Costs, according to the centers for disease control. But this year is expected to be far worse. That figure does not include the cost of lost worker productivity. Reporter to make matters worse, many employees are reluctant to call in sick, for fear of losing their jobs. So they continue going to work, delaying their recovery and infecting others. Some businesses have so many sick workers. Theyre severely understaffed and are scrambling for backup plans. Its a perfect storm. Companies are already quite lean in terms of their abilities to duplicate work if somebody is out. And this years flu season isc three times what the normal levels are for flu. Reporter doctors also have some recommendations forc companies trying minimize the impact of the flu on theirc workforce. If your employee is sick, they should stay home. You should recommend that your employees get the influenza vaccine, if they havent done so already. Reporter and thats advice i personally took to heart today. Erika miller, n. B. R. , the bronx. Tom the u. S. Trade gap grew unexpectedly in november. It went up 16 to about 49 billion. Xd the news is bittersweet. The gap grew thanks to an increase in demand for consumer imports like apples iphone 5. We heard some dissention inside the federal reserve. The head of the Philadelphia Fed Charles Plosser said the Central Banks policy of buying bonds is risky. But it was a mild day for wall street. The dow gained 17. The nasdaq added almost four points. The s p lost a fraction. And for the first full trading week of the year, both the dow and s p gained half a percent. The nasdaq ticked up nearly 1 . Susie investors were preoccupied tod with wells fargo. The first big u. S. Bank to report earnings. Even though its results came in better than expected. Investors were concerned by slower loan growth and how much money the bank makes on those loans. The socalled Net Interest Margin declined more thanc expected. Wells earned 92 cents, three cents more than estimates. Revenues also came in higher than expected up 6. 5 to almost 22 billion. But the stock fell less than 1 to about 35. Joining us now, joshua siegel, founder of stone castle partners, a new York Investment firm that specializes in banks. Josh, welcome to the program, thanks for coming. Some disappointment about that slowdown in mortgages at mortgage lending, and Mortgage Applications at wells fargo. What does this mean for profits Going Forward at wells . Well, it really depends on your view of mortgage product. With rates as low as they are, and if they stay low, theres only so much refinancing that can occur. If you have a view that mortgage lending will pick up, not just maintain, but pick up, you have a bullish view on the stock. If you think tell maintain or slow down which weve seen in the last quarter, it puts a little bit of pressure on the earnings in the coming quarter. Susie there certainly was pressure on bank stocks today. And next week we have a bunch of big bank that is are going to be reporting. Lets look at the calendar. J. P. Morgan reporting wednesday as well as goldman sachs, and then thursday, bank of america and citi. What do you think is going to be the theme of these banks reporting besides mortgages . I think the theme is going to be one time. Even if wells fargo, there was a number of one time events. Private equity gains. Gains on securities. There were if we take out the 10 billion of mortgage production kept on the balance sheet, it would affect the growth. And no better or worse than last year. Wheny woo look at the other majors the theme is where does growth come from . Wells fargo being the nations largest home lender would benefit the post from mortgage refinancing. And less for the other majors. I think the theme is traditional banking remains under pressure. You have Net Interest Margins that will compress. Generally, i dont see anything tha will produce upside in the coming quarters. Susie one area that has been resolved earlier this week, the settlement on that robo signing deal. So that is off the table so that these banks can now focus more on the future. Right. Susie what kind of year do you think 2013 will be for the banks . Do you think more positive or more negative . Well, theres a mixed question there. If its stock performance, i think weve seen most of the upside potential priced in. With wells down today slightly, even though it has a quarter of record earnings. I think what the market is telling us is even though wellss execution was probably perfect, theyve already priced in any upside in the market, and wont have a lot of upside. I think the year for stocks will probably be average. When we get into Smaller Banks that have more potential to be tactical. More upside for the regional and spaurl banks, not as much for the large barngs. Susie talk about that. Your firm can favor the smaller regionals. And less interested in the big banks. Quickly, we have little time left. You talked about wind trust financial, texas capital. Why do you think those . Whats the unifying theme between these companies . The unifying theme is that were tactical. Being a smaller bank, and the banks you just mentioned from a few billion to 15 or 20 billion in assets. They not only have room to grow geographically, but in specific markets experiencing growth, rather than when youre a a trillion or 2 trillion, youre playing the whole nation. And local, you can be specific on certain types of lending to achieve and focus efforts on the market. With those three different platforms, theyve had a fantastic year, and outperformed the market. And i think that trend will continue through 2013. Smaller banks will likely do better. Susie very interesting analysis. Pressure having you on the program. Joshua siegel, stone castle partners. For more going to nbr for more on banks, go to nbr. Com to hear from a financial expert on what it takes to fix the Financial System just look for the nbru tab to see good banks bad banks and the governments role as a fixer. Tom royal bank of scotland is expected to be the latest bank to pay big fines for its alleged part in a global Interest Rate rigging scandal. Libor is a key lending rate that affects everything from Student Loans to home mortgages. No details yet on the size of the payout or when the amount will be determined. Two banks have paid fines. Tom Boeings Dreamliner jet remains in Service Tonight even as federal regulators have opened a top to bottom review of the plane. The federal Aviation Administration announced the safety review after at least four separate incidents with the new planes this week, problems that have shaken the confidence of some shareholders. Reporter this is the most recent problem for boeings newest and most complex aircraft, a cracked windshield on a 787 in japan today. But it was problems earlier this week like an auxiliary battery fire on board an empty 787 in boston that got the attention of safety regulators. This review will cover the Critical Systems of the aircraft including the design, manufacturing and assembly. Reporter the action comes 15 months after the dreamliner was cleared for takeoff by regulators and came into service. The plane had been eagerly anticipated by the airline industry. It uses lightweight Carbon Composite Material more than other passenger planes. It also relies more on Electrical Systems instead of mechanical components. The result is a lighter plane allowing it to be more fuel efficient. 50 of the planes are currently in service and can remain flying during the safety review. More than 800 of them have been ordered by air carriers across the globe. We have complete confidence in our Production System and production plans and the manufacturing process that goes with it as well as the design. Reporter todays announcement was unusual in that boeing, the subject of the review was present along with its regulators, who echoed boeings confidence in the safety of the plane. I believe this plan is safe and i would have absolutely no reservation of boarding one of the these planes and taking a flight. These planes are safe. Reporter it has been a rocky ride this week for boeing shareholders, moving at least 1. 5 in four of the past five sessions. It was down 2. 5 today. I believe this plane was the next big thing, a Game Changing engineer feat. And the success of boeing if youre looking at the stock, looking at the company, the dreamliner is closely attached to that i believe. Tom the dreamliner was three years late coming to market, really changing the way planes are built. Major sectors of the plane are built in asia, europe and the u. S. , before final assembly outside of seattle. Still ahead, more than 14 Million People in 150 countries take a zumba class every week. Well take a look at the business behind the exercise craze with the companys c. E. O. Susie disappointing. Thats what the judge handling kodaks bankruptcy called the final sale price for the photo giants digitalimaging patents. But he approved the 527 million sale anyway. Its much less than the 2 billion kodak wanted. The buyers are a group of tech giants, including apple, microsoft, google and adobe systems. T since kodak went bankrupt nearl a year ago, it has shut down or sold off several divisions, including its consumer printing business. Susie theres a lot of factors that go into investors and market decisions that they make, and Human Emotion and sentiment is one of them. Now a company is using the twitter platform to come out with a way to measure mue Human Emotion and sentiment in realtime. Not sure about the technical how it works but it launches next week, and well be talking more tom its an interesting concept, one to watch. It starts in the u. K. And may come to the u. S. Next month. It will be following 350 million tweets a day trying to gather up investor emotion when it comes to stocks, currency and emotions. Theres a lot of emotion in the market. Susie absolutely. Tom little bit of emotion today, although not Much Movement overall for the major stock indices. Kind of a quiet day finishing with mixed results. The s p 500 traded most of the session in the red, as the market was not impressed with well fargos quarterly results. It pulled into positive territory at the closing bell to end unchanged. Trading volume was 632 million shares on the big board. Just under 1. 8 billion traded on the nasdaq. Five sectors were up, five were down, but none of them made any significant moves. c the Telecommunications Sector lost the most 0. 4 . Consumer staples led the gains with a small 0. 3 rally. The telecommunications space has been under pressure all week, even as the two big wireless carriers, a. T. T. And verizon reported strong smartphone sales over the holidays. A. T. T. Dropped a third of a percent today, while verizon fell 0. 7 . Verizon is off 2. 5 already this year. Best buy was in focus as holiday sales fell compared to a year earlier, but they didnt fall as much as feared. In wall street logic thats good news. Sales at best buys in the u. S. Were flat, which was a surprise. Shares jumped 16. 4 . Volume quadrupled with the stock closing at a two month high. But it wasnt all good news. Best buy cut its Free Cash Flow forecast as it faces earlier than expected payments to merchandise manufacturers. Best buys founder richard schluze continues looking for financial banking to fund a buy out of best buy. The cash flow at Department Store j. C. Penney also came under scrutiny today. Investment bank u. B. S. Thinks the store will have to change its turnaround strategy to address cash flow worries brought on by Company Spending money on new shops. Shares fell 4. 7 . Two specialty retailers were moving. Teen Clothing Store aeropostale fell 6. 5 . Investment firm Piper Jaffray cut its rating from overweight to neutral, pointing to a disappointing holiday season. Meantime Pacific Sunwear was shining up 2. 1 . Even though it warned about losing more money thanks to promotional discounts. Instead, an analyst noted the companys Profit Margins have improved from a year ago. A lower financial forecast also hit Global Engineering first k. B. R. It warned its full year earnings will not be as strong as anticipated. It partly blames the disappointment on higher than expected labor costs. Shares sank 7. 9 on heavy volume. Falling to a two week low. But ford motor is adding to its labor ranks. The auto maker announced it will hire 2,200 salaried workers this year. The Job Opportunities will be in manufacturing, technology and product development. c shares continued to rally to new 18 month highs, up 1. 2 . Goldman sachs raised its rating, expecting a pickup in pickup sales in america. Just yesterday ford announced it was doubling its quarterly shareholder dividend. Watsco today cut its dividend, saying it will continue paying them, but on a more moderate basis. Shares fell 3. 2 . That big stock drop in october was after the company paid a special five dollar per share dividend. Four of the five most actively traded Exchange Traded products were lower. The lone gainer was the Japan Index Fund up 0. 3 and thats tonights market focus. Tom a year ago i described tonights market monitor as quote, a bull. Plain and simple. And even as the stock market trades near five year highs, she is even more optimistic about higher stock prices today. c Elaine Garzarelli is president of garzarelli capital. Nice to see you. Tom a bull playing simple a year ago, and more optimistic today. Are you more optimistic than a year ago, and why . Well, i have 13 indicators in the stock market, and theyre at 82 . Anything below 30 would be a major sell signal or bear market signal, and below 42 would be a correction of 10 to 15 . So thats a very, very high level, and the indicators include monetary policy, economic cycles, sentiment and valuation. The valuation indicator is very bullish, suggesting a 10 to 15 gain in the market over the next year. Tom lets talk about that valuation part of the market here, because were seeing the valuation with a backgroubd of tepid Economic Growth. How do you square those two . Well, we see Economic Growth of two percent this year. The earnings gain will be modest. It will only be 5 to 6 per the s p 500 operating earnings. Thats a level of about 105. So give that a serveative pe ratio of 15 to 16 times and that gives us our 10 to 15 gain for the overall market. But if you get in the right sectors your gain could be twice that much. Tom and you brought those along, Consumer Discretionary being one of those sectors. Xly ticker simmel Exchange Traded fund. You see more gains. I do. The reason is because Consumer Confidence has turned up, and we have Lower Oil Prices and housing is doing very, very well. So this should bode well for this particular etf, and some of the stock markets in there would be home depot, disney, and ford. All household names, and you like semiconductors. Weve had a tough time over the past 12 months as folks looked at the traditional Computer Market going lower, and the big Movement Towards smart phones and tablets continue. Well, we think theres a turnaround in technology this year. As a matter of fact, we have technology growing three times more than real gdp this year. So with the uncertainty of the fiscal cliff over, we see a real turnaround there, and semiconductors are the most leveraged high data area of technology group. There we like broadcom, taiwan semiconductor, Texas Instruments and intel. And that group is down 10 from its peak last year. Its very good value. Tom and you also like telecommunications equipment, and in the Telecom Sector gotten off to a rough start at the beginning of the year. What do you anticipate . Thats why we love t. Underperformed and down from the peak last week. Extremely cheap, and we like the igni shares, and qualcomm, cisco, and juniper networks. Tom it has been a year since we spoke. You were a bull then, and youre a bull now. You like small caps, the russell 2000, up 14 . Technology up 13 and a half, and the industrials up 10 . You still like these sectors at all . Yes, i do. Tom would you put new money to work even though weve seen double digit gains from a year ago . I would, especially in the iwm, a small cap composite t. Reached an alltime high a couple weeks ago. Tom are you a hundred percent invested in stocks at for my Sector Analysis fund i am a hundred percent investmented in stocks. Tom the funds we mentioned tonight, do you have positions in those . I have positions in all everything i mentioned tonight in the Sector Analysis fund, yes, i do. Tom eating your own cooking. Elaine garzarelli back with us. President of garzarelli capital. Susie on monday, we continue our n. B. R. U series. Its our partnership with some of the nations top business schools. What should you do to fix your Money Market Fund . Well ask harvards robert pozen. And well talk to volkswagen america c. E. O. Jonathan browning from the north American International auto show. Tom at the beginning of every year we also see a lot of year end, best of lists. Best movies, best stocks. When it comes to being successful, its important to focus on doing your best, regardless of the task. This week lous been thinking about coming out ahead. Heres author and educator lou heckler. Having earned a degree from the university of North Carolina many years ago, i really have College Basketball fever in my blood. I am endlessly fascinated with great coaches mens and womens and how they draw so much from their players. One of those i have admired for years is pat summitt. No longer actively coaching Womens Basketball at the university of tennessee because of earlyonset alzheimers disease, her impact on the game remains profound. A few stats 1,098 wins, 38 years as a head coach without a losing season, eight national championships. Yikes just as importantly, her athletes graduated. Some went on to wnba careers and all of them learned what it took to be a winner on and off the court. She had a no miss, up front rule. That applied to the classroom and the basketball court. You dont miss practice just like you dont miss class. You position yourself up front because thats where you want to be your whole life. What if we had similar we all want to be up front, but have we created a climate where everyone knows what it takes to get there . Tell them a little about pat. One of the key areas we all must do in business is coach other people. Take a cue from one of the best coaches on the planet. Im lou heckler. Susie for many people a new year means making new resolutions to get fit. For those who find the gym daunting, theres zumba. Its described as a dance party that doesnt feel like exercise. As Ruben Ramirez discovered, zumbas Business Model is all about getting people excited about fitness without using the f word. Reporter make no mistake. This isnt your typical dance class, youre expected to sweat a lot and follow the choreographed dance moves. Its what zumba c. E. O. Alberto perlman calls a fitness concert. We want to take this on the road. We want to take this to vegas. Why not exercise while youre in vegas at night, or a standing show in new york, we want to have these shows go on tour. Reporter its the latest idea from the creators of the zumba empire, which includes everything from d. V. D. S to video games and a clothing line. But perhaps the empires biggest winner is the music business. We really like working with pitbull. He was the first one to see that we have a 14 Million People taking classes every single week station and i can promote my music through you guys and those 14 Million People can not change the dial. Of those 14 Million People in zumba classes, half are in the u. S. Reporter the Company Started a decade ago when perlman met beto perez. It was that ahha moment where the entrepreneur in me said, this needs to be scaled. Reporter and scale it has. Its been called the zumba economy. Edmee Cherdieu Dalexis has been teaching zumba for four years. Today, she coowns five zumba studios around new york city. What i wanted to bring to the new yorker was quality. The best of the best zumba classes they could take. Reporter so, whats it take to be a zumba instructor. The license costs 300 and its 30 a month for the music and the choreography. Perlman says instructors are the secret sauce to success with more than 100,000 and counting. Its the Business Model of empowering people to participatc in your business. Reporter that relationship is a mutual moneymaker. Its only been two years and its only now that were almost breaking even but compared to where we started, which was zero to where we are now i feel confident that were going to stay in business and were going to keep on spreading it. Reporter and if you thought its just a craze, experts say it gives participants a better workout than kickboxing, step and even pilates. Ruben ramirez, nbr, new york susie thats nightly Business Report for friday, january 11. Have a great weekend everyone and you, too, tom. Tom goodnight, susie. Well see you online at nbr. Com and back here next week. Captioning sponsored by wpbt captioned by Media Access Group at wgbh access. Wgbh. Org right now for the next four years, were talking about a balanced budget, were talking about living within our means. This is this is new. This is a breakthrough. Governor jerry brown in the spotlight this week unveiling a new state budget projecting a surplus for the first time in five years. Hes also making a dramatic call for federal officials to end their oversight of the California State Prison system. The Obama Administration is pushing for a National Gun Control legislation. Meanwhile, a wave of new regulations has already made its way to the california legislature. Including Assembly Member nancy skinners bullet bill targeting ammunition sales. And a massive oil tanker sideswipes the bay bridge, alarming environmentalists and prompting a federal investigation into what caused the crash. Coming up next
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