Transcripts For KQEH Nightly Business Report 20150926

Automakers emissions scandal. All that and more tonight on nightly Business Report for friday september 25th. Good evening, everyone, and welcome. Bombshell news on capitol hill today. Speaker of the house john boehner announcing his resignation just days ahead of a potential Government Shutdown at the end of september. So what does it all mean . Eamon javers takes a look at the implications. This morning i woke up and i said my prayers, as i always do, and i decided, you know, todays the day im going to do this. Reporter the announcement caught republicans on capitol hill by surprise. Even though tensions had been building in their conference for months. Evidence of that tension in the Republican Party the exuberant reaction by conservatives at the values voters summit in washington. Just a few minutes ago Speaker Boehner announced that he will be resigning. [ cheers and applause ] reporter some of the most conservative members of congress cheered the decision in their own way. He is not the man to lead the Republican Party into 2016 and i think its a great day. Finally we can hopefully elect a speaker that actually can not only believe in but articulate conservatives principles. Reporter at the white house president obama offered some praise for the ousted leader as a dealmaker, the very thing that frustrated conservative republicans about him. He is somebody who has been gracious, and i think maybe most importantly hes somebody who understands that in government, in governance you dont get 100 of what you want but you have to work with people who you disagree with, sometimes strongly, in order to do the peoples business. The early betting is boehners resignation makes it easier to cut a deal next week and avoid a Government Shutdown. But over the long term whoever inherits boehners speakership is likely to be in more of a move to fight than to cut a deal. For nightly Business Report im eamon javers in washington. So does John Boehners resignation today bring more uncertainty or clarity to wall street . Greg valliere is chief political strategist at Potomac Research group and michael farr is president of farr miller and washington. They both join us tonight. Good evening, gentlemen. Greg, im going to start with you if i could. Specifically, what does mr. Boehners resignation mean for wall street and also the prospect as wall street is watching very closely of a possible Government Shutdown . It doesnt mean a lot, sue, for a shutdown next week. I think well get a deal on that. The big story is december. I think in mid december we could see a crisis over spending levels, over the debt ceiling, and for wall street what that means is that the fed, the fomc is going to have a meeting the next week after their deadline of december 11th for the budget. So how can janet yellen raise rates if we have a Government Shutdown . Michael, do you agree with that . I do. And ive got to tell you Greg Valliere is my must read. I read gregs notes every morning. Hes my goto guy. I think what this means, a couple of things. Even with a fed to do something it wasnt a shift in policy. They were going to remain accommodative. So this was going to be a nominal thing. I think the fed put is gone. So if markets become a little bit shaky i dont think the fed rushes back in. I think that theyre out. But i dont think theres any chance they raise policy here. I think yellen said as much yesterday and told markets that should Something Else happen this is that Something Else. So greg, whats the next step in your book . I mean, obviously we need to get a new speaker. And that in and of itself can create uncertainty, depending upon who that person is. Yes. I think its probably going to be Kevin Mccarthy. Hes the oddson favorite right now, sue. Hes going to have to listen to the right wing. Hes going to have to be much more restrictive on any kind of new spending. Hes not going to be able to deal with nancy pelosi as john boehner did. And thats a big story for the health care sector. I think people who look at lab stocks, Health Stocks who might have gotten a little increase at the end of the year, im not sure anybodys going to get a spending increase at the end of the year. So michael, did i hear you just say that you do not think there will be a rate hike this year because the turmoil in washington will be so intense as we head into that debt ceiling fight . Thats exactly what i said, tyler. I think that this shift without Speaker Boehner there is a clear shift to the right. And therefore, that partisanship that was so acerbic in the past year or a year and a half ago comes back, and i think Greg Valliere has been dead on as hes been analyzing all of this. So health care becomes the question. And youre going to start looking at some of those stocks. Sues question was clarity and uncertainty. I think we have more clarity and more uncertainty. I think we got both with this resignation. What are you going to be watching for most, greg, signals on capitol hill . Often tell you what is going to come next. What signals are you watching for . Two things, sue. Number one, what will mccarthy say over the next few days . Will he sound conciliatory or will he sound confrontational . Number two, lets watch the Highway Trust Fund. It has to be replenished in late october. If its done fairly simply and theres money for it, that would be a good sign getting into december. If we cant even get the Highway Trust Fund done in late october, that would not be a good sign. Michael, whats the implication for equities given the Political Landscape that you and greg outline here . Well, i think that the risk trade is off. I think that all of a sudden the notion that if markets really fall that the feds going to step in and start buying more bonds or throwing more cash, thats out of here. So you really do need to know what you own, youd have to Pay Attention to the Balance Sheets and why you own it. I think the things that im going to watch for, though, hes looking gregs looking for Kevin Mccarthy and the Highway Trust Fund. Im going to be looking at the price of gold. Im going to be looking at the dollar. And im going to be looking at Interest Rates particularly on the tenyear treshz treasury. Youre nodding your head in agreement, greg. I think Interest Rates stay pretty darn low. Market rates arent going up very far. Theres too much uncertainty. Theres more fiscal restraint coming. To me that points to a low Interest Rate scenario. And remarkable that yellen and the fed seem to expect that we wont reach their 2 inflation target until sometime in 2018. I mean, that was a stunning piece of data. All right, gentlemen, thank you very much. That was Greg Valliere with Potomac Research group and michael farr with farr, miller washington. Well, from congress to the president ial race, where wage control and taxes will be a wage growth i should say and taxes will be a focal point for the american public. Republican president ial hopeful jeb bush sat down with john harwood and talked about those very things. Wage growth has been flat for a long time in the country. We have this big challenge that we have to fix. Growth by itself isnt going to create higher wages but higher growth will create more wage growth than no growth. And if you do it in the right way where youre putting money in peoples pockets, which i think is important, you can create economic activity. Given the trend toward income inequality, which you have been concerned about, given the trend within your party about deficits, why would you take the risk of a policy that confers a huge proportion of its gains in the immediate sense on people at the top of the income scale and if it doesnt have the growth effects youre talking about would substantially increase the deficit . The broad tax policy that were proposing does the opposite of what youre suggesting, which is it provides tax relief for the middle class. Everybody freaks out about the deficit. I mean, i worry about the deficit, the structural deficit, for sure. But if we grow our economy at a faster rate, the dynamic nature of tax policy will kick in. What does eliminating the estate tax, how does that help anybodys right to rise . Well, it means that a family wont lose their business. Were not but that tax only applies to people who have made it bigtime. Theyve risen. Or theyre dead. Theyve risen hopefully theyre up there. What weve suggested is an asset, a family asset doesnt get taken away. That allows for secondgeneration businesses to continue to flourish. I mean, when i campaigned, there were a lot of people maybe its just because of my campaign. I dont know. But i dont see a lot of Big Corporation guys hanging out in the political process. I do see a whole lot of familyowned businesses that are creating a lot of vitality and communities. And having an onerous tax code creates problems. Yeah, we have an exemption. But people have earned this through good fortune and a lot of hard work and taken risks and i dont think you should take that away from families. Well, if you want to watch the rest of johns interview with jeb bush log on to our website. Its called nbr. Com. It was a mixed day on wall street. Stocks were higher for most of the day but the Biotech Sector had its worst day in nearly a year and a half and is that dragged everybody lower. The dow stayed above water thanks to a 9 jump in nike following the earnings numbers that we told you about last night. In the end the Dow Jones Industrial average rose 113 points. The nasdaq fell about 48. And the s p 500 was off just a fraction. For the week all three indices were lower but the nasdaq was the biggest loser. It was down about 3 . While the drama of Speaker Boehners resignation was playing out on capitol hill, chinese president xi jinping and president obama held highlevel meetings at the white house today to discuss Cyber Security and a number of issues of contention between the two countries. Michelle carusocabrera has more from the white house. Reporter the leaders of the worlds two largest economies announced an agreement on environmental goals with china, the Worlds Largest polluter, agreeing to a cap and trade program to reduce carbon emissions. The two president s also claiming progress on cyber espionage. It was an agreement that neither government will conduct or knowingly support cyberenabled theft of intellectual property or trade secrets. But even president obama sounded uncertain about whether the chinese would follow through. What ive said to president xi and what i say to the American People is the question now is are words followed by actions . And we will be watching carefully to make an assessment as to whether progress has been made in this area. President xi was greeted on the south lawn with the most senior members of president obamas cabinet to receive him. While xi and obama went on to meetings in the oval office and the cabinet room the two first ladies, Michelle Obam ooh and peng liuan went to visit the chinese pandas at the national zoo. The moments of drama at the press conference when the chinese president took questions from two american reporters, one on Cyber Security and another on the economy. He answered both of them, repeating what he said in a speech in seattle on tuesday night. China strongly oppose cans and combats the theft of commercial secrets and other kinds of hacking attacks. Still the moment was significant. His predecessor, hu jintao, back in 2011, ignored an american reporters question about human rights, then pretended that he was having technical issues and couldnt hear before finally giving an awkward answer. No such awkwardness today, even though Cyber Security is clearly a tense issue. Just last week president obama raised the possibility of sanctions in retaliation for alleged Chinese Military hacking. Today president obama said that has to stop. For nightly Business Report Michelle Carusocabrera at the white house. And in Germany Volkswagen is making changes following the emissions scandal that has embroid broiled that company, and here government regulators are tightening the screws when it comes to testing vehicles as a result of that scandal. Hampton pearson has all the details. Reporter volkswagen in hopes of clearing the air after it was caught cheating on diesel emissions tests in the u. S. Today announced plans for a corporate overhaul. It named mathias mueller, the head of its porsche division, as its new ceo. Meanwhile, michael horn will remain ceo of the Volkswagen Group in america. Members of the Supervisory Board pledged to do Everything Possible to win back the public trust in the wake of the emissions scandal. The test manipulation on diesel engines for volkswagen mean a moral and political disaster. The noncompliant actions of developers and engineers and development shocked volkswagen as it did the general public. Reporter vw has admitted installing socalled defeat devices on volkswagen and audi cars with fourcylinder diesel engines on some 11 million cars worldwide including about 500,000 vehicles in the u. S. Late friday the Justice Department announced its own investigation. Meanwhile, the Environmental Protection agency is sending letters to all auto manufacturers outlining major changes to the way it tests for diesel emissions. We are putting Vehicle Manufacturers on notice that our testing is now going to include additional valuation and tests designed to look for potential defeat devices. Reporter the epa says vw could face 18 billion in fines. And attorneys general for more than two dozen states are launching their own investigation ahead of what could be an avalanche of class action lawsuits. For nightly Business Report im Hampton Pearson in washington. Coming up, this weeks market monitor says if you are looking for growth its time to get into the game. Hell explain. At the United Nations pope francis addressed the world, calling on leaders to take concrete steps to protect the environment, presenting it as a human rights issue. He also made an emotional visit to ground zero, where he asked for prayers of peace. Mary thompson has more. Reporter on his day and a half trip to new york city pope francis visited hallowed ground. Translator you can feel the pain here. Its palpable. Reporter at an Interfaith Service at the 9 11 Memorial Museum the pope appealing for peace, echoing remarks made earlier at the United Nations. Translator war is the negation of all rights, and its a dramatic assault on the environment. Reporter the environment the focus of franciss speech to the general assembly, framing the protection of the earth as a human rights issue. The pope saying the misuse of Natural Resources harming the marginalized the most, who become what he calls a byproduct of the culture of waste. Translator they are cast off by society, forced to live off what is discarded and suffer unjustly from the consequences of the abuse of the environment. Reporter francis also asking for restraint in response to financial crises, saying harsh terms put on developing economies debt hurts rather than helps them. He also asked for aid in dealing with the migrant crisis. In his 40 hours in new york city francis traveled 57 miles. From ground zero he went north to a Catholic School in east harlem, then through central park in a motorcade on his way to Madison Square garden, where hell say mass for 20,000. A brief visit marked by words and memories made for a lifetime. In new york city im Mary Thompson for nightly Business Report. A Product Announcement and disappointing quarterlies from blackberry, and thats where we begin tonights market focus. The smartphone maker reporting an adjusted loss as it is still trying to turn its business around. The company also announcing it will launch a new Android Phone to help its device business. Shares tumbled over 7 1 2 . They finished at 6. 49. Shares of finish line plunged after the Athletic Apparel retailer reported that profit fell in its most recent quarter. On top of that sales missed analyst estimates as higher overhead expenses weighed on the top line there. The company did see samestore sales rise, though. Still the stock slid nearly 20 on the day, 19. 91. Google is reportlid under antitrust scrutiny in the u. S. Regulators are investigating whether the search giant is using its android mobile operating system to stifle competition. Shares fell just under 2 to 640. 15. Japan tobacco is in advance talks to buy 5 billion in assets from reynolds american. That report according to bloomberg. Japan tobacco owns cigarette brands like winston and camel. Shares rose 2 to 42. 99. And a recall to tell you about. Sanderson farms is recalling more than a half Million Pounds of chicken that may have been contaminated with metal. Thats according to the u. S. Department of agriculture. Despite the news the shares of Sanderson Farms slightly higher to 69. 37. And now to our market monitor who has stock picks he thinks could rise 20 over the next 12 months. Last time he was on with us in april he recommended apple. Since then it is down 12 . Imax down 13 . And tesla, which is 17 higher. Hes ross gerber, ceo and president of his own Wealth Management firm, gerber kawasaki. Ross, welcome back. Good to have you with us. Do you still like apple, imax, both of them down, and tesla 17 higher . Absolutely. Apple more than ever. I mean, theyre just killing it today with iphone sales and we expect so much good stuff through the Christmas Season. And imax is still waiting for the global release of star wars, which is the premise here. So the stocks have gone down a little bit for now but i think its a great opportunity. And tesla we love. Facebook you like as well. We just heard from the ceo the other day. Virtual reality. We love it. We think Virtual Reality has so much potential. And facebook has built an amazing platform with the original facebook obviously but also with instagram and with whats app, and now with Virtual Reality growing like crazy we think this is a great opportunity to own a blue chip of the future. Its selling in the 90s now. Where do you see it in a years time . Well, we see if moving higher, ideally about 20 over the next year. But of course with aum investments theres risk and well see how it goes. All right. Tmobile, im not sure whether we want to focus on the stock or the ceo, who is colorful i guess is the best word to describe him. I love john. I think hes doing a phenomenal job. Hes not scared to take on the industry. He certainly isnt. Hes honest and he tells you how he sees it. But one 69 things we have to consider, hes incredibly smart and hes doing a great job taking customers from everybody else. And tmobiles growing and is growing really well. All of the carriers are getting away from not giving away but subsidizing phone prices. Is this the new model and is it going to work not just for tmobi tmobile, whos one of the first to get away from it and get away from the contracts . It is working and its great tore consumers. Its great for the phone companies because they dont have to come up with all the money up front. And its great for apple and the device makers as well because i just upgraded my apple phone and its only been a year and now im able to do it. So its almost like youre leasing a phone now instead of biegs one. Its a winwin for everybody involved. And tmobile was really the firm that got that that started. Let me turn to washington with mr. Boehners earlier resignation. We had a discussion in the program about how that plays out in terms of a possible Government Shutdown, whether it affects the fed. Does a fundamental news story like that affect your Investment Strategy at all, ross . How much attention do you pay to it . Unfortunately, i think the Things Holding the economy back is washington. And the resignation of john boehner is not a positive for republicans. He was a steady hand in a very unsteady boat that theyre in. But im really scared about the political future for this country if we dont get some real candidates running for office here that are real good. We led by saying youve got to get into the game if you want growth. And your game pick here is Activision Blizzard here. Why . Blizzard. You know, i love the video game business and ive been involved with it on and off for a long time but whats happening now with technology is the digital download business has increased margins hugely and mobile gaming has increaskraecr about alt to sell their games on different platforms. Activision has key franchises. As we had into the Christmas Season we expect them to do very well but their margins are e expanding and some of their new games like destiny are taking off. It also has a big potential with Virtual Reality. Ross gerber with gerber kawasaki. Speaking of gaming, did you know that watching people play video games is turning into a big business . May sound crazy but the numbers are staggering and Major Companies are taking notice and action. Next. Apples latest iphone 6s and 6s plus went on sale in 12 countries today, and as expected customers across the globe lined up to get their hands on the newest igadgets. The pope didnt pick up one today. Not yet. Maybe hes going to get one. Last week the tech giant said new smartphones are on pace to top last years record 10 million phones. Analysts expect up to 13 pl this weekend. Esports, or competitive video game playing, may not be physically grueling like traditional sports but it is competitive and it is big business. Julia boorstin looks at the booming business of watching people play video games. Reporter over 110 Million People around the world are esports fans, regularly watching competitive video gaming. And now the business is going to primetime. Turner and agency wme img are teaming up to create a new Esports League broadcasting 20 friday night telecasts on tbs every year. And video game giant Activision Blizzard announce the a new global Esports League for its mega hit call of duty. The league will have a pro and 578ture division and a 3 million prize pool. As the game maker looks to cash in on the activity around its games after it sells them. You think about the size of the number of people like call of duty, 40 Million People are playing and watching that game on an annual basis. Potentially, you can deliver an audience size of a similar size and caliber to what thursday night football is. And obviously theres a lost monetization there. As vithds continue to grow in popularity and Live Streaming improves, the popularity of esports is exploding. And so far the two Main Companies that have profited from the trend are youtube and livestreaming game app twitch, which amazon bought for nearly a billion dollars last year. A range of tradition a. M. Sports companies have moved into esports. Last week draft kings announced its bringing Fantasy Sports to video game contests starting with the World Championship for league of legend in paris next week. And espn has aired various esports competitions though ratings havent been as massive as expected based on the huge audience for esports. Thats because until now esports have been greatly fragmented. The risk is, again, that you produce the content poorly. I think the obvious trend of people wanting to play skillbased video games and other people wanting to watch them play is very clear. Now the next step we have to get to is we need companies to be able to create the content thats very attractive for everybody to watch in a television format. Now analysts along with the media giants are optimistic that consolidating the business into a few major leagues will create major ratings. For nightly Business Report im Julia Boorstin in san francisco. And finally tonight, they say a pictures worth a thousand words. Well, the people in this picture worth a whole lot more and were not talking words. Estimating the executives surrounding chinese premier xi at a Business Forum in seattle represent firms with a combined 2. 5 trillion in market value. Zuckerberg of facebook. Ma. Rommetti. Cook and bezos. That is 2 trillion alone. Front row. Thats a class picture for you. Yeah. That does it for nightly Business Report for tonight. Im sue herera. Thanks for joining us. Have a great weekend, everybody. Than well see you on monday. [1920s jazz music] narrator shes glamorous. Sometimes reckless. But she always gets her man. Phryne fisher just one golden night. Narrator shes the honorable phryne fisher. A modern lady sleuth in 1920s melbourne. Fighting injustice with her pearl handled pistol and her dagger sharp wit. Who says crime doesnt play . Coming up, youll learn what inspired the Popular Television series, miss fishers murder mysteries. Youll hear from the creators, get insights from the actors and retrace the story line back to the very beginning. Phryne confess what you did to my sister and hang for it. Narrator all of this and much more on miss fisher, uncovered. [whistling and catcalls] narrator in 2010, australian based every cloud productions