From: Alexei Egoryshev <aegoryshev@fdch.com> Date: June 27, 2013, 8:25:39 PM PDT To: <richard.carolan@nbcuni.com>, <samantha.wright@nbcuni.

com> Cc: FDCH Editors <list-newsteam@fdch.com> Subject: NBR 6-27 <Show: NIGHTLY BUSINESS REPORT> <Date: June 27, 2013> <Time: 18:30:00> <Tran: 062701cb.118> <Type: SHOW> <Head: Nightly Business Report> <Sect: Business> <Byline: Susie Gharib, Tyler Mathisen> <Guest: Richard Madigan, Ed Yardeni> <Spec: Business; Stock Markets; Economy; SIC: 7375> <Time: 18:30:00>

ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Susie Gharib.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Win streak, the Dow sees its best three-day gain in almost a year. Is the wobbly market behind

us? We`ll ask the chief investment officer of JPMorgan Private Bank.

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Pain in the apps. Why the banking on your mobile device, the wave of the future, is going to cost you.

MATHISEN: And failing grade, a trillion dollars in new student loans will likely be issued over the next decade, and now Congress is just days away from letting the interest rate double.

All that and more tonight on NIGHTLY BUSINESS REPORT for Thursday, June 27th.

GHARIB: Good evening, everyone.

If investors think the Fed will be hiking short-term interest rates any time soon, they`ve got it wrong. So says Bill Dudley, president of the New York Federal Reserve Bank, and one of the most powerful policy-makers at the central bank after Chairman Ben Bernanke.

In a speech today, Dudley said investors are misreading Fed policy, adding that a rise in short-term rates is "very likely to be a long way off."

WILLIAM DUDLEY, PRESIDENT, FEDERAL RESERVE BANK OF NEW YORK: The

FOMC`s policy depends on the progress we make towards our objectives, and this means that policy, including the pace of asset purchases, depends on the economic outlook, not on the calendar.

GHARIB: Well, investors were reassured by those comments from Dudley, and in reaction to some upbeat economic reports today. The government said consumers earned more and spent more in May, and first time jobless claims fell by 9,000 over the past week.

The Dow jumped 114 points, closing above the psychologically important 15,000 level. The NASDAQ added 20, the S&P rose by almost 10 points.

MATHISEN: Well, Susie, for more than a month, the market has vacillated. And that`s putting it mildly, shifting sometimes day by day from big gain to big drop and back again. More confounding some days, like yesterday, the market`s rise is traced to weak economic data that might stay the Fed`s tightening hand. Other days like today market gains are chalked up to good economic numbers, so go figure.

So tonight that`s what we`re going to do. We`ve invited two of Wall Street`s best to help us and help you go figure. We`ll call it the "go figure summit." Richard Madigan is chief investment officer of JPMorgan`s Private Bank; and Ed Yardeni, president of Yardeni Research, has probably made more smart calls on the economy and the market over the years than just about anybody.

Welcome to you both. Richard, let`s start with you. You say the Fed is not going to go cold turkey, which is certainly what Mr. Dudley seems to be saying. If I infer from that that you think this is not a bad time to invest and be in the stock markets, it ain`t over.

RICHARD MADIGAN, CHIEF INVESTMENT OFFICER, JPMORGAN PRIVATE BANK: We have been in stock markets and took advantage of this week for private clients to actually add a little bit in to equity. I think the big debate for me in the market is continuing to make this an event. And it`s going to be a process and the process is going to be protracted with slow growth, low inflation, and a corporate sector that we`ve never seen stronger.

The one thing I think that does have to change is people`s expectations on returns need to come down a little bit.

GHARIB: Do you think, Richard, that we have over done it on Fed talk? Do you think that investors have gotten off-track from some of the basics like earnings, revenues, and just, you know, corporate strategy?

MADIGAN: Some of it is just emotion. At the end of the day we forget that markets are people. And we`ve had a market that for the most part has gone up in one direction for 12 months. When you go up that far and this year that fast, you tend to lose perspective on how high you are.

And I think we were kind of grappling with what was going to be a provocation for more professional investors to take profits. And to me, that`s a large part of what we`ve seen over the last three to four weeks.

MATHISEN: Let`s talk a little bit about bonds, which I know is an area you`ve spent a fair amount of time thinking about.

MADIGAN: Yes.

MATHISEN: And I think that dovetails very nicely with your caution here to adjust your return expectations.

MADIGAN: Yes.

MATHISEN: A lot of people own a lot of bonds in their private accounts. What should they be thinking now?

MADIGAN: We`ve been ahead of this, so when I think about how we position private banking clients at JPMorgan globally, I think my theme has been don`t over-think bonds. And for us it has been sticking to very short duration. You`re not going to make a lot of money. Manage your expectations.

The income theme, be very careful about because if you`re focused too much on income, you may end up with bonds that have longer maturities.

Those are going to re-price more aggressively. But keeping it very short in terms of maturities, laddering them and rolling them, I think, and waiting until you extend to higher interest rates, which we see out several years, is really the way we`ve been playing it.

What we`ve been doing against that has been barbelling in things like equities. And we`ve been adding to equities in portfolios since last year, predominantly funded from credit markets.

GHARIB: Tell us more about going into equities, because we`re at the halfway point of the year, it seems like we`re at an inflection point for investors as they`re getting out of bonds, they have got cash. Do they go all into stocks right now?

(LAUGHTER)

GHARIB: I mean, what happens over the next six months?

MADIGAN: Sorry. It`s funny, everybody who started this year saying, we hate bonds, what always frustrated me the most in that conversation was they would never tell you what to do in fixed income. And they would lead the answer to be all stocks.

Most of our clients don`t need it to be the extremes. So we`ve said two things to clients this year. First and foremost, it`s not a year to be

out of markets. If you`ve been waiting for a world to normalize, this is the normalization. It is going to be protracted.

Two, to be balanced investing. So we`re at about -- we`re now overweight equity allocations, but we`ve been much more balanced in that. We funded a lot of it from credit markets that have had phenomenal returns over the last four years.

But I would caution not overreaching for risk, either, because markets aren`t cheap. They are fairly valued right now. We feel good about that.

MATHISEN: All right. Richard Madigan, thank you very much. Always good to see you, thank you for coming out and joining us on the set tonight.

MADIGAN: Thanks.

GHARIB: Well, let`s turn now to Ed Yardeni for his thoughts on all of this.

Ed, great to have you on the program.

ED YARDENI, PRESIDENT, YARDENI RESEARCH: Thank you.

GHARIB: It has been a while since we`ve seen you. We want to get

your views on both the economy and the market. But let me start with the economy. You see all of the data.

YARDENI: Yes.

GHARIB: You see what consumers are doing with their money, all of this Fed talk. Tell us what kind of shape is this economy in? Is it healed?

YARDENI: It`s healing. It`s growing at a subpar pace. However, by the way, if you take out government spending from real GDP, private sector economic activity has actually been growing 3 percent on a year-over-year basis since mid 2010.

So I think a lot of what we`re seeing is that the government`s role in directly spending on economic goods and services has actually come down and the private sector is not doing too badly.

However, clearly the employment situation has been slow and it has got the Fed spooked. And it`s right now a major issue whether they will taper QE or not, depending on what the labor market does.

All and all the economy is growing, but it`s slow.

MATHISEN: You know, Ed, I heard you earlier today talking about

something we mentioned in the introduction here. On one day the market seems to goes up because the economic data are bad, the next -- the very next day the market seems to go up because the economic data are good. How is an investor to make sense out of that? How do you make sense out of it?

YARDENI: Well, you can`t. I mean, you know, if it wasn`t -- if investing and trying to make some money wasn`t so serious, it`s almost comical, really, what we`ve seen. Tuesday we had really strong economic indicators, the market went up, and Wednesday real GDP was revised down and the market went up.

I think you have to kind of tune out the noise, and we`re getting a lot of noise not just from the economy but also from the Federal Reserve. I think we do have to focus on the fundamentals that don`t necessary make the headlines.

The fact of the matter, earnings per share continued to be pretty strong. The growth rate is slowing down, but they are at a record high. And compared to the opportunities right now in the bond market, stocks still look to be a pretty decent place to invest.

GHARIB: Ed, you say there is noise coming from the Fed. Do you think these Fed officials are talking too much and confusing investors?

YARDENI: Well, if I had my druthers, we would pass a gag order and

stop them from all of this chitchat. I can`t prove for sure but I would think I was one of the early ones to call it the "Federal Open Mouth Committee." They just talk too much.

And, you know, the notion that talking more is going to make things clearer for us just is -- is just not working out. But it is what it is. I mean, they are going to continue to do that. And I think, look, the bottom line really message that we`re getting the past week or so is that QE will be phased out if the economy does better, if the economy doesn`t do better, then QE won`t be phased out.

You know, think about all the troubles we had over the past four years. If this is our big problem, we`re doing pretty well.

MATHISEN: Enough transparency already, says Yardeni. A little more obfuscation. Isn`t an environment with low inflation and moderate growth pretty good on balance for stocks?

YARDENI: That`s a very, very good point. I have been increasingly coming to that view that, you know, usually if you have a business cycle, it tends to last about four or five years, and what happens at the tail end, you get too much inflation and the Federal Reserve has to tighten, and then you get a recession.

If we continue to have low inflation and slow growth, this may last

another four years.

GHARIB: All right. Ed, that`s a good note to leave this on. Thank you so much. Great having you on the program.

YARDENI: A pleasure.

GHARIB: Ed Yardeni, president of Yardeni Research.

MATHISEN: Well, one of the biggest drivers of the recovering economy has been the rebound in housing. And today some more good news there. Pending home sales, deals that are signed but not yet closed, rose to the highest level in more than six years in May, and are up 12 percent from May of last year.

That rush to lock in a deal may have a lot to do with rising mortgage rates, which jumped to a two-year high this past week. A 30-year fixed rate loan now averages 4.46 percent, that`s a half percent more than just a week ago. That increase is the biggest in one week since 1987.

And shares of KB Homes ended lower today after reporting a net loss of nearly $3 million last quarter, mostly on a big write-down over some water damage repairs, but the news wasn`t all bad. Revenue was 73 percent higher and KB delivered 39 percent more units while prices on those homes were 25 percent higher than in the same period a year ago.

GHARIB: KB Home and other big home-builders are feeling some of the heat from those rising mortgage rates that Tyler just told you about. They took their biggest leap in 26 years and are already inching closer to 5 percent. That rise is expected to impact future home sales, as well as sales that have already been made.

Diana Olick has that story.

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Sales of newly built homes rose to their highest level in five years, according to a Commerce Department reporter earlier this week. But the numbers may be misleading. They are based on signed contracts, not closings in May. Many of the homes sold haven`t been built yet so buyers would not have locked in loans, and mortgage rates are up over a full percentage point since then.

STEPHEN PAUL, EXECUTIVE V.P., MID-ATLANTIC BUILDERS: The challenge, of course, for a loan lock for a home that`s under construction is they never know when they`re going to actually have their closing dates.

OLICK: Maryland-based builder Stephen Paul is getting calls from concerned customers asking about longer term rate locks, but they can be expensive.

PAUL: The cost of doing a loan lock up to nine months, runs 2.5

points, and a lock for three months is 0.5, and so people are trying to judge on whether they want to invest in that loan lock.

OLICK: California analyst Mark Hanson (ph) says roughly 70 percent of May sales for the builders are suspect. He points to these numbers, of the sales contracts signed in May 31 percent were for completed homes, so buyers would have locked in mortgage rates near record lows, no problem. Twenty-four percent were for homes under construction, so some locked in a rate if the home was almost done, but some did not.

And 36 percent of the sales contracts signed in May were for homes that were not yet started. Those buyers in most cases did not lock in rates and are already facing sticker shock at today`s level. That could mean cancellations.

GLENN SCHULTZ, PERFORMANCE TRUST: It`s going to be dependent on the type of home-builder that you`re looking at. For example, if you`re looking at the Toll Brothers, which is more of a luxury builder, those customers can afford a bit of a rate rise and still be able to close their home or buy a home.

So it`s going to be very dependent on the segment of the housing market in which that particular builder is operating.

OLICK: Analysts for the big public builders say they are watching

this very closely and some do expect cancellations to climb. The jump in rates since the beginning of May has pushed the average borrower`s monthly payment up around 15 percent. That, says one analyst, is make or break for some buyers.

For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.

GHARIB: And for more on this story, read Diana Olick`s piece on our Web site, nbr.com.

MATHISEN: The Senate passed historic legislation today overhauling the nation`s policies on immigration, one that offers citizenship to millions of immigrants who are currently here in the U.S. illegally, while at the same time attempting to shore up our borders with Mexico.

The vote was 68 in favor, 32 opposed, but the measure now heads to Republican-controlled House where it faces some tough opposition.

And still ahead, the trillion dollar issue, is Congress any closer to preventing student loan rates from doubling on Monday?

But first, here is how the international markets closed today.

Wall Street regulators have filed a civil lawsuit against former New Jersey Governor Jon Corzine for his role in the failure of MF Global, the

trading firm that he ran before it collapsed back in 2011. The Commodity Futures Trading Commission says Corzine "failed to supervise diligently the activities of MF Global`s officers, employees, and agents."

Corzine`s lawyer says his client did nothing wrong and looks forward to vindicating him in court.

GHARIB: That American CEO held hostage by his own workers in China is now free. The nearly week-long standoff in his factory in Beijing ended with Chip Starnes walking out the door, but only after settling with 95 workers over back pay and other benefits.

MATHISEN: More troubles for celebrity chef Paula Deen after she admitted using some racially charged words in the past. QVC now says it is taking a pause, pulling her off the air, removing the cookware, food, and home goods bearing her name that it sells on its Web site.

Earlier today two other major retailers, Target and Home Depot, announced plans to phase out Paula Deen-branded items one day after Walmart did the same. But book buyers apparently are standing by Ms. Deen. Sales are so strong she`s on the bestseller lists on Amazon.

GHARIB: Now another former Paula Deen sponsor, Smithfield Foods, is the subject of a Senate hearing on its proposed takeover by a Chinese firm. The July 10th hearing will get plenty of attention since the $4.5 billion

deal would be the largest Chinese buyout of an American company ever.

MATHISEN: Well, when some of those same lawmakers passed a comprehensive overhaul of the laws governing Wall Street, banks had to stop implementing certain fees and penalties they often charge their customers. But some banks have found a new revenue stream, capitalizing on the sharp rise in mobile banking on smartphones and tablets.

Kayla Tausche has more.

KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT: In order to point, snap, deposit, you may have to pay. Long offered free to customers, mobile banking apps have various fees that are slowly but surely adding up. Minneapolis-based U.S. Bancorp has charged $0.50 to make a remote check deposit for three years.

Alabama-based Regions Financial now charging $0.50 too, but a whooping $5 if you want the funds right away. And Wells Fargo, the first universal bank to move into mobile fees for what it calls "premium products" like bank-to-bank transfers or emergency bill pay that posts immediately.

Banks say the sooner they have to post your funds, the more risk for them since they don`t have time to verify that the money is there. Sources say banks are currently lobbying Washington regulators to try and get cheaper insurance on these funds so they can start to waive some of those

fees.

Richard Hunt, president of the Consumer Bankers Association, says the move is natural. Banks have long offered products like checking accounts for free, too, but can`t afford to because of the increased legislative and regulatory pressure, not to mention the high tech investment.

Some customers could embrace small fees.

UNIDENTIFIED FEMALE: If Bank of America, for example, charges me $1 to deposit a $49 check, yes, I will continue to use the services. But if not, if they charge $5, I`m sorry, I definitely will not use it.

TAUSCHE: Others would change the way they bank entirely.

UNIDENTIFIED MALE: I would probably change banks, if -- you know, if Bank of America wasn`t doing that and Chase was, I would move my money.

TAUSCHE: Each month, millions of checks are digitally deposited at big U.S. financial institutions, and the number of non-traditional bankers that say they only used an app to bank surged 55 percent in the last year.

No doubt banks have a captive audience, always on the go and on their phones. Now time is money and saving time could cost you money, too.

UNIDENTIFIED MALE: I do it solely for the convenience and actually, it`s not very often. If they started to charge me for it, you know, enough is enough.

TAUSCHE: For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche.

MATHISEN: For more on the new banking fees, log on to our Web site, nbr.com.

GHARIB: And from fees to rates, starting this Monday, students looking to secure a new subsidized student loan will likely be paying a much higher rate.

Hampton Pearson has more.

HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: More than 7 million college students will take out an estimated $30 billion this year in government subsidized Stafford student loans, according to the Department of Education. Unless Congress acts, interest rates on those loans will double from 3.4 to 6.8 percent on July 1st, just four days away.

Brandon Anderson, a senior at Georgetown University, already looking at more than $25,000 in loan debt by the time he graduates, is among the millions of college students nationwide anxiously watching and waiting to see what happens to those interest rates.

BRANDON ANDERSON, STUDENT, GEORGETOWN UNIVERSITY: Letting the rates double is not good. It`s not good because it takes more money out of not just my pocket but the pockets of millions of other students, and that shuts out a lot of students, especially lower income students.

PEARSON: On Capitol Hill a bipartisan Senate compromise to reform the entire student loan program was introduced. It`s a 10-year blueprint for an anticipated $1 trillion in loans over the next decade. The key points, all new loans will be set to U.S. Treasury`s 10-year borrowing rates plus 1.85 percent for subsidized and unsubsidized undergraduate loans.

It will be a fixed rate over the life of the loan, with a cap on those rates for consolidated loans remaining at 8.25 percent.

SEN. JOE MANCHIN (D), WEST VIRGINIA: We`re notorious for not fixing anything. We`re notorious for kicking the can down the road. We said enough is enough.

PEARSON: But Rhode Island Senator Jack Reed is among leading Democrats who want to stop the clock, calling for a one-year freeze on loan rates while lawmakers craft a long-term solution.

SEN. JACK REED (D), RHODE ISLAND: This legislation would simply extend the current rate of 3.4 percent, the rate we have today for need-

based loans. These are the subsidized loans.

PEARSON: Despite their differences, many senators say it`s still possible for lawmakers to make a deal after the July 4th recess, and have those terms apply retroactively.

For NIGHTLY BUSINESS REPORT, I`m Hampton Pearson on Capitol Hill.

GHARIB: And coming up on the program, as gold prices drop, are consumers dumping their coins in bars or are they buying more?

But first let`s take a look at how commodities, Treasuries, and currencies fared today.

MATHISEN: Earnings report, a large part of our "Market Focus" tonight.

Nike (NKE) reported profit gains of 22 percent on improved revenues and gross margins. Nike says it has $12 billion in future orders for delivery through November, that`s up 8 percent. Nike shares were up during the regular session, they closed at $63.32, and then they jumped during after-hours trading.

ConAgra Foods (CAG) led the S&P gainers for most of the day after reporting profits ahead of estimates and raising its long-term outlook as

savings from an acquisition begin to kick in. Net sales there up 34 percent. Investors bought the long-term view, pushing shares up more than 5 percent on double the normal volume, they closed at $35.04.

And after the market closed, the Dow component Pfizer (PFE) announced a $10 billion share buyback, that`s in addition to 3.9 billion in buyback authorization remaining under the current program. Pfizer shares traded in a narrow range during the day, closing at $28.18, up a fraction but then they popped a bit on that buyback news.

GHARIB: A good day for Liberty Media (LMCA) and cable stocks in general. They jumped on a report that Liberty Chairman John Malone is working on a plan for Charter Communications (CHTR) to buy Time Warner Cable (TWX). Liberty owns a piece of Charter. Time Warner and Charter up more than 4 percent. Liberty gained more than 2 percent. And Cablevision (CVC) came along for the ride, up more than 5 percent.

And RVs are back on the road and that`s why Winnebago`s (WGO) profits zoomed up 94 percent in the spring selling season. The company reported its motor home backlog more than doubled as Baby Boomers take to the road. And Winnebago stock has also doubled over the past year, but today it was flat, closing at about $21 a share.

And gold prices fell below $1,200 announced today for the first time since August of 2010. And just as there were a lot of buyers for gold

coins and bars on the way up, Jane Wells takes a look at what consumers are doing now that gold prices are falling.

JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: When gold prices fall, gold trading rises.

KEN EDWARDS, CO-OWNER, CALIFORNIA NUMISMATIC INVESTMENTS: When we see a spike to the downside, it gets busy real fast.

WELLS: It started getting busy real fast this week at California Numismatic Investments in Los Angeles where they buy and sell gold and silver, coins and bars. Gold has fallen to prices not seen in three years. And while that has led to some panic selling, for longtime believers, prices heading toward $1,200 an ounce are a bargain.

Not everyone is a believer. A survey of gold investors by JPMorgan shows that fewer than half, 44 percent, believe gold prices will rise over the next 12 months, a year ago 71 percent believed they would.

Then there is silver. At the beginning of the year this 100-ounce bar was worth about $3,000, now it`s worth about $2,000. But supplies are somewhat tight. There is sometimes more buyers than there is material to sell But that has not made it more expensive.

So have prices peaked in precious metals? Is the gold rush officially

over? When we were at California Numismatic in mid-April after gold fell below $1,400, one major holder came in and sold a few million dollar`s worth, he has not returned yet to buy the gold back at a lower price. After all, those buying gold as a hedge against inflation haven`t really seen much inflation.

EDWARDS: I still think that`s the problem. I think you can`t print the kind of money they are printing, add $3 trillion to the balance sheet of the Fed, without having some kind of effects.

WELLS: However, figuring out where prices go from here has become as difficult as betting on what the Fed does next.

For NIGHTLY BUSINESS REPORT, Jane Wells, Los Angeles.

MATHISEN: Finally tonight, we told you earlier about bank fees for mobile banking, so imagine how high those fees might be if you do your banking from space. PayPal, the online payment system owned by eBay, is launching what it calls PayPal Galactic to figure out how to pay for things in space. The idea is to get jump on the big money that is expected to be spent on private space travel and tourism.

It seems like something that they ought to partner with Virgin Galactic and Richard Branson.

GHARIB: You won`t have to take your wallet when you go there.

MATHISEN: No.

GHARIB: Well, that`s NIGHTLY BUSINESS REPORT for us. Thanks so much for watching. I`m Susie Gharib.

MATHISEN: And I`m Tyler Mathisen, thanks from me as well. Have a great evening, everybody. We hope to see you back here tomorrow night.

END

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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