Transcripts For KQED Nightly Business Report 20170629

How much healthier the Financial System has become, the Federal Reserve gave the biggest u. S. Banks the green light to use their extra capital for stock buy backs and more dividends. Good news for investors looking for extra income. Kayla has more on the final results of the Central Banks socalled stress test. For the First Time Since the financial crisis, the Federal Reserve has not rejected any of the capital plaps submitted by the 34 banks getting stress testing, b finding the companies to be sufficiently capitalized while weathering a recession. Capital one is required to resubmit its plan within six months or risk shareholder payouts getting frozen. It exceeded the threshold, but didnt want adjusted returns before the results were out last thursday. American express did the same as one of its capital levels was below the fed threshold. Senior officials said the rapid growth in credit card balances and uptick in delen quincies that included more severe losses played a role. Am ex cleared the bar by recommitting its plan. Senior officials said unlike years past, getting close wont be met with penalty and to that end, banks have requested substantially increased shareholder payouts. These Officials Say banks already gett of their net r revenues to shareholders at this o be a post financial crisis first. For nightly business report, washington. And the banks were quick to react. Heres what some said almost immediately after the results were released. Citigroup doubling its dividend. Morgan stanley raidsing by 25 . American express by 9 and wells fargo by 3 and now, to discuss big bank names he likes now theyve been approved by the fed to pay out more dif depds to shareholders w kbw. Good to have you with us. News for the big banks, the ones thachb sort of restricted from paying bu or dividends to shareholders. If i dont own these banks already, is it too late for me to bet from this . We dont think so. Especially the biggest banks. What youre seeing here is both the results show theyre very stron capital. Credit is good. Theyre going to be paying a lot back in repurchases and dividends to shareholders and we ave a situation where t regulatory standpoint, too. Valuations are reasonable, so we e biggest o think the biggest opy for investors today. Who do you think is the best positioned in s pre and in terms of its future growth plan . Well, growth really isnt necessarily what youre looking for in the big banlanks today, think bank of america is top of our list. Very good results today. Theyre making Good Progress in terms of managing the costs and d twane. So thats our top pick f. You look at jpmorgan, another one, very good shape. Abov expectationsation and citi of course buy iing back shares below back value i alw a thing for a bank. Lets talk about going a different direction. Is there an argument to be made if i dont want to buy and hitch my wagons to an individual bank, buy a bank etf. Sure. Kwb is the one to beat. Did i set you up for that . You did. Thats the one that has weighted towards the largest banks. What did you think of the results of the stress test you review the feds comments and what was your reaction to the way that these banks have now managed to improve their capital levels and their Balance Sheets . Well, i think it was both a positive and a relief. The fed is going to go after at least one or two banks and fail. Wells fargo was on top of peoples list of concerns this year of all the problems theyve had over the last year and a half, yet wells far got over the hurdle, too, so yes, we had a resubmission by capital one, but it reconfirms that stress testing has become a way of life for these banks and we know how now, how to get it so that the banks can have positive returns, so i think not only is it a positive, its also a relief and it shows you that the process is well into place and regulatory this new administration, these numbers could improve more as we go into 2018 and 2019. Great to see you. Fred canon. Great to be on, thanks. Shares of Goldman Sachs and jpmorgan helped lead the dow to a triple digit gain today, helpr indexes rebound from their worst session Dow Jones Rose 143 points to 21,454. Nasdaq added 87 and s p 500 was up 1i. In passive talked investing is is fuelling the stock market rally. Accord iing to the wall street journal, ets spent 98 billion buying u. S. Stocks during the First Quarter. Even a stock market valuations appeared high and other big buyers were stepping back. So, will etf buyers continue to help drive this market higher . Michael is chairman of the turusso etf industry index, which tracks the performance of the etf industry. Michael, welcome. Good to have y, tyler. So, do i need to be worried ant this . How big is it . 98 billion sounds like a lot of money and by any measure, it is. But is it creating sort of bubbleiscious territory in the market . I like that term, but this is e the tf industry has been growing about 20 a year in assets for about ten years and at 3 trillion, 98 billion is about 3 , so, it is a huge number. But in a percentage term, its within historical norms. Not all etfs are created equal. There are some kind of hybrid etfs out there. So, as the investor looks at that landscape and if youre correct and we may see more expansion into this part of the market, what do you watch for . Well, you got to watch and know whats in an etf. Right . Like its not just about what the name is. Ou have to kn and how the process of creating the index works. So, when the money is is put into an etf. Say a financial add virz says im going r ca put it into an etf because you get great price efficiency, low expenses, diversification. All that money has to get put to work across the index or whatever the benchmark is, the trk f is measured against. That really doesnt cause anybody to be discriminating into whether theyre buying good values or not. Does it . In other words, all of that mo to work. Regardless of whether this stock is overpriced and that one is underpriced. Youre right and in the br index, like the s p or qqqs, i dont think thats a problem yet. Going about 6 or so with those kind kinds of name, but when you get into more niche things, reach for example today, its about 15 of the market cap. Etfs are a better way to get them so they go passive. You have to watch that. Thats place where to steal your term, it could be bubbleiscious. Michael with the etf industry index. To real estate now where fewer buyers signed contracts to buy existing homes in may. Likely because they cant find a home they want and if they do, its probably too expensive. The lack of inventory could be behind the. 8 drop in pending home sales last month, marking the third consecutive decline. As weve been reporting, there isnt enough supply to satisfy demand and thats causing prices to rise. Increasing the number of homes that are ouch reach for buyers. Weve seen an inkrecrease in demand for rentals, es apart an those prices are rising, one developer may have a solution and he opens it catches on with the young er more social generation. Di tonight. From the outside, this chicago Apartment Building likes like any other, but inside, theres an experimenthesitant, to think about it more. Then i thought im living alone isnt that great. Dan is whole living in apartment designed and built for three independent residents. Not just a roommate thing. Each room has its own bathroom and the common area is fully furnished with all the amenities from flat ware to flat screen and each resident has his or her own lease. Its cheaper because of their share. Its the brain child of brian r operate ng new york, miami and chicago. How do yo everybodys welcome. But Young Professionals are a notorious demographic and how to connect them. Through spaces in the apartment and in building like this open roof deck boasting a real chicago el car for parties and such. Noah, another partner in this project, also lives in the building. Monitoring the experiment. You dont want a dirty roommate, so were going to clea e a while with. You dont want a roommate you dont like. By year end, he claims there have been few problems and demand was off the chart. We did 30 deals in 35 days. Less than 10 of the units in this building are social and thats by design. Literally. The concept is so new that investors arent quite ready to buy into to a fully social building. Like evolving over many years, its not something you said hey, lets just jam people together and have a party. It has 10,000 moving parts to it. Our ability so set up and control all them is massively like a huge competitive advantage to somebody else others like we live and common also offer coliving, but its a t model. They dont own or build buildings, but act more like hotels, offering shortterm leases, the leases here are one year. Pmg is already developing other properties which will have more social units. Everything will have absolute element of coliving. We want to hit that price point. We want to cater to the people. Your cheapest entry into a building. Dan just signed his second i think it will continue, especially if people move around a lot and theyre not so much fixed at an early age through a location and this is a great bridge to a new city or new area. And a new way of living. For nightly business report, i diana oleic in chicago. I pension plan for nonunion employees. That change could affect more than 70,000 people. The company is not the first to do it and likely not the l mo brennan takes a look at why more companies are move ng this direction. Starting this 2023, ups will over 401 k plans instead of pensions and contribute to those accounts beyond any employees savings match. The move saves about 17 of ups workforce, but speak to bigger trend in Corporate America right now. Ballooning pensi s had a nearly 10 billion pension deficit last year and according to mercer, the shortfall of all s ps 1500 companies combined was nearly 400 why . Low interest rates. Tighter regulations and the the fact that many people are living longer. More employers are responding by freezing traditional retirement offerings and swifing to 401 k s. Says from 1998 to 2015, the percentage of new highers at foreign 500 companies offered traditional pensions fell from 60 down to 20 and b about 40 of employers had a frozen plan all together. Among those that have done so, boeing, u. S. Steel, Kimberly Clark and aig. Whats more interesting, many like general motors, United Technologies and sears and accenture, have off loaded those obligation, shifting them to insurers like Prudential Financial and met life. It maybes the employers Balance Sheets less volatile and creates a source of growth for life insurers, which have struggled amid low rates. Still ahead, the pocket of weed can i recall at the c. The food and Drug Administration is taking steps to increase the number of generic prescription drugs on the market. The agency said the move would make medicines more afford bable. While the fda does not have the power to evaluate prices, it can help with market competition. Were looking at plac of gen competitors. Were going to publish a list where there is only one generic drug on the market. Wee going to be prioritizing the entry of new drugs into a category until there are three competitors because we dont see the big price breaks for cons e scheduled a meeting in mid july to di discuss ponl changes to its rules for apgenerics. They have inadd v vevertently e some. Strong demand for soybeans helped bottom line. They reported quarterly profits better than expecteded. The seeds represent the companys biggest book. Also being bought for 66 billion by germanys buyer. If the deal is approved, it will create a company that commana qd market for seeds and pesti and the main increed yent in round up is at the cenr controversial move by california. The government officer says the ingredient causes cancer and plans to classify it as a carcinogen, but they vow to fight back. Adidi roy has more. Weather you batter leaves in youre or field, you are sides are some of the most effective method for controlling th is the most widely used weed killer in the u. S. And the world. Its also the flag ship brand used on genetically modified crops like corn and soybean, but the active herbicide is at the heart of a league battle. Its added to a list of chemicals known to cause cancer. Some scientists agree. It lies another agency to come to a scientific conclusion of on the Health Effects of this chemical. But they deny the claim, pointing out the Environmental Protection agency and other regulators worldwide have approved the herbicide. In a statement, a Spokesman Says we continue to aggressively challenge this improper decision. It started two years ago when the World Health Organizations International Agency for research on cancer identified the herbicide as probably carcinogenic to humans. Californias proposition 65 requires certain chemicals identify ied by that agency as ca. They went to court to stop the move, but a judge dismissed the suit. The compan it had decision. In the meantime, another battle is brewing in arkansas. In this case, the states plant board has banned the use of the camba. The governor still had to sign off on the ban for it to take effect. In this mornings earnings call, hugh grant addressed an analysts question. The number of inquiries were experiencing would be normal for any product. Even products that have been establish nded in the marketplace, so we feel really go where were at. Theyre under a standard review in europe and the u. S. Im adidi roy, san francisco. Fewer promotions helped results at General Mills and thats where we begin tonights market focus. Cheerios and hag b das said cost cuts contribu contributed. Sales edged lower, but still Strong Enough to beat forecast. They raised its dividend to 49 cents a share. Up to 56. 42. Fedex said the cyber attack yesterday could have a Material Impact on its financial results. The company said worldwide operations of sy unit tnt express were significantly effected, but fedex did not it does not believe any Sensitive Data were stolen. Shares rose more than a percent to 217. 15. A Dutch Health Care Company Phillips will buy u. S. Heart device maker for more than 2 billion. Phillips said the deal will allow it to further expand its image guided therapy business. Theyre up 26 to 38. 35. Paychecks reported sales grew and topped estimates. Earnings rose beating expectations, but the companys guidance for next r in shy and that sent shares lower by nearly 2 to 57. 65. And the home goods retailer pier 1 reported a narrower than expected loss, but the good news ended there. The company said same store sales were flat while overall revenue fell and missed estimates. Shares of the Small Cap Stock initially plunged in afterhours trade, but ended up just a fraction to 5. 38. Blue apron, the biggest Meal Delivery company in the United States is going public while the Meal Kit Delivery business is growing, it is changing quickly. With amazons recent purchase of whole foods as a major looming threat. As bob pisani reports, that is a big concern for some investors and it prompted blue apron to cut its ipo price range. Blue apron is in the business of delivering meal, but its chan easily get into business. Heres the good news, theres decent growth. Revenues are likely to hit 1 billion this year and Gross Margins are healthy. Theyve got a lot of orders that accounts for about 90 of their revenue and its reasonably priced compared to competitors. Heres the bad news. Theyre losing money because theyre spending a lot on marketing. They lost 50 million in the First Quarter because costs to get new customers are rising and competition is ramping up, so you have hello fresh which is really to do you believe in germany. Its already in the u. S. Home chef, but the big white shark is amazon. Fresh is just a grocery delivery, but has not as strong as amazon, you can be sure Home Delivery is a big reason for the whole foods purchase i. Spells major competition for blue ap n apron. Its good news for everybody who wants to buy blue apron. For nightly business report, im bob pisani. Coming up, we go behind the wheel of a selfdriving car. It is the next advancement in selfdriving cars. Going hands free in cadillac ct 6 with super cruise. Thats coming up on. The department of Homeland Security is calling for new security measures for Airlines Flying to the u. S. But is stepping back from expanding its ban traveling with laptops. In march, dhs prohibited personal Electronic Devices in the cabins of planes departing to the u. S. From africa. Officials say there will be enhanced screer belongings at f airports. The new rules will affect 180 airlines operating in 280 airports in more than 100 countries. The existing electronics prohibitions could be lifted if official there is comply with the motors said the world needs more computer coders and thats why mary barra announced a new push to train engineers. She said cars today have hundreds of millions of lines of code and thats why the automaker is partnering with four organizations to help train teachers who will teach more than 40,000 students during the Upcoming School year. The newest feature in selfdriving cars has the car watching the driver to make sure theyre ready to take control on the highway in case of o an emergency. Cadillacs new Super Cruise Technology. How does it work . Phil lebeau takes us for a ride outside palo alto, california. Cadillac calls its Super Cruise Technology a game changer, allowing hands free driving on the highway while ensuring drivers pay attention. Radar and sensors watch whats happening around the sedan and the small camera on the steering come lum watching the drivers eyes and head positi doze off behind the wheel, the cadillac will alert you to take control. Like a really long time. The technology is designed to lift the driving experience. According to the head of cadillac, who took us for a hands free drive. Weve designe to engage the driver. And the senators that are embed ed make sure that the driver remains alert. You dont have to drive. It comes more than a year after tesla made a big splash. It allows drivers to take their hands off the Steering Wheel for short periods of time. This is a shot across the baugh of tesla, which already has autopilot. Cadillac is really trying to take tesla on in that category of technology. Cadillac believes super cruise raises the bar compared to teslas autopilot. The other systems out there rerequiring with suh u per Cruise Technology goes on sale this fall and while the company has not said how much it will charge for this feature, cadillac believes it will be in demand by drivers who would like to go hands free. Thats nightly business report. Thanks for joining us. Thanks from me as well and. This. Wned. This is bbc world news america. Funding of this presentation is made possible by. The freemen foundation. And coal Fuller Foundation pursuing solutions for americas neglected me. Planning a vacation escape thats relaxing inviting. And exciting. Is a lot easier than you think. You can find it here in aruba. Families couples and friends can all find their escape on