TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR:
Back to basics. Why
this summer week taught us a lot about the U.S. economy and what it might
mean for the Federal Reserve and your money.
Long road ahead. The U.S. flag is raised at the embassy in Havana.
But there`s still a long way to go before economic relations are
All American. Why our market monitor is investing in companies that
do most of their business right here in the USA.
All that and more tonight on NIGHTLY BUSINESS REPORT for Friday,
Good evening, everyone. Welcome. Thanks so much for joining us. I`m
Tyler Mathisen. Sue Herera has the evening off.
Well, this August week was anything but a summer snoozer. Over the
past few days, we learned that the world`s largest economy, ours, remains
resilient, though far from firing on all cylinders. Manufacturing is
improving, in the face of a strong dollar and falling oil prices. The
consumer is spending, the job market is strengthening and the stock market
rebounded after China devalued its currency earlier this week and really
all week long.
Today, we got additional information on the state of the economy,
bringing investor attention back to good old fashioned fundamentals.
MATHISEN: It`s a familiar story, but it paints a muddled picture. On
the bright side, the U.S. economy is growing. Two key numbers out today
confirm it. The Producer Price Index or PPI up 0.2 percent, and industrial
production also higher, 0.6 percent, both up more than expected.
But whether the U.S. economy is moving fast enough to justify an
interest rate hike by the Federal Reserve — well, that is another
DAVID ROSENBERG, GLUSKIN SHEFF CHIEF ECONOMIST: If they`re going to
move it`s once or twice and only the move off of zero and to stay silent in
the election period.
LINDSAY PIEGZA, STIFEL CHIEF ECONOMIST: Remember, when we take a step
back, and look at this on an annual basis, the PPI is still very much in
negative territory, as it has been for the seventh consecutive month. So,
still no signs of upward pressure, no immediacy for the Fed to react.
MATHISEN: In fact, producer prices are actually down almost 1 percent
compared with a year ago. And the rise in July was a smaller jump than we
saw in June, so the rate of growth slowed down. Even core prices excluding
both food and the reeling energy sector are only up 0.6 percent over a
year, so we`re a long way from any signs of the 2 percent inflation the Fed
says it`s looking for.
Industrial production is also showing some weakness. Peel back the
headline number and you will find that almost all the growth came from
autos and auto parts manufacturing, up more than 10 percent. Strip out
autos and manufacturing which accounts for most of the industrial
production number was barely higher, 0.1 percent. And there were downward
revisions to the June number.
What`s more, the Fed has to consider the stronger U.S. dollar. That
cheapens imports and slows our exports.
Then there`s the weak energy sector and a generally bumpy global
economy. Earlier this week, China devalued the yuan. Today, the European
Union said it missed forecasts and revised the first quarter number down a
tenth of a point.
The U.S. consumer may be feeling a pinch, too. Even with a good July
retail number this week, consumer sentiment dropped below 93 after a slight
uptick had been expected.
Of course, it`s still summertime. The living may be easy, even if the
data for now looks choppy enough to make the Fed reach for the Dramamine.
MATHISEN: Well, that economic data sent stocks higher to finish the
week. By the close of trading today, the Dow Jones industrials rose 69
points to 17,477. NASDAQ climbed 14. S&P higher by 8.
For the week which was filled with volatility, believe it or not, all
three major averages rose by just a bit.
While investigators are pulling their money from U.S. equity funds,
Morningstar (NASDAQ:MORN) reports outflows through July are running at the
highest level since 1993. And as the money flows out of U.S. funds, it`s
going into the international funds. It`s also moving out of actively
managed ones and into passive or index funds.
Well, the U.S. has approved limited sales of crude oil to Mexico. The
Commerce Department has told lawmakers that it will approve an application
by Mexico`s national oil company. The application would allow Mexico to
enter into oil trade agreements with U.S. companies.
The energy industry has been pushing to relax Washington`s
restrictions on oil exports which have been in place for decades. Today,
nonetheless, the oil prices rose slightly to $42.50 a barrel.
Well, it was an historic day. More than 50 years in the making. The
American flag was raised above a new U.S. embassy in Cuba, symbolizing the
restoration of diplomatic and economic relations between the two countries.
But as Michelle Caruso-Cabrera reports, there`s still a lot of hard
MICHELLE CARUSO-CABRERA, NIGHTLY BUSINESS REPORT CORRESPONDENT: The
defining moment of today`s event — when the three marines who lowered the
flag the last time back in 1961 raised the flag today at what is now once
again the U.S. embassy here in Havana.
John Kerry became the first U.S. secretary of state to visit since
1945. In his speech, which was broadcast on national Cuban television, he
said that the U.S. and Cuba are not rivals, not enemies, but rather
neighbors. He once again repeated the president`s request to eliminate the
U.S. embargo against the island and at the same time, welcomed American
business executives` interest in trying to do business here despite the
JOHN KERRY, SECRETARY OF STATE: We are encouraged that more and more
U.S. companies are exploring commercial ventures here that would create
opportunities, for Cuba`s own rising number of entrepreneurs.
CARUSO-CABRERA: Many of those invited and in attendance were those
who worked to improve relations for the last several years. There were
many Cuban-American business people as well, including former Commerce
Secretary Carlos Gutierrez, the former CEO of Kellogg`s. He was born here
in Havana, Cuba, and today`s trip was his first since 1960.
CARLOS GUTIERREZ, FORMER SECRETARY OF COMMERCE: This morning, I woke
up and I was joyful, I was happy, to wake up in Havana. This was
incredibly emotional to see our flag coming up in Havana again. Having
CARUSO-CABRERA: And despite today`s watershed moment, there is still
a long road ahead before this full normalization between the two countries.
Once again, the Cuban government called for the end of the embargo against
the country. But it doesn`t look like there`s enough votes in Congress for
that to happen any time soon. And even if the embargo were to go away,
this is a communist country and it`s still incredibly difficult to do
In Havana, Cuba, Michelle Caruso-Cabrera, NIGHTLY BUSINESS REPORT.
MATHISEN: Meanwhile, in Brussels, members of the European Commission
said they reached an agreement to lend Greece the equivalent of $96 billion
in bailout funds over three years. The deal followed approval by Greek
lawmakers of austerity measures that were needed to get that bailout money.
And now to China where investors have been watching the government`s
move to devalue its currency this week. Small importers and exporters have
also taken notice. They can be sensitive to currency swings because they
typically have fewer resources to handle the impact. And for some, China`s
currency devaluation may be both a blessing and a curse.
Kate Rogers (NYSE:ROG) explains.
KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Raymond Arth is
manager of the Phoenix faucets division of Valterra Products LLC located in
Avon Lake, Ohio. Phoenix makes 40 percent of its gross sales revenue from
imported faucets and plumbing products from China. If the yuan devaluation
continues, it may mean better leverage for trade deals going forward.
RAYMOND ARTH, VALTERRA PRODUCTS LLC: What we are seeing here is more
evidence of weakness in the Chinese economy. And they have really been
facing some challenges over the last couple of years. Which has left the
manufacturers, the people we`re dealing with working very hard to be
aggressive with their pricing.
What that means for me as we go forward is, as a buyer, I may have
more leverage with the suppliers because they don`t have as much business
activity as they did and we may with the stronger dollar be able to
negotiate better deals.
ROGERS: While small business advocacy groups say a continued decline
in the Chinese currency will benefit importers of Chinese products, the
downside to that is a potential hit on “made in America” manufacturing.
JODY MILANESE, NATIONAL SMALL BUSINESS ASSOCIATION: American made
products are going to be more expensive in China to buy, which puts U.S.
exporters at a competitive disadvantage, and I think it also potentially
leads to an even widening of our already large trade deficit that we have
ROGERS: This is a concern of Arth as 60 percent of the products line
is manufactured here in the States. The yuan devaluation puts him in the
scenario where his two product lines are in competition with one another.
ARTH: The gap widens between my low price entry point, which is an
imported product, and the Phoenix made products that are produced in our
factory, customers will tend to move to buy the lower priced product. So,
it actually while I get the benefit of buying lower priced components and
finished assemblies, because it competes with my other product line, my
domestic faucets will probably see some erosion in sales as customers move
to lower price offering.
ROGERS: So as the global markets continue to monitor the yuan
decline, so too do American businesses.
For NIGHTLY BUSINESS REPORT, I`m Kate Rogers (NYSE:ROG).
MATHISEN: Still ahead, the big money behind some of the biggest state
fairs in the country.
MATHISEN: Ford is dropping one of the most popular mutual funds of
all from its retirement accounts for employees. The automaker pulling $900
million from Fidelity`s Contrafund, a fund that`s found in many retirement
accounts. In a statement, Ford said it makes changes from time to time to
suit the needs of its employees.
Well, Iowa is hosting one of the largest state fairs in the country.
And while it may conjure images of deep fried foods like fried butter and
amusement rides, this time-honored Midwestern tradition is also big
business for state associations and local shops.
Morgan Brennan is at the center of it all in Des Moines.
MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Fried food and
UNIDENTIFIED MALE: That looks pretty good to me.
BRENNAN: This is the Iowa state fair. With roughly 1 million
visitors each year, it`s one of the biggest in the country.
GARY SLATER, IOWA STATE FAIR MANAGER & CEO: Of those million people
that come to the Iowa state fair, many of them come and stay in the
surrounding area and they, of course, drive here and utilize our local
businesses in addition to the fair. We have estimate it`s over $100
million worth of impact in the 11 days.
BRENNAN: Even though they`re not for profit entities, state fairs are
a big business. With the largest racking up tens of millions of dollars in
revenue, including sales for local entrepreneurs and statewide associations
like the corn farmers and cattle ranchers.
In Iowa, officials have been taking steps to make sure the fair stays
KRISTIN FAILOR: In this last legislative session, the Senate and the
House, the governor all agreed to make sure that the school start — none
of the school districts can start schools until after the state fair is
BRENNAN: Western apparel retailer Western Edge has two booths at
MELANIE EDGE, WESTERN EDGE OWNER: We like coming here because there
are so many people here and then we`re advertising and hopefully they will
be coming to our stores in future.
BRENNAN: And, of course, politicians like to come here today. Since
the state holds the first caucus or major electoral event in the nominating
process for president. Groups gather around the soap box that hosts
candidates and Iowans line up at the cast your kernel booth to vote with
corn kernels on who will be the next commander-in-chief.
SLATER: Fair goers want to meet them. And I think it does drive the
BRENNAN: While the Iowa state fair is the campaign grounds of
presidential hopefuls, including earlier this morning, GOP candidate Jeb
Bush, when its comes to making money at the fair, it is all about the food.
UNIDENTIFIED MALE: Very hot. So be careful.
BRENNAN: There`s a waiting list for booth space and food vendors can
rack up hundreds of thousands of dollars in revenue in less than two weeks.
And if it`s on a stick, it`s likely to sell, be it corn dogs, cheese,
salad, or a local favorite, pork chop on a stick, of which the pork
association expects to go through 67,000.
For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan in Des Moines, Iowa.
MATHISEN: I`m now very hungry.
While investors cheered JCPenney on better than expected results and
that`s where we begin tonight`s “Market Focus”.
The retailer posted a loss, but it was narrower than expected, revenue
also beat forecasts, as did its increase in same-store sales. That added
up to a good day in the market for JCP. Shares rose 5.5 percent to $8.52.
Warren Buffett eliminated his stakes in National Oilwell Varco and
Phillips 66, according to a filing. The move signals Buffett could have
another large investment in the works, clearing the deck. Shares of
National Oilwell Varco fell a fraction to $39.55. Phillips 66 was also
down slightly to $82.30.
Lumber Liquidators rose after Tiger Management disclosed in a filing
that it is taking a new stake in the flooring maker. The firm`s nearly
240,000 share position is welcome news for investors, following allegations
that some of its flooring sold there contains a known carcinogen. Shares
were nearly eight percent higher to $14.02.
Nelson Peltz`s Trian Funds revealed it has taken a more than 7 percent
stake in the food services firm Sysco (NYSE:SYY). The position, worth more
than $1.5 billion, would make Trian the largest shareholder in the company,
according to reports. Shares were 7.5 percent higher to $41.38.
And with all the uncertainty overseas, how can you protect your
Tonight`s market monitor has three picks that he says are safe amid
all the volatility. This is his first appearance on NIGHTLY BUSINESS
And so, we welcome Mark Spellman, portfolio manager at Alpine Funds.
Mark, good to have you with us.
I note in my notes that you have two principal concerns. One is how
the market will react in the short term if and when the Federal Reserve
raises interest rates. And the other is slowing global growth.
How do you meld the two and come up with a portfolio strategy?
MARK SPELLMAN, ALPINE FUNDS PORTFOLIO MANAGER: Yes, I think this week
for sure, the emphasis has been on slowing global growth, the actions by
the Chinese government has clearly shown they`re very worried. That has
global implications in the area, their trading partners in Japan. Also
with commodity prices and energy, metals. That`s all a worry.
That`s why in our — in our Alpine equity income fund, we are really
trying to concentrate on companies that derive most of their revenues here
in the U.S. and also pay dividend, and they`re going to raise that dividend
MATHISEN: So, stay close to home and look for dividends. After all,
as you point out, you`re an equity income fund.
Let`s go through your choices. Discover financial is one of them.
You have a target price of $72 a share.
SPELLMAN: Yes, I think the bottom line with discover, is just
extremely cheap at ten times earnings. When you look at the Dodd-Frank
stress test that took place early this year, this company ranked number one
of all companies, all financial institutions. That`s going to help you
sleep well at night.
This is a company that`s raising its dividend, buying back 8.5 percent
of its shares. We think they`re going to do the same thing next year.
It`s also almost exclusively U.S. revenue. It benefits from improving U.S.
consumer, higher disposable income. We really like the name here.
MATHISEN: Let`s talk about CBS (NYSE:CBS) Corp. You got a target of
$64 over the next 12 to 18 months.
SPELLMAN: Yes. The space of media has been really beaten up. And I
think CBS (NYSE:CBS) has gotten beaten up a little too much compared to
some of its rivals. It doesn`t have the kind of exposures they have. It
does have ad exposure.
But this is a terrific network. They have what everybody wants —
content. So, if you`re worried about the slimming down of cable bundles,
CBS (NYSE:CBS) is going to be there. And they also have football. They
have the Super Bowl this year.
They have a lot of content that people want. They`re also buying a
lot of stock. They just raised their dividend 25 percent at 14 times
earnings is another stock we think has a lot of upside.
MATHISEN: And one of the best executives running it, in Les Moonves.
Let`s go to Kinder Morgan. You have a target price there of $40.
SPELLMAN: Yes, another proverbial baby out with the bath water, we
all know what`s happened in the energy sector over this past year.
However, this is a company that is the largest transportation pipeline
company in North America. Very little of its earnings and revenue are
derived from commodity prices.
This is a fee in volume business and there`s a lot of volume. This is
a company that has a 6 percent dividend yield. Not only do we think this
dividend is safe, we think it`s going to run up another 10 percent for the
next couple of years.
And the other thing I really like about this company, when a stock
gets hit the way this has done, this management team and the board of
directors since the middle of June have fought back $30 million — excuse
me, they bought $30 million of stock in the open market for their own
account. That`s a really good sign that they`re really confident in what`s
going to happen going forward.
MATHISEN: Putting their money to work in their own — that`s good.
That`s a good sign.
Mark Spellman, thank you, with Alpine Funds.
SPELLMAN: Thank you.
MATHISEN: And coming up, can Disney (NYSE:DIS) turn the force into
cold hard cash for the company and the shareholders?
MATHISEN: Shares of Disney (NYSE:DIS), along with lots of media
stocks, may have taken a beating recently, but they`re still up about 20
percent over the past year and today thousands of Disney (NYSE:DIS) fans
were on hand to see what new offerings the company has planned.
Jane Wells reports from Anaheim.
BOB IGER, DISNEY CHAIRMAN & CEO: He transported us to the galaxy far,
far away. And there was no looking back.
JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Of all the things
the Walt Disney (NYSE:DIS) Company wants to celebrate this weekend at its
fan event, D23, none matched the anticipation around “Star Wars.” “The
Force Awakens” will awaken in theaters in December, the first big screen
“Star Wars” movie under the Disney (NYSE:DIS) banner.
And today, George Lucas was honored.
GEORGE LUCAS, LUCASFILM FOUNDER: Not very many people realize that
Goofy was the inspiration for Jar Jar Binks. I know you`ll look at him
differently now, because it`s pretty obvious, actually.
WELLS: Investors hope to learn more about the plans to further
monetize “Star Wars”, like the possibility of converting Toon Town of
Disneyland into the “Star Wars” area. More tomorrow like than
Even “Star Wars” music is getting high praise as legendary composer
Danny Elfman paid tribute to the legendary John Williams who has scored
every “Star Wars” film ever made.
DANNY ELFMAN, COMPOSER: Of course, you know, he is separate from all
of us. There`s composers and there`s John Williams. And, you know, he is
WELLS: The “Star Wars” event will be the big event of the weekend and
even though there was a disturbance in the force right now in the Chinese
economy, box office expectations for this movie when it comes out in
December are galactic.
There is more to talk about, like Disney`s huge investment in the park
in Shanghai, given the Chinese economy. What`s up next for Marvel, a
branch of Disney (NYSE:DIS) which had no presence this year at Comic-Con.
And good news for friends of Buzz and Woody, John Lasseter will be
directing “Toy Story 4” in 2017. There were also be an “Incredibles 2” and
a sequel to “Frozen”.
JOHN LASSETER, PIXAR CO-FOUNDER: We only make sequels if we come up
with a story that`s as good or better than the original. That`s our rule.
WELLS: Finally, it`s also a weekend to remember those who made a huge
impact on the company and remember the past when Walt Disney (NYSE:DIS)
created something very unique a long time ago in an imagination far, far
For NIGHTLY BUSINESS REPORT, Jane Wells, Anaheim.
MATHISEN: And from Anaheim, we now head north to the beautiful
Monterey Peninsula, Pebble Beach, where some of the most expensive cars in
the world are on display and up for auction.
Robert Frank went to take a look at some of those very classic cars.
ROBERT FRANK, NIGHTLY BUSINESS REPORT CORRESPONDENT: It is the
richest car week in the world. Concours d`Elegance here in Pebble Beach is
where millionaires and billionaires gather to party, show off their rides
and buy cars that cost more than most houses.
This year, more than $400 million worth of cars will be auctioned off.
And more than 140 cars will sell for more than $1 million. Ferrari,
McLaren, Porsche and other luxury companies will hold exclusive dinners at
events for their top customers. Wall Streeters, real estate tycoons, tech
funders and European heiresses all fly in for these big three days.
JAY LENO, COMEDIAN/TV HOST: Well —
FRANK: Jay Leno has been coming to the Concours for decades and says
there are more international buyers and the prices have skyrocketed as the
rich buy these cars more as investments than just toys.
LENO: Oh, I have been coming here since the `80s. What`s changed are
the investment potential of the car. I mean, you could buy — well, I`ll
give you an example. There was a guy on Long Island that had the million
dollar car museum. He had a million dollars worth of cars. And he had 250
Now, you have one car in that museum. Maybe on jacks with the wheels
missing, you know, because — I mean, that`s how crazy it`s gotten.
FRANK: But some wonder if the collectible car craze is a bubble
that`s getting ready to pop. Prices for top cars have more than doubled
over the past three years and there are now more and more speculators
entering the market purely to buy cars for investment gains rather than to
MCKEEL HAGERTY, HAGERTY CEO: The concern in the marketplace is just
are they going the drive values through the roof? And, you know, really
kind of create that frothy, speculative environment that will make people
FRANK: Among the top cars are the pope`s Ferrari, a 2005 Enzo that
was given to John Paul II and then auctioned off to charity. Last night,
it sold for $5.5 million.
Ferrari Testarossa used on the “Miami Vice” TV show in the 1980s could
sell for up to $1 million.
The last car purchased by Steve McQueen, the actor and racing legend,
is being sold, the 1976 Porsche Turbo Carrera that could top $1 million.
And the most expensive car this week could be this 1961 Ferrari
California Spyder expected to sell for between $16 million and $18 million.
For NIGHTLY BUSINESS REPORT, I`m Robert Frank in Pebble Beach.
MATHISEN: I think the lesson is buy a Ferrari.
That`s NIGHTLY BUSINESS REPORT for tonight. I`m Tyler Mathisen.
We want to remind you — this is the time of the year public TV seeks
your support. Thanks for watching. Thank you for your support. Have a
great weekend, everybody and we will see you here on Monday.