SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Not too hot, not too cold.
Why oil prices may be entering a level that is just right for the economy and your investments.
TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Doubling down. Amazon
(NASDAQ:AMZN) makes a big investment in India and it`s not the only major
American company on the prowl there.
HERERA: Shaken faith. Why eight years after the housing crisis, the
American psyche has yet to heal.
All that and more tonight on NIGHTLY BUSINESS REPORT for Wednesday, June
MATHISEN: Good evening, everyone, and what a day it was.
The Dow closes back above 18,000, but we begin with big news about oil
where prices hit a new high for the year and that may be what the economy
needs. Prices settled above $51 a barrel. That`s an 11-month high and
nearly double the lows hit in February, thanks to one of the most powerful
crude rallies in years.
Experts stay a sustained price just above $50 a barrel takes some of the
pressure off of producers, yet it`s not enough to translate into sharply
higher price at the gas pump for consumers.
Jackie DeAngelis takes a look at where oil prices may go next and how long
they may stay in this sweet spot.
JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Oil prices are on
the rise, a big bump up from February lows where crude got dangerously
close to $26 a barrel, an interesting dynamic emerging. In a higher priced
environment, perhaps producers will pump more crude.
JEFF GROSSMAN, BRG BROKERAGE: Producers will feel more ease now. But I
think we`re just beginning that trend. I think the real profitability area
is between the mid-$50s and $60. I think then they`ll start to think about
getting back in the game.
DEANGELIS: In fact, the Energy Administration Agency reported today that
U.S. production rose slightly for the first time in 15 weeks and last week,
Baker Hughes (NYSE:BHI) says that rig counts increased which surprised the
But what happens when prices go up and produces come and actually pushed
prices right back down.
GROSSMAN: That`s the way economics work. It`s supply and demand. It`s
like anything else. At this point of the higher prices, it`s more
conducive for people to explore and to pump more.
DEANGELIS: The good news is that while oil prices climb, gas prices are
staying relatively low. AAA reporting that the national average for a
gallon of regular is $2.36, certainly up from this year`s lows, but about
40 cents lower than this time last year.
Will gas prices continue to stay low? They actually might. Consensus
seems to be that oil prices have limited upside from here.
GROSSMAN: I would think we`ll move up through the end of this month
probably at the most would be about the mid-$50s, $54 is about the upper
range of this.
The driving season is definitely a factor but we have to see the inventory
go down a bit. So far, we really haven`t seen what we want to see as far
as a real impetus for the market to go up.
DEANGELIS: Remember though that last year at this time, we saw crude
prices peak around $60 in June and then they went back to the high $30s by
August. It`s too early to say that we won`t see that pattern again.
For NIGHTLY BUSINESS REPORT, I`m Jackie DeAngelis.
HERERA: So, let`s pick up on where we left off. How long does this sweet
spot in oil last and what does it mean for the economy and the consumer.
Joining us now to discuss that is Scott Roberts, senior portfolio manager
at INVESCO, where covers the oil and energy markets.
Good to have you here, Scott. Welcome.
SCOTT ROBERTS, INVESCO SR. PORTFOLIO MANAGER: Thank you.
HERERA: Let`s start with what Jackie left off with, which is, you know, we
did see oil move up sharply at one point in this most recent cycle and
then, it move right back down to $30. Where do you think we are right now?
Is the level that we`re seeing in oil now stainable for a longer period of
ROBERTS: Well, I don`t think the consumer has to worry much in the short-
term. If you think about gas prices the around the U.S., about $2.35 a
gallon, it`s a pretty attractive level and we`re seeing that in data points
like SUV sales, certainly pickup sales. So, I think the consumer has a
while to enjoy this price range.
I think in the coming months, what`s really going to weigh on oil prices
overall is the massive storage amount we have in the U.S. We`re still over
530 million barrels of oil in the U.S. in storage.
MATHISEN: So, let`s talk about where you see in the out-years as they stay
in politics, three, four, five years down the road, you have a rather more
bullish oil price in mind of about $70 and that seems to me because you`re
focused, unlike a lot of people who follow oil, you seem to be more focused
on demand than supply.
ROBERTS: Absolutely. You know, one of the very quick things to see about
oil demand is it grows each year. The exception, of course, would be 2008
with the financial crisis.
But what we`re seeing is population growth around the globe is leading to
stronger demand for transportation. That means cars, trucks, planes,
busses. So, we`re seeing demand growth of about a million barrels a year
and that`s — I should say a million barrels each day per year. That`s a
Now, on the supply side, the industry went too far with the capex dollars
being spent. They had a massive pull back and now, we`re seeing the change
from the low in February to, you know, just about $51 today.
HERERA: But is some of the pain that`s being felt for in stance in the
shale sector and also in the energy sector, we`ve seen a number of
companies have issue with debt and things like that, do you think we`ve
seen the worst of that?
ROBERTS: Well, the pain`s not over yet and there`s two very different
worlds out there. There are those energy companies that have sustainable
capital structures with great assets and low operating costs and those that
don`t. What we`re seeing here today is something about $35 billion of debt
that`s default from companies that were really over-leverage and didn`t
have very good assets.
On the flip side, we`ve seen just over $17 billion in capital raised on the
equity side from stronger companies. Those are the companies that have the
best assets to low operating costs that are starting to look at adding rigs
back into production.
HERERA: All right. Scott, we`ll leave it there. Thank you. Scott
Roberts with INVESCO.
ROBERTS: Thank you.
MATHISEN: And how about this? Stocks closing in on new highs, the rise in
oil prices lifted energy shares which in turn pushed the major indexes up.
Also helping stocks is the belief that central banks are going to continue
to support moderate economic growth — read that: keep interest rates down.
As we mentioned at the start of the program, the Dow Jones industrial
Average reclaimed that 18,000 peak, rising 66 points to 18,005. NASDAQ
added nearly 13, the S&P 500 rose about 7, its third day of gain, and just
a half percent now, a half percent from its all time high.
HERERA: And there were a record number of job openings. The labor
department reports more than 5.5 million positions posted in April. That
matches the all time high. The openings are across the range of industries
from manufacturing to trade to transportation. And while the report does
show that employers want to hire more, the high number can reflect the
difficult times some companies are having finding the right workers.
MATHISEN: The World Bank cut the forecast to just under 2.5 percent.
That`s down from its previous forecast of just about 3 percent. The energy
cites lingering commodity price pressure, sluggish demand in advanced
economies and weak trade. The World Bank`s current forecast is more
pessimistic than the IMF`s outlook for growth this year.
HERERA: In Washington, Indian Prime Minister Narendra Modi told a joint
meeting of Congress that the ties that bind the U.S. and his country are
indispensable. Modi received a warm reception from lawmakers, sharing his
vision as he looked to deepen the relationship between the U.S. and the
fastest growing major economy.
(BEGIN VIDEO CLIP)
NARENDRA MODI, INDIAN PRIME MINISTER: Let us work together to convert
shared ideas into practical cooperation. There can be no doubt that in one
thing in this relationship, both nations stand to gain.
(END VIDEO CLIP)
HERERA: Modi hopes that gain translates into a more prosperous India.
And as Seema Mody tells us, U.S. companies plan on being part of India`s
SEEMA MODY, NIGHTLY BUSINESS REPORT CORRESPONDENT: India continues to
garner the support of corporate America partly due to its economic growth
story and its passionate pro-business leader, Narendra Mody. The U.S.
executive John Chamber of Cisco (NASDAQ:CSCO) and Jeff Bezos of Amazon
(NASDAQ:AMZN) at a reception last night pledged their deep support for the
prime minister`s growth agenda.
JEFF BEZOS, AMAZON CEO: I`m pleased to announce today that Amazon
(NASDAQ:AMZN) will invest $3 million on top of the $2 million investment
that we announced in 2014, to bring our total committed investment in India
to over $5 billion U.S.
MODY: With China slowing down, India`s appeal as a destination for U.S.
companies continues to grow.
TIM SEYMOUR, TRIOGEM ASSET MANAGEMENT: You hear them talking about the
opportunities in India and India has replaced China and that story is only
getting better. We`ve heard Apple (NASDAQ:AAPL) talk about it. We`ve
heard GE, we`ve heard Lockheed, all these companies.
MODY: Experts say, in order for U.S. companies to prioritize growth in
India over China, the Indian government will have to crack down on
corruption, bureaucracy, and red tape which the Prime Minister Modi says
he`s working to improve. The question is, when will see results?
For NIGHTLY BUSINESS REPORT, I`m Seema Mody in Washington.
MATHISEN: Still ahead, why the scars from the housing crisis run deep even
eight years later.
MATHISEN: The automobile crash that killed the former CEO of Chesapeake
Energy (NYSE:CHK) has been ruled an accident. The Oklahoma medical
examiner said that Aubrey McClendon died of multiple blunt force trauma
when his car crash into a concrete underpass back in March. The crash
occurred one day after McClendon was indicted on a single count of
conspiring to rig the price of oil and gas leases.
HERERA: Insured losses from the Canadian wildfire in the city of Fort
McMurray near the oil sands are likely to total more than $3 billion. That
estimate comes from the reinsurance broker Aon (NYSE:AON) Benfield. The
fire destroyed at least 10 percent of Fort McMurray, including more than
MATHISEN: To the housing market now which saw the volume of mortgage
applications swell more than 9 percent last week from just the previous
week. According to the Mortgage Banker`s Association the increase may in
part be due to a slight drop in interest rates. The rise follows several
weeks of declines.
HERERA: Though it`s been eight years since the housing crisis, the next
guest some home buyers are still dealing with the fallout from dishonest
mortgage lenders and banks today, and he believes that the housing crisis
has led to a breakdown of social order and a lack of trust in our financial
system. He is David Dayen, journalist and he`s author of the book “Chain
Welcome. It`s nice to have you here, David.
DAVID DAYEN, JOURNALIST & AUTHOR, “CHAIN OF TITLE”: Thank you.
HERERA: You know, it is surprising that the wounds go so deep, on the one
hand, but on the other hand, when you look at the completed and total
collapse of the housing market, perhaps it should take that long to heal.
DAYEN: Yes, perhaps. The fact remains is that not only did we see
dishonest lending at the origination stage and then dishonest
securitization where the investors were defrauded and told that the loans
were of good quality when they actually weren`t, but we saw dishonesty in
terms of breaking the transfer process and the chain of title that goes
from entity to the other, and when individuals were foreclosed on, they
were done so with false documents which was a cover-up for this lack of
chain of title.
And so, there was dishonesty and the fraud was layered on top of one
another, and it really does engender this loss of faith in institutions.
MATHISEN: Well, let me bore in a little bit on that. So, you`re saying
some of these people who bought houses with loans they couldn`t repay, what
was faulty about the foreclosure that caused them then to lose their homes?
DAYEN: Well, what was faulty was that the evidence that was used for the
foreclosing entity to prove that they actually owned the loan and had an
interest in it was faulty. It was fabricated. It was forged and in any
other legal context if you`re using false evidence to convict somebody, the
judge would throw you out of court, whether you were innocent or guilty.
And the fact remains that every day in America, to this day, somebody is
kicked out of their home based on a false document.
HERERA: And as I understand it, you feel as though that`s part of the
reason this lack of faith in institutions, it has led to sort of societal
breakdown if you will, the lack of trust that goes much further than in
some previous financial crisis. Is that — is that correct?
DAYEN: Well, I mean, I think there`s a lot of frustration, a lot of
anxiety, and it gets to the lack of accountability. The fact this is still
going on today, we had settlements over this activity in 2012. You would
presume that when you settle over unlawful conduct, that the unlawful
And the fact that it`s gone on and continued and most people feel that
there was not very much accountability for those who perpetrated the
financial crisis and the associated frauds that occurred and that is —
that runs deep, sort of in the American psyche. It gets to fair play and
justice and all these bedrock American values.
MATHISEN: What responsibility do borrowers have in all of this? A lot of
people took out loans in that they had no business taking out. I`m not
saying that they weren`t sold those loans, rather than being the viewers of
them. But the fact remains, they had no business being in it.
DAYEN: The fact remains that there are two sides to a lending contract.
And just as the borrower makes a promise to pay, the lender is supposed to
make a promise that they`ve underwritten the loan and seen that the
borrower has the ability to pay.
And so, there`s plenty of fault to spread around in that particular
process. However, what we know and what is detailed in my book is that
there was tremendous deception at the lending stage and also at the loan
servicing stage. A lot of these defaults were servicer driven where you
had loans that were 2 cents short and put into default.
You had loans — you know, people getting foreclosure notices when they
paid cash on their homes. There was a serious breakdown in the system of
property records law which is 150 years older than the Constitution. When
you have that breakdown, it really does have this sort of breakdown in the
HERERA: David, thank you. We have to leave it there. Thank you very much
for joining us.
HERERA: David Dayen, author of “Chain of Title”.
MATHISEN: Lululemon says it is back on track and that is where we begin
tonight`s “Market Focus”.
The company CEO said inventory levels back in line which led the company to
reaffirm its full year profit guidance, raised its revenue outlook.
“The Atlantic” clothing company posted weaker than expected earnings for
the latest quarter, but did see a rise in sales that managed to top
targets. Shares of Lulu up nearly 5 percent to $71.48.
Williams Companies (NYSE:WMB) warns that it may need to cut next quarter`s
dividend if its merger with energy transfer equity falls through. The
proposed merger`s outcome questionable as ETE wants to restructure or end
the deal. Williams shareholders are expected to vote on the deal June
27th. Shares today down more than 1 percent to $23.17.
HERERA: Yahoo (NASDAQ:YHOO) is selling about 3,000 patents. The tech
giant has launched an actuation and contacted potential buyers, hoping to
generate more than $1 billion from patents that include the company`s
original search technology. Shares of Yahoo (NASDAQ:YHOO) up a fraction to
After resigning last month for business misconduct, former Lending Club CEO
Renaud Laplanche may actually be interested in buying the peer-to-peer
lender. “Reuters” says Laplanche has been speaking to private equity firms
and banks regarding a potential buyout. Shares of Lending Club up a
fraction to $4.42.
And Restoration Hardware is cutting its earnings and revenue guidance after
swinging to a loss in the most recent quarter. The company citing a
slowdown in luxury shopping. Shares finished the regular session up 2
percent to $36.10 but cratered about 20 percent afterhours following that
MATHISEN: Well, pigs may not fly but pork prices certainly are. Demand is
climbing, especially in China and producers are feeling the effects.
Kate Kelly, who gets all the great assignments, reports from the world pork
expo in Des Moines.
KATE KELLY, NIGHTLY BUSINESS REPORT CORRESPONDENT: All day breakfast menus
at restaurants like McDonald`s, the on set of summer grilling and BLT
season, all have something to do with rising pork prices. But analysts who
watched this market say that foreign exports, which account for about 22
percent of U.S. pork production, are a big part of this story too — thanks
BRETT STUART, GLOBAL AGRITRENDS PRESIDENT: We`re seeing a shortage of pork
and so demand in red hot in China. They are currently scouring the globe,
trying to find pork to fill that demand. When you see Chinese hog prices
literally double the price of U.S. hogs, the market starts to get a little
KELLY: Mexico has placed big orders for U.S. pork too, and seasonable
trends make it likely that prices will likely go higher between now and
So far this year, hog prices are up about 45 percent, making it one of the
best performing major commodities. Still, we`re far from two years ago
when we hit an all-time high of $1.34 per pound. That was amid a virus
that wiped up about 7 million pigs in the U.S.
Pork producers are happy to leave those days largely behind them, given
that an estimated 7 million pigs were wiped out, and many have installed
baths or decontaminating features hoping to keep the animals as healthy as
possible. It`s all contributing to a sense of optimism at the moment.
JOHN WEBBER, NATIONAL PORK PRODUCTION COUNCIL PRESIDENT: We`re back pretty
much at full production. Consumer demand has been terrific. It`s held in
there very well. Our exports have done well. We`ve been able to compete
against the competitive proteins and I think that`s why pork prices have
remained strong and profitable for producers.
KELLY: For now the sun`s out, the show pigs are preening and farmers are
riding high on the hog.
For NIGHTLY BUSINESS REPORT, I`m Kate Kelly, from Des Moines, Iowa.
HERERA: From pigs to pups.
HERERA: Coming up, combine an app with puppies and one entrepreneur sees a
recipe for business success.
HERERA: Shopping is going to the dogs. Americans spend billions of
dollars on their pets every year and now, one startup is on a mission to
grow its share of that market.
Courtney Reagan takes us inside a high tech pup-up shop.
COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: You`ve likely
heard about pop up shops, a physical retail store that`s temporary where
companies hope to build up their brand with existing customers, or appeal
to new one.
But what about a pup-up shop. Online startup Bark and Company is going
from digital to physical, but here, it`s the dogs, not the people doing the
This is Barkshop Live. It`s a pup-up shop here in New York City. Dogs can
come in on a reservation system, five at a time. They wear these RFID
vests that transmit a signal back to a mobile app. So, parents can follow
along, see which products the dogs are most engaged with and buy them
easily right through the app.
It`s a first of its kind concept in an area of retail that continues to
grow. Americans will spend $62 billion on their pets this year, up 4
percent from last year. But Bark and Company cofounders believe there`s
plenty of market share to be had.
HENRIK WERDELIN, BARK & CO. CO-FOUNDER: Dogs today are much more like kids
than they are hamster. And so, we try to create products and services that
play into this idea that that`s been a change in our attitudes to our dogs.
MATT MEEKER, BARK & CO. CEO & CO-FOUNDER: We want to bring Disney
(NYSE:DIS) to the dog world, so there`s — when none of that has been
created there`s just a tremendous amount of innovation available to you.
REAGAN: Many pet owners know four-year-old Bark and Company for the
monthly subscription Bark Box which represents 75 percent of their revenue.
But the business has expanded. Bark and Company has shipped more than 25
million pet products to date and its website which also have original pet
videos get 10 million unique visitors a month.
One of the company`s more popular products is the Dognald. But there`s
Hillary Kitten, too. Let`s say which one Shofu (ph) likes the most.
What do you think? Oh, Dognald.
REAGAN: For NIGHTLY BUSINESS REPORT, Courtney Reagan, New York City.
MATHISEN: The rich are getting richer, and according to the new report,
they will be more so over the next few years.
Robert Frank has the details.
ROBERT FRANK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, you`ve heard of
the 1 percent, but everyone should be on the lookout for the 0.01 percent.
In the next five years, the world`s millionaires will control more than
half of global wealth.
So, where is a lot of that millionaire growth coming from? You guessed it.
Asia. Even as millionaire growth is slowing in North America.
ANNA ZAKRZEWSKI, THE BOSTON CONSULTING GROUP: We do see a slow down in
economic growth and also GDP development in some parts of the world and
also in others, it was also very weak market performance.
FRANK: Yet, the very rich are expected to see the fastest growth and gain
an even larger share of wealth. Households worth $20 million or more will
see their wealth grow 9.5 percent a year through 2020. Although those
worth $20 million will see their wealth growth at around 7.5 percent. The
reason, equities will drive much of the wealth creation in the coming
years, and the very rich own the most stocks.
And as for that exploding growth overseas —
ZAKRZEWSKI: Asia Pacific will overtake Western Europe in 2017 in terms of
size to become the second largest region.
FRANK: And women will play a growing role as well controlling a third of
the world`s wealth.
For NIGHTLY BUSINESS REPORT, I`m Robert Frank.
HERERA: And speaking of millions, “Forbes” is out with its list of the top
100 earners in sports and two out of the top three made multimillion
dollars playing soccer. In third place is LeBron James who earned more
than $77 million. Number two, Lionel Messi, who plays soccer for Barcelona
and he made $81 million. The highest paid athlete is Real Madrid`s
Cristiano Ronaldo with total earnings of $88 million. Only two women made
the top 100, Serena Williams at number 40 with earnings over the past year
of nearly $29 million, and Maria Sharapova at number 88 who today was
suspended for two years from women`s tennis for admitting to using a banned
And that does it for us on NIGHTLY BUSINESS REPORT. I`m Sue Herera.
Thanks for watching.
We want to remind you, this is the time of year that your public television
station seeks your support.
MATHISEN: And I`m Tyler Mathisen. We really thank you for your support of
NBR and public television. Have a great evening, everybody. We`ll see you
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