tv Nightly Business Report PBS November 1, 2013 6:30pm-7:00pm EDT
this is "nightly business report" with tyler mathisen and susie gharib brought to you in part by. >> thestreet.com. interactive financial multimedia tools for an ever changing financial world. our dividend stock advisor guides and helps generate income during a period of low interest rates. we are thestreet.com. solid sales, general motors, ford and chrysler all report double digit sales gains for october. so what is going right for the big three, and what the industry needs to keep firing on all cylinders? >> buy back bonanza, are buy
back company as better investment than ones that don't? >> picture perfect? kodak is back. the next chapter started today and shares traded on the big board but this is not your father's kodak or the one you used to know. can it succeed? that and more on "nightly business report" for friday, november 1st. good evening everyone. americans are buying cars, a lot of them in showrooms across the country were bustling in october. despite the government shutdown, october was another month of strong auto sales, proof that the manufacturer in new car sales and trucks are one of the engines powers the economic recovery. each of the big three scored double digit sales gains and much of that on pickup truck. general motors was in the fast lane. sales surged almost 16% at ford sales grew 14% and chrysler they were up 11%. phil la bow joins us from chicago with more on that. it was an amazing month. you know, the headline numbers
look fantastic but when you look under the hood there are some numbers that weren't so good like chevy volt numbers, they dropped. what happened? >> that ocho got a lot of attention today, suzy. they dropped 31.7% for the month of october this year compared to october of 2012. gm is quick to point out that october of 2012 was the second best month ever for volt sales and believe the inventory is on the low side so as a result it's not as though they are seeing falling demand, but at the same time the volt sales this year are just over 18,000. for the year volt sales are up just 2.7%. not a huge amount of growth there and a lot of people are sitting there saying will this be a niche vehicle, or can general motor take the sales and grow them at a nice clip over the years to come? that remains a big question for us. >> tell us about pickup sales. have they started to slow a bit?
>> they are. that is expected. they had a huge run in the first half of the year because of the housing market picking up, small business owners restocking fleets and almost everybody in detroit will tell you they expected the start of a cool down in terms of pickup truck sales. that doesn't mean a slowdown, just they won't grow as quickly as the first half of this year. >> phil, i was surprised to see incentives and rebates are back. what's the story there and will this keep the auto sales market strong in 2014? >> susie, this is what worries people the most about the auto market. will they repeat the mistakes from several years ago when they put huge amounts of money on the table to juice sales. we are not seeing that yet. what we are seeing is a competitive market and the concern is if this economy plateaus or doesn't continue growing at the clip it's been
growing at, will they have to put more money to goose the sales? >> all right. we'll keep watching. phil, thanks so much. well, it is a new month and on wall street, day one was a good one for stocks. the markets got a big boost from a surprisingly strong read on u.s. manufacturing in october. it rose at the fastest pace in 2.5 years. all major averages avoiding a third consecutive day of loses with stocks rising into the close, the dow up nearly 70 points, nasdaq added two, the s&p 500 was up five. rates on the ten-year treasury note rose steadily all session long closing up at 2.6%. time for the central bank to phaseout the stimulus program. charles plauser said the feds should have begun tapering back at its meeting earlier this
week. >> i thought we kind of missed an opportunity to make a small gesture to signal the fact this is a dial we can promove and adt it and fine tune it, if you will. >> he suggested setting a maximum dollar amount instead of sticking to the target of u.s. unemployment rate getting down to 6.5%. and in audition to the fed stimulus this year, one of the factors that has helped stock prices in 2013 is a rash of buybacks. companies using cash reserves to snap up their shares that reduces the supply of stock and lifts the profit per share. dominic chu has the story. >> reporter: corporate profits in the stock market are at record highs but one financial success may be a bit more complicated to explain. that's earnings per share. if you have $100 in profits and 100 shares out standing and buy back half, your earnings per share will go to $2.
you can double them without actually growing profits. it's one way to grow earnings per share but not corporate profits. >> reporter: andrew wilkinson took a large at companies with a larger share to look at how earnings per share were affected. take oracle, it was better because of fewer shares outstanding. global wind resorts got an estimated 23% improvement and satellite tv provider direct tv got an estimated 47% improvement. as set management bob doll said the effects of share buy backs are important. >> 2 to 3% is from buybacks, the shrinking. >> reporter: companies that buy back shares outperformed the broader market. since the end of 199 9 wilkon
sin notes the buy back index is up 250%. that's versus the 20% rise in the s&p 500. there is an even exchange traded fund that tracks companies that engages. the power shares buy back achievers, ticker pkw. so that's one place to look if you believe or don't believe the stock buy back story. for "nightly business report", i'm dominic chu. tim courtney is a believer and he's chief investment officer at wealth advisors. welcome to nightly business report. let me begin by asking you and get into the debate about stock buybacks. some people would say you're playing with the numbers, it's financial engineering and that it would be better if a company used that money to grow the business and develop new products. what do you say to that? >> for one, i think market is pretty good at seeing through that. it is pretty transparent and it's hard to hide the fact that you are increasing earnings per
share by doing share buy back. i think the market does a good job of pricing stocks and seeing through that, but i think another reason why companies would do that besides maybe trying to make the numbers look better is because maybe they don't feel like they have enough confidence in the economy or maybe there are legislative risks to go take cash and go do a large scale research and develop the project. they would be better off taking that cash and buying back stock. >> you know, you saw numbers in dominic's piece there. if i'm trying to choose between two companies, relatively comparable in many ways and one is buying back shares, the other is not, should i choose the one buying back shares? >> it depends. that's a good sign if the company is looking at prospects and has access cash, i think that's a mark in the favor.
all things being equal, you would want to see that. >> not all buybacks are beneficial. it doesn't always work out that way, right? >> that's right. there are some studies that show that companies that have lower profitability when they do invest in themselves, they tend to have lower returns and there are examples of stocks recently that have shown that same phenomenon. so it tends to be the companies it works best for are higher profitability taking precash and putting it back to work, not so good for companies struggling. >> do any of those companies you mentioned, do any come to mind? name them. >> there was an article yesterday from the wall street journal talking about ibm and how the price has not moved in the last couple years and primarily because ibm is having trouble generating revenue growth. that's a good example of doing share buybacks but not affecting the price and goes back to the
market being pretty effective at determining what is causing these earnings per share increases and not just adding value onto the stocks because they are buying back shares. >> what are the trend for buybacks? this was a big year, seems like every company was announcing it. has the trend run its course? >> it looks like it's going to continue because earnings are still growing. companies it looks like in the third quarter, profits will set a new quarterly record so a lot of cash on company's balance sheets and that probably is probably going to tend to indicate the buybacks will continue probably into 2014 increase. >> let me throw a little curveball at you. some companies like apple are urged to go out and borrow money to do a stock buy back and not use case in apple's case because they have to bring it back from over seas and pay tax on it. does that tell you anything if they borrow to buy? >> yeah, i've seen that a lot and i think the match shows that
that can make sense and again, that's an issue with the tax code. it -- i don't necessarily agree with some of the tax policies that we have for patrioting of cash but with those costs to bring back in money from the united states, it certainly can make sense to borrow and buy back. >> we'll leave it there. thank you for your thoughts. tim courtney. and some more trouble at jp morgan chase. the u.s. justice department and securities exchange commission are looking into the hiring practices at jp mogen at hong kong offices. relative of chinese party officials got jobs there and the bank said in a regulatory filing that several u.s. government agencies requested information about the foreign exchange trading business and whether employees were rigging the market. jp morgan chase isn't alone. citi group, the bank that
conducts the most international business revealed that federal investigators are looking into the foreign exchange trading for evidence of possible market manipulation. more on the trouble of the affordable care act healthcare.gov. they looked at what users of the website experience as they shop for health insurance plans and when they found may surprise you. bertha coombs has more. >> reporter: how bad was the first day of open enrollment on healthcare.gov? six people managed to enroll during the first day. by the morning of october 3rd, fewer than 250 because of the technology problems plaguing the site. while access was universally poor, the site's glitches made access in some of the 36 states on the federal insurance exchange worse than in others. >> there are variations that tend to be effected by geography or which internet service
provider or which browser that you're using. >> reporter: engineers in l lexington began independently tracking it in mid october. at that time, users in a hand full of states like oklahoma in green saw pages load with normal 1 to 2-second performance but in states with red it took well over 8 seconds. >> that relates to geography. there are certain techniques employed to minimize the differences. >> reporter: recent fixing appear to have improved user experience times overall. >> you want to provide a performance testing environment at scale so millions of users are simulated users are running against the site to make sure that it will scale and provide the response times necessary under that condition. >> reporter: just signed, the obama overseer says their
measurements are showing that page loads are taking less than 1 second on average across the site. but here at use egg testing they are seeing wide disparities and kansas city, kansas, pretty good, 4 seconds but next door in kansas city, missouri, it was taking over 30 seconds. to improve your own experience, they suggest making sure you have the latest version of your web browser. clearing your cashe history and of tim miezing the connection and make sure you're not slowed down by sharing wi-fi for example. health officials vow the site will work smoothly by the end of this month. >> they will see a surge of activity they better plan for. >> reporter: because the stakes are too high now for another failure. bertha coombs, "nightly business report." still ahead, a kodak moment. the iconic brand is back on the big board but how does it
company differ from the old and is it a good investment? who says you can't go home again? kodak emerged from bankruptcy and traded again today on the new york stock exchange but as hampton pearson reports, the pioneering photography company is different from your great grandfather's kodak. >> reporter: the new kodak is a technology company focused on imaging for business with a full line of high tech commercial printing products. now trading on the nyse with the new tricker symbol kodk today was the first kodak moment for the new business according to ceo antonio perez. quote, the change in our symbol
reflects we're a new company focused on business to business product services capitalized and committed to delivering value for shareholders and invasion to our customers. the rodchester company founded in 1889 became an american icon selling cameras, film, chel kim and photograph paper but those became useless in the digital age. kodak did not transfer fast enough and forced to do bankruptcy filing last year. a textbook case for how not to survive in a 21st century global economy. mistakes of the past still haunt the company. they are adapting a wait and see attitude. it gives them a borderline jump credit rating and it risk comes from the small share in the large and declining market for printers. kodak professional film remains the gold standard for the
picture industry including contracts with six major hollywood studios just in the last year. in a future kodak moments will depend how the company competes in an industry transformed by technology. for "nightly business report", i'm hampton pearson. the container store began trading on the new york stock exchange today and that's where we begin tonight's market focus. shares of the retailer doubled after pricing shares aabove the expected range, the cceo says he's optimistioptimistic. >> we indicated we can grow absolutely at 10% square footage growth per year minimum so we're looking at double digit growth from here on. it's great to be immature in retail with 63 stores, there is a lot of runway with. it surged to $36.20. weakness in remaining, the
country's number two oil company reported gas and oil output increase but not enough to meet estimates. that pressured the stock to close at 118.01. madison square garden posted an earnings beat. net income jumped 16%, that made up for weak revenue generated by radio city music hall. but shares ended the day down at $58.45 a drop of 3.5%. shares of first solar surged after the company boosted the profit forecast for the year. the maker of solar equipment reported earnings yesterday that came in ahead of analysts estimates. sales in canada and rev knew from a solar brand in california helped the company beat forecast. the stock climbed to a two-year high up today almost 18% to $59.14. our market monitor guest in week sames the stock market should continue to rally this month and in december. he's calling for the dow to hit 16,000 by the end of the year
and 1800 on the s&p 500. he's hank smith, chief investment officer at haviford investmen investments. good to see you. how confident are you that the markets will continue to do well? >> we're entering a seasonable period of time, november, december historically are very good months for the market. we've gotten over a historically unfavorable seasonable period, october and september. in fact making new highs along the way. but look, what's happening now is confidence and sentiment is improving from years of fear and anxiety and i think we have a long way to go in that regard. >> hank, what is really going to drive stocks to go that much higher from here? >> well, first of all, fundamentals have been good and continue to be good. corporate america is the shining star from the recession and
financial crisis. balance sheets are exceptionally strong flushed with cash, productivity is high, earnings are good. they continue to beat expectations. and if we can get an economy that picks up a little bit in 2014, i think that's going to fall right to the bottom line with continued good earnings. >> let's move, hank, to a couple stock picks and begin with jp morgan, a bank that's been operating under a regulatory and legal crowd continues to do so. why should i put money into that bank given its circumstances and not another? >> right, it's still one of the best and high -- best managed and highest quality banks in the world and with tremendous earnings power and it's amazing how after discussions of 13 billion, 15 billion the stock is still holding up. that's because investors realize the earnings power this company has and i think you're going to get it at a very attractive
evaluation right now. >> let's talk about ibm. you heard the guest earlier saying despite the stock buybacks it's doing, that the stock hasn't really benefitted from it and if you look at the chart, here is a stock that was above 200 not too long ago and now at 179. why do you like it? >> well, look, ibm is about software and services. that's how the company has evolved and yet, the quarterly misses in the past two or three quarters have been about the hardware business, which is becoming sequentially less and less important. we think they will get through the problems and we do believe they are going to hit that $20 per share by 2015, which makes this an extraordinarily cheap company and if you're worried about the market reaching all time highs, this is a nice stock to buy that is very high quality company not at the all time high. >> give me a 30-second pitch for
united health. >> it's the highest quality of the hmo group and look, the hmos are port of the solution. they aren't going to be excluded. that was the fear from last year and we're very encouraged that the government's hiring their division to fix the software glitches of government.org and we think this company, too, is very attractively priced with a good growth prospect. >> do you or haverford own these stocks? >> we do. they own them and i own them personally along with my immediate family. >> put your money where your mouth is. appreciate it. hank smith, chief investment officer at haverford investments. the cost to protect the new york city marathon.
a gunman shot and killed a tsa worker inside a terminal at los angeles international airport this morning. that delayed flights in and out of lax for hours. the shooter, a 23-year-old from new jersey was taken into custody. several others injured. that deadly shooting at lax comes just two days before the new york city marathon. security was already high in the wake of terrorist attack at the boston marathon earlier this year. mary thompson looks bekind the scenes of the largest marathon and what it means for the new york economy. >> reporter: when runners go through the starting line of the new york city marathon, they do so as the shadow of the boston
marathon. >> nypd began examining and enhancing the coverage of the race starting until the day after the boston marathon. >> the club is spending over a million dollars on security this year, more than double spent on the last marathon. on race day, spectators backpacks will be subject to search, hundreds of mobile cameras around the city will be monitored by security, 48,000 runners will be scened at the start and stripped of certain gear. >> so many things we change what's new this year was over the shoulder hydration packs that some of the runners wear, camel backs are what they are called in the industry, those aren't permitted. >> reporter: this is a come back marathon, cancelled because of super storm sandy. but the bad feelings didn't last. they are saying last year's controversy didn't scar runners
or sponsors away. >> sponsorship is sup. we'll scelebrate this year and structured partnership for next year for the next eight years. partnership is stronger than ever. >> reporter: the making of running year sasics. >> this was the largest race in the united states. we're excited and it's something that we've been doing for a long time, and we love it. >> reporter: like the runners, they are in it for the long haul saying the 26.2 mile course come hell or high water. for "nightly business report" i'm mary tomorrow son. >> to prepare, head to our website nbr.com. you know, it's so nice to see people so positive, whether you're a sponsor or runner and against all odds. >> that's right. so many people -- i was talking to one running on this weekend, she said she had to get there
like four hours early in part to compile with the new security screenings for the runners themselves. >> great day -- >> cold but good. have a good weekend everything. we'll see you back here on monday. "nightly business report" has been brought to you by. >> thestreet.com, interactive financial multimedia tools for an ever changing financial world. our dividend stock advisor guides and helps generate income during a period of low interest rates. we are thestreet.com.