Transcripts For KQED Nightly Business Report 20131012

A top bank analyst gives his view and names names, that and more tonight on nightly Business Report for friday, october 11th. Good evening everyone. Lawmakers are talking in washington and on wall street stocks are rallying. More strong gains in the markets today on renewed signs of optimism congress and the white house are working on a deal to extend the Borrowing Limit and negotiate a resolution to reopen the government and get furloughed workers back on the job. To be clear, though, there is no deal yet, and large parts of the government are still shut down but democrats and republicans are at least talking for a second consecutive day giving the markets hope a solution is close at hand. Eamon javers is in washington. How close do you think were to a deal by monday . There is a lot of movement in washington but not clear where were going. Senate republicans went to the white house to meet with president barack obama including ted cruz, the president s chief antagonist in this. He was in that meeting today. We didnt get what happened inside that meeting. Later the president called the speaker of the house john boehner for conversation. We didnt get a readout on that one, either and throughout the day the white house continued to postpone the typical Daily Press Briefing hour after hour after hour. We finally got that briefing late in the day and the white house didnt say that much, either. Thats generally a good sign. When they are actually negotiating they dont say a lot. When its total stalemate they come to the microphones and denounce each other. Encouraging dynamic in washington. You answered my question, i was going to ask should we infer it was a pretty silent day in washington. What would be the timeline of a deal or a frame work for a deal over the next few days . Could we expect . We know the house of representatives is coming in tomorrow. They will be here at 9 00 a. M. Congressmen hate to workweek ends, so they will want to work this as quickly as possible and we know the deadline is thursday next week. Thats the day the treasury said it will run out of money and well hit the debt ceiling limit. So presumably between monday and thursday is the sweet spot for getting a deal done if they get one and it looks like the dynamic is they are actually talking to one another, although the white house is bending over backwards to avoid saying they are negotiating because of course, the president promised he wasnt going to negotiate. Nonetheless, he was in a room with republicans talking about something, whether negotiation or not, thats up to you. E mmon, two back to back day of triple digit gains. To what extent does that make them come up with a deal because it will look bad monday and tuesday with sale offs. We saw the mega rally on wall street and he said season tonat watching that through deliberations but might not be enough to change the minds of those people that are pretty much set on a course of action. So they are paying attention. They are feeling the push from wall street, but it might not be enough to make them change their mind if they feel strongly. These are very core political values being debated here. Thank you, have a great weekend. The fact there were no negative headlines in washington kept stocks in rally mode. The gains today combined with yesterdays made for the best twoday return for the dow, nasdaq and s p since january. The dow and s p scored gains for the week up a percent but nasdaq up less than a percent for the first time in the past six weeks. Today just one day after its largest point increase in nearly two years, the dow close the at the high of the session up 111. The nasdaq up 31 and the s p gained ten. So, what do you do with your portfolio while Congress Still tries to hammer out a debt deal . Well tell you what some market pros are doing, thats coming up a little later in the program. The markets move on date and today the u. S. Energy information announced it wont publish the weekly crude and gas weekly inventory levels and other data until government fuding is restored. They asked come neens to submit companies to the eia that will be processed after furloughed workers return. One wellknown Corporate Executive is fed up with the shut down and urging customers to do something. Ceo of starbucks is asking people to sign petitions in the coffee shops over the next three days and took out fullpage ads that readers can bring into starbucks stores. Schultz explained his frustration and what it means for businesses and for the u. S. The polarization in washington is the standing in the world, consumer confidence, consumer behavior, small and Large Businesses across the country will be affected dramatically and this is no way to run a country. How concerned are you about the debt ceiling and Government Shutdown . We went outside and tried to find out. What im most concerned about is that the government is not functioning right now. Im concerned about the stock market. Im concerned about banking. Politicians, which they dont care about us, they care about agenda. The whole thing is a joke. Trying to crook us out of the money we make. Have to pay bills. They have to do their job and they are not serving our population. A top Federal Reserve official is doing his job by defending the decision to maintain the massive stimulus plans instead of tapering back the measures. Speaking in new york today, the president of the most boston Federal Reserve bank said the decision not to pull back on bond buying was fully warranted because of weak Economic Data and a steady rise in Interest Rates. Two of the nations biggest banks reported Third Quarter results today. They are watched because the financials are the second biggest component. The dow component, jp morgan reported the first loss ever under jamie diamond that lost 380 million and the bank set aside more than 9 billion to cover legal cost. Strip out those charges and the bank beat them with a 1. 42 a share or 5. 8. Wells fargo posted a profit, 99 cents a share or 5. 6 billion, two credibilients ahead. Here is brad hints. Welcome. Good to see you, lets talk a bit, if we might about jp morgan. The company said they have 23 billion in total legal reserves and its possible they could exceed that amount by nearly 7 billion. Thats stunning, isnt it . Well, i think what you have here is a bank that is attempting to tell the market were well we served. The 9 billion we put away today puts us in a good position for whatever happens Going Forward and trying to settle with the government. You can hear it in terms of what how the ceo spoke when asked about regulation. He said well compile. So to me, this is jp morgan saying lets negotiate, lets get this behind us and thats really one of the one of the positives. Jpm is under performed if you look relative to the other banks over over the last over the last six months or so. A lot of this is the regulatory over hang. So what jp ms management is doing is saying, you know, here is the number analysts. You dont have to worry about it now. So, really two related questions, first on jp morgan, are you recommending the stock . Would you buy it at 52 . I think the issue we have out perform on jpm. The to me from a timing point of view, the issue is this is a stock that will do extremely well once the settlement is behind it. You know, the over hang of the regulatory charges, the concern about them from a litigation point of view really pushed down the stock. This is a leading Investment Bank and a recovering economy. So, you know, extremely well run place. What i wanted to ask you, brad, the followup is this conversation around jp morgan reminds me about litigation problems going on with bank of america recently and people were fleeing from that stock. Is jp morgan still a buy or is bank of america a better one . Legal problems are pretty much behind it. Jpm has certainly been hurt worse, so it strikes me as jpm and the analogy that i would use is Goldman Sachs. Both jpm and Goldman Sachs were the leading banks and as the leading banks unfortunately, youre the one who gets shot at by the regulators. In terms of regulation, the issue is to make sure wall street finds out who is in control. Thats very much what is going on here. Yes, yes, there were there were problems in terms of the Mortgage Backed business, but, you know, jpm the wellrun firm is the one being focused here. Talk to us a little bit about the changing sort of environment in which banks are doing business today. Interest rates have been rising. The other bank that came out with numbers today, wells fargo, the largest mortgage organize nay tore, with chase, how is that changing their business . When you look into their segments, fixed income, commodities and currencies, that wasnt doing that well, trading wasnt doing well. Investment banking not doing well. Are we looking at a changing environment for big banks . Certainly on the trading side you are. On the trading side seeing less risk, more capital. Higher much tighter Risk Management culture. This slows down decision making. Now, we are in a transition stage and that transition stage is were trying to learn how to live in that environment, and what will happen is spreading will open up, in other words, the cost of doing trades will be more expensive and markets less liquid. The street will learn to operate with less capital but the transition phase is low returns. There are two banks in the world beating the cost of capital Goldman Sachs and jpm. The rest are in the learning stage and it could be 18 months. Very interesting time for the banks. Thank you very much. Pleasure. Equity research analyst. Still ahead on the program, how could u. S. Debt default impact your retirement nest egg . Coming up, well have the answer and how you can protect yourself. First, how the International Markets closed today. Some good news for a change for motor city. Bar clays bank will provide the cash strapped city of detroit with up to 350 million. The fie gnanancing helps make investments in infa structure and end at a discount. Long wait times,er r error messages shopping people from shopping for Health Insurance plans, part of the Affordable Care act and now experts say administration has more than a month to fix the woes or risk jeopardizing signing up millions of americans in the 36 states that dont offer their own online marketplaces. Weve been reporting all week about the impact of the washington stalemate on the markets, economy and american businesses. But here is another worry, your retirement savings. Even though lawmakers are negotiating to avert a u. S. Debt default, the staggers default would take on retirement accoun accounts. Reporter jill haguen in her 50s assumed she would work for ten more years. Now the fight in washington over the u. S. Debt has this new jersey pediatrist worried that retirement could be decades away. It concerns me when i retire i may not have enough money in the Retirement Fund to live the life ive been living mainly because who knows what will happen, with the government in debt and deficits. Reporter even if lawmakers come to a shortterm agreement on the United States Borrowing Limit, many investors like haguen troubled by the debate fear it could have a devastating impact on the economy, Financial Markets and their retirement savings. Im not investing now because of the situation were in. Im just on hold with my investments. We dont really feel like we need to make more money. We just like to not lose the money we currently have. Im concerned you pay your money and you hope one day to see the benefits of the money you contributed. There is reason to be concerned. According to a new report, private pension assets including 401 ks and iras could suffer losses in excess of 20 , thats over 2. 4 trillion. They base it on what happened in 2011. This sum ser the second Asset Purchase Program expires. The u. S. Debt negotiations went to the 11th hour and days after the debt limit was raised, the United States Credit Rating was downgraded. There was immediate sell off and 17 and took nearly seven months to recover. While most investors follow stock market performance, if a deal isnt reached soon, Interest Rates could spike and the value of bonds considered a safer investment may plunge. Thats a major worry for retirees and baby boomers nearing retirement counting on stability and a steady stream of income. Most of patients tell me they cant retire because they didnt have the savings and Retirement Funds. Reporter for now some Financial Advisors say shifting assets to shortterm bonds and cash and others advice adding internal investments to help weather the storm. While some may see a shortterm side, its said account balances should recover over time. For nightly Business Report, im sharon epperson. Two Major Drug Companies get downgraded and thats where we begin market focus. Jeffreys cutting mirk. Mirks cost cutting efforts, both stacks down on this up day. Merck off less than 1 to 47. 29. Eli lily 48. 88. One analyst says the companys guidance isnt as great as hoped. Another analyst downgraded to under perform for market perform. Dont lose sight of the fact micron shares soared to 165 this year and fell to 16. 84. Safe way was the best performing stock despite reporting earnings below estimates. They focused on the supermarket chains strong revenues and exiting the chicago market, something an active investor has been pushing the company to do. The stock ran up 7 to 33. 75. A warning today from Silicon Graphics slammed its stock. The earnings could come in below estimates because some of the it projects funded by the government have been put on hold. Silicon graphics provides Computer Services to largescale data servers and biggest names in tech include facebook and yahoo. Shares went to 14. 75. Solar city soaring on a sunny forecast and expects instillation of the rooftop solar panels to rise about 90 next year. The company allowed homeowners to lease solar panels and means a small up front cost. The stock rose 23 to 47. 18. The market monitor tonight says his stock picking strategy has less to do with what is going on in washington and more to do with the fundamentals of individual companies. So far that strategy is working for him. The fund he managings, the chase mid gap growth fund is up more than 25 this year. Joining us now, brian, hes Portfolio Manager with chase investment counsel. Brian, nice to have you back on the program. I want to ask you a little bit about your strategy. Are you saying that these triple digit gains on the dow or if we get big sharp declines next week, youre not paying attention to them, its just sort of noise in the background and going about business as usual . Thanks for having me, susie. I wouldnt say were not paying attention but learning toward the volatility. Youve seen the volatility the last couple weeks to the downside previously and the upside over the last couple days and for the most part were trying to use that as opportunity to add to positions we like in the portfolio or sometimes on good days take a little off the table. Brian, nice to have a stock picker from my home state of virginia, first off. Lets get to some picks here because thats what people want to know and the first one is Harley Davidson. They had a rough patch, but i guess they are coming back. Sure, tyler. Harley davidson is a very longterm, people thought of it as a Growth Company but as you said, they went through a difficult couple of years, really seem to be getting things back on track and one of the things we favor in our process is earnings momentum and to use a pun, earnings are really accelerating for Harley Davidson right now. They really have some strong improvements for the 2014 model year. People are getting excited about and we think it has a pretty good Going Forward. Your next pick is jah, this is yarden corporation. People might not know what this is but they know the brands, right . Yeah, susie. While most people dont know jarden, everybody heard of some of their brands like coleman and crock pot, rollings sporting goods. Recently the Company Acquired yankee candles, rather significant acquisition for them. It will push earnings this year on top of what were already good earnings profile so were looking at a Company Growing in the teens and trading for about 12 times next years earnings, pretty attractive. And you like dollar tree . Yeah, dollar tree is kind of classic conservative growth and consistency of growth story. Thats one of the things we really favor in our process, dollar tree really grew earnings through the last two recessions without a hiccup. Certainly, the stock under performed some of the more exciting when people get really excited about the market, but sit a very good longterm story and we like it here. One thing i notice with stock picks youre giving us, brian, is that they really had a great runup over the past year. I dont know if there is still upsides to address but tell us about eeft that trades on the nasdaq. Yeah, and of those, over the last year or so has been the best performer, actually that good performance is something we look for in our process. We favor strong relative price performance, but at the same time we Pay Attention to evaluation. So a stock like euronet can do well but as long as earnings are good and continue to grow, well invest in it. Its in several businesses, they offer atm networks in europe, they do gift cards and prepaid phone calls and money transfers. Really interesting collection of businesses and a good investment opportunity. All right. Sounds good. Any disclosures to make, brian . I own all four of those stocks. Thank you so much, have a great weekend. Brian with chase investment counsel. No worries. Still ahead, investors will be focused on debt talks, of course, so well get advice from market pros what could happen next week and what to do to get ready for it. First, how commodities, treas y treasuries and currencies performed today. Gold lost a bit of luster today following more than 2 and closing at a threemonth low, 1,268 an ounce. Investors cashed out of the safe haven as lawmakers appear closer to reaching a deal on the debt ceiling. Sharp declines forced a halt to prevent what officials called quote excessive price volatility, tyler . Saw susie, while they want t hammer out a deal investors may want to use a weekend to prepare portfolios for whatever plan or nonplan lawmakers come up with or if they fail to reach a deal. What experts say to do with your money now. What are you finding . Its interesting because there is a debate in washington but a huge debate in the market. There is under current, push and pull and buyers and sellers. The last two days the buyers won. There are three different schools of thought, one is run for the hills but not all the way. They are saying equity strategist, if you made money in the market sell off and reap benefits. There is also those who say hey, stay bullish and where you are, jump in and buy more stocks, the pull back is huge. I was speaking to alan at trading advantage. He say ifs there is a pull back, i want to buy big blue chip names. He likes cocacola and these names that pay a dividend but then there is those who say stay put, dont worry. It wont have a longterm effect. These guys in washington are going to figure this out. So stay put, this should not affect your longterm portfolio plans. So Top Performing Portfolio Manager at douglas c. Lane. Are your sources saying this market is vulnerable to headline risk most especially because if headlines come out over the weekend the talks are stalemated or breaking down and boy, well have a lot of the sunday talk shows focused on this, i would think monday mornings open could be a rough one. Here is the thing, it could be with rough one to the upside and downside. Sure. If there is no deal done, maybe the market sells off but you should position for that before hand. It could be on sunday morning we get a great grand bargain and everything goes higher. No matter what, you have to pick a path and thats what traders have been doing. Do you think this monday partial holiday for you know, banks are closed, markets are open, could work for or against the market . Its interesting because liquid did wont be a concern. Stock markets stay open. We had two good up days for the dow. Well see if it continues. Dom, have a great weekend. Finally tonight i think we well have to wrap up. Im susie gharib for more on the stories we covered, join us on nbr. Com, thanks for watching. 20 pounds of potatoes in a 10pound bag tonight. Have a good night, im tyler mathisen. Well see you monday, deal or no deal. Nightly Business Report has been brought to you by. Thestreet. Com. Interact financial multi media tools. Our dividend stock advisor guides and helps generate income during a period of low Interest Rates. We are thestreet. Com. Funding for this program is provided by the Gruber Family foundation and by the members of kqed. A coproduction of kqed and center for investigatie ive reporting. Californias San Joaquin Valley is one of the most productive farm regions in the world, yet the people who live and work near those farms cant always access that bounty. Theyre picking fresh fruit for everybody else, but actually they dont even have fresh fruit for their own family. Families in the Central Valley experience some of the nations highest levels of food insecurity. One in four families are at the risk of going to sleep hungry. One in three children are at risk of being hungry. In tolarie county, the food bank is already feeding a fourth of the population. If thats not a disaster, i dont know what