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tv   Nightly Business Report  PBS  May 28, 2014 1:00am-1:31am PDT

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sempra. this is "nightly business report" with tyler mathisen and susie gharib. brought to you in part by. >>, featuring herb greenberg who reminds investors that risk is real with herb greenberg's reality check researching stocks in terms of risk. you can learn more at check. new height, investors are back from the beach and in an optimistic mood sending the s&p 500 to a record close. the head of charles schwab, one of the nation's largest vestment advisers, tells people who they can do their money. and astrazeneca, and the story is far from over. and power surge, why utility
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stocks are this year's darlings and can they continue to out-perform? we have all that and more tonight on "nightly business report" tuesday may 27th. good evening and welcome, everybody, back to work and back to setting records. investors return from the long holiday weekend in a buying mood pushing the s&p 500 into record-closing territory and driving the enthusiasm today with deals and data. pilgrims pride offering to buy hillshire brands for more than $6 billion. more on that one and on the economic front, orders for goods rose, and shares are increasing. by the close the dow gained 69 points to finish at 16,675. the nasdaq added 51, the s&p 500, added 11 clouto close at t all-time high. there were other milestone, the transportation and material
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markets sitting at all-time highs while technology is at levels not seen since the year 2000. but this year, believe it or not, the biggest groups are utilities, yes, utilities, the top sector of 2014 so far up more than expected. dominic chu has more on the stable industry and why boring may be beautiful for you. >> reporter: they may not be all that glamorous but utility stocks have been wall street darling darlings so far this year. and there is a big reason why. dividends. >> the utilities tend to have a higher yield than say some of the s&p 500 companies, the utilities tend to grow their dividends pretty consistently every year. >> utility companies tend to pay out more of their profits to shareholders rather than reinvest all the profits back into their business. so if you're an investor, looking for utilities, it can
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play a role. her firm manages over $26 billion in client assets, they have a specific focus on income generation and they invest in among other things utility stocks. among her favorite picks in the sector are companies like sempra energy which owns utilities in southern california as well as latin america, she likes energy in the midwest. both companies have a yield of around 3% and have grown their yield substantially over the course of the last five years. another big reason the investors like utility stocks is their relative immunity to the up and downs of the overall economy. no matter what, customers will always spend money on electricity and natural gas, they literally power the economy no matter how strong. but with all investments there are risks, utilities are no exception especially if bond prices start to fall and yields
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begin to rise. >> the first thing they will do is sell utilities. they have been bought for non-fundamental reasons which are basically dividends. but if you look at the s&p, those low utilities have very low to no growth. >> so the bullish case involves investment income from dividends. the bearish case for utilities involves an improving economy and rising interest rates which could put a damper on low growth saving stocks, no matter the view, the utilities are definitely worth paying attention to. so let's find out what our guest is paying attention to. he is walter bettinger, chief executive of charles schwab, walt, thank you for joining us. >> thank you, susie, it is great to be here. >> let me begin by getting your gauge on the investor sentiment. because today it was really nice, we had all of these records on the s&p. a week or two ago we had
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investor send-off. what is it like from the perspective of schwab clients and where are they putting their money these days? >> well, i think the sentiment of our investors continues to be taking a long-term view and investing their portfolio on long-term goals. susie, just as you indicated many of the articles are investors selling their portfolio, the old walk away in may and we know the timing of the market is always impossible. you have to get it right twice, you have to know when to sell and when to buy. our clients are taking a long-term view, they have been net buyers for equities for well over a year. >> it has been a little bit of a surprising year. bonds have basically out-performed most categories of stocks at least so far this year not withstanding the recent gains. what do you say to investors when the markets confound the predictions with which we begin the year? >> tyler, i think we say that is
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the markets. nobody really has that crystal ball and as i always say the more certain a person sounds that they know what the future holds the faster we should all run away from them. the bond market has its own life. it is clearly getting some impact by fed decisions. and as they have made the moves continuing to keep downward pressure on rates for the most part the bond market has responded this year. >> you know, walt, i was interested that just a few days ago your colleague, charles schwab himself, was saying that he thought that index funds is the best way for 98% of american investors. you obviously agree with that. tell us why and why now? why index funds now? >>. >> well, as i indicated earlier with respect to market timing it is so hard to get it right. you have to be right twice, when to get out, when to get in. and the point chuck was making
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for most investors simply being in the market is a winning strategy. we've all seen studies where the market has gone on 8% on average, but the typical investors captured about half that because they make those moves in and out. and chuck's point was buy the market, stay in the market and you're likely to capture the upside gains over a period of time. that is the beauty of index funds and chuck and i have both been long-time supporters of them. >> and of course, they're both inexpensive to own. let me turn you to an industry question, i was at the investor's meeting last week and one of the concerns there was the large assets manager, i would include schwab in that category might find!zm> well, tyler i have to say in
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fairness before answering the question at charles schwab we're already under the federal reserve oversight. so we're already in the category in which the federal reserve plays a meaningful role in regulating our firm. i think the question is whether the management of people's money makes them systemically important. most of the companies looked at are in a variety of businesses. and although they may be known to the average person as an asset manager, they may be involved in holding client cash on a balance sheet. so there is activities beyond traditional management. so my understanding is those are the areas that have traditionally investment in f-sock, it is good to let that debate play out. >> just to wrap it up, we have about half a minute. any kind of advice or wisdom
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that you would impart to investors at this very confusing time? >> well, seven out of ten investors that we surveyed say they're more comfortable investing when they have someone to talk about with respect to the markets and that is what i would encourage people to do today. there is no one with all the right appearances but getting assistance and getting a professional to guide you in most cases will give you a better outlook than purely trying to do it on your own. there are few people that can do that, but not many, few and far between. >> thank you talking to us, walt bettinger of charles schwab. and the bid for astrazeneca now off the table after a u.k. regulated time limit to reach a deal expired. that sent shares of astrazeneca down and shares of pfizer by
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half a percentage. what does pfizer do now? >> pfizer could come back for round two but not until later this year. under the uk law they must wait three or six months. analysts say in that time investors will watch astrazeneca closely to see if they can deliver the same offer on its own as much as pfizer. >> they are looking to see where the company can deliver over the next decade. in the next six months there could be setbacks, any setbacks could be an opportunity for pfizer to come back in the situation and make another bid probably similar pricing to where its final bid was for astrazeneca. >> others suggest it is time that pfizer look elsewhere. they suggest new york neighbors bristol myers which they say is a leader in the area of onc
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oncology, morning star's conover say they could consider the irish drug maker shire, there is speculation that pfizer could split itself up in the next few years, separating the new drugs and older profits. for lower tax costs and pipeline drugs it is possible we should not discount pfizer and astrazeneca just yet. more now on the food deal that tyler mentioned earlier in the program turning into quite a food fight. pilgrim's pride, the second largest poultry producer offering to buy hillshire brands for more than $6 and a half billion. it would expand the business beyond chicken and into hot dogs and sausages. it could derail their plans to buy pinnacle foods, hillshire says they still believe in the value of the pinnacle deal but
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plans to review hillshire's proposal. pilgrim's pride rose while shares of pinnacle fell. now to china, where officials are pressing banks to replace high-end servers made by ibm with chinese-made models. the move comes as beijing and washington and espionage is at issue. and investors paying close attention to the ukraine after a billionaire businessman won this weekend's election. the hope is petro poroshenko can restore the working relations in his country and have a better working relation with moscow. more from kiev. >> reporter: here in ukraine, violence continues on tuesday in the eastern region of donetsk where the government now is trying to reclaim control of not
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only the airport but indeed the entire region, which was reluctant to take part in the election. the election which gave an overwhelming mandate to president-elect petro poroshenko, there are concerns that relations with russia are still very poor. in fact those concerns were shared with us by jeffrey piatt who is the u.s. ambassador to ukraine. >> there are still russian behaviors we are deeply concerned about. the violence in donetsk, terrible violence is fuelled in part by people coming over the border. we believe that needs to be maintained and are trying to do jointly with our partners, we're trying to see what washington welcomes. >> the russians say they're owed a total of $5.1 billion. the ukrainians for their part say they need to negotiate for much lower gas prices than what the russians are offering, there
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are real concerns, too, if there would be another round of sanctions, but the u.s. and the ue are waiting on the sanctions, others are trying to deescalate the sanctions, and are waiting to see if poroshenko and putin come to the table. still ahead, what could change the way some companies do business. on monday, the white house is expected to unveil the rule cutting emissions from coal plants's the regulation could have wide-ranging implications on governments and john harwood joins us with more, john, what
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do they propose? >> they will propose regulations using the authority the supreme court has recognized to regulate the carbons under the clean air act, not under the cap and trade segment that congress rejected a couple of years ago. but they will do it by setting goals on achieving the reductions. >> john, you just mentioned cap and trade, and how is that really different? >> well, the way it could end up being similar, susie, is the method a state could choose to comply with the regulations could be a cap and trade system. remember, we already have those systems in california and in several states in the northeast. so there is precedent for that. and one of the questions that we'll be watching is whether or not the one option for states will be to join one of those existing cap and trade systems so western states could join with california, for example, states in the midwest and
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northeast could join the ones that are already operating. >> john, how much of a political fire storm will this create in the election year? >> very large because you already have the trade groups representing the power industry, complaining the obama administration hopes to split some elements of the power industry. for example, those more reliant on coal will be much more affected than those relying on gas which is a lot cleaner burning. you can expect the argument lines to be drawn. but this will raise energy prices and in fact it is likely to do so. the question is will the public accept that trade-off for the environmental benefits that will come with the system if it survives court challenge. >> thank you, john, john harwood reporting from washington tonight. and the ceo trying to gain access to the bid to buy.
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the chief jeffrey immelt is ready to partner. and would increase business by building new sites. >> we will local the global headquarters for four of our businesses in france. grid, hydro, and offshore wind. the technology for these businesses will be made in france. >> ge's proposal has been extended until the end of june, shares of general electric up a fraction to $26.57. netflix buying the rights to sony's animated films that pay channel stars had the right to the movies but agreed to give them up to the video streaming services company. the multi-year agreement includes one or two films a year and will add to the company's already large content costs. shares of netflix off to $98.81,
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sony up to $16.64. autozone seeing their third quarter surge. the auto part retailer's sales were helped by sales in brazil and mexico. despite that shares to $524.25. shares of well team and sen sentra, according to a report in modern health care the ceo of ascension health says his company was in talks to acquire and operate in states. that sent shares of senteen up 4%, well care rose about 3% to $76.91. bio chris says the drug which treats a rare immune disorder is in the testing stage, more testing must be done, but the promising result
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sent shares to $9.99. surging today, the news of the retailer securing credit facility from the private equity firm sycamore partners, they reported another quarterly loss, but today's news gave investors hope. shares popped 15% to $3.92. and apple fans had another reason to buy up the stock. according to reports, the company is planning to introduce a smart home system at a conference on june 2nd. the technology will reportedly allow users to control their lights, appliances and security systems with their iphone. the stock rose nearly 2% to $625.63. $10 million, that is the median pay package for chief executives of large public companies in the united states. it was the fourth straight year of hefty pay increases and the first time median compensation rose into eight figures, mary
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thompson took a look at what is driving the trend and who is bringing home the fast paycheck. as the stock market goes, so too, does ceo pay. and in 2013, they both soared. the median pay of an s&p 500 ceo b by almost 9% to a record $10 and a half million. this thanks to equity link brand s a and pay. >> it is also a financial performance revenue, profitability. various returns in margins. >> 2014 brought increase in pay after a brief dip in 2009. it showed pay gains behind a widening gulf inpay. at the ceo earning 257 times more than an average worker up from 180 times back in 2009. the widening gap failing to
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ignite the investor outrage. they say the shareholders reject executive pay plans, a trend mercer credits to better communication. >> they are doing a much better job of engaging with their shareholders on a very pro-active basis, explaining their program, how it aligns with the company's strategy. it is important to retain the quality of executives they need to be successful in the organization. >> the study of the s&p 500 firms found the decree of the industry to become the highest pay, it rose almost 250%. cbs's pay rose a 9% to a staggering 6 million, the ceo richard atkinson's compensation as he gave up claims to
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severance pay. he earned more in 2012, taking home $55 million. at number four, a new edition to the highest paid list, steven coffer, as a grant made up most of his $38 million in compensation. this as the pay scale continues to tip in the favor of ceos. for "nightly business report," i'm marianne thompson. and coming up on the program, exit strategies, five tools the federal reserve can use to get out from under its record economic stimulus program. that is next. the investigation into
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general motor's faulty ignition switch is expand iing, canada i looking into the gm cars both of which are subject to the recall. transport canada received nine other complaints, gm is quoting with canadian authorities. meanwhile, safety regulators opening an investigation into about 2,000 nissan automobiles for potential breakage issues, the cars here, the sentras and versas, they continue to move as the brake pedals are being pressed. there are no reports of accidents or injuries. and a warning from john gersback warned trading could deepen by 20 or 25%. j.p. morgan gave a similar warning as banks continued to struggle with low volatility. and last month, the bank
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disclosed a calculation error that forced bank of america to suspend its stock buyback and dividends. the error left the bank with $4 billion less in capital than previously thought. the revised plan is smaller than the original, and the fed has 75 days to review it. >> federal officials reviewing the taper of the monetary stimulus necessary, what is less clear is exactly how the central bank will decide to control interest rates when the time is right to let them rise. steve liesman takes a look at the fed's exit strategy and the tools available to policymakers. >> let's take a look inside the federal reserve's tool box it will use to regulate interest rates, the main tool, the fed fund rate is not doing to work. during the easing the fed bought all the security and put all the cash out into the system. in order to control interest
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rates the fed has to control the amount of money in the system. what else does it have? it has this big thing? really an axe. effectively, the federal reserve is going to pay the banks in order to keep the money on accounts at the federal reserve. if that doesn't work, what else does it have? a thing called reverse repo, we're going to have to get used to the terms, the fed lends out a security. again, soaks up cash for a period of time. the deposit facility, think of it like a certificate of deposit at the federal reserve. if it works you put your money in the bank for a period of time, the fed pays you interest rates. finally if all else sells, the feds can actually sell the assets for good, retire the cash, that is what we have
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inside the fed's tool box that hopefully sometime next year if the economy is going year the fed will begin to raise rates and use all the tools in order to keep interest rates, normalize interest ñrrates. for "nightly business report," i'm steve leesman. just when you got used to a whole vocabulary o-- >> now we have term repot. >> i'm going to audit his report after that. i'm tyler mathisen, thank you for joining us. have a great evening, everybody. we hope to see you back here tomorrow night.
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>> the following kqed production was produced in high definition. [ ♪music ] >> this is kathak, an indian dance form. >> chitresh das: it's a magician! >> kathak master pandit chitresh das shares the secrets of his ancient art form. >> chitresh das: i call it meditation in motion. >> mark jackson: kain dies ... >> in the last few years mark jackson has invigorated bay area theatre with his plays and direction. >> mark jackson: theater seems to me the most contemporary art in that it's literally in the present moment. >> and midori performs in san francisco. francisco. this time on spark. [ ♪music ] major funding for spark is provided by the william and flora hewlett foundation, supporting cat