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tv   Nightly Business Report  PBS  September 27, 2013 4:30pm-5:01pm PDT

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>> announcer: this is "nightly business report" with tyler mathisen and sue see gareeb. brought to you by, you get close to iconic landmarks, to local life, to cultural treasures. viking river cruises. exploring the world in comfort. worst week ever. jcpenney falling 30% in the past five sessions. and as the retailer tries to raise almost $1 billion, today the chain is pinning its turnaround on a new grant. but is it enough to bring in consumers? crunch time. 2013 has been good to investors
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so far. but the critical fourth quarter begins next week and uncertainties abound. what's next for the markets and your money. and microsoft man. could the boss at ford be the right person to turn around microsoft? we have all of that and more tonight on "nightly business report" for friday, september 27th. good evening, everyone. it's cleanup in aisle 6. that's because it has been a mess of a week for the retailer, jcpenney. worst week ever for its shares, down 30%. the department store has prospered for more than a century, through the great depression, to world wars, the online shopping revolution, but now penney's is in a fight to survive. same-store sales down eight quarters in a row. a savior brought in and then kicked out. his turnaround plan an unmitigated flop. then a new boss, the old boss, and yesterday a plan to save cash so they can get through the holidays and into next year. still, the company is resolute,
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launching new boutique shops within its stores today. court reagan has more. >> reporter: it's been a long week for jcpenney shareholders. the beleaguered department store's stock price fluctuating in both directions. ultimately, the stock posts its worst week ever. late thursday, jcpenney announced an 84 million share offering to raise nearly $1 billion. the department store says it will use the proceeds for general purposes. but today jcpenney is focusing on the core of its business, selling merchandise. 565 giggle baby and disney shops are opening in jcpenney locations throughout the country, a year after the design partnerships were announced under then-ceo, ron johnson. a question in recent months has been the confidence of jcpenn jcpenney's vendor community. in order for the business to survive, jcpenney must maintain the relationships between its suppliers and its design partners. while giggle baby merchandise is just now available for shoppers,
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founder ali wing says despite jcpenney's broader issues, the only, quote, crazy part of the past year has been the development of 200 new products for her jcpenney shop. >> we see some early numbers online, and i think some of their online are very quickly bound and having online perform is really encouraging to me what they can do as a brand. and absolutely, they're talking to us about this all the time. they've been great partners. >> we talk to our partners every day. we have amazing relationships with our vendor and supplier community. everyone's having the staple q3, the same year, in a lot of ways, and everyone's looking for more traffic. >> reporter: though jcpenney needs shopper traffic more now than it ever has before. this holiday season is going to be the most scrutinized in its history, getting back shoppers is critical for its longtime survival. for "nightly business report," i'm courtney reagan in new york city. washington worries created jitters on wall street today.
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investors were discouraged by the lack of progress in budget negotiations and the real possibility of a government shutdown. stocks ended a dismal week in the minus column. the dow and the s&p recorded their first weekly decline since august. not even a six-month high in consumer income and greater consumer spending last month inspired investors. by the close, the dow was down 70 points, the nasdaq lost 5, and the s&p was off by 9 points. but despite a losing week, and with one trading day left in the month, the major averages are on track for the best september in three years. up between 3 to 5%. and the dow and the s&p are on track end to higher for the third quarter, making it three up quarters in a row. tyler? our first guest tonight, susie, says barring a positive surprise, stocks are more likely to move down than up. he's brad mcmillen, chief investment officer with commonwealth financial. mr. mcmillen, welcome.
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good to have you with us. why do you say that? and how far down do you expect they might go? >> well, if you look at the way the news is evolving, we've seen a lot of positive surprises, but the most recent one, the positive surprise of no taper actually resulted in a pop, but then we've given all of that back and then some. so the question is, with earnings, in my opinion, rolling over, what is going to carry the market higher? i don't see a lot of potential good news out there, but i do see a lot of potential bad news, starting with washington, d.c. >> well, a lot of investors are looking forward to those earnings numbers for the third quarter. they should be coming out in the next two weeks or so. what are you expecting? >> when you look at what happened in the second quarter, most, if not all of the earnings gains, came from the financials. now, with the mortgage refinancing boom having largely plaid out, with financials really starting to come under pressure from a regulatory perspective, jpmorgan is a good example of that, our financial
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is going to come to the rescue again. i have my doubts. and when you look at the expectations of earnings growth, we were less or about double what we actually saw in the second quarter. i'm not sure that's what we're going to see. and i think disappointment is quite possible. >> so, brad, if i buy your thesis here, and i've had a pretty good year so far, i'm up about 20% in the s&p, and let's say i have a balanced portfolio, 60% stocks/40% bonds, what i should be doing now. how can i protect my profits and still leave room for more, if there's more to come? >> the answer really is strategy diversification. not only in the equities, but also in the fixed income. you can go with the long/short approach or a low volatility approach in equities. at commonwealth, we've been recommending caution in equities for a while. we've wanted clients to diversify their portfolios among equity strategies, to preserve the upside exposure, but do it in a way that's going to limit any downside exposure.
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in fixed income, munis right now are probably the most attractively priced option. the detroit situation has resulted in some opportunities being created there. >> all right. brad, i saw in your note that you see, you're a little optimistic about what's going on in europe and in china, you see some hope there. are you looking at that from an investor point of view, of investing in european or chinese equities or in u.s. companies that have operations there. what's the best play? >> i think both of those are opportunities, but when we look to invest at commonwealth, we look at valuations. we would much rather buy cheap than expensive. and you can argue about how expensive u.s. equities are, but it's tough to make an argument that, in fact, they're really cheap. you look on an historical basis, if you look in europe, relatively speaking, they're much less expensive than they have been. and on a going forward basis, valuations are pretty much one of the major keys to future returns. buy cheap, sell expensive. u.s. is expensive, europe is cheap.
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>> that's a pretty good recipe there, brad mcmillen. it usually works pretty well if you do it, chief investment officer with commonwealth financial network. thanks so much for joining us tonight. have a great weekend. more now on the growing threat of a government shutdown. by a vote of 54-44, the senate today approved a bill that will continue to fund the government, but only through november 15th. and it will keep funding the affordable care act. now, that legislation heads back to the republican-controlled house, where lawmakers there will put together a new version, they hope, could win approve in both chambers. today, a frustrated president obama spoke at the white house, saying that shutting down the government is like shutting down the economy. >> my message to congress is this. do not shut down the government, do not shut down the economy, pass a budget on time, pay our bills on time. refocus on the everyday concerns of the american people. >> well, jcpenney isn't the only big company in big trouble.
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blackberry simply isn't selling enough smartphones. and as expected, the company today reported it lost nearly $1 billion in its most recent quarter. and now, published reports say that if the devicemaker is sold to fairfax financial, which offered $4.7 billion to take it private earlier this week, and ceo thorsten heinz loses his job, he could still rake in $54 million. this so-called golden parachute is said to be secured by three blackberry board members, including the chairman of fairfax financial. let's turn now to microsoft. who will replace microsoft's steve ballmer? there are a lot of names rumored to be in the running, but only one is apparently at the top of microsoft's wish list. he's ford ceo, alan mulally. according to the tech website, mulally has vaulted to the forefront of the candidates and the discussions with microsoft are said to be serious. now, if this is true, is alan mulally the right man to run
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microsoft. kara swisher, co-executive editor joins us now along with jon fortt. we know that alan mulally has a reputation as a turnaround specialist, but he's a car guy and can alan mulally turn around a complex company, tech company, like microsoft? >> well, he runs a complex tech company, if you think about it. talk about a complex company, delivering and creating cars is a similar kind of thing with lots of technological challenges, logistical challenges. so he's certaiy got the skills to do it. he ran the commercial airlines division of boeing. these are all very difficult and complicated jobs. i think the issue is, he's a non-techie, although he's quite technical, it's sort of besides the point. what they need at microsoft is a leader who can try to figure out where microsoft goes next. and the question is, is he too -- i don't want to say old, but he isn't of the new internet. does he have enough experience in where the internet's going, is more the point. >> carol, let me drill down a
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little bit more on your fine article there. and just to be clear, this is not speculation. the two of them are actually having conversations you characterize as serious conversations about this job. >> yeah. >> how far along are they and when might we expect to hear who microsoft has selected? >> i think it's going to take them time, actually. what's going on here is there are sort of twin things going on. you have the committee which is searching for candidates. they are still doing that. that is still happening. this isn't going to happen monday, all of a sudden, alan mulally is -- we didn't say that. a lot of the articles were speculating that, but that's not the case. he's just become one of the more significant candidates in that list. and there are others, which i mention in the story, such as tony bates, an internal candidate, such as stephen elop, who came from the nokia acquisition, and another ex-microsoft guy, paulmo moritz. so they're going to drill down on the key candidates and
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hopefully not take until before the end of the year, but you never know with microsoft. they could take a very long time. >> jon, you're right there in the heart of silicon valley, you're hearing what everybody is saying. what are you hearing about alan mulally versus these other candidates that kara brought up? >> well, he seems to represent one end of the spectrum as far as what microsoft could choose. one end of the spectrum is your master manager. the other end of the spectrum is your technology visionary. and in a way, steve ballmer was more of the manager type. he was a sales guy, bill gates, the original ceo, more of the visionary type. and he has to have more of a bias towards visionaryists. that's what microsoft needs at this stage. someone who has a vision for where microsoft can go, can cut through a lot of the nonsense and bickering about whose idea, decide which path to take, and pursue it. and i think the question is, could mulally, though he is a
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hardware engineer, aeronautics engineer by training, could he do that with a company that's a bit different in the types of decisions has to make technology wise? >> he does, john, have some connections to seattle, because we've mentioned, obviously, that he was in charge of boeing's commercial airlines division for a long time. microsoft and ford have partnerships with respect to the data screens in their cars. but he is a 68-year-old guy. he's got lots of energy. i've met him, he's an incredibly dynamic photo to see. but i can't imagine that if he were the choice, that he'd be there all that long. >> well, i don't know. i mean, that's true. he's not the founder. larry ellison is right up at about that same age, and people don't often speculate about him retiring, because of age, anyway. he still knows how to win. so i don't think age is the issue so much as, is he the right guy for microsoft at this stage? and i think a lot of people would say, if he is the ceo, he's going to have to have a pretty clear number two or number three with a different
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skill set of who's very clearly the visionary in technology and can end some of that infighting that's happened between those divisions over the years. >> kara, real quick question to you, just to wrap up our conversation. what about bill gates? i understand he's taking a very active role in this search and he's a very hands-on chairman. is he a possible candidate? >> that would be, i think, a lot of people wish that would happen. i would be surprised if it did. you know, you never can rule it out, and that's happened before at yahoo! various different places. i don't think that's what he's aiming for and i would be surprised if that happened. he's very devoted to his charitable organization. so i would probably not rule it out completely, but i would -- it would be unusual. >> all right. to be continued. thank you very much, kara fisher, co-executive editor of "all things digital" and our very own jon fortt. and still ahead, what automakers are doing to avoid collisions as drivers find themselves more distracted than ever. first, though, how the international markets performed today.
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crash prevention systems can add thousands of dollars to the price of a new car. until now, consumers had to take the word of automakers that these systems actually work. now, for the first time ever, the insurance institute for highway safety conducted crash tests and came out with ratings on the best ones. phil lebeau has the results. >> reporter: in a world where drivers seem more distracted, preventing rear-end crashes has become a priority for automakers. nearly all now sell models with collision avoidance systems, but >> these now front crash prevention systems will help drivers avoid crashes and avoid being injured in those crashes. >> reporter: the insurance institute for highway safety has developed the first crash test for collision avoidance systems. these tests matter two things,
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how quickly you're warned about hitting a car in front of you, and for those cars with automatic brakes, how quickly do they stop the car? seven models, including two volvos, two cadillacs, and the mercedes c-class were rated "s," superior, with the legacy and outbarra outback, earning the best scores. nearly a third of all accidents in the u.s., are rear-end collisions, causing 31% of the injuries linked to car crashes. a prime reason more automakers are pushing this technology. >> safety sells. and it is actually required in a lot of the premium markets that you absolutely have to have the latest safety content going forward. >> reporter: these systems typically cost more than $1,000. well worth it for those who have the technology in their cars. phil lebeau, "nightly business report," charlottesville, virginia. and we begin market focus
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tonight with a warning from the world's largest air carrier. continental projecting third quarter revenue to come in below expectations. the company says lower fares on some overseas flights are responsible in the drop in price per seat mile. the stock fell 9% to $30.91. and shares of lumber liquidators were briefly halted this morning after the company said that federal agencies had raided its headquarters. a court-ordered search was related to certain wood flooring products that have been imported. lumber liquidators sells hardwood, bamboo, cork, and laminated flooring. the company says it is cooperating with authorities. shares dropped 5% to $107.30. finish line reporting a jump in earnings and stronger sales and cost cutting. it also lifted its guidance for full-year sales. this athletic retailer says things are progressing well with its macy's business and trends are improving in its running business after the chain's largest product category. the stock rose 9% to $24.41.
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and a surge in recreational vehicle sales is helping four industries bottom line. the company says the rise in revenue is thanks to strong growth in motorized rv sales and more modest growth in towable rv sales. they've reported strong quarterly earnings for more than a year. the stock gained almost 4%. time for our market monitor segment this week. and he says that stocks are troubled by politics and uncertainty over the fed, but that those very troubles provide buying opportunities. david cotox, with cumberland advisers, great to see you. since you're seeing troubles the in the market, what are you doing in your portfolios to reposition them? >> hi, tyler. good to see you too. we think you've got a buying opportunity on weakness and we're faciphasing into the mark. we have been doing that on a scaling basis. we continue to do it, because we
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believe that the debt, deficit, sequester, political fight in the end gets revolved. and when it does, markets go higher. and we don't know when it's going to be resolved, but i don't believe the united states of america is going to shut down forever. >> well, meanwhile, you have a couple of recommendations that are all etfs, they're all in different kinds of areas, and they all have done rather well so far this year. so let's go down your list. top of your list is ticker symbol, iwo. these are the shares of the russell 2,000 growth indexes. these are small caps. why do you like these? >> i like them, susie, because the small caps, number one, have been outperforming. and if the economy continues to recover, even slowly, with low inflation and low interest rates, and it looks like that's the case for several years. small cap companies is will do
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well. they have the u.s. domestic recovery advantage in so many ways. so small caps have outperformed large caps. they continue to do so. if you look day by day by day by day, when the market goes down in this last rocky period, they go down less. when the market goes up, they go up more. so the relative performance is good, the trend is up, and the growth side is the aggressive side, if you think the economy is going to do better, we do, so iwo is a great way to be broadly diversified in a good index, it's a fund of $5 billion. it's big enough, liquid, for an investor to get into. >> give us a quick thumbnail on your second choice. ibe is its ticker symbols, biotech fund. >> biotech is on a tear. the sector of the health care industry, which is going to do well, not threatened by
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politics, the companies are gangbusters. it's outperforming. we own it, we continue to balance into it. we like it, we think it's gone much higher. >> and how do you feel about these transportation stocks? because that's your other etf, ticker symbol iyt, this is for the transportation average, also up sharply, 24% so far this year. >> well, transports gets you into the housing recovery. you've got to carry lumber somehow. they have a kicker in the rails, because they're carrying oil. we don't put pipelines running in the right direction so far. and airlines, air transport, doing better. again, slow economic recovery, you get it in transports. the nice thing about the transport index is that it is u.s. recovery-based. you cannot outsource a trucker and a truck to some other country. you've got to do it in the united states. >> david, i assume that your firm owns most of these
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companies or funds that you mentioned. do you, personally? >> i don't own any security that my clients own, because of a conflict. it's unfortunate for me, because i have to choose less liquid etfs because of that. we have a no-conflict rule, and a day late trading rule in our firm. clients come first. >> thanks very much, david kotok. have a great weekend, sir. >> thank you. david is chairman and chief investment officer at cumberland advisers. coming up on "nightly business report," private companies have been running health care exchanges successfully for more than a decade. so will the new health law bring in a wave of new business? but before we get to that, here's a check on how commodities, treasuries, and currencies performed today. just four days ago to go
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before state and federal health care marketplaces, part of the affordable care act, open for business. but those government exchanges aren't the only options for insurance seekers. with private online insurance brokers also looking to get a piece of the action. bertha coombs has more. >> let me see if i can pull up your information. >> reporter: while it's usually a busy time at e-health sacramento call center, they and other e-brokers have been helping people shop for individual insurance coverage since the late '90s. this year, they see an opportunity for growth under obama care, with all americans now required to get health insurance. >> the more people we can get enrolled, the broader the enrollment is, the more young people we can get enrolled, the higher chances for success in this legislation. >> reporter: executives at go-health have been expanding their staff ahead of the october start of open enrollment. >> we will hire a total of 648 additional people this year. so we expect on 10/01 to have
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roughly 650 to 700 licensed benefit advisers in anticipation for the phones to ring heavily with all the marketing partners we have in place. >> reporter: for all of their experiences, marketplace veterans is say it was an uphill battle convincing the obama administration to allow them access to enroll people in the subsidized health plans being offered on the exchanges. it was late summer when health department officials gave them approval to connect to the federal system and stem cell obama care plans being offered on the 36 federally built marketplaces. but the states that had built their own exchanges, like california and new york, have denied them access to their marketplaces. >> the upshot is, the states have gotten federal grant money from the federal government to develop the exchanges themselves, and they're looking at it as an opportunity to put people to work and develop this capability. and they do not necessarily want participation of the private sector, at least initially.
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>> reporter: while the brokers insist they're not competing with the exchanges, they point out, they'll be able to offer consumers a broader picture of their options, with side-by-side comparisons of exchange plans and plans being offered in the private sector. and they'll help them calculate which is a better buy. >> someone who is subsidy eligible, but because they're so high in the income bracket for a subsidy, it's a very small subsidy, and there's something else that makes more sense for them financially. we help them with those kinds of things. >> reporter: bertha coombs for "nightly business report." and finally tonight, could the miami beach mansion that once belonged to the fashion designer, johnny versace, become an apple store? it could happen. the famous oceanfront estate was bought last week for more than $41 million. the thinking was, the home on ocean drive, and it is one heck of a place, might be converted into a hotel. but now representatives of the owners say part of the property could become a retail space and mentioned an apple store as a potential occupant. it's not a done deal, by any
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means, and as you might expect, no comment from apple, which usually goes for a sleeker, more minimalist look than that. >> can you picture that? >> a very baroque place. >> i can't picture the iphones and ipads there. that's "nightly business report" for us. have a great night. i'm susie gharib. >> we'll see you back here monday night. >> "nightly business report" has been brought to you by -- >> sailing through the heart of historic cities and landscapes on a river, you get close to iconic landmarks, to local life, to cultural treasures. viking river cruises, exploring the world in comfort.
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