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118> <Type: SHOW> <Head: NIGHTLY BUSINESS REPORT for May 30, 2013, PBS> <Sect: News; Domestic> <Byline: Susie Gharib, Tyler Mathisen, Kayla Tausche, Jon Fortt, Jane Wells> <Guest: Walter Bettinger, Patty Lovera, Rick Quinn> <Spec: Business; Economy; Stock Markets; China; Food and Beverages; Policies; Trade; Banking; Consumers> <Time: 18:30:00>
ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Susie Gharib, brought to you by --
TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Turning point. The bulls say more gains ahead, the bears say brace for a pullback. So, what should you do with your money? We`ll ask the CEO of Charles Schwab, Walt Bettinger.
SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Food fight. Now that a Chinese company is buying America`s biggest pork producer, should the deal be blocked? We`ll debate it.
MATHISEN: And gaining interest. Looking for a little extra cash -- of interest on your cash? We found a way to do it, but it`s not as easy as it used to be.
All that and more tonight on NIGHTLY BUSINESS REPORT for Thursday, May 30th.
GHARIB: Good evening, everyone.
Big ups and big downs. That defined the market recently, and today was an up day. Investors brushed aside another sharp drop in Japan`s stock market and focused on economic reports here at home. The economy grew at a slightly slower pace than initially estimated. And jobless claims ticked slightly higher.
But that tepid news is being interpreted as good news, easing concerns the Federal Reserve will gradually pull back on its policies to stimulate growth.
MATHISEN: Stocks did lose some altitude into the close, though. In the end, the Dow gained 21 points to 15,324, the S&P up six to 1,654, and the NASDAQ up 23 points to 3,491.
So, as the market searches for direction, is it time to get in? Time to get out? That`s the question everyone`s asking.
MATHISEN (voice-over): It`s the debate of the summer. No, not "Iron Man" versus "Superman," it`s bull versus bear, buy versus sell. And right in the middle of it all is this man, Fed Chairman Ben Bernanke.
Will he or won`t he moderate the market methadone the Fed has been supplying in the form of $85 billion a month in bond purchases? Bulls like Federated`s Stephen Auth say it won`t happen soon, and if it does, it will be a positive sign.
STEPHEN AUTH, FEDERATED EVPO & CIO EQUITIES: We`re not going to start tightening until the economy really starts to get airborne.
MATHISEN: Today`s report on economic growth, a tepid 2.4 percent pace in the first quarter suggests the economy has left the gate but is still taxiing.
The bulls` conclusion: the Fed -- not to mention central banks in Europe and Japan -- will keep pumping cash through the summer and stocks already up 16 percent this year move higher from here.
The bears say not so fast. Bond yields are moving up, reflecting not only inflation fears but growing Fed chatter suggesting that the money spigot may tighten sooner rather than later.
Philadelphia Fed President Plosser said two weeks ago he`d like to see it scale back as soon as June.
Add to that concerns that stock prices are anticipating faster growth than seems probable, and you see why some of the world`s most respected investors like PIMCO`s Mohamed El-Erian are taking a cautious stance.
EL-ERIAN, PIMCO CEO & CO-CIO: At these level of prices, we are walking away from risk. We`re not running away. We`re not sprinting away because central banks are committed, but we`re walking away. So we`re taking money off the table.
MATHISEN: Remember, market timing is a fool`s game. But no one ever went broke taking profits.
GHARIB: So how do individual investors feel about the stock market, and what are they doing with their money?
Let`s find out now from a man who is in close touch with them, Walter Bettinger, CEO of Charles Schwab Corporation.
Walt, nice to have you back on the program.
Let me begin by asking you, how would you describe investor sentiment right now? Optimistic? Pessimistic? Are individuals feeling that they miss out on the rally? Are they participating? What are you finding?
WALTER BETTINGER, CHARLES SCHWAB CORP. PRESIDENT & CEO: Well, Susie, thanks first for the invitation to be here. It`s great to be back.
I think most of our investors at Schwab are feeling pretty good. As you know, we`re not advocates of market timing. And what we recommend to our clients is develop an investment plan that is going to have them taking a long-term perspective, understanding their risk tolerance, making sure they diversify from the downside standpoint, staying invested, not trying to guess the market and keeping expenses low.
So, the investors who follow our advice at Schwab have done quite well. They`ve caught a very, very nice run in the last three-plus years.
GHARIB: All right. So, you say have a plan, but, you know, this is a very confusing time. There are a lot of choices out there.
People aren`t sure, should I buy individual stocks? Should I turn to an index fund or an ETF? U.S. stocks versus international? A lot of confusing decisions to make.
What do you tell Schwab clients should be at the core of every single portfolio?
BETTINGER: Well, I think every portfolio has to have a waiting in U.S. stocks. We`re still the strongest, largest economy in the world. Our stock market is the most liquid. I believe it`s the most trustworthy market out there and core U.S. stocks should be at the heart of every portfolio.
But I guess what I would add is maybe even more important than that is understand your own risk tolerance. In volatile periods like we experienced during the financial crisis, made a lot of people sit up and take notice that maybe their risk tolerance was a little bit less than they had been investing at. And so, understating that risk tolerance as I indicated, protecting your downside with diversification. That`s maybe even more important than what you put at the center of that portfolio.
GHARIB: Walt, you heard Mohamed El-Erian that Tyler just did, saying that he`s walking away from risk. But do you find as the market keeps going up on, that investors are taking on more risk, or are they becoming more cautious?
BETTINGER: Well, I think investors have moved more into the market. Mutual fund inflows show that. In recent times, they have moved more into the market. Frankly just the market going up, of course, is an indicator, as we know, that there are more buyers than sellers. But I think that the timing is less the issue than the realization of people that being in the market for a long time is the only winning strategy.
Guessing the market is just so difficult. I like to say that even that broken watch is right twice a day, but that`s no way to invest. When you time the market, all you end up doing is timing losses.
Now, professionals like Mohamed or others, they might be able to make small moves -and he even indicated, I think, in his interview that he was only walking away from risk --
BETTINGER: -- as opposed to moving aggressively away. That`s not necessarily a bad strategy for someone who follows the markets every day.
GHARIB: All right.
BETTINGER: For the average investor, you`ve got to stay invested, you`ve got to live with some of the ups and downs. And in the long run, history shows you`re going to come out ahead.
GHARIB: All right. Lots of good advice.
Walt, thank you so much for coming on the program. Walter Bettinger, CEO of Charles Schwab.
MATHISEN: And now to housing news. Pending home sales, a forward- looking indicator based on contract signings rose 0.3 percent in April and continued to be well above levels a year ago. This as RealtyTrac reports that sales of bank-owned homes fell to a five-year low in the first quarter.
Meantime, the Obama administration is extending its home loan modification program called HAMP for two more years. The program was set to expire at the end of the year.
And don`t look now, with the 30-year fixed-rate mortgage is inching higher, now at a one-year high of 3.81 percent. That according to Freddie Mac.
GHARIB: Turning now to market focus.
We begin with developments in the deal derby between Clearwire (NASDAQ:CLWR), Sprint and DISH Network (NASDAQ:DISH). Clearwire (NASDAQ:CLWR) has postponed a shareholder vote scheduled for tomorrow on Sprint`s takeover bid because now DISH Network (NASDAQ:DISH) made a new higher counterbid for Clearwire (NASDAQ:CLWR). Clearwire (NASDAQ:CLWR) jumped 29 percent on DISH`s new offer. DISH and Sprint each gained less than a percent.
Facebook (NASDAQ:FB) gained on a pair of upgrades as analysts took a look at the impact of mobile video ads expected to launch as early as July. Jefferies said that the video ads could be Facebook`s next billion-dollar business. Investors pushed Facebook (NASDAQ:FB) shares to $24.55. That`s a jump of more than 5 percent.
CIT Group (NYSE:CIT) announced a $200 million share repurchase after the market closed today, hours after the New York Fed ended its oversight arrangement with the company. John Thain, who you remember, used to run the New York Stock Exchange is CEO at CIT.
Investors piled into the stock more than six times usual volume. And the share set a new five-year high, closing at $46.90. That`s up nearly 5.5 percent before gaining some more on the buyback news.
MATHISEN: Costco (NASDAQ:COST) reported 19 percent jump in profits, but an 8 percent gain in revenue was below estimates. Costco`s revenue for memberships was higher by 12 percent. The company said it plans to open an additional nine warehouse stores by September. Busy summer there.
Costco (NASDAQ:COST) shares up 32 percent over the past year were off about a percent today on that revenue miss. They closed at $111.88.
CNBC is reporting that Sony (NYSE:SNE) has hired Morgan Stanley (NASDAQ:NBXH) (NYSE:MS) and Citigroup (NYSE:C) to review hedge operator Dan Loeb`s proposal to spin off Sony`s entertainment business through an IPO.
Loeb`s Third Point Fund is the largest holder of Sony (NYSE:SNE) shares with a $1.1 billion stake. Sony (NYSE:SNE) CEO Kaz Hirai said the company`s new board will meet on Loeb`s ideas later in June.
(BEGIN VIDEO CLIP)
KAZ HIRAI, SONY CEO: The proposal is that we look to spin off about 15 percent to 20 percent of our entertainment assets. And we want to make sure that we have a thorough discussion of the merits of the proposal before we come to any conclusion.
(END VIDEO CLIP)
MATHISEN: Sony (NYSE:SNE) shares jumped when word of the review leaked, Sony (NYSE:SNE) closed at $20.84, up more than 3.5 percent.
And still ahead, want to earn a little interest on your cash, your checking account? We found some safe ways to do it. They`re getting harder to come by.
First, though, how the international markets closed today.
MATHISEN: As the pros debate whether stocks will move higher or pull back, some aren`t willing to take the risk that goes along with putting money in the market. So what`s the alternative for your cash? Our Kayla Tausche found one that`s risk-free, liquid and even earns a little interest.
KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT: For every investor in the stock market, there`s another who likes their money right where they can see it -in their checking account, insured and in a perfect world, earning interest.
With that last detail hard to come by, experts say a high-yield checking account might be the answer. A high-yield checking account, on average, returned 1.64 percent according to a Bankrate survey out Thursday. That`s an average of $280 per accountholder per year. Leaps and bounds beyond money market accounts or certificates of deposit.
GREG MCBRIDE, BANKRATE.COM, SENIOR FINANCIAL ANALYST: And a lowrate environment where people are looking for yield, these accounts give you the opportunity to earn a higher yield on a portion of your savings without sacrificing either the safety or the liquidity of the money.
TAUSCHE: More so (ph) if you can stomach the requirements. High- yield checking accounts commonly require at least 10 debit transactions a month to earn the highest rate, and they only let you earn the highest interest up to a certain balance. With yields continuing to fall, the costs may soon outweigh the benefits. The $280 earned was an average of $400 last year and experts say the numbers could keep going down since consumer interest rates lag the general market.
Financial planner Derrick Kinney says consumers should be realistic.
DERRICK KINNEY, DERRICK KINNEY & ASSOC., PERSONAL FINANCIAL ADVISOR: The biggest risk to a consumer is how much interest will they earn on the account? Keep in mind CD rates are almost at an all-time low, savings rates aren`t paying much more.
Consumers who are expecting too much may be very disappointed by what a high-yield checking account or savings account pays. Use this clearly for flexibility and liquidity. Use the account as a way to save money and keep it liquid.
One of the best ways is if you need the money in the next six to 12 months. Let`s say you`re a business owner who may pay taxes on some things a year from now. An account like this, liquid, pays a higher return than checking, could be a great alternative. Let`s say it`s a short-terms savings goal, you got -- your son or daughter going to college in a year, park the money in this type of account.
TAUSCHE: To find one, look local, at employee credit unions and regional banks. Internet Bank Ally and brokerage Charles Schwab are two of the few companies that offer these accounts nationally and just one high mark from Pew Charitable Trust for checking transparency.
Kayla Tausche, NIGHTLY BUSINESS REPORT, New York.
MATHISEN: And for those with a bit more patience, perhaps keep an eye on when interest rates might go up a little bit.
GHARIB: Well, no surprise in this new study. Wealthy Americans benefit much more than low-wage earners from big tax breaks. That report from the Congressional Budget Office also finds that the top 10 tax breaks like deductions for mortgage interest and charitable giving will also keep $12 trillion out of government coffers over the next decade. The top 20 percent will receive more than half of those tax benefits.
But not everyone is feeling wealthy these days. A report from the Federal Reserve Bank of St. Louis says the recovery has been uneven and that the average American household has a long way to go to recover the wealth lost during the financial crisis. The study took into account inflation rates and population growth and concluded that the typical household has regained less than half of its lost wealth, that`s far below what other reports have stated.
MATHISEN: Well, Susie, that $4.7 billion takeover of the pork giant Smithfield Foods (NYSE:SFD) by China`s Shuanghui is generating a lot of buzz. The proposed deal faces
regulatory scrutiny and some consumer groups are not, shall we say, hog wild about the deal amid what they say are food safety concerns.
And here to debate the topic is Patty Lovera. She`s the assistant director of Food and Water Watch, a consumer advocate group.
And Rick Quinn is a principal at FDAImports.com, which advises Chinese companies looking to export to the U.S. and also works with American importers.
Folks, welcome. Good to have you here.
Patty, you say we think the deal should not be approved. What`s worrying you?
PATTY LOVERA, FOOD AND WATER WATCH: So, in the short term, anytime what -- I mean, Smithfield is the largest pork producer in the U.S. Any news that`s going to make them bigger we think is worrisome for consumers and for U.S. farmers.
Very short term, if they do as much exporting to China as they say they want to do, we`re worried that prices could go up for consumers here.
Longer term, we`re worried about imports from China and China is a country with a really very troubling food safety track record. And we`re concerned that this is leading towards that eventual step.
MATHISEN: And this company, Rick, in particular, has -- she characterizes it as a troubling track record. They were sanctioned some years ago for using a known carcinogen as part of their pork feed.
Should we be worried? How do you respond to what Patty just said?
RICK QUINN, FDAIMPORTS.COM: Thank you for the opportunity to be with you. It`s a good question. The answer is that Shuanghui is buying quality, and that`s why they`re buying Smithfield. If you read the reports in the Chinese press, the CEO is clear he`s buying supply chain management, integrity, technology and scale.
As to whether we should be worried about Chinese pork in general, I would simply say that 90 percent of the last 10 to 15 food recalls that represented significant health risk or death to humans in the United States came from domestic food production. So, the Chinese food import business is certainly subject to bad PR, some of which is warranted, but most of which is not.
MATHISEN: Some people, Patty, say that this is a national security issue, that this is going obviously not to secure defense technologies or telecommunications technologies, but to a truly important national asset. It`s easy to poke fun if they`re just buying some pigs, but really they`re buying agricultural production here. Are you worried about it as a national security issue?
LOVERA: Sure. I mean, I think we think the definition of national security should include how a country feeds itself, and this could lead to radical changes in the structure of, you know, our food system. So we already have other meat companies that are owned by foreign companies.
This is not the first one. This would be the first one where we have this Chinese presence, and there`s been lots of evidence that this is not a place where our business relationships are always on equal footing, as they should be. And we are very worried.
I mean, the poultry industry already wants to import chicken from China. The cost of doing things there are so much lower, and we have to assume -- we think it`s a safe assumption they`ll eventually get to that point with pork, and that is very worrisome if you`ve replaced that kind of production and put it in a foreign country, what are you missing if that production was cut off?
MATHISEN: Patty seems worried, Rick, that Chinese product -- Chinese pork might work its way into the United States. You work with Chinese companies. My assumption is that Chinese food that comes into the United States would be subject to exactly the same standards of quality as the domestically produced stuff.
And we already get shrimp, tilapia, other kinds of products from foreign sources -- and I assume that they have to meet our standards, too.
QUINN: Well, it`s true, but it`s also true that foreign product is subject to higher standards importantly from the standpoint of enforcement resource allocation at the ports of entry, only about 1.7 percent of products offered for import are subject to examination. So, even if you multiplied that by a factor of 10, you would have four entries getting without exam for every one that is examined. So, single out the Chinese is unfair.
But from the standpoint of national security, it`s certainly true that food infrastructure has an impact potentially on national security and the congressional review that will ensue under the Foreign Investment National Security Act could, on the floor debate, use a populist approach to the definition of national security in a way to clog the proposed merger.
But what I would simply say is this. You have a company in China with $100 billion in revenue last year, buying a U.S. company with $5 billion in revenue. The Chinese firm is trying to recover the brand equity from issues they had previously, and they`re using Smithfield to do it.
MATHISEN: All right.
QUINN: The idea -- the idea that they would sacrifice that equity for short-term profit is nonsense because the acquisition is relatively small compared to Shuanghui`s market size.
MATHISEN: All right. Folks, we have to leave it there.
Patty Lovera of Food and Water Watch, thank you. And Rick Quinn of FDAImports.com.
In a statement issued yesterday, we should point out, the company said, "Shuanghui will continue its long-term strategy and vision to become a global leader with strict adherence to the highest standards of quality control and safety compliance. Its agreement to acquire Smithfield is fully aligned with this focus."
GHARIB: And coming up a little later on the program, cameras and screen you can wear. Will the next new thing be wearable technology? We`ll take a peek into the future.
First, a look at how commodities, currencies and treasuries fared today.
GHARIB: Amazon (NASDAQ:AMZN) is going after Netflix (NASDAQ:NFLX). The online retailer plans to produce five new television shows following Netflix (NASDAQ:NFLX) deeper into the world of original content delivered over the Internet. The new series will be shown exclusively on Amazon`s prime instant video service that comes out later this year and in early 2014.
Amazon (NASDAQ:AMZN) rose slightly to $267 and Netflix (NASDAQ:NFLX) jumped more than 3 percent to $222 a share. This stock has more than doubled this year.
MATHISEN: As technology companies battle for dominance, the next big thing may not be the newest and coolest device but how you wear it.
Jon Fortt takes a look at whether wearable technology is about to be a big part of your future.
JON FORTT, NIGHTLY BUSINESS REPORT CORRESPONDENT: We`ve had tech on desks, on laps, and lately in pockets. But the latest buzz, cameras, sensors and screens you can wear.
GoPro, Nike (NYSE:NKE) and others have been doing it for sports. With sensors on your wrist and cameras you connect to a phone. The next step is smarter technology you can wear all day. Google`s first bid in that market is Glass, which goes on your face. Not clear whether people would wear something like that.
UNIDENTIFIED FEMALE: I`d have to, like, try them out, though. I don`t know if I`d wear them in public while talking to somebody.
UNIDENTIFIED MALE: If they had sunglasses with TV, I`d like that so I could walk around and watch TV while walking.
UNIDENTIFIED MALE: You can`t resist technology. That`s the mainstream where society is heading. That`s just the y that you go.
FORTT: At the D-11 conference outside L.A., Twitter CEO Dick Costolo weighed in.
UNIDENTIFIED FEMALE: Do you wear Google (NASDAQ:GOOG) Glass?
DICK COSTOLO, TWITTER CEO: No.
UNIDENTIFIED MALE: No? Because?
COSTOLO: I have these glasses.
UNIDENTIFIED FEMALE: But you could wear them on top of it.
COSTOLO: I could wear them on top of these?
UNIDENTIFIED FEMALE: Yes.
COSTOLO: I don`t wear Google (NASDAQ:GOOG) Glass. I wear these glasses.
FORTT: Apple (NASDAQ:AAPL) CEO Tim Cook was in the same camp, saying he doesn`t think tech in glasses will catch on soon.
Most people only wear glasses if they have to. But he called the wrist intriguing.
COOK: I think for something to work here, you first have to convince people it`s so incredible that they want to wear it because where you two guys are wearing watches, if we had a roomful of 10 to 20-year-olds and we said, everybody stand up that has a watch on --
UNIDENTIFIED MALE: Just a time --
COOK: I`m not sure anybody would stand up. I don`t see it.
FORTT: The market could be huge. Cook said smartphones ignited the post-PC revolution. Tablets accelerated it, and wearables could push things even further.
But first, these companies have to figure out where on our bodies we`re willing to wear this stuff and how it could be really useful.
For NIGHTLY BUSINESS REPORT, I`m Jon Fortt.
GHARIB: And finally tonight, with all the focus on technology these days, one of our core building blocks seems to be getting neglected. We`re talking about spelling. But several hundred students from across the nation are proving all is not lost.
Jane Wells explains.
UNIDENTIFIED MALE: Longlove (ph).
UNIDENTIFIED BOY: Longlove?
UNIDENTIFIED MALE: Longlove.
JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Yes, I don`t know it either. But nearly 300 of America`s best and brightest are giving it a shot this week in the 86th Annual Scripps National Spelling Bee.
UNIDENTIFIED MALE: Ext (ph).
UNIDENTIFIED BOY: Can I please have the definition?
WELLS: Does spelling even matter anymore? In an age of spell check and texting shorthand, who cares?
MIGNON FOGARTY, "GRAMMAR GIRL": Today`s spelling matters especially because it`s the first impression you`re often making on people. You know, whereas 30 years ago, we might pick up the phone and call someone for business. Now, we`re much more likely to send an e-mail or even a text message.
WELLS: Mignon Fogarty, aka "Grammar Girl", warns to be careful relying on software to fix your mistakes. Many of these spelling bee words weren`t even recognized by autocorrect.
UNIDENTIFIED MALE: Nenuphar.
UNIDENTIFIED GIRL: Nenuphar?
UNIDENTIFIED MALE: Also nenuphar.
WELLS: Take nenuphar or nenuphar, a water lily.
UNIDENTIFIED GIRL: N-e-n-u-p-h-a-r. Nenuphar.
WELLS: Autocorrect turns it into menu phase.
(on camera): This year`s spelling bee has an added twist. Contestants also had to define vocabulary words, a completely different skill.
FOGARTY: It would be almost as if you were having a Sudoku competition and suddenly you told people they had to do multiplication tables to qualify.
WELLS (voice-over): And isn`t the spelling part hard enough already?
UNIDENTIFIED MALE: Bacciferous.
UNIDENTIFIED BOY: Bacciferous -- could I get everything, please?
UNIDENTIFIED MALE: Sure.
WELLS: Type in bacciferous and autocorrect turns it into vaccine toys.
FOGARTY: None of those programs are foolproof and I`ve seen too many people doubt themselves.
WELLS: Sometimes you just have to trust your gut.
UNIDENTIFIED BOY: B-a-c-c-i-f-e-r-o-u-s? Bacciferous?
UNIDENTIFIED MALE: Yes.
WELL: And nothing can be as eudemonic as when you elucubrate for months for a moment like this.
For NIGHTLY BUSINESS REPORT, I`m Jane Wells.
MATHISEN: I would have spelled bacciferous as machine toy or whatever it was, vaccine toy.
The finals are tonight and the winner gets $30,000 in cash, a $2,500 savings bond and a big reference library digital, of course.
GHARIB: Next, they`ll be wearing those glasses that will tell you how to spell the word.
MATHISEN: It will spell check for you.
GHARIB: Yes. That`s NIGHTLY BUSINESS REPORT for tonight. I`m Susie Gharib. Thanks so much for joining us.
MATHISEN: I`m Tyler Mathisen. Thanks from me as well. We`ll see you back here tomorrow night.
Nightly Business Report transcripts and video are available on-line post broadcast at http://nbr.com. The program is transcribed by CQRC Transcriptions, LLC. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Nightly Business Report, or CNBC, Inc. Information presented on Nightly Business Report is not and should not be considered as investment advice. (c) 2013 CNBC, Inc.
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