tv Nightly Business Report PBS August 19, 2014 7:00pm-7:31pm PDT
this is "nightly business report" with tyler mathisen and susie gharib. >> renovation nation, homeowners areoney into new projects and home depot is coming out on top with a strong quarter and a stock at record highs. >> must-owns for your portfolio, the one stock our guest tonight says every investor should buy whether you're just startining t or been in the market awhile. >> making the splash, how the ice bucket challenge could forever change fund raising and charitable giving. that and more tonight on "nightly business report" for tuesday, august 19th. good evening, everyone. housing and home depot, those are the two big boosters on wall street today adding to more gains for the major stock
averages. housing stocks surged last month and earnings went through the roof at home depot making it the best performing stock in the dow today. we'll have more in just a moment. encouraging news about inflation. consumer prices rose 1/10th of 1% in july, this is the slowest gain since february. a sharp drop in gasoline prices offset a rise in food costs keeping inflation in check. by the closing bell, the dow was up 80 points, the nasdaq rose 19 and s&p added nearly ten points and is just a half a percent high of the all-time record close. >> more now on the rebound in new home construction last month. it shot up nearly 16%, the most new home building since last november. with construction of single family homes and multi family units both up sharply, now, even though housing stocks surged in july, all housing data are not equal in the current recovery.
diana olick explains why. >> reporter: it was a welcome surprise from the builders, housing starts soaring nearly 16% in july from june, it was well beyond what traders expected and so the trades took off. names like dr horton, lennar all climbing on the news. but it was these stocks, multi family apartments, avalon bay and equity residential that hit all-time highs. >> people are down playing the multi family side. that's been a big part of the construction recovery. when you look at the markets that are seeing a construction boom right now relative to what is normal to them, it's places like new york, boston, san francisco, los angeles, places where most of the new construction is multi unit. >> reporter: single families stock rose 8% month to month and up 10% from a year ago. multi family, which is mostly rental apartment jumped 33% month to month and nearly 50% from a year ago.
apartment rents are soaring with starts, but demand is still strong. the same cannot be said for the jump in single family home prices, prices which are sidelining some buyers. >> we are seeing a sort of boom in the housing market. so, you know, we've got stocks and bonds highly priced and now we're starting to see maybe housing going in the same direction. it's like everything, everything is pricey. >> the boom is in prices, not so much in sales, yet and that was a strategic move by builders. >> it was a little bit too much too fast. i think the builders were trying to slow down their sales paces because they were running short on lots, they wanted to maximize their profit margins per house, so they said let's raise the prices, that's the only natural thing to do, but they over did it. >> reporter: now going into fall, builders may take on a new strategy. dr horton in fact already said it would start offering incentives to buyers to get them back in the door. for "nightly business report",
i'm diana olick in washington. >> to read more about the hot market for apartments, head to nbr.com. now another beneficiary of the housing recovery is home depot as more americans fixed up their homes and yards, home depot shares rose more than 5% today closing at a new all-time high, $88.23 a share. courtney regan has more on what is behind home depot's strong earning's report and what is ahead for the do it yourself chain. >> reporter: retailers may be lagging, though far from the case with the world's largest home improvement store. home depot built another strong quarter straight through and all around improving profit and sales above expectations, posting record customer transactions, strong traffic throughout the store and across regions, a stark contrast to many other retailers' reports. home depot executives attributed
the sales strength to new store layouts, including the core of the store and demand for spring m merchandise and appliances like counter top and window instillation. >> people had not put very much money into their homes during the housing downturn, so you're seeing the release of demand that is driving remodel activity and wallet shares shift to the home improvement space. >> reporter: while the housing market has been a driver for home depot, on the conference call, the cfo said she's most concerned about mortgage financing availability, though not everyone is worried. >> the large majority of what drives home depot's business is non-mover remodelling and as long as home prices are going up, we think that remains the key growth engine to the basis. >> reporter: despite mixed signals, analysts say the low interest rate environment will continue to give consumer as reason to spend on their homes. as a result, analysts from
credit suites, think the stock market hasn't given home depot appropriate credit for consistently impressive results but investors may have made up for lost time today pushing shares to all-time highs. for "nightly business report", i'm courtney regan. >> another big retailer topping wall strooeet forecaster, tjx, e owner of the off price stores like tjmaxx, marshalls and home goods, it climbed 8% and with the company raising the full year earnings forecast, shares up nearly 9% today. the earnings news at dicks sporting goods not as strong. net income fell after the retailer cut jobs in the golf business on declining sales of golf gear and equipment. still, dick's beat analysts estimates and shares rose. >> after the bell earnings from a company that makes products i
know and love, lazy boy, missed by a penny even though revenues topped forecast as sales were up 7% despite what the ceo called a challenging retail environment. the board of the company okayed plans to purchase 5 million more shares in the company. shares initially fell in after hours trading as you see there, but they closed the day higher. steve balmer is out at microsoft. the long-time chief executive of microsoft and new owner of the nba's clippers has resigned from the board of the legendary tech company. this ends a 33-year career with the world's largest software maker where he was one of the original employees hired by bill gates. he is still the largest individual shareholder at microsoft. still ahead on the ten-year anniversary of google's going public, its shares are up more than 1300% is the stock still worth buying?
a milestone birthday for google today. it sold stock to the public ten years ago. on this special occasion, the company is reportedly going after a new demographic, kids. it is planning to offer g mail and accounts. parents will have control. google bought out youtube and we know google from the online search business which many of us use every day but the footprint is a lot larger than
online searches. josh lipton how google has become in our lives. >> reporter: when you think of search, you think of google. >> i use google for everything. >> google docs. >> the drive and google documents. >> almost all the things are coming in google. >> have an apple phone, but i still use the google software because the maps are better. >> reporter: there are 3.5 billion searches every day but more to google than meets the eye. >> navigate to the golden gate bridge. >> reporter: if you have a smart phone, chances are you're using android. google's operating system. android will run on 80% of smart phones sold this year according to idc. been to youtube lately? google bought that company in 2006 and generates an estimated $5.6 billion in gross revenue per year and thanks to google, the days of paper maps and those
gps units are long gone. so what is next for google? at the company's developer's conference in san francisco earlier this summer, google said it wants even using the operating system, whether at work, at home or in their cars. for "nightly business report", i'm josh lipton in mountain view, california. >> paul meeks has been a big believer of google and its stock. he's portfolio manager and head of technology research. paul, nice to have you on the program. i know you're a big believer in the stock. you say if someone is going to start a paortfolio from scratch one stock they should buy is google. at $596 a share, it's hard to see how much of a return you'll make. so make a case about why someone should buy google today. >> first of all, even though the company has been ten years since its been public, it's growing at a rapid rate. the top and bottom line will continue to grow at 15 to 20%
and next year on december 2015 earnings, the stock is trading when you adjust for cash at about 17 times per earnings and it will grow that year 19% and so this is actually a one peg or sub one peg ratio stock which is compelling for technology space or elsewhere. >> do they have a particular mote around the businesses? >> tyler, great question. they started dominating search on the desktop and they have extended that dominance with facebook on the mobile application and i also think over time they will see a wonderful growth driver in what we call the internet of things. >> what does that mean, the internet of things? >> now, about a year ago, they acquired a company called nest labs. so what this will do is link mundane apps in your life, not even non-technology apps to the internet and really change your
life and could be a monsterous market. >> let me followup on that. when we think of google, we think the king of tech. it has a lot of cash and attracts some of the best technology in the world. that's what it's been for the last ten years. looking at the next ten years, can it continue to dominate the technology world? we've seen companies dominate like ibm and microsoft and didn't continue that way. what about google? >> i think google has as good a chance as anybody else. it's tough for a tech analysts and portfolio manager like me. i've been doing this almost exclusively since the late '80s to say they will never slow down. i think they do have runway for that 15 to 20% top and bottom line growth for several years. now the interesting thing about this company unlike some of the tech tigtans of the '80s and '9s
it's reinvented itself. i feel strong about the vision and execution and i think they will do well for the foreseeable future. >> so you own the stock. i assume you would add to the stock, your holdings at these prices. which shares would you buy, a's or b's? >> the share class goo gl that is most friendly. so not too the long ago, earlier this month traded 570. that's an interesting place to nibble and the best place to buy more is where it's shown great support to the 200-day moving average and that's 564. >> real quickly, do you think google will ever pay a dividend? >> i think they will but in the near term, i'm pleased they don't because they have enough opportunities to reinvest the cash flow and high return on investment projects. when you see a company particularly in a tech sector
start to pay very lavish dividends and buy back stock regardless how high the stock has risen, they are probably mature or slow down. >> very quickly, what's the biggest risk it faces? >> i think the biggest risk, tyler, is that i'm wrong and fails going forward to continue to recreate themselves, to continue to be visionary and miss the next trend. >> all right. very interesting conversation. paul, thanks so much for joining us. paul meeks. >> thank you. since google began trading ten years ago, shares have risen 1300% but here are ten other stocks, ten others that have done better over the same time frame. see if you can guess some. keurig green mountain, up nearly 8,000%. monster, online travel site price line and apple and then
alexion and rounding out the list, netflix intuitive surgical, sales force, western digital. i hope you-all bought them a decade ago. elizabeth arden is where we begin "market focus." they didn't blame the weather or consumer funk. they said justin bieber and taylor swift, celebrity fragrances particularly from them hurt revenue. shares spiked on a report that alleg rirks na is in ta battling a $53 million hostile bid.
salix popped 15% to 160. $0. shares of allergan up to $161.82. skilled health care and genesis health care combined to create one of the largest operators of long-term care facilities in the united states. the combined companies will be called genesis health care and trade on the new york stock exchange. shares of skilled health care jumped almost 20% to $7.37. pets mart popped toward the end of the trading day on a report it may soon announce its intent to explore strategic alternatives. the activist investor january th -- jana partners, the stock up 2% to $69.70. sprint is upping the ante.
they unveiled a plan that offers 20 big bites of data and ten lines for $100 per month. it will offer customers more data for the money than plans from verizon, at&t and some of t-mobile's options. shares of sprint fell 4%. bhp is planning to spin off $16 billion in the form of a new company. the move is an effort to focus on its most profitable assets but investors were disappointed the company is holding off on a share buy back. that sent shares down 4% to $70 and change. soon you'll be able to wakeup and smell the mccafe at home. mcdonalds plans to start selling it by early next year. the fast food chain is partnering up with kraft foods to make and distribute the coffee. shares were up to $94.57. a milestone for apple today, the tech giant hit $100 a share
for the first time since its 7 for 1 split in june. shares held on closing at $100.53. a good idea with a best intention doesn't always work out the way you might have anticipated and last month we told you about new rules proposed by the securities and exchange commission to stop runs in the money market mutual fund indust industry. today, those very rules could actually insight runs. new york fed economists say giving funds the ability to limit out flows when liquidity runs short could make investors pull money out sooner. how the ice bucket challenge may do more than make a splash and also change the way people donate to charity. that's next.
a big american company has tax inversion despite criticism from washington about dodging taxes. we're talking about medical device maker medtronic and it's committed to completing the deal to buy air land based health care products company and then reincorporating in ireland to lightening its tax burden. >> it is one of about 50 u.s. companies using inversions to reduce tax bills and the u.s. treasury is taking steps to block companies from reorganizing. joining us to talk about what the administration can do is andrew freed mman.
andy, welcome and happy birthday, by the way. >> oh, thank you, tyler. >> we're so happy you're spending your birthday with us. >> thank you. >> let's talk about what the administration can do. i gather their pallet of options. >> you're right. this is not the first time we faced inverses. congress gave us rules saying if the company merges with an offshore company and 20 per% ar foreign entities, foreign people it's a good inversion and there is no regulations this allow treasury to do much to stop that. it takes congressional action. >> so what can treasury or the white house do in the meantime whether it's, you know, a partial fix or not, what exactly can they do to change that and disincentive american companies from doing it?
>> first of all, there is jawboning. the president made it clear these companies leaving the united states is unpatriotic and that's having some effect, walgreens is suggesting maybe it won't do that. companies that get a lot of money from the irs through medicare will be hesitant. there is big icing, once the companion inverts, it can have a foreign parent loan money to the u.s. subsidiary and it pays interest out of the united states back to the parent and that interest is deductible. this is called earnings stripping because it lowers the earnings here in the u.s. and their treasury does have a lot of authority to say those aren't really loans and that isn't really interest and the amount shouldn't be deductible. >> that's really a payment of equity back to the company that should not be deductible. could the federal government say to these companies, you mentioned it with respect to medicare and medicaid.
could the federal government say to these companies, if you do this, we will not do business with you. you're not going to have federal contracts? >> absolutely. some senators asked the president to do just that. issue an executive order and say if you move out of the u.s., you're no longer going to do business with the federal government. that is, again, something that can force those companies to rethink moving offshore. >> how big a problem is this really and we just reported that about 50 american companies have done this over the last decade. it doesn't sound like a lot. is this more headlines or a serious threat to the u.s. economy? >> i'm not so sure it's that big a threat, susie. you may have seen the article yesterday that looked back at the companies inverted and turns out they are lower since the inversion than before. that may not be because of the inversion but it certainly is not giving companies wonderful earnings. i'm not sure it's that huge a deal, but if you really want to address it, you address it with
tax reform. you lower the corporate tax rate. >> but the effective tax rate for corporations is low, it's not comparatively with others, it's not the stated rate. >> that's right, tyler. the reason it's slow is companies are moving operations overseas. so we have the apple ceo testify in congress they have moved all their manufacturing overseas, they lowered their tax rate. it means they have less u.s. earnings and paying less u.s. taxes. >> once again, happy birthday andrew. >> thank you, take care now. you've probably seen the video, the ice bucket challenge. this is a clever campaign to raise money for research into als. but is the popularity of the challenge a one-time gimmick or does it mark a fund mental change in the way charities will raise money in the future? robert frank takes a look.
>> reporter: the ice bucket challenge has become one of the biggest sensations ever in the charity world. it's raised over 22 million over the past three weeks, that compares with 1.9 million during the same period last year. these donations come from 4 53,000 new toners with existing givers, not just facebook and twitter users, it's also many of the top ceos and leaders from microsoft founder bill gates, amazon ceo to facebook's mark zuckerberg and chris christie. the question is whether this is one-time gimmick or whether this will change the entire business model. americans gave $300 billion to charity last year and most of that still used the old model but the ice bucket challenge could change all that. charity experts tell me this shows the power of social media and attracting mass donors rather than relying on a few
rich patrons and added an element of fun to fundraising and shows nonprofits can support a campaign without controlling every detail. yet the bucket challenge is starting to create a bucket backlash and some say it goes against the core values of giving to solve serious social problems. the stunts may overshadow the cause. many people have watched videos and still don't know what als is or have given money. and this money may be a one-shot donation that's not repeatable. either way, the ice bucket challenge has thrown cold water on old notions of fundraising. for "nightly business report", i'm robert frank. >> and finally tonight, imagine a world with no nutella. if you're nuts about that hazel nut and cocoa spread as my 8-year-old is, you may want to stock up because there could be a shortage of the popular treat after bad spring weather in turkey wiped out more than half
of this year's worldwide hazel nut crop. hazel nut prices have been soaring this past march now at a ten-year high. if there is no nutella, my son will not eat. >> you better run to the store now. >> i'll get jugs. >> that's "nightly business report" for tonight. i'm susie gharib. thanks so much for joining us. >> i'm tyler mathisen, thanks from me, as well. have a great evening, everybody. see you tomorrow, eat your nut the ella.
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