Tuesday, september 23rd. Good evening, im tyler mathisen, stocks sold off sharply again, the dow had the worst day since the backtoback triple losses since june, they finished at five week lows, one reason for the selloff was a sharp slide in health care shares. Why . Because last night the treasury announced new rules that make socalled tax in versions harder. Those are the deals some companies have used to skirt u. S. Taxes by buying a Foreign Company and then moving the newly combined headquarters offshore. Drug biotech and medical Device Companies have been the strongest users of inversions, some with pending deals are among the hardest hit today on the stock market. Medtronic down, aiming to buy covidion for 43 billion and rebase to ireland. And looking to buy shire for 55 billion, they are down 2 , and ukbased astrazeneca fell nearly 5 , you may recall that pfizer tried to buy it for 5 million but was rebuffed. Amon javers has more. Amon, what are the new rules the treasury introduced, they are more complicated . Yes, theyre using terms like spin version and what the treasury is doing is changing rules on how companies have engage in inversions and blocking the most common tactics. The idea is to make inversions a lot more expensive for companies so they will choose not to do it. What they could not do is block inversions altogether, taking an act of congress to change the law. They dont have the votes on capitol hill to do that. It doesnt seem they are doing anything now between the election in november. We have to move now, treasury took the action yesterday and this will be effective as of yesterday. Meg, you have been on the phone all day contacting companies with deals. What do the new rules mean for them, what were they telling you . Well, it is not really clear right now, the big question overall is there are at least five Big Companies in the middle of the inversiontype deals. They announced them. They were expected to close in the early fourth quarter, some of them include shiree, more than 40 billion deals. Everybody is reassessing, while the Companies Say they would have pursued the deals anyway because there are things they like about the target companies other than just the tax rates, is that they may want to negotiate the terms of the deal. They may want to mix the equity and if they cant reach the agreement with medvinion there are a lot of questions going on. Amon, are there new rules proposed subject to challenge . Can anybody fight back against them . Yes, there is some expectations there meeting a lawsuit particularly with companies who have deals in process who are now effectively blocked by this. Some folks in washington say it appears to be very carefully written by treasury to make sure they stay within the four corners of their legal responsibilities here as treasury. And not getting too far into something that would be a law change. So the expectation at least among folks im talking to here is that this was the survival lawsuit. Some of the other Companies Feel they may have been wronged here. Will these companies go the full mile and test in the courts . That is expectation among the analysts. He said it may take one of the Companies Already in the deal. It doesnt have the purview to put the deals in place or is not trying to do it the right way and trying to stop the deals coming into place. We saw an expectation that pfizer may try to do a deal. It takes a pause and of course hits the stocks. Amon, thank you very much. Well, those inversion worries were not the only reason for the market selloff today. The escalating war in the middle east and the Economic Impact of u. S. Airstrikes in syria as well as down beat data out of the euro zone economy also weighed. All ten sectors of the s p were in the red, the dow lost is 16, dow nienlt, the s p off 11. And the overall theme of this years Clinton Global Initiative in new york city, where business, government and entertainment leaders from around the world gather to discuss the controversial issues and look for solutions. Its a big event, filled with headliners. And it coincides usually with the annual u. N. General Assembly Meeting across town. John harwood was there. This was a rare event where the sitting president of the United States was not necessarily the principal focus on a day even when he discussed airstrikes against syria, that is because the Clinton Global Initiative draws people from around the world, from Actor Matt Damon discussing the need for clean water, to jack moss talking about the rising need of technology. Young people focused on the technology, that is the opportunity. The world will be changed by mobile internet. Mobile technology, countries like you guys helping young people succeed. Helping young people to reach the inflammation, helping the young people try the new things. Of course, given our host, it is no surprise that business and politics came up. President clinton said he supports president obamas initiative to support the tax inversions. The president should do what they can. It is their duty to collect whatever money is owed under american law. If they can find a way to discourage people from moving overseas they ought to. The best encouragement is to reform taxes and repatriotate now the 2 million overseas. President clinton said he oversaw the last increase in the Corporate Tax rate but says it is now time to come together on a bipartisan basis to come together with the rest of the world. Some encouraging news on home prices. They inched a little bit higher in july and have now regained much of what was lost in the 2008 housing crisis. They rose 1 10th of 1 in july. It doesnt sound like a whole lot but they are still rising. And according to the federal Housing Finance agency u. S. Home prices are now almost 6 below their alltime highs from 2007. Home prices are not the only thing rebounding from the financial crisis, u. S. Manufacturing activity for september currently hanging around a 4. 5 year high. The report also showed employment levels among producers rose to a 2. 5 and a half year higher. China is also seeing a muchneeded lift in manufacturing, amid concerns that its Overall Economic growth may be slowing down. More from beijing. Reporter the survey of chinas Manufacturing Sector showed that factories here picked up steam in september. There was a modest improvement from august and better than what investors were expecting. New exports were expected as customers ordered more goods from overseas in china. However, more of course on the employment factor, the data showed they are shedding jobs more in the past five years when china was working with the financial crisis. That means that china is bracing for tougher times when the pace slows down. Many expect them to target measures with the growth, while other hurdles continue to haunt the chinese economy. A disturbing new forecast concerning the rapid spread of the ebola virus in africa. The atlantabased center for diseases control says unless they get the disease under control quickly more than a Million People could be infected in west africa in january alone. One official said it is still possible to avoid the worse Case Scenario if a sufficient number of patients are isolated. Once this happens the number of cases will likely decline very quickly. Still ahead, will september historically a bad month for stocks deliver a pleasant surprise for investors and banks . The answer coming up. Barkleys bank is paying a hefty fine for the way it mishandled customer funds, british banking regulators fined them a record 2. 12 million for exposing the clients to what they called unnecessary risks and keeping a shoddy. This is the second time they were fined for the way they handle customer accounts. Another big bank, Goldman Sachs is looking to enter into the fastgrowing business of change funds. They are looking to design and sell to investors, a series of actively managed ones, others based on their own index is created by the bank. Now other banks have been moving in this direction. J. P. Morgan in june launched the first etf, and wells fargo got the okay in september. And historically, this is a bad month for the stocks, but this year it is shaping up to be a good month for traders, possibly delivering a good september surprise for money banks, Mary Thompson has more. Reporter for traders, september is the make or break month in the Third Quarter. This year it looks like they may make it. We are looking at september being stronger. Reporter across a wide range of trading businesses, volume and volatility is up. That could be good news for big banks including j. P. Morgan and Goldman Sachs. Where trading revenue could be anywhere from 15 to 40plus percent of a banks total. The stock markets run and alibaba among the reasons analyst marty mosby believes that september is looking better. Were seeing ipos hit, which caused trading activity. Were starting to see at least the middle part of the curve moving higher. And as we see Foreign Exchange volatility finally we could think that september may be able to at least hold the Third Quarter in there close to what we saw in the Second Quarter. Reporter mix in the volatility scene in the oil markets and the higher level of activity across currency, bonds and stocks could create a september surprise. Still, analysts including mosby caused it may not be enough to overcome the slow start to the quarter. Meaning any surprise could be subtle. During the change in volume, a subtle change to the upside, a welcome sign for banks. For nightly Business Report, im Mary Thompson. Shares of car max fell even though the Company Posted earnings that topped estimates. And that is where we begin tonights market focus. The used car super store saying the profit rose 10 in the Second Quarter driven by an increase in used car sales. But as Profit Margins fell from a year ago and sales rose less than expected. Shares fell 9. 5 to 47. 80. Carnival hikes out for the year as the profits jumped by more than 30 . The crews operated good results driven by onboard spending and a stronger performance in the asia division, shares rose a fraction to 40. 51. And Fertilizer Company in preliminary merger talks with norways yara, also a fertilizer producer, they say there is no guarantee that any deal could come out of these discussions. Still, shares popped 5 to 269. 37. Deer says it is thinking over Strategic Options for the low margin Crop Insurance business and it has hired citigroup as an adviser. The revenues have been falling as farmers hold off from buying new products because of lower expectations for Commodity Prices and harvest. The stock lost a fraction. And ftc may be looking to block the planned merger of cisco and foods. They are concerned that combining the nations two biggest suppliers could threaten competition. Shares of cisco off to 36. 75. And Proctor Gamble selling eukanuba to spectrum brands. They say exiting the business will help to focus on the core units. The financial terms of this particular deal were not disclosed. Shares down a little bit. 84. 44 at the close, facebook unveiling a new ad platform, to show the effectiveness of advertisements. The tool will help the marketers understand which facebook users are interactive. The shares of facebook are up almost 2 on this otherwise down day to 78. 29. And after the bell, shares of bed, bath and beyond initially popped on a strong earnings report. The retailer beat on both the top and bottom lines and gave an upbeat full outlook. Shares moved into the great beyond during the regular trading day, bed bath and beyond was down 1. 5 . As we reported earlier, former president bill clinton discussing issues important to businesses including wages, the shrinking middle class and what corporations care about most. The company after Company Takes more of its profits and spends it on dividends, stock buybacks, management increases. And less on sharing it with the employees broadly. That, he said, will change over the next few years. But it could be one of the reasons why Many Americans dont have a strong opinion of corporations. In a recent cnbc survey on corporate perception, 52 of people in developed nations have a favorable view of corporations, compared to 72 in developing countries. So what role do corporations have in society . Bill, thank you for joining us on the program. Glad to have you here. Thank you, susie. You know, another statistic out of that survey that sort of stood out for me, it said four in ten millennials and baby boomers view corporations as a source of fear, not hope. So my question to you is, why the disconnect and is it important to american corporations to fix this perception . Absolutely, it is essential. We have had 12 years of breaching the trust going all the way back to enron, and the financial crisis in 2008. A lot of corporations are trying to rebuild it. But it takes a long time to rebuild that trust. And i think that is where we have to go right now. President clinton had it right. So you clearly think that corporate misbehavior is contributing to the reason why americans have a lower view of corporate sort of imagery than foreigners do. Does the wealth gap play in there as well, bill . No doubt about it. The fact that americans are not earning as much and theyre not sharing in the success of companies. I think that plays a big factor. And the fact that the government has been coming at businesses, supporting the great global companies. The government is doing everything it can to fine them, penalize them and send them to jail. This caused a breach of trust, as well. It seems also there is a disconnect between what Corporate America believes their responsibilities are. I mean, we just heard from president clinton saying they have to do more for the social good, it seems. That seems to be what the American Public wants. Is there a way to bridge this misperception . Well, i think the ceos today, theyre the best group weve ever had, and theyre committed to rebuilding the trust. I spent a lot of time with a number of ceos is committed to this. But there is a clash with the wall street drivers, and they are taking on Great Companies like dupont and pepsico. The clash is hurting us. Business has to recognize first and foremost, it is chartered to Serve Society, that is how we get our existence, whether in china or japan. Of course the activist investors, bill, would also say we have a salutory effect, making them better. That is for another conversation. But i wonder why you think people in the United States have a more favorable view of large corporations than we do. Is it because they dont know them as well . Why . Well, they havent had the battering of large companies. They see them as the job providers, the Wealth Creators that are building these developmenti i developing countries. What do you think is going to be the wakeup call for American Companies and what is your prediction, lets say ten years from now . Is the situation going to be the same, better or maybe worse . Susie, we have had our wakeup call. The answer is for ceos to come together with government which we have not been able to do and declare that were there to Serve Society everywhere we go in the world. And were not just there to serve the shortterm shareholder. If we do that well we serve our customers through the mainstream business, creating shared values, as my colleague Michael Porter said. Well rebuild the trust but you have to put the customers first. You cant put the shareholders first, you have to put the customers first, if we have do that the shareholders will be the huge beneficiaries as they have been in the last four or five years. That is a really interesting point because i think a lot of people in the Investment Community would say that the ultimate responsibility of the board or ceos is to serve the shareholders and they do come first. Well, i dont agree. The law says to the company and the shareholders, that is what the law says. And weve kind of forget about the company. We want to sustain institutions. We want dupont, deere, these are great institutions, we want them to go on for another 100 years so they can compete globally and create jobs. And theyre doing that. People dont appreciate that. As president clinton said, you cant just do stock buybacks, theyre fine, but we have to invest in the companies in research, in people, and in market expansion. Bill, i would love to sit in on your class at harvard. Bill george with Harvard Business school. Thank you, so that is who we teach, thank you. Coming up when times got tough one Small Business decided to shift the strategy to survive. Well meet the Business Owners tonight when we kick off the series Small Business matters. More Health Plan Choices are coming to the federal chances next year. Department of health and Human Services official are the folks who run this healthcare. Gov marketplace. Now say that the plans offered will increase by 25 in 2015. Meanwhile, governmentbacked hackers purposely breached the healthcare. Gov website and got mixed results. The Senate Services sent their own hackers to break into the website, finding a critical vulnerability during a critical scan, they didnt talk about what the problem was. The insider hackers also reported strong defenses on the site, which aim, of course, to keep personal data secure. Several estimates show that the u. S. Lost more than 170,000 Small Businesses during the great recession, and the ones that survived were leaner and more focused, being careful not to repeat past mistakes. In the first segment of the series called Small Business matters, Sharon Epperson talked about lessons they have learned since then. Here is step one, when times are tough, cut the fat. Roberto and colleen are the husband and Wife Team Behind the company you may not have heard of. This is a brand building consulate for the apparel industry. But likely youve seen their work. Our clients range from boutique to fortune 500 or the gap. They launched their own label, a premium childrens brand sold at Luxury Department stores. Popular with celebrities and moms. One of the best selling products . Stretch leather pants for kids with a product sold at barneys. They understand who theyre selling to, that is how they have done well. They have a very expensive product from a fashion line, selling to parents who have the money to spend. Were excited. It has been a good year so far. 2008 was the defining moment for this design company, a critical juncture when many other Small Businesses went out of business. Huge companies were laying people off. It was a huge deal in fashion because it is fashion. And it is one of the things that people cut from their budgets, right away. Withsight and effort to not go out of business we decided to immediately restructure. What resulted was a leaner, more efficient fds, by letting go employees and hiring designers on a Product Design basis the company cut down cost and reduced unnecessary work space. With our Previous Company we had expenses of 200,000 a month, now it is like 25,000. So it is a drastic difference and just makes a lot of sense. With the huge financial crash that could have gone under, instead they were able to adopt. They were able to see what was happening in the world and make big changes in their business which started by changing the whole sort of model of how they worked with designers. For fds, the transition to working virtually using mostly freelancers has been seamless. We just love working this way. And it has been very, very efficient for us, a new way to work. It becomes the new model for many Small Businesses and for some the secret to their success, for nightly Business Report, im Sharon Epperson. And finally tonight, the most expensive cities in the world to live and do business. And there is a new name at the top. Third place, the big am. New york city, second place, hong kong, top spot now . London, a stronger british pound over the past year was the main driver for londons rise to the top. That is nightly Business Report for tonight, im susie gharib, thank you for joining us. And im tyler mathisen, thanks from me, as well. Have a great evening, everybody. We look to see you back here tomorrow night. This time on spark first, spark follows photographer Katherine Westerhout inside a forgotten west oakland landmark the 16th st. Train station. Ive been photographing abandoned buildings for about 12 years now. Then, w. Kamau bell uses comedy to start conversations about race, and his provocative solo show has gotten people talking. And wil blades proves his prowess on the hammond b3 organ. Next on spark. Major support for spark is provided by
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