Make you pay more for your coverage. But the new approach could be hazardous to your wealth. All that the and more tonight on nightly Business Report for friday, may 16th. Good evening, everyone, the bad news for General Motors got even worse today. Federal transportation officials slapped the automaker with a 35 million fine. The biggest allowed by law. For failing to act quickly enough to recall millions of cars with faulty ignition switches that were linked to transportation deaths. The transportation secretary said that gm broke the law by waiting too long to order that recall even though it knew about the switch problem. What we cannot tolerate, what we will never accept is a person or a company that knows danger exists and says nothing. Literally, silence can kill. In a statement, General Motors said quote, we have learned a great deal from this recall. We will now focus on the goal of becoming an Industry Leader in safety. Phil lebeau is with us now with more on General Motors and what else gm has agreed to. Phil, thank you for joining us. First, lets talk about that 35 million, it does not sound like a whole lot of money for a big company like General Motors. So once they pay that are they free and clear . Could they pay more fines . Oh, absolutely, there will be more fines coming out. The doj is looking at a criminal probe right now. There is an investigation if there were criminal laws broken and if there were you can bet that the final potentially will be over a billion dollars, or beyond that, depending on what they find. So you have that out there. With congressional hearing, and they are telling General Motors this is not the end of it. Youre going to continue to give us more information and we want to see more of what youre doing in the future when it comes to safety issues. To me, phil, there seems to be an irony that nit lz a was fining General Motors when it, too, missed connecting the dots. Are they partly at fault here . Yes, because nitsa should have strung together the dots and said wait a minute we have an issue long ago. They did three separate crash investigations and there were other documents that came out that showed they probably should have known more and they did not. At the end of the day theyre probably trying to say a, were going to be more forceful with General Motors and b, trying to convince people they are the watch dog that is out there. Put this in perspective out there. Youre talking about gm possibly paying a billion dollars in fines. We know that toyota recently got slapped with big fines. How does that compare with what gm is going through . Well, the toyota fine was the largest ever for an automaker. And lets be clear, General Motors has not been cleared of any criminal actions, it may be at the end of the day they found no criminal wrongdoing. But if there were criminal acts out there, the toyota blueprint is out there. And that is very clear, it says the federal government will make you pay a stiff fine if youre an automaker for not doing more when it comes to recalls. All right, phil, thank you so much. And to read more about the gm recall and the Corporate Culture at the automaker go to our website at nbr. Com. And after spending most of the day at a flat line, the major averages halted a twoday losing streak with stocks on the upswing, but todays gains were not enough to keep the stock from a losing week overall. The dow up 44, nasdaq higher by 21 and the s p added seven. B biggest gainer in the dow today, verizon with shares there up more than 2 . That is after regulatory fileins showed that a number of billionaire investors increased sthr ownership stakes in the telecom giant. So what is it about verizon that has so many bigname investors going all in on the stock . Dominic chu has more. Reporter verizon is now a target for some of americas biggest and best performing money managers. Yes, that verizon. It is one of the most eyecatching trades wall street has seen in quite sometime and it is in one of the least glitzy industries out there. Verizon is seen by many as a massive mature company, but there are reasons why stocks are more attractive. These have sound fundamentals, typically a solid cash flow, high dividend yield. There is a real need for income today and it can be found in this space. That may be what is grabbing warren buffets attention, in the latest round of disclosures, buffets Berkshire Hathaway is seeing profit, paulson and others are adding other stake, paulson bought 8. 7 million shares of the company, and loeb bought three and a half million shares, some point to the steady business along with the heavy dividend. Holders are entitled to payments each year. Dividend paying stocks are the sweet spots, among those are really good telecom names that offer what baby boomers need today which is income retirement as well as capital appreciation. Of course there is always the risk that the stocks can go down. Now maybe it is a longer play or a shorter term play but the dividend seems to be a big part of the reason why the stock is so attractive to these wall street heavyweights. For nightly Business Report, im dominic chu. Turning to the Housing Market there was a surge in the new Home Construction in the month of april. Housing prices rose 13 but the volume was driven entirely almost by multi family units, while the construction of Single Family homes continues to struggle, is this good news for housing . Diana olick takes a look. Reporter maryland home builder steven paul says despite a lot of optimism last year demand for his new homes this year is just not showing up. Were not seeing that demand. I wish that we were seeing it. We are seeing a change you know, in policy where youre seeing more town houses being brought to the market for development and less Single Family. But the traditional Single Family market is very slow. Reporter and that is why the numbers are so drastically different. Single family establishments were down, but multi family homes were up, it was worse for a Single Family, with permits up barely a percentage point month to month and down over 3 from a year ago. Multifamily apartment demand is still very strong, rents are still rising and that is why youre seeing developers put up so many new buildings, but some argue that could all change very soon. We actually did a Consumer Survey recently of over 3,000 adults in the country. And we asked those that are married living in an apartment why they live there, and the least selected answer was Single Family homes, bad investment. At a realtor conference in washington this week, agents say the biggest barrier to recovery was not lack of demand but lack of homes for sale. It is kind of argue that sflie brings demand, but in a market where there is a lack of inventory and excitement. Reporter steven paul says he will turn to town homes which are generally more affordable. In the next two years ill build town homes, as of right now it is Single Family. Reporter with the Single Family home prices still rising that is where he sees demand still rising. Im diana olick in washington. And demand s for health car seems to be rising as well as costs. Now Insurance Companies are setting limits, coverage caps is that could end up costing you more money. Bertha coombs has more. Reporter calpert was fed up with paying different prices for the same medical services. One hospital could be charging 15,000, another hospital could be charging about 100,000 for the same procedure, for the same length of stay and for the same quality outcomes. That is what drove us to take a broader look at this and say what can we do to standardize that. So calpers took a bold step setting a limit for 30,000, telling people where they would get the best care for that. The savings, 5 and a half million, members shopped around and that forced area hospitals to respond. A lot of hospitals reduced their prices. They didnt want to lose these patients, the low price hospitals didnt reduce their rates but just stayed where they were. Under the Affordable Care act, Health Care Plans cant set spending caps when it comes to overall coverage, but the Obama Administration earlier said this month that calpers and others will be allowed to set spending caps for procedures at least for now. For standard procedures like Knee Replacements and colonoscopies, it is a good tool to bring the costs down says the berkeley Professor James robinson. They will try to make sure you can go to the moderate price provider and if you want to go to the more expensive one that is your right. Were not stopping that, but you have to pay the difference yourself. It only works when there is emphasis on quality care. The danger is they may be inclined to implement a program like this but not have all the support systems in place to make it work for the patient. The Obama Administration will issue a final rule on the placements later this year. Joining us now to talk more about all of this, craig garthwaite, a professor of management. His specialty is health care. Craig, nice to have you back with us. You know, i dont think too many people would argue that we want to get our Health Care Costs down. And this is one strategy to do it. But are we at risk here of getting you know, low prices but also coming with it low quality care . What about quality care . So i think the representative from calpers is perfectly correct on that this this only works if you give the patient enough information to pick the right hospital that offers the quality. You set the price where there are a number of high quality providers. Lets be clear, you can do that, there is such dispersion in the prices there are lots of places you can get relatively routine procedures like a Knee Replacement at a lower cost than you might currently be playiayi but if you can access the cost where can you get the information on quality. How long a person took to recover, the incidents of infection and complications, things like that. It is going to be incumbent upon the insurers that want to reference this pricing scheme to give that information to their customers. And that will only come through the insurance, through us having a really good sense of what quality means in this setting. So infections after surgery are one case, but also you want to think if you are getting your knee or hip replaced, how long does it take you to get back to daily living . And there are Patient Matters that will have to be included in the system. You know, craig it is very difficult to many people to understand the Current Health care system and now were adding in all of these new roules and terms and policies. Talk us through the type of education well need for the consumers and patients in all of this. What weve seen in the financial education, a lot of people dont even understand how a 401 k works and that is hard. If we understand the health care system, it is quite difficult. But i think the goal is there, to pick a set of procedures and provide the patient with tangible quality information. Like for example, how many infections do these patients get, how fast can they get back to having painfree living than others. There is going to be a lot of effort over the next few years, keeping in mind the patients will always have the option to not buy one of these insurance plans. There will be a tradeoff here. You are going to choose if i want to pay a high premium and have high flexibility and less pricing or do i want a low pricing and have to be able to shop around a bit to get the best price. These are the changes well face as we try to control the Health Care Spending. As a matter of pricing theory, craig, when a third party is paying for something you dont care very much what the price is, what the cost is. This seems to be driving it the idea that i, the insurer are going to make you the ultimate user very aware of what the cost is. And youre going to have to bear more of that cost. Is that potentially a good thing in terms of bringing the market to bear to bring prices and costs down . We certainly want to have a little bit more of a situation where the patient is responding to price signals within health care. And so we want to do that. We want to do it in a way in which the patient can make an informed decision. That is why i want to do it and pick these types of relatively informed procedures. We dont want people to pick their care if theyre type two diabetes based only on price because we dont believe patients have enough information for that. But we want to identify procedures like an mri, which are relatively selfcontained episodes and patients can shop on the price. Really it is the only way to solve the Health Care Spending in some ways it is a simple problem. We either consume Less Health Care or pay less for the health care we consume. This is one attempt to get at the price question. Well, it is a whole new landscape, thank you craig for explaining part of it. We really appreciate it. And still ahead, the case for midcap stocks from a market monitor. Well name narz names and give you a number. But first, india elected a new Prime Minister in a landslide victory sweeping the new dominant Congress Party from office. Narenda modi has a stronger Fiscal Partnership with the u. S. Sending the benchmark index to record highs. Golden gate capital reels in red lobster from darden and that is where we begin the market focus. They have agreed to sell the chain for more than 2 billion in cash going against pressure from activist investor Starboard Value that opposed the sale. Other investors didnt like the news either, shares fell to 48. 49. Another drug merger in the news today. Abbott laboratories are paying sn million, they would expand their presence in latin america and more than double their brand of generic drugs in that region, shares fell to 39. 06. And shares of World Wrestling entertainment got slammed today. The company says the new Online Network wont make up for loss of the pay per view on demand business. The Stock Plunged to 11. 47. And dillars shares jumped. And pfizer approving a new drug, early in the Third Quarter of this year, the drug maker wouldnt have to do bigger expensive latestage testing for approval of the shares there. Up slightly, 29. 12 to close. True car had a successful market debut, even after the marketing was priced at nine per share, the company which operates truecar. Com and online car shopping and Research Site raised about 70 million from the shares of its sales, stocks closing up million 12 . And uber technologies, and the mobile app in the process of raising hundreds of millions, pegging the company with the value of 10 billion, and pinterest raising another 200 million from the investors putting that companys value at 5 billion. And while large cap stocks will do better, there are a few midcappers in mind doing well. Brian, welcome. Let me get your overall view of the market after this very, very sort of up and down week. Yeah, it certainly has been a choppy week, thank you for having me. You know, we believe the market the weight of the evidence still suggested that the market is in a primary uptrend. Although certainly markets become more selective. And you have seen deterioration between the surface over the last few weeks. That is notable in the smaller and midcap stocks, some of the more defensive issues out regarding the growth names. And given the markets volatility and uncertainty, you say that large cap stocks will do well in this market, not as much midcaps which we know did well last year. Talk us through the difference. Sure, and you know large cap trailed a bit last year, over the last couple of years it really has been a better environment for smaller and midcap stocks. And were seeing a little bit of that this year in that large cap has done better so far. Some of it has been a flight to safety, some of it a reverse of the things we saw last year. That could continue for sometime. We still believe from a diversifiation standpoint, you have to be more selective. And skyworks solution, tell us a little more. Sure, they make components that connect things, obviously that makes a lot of sense for smartphones and tablets, and they are their business is doing great there. And theyre continuing to get more dollar content in n8 smartphones and tablets so that is a positive. But theyre also seeing a trend of connecting other areas of peoples lives. Things such as health care, autos, things around the house getting connected. And as more and more devices become connected to the internet of things that i a huge growth potential. For a company like skyworks, business is tremendous. The stock has had a pretty good move but the valuation is still attractive. All right this is another field, grand canyon education, trading at 45, why do you like this one . Grand canyon is the in our opinion the highest quality stock in the forprofit education space. Grand canyon is a traditional ground campus university. It is a Christian University based in phoenix with about 10,000, 11,000 ground students this fall. They are growing tremendously. Theyre building a second campus out in phoenix. They think theyre going to be by the start of next school year about 18,000 students. So very strong growth. And you know they really offer a value proposition. Everybody has been talking about the rising cost of higher education. Theyre tuition and fees have not been increased in the last five years, which is just remarkable if you look around at what has happened everywhere is in that space. Did you have them in your ncaa bracket, brian . I did not have the antelopes, y and that is where the Ticker Symbol comes from. They provide services from everybody from directtv and at t in terms of Residential Services to bigger projects suchnr as wi, power transmission, if you think about the way people talk about infrastructure in the United States and the need to upgrade that infrastructure theyre one of the bigger players in that area. And stand to benefit from that longer term. Again, very consistent solid growth story but very reasonable valuation. Any disclosures,x,c÷rpn briat those stocks . Own all of those three stocks, but not personally, in our funds. And highways bumper to bumper when you hit the road for the upcoming memorial day weekend. The answer up next. And finally tonight, the unofficial start of summer is just ten days away. Wow, and that means millions of americans will be hitting the roads as well as the rails, taking to the skies over the long memorial day weekend. Just how many of us are expected to leave home next weekend . Hampton pearson takes a look. Reporter after a harsh winter millions of americans will jump start the travel season with the memorial day getaway next weekend. Triple a is forecasting a postrecession high, 36 million travellers. The biggest yearoveryear jump ekrn people are tired and looki for summer found. Reporter more than eight out of ten travellers will be driving to their destination, about 80 of all gasoline sales happen at gas stations nationwide, and the forecast Shows Operators seeing increased spending over last year and looking ahead to a big Summer Travel season. Once you see kids get out of school whether college or high school you really see travel pick up. Reporter memorial day air travel should top 2. 6 million, despite sales being lower a year ago, the cruise industry is surging. The harsh winter appears to be good news for people gaining interest in summertime travel. The cruise industry seems to have benefitted with a 6. 5 category increase in travellers. Reporter part of a one and a half million increase in those taking boats, buses and trains to get over that winter cabin fever. We wanted to get to a place where we could just really relax and get some sun. And when we added all of those things together, a cruise seemed like a new experience. I would travel more if the prices came down certainly. But i do love to travel. If i want to take a trip im going to take a trip. Ill worry about whatever else got to get paid whenever it has to get paid. With any kind of break in the weather the forecasters predict the memorial day weekend could be the start of one of the biggest Summer Travel seasons since the end of the recession, for nightly Business Report im Hampton Pearson in washington. Ill be on the road, i hope we have good weather. People want to get away after the winter, we have earned it in the east and the rest of the country as well. That is nightly Business Report, im susie gharib, thank you for joining us. And im tyler mathisen, thank you as well from me, have ad2 great weekend, we hope to see you back here on monday evening. Gwen Shifting Sands at the v. A. On Immigration Reform and in politics. Well cover the topsyturvy week tonight on washington week. Political interests do not come, do not come before the needs of the men and women who have served and sacrificed for this country. Gwen rare bipartisan agreement. Treating those to whom we owe the most so callously and so ungratefully is unconscionable. And we should all be ashamed. This needs to be a wakeup call for the department. Gwen as Veterans Affairs chief Eric Shinseki is forced to defend the agency against charges of substandard treatment at v. A. Hospitals. Whatever comes out of this, whatever substantiated, actions will be taken. We will take actions on. Gwen so the invga
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