Conflict and the escalating tensions in iraq. Good news, right . Not for many investors, theyre puzzled before how and why stocks can keep going up, avoiding the correction that so many have predicted after a fiveyear bull run. With political turmoil and Economic Uncertainty all around the world. The rise in equities has confounded the experts. Heres how the major averages ended todays session. The dow rose 16 points, the nasdaq up 30 and the s p 500 added five points. Unnatural, thats how Mark Luschini describes the stock market that hasnt experienced a 10 pull back in three years. So would investors be on firmer footing if there had been a wicked selloff or two . Mark luschini joins us now as well as jack abalon. Mark, let me start with you. Do we need a pullback nor the market really to be healthy . I dont think we need a pullback, tyler, at least not in that vein. Certainly like many i would welcome one, i think it would reenergize equity investorers. Theres no law that says we have to find one. Over the last 34 years, there has been a correction of that order 19 times. It hasnt been 100 , as a consequence, i think as long awe continue to see the economic and corporate fundamentals improving, that should allow for stock prices to advance commence rat with earnings growth. I dont think we need to have one in order to invite continued interest in equities. You are of a different opinion. You think we do need a correction in the stock market. Tell us why . Sure, i think that there are a lot of investors sitting on the sidelines, because valuations are expensive. I think mark is right, as long as earnings can outpace current valuations for a while and revenues can outpace them perhaps we could move forward without a corruption. But i think the fact is well valuations expensive, and the economy doing okay we could use a pull back to get some of this cash sitting on the sidelines in the market. Thats the good side of a market pull back . In other words when valuations go down, it attracts more money in . Yeah, so i can in our own case, if someone were to open an account with us today and give us 100 cash, i would have a difficult time buying certainly small caps. I wouldnt touch small caps at these levels. Theyve already had a 10 correction. Large caps, i would have to really be careful and pick and choose where we would go. I certainly would not just make a lump sum allocation to equities at this level. A lot of people are keeping score how many days its been since weve had a market correction, Something Like 1,000 plus. If you look back in history, there have been periods that have gone longer than this without a correction. So, i mean, just answer the question, is it bad or is it good not to have a correction . Its good not to have a correction, as long as equity prices continue to be supported by the fundamentals, i think on the other hand it would be bad if we saw a meltup in equity prices in the absence of cooperating fundamentals which drove valuations to egregiously high levels. While i mostly agree with what jack said, i will differ, i dont think valuations are all that expensive, i think valuations are about 15 times, a little more than that, perhaps forward 12month earnings are full, ien wot argue theyre expected, and the consequence, particularly given the alternatives in bonds and cash for risk base capital. I think equities can go higher without the need for a corrective phase. It seems like there are a couple things that may have changed the equation a little bit. One is that the period of high liquidity of easy money does seem to be changing. The feds are cutting back on the bond purchases and likely will raise Interest Rates this year. There is heightened geo political concern around the world. How likely do you think a 10 pull back is in the market over lets say the period between now and the end of the year . And what would you do . Where would you put money if one happened . Its entirely likely. I think that i agree with mark, through the lens of bonds, stocks do look cheap. That is the only lens in which stocks look cheap, because Profit Margins are near alltime record, if youre relative to sales, stocks are probably 25 age points above their median levels. If we do get continued pull back in liquidity, which i believe has been the driver over the last 12 do 18 months or so, its entirely likely we go to cash and sit it out. We watch liquidity in credit spreads and we watch momentum in the Market Action itself. And that could prompt us to reduce our risk and go to cash. Spirited discussion. Mark luschini with Janney Montgomery scott. For all the talk about a market correction, there are some s p 500 stocks that have fallen sharply from their 52 week highs and some have plunged into correction status. Could some of those hard hit companies now be poised for a comeback . Dominick has the story. It was shaping up to be the pull back in stocks that so many traders had been waiting for. Geo Political Risk for flaring up all around the globe and stocks began selling off. That drop was short lived. For now, the index dips just 4 over the last couple weeks, and bargain hunters stepped in. Comes out of this pullback, we think its reflective of economic growth, it should be the best areas to be in, and that would be mostly energy, industrials and technology. Many investors who are looking for bigger returns in the stock market often look toward the stocks that have been beaten up in training. The ones who have fallen the most out of their recent highs. More than 1 3 of them have fallen by 10 from their respective cases over the last few years. A level that many traders call bear market territory. Among the hardest hit stocks are amazon. Com, also luxury goods retailer coach and upscale grocer whole foods. Investors in all three have sold shares because of concerns over things like future growth and stiffer competition, the selloff in shares has given some traders a reason to give these companies another look. Some experts are looking even deeper into those companies with particular strengths. Nordstrom and macys and places like that who have had strong online capabilities, thats where the retail leadership has been, and probably will continue if there is any leadership out at retail. Retail stocks will be important this week as Companies Like macys and walmart help to wind down large cap earnings seasons. Those reports may shed more light on the health of the come assumer and whether or not stocks can balance back. For nightly Business Report, dominick chiao. Remarks widely interpreted at fed policies aimed at supporting economic growth. Stanley fisher called the performance disappointing. He questioned whether the growth was cyclical or structural. Whichever it turns out to be, the result has been a general down shift in forecasts for long term u. S. Growth. Over in the oil patch today, a big Corporate Restructuring announced by the nations Biggest Energy pipeline company. Kinder morgan is consolidating its huge pipeline business into a single company. A 44 billion transaction, and investors like what they heard. Shares gushed higher by 9 . Morgan brennan has more on whats behind this massive change. Announcing plans to combine its four businesses to become the Largest Energy Infrastructure Company in america. Valued at 71 billion. It will be the second Biggest Energy deal in u. S. History, behind exxons 74. 5 billion purchase of mobil in 1999. The consolidation will put the Energy Partners and management and el paso pipeline under the Kinder Morgan ink umbrella, bringing together 80,000 miles of oil and gas pipeline. To do this, the company is abandoning the massive Partnership Structure associated with some of its businesses. Putting assets into a single C Corporation. First and foremost, i think the simplification of four entities going into one. Also, you had this c corp. And three mlps, youre going to have one entity, and i think its going to be a great way to play the Energy Renaissance goingforward. Theyve become very popular in the Energy Sector because of their Tax Advantages and high dividends. Richard kinder considered a pioneer, says his partnerships have gotten too big to make significant investments and maintain growth. He says the C Corporation will lower the cost of capital and result in tax savings. You put all that together and we think this is a recipe for us being able to do lots of capitol projects and lots of potential acquisitions that we simply couldnt do under the old structure. The move enables the combined company to increase its dividends to 2 next year and continue raising it 10 annually through 2020. Analysts note that the company will be able to acquire all kinds of energy assets, not just infrastructure, which is what the mlps are limited to. It plans to continue investing in infrastructure, there could be 120 energy mlps it could potentially target. With 640 billion in new tanks, there will be plenty of room to now grow. For nightly Business Report, im morgan brennen. Another Oil Giant Shell appears to be pulling back on shale according to the wall street journal, private equity firm Blackstone Group is close to a 1. 2 billion deal to buy a 50 stake in natural gas assets in the haynesville shale formation underneath louisiana and texas. That is now owned by royal dutch shell. Neither company will confirm the report. While shale exits the shale business, several Energy Giants are scaling back operations in the wake of increasing violence in iraq. President obama said he stands ready to support the new government in that country and that the u. S. Has stepped up military advice to the iraqis and kurds. The past few days, American Forces have successfully conducted targeted air strikes to prevent terrorist forces from advancing on the city of erbil and to protect american civilians, Kurdish Forces on the ground continue to defend their city, and we stepped up military advice and assistance to iraqi and Kurdish Forces as they wage the fight against islam. What do these moves of the Energy Giants mean for the Major Oil Companies and for oil prices . Jackie deangelis reports. Reporter as the situation in Northern Iraq remains tense, reports that u. S. Oil majors like chevron, exxon and hess are removing nonessential employees from the region are a concern for the market. Normally news like this would cause oil prices to spike, but this time the market seemed to be acting rationally. Thats because of iraqs 3 Million Barrels a day of production. Only 60,000 come from the north, and only a third of those are exported. Iraqs ministry of Natural Resources saying this weekend that production in the north hasnt been interrupted. The south is what were really worried about, 3 Million Barrels a day come from there. If theres any disruption to that supply, its going to be problems for the rest of the world. In the middle east and iraq specifically. Workers are no strangers to conflicts. Evacuations like this have been seen before, many times just temporary, and part of standard operating safety procedures. What draws them to the region . High salaries. Oil and gas industry workers are paid for the risks that they assume. Average salaries are over 90,000 and in some cases where employees have more experience. They can bump into the six figure range. Also keeping crude prices in check supply and demand. Global supplies on the rise, and demand seasonally in places like china and the United States is weakening. Geo political tensions have eased in certain parts of the world, they remain a problem with russia and iraq in particular. In the fourth quarter, demand usually drops and that could offset any geo political tensions. The good news . Domestic prices for crude have backed off almost 3 in a month. Now back below 100 a barrel and gas prices have declined as well. The lundeberg survey reporting another 6 cent drop in the last two weeks, bringing the National Average for a gallon of regular to 3. 52. Where does crude go from here. Traders say, unless geopolitics really explode, crude prices are headed lower. For nightly Business Report, im jackie deangelis. Amazons new playbook picking a fight over pricing. This time with disney, but which company will blink first. Thats next. The u. S. Postal service delivering some bad news, overall revenue rose 2 in the Third Quarter, thanks to a boost in shipping and package services. But the post office lost 2 billion during the past three months on another big drop in first class mail. The Postal Service has reported a loss in 21 of the past 23 quarters. Once again, amazon. Com is embroiled in a heated contract dispute with a major content provider. And this time its blocking preordinaries of some of this years biggest movies from disney . Whats amazon after . And could this fight be good news for consumers . Julia bors ten has the story. You go to amazon to preorder dvds or bluray disks, youre out of luck. Amazon allows users to preorder digital downloads but not the dvds. Neither amazon nor disney will comment but the two companies are in a dispute over pricing. Amazon is trying to use whatever leverage it has to squeeze some kind of a concession out of disney. I dont know if thats on pricing or some other type of terms, but most likely pricing. And i think that whats interesting about it, is that amazon not being a brick and mortar retailer doesnt really care about preorders. This is just one of many standoffs amazon has had with content giants. Cutting off preorders of Warner Brothers dvds including 300 rise of an empire. Amazon and Warner Brothers came to an agreement. Amazon is in the midst of a pricing battle over e book prices. Heshett objected to lowering e book prices. Reducing discounts and slowing delivery. The battle escalating with writers taking out ads to protest actions. This battle with amazon is about the life blood of the publishing industry. If they negotiate a discount on books, then the publishers actually eat it and the authors eat it. This is their only chance at monetizing the Creative Content selling books. When amazon squeezes them on price, everybody in the creative side and publishing side loses. Disney and amazon will come to an agreement fairly soon. The book battle with steaks so high could continue to drag on. Shares of the nations largest milk processor slump and thats where we begin tonights focus. Dean foods reported a wider than expected Second Quarter loss and warned on its Third Quarter. The reason raw milk prices remain unpredictable and volatile. They also pulled its fullyear forecast calling this the most difficult operating environment in its history. That sent shares curdling 3 lower to 15. 20. Better than expected earnings for price line, the Online Travel Company Reported a jump in International Bookings for hotels, airlines, rental cars. The company spent a lot to expand globally, and that will pressure its Third Quarter results. Nevertheless shares of price line up 2 to 13. 09. Shareholders of Mattress Firm will sleep well tonight. The company said it expects earnings and sales to exceed market expectations. The company also raised its outlook for the year. 13 gain today to 54. 53. It was the opposite story for gogo. They reported a Second Quarter loss, and said operating profits this year will be at the low end of the prior guidance. The company blamed the weak forecast on higher costs to expand its business. Shares fell nearly 5 to 15. 24. S sanofi and mankind are teaming up. The deal comes just about two months after the drug won Regulatory Approval in the u. S. Shares rose 8 . Sanofi fell slightly. Intercept pharmaceuticals soaring after ours after more details are released about Clinical Trials for its experimental liver drug. The company says the drug showed improvement in 46 of patients with serious Fatty Liver Disease versus 21 with a placebo. Shares were up a in regular session. Coming up, a large portion of American Population is getting older and that could mean big changes for our economy tonight. We begin a fourpart series on aging in america. With thousands of American Workers putting in their retirement papers avenue day, were kicking off a fourpart series called aging in america. We begin part one tonight with a look at the impact of what an aging population along with an older workforce would have on the u. S. Economy. Steve liesman has our story. Every day in america, 10,000 baby boomers turn 65. By 2030 the population is set to grow from todays 45 million to 72 million or a fifth of the population. For economists, these used to be much scarier numbers. They raised fears that an aging population would lower growth permanently. An older workforce would be much less productive. While the booming baby boomers present serious challenges, the new thinking is far more optimistic. The good news in our economy is that the employment patterns for the 55 plus group have been going steadily up for the last generation. Theyve also learned when you make a few changes in the workplace, the productivity for older and younger workers is the same. Like red or white on the factory floor or bigger computer screens in the office. Finally technology can be a major part of the solution. Replacing the work of retirees who leave the workforce. Still, the problems presented by baby boomers are considerable and wont support themselves. Oh, my god. Those picnickers down by the sea shore at low tide are all going to drown. Yes, of course, theyll drown if they dont move. But they can move. Moving means finding new ways to curtail the rise of health care costs. Spending will double from an average of 7 over the last 40 years to 14 by 2039. And it may also include raising some taxes on the young or wealthy, to pay for the baby boomers retirement. Immigration reform and better Overall Economic growth can be a big part of the solution. Economically it is much easier to address these kinds of issues if you act sooner rather than later. Because you have more time, so you could for example implement whatever tax increases or benefit reductions you might make over a longer horizon. Unfortunately for some baby boomers, the one solution could be the worst. Theyre going to have to work longer and save more. Theres some justification, one study found the health of 69yearolds today is about the same as 60yearolds back in the 1970s. Stats like that help put the problems into perspective. The fact that weve added 40 years to the human life span outweighs any economic advantage we have. Dont get depressed about the aging population, its the best thing thats happened in the world. History of the world. Well, tomorrow were going to continue our series, aging in america, with a look at the impact on the health care industry. Something i have a lot to say about having just gone through welcome back, i wish everyone could see this wonderful pink cap and the matching pedicure. Dont say break a leg. I wont. Not to me. Thats nightly Business Report for tonight. We want to remind you this is the time of year your Public Television station seeks your report. On behalf of your public tv station, thank you for your support many we hope to see you back here tomorrow night. announcer production funding for this program provided in part by generous donations to yosemite conservancy. Additional production funding provided by Delaware North companies, innovators of the greenpath initiative. [birds chirping] [hoofbeats] [footsteps]
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