Transcript: Friday, November 21, 2014

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


of the world`s most prominent central banks in Europe and China triggered a
stock market rally across the globe and sent investors looking for new
places to put their money.

Two big events are happening next week that could determine whether
oil prices continue to slide.

And one big hearing where senators accuse the Federal Reserve Bank of
New York of being too cozy with the banks it regulates.

All that and more tonight on NIGHTLY BUSINESS REPORT for Friday,
November 21st.

Good evening, everyone. And welcome. Susie has the night off.

Well, the major averages just wrapped up their fifth week in a row of
gains and there were more record closing highs for the Dow and the S&P 500
today, thanks to major moves by two of the world`s large banks.

First, the People`s Bank of China cut benchmark interest rates over
there for the first time in more than two years, looking to combat slowing
economic growth. Then, European Central Bank president Mario Draghi
promised to use whatever means necessary, even buying up sovereign bonds,
to boost that region`s struggling economy.

And with that, investors plowed into stocks in Asia, in Europe, and
right here in the U.S. That sent major averages surging right out of the
open, before they lost a little bit of steam later in the session.
Nevertheless, at the close, the Dow was up 91 points, record high there,
closing above 17,800 for the first time. The NASDAQ up 11 and the S&P
tallied a 10-point gain. For the week with the Dow it was up 1 percent,
the NASDAQ up half a percent, and the S&P up 1.1 percent.

Steve Liesman has more now on the market-moving actions by some of the
world`s big central banks and what`s next for our own Federal Reserve.


Central bank developments in Europe and China highlight not just the
difference in economic weakness overseas and strength in the U.S., but also
the increasing divergence in interest rate policies. While the European
Central Bank considers greater quantitative ease, the Fed just ended its QE
program. While the People`s Bank of China cuts rates, there`s wide
agreement that the Fed`s next move is to raise them.

But the Fed is carefully watching these overseas moves. It even
debated at its October meeting whether to say in its policy statement that
foreign weakness raised the risks for the U.S. economy.

But will it keep them from hiking?

TOM PORCELLI, RBC CAPITAL MARKETS: If things fall hard enough in
Europe as an example, then yes, I think it could actually attenuate the
cycling in the United States. But we`re talking about a backdrop that
would have to have deteriorated in a material way.

LIESMAN: Others have already changed their views. Citi moved ahead
its first forecast for the rate hike of December 2015 from September.

And money manager Jack Ablin said foreign weakness and central bank
easing is going to make the Fed wary about moving too quickly.

JACK ABLIN, BMO PRIVATE BANK: I think the Fed recognizes that the
risk of tightening too soon and ending up back in the ditch is much harsher
than waiting too long and having to fight perhaps growth or inflation down
the line. I think they would rather err on the side of too much ease and
then, you know, ratchet back than to tighten too soon and really run out of

LIESMAN: All that global easing Ablin says is good for equities, but
there are challenges. The dollar has strengthened against the euro as
investors come to believe the Fed will tighten, that is raise rates, and
the ECB will ease further. It`s a challenge to U.S. exporters and pushes
down on inflation by making foreign imports cheaper in the U.S.

(on camera): Most likely, the Fed will watch to see if these actions
by other central banks help their economies grow. If they do, the Fed will
stay the course and hike rates next summer. But if global weakness
undermines the U.S. economy and if deflation overseas washes up on these
shores, then the Fed could well hold off and stay at zero for a bit longer.



MATHISEN: Tonight`s market monitor joins us now to talk more about
what Europe and China`s Central Bank moves will mean for the U.S., as well
as his stock picks. He`s Erik Ristuben, chief investment strategist with
Russell Investments.

Eric, good as always to have you here.

Do you think what China is doing and what Mario Draghi proposes to do
are the tonics that those two economies need to get them moving in the
direction that the central bank seemed to want them to?

ultimately, yes, we think these are going to be successful moves.

I mean, in China`s case — I mean, they`re obviously intentionally
slowing their economy, but more specifically they`re trying to adjust the
composition of their economy. They`re trying to slow the investment part
on housing principally while actually making sure that the other part of
their economy, particularly the consumption part of the economy, grows. If
lowering interest rates internally within the country helps, probably also
helps making their currency a little cheaper versus the yen.

In Europe, Draghi is really continuing to communicate with maybe a
little more urgency and he`s worried that the inflation rate is too low.
So, he`s talking about doing as much as he can as fast as he can to raise
inflation and to raise inflationary expectations. This is in addition to
the trillion dollars almost of euro stimulus that he`s already started to
put in the system in the summer and the fall. We think ultimately, those
will be successful in raising the inflation expectation and therefore the
growth rate in Europe.

MATHISEN: Is Draghi really walking the walk in addition to talking
the talk? It sounds like there`s a lot of wind-up and not as much pitch

RISTUBEN: Yes, certainly. He`s been winding up for quite some time
on this.

Look, he`s got a very difficult political process. He`s got to
effectively bring the Germans along. There`s — you know, the Germans will
point out there`s a legality issue as it relates to full-blown quantitative
easing where the ECB would buy sovereign debt. He`s trying to create the
conditions so that the necessity to do QE kind of, you know, is the mother
of invention in terms of actually being able to get the Germans to
implement it. If he needs to get there, I think he`s actually going to be
successful. It`s not clear he`s going to have to go to full-blown
quantitative easing however.

MATHISEN: Let`s move on to a couple of your stock picks. I know you
see the U.S., as Keith Jackson used to see, as the bell cow of the global

Let`s start with your reasoning behind financials. You like PNC and
your second one is also a financial. Why you like (ph) it and financials

RISTUBEN: Yes. Well, financials and specifically financials banks.
Look, we think the U.S. economy is continuing to expand. We think
employment is such and the economic activity that we`ve seen and the
improvement in employment and economic activity is going to continue to
cause greater and greater loan demand. We`re really basically looking at
banks as kind of a fundamental play in terms of we think the earnings are
going to be accretive, because there`s going to be more loan activity
because of a better economy. And Citibank in particular is cheap.

MATHISEN: And Citibank is your second choice there. And it is
relatively low priced, but it`s kind of low priced for reason, isn`t it,

RISTUBEN: Yes. Well, it has lots of reasons why its price
historically has been low. Those reasons are beginning to fade into
history, and really, we think their business, their ongoing operating
business, will be enough to drive value. PNC is one of those super
regional that`s just been well-positioned throughout the entire cycle — a
little more expensive but probably a safer bet in terms of future

MATHISEN: Let`s move on to your third choice, which is Live People.
I`m not familiar with it. Tell me about it.

RISTUBEN: Yes. LivePerson (NASDAQ:LPSN) is — it`s actually an
interactive client engagement. They sell software. If you`ve ever been on
a Web site and a little bubble comes up and says, do you need some help?
You know, you haven`t done anything in a while, do you have a question for
me? hat`s probably using the LivePerson (NASDAQ:LPSN) software.

We think they`re — one, they`re well-positioned within the segment.
We like software in general, but in particular we like them because they`re
well-positioned. The other thing is they`re a potential takeover target.
And finally, they should be able to benefit from what we think is going to
be a continuation of increasing capex expenditures, and particularly in
technology and they`re kind of in a sweet spot in our mind for that.

MATHISEN: Erik, thank you so much. We appreciate you being with us.
Have a great weekend.

RISTUBEN: You, too.

MATHISEN: Erik Ristuben with Russell Investments.

Well, today`s efforts to boost the economies in China and Europe also
lifted the price of crude oil. West Texas Intermediate settled 66 cents
higher at $76.51 a barrel. Benchmark Brent Crude rose more than a dollar.
It closed at $80.36 a barrel, wrapping up its biggest weekly gain since all
the way back in June.

Even though oil prices have tumbled 30 percent since their summer
peaks, a couple of events coming up this week or next week really could
really rattle the oil markets and oil prices.

Our Jackie DeAngelis has the details.


The freefall in oil contained for the time being, but next week could be a
game changer.

Monday`s the self-imposed deadline for talks over Iran`s nuclear
program. Traders eyeing the date as a potential catalyst because it could
open the door for sanctions on Iran to be lifted, which would flood the
market with Iranian oil. If that were to happen, prices could fall further
from here.

JEFF GROSSMAN, BRG BROKERAGE: If Iranian oil comes back onto the
market, conventional wisdom does say that we will work our way lower.

DEANGELIS: And Thursday, Thanksgiving in the U.S. but a highly
anticipated OPEC meeting in Vienna. Up until now, expectations were that
OPEC would not announce any production cuts, but sentiment is shifting and
there is talk in the market that OPEC might reduce output by 500,000
barrels per day to boost prices or at least stem steeper declines.

ANTHONY GRISANTI, GRZ ENERGY: Well, the consensus seems to be that
OPEC will not cut production Thursday. I`d be very surprised if they

DEANGELIS (on camera): If OPEC were to reduce its output, 500,000
barrels per day isn`t that significant when you consider that the cartel`s
production is 30 million barrels per day. However, it does indicate that
certain members like Venezuela are starting to pressure the Middle Eastern
members to cut prices before they fall too far too fast.

(voice-over): Right now, it seems the market is in a wait-and-see
mode. Traders not wanting to position themselves ahead of these big
events, but next week could be key in determining oil`s price direction for
the foreseeable future.



MATHISEN: On to Washington now and day two of Senate hearings over
allegations that some of Wall Street`s biggest investment banks manipulated
prices and unfairly traded commodities like aluminum.

Federal Reserve Governor Daniel Tarullo, the Central Bank`s point
person for bank regulation, said the Fed would broaden its review of gaps
in oversight of physical commodity operations in the U.S.


that we have been thinking about in general although now specifically in
the commodities context as well is how to assure that there are robust
enforcement and compliance mechanisms within firms.


MATHISEN: In written testimony, Tarullo also promised new Fed rules
overseeing commodities trading by banks in the first quarter of next year.

At a separate Senate hearing, lawmakers blasted the president of the
New York Federal Reserve Bank as they probed whether regulators are too
close to the institutions they`re supposed to be overseeing.

Hampton Pearson reports from Washington.


No Republicans showed up far Senate hearing focused on the Fed`s oversight
of Wall Street`s biggest bank, but that didn`t stop Democrats from putting
New York Fed president William Dudley on the hot seat.

SEN. ELIZABETH WARREN (D), MASSACHUSETTS: Are you holding up a mirror
to your own behavior when you say that no one should question your motives
or what you`re trying to accomplish?

SEN. JACK REED (D), RHODE ISLAND: The culture starts at the top, and
the perception is that you essentially were hired by the people you`re
regulating. I think that cultural message goes — permeates throughout the
entire organization.

WILLIAM DUDLEY, NY FED PRESIDENT: I think the bank culture needs to
be improved significantly. I think there`s a number of things that we can
do in that space to improve incentives to get the behavior that we
absolutely require from the banking industry.

PEARSON: At the heart of the latest firestorm, allegations of Federal
Reserve Bank of New York went easy on Goldman Sachs (NYSE:GS) in reviewing
a deal Goldman was pursuing with a Spanish bank.

Adding drama to the day, a former Fed employee Carmen Segarra sat a
spectator in the hearing room. Ms. Segarra, who`s engaged in a lawsuit
over her dismissal from the Fed, came in the media spotlight when she
released secret recordings of Fed meetings that appear to show the Central
Bank is a lax regulator.

WARREN: We`ve got on tape higher-ups at the New York Fed calling off
the regulators.

DUDLEY: There are 46 hours of tapes. There was about 10 minutes of
those tapes that were released.

PEARSON (on camera): The New York Fed president denied the central
bank has serious cultural problems, but he did say it can always improve
how it oversees the nation`s biggest banks.



MATHISEN: Also in Washington, harsh words from Speaker of the House
John Boehner one day after President Obama announced he was extending
protections against deportation for upwards of 5 million undocumented
immigrants currently in the U.S.


president has chosen to deliberately sabotage any chance of enacting
bipartisan reforms that he claims to seek. And as I told the president
yesterday, he`s damaging the presidency itself.


MATHISEN: In response to the president`s executive order, Boehner
says Republicans are considering filing a lawsuit or may try to block
funding for the president`s policies or may even pass immigration measures
of their own.

And House Republicans did file a lawsuit today. This one trying to
scuttle the president`s signature legislation, the Affordable Care Act.
The suit cites the act`s administrator, the Health and Human Services
Department and the Treasury, for delaying the implementation of the
employer mandate, which was supposed to go into effect this year, as well
as for the $175 billion in funding that`s been given to insurance companies
to subsidize health care enrollees.

Still ahead, will this early winter turn into a business boom for the
ski industry? We`ll hit the slopes, next.


MATHISEN: A new stock began trading on the NASDAQ today. It`s Peak
Resorts. It operates 13 ski resorts in the Northeast and Midwest,
including Mt. Snow up in Vermont and Snow Creek in Missouri.

Now, after pricing at $9 a share last night, things did go downhill
pretty fast. Shares which trade under the sticker symbol SKIS, clever, in
their first day of trading down 5 1/2 percent.

Well, if that`s got you thinking about hitting the slopes, you are in
luck because the ski season officially opened for business nationwide
today. What can the industry expect this winter?

Our Morgan Brennan has more from Hunter Mountain in Upstate New York.


It`s that time of year again, the start of ski season.

Thanks to the cold snap stretch across so much of the country, ski
resorts are kicking off their seasons earlier than usual. In New York`s
Hunter Mountain, slopes officially open today, before Thanksgiving for the
first time opening in five years.

And conditions in the Rocky Mountain West have operators optimistic
about business.

ROB KATZ, VAIL RESORTS CHAIRMAN & CEO: We`ve got tremendous natural
snow in Colorado and have had for the last couple weeks and we`re looking
at more snow for Tahoe, for Utah, and here, all for the next week.

BRENNAN: Weather is the single biggest factor for ski resorts. The
reason profits have shrunk for some companies despite higher ticket prices.

Companies have been investing in more snow guns to minimize the impact
of volatile weather. But making snow is a costly process, and it requires

The National Ski Areas Association says visitor numbers modestly
declined last year to 56.5 million, thanks largely to the lack of
precipitation in the Pacific West.

But the ongoing drought in California could further that trend this
year. But analysts say companies like Vail and Intrawest Resorts are
finding creative ways to lure customer, for example, pushing season passes
before winter begins.

JOEL SIMKINS, CREDIT SUISSE ANALYST: That`s the big trend, is get
people to commit to skiing earlier in the season, and effectively once you
lock them in, they`re more likely to ski a number of incremental days
throughout the season. It`s really a move the get people to book earlier
and ultimately, they`ll ski more often.

BRENNAN: And spend more. Last winter, Americans spent a record $3.6
billion on ski equipment, apparel, and accessories. And snow sports
industries America projects similar sales this season.

(on camera): But whatever this winter brings, one thing is certain,
and that`s the ski industry remains healthy. But days like this, it`s easy
to see why.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan in Hunter, New York.


MATHISEN: Well, Dow chemical dodged a bullet, settling a debate with
an activist, and that is where we begin tonight`s “Market Focus.”

The specialty chemical maker has agreed to add four new members to its
board of directors, after pressure from Dan Loeb`s Third Point hedge fund,
and it avoids a proxy battle in so doing. Also, Dow and Third Point have
entered a standstill agreement, meaning Third Point will not publicly
criticize the firm for one year. Shares of Dow popped more than 2 1/2
percent to close today at $52.84.

Loeb also came out on top in his fight with Sotheby`s. The CEO of the
auction house will step down now by mutual agreement with the company`s
board, but he will remain in the job until a successor is found. This
after activist Dan Loeb and others joined Sotheby`s board. Shares were
almost 7 percent higher. They closed today at $41.93.

Foot Locker`s third quarter sales and earnings stepped past Wall
Street consensus, but investors didn`t seem too impressed. The CEO of the
athletic gear company is stepping down on December 1, and that could be
rattling investors, since the transition comes during the holiday shopping
season. Shares fell more than 4 percent. They closed to $54.55.

Ann Incorporated, that`s the parent of Ann Taylor, posted sales that
missed estimates and warned that it would log its first comparable store
sales decline in 10 quarter. Its earnings did manage, however, to top
estimates. The company partly blamed product shipment delays out West
Coast ports for its weak sales. Shares fell slightly to $38.23.

And Aetna (NYSE:AET) is hiking its quarterly dividend. The payout
will be 11 percent higher, up to 25 cents a share now. The insurer is also
setting aside an additional $1 billion to buyback shares. Shares up more
than 50 cents today to $86.36.

Well, cancer is among the leading causes of death in children. But
most drug companies don`t make medications designed to treat kids. One
mother who suffered a terrible loss is looking to change that.

Meg Tirrell has the story.


Nancy Goodman`s son Jacob was 8 1/2 when he started getting debilitating

NANCY GOODMAN, KIDS V. CANCER FOUNDER: Jacob ended up being diagnosed
on Sunday afternoon, and Monday, we went in to see the neurologist.
Tuesday morning, he had emergency brain surgery.

TIRRELL: Jacob had a medulloblastoma, a rare brain cancer. After his
surgery, his doctors prescribed a regimen of chemotherapy drugs, even
though they feared it wouldn`t work.

GOODMAN: The protocol they suggested was 40 years old.

TIRRELL: Jacob was one about 15,000 kids in the U.S. diagnosed with
cancer annually. It`s the leading cause of death among children after

Yet the number of kids with cancer peals in comparison to that for
adults. Pediatric cancers represent 1 percent of all diagnosed according
to the American cancer society. With such a disparity in market sizes,
Nancy came to realize drug companies don`t focus on cancer affecting kids.

GOODMAN: We also open up the newspaper and we`re learning about all
these wonderful advances in science and in treatments for cancer. I was
shocked to learn they don`t apply to kids. Kids don`t get access to these

TIRRELL: As the doctors expected, Jacob didn`t benefit from the drugs
they prescribed. He died five years ago at age 10.

Nancy has since devoted her life to solving the problem that took her
son`s. She founded a pediatric cancer advocacy group and took her fight to
Washington, where she helped pass a law incentivizing drug makers to focus
on rare diseases affecting kids.

GOODMAN: How could I possibly be here on the earth and Jacob isn`t?
You know, I just — if the world`s set up the way it is can`t accept Jacob,
then I need to change the world.

TIRRELL (on camera): Drugmakers say they`re looking at the issue.
Companies including Genentech and Amgen (NASDAQ:AMGN) have hired pediatric
specialists to look for ways to apply their pipeline medicines to diseases
affecting kids. Genentech established a team of 25 focused on the effort.
And the legislation Nancy`s advocacy group Kids Versus Cancer helped pass,
called the Creating Hope Act, has already attracted attention from drug
makers like BioMarin, Regeneron and Sanofi. Still, Nancy says, there`s
more to be done.



MATHISEN: And still ahead, we all know, Apple (NASDAQ:AAPL) and
Google (NASDAQ:GOOG) got their start in a garage. But where does the story
of Alibaba begin? We`ll take you there, all the way to Hangzhou, China.


MATHISEN: Walmart is gearing up for big crowds of shoppers on Black
Friday and for protesters, too. Labor organizers and Walmart workers
unhappy about low pay, poor working conditions, and little chances to
achieve a full-time job are planning protests at 1,600 stores across the
country next Friday. That`s, of course, one of the busiest shopping days
of the year.

And finally tonight, a look at the small apartment in the Chinese city
of Hangzhou, where Alibaba, now one of the world`s biggest companies, was
born. And surprisingly, 15 years later, Jack Ma`s modest flat is still
being used to foster inspiration by the company`s programmers and product
developers, hoping to make the e-commerce giant even gianter.

David Faber has more now from Hangzhou.


the sacred spot where so many technology companies were born. In China, it
is this one place, Building 16-1, Lakeside Gardens, Hangzhou China.

It`s the apartment where Jack Ma lived with his wife when he started
Alibaba in 1999. Unlike its predecessors in the States, this is no shrine
but an active office where Jack Ma sent his most promising developers and
programmers to find inspiration.

(voice-over): Ma`s apartment sits just through this gate off this
busy Hangzhou street. A few miles from the 54-acre Alibaba headquarters
that`s home to 14,000 employees.

The campus has all the accoutrements of an American tech company —
the gym, the foosball and pool tables, and a state-of-the-art television

But given the option of working there, on campus weather all of its
trappings, the top-level programmers are happy to be here, in this six-room
modestly decorated and dare I say crowded apartment where Ma lived 15 years

(on camera): Do people like working here in the apartment?

Not — the headquarters is very nice. It`s got a gym, you can play
ping-pong, the pool. There`s nothing here.

CHEN HANG, ALIBABA PRODUCT MANAGER: I think its owner. Its owner and
all the people.

FABER (voice-over): Chen Hang is a product manager for Alibaba.

(on camera): So when you are starting a new product at Alibaba, it`s
important people come here to get inspiration, to feel the power.

HANG: Yes, yes, yes. Yes, yes, yes.

FABER (voice-over): He and his team will spend about 10 months here
working 13 hours a day, seven days a week, eating, napping, working, and
channeling their inner Jack Ma.

(on camera): It must be important.

HANG: Yes. Important project.

FABER (voice-over): Important indeed. Tmall, Alipay, and Taobao were
all developed here. It`s no wonder Jack Ma keeps sending them back.

(on camera): The biggest parts of the company were created here.

HANG: Started from here.

FABER: Wow. No wonder it`s got power.

HANG: Yes. Yes. Chinese (INAUDIBLE) Feng Shui. Maybe Feng Shui is

FABER: It`s very good here. OK. Maybe I`ll stay.

(voice-over): Jack Ma doesn`t show up all that often, but there is a
message on the wall, handwritten by Ma in 2008. It roughly translates to
this, “The core of this company is to grow and grow.”


MATHISEN: Good Feng Shui there. David Faber reporting for us from
Hangzhou, China.

Well, that is NIGHTLY BUSINESS REPORT for tonight. Thanks so much for
watching us. I`m Tyler Mathisen. Susie will be back on Monday.

Have a great weekend, everybody. We`ll hope so to see you here next


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