Transcript: Monday, June 23, 2014

NBR Thum ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Susie Gharib.

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Within reach. The Dow may have snapped its winning streak, but 17,000 points away. Which stocks got us here, and which may lead the next leg?

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Home sweet home. It was the biggest jump for existing home sales in three years. Is the housing market finally on firmer footing?

GHARIB: And rainy day funds. More than a quarter Americans have no emergency savings. But there’s a relatively simple way to get more money in your piggybank.

We have all that and more tonight on the NIGHTLY BUSINESS REPORT for this Monday, June 23rd.

Good morning, everyone. I’m Susie Gharib.

GRIFFETH: And I’m Bill Griffeth. Tyler Mathisen is off again this evening.

It looks like Dow 17,000 is going to have to wait another day. Stocks have been on a tear lately as you know, reaching historic closing highs for both the Dow and S&P on Friday. But both those averages kicked off the new trading week with some modest declines. Another round of mergers would normally send stocks higher but not today. And we’ll have more on those deals later in the program.

At the close, the Dow was down nine points, the NASDAQ managed to eke out a fractional gain enough for a fresh 14-year high, and the S&P was down by about a quarter point. Now, even with today’s declines, the Dow is just 63 points from the 17,000 mark, rallying about 2 percent this year.

So, with a week to go in the first half of this year, Dominic Chu takes a look at the stocks that helped get the Dow to this point and what may lead in the next leg.


DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): We hit Dow 16,000 back on November 21st of last year, and a handful of stocks that helped propel the index toward the 17,000 mark. Since then, semiconductor maker Intel (NASDAQ:INTC) has been a star performer. Shares were up 19 percent during that time frame.

Then, there’s pharmaceutical giant Merck (NYSE:MRK). It’s managed a 21 percent gain since the Dow hit 16,000, and the single best performing stock in the Dow Industrials over that time span has been construction and money for the maker Caterpillar (NYSE:CAT). It’s up a whopping 34 percent.

Now, the question for many investors is, where will the next round of leadership in the stock market come from?

NOAH BLACKSTEIN, DYNAMIC FUNDS: I think some of the areas that look attractive for us are the technology space. A lot of next generation technology companies that are focused on Cloud and next generation architecture were sold off very hard in March and April. I think also in the consumer discretionary space, some of the midcap retailers continue to look attractive to us, as well as some areas of the health care space.

CHU: Of course, there will be more to consider as well, and some of those pertain to the bigger picture economy and even Central Bank policy.

BLACKSTEIN: I think you need to keep your eye on interest rates, and if they’re moving too far too fast, that would probably be the beginning of a more substantial correction of the stock market.

CHU: Regardless of the risks, it’s important for each individual investor to gauge their own appetite for how much they want to take.

KRISTINA HOOPER, ALLIANZ GLOBAL INVESTORS: What I would say to investors is, the thing they should be most concerned about is their own intestinal fortitude. If they have a long enough time horizon, they need to remain committed to stocks if they’re going to meet their long term goals.

CHU: The stock market near record highs doesn’t mean there aren’t still opportunities. But one should definitely be aware of the potential pitfalls when making those decisions.



GHARIB: Some good news about American factories, they’re keeping busy, very busy. This month’s reading of U.S. manufacturing was the highest it’s been in four years. A London based research firm Markit says order, production and hiring all expanded in June.

GRIFFETH: And there was also good news in housing today. Sales of existing homes saw a stronger than expected leap in May, rising nearly 5 percent from April’s rate. That was the biggest one-month gain in three years. Sales may still be slower than they were a year ago, but realtors do cite a combination of more listings and stronger employment data for driving sales higher right now. And there still may be more than that.

Diane Olick has our story tonight.


DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): In Burbank, California, Eric Tan says the housing market is finally getting more stable. But stable doesn’t necessarily translate into sold.

ERIC TAN, REDFIN REAL ESTATE AGENT: There are so far more homes for sale, there’s a lot more inventory. But at the same time, the number of buyers has increased a lot.

OLICK: Sales rose dramatically in the Midwest, likely due to pent up demands from the bad winter. But in the West, where weather wasn’t a factor, sales struggled. Up less than 1 percent month to month, and down a stunning 11 percent from a year ago.

TAN: The buyers see overpriced listings, what we’ve observed is that buyers tend to shy away from those listings.

OLICK: Inventory nationally surged 6 percent in May from last year, which helps moderate recent price gains. The median home price in May up just 1.5 percent year over year, the smallest increase since March of 2012.

LAWRENCE YUN, NATIONAL ASSOCIATION OF REALTORS ECONOMIST: Anecdotally, we’re still finding that there are more buyers than sellers, multiple biddings, ongoing process. And many of the buyers frustrated by lack of choices.

OLICK (on camera): Distressed sales in May fell to the lowest levels since the realtors began tracking it during the crash. Investors sunk to just 16 percent of all sales and first time home buyers are not picking up the slack. So, while the remnants of the housing recovery begin to fade-away, the market isn’t exactly back to normal yet.

JED KOLKO, TRULIA CHIEF ECONOMIST: Young people are still recovering from a rough recession. They’re at the point now where they’re starting to move out of their parents’ homes into their own rentals, but not yet into first time homes that they’re buying.

OLICK: The last piece of the recovery puzzle that has yet to fall into place.

For NIGHTLY BUSINESS REPORT, I’m Diana Olick in Washington.


GHARIB: A busy day at the Supreme Court today. In one ruling, the court made it harder for investors to band together to pursue class action lawsuits when they claim to have been misled when buying or selling stock in a company. The decision will likely cut back on the number of suits that involve enormous sums of money.

In a second ruling, a divided court blocked the Environmental Protection Agency from requiring permits for greenhouse gas emissions at new or modified facilities. The high court said only Congress can make that determination. But the ruling does allow the EPA to regulate emissions from industries that are already required to get permits for other types of pollutants that cause global warming.

GRIFFETH: A lot of buzz right now on Wall Street about that newly elected House majority leader, Representative Kevin McCarthy in California. He’s calling for the Export Import Bank to be phased out. The government run bank provides loans and credit insurance to foreign buyers of American made products. Now, closing that bank would be a big blow for Boeing (NYSE:BA), for example. They see their shares fall 1 percent today. Boeing (NYSE:BA) sees big benefits from that bank’s support for U.S. exports.

GHARIB: Well, efforts to abolish the Export-Import Bank is a sign of a critical view that some ultraconservative lawmakers and Tea Party candidates have about government practices and policies that are considered business-friendly. That’s making Tuesday’s U.S. Senate GOP primary in Mississippi a closely watched race by both little leaders and the business community.

John Harwood tells us why.


JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: It’s not just Mississippi Republicans and national Republican leaders who are going to be watching the outcome of tomorrow’s U.S. Senate runoff in Mississippi. American business will be watching, too, because there are big stakes for business. On one hand, you’ve got six term incumbent Thad Cochran, a traditionalist conservative comfortable with existing institutions.

On the other, you’ve got Tea Party favorite Chris McDaniel, a more confrontational conservative, and he would strengthen the wing of the caucus that takes a skeptical view toward the Export Import Bank, the extension of the highway bill, comprehensive immigration reform, even keeping the government open and raising the debt ceiling in certain circumstances.

Now, there are two ways this could have an effect depending on the outcome tomorrow, in which McDaniel is favored to be the nominee. One is by changing the stance of the Republican Party itself. And the other is by potentially strengthening Democrats. Democrats believe they have an outside chance of holding the seat, if Chris McDaniel is the nominee, because he’s so far right. You also have the question of whether the Republican Party can adapt and broaden it’s appeal for the 2016 presidential race.

So, it’s a low turnout election expected on Tuesday, but big consequences.

For NIGHTLY BUSINESS REPORT, I’m John Harwood in Washington.


GHARIB: Still ahead, it’s being called one of the most important events for biotech investors this year, and it could result in a break through treatment for patients suffering from cystic fibrosis. That’s coming up.


GRIFFETH: There is new hope for people suffering from cystic fibrosis, a regiment of medications that some analysts say could be the event of the year in biotechnology. And some Wall Streeters say it could mean a tremendous boost for shareholders of drugmaker Vertex.

Meg Tirrell has more on this new treatment and what it could mean for the company behind it.


MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: Investing in biotech has always been risky. But there’s an event coming up that analysts say tops all others this year. Vertex Pharmaceutical is expected to report data soon on a combination of drugs for cystic fibrosis, a rare inherited disease that causes lung infections and other problems that can be fatal by age 40.

Here’s what you need to know about the program:

(voice-over): Cystic fibrosis is caused by mutations to a gene known as CFTR. When the gene is defective, the protein it creates can’t help chloride escape the cell. That hampers the movement of fluid across the cell wall, and leads to the production of thick mucus in airways and other areas.

The first medicine to address the genetic root of the disease was Kalydeco, which restores the protein’s ability to allow chloride to pass through the cell’s membranes. Only about 2,000 patients with CF have mutations that Kalydeco alone can currently help.

Many more, though, have a bigger problem. The protein can’t get to the membrane at all. So, Vertex is testing another drug, Lumacaftor, which aims to help the protein get to the cell wall, where then Kalydeco enables it to open the passage for chloride. The combination of both drugs could help more than 14 times as many people.

(on camera): That bigger patient population also means bigger business. And positive data would be a huge driver for Vertex’s stock. It’s currently trading around $67 and analysts say positive results could drive the stock up past $100, a negative outcome could plunge it into the $40s.

While cystic fibrosis affects few patients, Kalydeco like other drugs for rare diseases, is priced at about $250,000 a year and patients take the drug chronically. Kalydeco alone already draws $371 million in annual sales.

All together, analysts estimate, if they work, Vertex’s cystic fibrosis medicines could bring in more than $5 billion. Not to mention the huge difference it could make for patients.



GHARIB: Gas prices rose just 2 cents a gallon on average over the past two weeks, but get ready to start paying more. Because of the conflict in Iraq, experts now say drivers should expect prices at the bump to start rising sharply, when the cost of gasoline catches up to the recent rise in oil prices.

GRIFFETH: Well, there is no gasoline needed for this new electric motorcycle unveiled today by none other than Harley-Davidson (NYSE:HOG). Now, the legendary motorcycle maker is considering bringing the new environmentally friendly bike to new markets around the globe, as it searches for new customers.

Morgan Brennan with the story.


MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): It’s called Project LiveWire, Harley-Davidson’s first ever electric motorcycle. It can accelerate to 60 miles an hour in less than 4 seconds, but very, very quietly. With none of that roaring sound that Harley once tried to trademark.

But the motorcycle isn’t for sale, instead Harley is taking the prototype on a multicity tour, looking for customer feedback, though not necessarily from its core male white baby boomer clientele.

(on camera): For Harley, Project LiveWire represents a significant shift in strategy, an electric motorcycle targeting a much younger more global demographic.

MATT LEVATICH, HARLEY-DAVIDSON: Some of the cities like New York city that want to zip around, have the nimble responsiveness that this electric bike delivers. But in cities, all over the world, LiveWire is (INAUDIBLE) —

BRENNAN (voice-over): Harley is looking to expand its appeal after sales were hit hard in the downturn, and while shipments are now recovering. In 2013, they were still 25 percent below the company’s 2006 peak.

Analysts say core customers have been watching their spending, waiting longer to trade up on bikes, maybe recruitment of new riders more crucial. LiveWire is part of that push and so are the two new street bikes coming to the market this year.

But the electric motorcycle is still likely years from hitting the market. One reason the company’s not disclosing the cost.

Asking price will depend on the evolution of lithium ion batteries, currently expensive to manufacture, and with a limited battery life, only about 53 miles per charge.

But Harley could face an even bigger challenge.

UNIDENTIFIED MALE: It doesn’t make enough noise.

BRENNAN: Trying to reinvent the company, without alienating its tried and true customer base.

UNIDENTIFIED MALE: I won’t buy electric motorcycle. Might as well buy a scooter, or something like that, but not for me.

BRENNAN: For NIGHTLY BUSINESS REPORT, I’m Morgan Brennan in New York City.


GRIFFETH: Harley’s got to have noise, you know?

Oracle (NASDAQ:ORCL) seals a deal to buy Microsystems. That’s the biggest acquisition since 2010, and that’s where we begin tonight’s “Market Focus”.

The tech giant will pay $5 billion for Micros, which makes software for restaurants and hotels. The move is an effort to reignite slowing growth. Just last week, Oracle (NASDAQ:ORCL) reported rather disappointing earnings. Shares of Oracle (NASDAQ:ORCL) rose a fraction to $41.10. Microsystems saw its shares pop by more than 3 percent to 67.97.

Alstom has now finally agreed to sell most of its energy business to General Electric (NYSE:GE) after months of negotiations. We told you last week that as part of the deal the French government will also acquire a 20 percent stake in Alstom. The $17 billion purchase is GE’s biggest acquisition ever, believe it or not. Despite the news shares of GE were down 1 percent to $26.68.

More deals, Wisconsin Energy (NYSE:WEC) and Integrys are merging. The deal valued at more than $9 billion. The combined utility will serve more than 4 million gas and electric customers in Wisconsin, Illinois, Michigan, and Minnesota. Shares of Wisconsin Energy (NYSE:WEC) fell by more than 3 percent to $45.27. Shares of Integrys though surged by 12 percent to $68.35.

GHARIB: Here’s another update on the Allergan (NYSE:AGN) and Valeant takeover battle. Allergan (NYSE:AGN) advised its investors not to sell their shares to Valeant, which launched a hostile takeover bid last week. The Botox maker called the unsolicited offer, quote, “grossly inadequate.” Shares of both Allergan (NYSE:AGN) and Valeant fell slightly today: Allergan (NYSE:AGN) at $164.82, Valeant at $121.21.

Shares of Nordic American Offshore surged on news that investor Leon Cooperman reported a 21.8 percent stake in the company. Nordic is a supplier of offshore energy vessels and went public earlier this month. Shares jumped more than 13 percent to $18.76.

And Abbvie upped its 2014 earnings forecast. The drugmaker, which is trying to buy Dublin-based Shire (NASDAQ:SHPGY) for $46 billion, cited strong business performance and said that it expects to continue to do well throughout the year. Shares rose a fraction to $53.75.

GRIFFETH: A new survey finds that too many Americans, especially those between the ages of 30 and 49 have no rainy day emergency savings. So, why are Americans saving less money these days and where does all their money go? Sharon Epperson takes a look.


SHARON EPPERSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): When it comes to saving for a rainy day, everybody knows what they should do.

UNIDENTIFIED FEMALE: Try to save more, try to manage my money a little bit better.

UNIDENTIFIED MALE: You can’t live check by check, because you never know.

UNIDENTIFIED MALE: Every time you get paid, you put something aside.

EPPERSON: But there aren’t too many people actually doing it.

(on camera): You have money put aside for emergencies?

UNIDENTIFIED FEMALE: I do have money — yes, no.

EPPERSON (voice-over): More than a quarter of Americans have no emergency savings. Even as the stock market reaches new heights and parts of the economy are slowly starting to improve, Americans have made very little progress in their savings, according to a new survey by

Half of Americans have less than three months worth of expenses saved, the survey found. Fewer than one out of four have saved six months or more of expenses. The ideal amount recommended by most financial experts.

GREG MCBRIDE, BANKRATE.COM: This lack of emergency savings ands lack of sufficient emergency savings is pervasive in America. Even the highest income earning households, the top third of income earning households, fewer than half of them have an adequate emergency savings cushion.

EPPERSON (on camera): Another study by the Corporation for Enterprise Development found that a quarter of middle class households, those earning between $56,000 and $91,000 a year are considered liquid asset 4, meaning they have less than 3 months worth of savings, to even live at the poverty level. That’s less than $6,000 for a family of four.

ANDREA LEVERE, CORP. FOR ENTERPRISE DEVELOPMENT PRES.: People are stunned when they see it’s not just an issue faced by people who are traditionally viewed as poor.

Eighty-nine percent of the people in liquid asset poverty are employed, which to me also refutes the stereotypes of people who are really living on the financial edge.

EPPERSON: Many working Americans say they just don’t have the extra money to sock away, their paychecks have stayed about the same, even as there have been modest increases in expenses for food and transportation.

That leaves little wiggle room in the budget. And not having a budget, a plan that includes how much to save and spend is another obstacle that prevents households from stashing money away.

MCBRIDE: The biggest barrier to savings is not being in the habit of saving. And too many people, they try to do their saving this way. They wait until the end of the month and try to save what’s left over. And guess what? Most of the time, nothing’s left over, so the savings doesn’t happen.

EPPERSON: Financial experts agree, a simple step can reverse that trend and get folks in the habit of saving. Just remember to pay yourself first.



GHARIB: Ric Edelman joins us now to talk more about how you can save for a rainy day. He’s chairman and CEO of Edelman Financial Services.

So, Ric, you heard in our package that the ideal amount to save is at least six months of a rainy day fund. Do you agree with that, and if you are living paycheck to paycheck, how do you even get started?

RIC EDELMAN, EDELMAN FINANCIAL SERVICES CHAIRMAN & CEO: I think six months is too low. We learned through the credit crisis of 2008 that it was taking people two, three, four years to find new jobs after they lost their old one. Six months is not long enough.

So, we advise our clients to have 12 to 24 months worth of spending. That’s a really big number I know. But if you found yourself in that predicament, you’d be glad to have that cash.

GRIFFETH: Yes, but there’s part two of the —


EDELMAN: Try to figure out where do — how do you dot it, how do you start?

GRIFFETH: Exactly.

EDELMAN: Where do you come up with the money?

Just start. It’s as simple as that. You know, how (INAUDIBLE) at time. So, if you’re trying to amass thousands of dollars in cash reserves from a rainy day fund, just put away 20 bucks, 50 bucks, 100 bucks, whatever you can out of this paycheck. Don’t worry it seems like a small amount of money, just get started.

And for those who are convinced they can’t afford to, as Sharon mentioned in the package, pay yourself first, before you start paying your bills, write a check to yourself and deposit it into a money market account or a bank account. You’ll still be broke when you’re done paying your bills. But now, you’ll be broke with money saved, as opposed to having no money without any money saved.


EDELMAN: And my favorite strategy is to use coins. Most of us are now using credit cards and debit cards, paying electronically but knock it off. Use paper currency. When you’re buying cafe latte, when you’re making small purchase, buying gasoline or whatever, use cash. And when they give you the change, take the coins and save them. I use Planters peanut can, throw it into a glass jar, a piggybank, whatever, literally, without trying, you’ll come up with 50 bucks a month in coins.

GRIFFETH: Yes, I’ve got a big jug as a matter of fact.

But, you know, I’m not going to make excuses for people who don’t save, but let’s face it, we live in a consumer-oriented society, where a barrage of advertisements come our way. Spend for this, spend for that, you know, the latest vacation and all. I mean, that is how we live our lives as Americans today, isn’t it?

EDELMAN: It is, unfortunately. And the peer pressure to constantly spend really does us in. When you’re coworker say, hey, let’s go out for a drink after work, well, $30 later, you know, where are you?

So, it is a problem. This is why we’ve got to break out of that habit. Another really good strategy to help you do this, is to have your employer direct some of your paycheck directly to a savings account. Many employers will do this by having the money get diverted before you get your paycheck, you won’t notice it’s missing, so that you can go out and have fun with your friends and better yet, choose something that doesn’t involve spending money.

Instead of going to a bar, go to a library. Instead of going to a movie, go to a park, go to a museum, go to a gallery show. Do something, ride a bike, do something that doesn’t involve spending money.

GHARIB: All right. So if I started today, right after this show, how long would it take me to put together a six-month rainy day fund? A 12 to 24-month rainy day fund.

EDELMAN: If you’re really starting from zero right now, we find it takes our clients typically two to three years. So, don’t worry that it’s going to take a while. You’ll be amazed at how fast that time goes by. You’ve got your whole life ahead of you to pull this off.

Remember, the longer you delay in starting, the longer it will take to achieve this goal. And you do not want to enter retirement without having cash reserves. You don’t want to face a job loss or a car repair, or a roof leaking, or a medical crisis facing you at a situation of not having any cash.

GHARIB: All right. Thank you. A lot of good tips. Thank you so much, Ric Edelman with Edelman Financial Services.

GRIFFETH: I’ll meet you at the library, how is that?


GRIFFETH: Coming up, start-ups that are looking to make it big and the potential multibillion dollar marijuana economy.


GRIFFETH: We have new reports tonight on an insider trading probe. According to Dow Jones, Dean Foods (NYSE:DF) received a subpoena from federal officials related to that investigation of activist investor Carl Icahn, sports better William Walters and golfer Phil Mickelson.

GHARIB: And finally tonight, the Colorado cannabis craze has sparked hopes for a new kind of Rocky Mountain High. Some 250 investors gathered in Denver today to hear pitches from marijuana related startups, looking to get in on the ground floor of those budding entrepreneurs.

Josh Lipton was there.


JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): It’s a rapidly growing industry, one that is lighting up in the minds of some investors.

TROY DAYTON, ART VIEW GROUP: Wonderful, welcome back.

LIPTON: Troy Dayton is the co-founder and CEO of the Art View Group. It’s a national cannabis investment and research firm, which over the last year has invested $10 million in 14 different marijuana industry-related start-ups.

DAYTON: I believe what we’re seeing right now is the birth of a next great American industry.

LIPTON: Why all the excitement about this industry? Because industry sources say that the $1.5 billion legal marijuana market could quadruple by 2018. And investors gathering here in Denver want to hear from start-ups looking to make it big in this budding industry.

UNIDENTIFIED MALE: We offer chill, giggle, create (ph), bliss.

UNIDENTIFIED MALE: What we’re doing is building a digital support application for cannabis retail.

LIPTON: They aren’t investing in the green stuff itself. Instead, they’re looking more towards feeder industries like packaging, hydroponics equipment.

UNIDENTIFIED MALE: So, we wanted to really standardize this process.

LIPTON: And customer service, which is CannaBuild is offering. Its CEO calls his online service butt tending.

ZACH MARBURGER, CANNABUILD CEO: Jane Smith is sitting in Boulder, Colorado. She may have a headache, and she wants to figure out what product is right for her. So, through our app she can find a butt tender online near her, have a session with her and be able to find out what products will suit her needs best and reserve that product for in-store pickup at a later date, very similar to traditional standardized CVS (NYSE:CVS) experience.

LIPTON: Another startup here today called Ebbu has already raised $2 million from investors who are excited about its focus on personal pot. Consumers can tailor how they want to feel.

DOOMA WENDSCHEN, EBBU CEO: When you go to a bar right now, you have one choice, would you like to have a drink or not? Would you like to get drunk or be sober? With cannabis, we have the opportunity to set someone on a path so that they can have an array of different experiences when they try our products.

LIPTON (on camera): The industry faces challenges, selling marijuana is still a federal crime. But as the American public gradually embraces the idea of legalization and start-ups become more sophisticated in pitching investors, industry sources say there will be plenty of profit in pot.

Josh Lipton, NIGHTLY BUSINESS REPORT, Denver, Colorado.


GHARIB: Very creative with those company names, too.

GRIFFETH: Yes, they are.

GHARIB: That’s NIGHTLY BUSINESS REPORT for tonight. Thanks for watching. I’m Susie Gharib.

GRIFFETH: I’m Bill Griffeth. Have a great evening, everybody. We’ll see you tomorrow.


Nightly Business Report transcripts and video are available on-line post broadcast at The program is transcribed by CQRC Transcriptions, LLC. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Nightly Business Report, or CNBC, Inc. Information presented on Nightly Business Report is not and should not be considered as investment advice. (c) 2014 CNBC, Inc.

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