Transcript: Monday, November 24, 2014

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

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TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Economic feast. This shortened holiday week is packed with data. What to expect from several key reports and what the numbers could mean for the markets and your money.

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Big bull run. A prominent Wall Street strategist says U.S. stocks are in their sixth year of a 20-year bull market. Why is he so optimistic? We’ll ask him.

MATHISEN: Abrupt change. The chief executive of one of the country’s biggest blue chips, United Technologies (NYSE:UTX), steps down without giving a reason — leaving investors wondering why.

All that and more tonight on NIGHTLY BUSINESS REPORT for Monday, November 24th.

MATHISEN: Good evening, everyone.

More all-time closing highs for the Dow and the S&P 500 today and we’ll get more on today’s market action in just a moment.

But we begin with an avalanche of economic data that investors are focusing on stuffed like a turkey into the next two days ahead of the Thanksgiving holiday and a shortened day of trading on Friday. That data includes the latest on third quarter GDP, home prices for September and consumer confidence for this month. They’re all out tomorrow.

And on Wednesday, we’ll get initial jobless claims as well as durable goods orders, personal income and spending and new home sales all for the month of October.

Steve Liesman has more on the big data points worth watching this week.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): A generous helping of economic data tomorrow and Wednesday should give investors plenty to chew on ahead of their holiday meals. The servings begin with a second look at third quarter gross domestic product and investors will have to digest a slight downgrade to an estimated 3.3 percent from the originally reported 3 1/2 percent. Weakness overseas, especially in Europe, hurt U.S. exporters. That will be offset by slightly better consumption here at home.

The data side dishes on Tuesday include the Case Shiller home price report, expected to rise by 4.8 percent, and consumer confidence, which is seen hitting a new post-recession high of 96.5.

Confidence will be watched closely as investors try and gauge the mood of the consumer heading into the holiday season, and especially to see if lower gas prices lift spending spirits.

A second helping of data comes Wednesday, stuffed with jobless claims and durable goods orders, where economists see a 0.5 percent decline driven by fallen aircraft orders. But business investment is forecast to rise by a percentage point underpinning economic optimism.

LIZ ANN SONDERS, CHARLES SCHWAB CIO: You’ve got growth in employment in the 25 to 34-year-old bracket finally starting to kick in, which could lead to greater household formation, which has been missing in this recovery. You add that to the fixed investment part of the economy capital spending and you see much less fiscal drag. I think you could finally see the overall economy growing at the same pace as the private sector has been over the last couple of years.

LIESMAN (on camera): Rounding out the data delicacies will be personal income and spending for October, consumer sentiment and new home sales. After a run of upbeat data for the U.S., the hope is that none of the reports ends up being a Turkey and that the forecast of 2.8 percent growth for the fourth quarter stays on the table. Bon appetit.

For NIGHTLY BUSINESS REPORT, I’m Steve Liesman.

(END VIDEOTAPE)

MATHISEN: Economic giblets from Steve Liesman.

On Wall Street stock eked out closing highs for the Dow and the S&P and the Dow Transports today, all despite low trading volume. Hopes that China may further cut interest rates to boost its economy helped, along with some mergers in the insurance and pharmaceutical industries. We’ll tell you about in a minute.

The Dow added seven, the NASDAQ had its biggest one day gain so far this month, up about 42 points, thanks to nearly 2 percent jump in Apple (NASDAQ:AAPL) shares and the S&P added about six.

GHARIB: Well, it’s hard to believe that 2014 will be over in less than six weeks. Some Wall Street pros are already coming out with their outlooks for the markets in 2015.

Dominic Chu takes a look at the early trends for the New Year.

(BEGIN VIDEOTAPE)

DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Forget about New Year’s Day. It’s not even Thanksgiving yet and some of Wall Street’s biggest forecasters are already handing out their stock market predictions for 2015. And the general feel so far is bullishness.

Oppenheimer chief market strategist John Stoltzfus falls into that camp. He expects that by the end of next year, the large cap, S&P 500 index will climb to 2,311. That’s around 12 percent higher than current levels. That’s thanks to growth in corporate sales, profits and the overall economy. He believes investors should be buying stocks that have the most exposure to economic improvement.

JOHN STOLTZFUS, OPPENHEIMER MANAGING DIR. & CHIEF MARKET STRATEGIST: We want to be in cyclicals, so we want to be in industrials, technology. We want to be exposed to materials, continue that type of action, getting some exposure to financials.

CHU: Other forecasters are positive but more measured in their expectations. Goldman Sachs (NYSE:GS) chief U.S. equities strategist David Kostin is in that category. His target for the S&P 500 is 2100 which is just about 1 1/2 percent higher than it is right now. While he believes corporate earnings will continue to grow, the possibility of rising interest rates in the second half of the year could temper stock market gains and positive but lower stock market returns could be the norm in the coming years.

DAVID KOSTIN, GOLDMAN SACHS: That’s essentially the story, the narrative of the last couple of years. You’ve had a great rally in the market, that’s terrific. And moving forward, you think you’re looking at around of 6 percent annualized return over the next five years as a type of expected return you should anticipate.

CHU (on camera): Those are just a couple of the early reads from Wall Street experts. Many more are expected to give their predictions in the next few weeks. Remains to be seen whether any will be pessimistic about the year 2015 or if the general consensus is that the bull run continues.

For NIGHTLY BUSINESS REPORT, I’m Dominic Chu.

(END VIDEOTAPE)

MATHISEN: Well, our market guest tonight isn’t just bullish about next year, but for a lot of years thereafter. He believes the U.S. stock market is just six years into what he says will be a 20-year bull market. He’s Brian Belski, chief investment strategist at BMO Capital Market.

Brian, welcome back. Good to have you with us. We applaud anybody who will stick their neck out the way you just have. What gives you the confidence to think that we’re in a 20-year bull market? Not to say we haven’t had them before, and particularly most recently in the bond market.

BRIAN BELSKI, BMO CAPITAL MARKETS CHIEF INVESTMENT STRATEGIST: Well, thanks for having us, Tyler.

I would say — number one, this is not a new call for us. We’ve been talking about 20-year circular bull for at least three years. Number two, we originally turned bullish on the stock market back in December of 2008. In fact, I believe we were one of the very first strategists on Wall Street to put a double digit percentage return on the S&P 500.

However, it took a lot of our Wall Street brethren to turn bullish over the last few years, now it just seems in terms of the prior package, a lot of people are bullish, but I would warn people. Not a lot of people are looking out longer term. I call it the over the shoulder stealth bull market, the greatest stealth bull market of my 25-year career.

And I think what we’ve seen to date is not a lot of believability from the longer term perspective. We believe many of our institutional portfolio managers around the world are still managing their portfolios on a quarterly base and not even on an annual basis. They’re chasing performance. They’re not believing in the trends, and I think the best bull markets according to our work through history especially equities, Tyler, come from lost decades.

Now, clearly, in America we had a lost decade to start this new millennial. We had a lost decade in the ’70s, which spurred the great bull market of the ’80s and ‘90s, that a lost decade in the ‘30s, which spawned the great bull market of the mid-‘40s and mid-’50s.

GHARIB: OK.

BELSKI: So, that’s what we have going for us. And the believability factor remains very low. So, from a fundamental perspective, we remain very bullish as well.

GHARIB: So, let me just ask you a question as to what you just said, Brian. Believability. I mean, that is an issue not just for the institutional investors but for the individual investors and they may be thinking even more short-term than a couple of months out. Where are the fund flows going to come to drive this bull market that you’re talking about?

BELSKI: Susie, it’s a great question. But let me caution you about one thing that you said. I believe that actually the institutional investors and the retail investor have swapped spots. When I learned the business back in the late ’80s and early ’90s, it was the institutional investor that was much longer term and the retail investor was shorter term. And I think they’ve switched positions. I think retail people look much more longer term.

Institutional investors get paid and judged on a quarterly basis with respect to their performance. Retail investors are really looking for the longer term trends. Many retail investors around North America get spook this year when interest rates actually went down. And so, we think retail investors are looking out for the longer term. They have yet really to commit the capital that we think will really help fuel this bull market to go higher.

MATHISEN: But, you know, Brian, I take all your points. I remember back in the late ’90s, when valuations were different than they are today, I’ll grant you that. A lot of people thought that everything was just going to keep going up.

But then, we seem to have a remarkable way in our global culture of messing up bull markets. Sometimes the events can come sort of exogenously. 9/11 was nothing we could have anticipated, and then the big crisis in ’07, ’08 and into ’09. So, they can often get derailed very dramatically.

BELSKI: Well, the bull market was already over by 9/11, Tyler. If you remember, the market peaked in the third quarter —

MATHISEN: It had peaked the year before, true.

BELSKI: It peaked the year before, and remember, too, it was also brought on upon a capacity led recession caused by technology.

Over that lost decade, we had two recessions, multiple wars, 9/11. America stopped believing in itself. During that time corporate America became conservative, rebuilt their balance sheets. And now, corporate America has fueled the most stable earnings in the world.

And we know what’s going on with retail. They’re scared. They’re — you should never lead any of your emotions by fear — any of your investments by fear and emotion. They bought bonds and saved cash because they were scared. You should never base your investment decisions on fear, you should base it on fundamentals, and fundamentals say equities and especially U.S. equities look very, very attractive.

MATHISEN: Brian, may all our 401(k)s be listening to you. Thank you very much. We appreciate it.

Brian Belski with BMO Capital Markets.

GHARIB: United Technologies (NYSE:UTX) was one of the biggest decliners in the Dow today. Shares fell about 1 1/2 percent after the industrial giant’s CEO suddenly and unexpectedly resigned.

Mary Thompson has more on the unusual move at United Technologies (NYSE:UTX).

(BEGIN VIDEOTAPE)

MARY THOMPSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): The announcement from United Technologies (NYSE:UTX), void of the sugar coating, that typically accompanies a CEO’s departure. Louis Chenevert, CEO since 2008, retiring immediately and being succeeded by his CFO, Greg Hayes.

JEFFREY SONNENFELD, YALE SCHOOL OF MANAGEMENT PROFESSOR: This is a shocker. It was not anything anybody anticipated.

THOMPSON: An industrial giant with businesses ranging from carrier air conditioners to Otis elevators to Pratt and Whitney engines, UTC only saying Chenevert’s departure is unrelated to the firm’s financial performance and the transition is part of an established succession plan.

(on camera): Still, investors didn’t know the change was coming and that’s unusual for a firm this size as typically they try to telegraph CEO succession. With nothing else to go by, Yale’s Jeffrey Sonnenfeld said investors are right to question whether it was personal, personnel or strategic issues that were behind the departure.

SONNENFELD: There’s something that’s being hidden, something hidden from sight.

THOMPSON (voice-over): A 20-year veteran of the firm, Chenevert was seen as capable if not dynamic. And despite concerns about competition in key markets like China, he wasn’t dogged by criticism. Now, his successor is left to respond to unanswered questions at the firm’s annual investor day next month.

For NIGHTLY BUSINESS REPORT, I’m Mary Thompson in New York.

(END VIDEOTAPE)

MATHISEN: And some facts now about United Technologies (NYSE:UTX) if you’re not so familiar with the company.

UTX shares are up more than 50 percent since Chenevert took over as chief executive back in 2008. Its dividend yield just 2 percent. That puts it in the bottom third of Dow components. And institutions hold more than 83 percent of those shares. Blackrock, Vanguard, State Street (NYSE:STT), Global Advisers, big indexers, big ETF companies, they own the biggest chunks of UTX.

GHARIB: Switching now to energy, Iran and six world powers including the U.S. missed a second deadline today to resolve a decade-long dispute over its nuclear program. They extended talks until next June. Meanwhile, Iran is one of the founding members of OPEC which meets this Thursday in Vienna to discuss cutting production levels in order to stop the steady drop in oil prices.

But with oil traders expecting no change of production levels by OPEC, crude prices fell again today. West Texas oil down 73 cents a barrel to $75.78. Benchmark Brent Crude off 68 cents, closing at $79.68.

MATHISEN: And in response to reports that OPEC nations may vote to cut crude production at Thursday’s meeting, the energy minister from the United Arab Emirates said today that the cartel would make what he called the appropriate decision regarding production levels.

GHARIB: And just ahead of the long Thanksgiving Day holiday weekend, gas prices are down again. That’s good news for the 46 million Americans who are expected to hit the road over the next few days. The Lundberg Survey says average gas prices fell another 10 cents a gallon over the past two weeks, to $2.84 a gallon nationwide. That’s a fresh four-year low.

MATHISEN: Still ahead, big investors have played a major role in the housing market since the crisis, propping up the market by buying distressed properties. But as they start to cash out, is anyone moving in?

(MUSIC)

MATHISEN: Are higher interest rates a sure bet in 2015? One top bond investor thinks definitely so. Jeffrey Gundlach, the founder, CEO, CIO of DoubleLine Capital, said that he expects the Federal Reserve will raise benchmark rates next year and the impact on bond yields will be significant.

(BEGIN VIDEO CLIP)

JEFFREY GUNDLACH, DOUBLELINE CAPITAL LP CO-FOUNDER & CEO: The surprise will be how low a level the U.S. yield curve flats at. I think the Fed is going to raise rates. The message of 2014 has been, as the potential for Fed rate hikes has increased, the long has done nothing but rally. I think the yield curve is going to flatten at a level previously thought unthinkable.

(END VIDEO CLIP)

MATHISEN: Today, the yield on the 10-year note fell slightly.

GHARIB: Now, to a shift to the housing market. The large scale investors who helped prop up the sector during the housing crisis are now moving out. But who’s moving in?

Diana Olick has that story.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): They mopped up the mess of the foreclosure crisis buying distressed properties and hoping to squeeze out big profit by turning them into rentals. Large scale institutional investors like Blackstone, Colony and American Homes 4 Rent, but now they’re slowing their purchases and letting the little guys in.

SIMON FROST, KEY PROPERTY SERVICES CFO: They’re slowing down their purchases because they still need to prove that they are able to make a lot of money in this space. To do that, they need to raise rents. They need to see house appreciation specifically in the units that they own. That’s going to take a little while.

OLICK: Frost’s Key Property Services buys homes, rehabs and sells them to other investors. Headquartered in the Atlanta area, Frost says he’s seeing the big investors less frequently on the courthouse steps but the rental trade is still red hot.

UNIDENTIFIED MALE: Open the bid at $80,000 —

FROST: I feel like the fly of the wall of a far bigger movement. And it’s really the smaller investors that are driving them.

OLICK (on camera): Rental demand is still sky high. Even with rents rising, we’re seeing it in both single-family and multi-family units. That’s because potential buyers, especially first-time buyers, are still having trouble getting a mortgage.

STUART MILLER, LENNAR CEO: We can’t get mortgages approved, and that’s really governing demand. So, it’s keeping the range of improvement of the market really constrained into a narrow band.

OLICK: And at the same time broadening opportunity for investors large, medium and small to take the rental trade to the next level.

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

(END VIDEOTAPE)

GHARIB: For more on the shift in large-scale investors moving out of housing, go to our Web site, NBR.com.

MATHISEN: We begin “Market Focus” tonight with another sizable deal in drug land.

BioMarin is buying Dutch drug company Prosensa in a deal that could be worth more than $800 million. The size of the deal will depend on whether some of Prosensa’s drugs gain approval. Shares of BioMarin up more than 2 percent to $87.77. Prosensa saw its stock surge 62 percent to $18.60.

Two reinsurers will also combine a deal also announced today. RenaissanceRe will purchase fellow Bermuda-based reinsurer Platinum Underwriters for almost $2 billion. This is an effort by RenaissanceRe to generate business amid more competition and falling premiums. RenaissanceRe fell more than 2 1/2 percent to $98.76. Platinum up 21 percent to $74.19.

Merck (NYSE:MRK) is buying the rights to an experimental Ebola vaccine from New Link Genetics. As part of the deal, Merck (NYSE:MRK) will have the right to develop and distribute the treatment and any follow on products derived from that vaccine. With Merck (NYSE:MRK) involved, the drug’s development could move at a faster pace.

Still, Merck (NYSE:MRK) shares fell a little bit today to $59.25. New Link down more than 2 percent to $34.44.

And Lockheed Martin (NYSE:LMT) won a nearly $5 billion government contract, and that sent shares up slightly. The deal is with the Pentagon is to supply an eighth batch of those pricey F-35 fighter jets. The stock was 89 cents higher to $188.82.

GHARIB: A big selloff in shares of Trina Solar after the company cut its full-year forecast for shipments. This was partly because a large project order was cancelled. Its quarterly results also missed expectations. Shares slumped more than 5 percent to $10.36.

A unit of Citigroup (NYSE:C) must pay a $15 million fine for lapses in supervision. The financial industry regulatory authority or known as FINRA found that the company failed to adequately supervise its research analysts’ interactions with bank clients. The bank neither admitted nor denied the charges, but it consented to the finding. Despite that, shares rose almost 1 1/2 percent to $54.40.

Renting Redbox movies is about to get more expensive. The owner of Redbox Kiosks, Outerwall, is hiking the prices for renting movies and games to help fund improvements in its business as streaming sites are reducing demand for DVDs. Movies used to cost $1.20 a day, now they’ll be $1.50. Shares rose by almost $8 to $71.39.

And after the market close today, Workday posted a smaller than expected for the third quarter on better than expected revenues. The maker of human resources software maker gave fourth quarter guidance that was basically in line with street views. Still, shares tumbled initially in after hours trading. In the regular session, shares slipped slightly to $92.49

MATHISEN: Well, could disappointing sales of the Samsung Galaxy S5 smartphone mean that heads may roll over at company headquarters? “Wall Street Journal” reports that S5 sales fell 40 percent short of forecast, Samsung is now looking to shake up the executive ranks in its mobile phone division. It’s trying to simplify costs and streamline options for consumers.

GHARIB: A new computer virus has been discovered. One of the most sophisticated examples of malware ever seen. Security firm Symantec (NASDAQ:SYMC) says it’s been used to spy on private companies and governments for the past six years.

Eamon Javers join us now from Washington with more on all of this.

So, it’s a really troubling situation, Eamon. What is it about this malware that makes Symantec (NASDAQ:SYMC) think it was created by a nation state?

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, Symantec (NASDAQ:SYMC) is looking at the level of sophistication of this malware here and also the amount of stealthiness that was involved in creating it. It’s designed to get into systems and stay in those systems for a long period of time, sending back information to whoever the initial hacker was. And that’s why Symantec (NASDAQ:SYMC) is coming down with that conclusion that it was likely a nation state behind the creation of this malware and an English speaking nation state because they found English language words tucked in among the computer code that created this piece of malware. And it’s been attacking specific countries, notably Russia and Saudi Arabia, but not the United States and China. That might give you some indication of where this is coming from.

GHARIB: So, you hinted at who’s been hit by it. Has it mostly been governments that have been hit or have commercial properties been hit as well?

JAVERS: It’s been largely private and commercial properties as well as telecom and communications. Some of the theory behind this from Symantec’s white paper today is that this is a particular computer Trojan that’s designed to monitor communications, perhaps for tracking people or finding out what they’re talking about on the Internet in those particular areas. Again, Russia and Saudi Arabia seem to be the focus here of a lot of this malware activity.

GHARIB: So, how vulnerable are businesses, Eamon? And is there anything they can do to protect themselves?

JAVERS: The old advice applies here. Don’t click on anything that seems mysterious or a link that somebody sends you that just doesn’t quite seem to fit. Be very careful particularly on Yahoo (NASDAQ:YHOO) Messenger. That’s one of the vectors they say was used here at least in some cases by the creator of the malware to get into the systems.

GHARIB: Thanks a lot, Eamon. Eamon Javers reporting from Washington.

And coming up on NIGHTLY BUSINESS REPORT: the job skill that’s in high demand and offers a six-figure salary without a four-year degree. You might be surprised by the answer. That story is next.

(MUSIC)

MATHISEN: If you’re in the market for a new job or maybe a whole new career, you may want to consider becoming a court reporter. The pay is surprisingly good. You may even get to set your own hours. And as Jane Wells shows us, court reporters are in high demand right now.

(BEGIN VIDEOTAPE)

JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Are you ready?

(voice-over): I’m reading my own story about an Ebola toy as a court reporter tribes. She said Ebola plush toy comes with a rather robust hang tag. All those symbols turn into words and money. The court reporting industry is begging for professionals with a skill that does not require an expensive four-year degree. Jobs go far beyond the courtroom with new mandates for more closed captioning.

SARAH NAGEOTTE, NATIONAL COURT REPORTERS ASSN. PRES.: There is going to be a demand and a need for at least 5,500 new positions over the next three to five coming years.

UNIDENTIFIED FEMALE: So here we go from the top again.

WELLS: Margaret Ortiz runs the court reporting program at West Valley College in Saratoga, California.

MARGARET ORTIZ, WEST VALLEY COLLEGE: Many of our students have musical backgrounds. They — a lot of them have played the piano.

UNIDENTIFIED FEMALE: Objection, your honor, speculation.

UNIDENTIFIED FEMALE: Sustained.

WELLS: Students include Katherine Schilling, who graduated from Smith College, but felt herself hitting a salary cap in the corporate world.

KATHERINE SCHILLING, COURT REPORTING STUDENT: I was watching “Sons of Anarchy” on Netflix (NASDAQ:NFLX) and it has subtitles. And I love watching with subtitles. And at the very end, it says, captioning provided by — da, da, da. And I thought, it’s a job. People do this. You get paid for this?

WELLS: Gabriella Woodson is a high school graduate who’s mom is a court reporter.

GABRIELLA WOODSON, COURT REPORTING STUDENT: I love to type. I love to write and all that. And I’m good at being quiet. So, I just thought it’s perfect for me.

WELLS: To be certified, court reporters need to type 225 words a minute with at least two voices speaking. Those who succeed can often set their own schedules.

ORTIZ: There is a current job opening, permanent job opening for a court reporter in the San Francisco courts, and it is starting salary is over $100,000.

WELLS (on camera): Plus benefits?

ORTIZ: Plus benefits.

WELLS: Siri, I’d like to call a witness to stand in this malpractice case to ask him if he left a scalpel inside a patient.

Objection, your honor.

Sustained. Strike from the record.

(voice-over): But will Siri eventually remove the need for court reporters?

SIRI: I’m sorry. I can’t take many words at once.

WELLS: Not yet.

ORTIZ: Back in the 1980s, people were asking court reporters can’t this be done with a tape recorder? And we’re still here.

WELLS: Still proving the need for the human touch.

For NIGHTLY BUSINESS REPORT, Jane Wells, Los Angeles.

(END VIDEOTAPE)

GHARIB: Two hundred twenty-five words a minute. I think maybe I do 50.

MATHISEN: I think most newscasts go at 180 words — I can’t talk 220 words a minute. My goodness.

GHARIB: This job’s not for you.

MATHISEN: No.

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

MATHISEN: And I’ll speak slowly. I’m Tyler Mathisen. Have a great evening, everybody. We’ll see you back here tomorrow night.

END

END

Nightly Business Report transcripts and video are available on-line post broadcast at http://nbr.com. 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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