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tv   Nightly Business Report  PBS  January 21, 2015 7:00pm-7:31pm EST

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report" with tyler mathisen and sue herera. waiting on mario. the head of the bank mario draghi expected to make a major move tomorrow to help the struggling euro zone economy and the stakes are high. historic meeting. a delegation from the u.s. arrives in cuba in an attempt to reestablish economic ties. american express reports a rise in profits but plans to lay off thousands. all that and more tonight for "nightly business report," january 21st. good evening, everyone. i'm sue herera. tyler will join us later in the program from the morning star fund manager of the year awards. wall street wraps up another volatile trading day with stocks
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ending modestly higher as anticipation builds for the expected announcement of a massive stimulus package from the european central bank. here's how things looked at the close. the dow up 39 points despite a big drag from a 3% decline in shares of ibm following weaker full year guidance. the nasdaq was up 12 and the s&p added 9 points. with stock's gains and losses today, investors are looking for some real direction tomorrow when we learn just what the ecb has in store for europe and for the global economy. the european central bank has one big tool left in its belt quantitative easing. a massive bond buying program aimed at restoring growth to its economy similar to the one the u.s. federal reserve ended latz fall. the big questions are, just how big will the program be how many euros are involved how long will it last and ultimately will it be enough to make a difference?
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>> to think that the ecb has a magic wand and will already change all the situation in europe by its magic wand in my opinion is not the appropriate reasoning. we need the ecb to do more. >> stock markets are looking for a big a package as possible. one possible guest? $500 billion euros, some call for unlimited, as long as it takes approach. anything less than 500 billion euros is likely to disappoint marcus and chase investors away. why? a bigger plan ingests more euros into the system their price down in six months, down some more. a cheaper euro lowers prices on european exports. if european manufacturers can sell more goods, demand rises. when they increase supply they'll hire more workers, pay them better and improve their spending power. like the fed here at home the
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ecb wants inflation back up at 2%. but qe comes with huge economic and political risks, especially in germany. it's the largest and most stable of the 19 euro zone nations. if one or more of those countries cannot repay their notes, germany may have to shoulder the burden and no one is even sure which countries will be getting the most help for now or who will end up having to pay for it later. if nothing else qe european style will be a tricky dance. >> we need the government. we need the parliament to be on board and even i have to say we need the social partners to be on board because, again, they have a decisive role to play. >> our guest tonight says the ecb will likely deliver on a massive bond buying program tomorrow. he is alec young, chief strategist at oppenheimer funds. great to have you here. >> great to be here. >> i guess it's the component of the package that everyone is focusing on. how do you expect it to be
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allocated and what do you expect it to look like? >> well we've seen a draft proposal that the ecb is currently debating and they'll make an announcement in reference to tomorrow morning new york time and it's subject to change but media reports based on that draft proposal suggest that they're targeting 50 billion euro monthly bond buying primarily focused on sovereign bonds that would begin in march and run through the end of 2016. so we're looking at slightly more than a trillion euros and i think it's certainly well above the least the market was really looking for which is about 5700 billion euros, so it shouldn't disappoint from a size perspective but there's obviously a lot more that goes into something like this. >> yes, such as risk sharing. how is that going to work? you have the european central bank but there are some ewe reen countries that need more help than other european countries and a lot of people don't see germany wanting to share risk
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with greece or say one of the others. >> sure. that's the kind of detail we need to learn more about tomorrow but at oppenheimer fund we are more focused on the headline amount. they set a basd the a reason to expect we'll get that but beyond that we're not as focused on the risk sharing. ultimately euro whether it's a portuguese or german euro it comes down to the same thing. so we're more focused on how big the package is and the fact it's not kind of one and done. it's going to be something that's persistent and ongoing and somewhat open ended. we think that has the potential to succeed in reducing deflation fears in europe and boosting asset prices which has been the experience in the u.s. and japan and the u.k. which have been other major economies that have tried this. we know people will focus on the risk sharing aspect and politically, that's important but from an investor perspective, we focus on the size and the time frame with
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regards to the qe plan. >> so if indeed this package does come in about where you expect it to, what'sith the length you expect would you put money to work in europe and develop based on that? >> we would. this is a widely anticipated economic event so a lot has been priced into markets. draghi talked about expanding the ecb's balance sheet from 2 trillion to 3 trillion which is rougi think what we're going to get, a lot has been priced into markets but we would remain positive on european equities as well as u.s. we canequities because the qe has returning on assets. that's what we would be banking on. we think deflation expectations are such a height right now in europe there's every likelihood that a credible plan can help did i have fufz some of the fears in the short run and certainly from a u.s. investor
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perspective, the fact we have qe in japan and ramping up in europe deflation pressures out there, we think that mean it is fed is going to be much slower than many may expect in terms of how quickly they tighten. we think we're in a low for long environment with a aggressive central bank policy favorable for risk assets not just but the u.s. as well. >> alec young with oppenheimer funds. the bank of canada became the latest central bank to make a stunning move ahead of the ecb stimulus plan cutting by a quarter point tonight, the first rate change in 4.5 years. canada's blachled on oil prices and growing uncertainty about the world's fifth largest oil producer. today, oil prices rose on hopes that stimulus plans out of europe might help the market. west texas crude was up nearly 3% while benchmark brent crude
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closed just over $49 a barrel. and not to be left out of all of today's central bank action the bank of japan cut its inflation forecast to just 1% for the year also blaming the sharp drop in oil prices but the bank also increased its forecast for economic growth projecting the world's third largest economy will expand by 2.1% by next year. now to another troubled economy. cuba. where a delegation from the u.s. began historic talks to normalize relations between the two countries after a half century standoff talks that could have a big impact on american business. eamon javers has more from havana. >> reporter: a small group of american tourists watched obama's speech on live television from a most unlikely location right in the heart of castro's cuba. >> it's an ironic experience to be in cuba and have cuba in the
quote quote
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basement of the hotel nationale and watching obama's state of the union. i love it. >> reporter: people are watching in havana and wanting to burst into a flood after the obama administration opened up a total of 12 categories of travelers allowed to the isolated islands. >> when what you're doing doesn't work for 50 years, it's time to try something new. and our ship in cuba policy has the potential to end the mistrust in our hemisphere. >> reporter: wednesday, american diplomats arrived in havana to begin historic talks with their counterparts. the american delegation is led by roberta jacobson who becomes the first assistant secretary of state. this is the russian ship victor leeonov. arrived in havana harbor as the u.s. delegation was getting set
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to come here to havana. the russians say nothing meant by this just ordinary naval operations but a lot of american officials and cubans are taking note of their presence here. u.s. officials say it's not clear what can be accomplished by this first round of talks, but they hope to reopen the u.s. embassy here and make a new start in cuba. for "nightly business report," i'm eamon javers in havana. a world away from cuba in the alpine village of davos, switzerland, the economic forum kicked off today as business and political leaders prepare for urgent and immediate changes, they're about to shake up the global economy. andrew sorkin ross sorkin has more from davos. >> reporter: looking down at davos, the movers and shakers of business and government take note of the change they've seen than a year ago. the world economic forum putting world issues into perspective with what it's calling the new global context but the
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discussions begin amidst a backdrop of new and potentially divisive tensions. >> society has gotten a bit more used to being divided. i happen to think this is a very very bad idea. i think we have a lot of work to do. this is in the united states and some other countries to bring our people together and that's the way you get the most out of this society. >> reporter: on the agenda middle east undersiege russia at odds with the west and the upcoming elections in greece. china's premier is in davos for the first time. the growing gap between the goals of government and those of big business and changing economic conditions in the united states economic stimulus has ended with slowing growth in china and no growth in europe. >> i think mario draghi's done a great job and i hope i think the world should do something. it shouldn't mask the fact of the structural form in europe.
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>> i don't think the euro has come close to living up to the hopes of those who inaugurated it. >> they let the politics trump the economics and they're paying the price for that. >> reporter: som on the agenda may. climate change hottest year on record internet security leaks after the united states pointing a finger at north korea in the sony hacking attack and income inequality none to be ignored if business and politics to come together. >> it's not enough to drive growth. we've got to make sure the way in which we have that growth is equally distributed. >> lower energy prices is probably the largest redistribution of wealth that we've seen in our lifetimes. >> most companies are global. there's a lot of success around globe. all the regulatory health care
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new things. >> reporter: if nothing else change in the air as 2015 unfolds. it's still an uphill climb. for "nightly business report," i'm andrew sorkin in davos, switzerland. talking to fund managers of the year to get their views on the market and where they see opportun
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wall street regulators in two states settled charges against the s&p ratings agency for overly optimistic ratings it gave back to bonds by risky mortgages a few years back. securities and exchange commission get $58 million from s&p to settle fraudulent misconduct allegations. new york state will get $12 million, massachusetts will get $7 million to compensate investors. turning to earnings now with united health reporting before the bell. the nation's largest health insurer topped wall street estimates last quarter and saw profits rise by adding 400,000 customers through the federal health care exchange. shares of united health hit a 52 week high today and the biggest gainer in the dow up some 3.5%. after the bell strong earnings from another dow component, american express, but the news wasn't all good. the credit card giant is cutting 4,000 jobs this year. american express earned $1.39 a
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share excludeing items a penny better than estimate. topped $9 billion and beat forecast as more card holders did more spending last quarter. shares initially higher in after hours trading but then they fell back just a bit. mary thompson joins me now with the one big takeaway from this report. mary there was a lot to dig through with this one. >> there was, but i think the take aiway focuses on the job cuts. the company is continuing to put a tight control on expenses. here's one of the reasons. american express has a growth target of 8%. this looks good but it was because of the gain of a sale with part ownership in. so investors looked at that. business with the total number of charges on their cards, they increase 6% in the fourth quarter but that was down from the growth rate we saw earlier, so if the company looks for new ways new initiatives to boost revenue, they're keeping a tight control on spending as they have been for a while. so that 4,000 number is the key
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takeaway. >> key takeaway mary thompson thank you so much. ebay announced with tonight's market focus. the company expects to slash 1% of its workforce and exploring a sale or public offering of its enterprise unit as it is prepared to spend off its paypal division later this year. entered with carl icon and appoint two picks to his board. as for earnings its revenue and outlook missed estimates. after the bell initially rose. before the close was slightly off closing at $53.38. t.d. ai mer trade with matched estimates but transaction fees fell. but the company's profit rose from a year ago on asset growth. the ceo said strong investment activity helped t.d. this quarter.
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>> no matter what metric you look at with ameritrade whether it's bullish, client cash is a percentage of assets and margin loans, net buying activity over $13 billion in the quarter, 25% up from last year. no matter what you look at people are moving into u.s. >> shares were a fraction higher to $33.28. shares of boeing rose after the company said demand for its fuel efficient jet liners remains strong despite the recent slump in oil prices. the plane maker's top sales man said cheaper energy contributes to a stronger economy that is sustaining demand for boeing's jetts. stock at $132.41. microsoft lifted the feature on what windows 10 is offering. no specific release date but expected a bit later this year. that upgraded system will be free for those using windows 7
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or later version. shares of microsoft fell 1% to $45.92. star board value taken a stake in the outsourcing company in sparety. the largest shareholder in the firm. star board said tbls the company is deeply undervalued and that opportunities exist to create value for shareholders. shares spiked 13.5% to $41.24. tootsie roll's ceo melvin gordon has died. a market capital over $1 billion from over 50 years. the candy maker will appoint gordon's wife as the new chief. speculation that the company could be acquired sent shares up 7% to $32.99. investment research firm morning star announcing fund managers for the year today for delivering a strong performance in 2014 and showing a solid outlook for long-term investing. our own tyler mathisen has the
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story from chicago. >> reporter: sue, every year morning star announces its fund managers of the year. the team of morning star goes through the thousands of funds it follows and comes up with the best performances for the year in five separate categories. for 2014 in domestic stocks, it was prime cap odd see with airlines and pharma for a 16% total return. dodge and cox international were the best in the international category and there the trick was that they managed not to lose money in a category where the average return was a negative 5%. i asked the manager today what she's looking forward to in terms of the macro themes for 2015. >> we ask a different question. it's not what exactly is going to happen because no one can predict that. we ask, what's priced? >> reporter: the fixed income lee at asset core bond.
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lead to a 7.5% return in 2014 which placed in the top 3% of its peer group. the reason he did so well? he had a very interesting view of inflation, something that he thinks bears watching in 2015. >> people will want to focus on growth interest rates. that's very very important, just as importantly as the inflation backdrop. >> reporter: in allocation, winner was ann lester and her team at the j.p. morgan smart retirement day funds. remarkably every single one of lester and her team's funds have outperformed their peer group over the past five years. low risk very nifty returns. but she says that one of the things investors needs to understand is that it's what you do as important as she and her team does. >> the money that you put in is more important. if somebody is putting away at
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least 10% of their salary and company is hopefully matching some of that so their overall savings rate between 10% and 15% of their gross paycheck they'll be fine. >> reporter: in the alternatives winner from boston partners long short equity. ally matomit turned the $10,000 into $31,000 over the past ten years. that's the kind of performance to lift you to the top. the fund is 24% long which suggests the group of managers there say it got stretched. when i asked motomat, here's what he did. >> biotech suits that right now. if you look at the category we've had hundreds of ipos in the space in the past four or five years. they're massive consumers of capital because they're constantly spending the money and don't have anything to show for it and won't for six or
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seven years. meanwhile, we've had massive increases in prices for these drugs and that's what'sprofitability. >> all came from teams. there were no star individual managers on the podium here today. john martin of giliat sciences won the ceo award. that company has gone gang busters but maybe you don't want allie matomat there. >> thank you, thai. the new taxes for marijuana bills filed and the processes bringing together two rather unlikely g
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uber keeps picking up new investors. the privately held firm just raised another $1.6 billion in financing and convertible debt from goldman sachs wealth management client as it hopes to expand internationally. and toyota has done it again. it was the top selling car maker in the world for the third year in a row in 2014. selling more than 10 million units worldwide. volkswagen a close second and gm came in third. and finally tonight with the legalization of recreational marijuana in some states pot-related businesses are preparing to file their first tax returns. but some professionals have been called in to make sure their
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returns don't go up in smoke. jane wells has the story. >> reporter: growing and selling marijuana may be illegal federally, but you still got to pay the tax man. >> all my clienlts file federal tax forms because to do so would be illegal and not worth it. >> reporter: button down cpa and tax attorneys gathered in san diego to talk about decidedly unbutton topic, navigating tax code in the marijuana industry. >> chances are they're not paying fair share in taxes. >> reporter: why are you paying taxes? >> i'm in for the long haul. >> reporter: in colorado and washington filing their first returns and with no bank accounts many are paying the irs in cash. >> my suggestion the irs in denver got cash counting machines and now they have a separate line for cash. >> reporter: but the biggest issue being discussed here is
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how the marijuana industry is singled out by the irs when it comes to deductions. ironically you can deduct the cost for growing pot but not the cost of selling it. so no deductions for things like retail stores or payroll or security. how come they're allowing one and not the other? >> they're just making it up. >> reporter: denver cpa said the inability to conduct retail costs can wipe out profits for some stores and accountants look for legal workaround like dedupr of that does not directly touch pot. >> if you do not handle deductions properly there's no way you can remake enough money to remain in business. >> reporter: he's seen them file illegally and never with a tax return. >> i see a learning curve for some people. i don't know there's much learning involved but there's paying and that is disappointing. >> reporter: disappointing but
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perhaps necessary as pot comes out from the shadows. who knew a gathering of accountants could be so interesting? for "nightly business report," jane wells, san diego. that does it for "nightly business report" for tonight. tyler will be back with me tomorrow. i'm sue herera. thanks for watching. have a great evening, everybody. and we'll see you tomorrow.
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