`t want to blame anyone.
He just wants to get back to focusing on his business rather than the

KILIC: Because of that tradition (ph), just the decision you have to
make, you have to buy U.S. dollar, you just make investments. Every day
you have to check it. It`s your business investment.

CARUSO-CABRERA: A business investment in a tenuous place at a tenuous

For NIGHTLY BUSINESS REPORT, Michelle Caruso-Cabrera, Istanbul,


MATHISEN: Earlier, we told you about Boeing (NYSE:BA)`s weaker
forecast for the year ahead despite wrapping up a record year for aircraft
deliveries and orders. Boeing (NYSE:BA) was the biggest decliner in the
Dow today, falling more than 5 percent on that lower outlook. Accounting
for about a quarter of the Dow`s drop today.

So, why the stormy skies ahead for the aircraft-maker?

Phil LeBeau has our report.


After a 2013 that went from very bad to very good, investors in Boeing
(NYSE:BA) are wondering if the aerospace giant is losing altitude. Shares
of Boeing (NYSE:BA), which soared over the last 12 months, got clobbered
when the company said 2014 earnings would come in 5 to 7 percent below
analyst expectations.

Why the difference? Boeing (NYSE:BA) says its cash flow will be hit
by greater taxes, a one-time signing bonus to members of the machinist
union and other factors.

Boeing (NYSE:BA) may be cautious about its earnings this year, but
it`s still expecting to deliver a record number of new planes. Leading the
way, the 737. By mid-year, Boeing (NYSE:BA) will crank out 42 per month.

Meanwhile, the company is still wrestling with challenges building the
787 Dreamliner at its plants in Charleston, South Carolina.

As for Boeing (NYSE:BA)`s next plane, the 777X, planning is under way
for where that plane will be assembled. It will be in the Seattle area,
following a new ten-year labor contract between the machinist union and
Boeing (NYSE:BA).

JAMES MCNERNEY, CHAIRMAN & CEO: We`re exiting a period where every
few years we had a dramatic event. And we`re entering a period of 10 years
of stability.

LEBEAU (on camera): Keep in mind Boeing (NYSE:BA)`s backlog of orders
stands at an all-time high of $441 billion, which means on some models,
airlines placing new orders may not be flying those planes until the end of
the decade.



GHARIB: And still ahead, President Obama is creating a new way to
save for retirement. But how does it work and will it encourage more
people to start building a nest egg?


GHARIB: Facebook (NASDAQ:FB) shares were on fire late today, thanks
to stunning quarterly results. Profits, revenues and the number of users
all came in better than expected. The social networking giant earned 31
cents a share. That was 4 cents ahead of estimates. Revenue in the fourth
quarter shot up 63 percent, topping forecasts as revenue from mobile
advertising now accounts for more than half of total sales. In after hours
trading, Facebook (NASDAQ:FB) shares surged as much as 8 percent.

Sheila Dharmarajan joins us now from the NASDAQ exchange for more on
Facebook (NASDAQ:FB).

So, Sheila, as you looked over all the numbers, what`s the one big
takeaway you see in this report?

Susie, the one key takeaway is that Facebook (NASDAQ:FB) has really figured
out the secret set when it comes to monetizing social media, especially the
mobile aspect of it. Remember, when Facebook (NASDAQ:FB) first came on the
scene a lot of questions how is it going to monetize its users. Would
advertisers really flock the platform? Would ads on Facebook (NASDAQ:FB)
really be effective?

Well, this earnings result and strong result from it really seems to
have thrown cold water on all those doubts. Facebook (NASDAQ:FB) showing
it`s really at the forefront when it comes to digital advertising.

Also another thing a lot of people have been questioning is Facebook
(NASDAQ:FB) losing its cool when it comes to users. Well, in the past
year, Facebook (NASDAQ:FB) said it added 170 million users to the platform.

MATHISEN: Well, Sheila, stay there. There`s a deal to talk about
tonight. China`s Lenovo apparently buying Google (NASDAQ:GOOG)`s Motorola
handset division for almost $3 billion. Now, that unit makes the Moto X
and Moto G smartphones.

Google (NASDAQ:GOOG) bought the company not too long ago, in 2011 in
fact for $12 billion, little more than that, its largest ever acquisition.
Of course, that $12 billion is more than four times now the amount it is
said to be selling the unit for. This is going to end Google
(NASDAQ:GOOG)`s move into hardware.

Sheila, what do you make of this report and what has been the reaction
in Google (NASDAQ:GOOG) stock early today?

DHARMARAJAN: Yes, Tyler, let me tell you. Shareholders are really
applauding the move. Google (NASDAQ:GOOG) stock has climbed higher in the
after the hours.

You know, there`s a lot of skepticism when Google (NASDAQ:GOOG) first
made this deal. Why would a high margin, high growth Internet company
really want to get into a hardware business? So, now that Google
(NASDAQ:GOOG) is unloading the business, I think shareholders are really
happy with the move, that Google (NASDAQ:GOOG) is going to focus on its
core search and advertising business.

If there was one key takeaway to take away from this, I think it`s
that, look, even great companies can make mistakes. Google (NASDAQ:GOOG)
kind of acknowledging it`s made a mistake by buying this business and now
it`s cutting its losses.

MATHISEN: All right. Sheila Dharmarajan, thank you very much.

Reporting after the bell today, Qualcomm (NASDAQ:QCOM) whose Snap
Dragon mobile chips are used by both Apple (NASDAQ:AAPL) and Samsung in
their smartphones. Qualcomm (NASDAQ:QCOM) pulled in $1.26 per share, $1.26
in the first quarter, their first fiscal quarter. A top line beat of 8
cents. Revenue was 10 percent higher than it was a year ago but was still
a little less than forecast. Shares of Qualcomm (NASDAQ:QCOM) popped
initially on the report, but there`s one thing that Qualcomm (NASDAQ:QCOM)
is counting on for future growth.

Josh Lipton explains.


smartphone from Apple (NASDAQ:AAPL) or Samsung, then you rely on Qualcomm
(NASDAQ:QCOM)`s technology. Its chips are the brains that make smartphones
smart. The company`s chips are in 70 percent of smartphones around the
world. Analysts say it`s China that holds the key to Qualcomm
(NASDAQ:QCOM)`s future. In the second half of the year, China Mobile
(NYSE:CHL), the world`s largest carrier, will continue to roll out its new
wireless 4G network, a cell phone standard in which Qualcomm (NASDAQ:QCOM)
is the clear leader.

rolling out the networks this year and handset volumes ramping this year.
That`s a new incremental growth driver to Qualcomm (NASDAQ:QCOM)`s

LIPTON: The potential for Qualcomm (NASDAQ:QCOM) in China is huge.
According to market researcher IHS (NYSE:IHS), the 4G smartphone market in
China is set for explosive 1,500 percent growth this year. Analysts say
Qualcomm (NASDAQ:QCOM) is well-poised to capitalize on the opportunity.

They have, you know, over 95 percent market share by units of the chips
that go into LTE handsets worldwide. So, that maturity is going to be a
differentiator for them.

LIPTON: But there are also risks for Qualcomm (NASDAQ:QCOM) in China.
Reports say regulators there are threatening the company with a $1 billion
anti-trust fine. The details aren`t clear, but Walkley says it looks like
the Chinese government is trying to win concessions from Qualcomm
(NASDAQ:QCOM) as it rolls out faster mobile networks. Low-cost tablets and
smartphones made in China are also pressuring Qualcomm (NASDAQ:QCOM). The
competition is coming from Chinese chip companies such as Rock Chip and All

Mark Su (ph) of RBC is looking for a possible, quote, “Snowden effect”
— companies doing business in China such as Cisco (NASDAQ:CSCO) has said
that NSA revelations by Edward Snowden have spooked customers there. The
question is whether Qualcomm (NASDAQ:QCOM) could suffer from anti-American

Qualcomm (NASDAQ:QCOM) is in negotiations with the Chinese government
over licensing fees over its technology and possible anti-trust fines. The
company offered no comment on the status of those talks.

Josh Lipton, NIGHTLY BUSINESS REPORT, Silicon Valley.


GHARIB: WellPoint shares get a boost even though quarterly profits at
the health care industry plunged 68 percent. And that`s where we begin
tonight`s “Market Focus.”

WellPoint`s customers raced to use medical services before policies
were canceled at the end of 2013, which is why profits fell. But the
company gave an optimistic enrollment outlook saying it expects applicants
in the Affordable Care Act plan will be in the age and demographic range
that it anticipated. WellPoint shares rose more than 1 percent to $85.37.

Shares of Dow Chemical (NYSE:DOW) surged and that`s thanks to good
earnings. On top of that news that the company is hiking its dividend and
tripling its share buy back program. Dow was recently targeted by activist
investor Dan Loeb of Third Point Capital. He`s been urging the company to
spin off its petrochemical unit. Shares jumped almost 4 percent to $44.73.

MATHISEN: Fourth quarter earnings at JetBlue airways soared on
improved passenger traffic and stronger revenue. But recent bad weather
and flight cancellations prompted the airline to slash its revenue outlook
for this quarter. That worried investors and sent shares down almost 3
percent to $8.50 even.

And shares of the auction house Sotheby`s which trade under the clever
ticker symbol BID were lower today. The climb came despite news that BID
will return more than $450 million to shareholders through a special
dividend and buy back program. Investors put the paddles down nonetheless.
The stock was off slightly to $48.74.

GHARIB: Moving from stocks to big news in the world of fixed income.
PIMCO, the world`s largest bond fund manager, has to fill some big shoes
ahead of the announced departure of CEO Mohamed El-Erian.

Today, PIMCO`s co-founder, Bill Gross, appointed four new deputy chief
investment officers — they`re all company insiders — to help replace El-

But growth still doesn`t appear to know where his high-profile
colleague is headed next.


BILL GROSS, PIMCO FOUNDER & CIO: All we know is that he does have a
new job. He said that if one develops that it won`t be in the financial
industry. So that`s an important consideration. So, Wall Street and the
city in London can breathe easier, I guess.

Where do we think it will wind up in 2015 and beyond? Well, certainly
somewhere I think at elevated circles of influence.


GHARIB: Well, El-Erian is scheduled to leave PIMCO in mid-March.

MATHISEN: The House passed that bipartisan $1 trillion farm bill
today. It is the first comprehensive legislation covering everything from
federal assistance for farmers to crop insurance to food stamps since 2008.
The measure now heads to the Senate where a vote is expected as early as
next week.

GHARIB: A lot of talk and curiosity today about President Obama`s
proposal for a new simpler way for Americans to save for retirement. In
his State of the Union address last night, the president announced a
retirement savings plan that he called myRA.

Sharon Epperson explains how it works.


western Pennsylvania steel plant, President Obama today signed an executive
order creating in new plan designed to give those with no retirement
savings and no workplace retirement plan a place to start. The president
first announced program called myRA in his State of the Union speech.

And today, he hit the road to promote it.

have a 401k on the job, don`t have a pension on the job, don`t have a
mechanism to start saving especially younger workers, you can get started
now. And in an emergency, you can withdraw contributions without paying a
penalty. So, it`s a pretty good deal.

EPPERSON: As long as your 2014 income is less than $129,000, $191,000
for married couples, you can contribute to a myRA. It will work like a
Roth IRA. Earnings and contributions grow tax free. And you can withdraw
contributions tax-free, too.

For savers worried about the volatility in the financial market, the
money you put into a myRA, your principal is protected, guaranteed by the
U.S. government, and invested in the government securities investment fund,
which is currently available to federal workers.

You can open a myRA through your employer with as little as $25. Once
your balance reaches $15,000, you can roll it over into a privately managed

isn`t going to make or break someone`s retirement account, but what it`s
going to do is it`s going to start the ball rolling early on. It can
encourage healthy savings habits.

EPPERSON: Some say the new plan would be more effective if paired
with automatic savings options. And the big is how many employers will
want to offer the myRA.

CRISTINA MARTIN FIRVIDA: This is a good idea if it`s paired with some
other policy proposals that are out there that make it more attractive for
employers to offer retirement savings plans. And we do have to pay
attention to what employers need.

EPPERSON: The Treasury Department says a pilot myRA program will
launch with an initial set of companies by the end of the year, and will
later be offered to more workers through their employers.



MATHISEN: Well, coming up, as football fans converge on the New York
City region for the Super Bowl, many homeowners are finding ways to cash in
on the big game.


GHARIB: And finally tonight, just four days to go until the Super
Bowl at MetLife (NYSE:MET) Stadium in New Jersey. It`s the first time the
big game is being played outdoors in a cold weather state, but some local
homeowners are warming up to the idea of renting out their houses to fans
headed to the game.

Dominic Chu has our story.


York and New Jersey homeowners are hoping to cash in on the Super Bowl in
the Garden State. An increasing number of homeowners are offering to rent
out their homes and apartments on Web sites like HomeAway and Airbnb to
football fans planning a trip to the big game.

opportunistically they can make some money during that period.

CHU: Homeowner Peter Tichey is charging $1,000 per night to rent his
home. That`s $600 more than what he usually charges.

hotels are going to be completely booked in this area. People just want to
stay close to the stadium. And my house I believe is located perfect

CHU: HomeAway says they`re seeing a 221 percent increase in home
rentals in the region during the Super Bowl period.

SHARPLES: Hotel prices have really gone through the roof for that
small window of time. And so, you see the same thing happening with home
rental prices as well.

CHU: This six-bedroom Super Bowl vacation dream home, complete with a
personal chef, is going for $119,500 per week. Tickets to the game not

Trip adviser estimates that fans staying in hotels within 10 miles of
the stadium can expect to pay more than $400 per night, that is if they can
still find a room.

SHARPLES: A typical three or four-bedroom house might sleep up to six
people. People also have a kitchen so they can save money on food. But
nighttime instead of being distributed in a different hotel rooms, they
have a place that they can gather.

CHU: Factors like that make renting a house an appealing option for
many, especially for those traveling in groups.



GHARIB: Got to get the tickets.

MATHISEN: Yes. You got to get the tickets.

GHARIB: That`s NIGHTLY BUSINESS REPORT for tonight. I`m Susie
Gharib. Thanks for joining us.

MATHISEN: And I`m Tyler Mathisen. Thanks from me as well. Have a
great evening, everybody. We`ll hope to see you back here tomorrow night.


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