Transcript: Friday, June 27, 2014

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

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: As good as it gets? As
the calendar nears the end of the second quarter and the first half, have
stocks seen their highs for the year?

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: The clock is ticking.
What could happen to the economy if dock workers strike and commerce is
disrupted across the country?

GHARIB: And deep in debt. Why college costs are going up again next
week?

We have that and more tonight on NIGHTLY BUSINESS REPORT for Friday,
June 27th.

Good evening, everyone. I`m Susie Gharib.

GRIFFETH: And I`m Bill Griffeth, in tonight for Tyler Mathisen.

The books are nearly closed now on the month, the quarter and the
first half of the year nearly. But we`ve got one trading day left. It
appears there will be no June swoon this year and that`s saying something
because over the last 15 Junes, the Dow has been positive only five times.

As for today, stocks clawed higher in final hour of trade to turn
around and end the week on a positive note. The Dow gained nearly six
points, the NASDAQ rose by 19 again, and the S&P tacked on almost four.
But for the week, the Dow and S&P were down slightly while the NASDAQ
continued its climb higher.

The quarter is the story to itself with three averages looking like
they will end solidly higher, but as with the market, some areas have stood
out more than others.

And as Dominic Chu explains now, a little research goes a long way.

(BEGIN VIDEOTAPE)

DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): The
second quarter is shaping up to be a decent one for the stock market.
While the broader S&P 500 is up nearly 5 percent since the end of March,
industry groups like biotechnology, tobacco and computers posted higher
returns. If you took time and lucky enough to invest in these types of
stocks, you would be having a great quarter. Many experts believe that
doing some homework and picking specific parts of the market will pay off
for investors.

JEFFREY KLEINTOP: This year, we think it`s about the return of
business spending as businesses feel more confident, do a bit more hiring,
and even build for factories and offices. So, we`re looking toward that as
a key driver. This benefits industries or companies in the industrial
sector and the technology sector of the stock market.

CHU: The market is currently in a state of flux and sometimes, stocks
can be beaten down enough to create attractive buying opportunities.

Take a look at shares of Apple (NASDAQ:AAPL), fresh off a stock split
that made the shares more affordable for many investors. After losing
around 45 percent of its value from record highs back in September of 2012,
the stock is shot up by 66 percent. Or cosmetics giant Estee Lauder, a
stock that dropped around 16 percent off its record highs late last year,
only to bounce right back and hit fresh record highs this year.

Both are stocks where investors were rewarded for buying on a dipping
value. Bullish investors think that there`s still room for the market to
run even higher.

KLEINTOP: There`s still some good growth ahead for earnings for U.S.
corporations. That`s really the life blood of the stock market. As we
look to the second quarter, we`ll likely see some pretty good results from
a wide variety of companies bouncing back from what was a pretty lackluster
first quarter owing to the weather effect.

CHU: If that were to happen, the current long-term uptrend for stocks
could remain intact and drops could be buying opportunities. But the more
pessimistic out there say we`re still long overdue for a significant stock
market pull back.

For NIGHTLY BUSINESS REPORT, I`m Dominic Chu.

(END VIDEOTAPE)

GHARIB: Our guest tonight has his doubts about stocks going much
higher the rest of this year. He`s Richard Steinberg, president and chief
investment officer at Steinberg Global Asset Management.

Hi, Rich.

You know, you`re calling for S&P to end the year at 1,920, which is
lower than where it is right now. And the Dow to end at 16,800. You say
this is as good as it`s going to get for 2014.

Tell us why.

RICHARD STEINBERG, STEINBERG GLOBAL ASSET MANAGEMENT: Well, the only
way that will change, Susie, is if earnings start to really accelerate.

Right now, the S&P is going to earn $119 this year and analysts have
$132 next year. We`re just not quite sure that that 11 percent growth is
reflected in this economy that`s somewhat sluggish and if you add
geopolitical risks and other factors, we just think the market is a little
bit ahead of itself. It doesn`t mean you can`t make money in the market,
but there`ll be some pullbacks along the way to justify this valuation.

GRIFFETH: I`m looking at the stocks you are talking about tonight,
Rich. And it looks like you`re going for dividend yield. I mean, that —
is that the way you`re making money in the market right now? Lockheed
Martin (NYSE:LMT), for example.

STEINBERG: Yes, the stock is yielding 3.3 percent, Bill. They have a
great line of their products with the defense company. Stocks trading at
under 15 times 2014 earnings. We have a $225 target, and there is a ton of
cash flow from this business as projects that they have with the Defense
Department continue to mature.

International, there is also an upside.

GHARIB: And one of your other picks, Ford, ticker symbol F, you also
like. It also has a pretty rich dividend. Tell us the story there.

STEINBERG: Yes, the stock yielding at just under 3 percent, at 2.9
percent. It`s really cheap trading at nine times 2015 earnings. We`ve had
an upgrade in their product cycle where they spent a lot of money. Now,
the cash flow going forward should be better. We have a $21 target roughly
from these levels.

It`s a boring stock, but we think that, you know, in a market where
you really want to have stocks that are getting paid while you wait while
we kind of figure where evaluations go, it`s one that we would definitely
want to own.

GRIFFETH: And your highest yielder, we`re going to talk about is a
Master Limited Partnership, which I keep hearing about. If you`re looking
for good dividends, tell us about it and, you know, who is this best for in
terms of investing right now?

STEINBERG: Well, this is the JP Morgan Alerian MLP Index. It`s an
ETF. It`s yielding 4.4 percent. We have a $56 target.

This is a story of more production for U.S. oil and energy bill and
also, there could be good rulings within the Commerce Department to allow
the export of U.S. energy. These are beneficiaries. The stocks had a big
run so I think this is one you buy back on a pull back, but the MLP space
also in ETF form is a good way for individual investors to play the space.

GHARIB: You know, Rich, I want to circle back to where we started
this conversation, on your outlook for the market.

You know, we`re coming up on earnings season. We`re going to be
hearing from a lot of CEOs on these analyst calls. What do you expect to
hear and might you change your outlook and change your mind about the
markets depending on what you hear?

STEINBERG: Yes. At the beginning of the year, when you and I spoke
last January, we had a 1,936 target and that was based on the earnings we
talked about. If we start to see in the next two weeks better that
companies are getting much more upbeat, we`ll flick our switch to 2015
earnings. If you apply a 16 multiple to those earnings were lower than the
street, you could have an 8 percent to 10 percent upside between now and
the next 12 and 16 to 18 months.

But we`re not ready to do it yet, Susie. We think this market needs a
break. There`s a lot of investors with money on the sideline that could
maybe help us from falling down too much. But we really think that
investors need a little break unless we get a break in the Ukraine or in
the Mideast and better earnings.

Don`t forget, oil at $106 is a drag on the economy. So, we`re going
to be watching the consumer names also to make sure that we`re in good
shape.

GHARIB: Yes, it`s a tricky market right now.

Rich, thank you so much.

GRIFFETH: Thanks, Rich.

GHARIB: Do you have any disclosures to make on the three stocks you
were talking about?

STEINBERG: We own them on the firm and I own them all personally in
our dividend portfolio, yes.

GHARIB: OK, great. Richard Steinberg of Steinberg Global Asset
Management.

GRIFFETH: Well, speaking of consumers, their moods brightened this
month. The survey conducted by University of Michigan said that steady
hiring is improving Americans` finances right now. Economists watch
sentiment levels to get a feeling for the direction of consumer spending,
which, of course, is a key indicator of economic conditions.

GHARIB: But the economy could run face first into a potential threat
if dock workers at some of the busiest ports decide to strike on Monday.
Billions of dollars in commerce all across the nation could be disrupted
and that`s worrying businesses and consumers.

Courtney Reagan explains.

(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
The clock is ticking as the current contract keeping shipments on track at
West Coast ports expires at midnight on Monday. The 30 West Coast ports
handle at least 40 percent of goods that enter the U.S. A port shut down
could cost the economy as much as $2.5 billion per day, though the union
involved in talks calls that figure exaggerated.

On one side is the International Longshore and Warehouse Union,
representing 13,600 West Coast port workers. The Pacific Maritime
Association is on the other side, representing major shipping companies at
ports from San Diego to Seattle and expects talks to continue past the
deadline until possibly mid-July.

The worry for businesses, talks could stall and so will dock work. Or
worse, if workers strike, goods destine for store shelves will be stuck. A
scenario that puts retailers in alert with back to school merchandise stuck
between the shore and stores.

MATTHEW SHAY, NATIONAL RETAIL FEDERATION: There may be goods that
reach the markets they are intended for too late if there`s a strike or a
slowdown, and then those goods have to be marked down at a loss or
certainly at a reduction in profit.

So, I think there are any number of forms of impact on the economy, on
retailers and other businesses, none of which are very good.

REAGAN: Most don`t believe a strike is likely, but retailers aren`t
taking chances. Wal-Mart (NYSE:WMT), Best Buy (NYSE:BBY), Target
(NYSE:TGT), Macy`s (NYSE:M) and J.C. Penney all told us they are exercising
caution, closely monitoring the situation, and invoking already established
contingency plans ahead of the important back to school shopping season.
Shipments will be moved to other ports, transported by rail and sometimes
air to meet customer demand.

(on camera): 2002 was the last time ports closed surrounding a
contract dispute. It lasted 10 days and cost the U.S. economy upwards of a
billion dollars per day. It only ended because President George W. Bush
ordered both sides back to work under the Taft-Hartley Act.

(voice-over): One track driver at the Los Angeles port told us there
are already signs the union is flexing its muscles. He waited seven to
eight hours last week to pick up cargo.

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan.

(END VIDEOTAPE)

GRIFFETH: Now to another pillar of the economy, namely housing, in
this case home builder KB Home (NYSE:KBH), reported earnings that topped
estimates, thanks to higher home prices. While fewer homes were sold this
quarter compared to the same period last year, their sale prices were 10
percent higher on average. KB also says it is beginning to see first-time
home buyers reemerge in some markets and that helped sends shares up by 4.5
percent today.

GHARIB: And there`s new housing trend emerging in pricey urban areas
where demand is high and space to build is at a premium.

And as Diana Olick explains, that`s why some developers are thinking
outside the box, way outside.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Land
values in hot urban neighborhoods are only going up, and that have
developers going up to, buying air rights, even in the middle of 100-year-
old row houses. They are called pop-ups and some say these new buildings
stick out like a sore thumb, or even worse, a middle finger.

JENNA GOLDEN, POTENTIAL HOME BUYER: Well, maybe that`s one way to
think about it. I would say I don`t agree. I think it`s unique.

OLICK: Jenna Golden has been house hunting in D.C. for eight months
to no avail. Bidding wars, multiple offers, all cash offers, she keeps
losing out. There`s just isn`t enough for sale to meet the demand,
precisely why developers are building up, not just here in D.C. but in
other tight urban neighborhoods like Philadelphia and New York.

The sky is the limit even if the sky is the only view worth looking
at.

HILDA LAWRENCE, REAL ESTATE AGENT: They will take it up as high as
they can go to get more units out of the square footage of the lot.

OLICK: And oversized bookend to a row of three story houses, this
building now offers four stories plus a basement, four separate condo
units, one even a duplex listed at over a million dollars — and it is not
alone. Others are popping up nearby and more are planned. The neighbors
hated this one at first and tried to block construction, but the pastor and
the church across the street says it`s growing on him.

KEVIN HART, PASTOR: Now the only time people that have seen it stop
is when they have family in town visiting, they want to show them the
building on V Street. This is like a tourist site.

OLICK (on camera): You can`t do this everywhere. The neighborhood
does have to be zoned for it, and whatever you think of the style,
developers probably don`t care because they are selling.

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

(END VIDEOTAPE)

GRIFFETH: Still ahead, how can casual dining chains win over the
lunch time crowd? The answer might surprise you and change the way some
restaurants do business.

(MUSIC)

GHARIB: Tablets, apps, data, analysis — you don`t usually connect
those things when it comes to fast food or casual dining restaurants. But
Panera Bread (NASDAQ:PNRA) is making a big investment in technology and
that could one day change its business model and potentially via blueprint
for others.

Morgan Brennan explains.

(BEGIN VIDEOTAPE)

MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
Panera Bread (NASDAQ:PNRA) is looking to transform the way fast food works,
launching sweeping digital changes that will take the chain high tech.
Panera 2.0 will be implemented across the company`s 1,800 North American
stores by the end of 2016. The changes allow customers to avoid the long
lines. They can order through a mobile app or kiosks in store.

BLAIR HURST, PANERA TECH & TRANSPORTATION EVP: The comparable sales
in a cafe like this versus a non-Panera 2.0 cafe — they are in the high
single digits higher than what we see in other cafes. So, we`re very
pleased with the results.

BRENNAN: The new tech took four years and $42 million to develop.
Panera believes it will improve service and cut down on order mistakes.

Analysts say 2.0 could be a long-term game changer for Panera, but
it`s not without short-term risks.

NICOLE MILLER REGAN, PIPER JAFFRAY & CO. SENIOR RESEARCH ANALYST: For
Panera 2.0, there are some risks and challenges associated with the
evolution of this rollout. Frankly, the timing is very uncertain and for
changes of this nature, it can often take longer and be more costly.

BRENNAN: One potential cost, more labor. While some worried
restaurant automation will cut jobs, Panera insists it won`t reduce its
workforce, implementing the new system could even require more jobs, but
Panera is not alone. Chili`s and Applebee`s have been experimenting with
self ordering at restaurant tables. McDonald`s is testing kiosks in stores
overseas. And Dominos, Pizza Hut, and Papa John`s are all ramping up their
mobile ordering options.

(on camera): An estimated $12 billion on annual restaurant revenue
comes from online ordering. Still, that`s only a fraction of the $675
billion the restaurant industry pulls in overall each year. As Panera and
others adopts more technology, that number is likely to increase
considerably.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan in Braintree,
Massachusetts.

(END VIDEOTAPE)

GRIFFETH: Craft retailer Michaels didn`t exactly sparkle in its
trading debut. That`s where we begin tonight`s “Market Focus”. Shares of
Michaels stores went back and forth between small gains and declines today
and priced the initial public offering of almost 28 million shares at $17 a
piece. That was the low end of the expected trading range. The stock
trades under the NASDAQ ticker symbol now MIK and at the close the stock
rose slightly to $17.02.

News that Dollar General (NYSE:DG) CEO Rick Dreiling is retiring next
year sent shares of that stock lower today. That decision comes as
activist investor Carl Icahn has, of course, been pushing for the chain to
merge with family dollar. Dollar general is also sticking with its lowered
full year profit outlook and as a result, the stock tumbled more than 7
percent to $57.19.

A strong first quarter finish, though, for finish line. The athletic
apparel company posted earnings and revenue that topped estimates as sales
and margins expanded. Finish line credits its relationship with Macy`s
(NYSE:M) for helping expand its market share. That stock was up more than
1 percent to close at $29.56.

GHARIB: Shares of Rackspace fell after a news report saying the
company is not catching the eye of potential buyers. You`ll recall that
shares surged in May after Rackspace hired Morgan Stanley (NASDAQ:NBXH)
(NYSE:MS) to look for strategic relationships ranging from partnerships to
an outright acquisition. But today, the stock was down more than 7 percent
to $33.63.

And Caesars delivered another blow to New Jersey`s struggling Atlantic
City. It will close the Showboat Casino Hotel this summer which it blamed
on falling revenue and high property taxes. Caesars CEO says the move is
necessary to help stabilize the company`s other casinos in the seaside
resorts. Shares fell slightly to $17.67.

GRIFFETH: Yahoo (NASDAQ:YHOO) reportedly wants to buy one of
YouTube`s biggest content creators. The Internet company`s going after
Fullscreen, which brings in over 3 billion YouTube views per month as part
of an effort to expand its reach to young consumers. Fullscreen is just
one of the startups, along with more established companies attending
VidCon. That`s the world`s biggest online video event, because as the
popularity of online video grows, so does the potential for more ad
dollars.

Julia Boorstin has more.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
YouTube fans flocked to this annual event, to hear from their favorite
YouTube stars, talking about creating content to the fast-growing digital
video platform.

UNIDENTIFIED FEMALE: I am here to meet all the YouTubers and stuff
that I`ve been watching for years.

UNIDENTIFIED FEMALE: It`s insane, 18,000 people for online video.
But I also like seeing a lot of the exhibits and like how a lot of
businesses are involved in YouTube.

BOORSTIN: YouTube is projected to hit $7.2 billion in gross ad
revenues this year says E-Marketer, and it pays about half of that to its
content partners, making some of the big stars here hundreds of thousands
of dollars a year or more.

Producer Devin Graham has 2 million subscribers watching his videos
about extreme sports.

DEVIN GRAHAM, FILMMAKER: It keeps on growing faster and faster, and
people –advertisers are seeing that. So, they`re contacting Fullscreen
and YouTubers like us to do videos with them.

BOORSTIN: Fullscreen, which works with Graham and a range of other
content creators and brands is one of many startups built around YouTube`s
ecosystem.

GEORGE STROMPOLOS, FULLSCREEN CEO: Brands are creators, too, right?
Media companies that create content brands want to create more content to
touch consumers, and they ultimately want to find ways to reach audiences
and particularly young audiences.

BOORSTIN: To help grow those ad dollars, this year, YouTube is
bringing 100 brand representatives to the event, including EA, Mattel
(NASDAQ:MAT) and AT&T (NYSE:T). YouTube`s hoping to help brands overcome
concerns about user-generated content and get them to buy into YouTube`s
brand partner program.

(on camera): And it`s not just Google (NASDAQ:GOOG) and the YouTube
creators trying to cash in. Disney (NYSE:DIS) recently acquired Maker
Studios for $500 million. DreamWorks Animation acquiring Awesomeness TV
for $33 million. Their next iteration digital studios focused on YouTube
content.

(voice-over): But YouTube stars are increasingly looking to move
outside the platform, to earn higher ad rates and a bigger piece of the
pie. Maker Studios launching its own video hub, Maker.tv, to find media
and Fullscreen also trying to help talent find other distribution channels.

To keep its content creators happy, here at VidCon, the YouTube CEO
Susan Wojcicki announced new tools to help creators craft and manage videos
and perhaps, most important, a way to fundraise from fans.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Anaheim,
California.

(END VIDEOTAPE)

GHARIB: Coming up on NIGHTLY BUSINESS REPORT, if you think paying for
college is expensive now, wait until next week when loan rates are set to
rise.

(MUSIC)

GRIFFETH: Well, here we go again, General Motors (NYSE:GM) announcing
four more recalls covering more than 400,000 vehicles in the United States
first covering the Chevy Cruze air bag issue we told you about last night.
The other three are related to wipers and rear shock absorbers in some
pickups, SUVs and some sedans.

You can get more details on this latest recall on our Web site at
NBR.com.

GHARIB: Some troubling news from BNP Paribas. Reportedly, it plans
to cut its dividend and raise funds by selling billions of euros worth of
bonds next week. According to “The Wall Street Journal”, the move comes as
the largest French bank faces a potential fine from American regulators for
alleged sanctions violations. The bank is expected to plead guilty to
federal criminal charges and pay a fine of nearly $9 billion.

GRIFFETH: Well, if you`re planning on driving over the 4th of July
weekend, your trip could be pricier than it`s been in a while. According
to GasBuddy.com, this will likely be the most expensive 4th of July for
gasoline prices in six years. The catalyst, concern over violence in Iraq.

GHARIB: And many college students will soon be hit with sticker
shock. On July 1st, interest rates on new federal student loans are set to
rise and many new borrowers may be saddled with lots more debt than they
expected this coming school year. So, how much more will rising rates add
to the debt burden? Sharon Epperson explains.

(BEGIN VIDEOTAPE)

SHARON EPPERSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
For Samantha Cook, making the decision to go to George Washington
University was a big one financially.

SAMANTHA COOK, STUDENT: I definitely had doubts about it. My parents
wanted to assure me that no matter what I`d picked, we`d find a way to make
it work.

EPPERSON: Like most families, Samantha and her parents are making it
work by combining their household savings, scholarships, grants and student
loans. But loans are about to become more costly for new borrowers.

(on camera): It`s not the first time loan rates for students have
gone up and it`s likely not going to be the last. Though federal student
loan rates are fixed for the life of the loan, they reset every July 1st.
And thanks to legislation passed last year, the loan rates are tied to the
treasury markets whose rock bottom rate haves gone up.

(voice-over): The interest rate on federal Stafford Loans will go
from its current fixed rate of just under 4 percent to over 4.5 percent.
For loans that are distributed between July 1st of this year and June 30th,
2015.

For graduate students, the rate will rise from just over 5 percent to
a little over 6 percent. Plus, loans for graduates and parents are still
the most expensive, with rates rising to over 7 percent.

The increase in monthly federal student loan payments can add up
quickly, but shouldn`t be too burdensome for most students. For every
$10,000 in loans, new borrowers will pay about $4 more a month based on a
10-year repayment period. Still, experts warn this is only the beginning.

Federal student loan rates may continue to increase in the next few
years. Even with caps, rates could go as high as 10.5 percent for some
loans. So, financial advisers say, instead of dealing with this debt after
graduation, find ways to make your education cheaper while you`re in school
or even before you start.

TIM MAURER, BAM ALLIANCE: We can look for more creative ways to get
that degree and get it for less money. For example, you can go to a
community college for two years and then go to a great in state university
commuting, get an entire degree for the price of one semester at Harvard.
That`s no slam on Harvard but it does suggest that while education can be
very expensive, it can also be made very inexpensive or affordable.

EPPERSON: But attending a less expensive university wasn`t an option
that appealed to Samantha who was studying international affairs and
political science.

COOK: I considered transferring to the University of Pittsburgh at
the end of last year because in state, it`s about 1/3 of the cost of going
to G.W. So, I decided against it because, you know, the value of a G.W.
degree, my parents and I agreed for me, at least, would be more valuable
when looking for jobs later on.

EPPERSON: Samantha says she`s aware of the debt load she`s taking on,
but she`s put off worrying about it for now.

For NIGHTLY BUSINESS REPORT, I`m Sharon Epperson.

(END VIDEOTAPE)

GHARIB: And if you want to read more about rising student loan rates,
go to our Web site, NBR.com.

And that is NIGHTLY BUSINESS REPORT for tonight, thanks so much for
watching. I`m Susie Gharib.

GRIFFETH: I`m Bill Griffeth. Have a great week, everybody. We`ll
see you again here on Monday.

END

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