tv Nightly Business Report PBS January 23, 2012 4:30pm-5:00pm PST
>> susie: blackberry maker research in motion dials up a c.e.o. overhaul, but some investors say the shakeup's not enough to revive the blackberry brand. >> tom: meanwhile, something new this week from the federal reserve. for the first time, the central bank will predict future interest rates. it's "nightly business report"
for monday, january 23. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by: captioning sponsored by wpbt >> susie: good evening, everyone. investors were hanging up on research in motion today after the surprise resignation of its co-c.e.o.'s leadership over the weekend. tom, shares of the company plunged 8%. >> tom: susie, this is a big management shakeup at the maker of the blackberry smartphone,
but by the looks of today's stock sell-off, investors aren't convinced that new c.e.o. thorstein heins can do more to help the company better compete with apple and google. >> susie: but on day one in the job, the new c.e.o. was putting out the message that he has a plan to get rim on the right track. erika miller reports. >> reporter: thorsten heins is smiling in his media photo, but it's clear there's a lot of weight on his shoulders. this little-known insider took the helm at troubled blackberry maker research in motion over the weekend. in video released by the company, heins is promising to deliver change. >> when we decide on getting something done, i want it to be done on time, at good quality, and good cost, because that then defines our customer satisfaction and it also defines our economic results. >> reporter: heins replaces rim's co-founders jim balsillie, on the left, and mike lazaridis, on the right.
both those men will remain on rim's board of directors. analyst will power is not impressed by the change. >> it's really status quo within rim. aside from changing the chairs on the deck at the titanic, in terms of strategy, there really is no change moving forward here. >> reporter: while he has the stock rated "underperform," his firm is seeking to do business with rim. for months now, rim has been under serious pressure from shareholders to change management. many are concerned blackberry can't compete with apple's iphone and google's popular android phones. heins is pledigng a renewed focus on the consumer market. >> i think what we need to get a bit better at here is to have a little bit more an ear toward the consumer, so i want to strengthen this by bringing some really good marketing expertise in. >> reporter: near-term, the company's fortunes hinge on the release of the next-generation blackberry 10, due out later this year. what's troubling investors is a comment heins said on a
conference call with analysts this morning. >> i don't think that there is some drastic change needed. we are evolving our strategy. >> reporter: that helps explain why shares of rim fell sharply today, and are down more than 70% in the past year. in that time frame, the company has fallen behind rivals in smartphone sales, experienced >> susie: our guest tonight is a major shareholder in rim and has he'sictor alboini, chairman and c.e.o. of jaguar financial, the toronto-based investment firm. he's been the most local investor calling for change there we asked if the new c.e.o. has what it takes to lead a come back. >> i don't, i think he's the transitional leader. he certainly doesn't generate a lot of spark and enthusiasm. he comes across as a very wonderful person. but he's not the kind of transformational leader that
rim needs to make change. and in fact he articulated today that he there is no reason to make change and it will be stay the course. and the market has voted with its feet. and the stock prices dropped. >> susie: alboini and his jaguar financial own about 10% of rim's outstanding shares. >> tom: news around research in motion has dropped now withstanding overall stocks closed little change and investors wait forth u.s. federal reserve, which kicks off its first policy meeting of the new year tomorrow. we'll have more on that two-day meeting in just a few moments. let's go ahead and take a lack at the closing numbers. with the dow fouling almost 12 points. the nasdaq 2.5, te s&p 500 eke out gain, just a fraction. volume was a little slower starting off the week, with 722 million shares moving on the nyse and 1.7 billion on the nasdaq. we got word late today of the possibility of a new deal for a big bailout fund for europe. it's a $600 billion effort to help out struggling european governments. it would be able to make emergency loans if enough governments agree. it remains far from certain, however.
each of the 17 euro-zone governments must okay the creation of the fund before it becomes a realty. also today, the european union voted to embargo iranian oil importbegiing july fst. u.s. oil settled up, almost to $100 per barrel. the european embargo was widely expected as an effort to pressure iran over its nuclear ambitions. still ahead, tonight's "word on the street?" "dividends." looking for steady and growing stock pay-outs from a drug maker and power company. >> susie: the federal reserve is about to break new ground, giving investors far more information than ever before about when and why it will raise interest rates. the 17 federal reserve officials charged with setting interest rate policy will meet tomorrow and wednesday, then they'll release their individual views of when the central bank should start raising rates. darren gersh reports on the fed's efforts to forecast its own actions. >> reporter: last august, the federal reserve made a promise,
telling investors it would keep its key interest rate near zero until the middle of 2013. on wednesday, the federal reserve is going to tell investors how many of the people who gather around this table to make decisions want to keep interest rates near zero through 2014, or even longer. >> so, if the fed says that we're not gonna raise rates anytime soon, then people will be more willing to lend you money at a lower rate, because they know there won't be any alternative, better use later. >> reporter: the fed plans to release the interest rate forecasts for the top 17 policy makers who serve on the interest rate-setting federal open market committee. the forecasts won't have names attached to them, but investors will be able to see how many policy makers want to raise interest rates, when they want to raise interest rates and to what level. analysts expect most will want to keep interest rates near zero well into 2014, which is about as long as anyone could expect the fed to keep a promise. >> if you think about it, if they said more than four years,
it would be hard to believe that, for one thing, because chairman bernanke would be gone by then, a lot of members will be gone by then. >> reporter: the fed has also bought trillions of dollars in bonds in a bid to drive down interest rates. some expect that policy, called quantitative easing, will be extended for a third time this year. but that depends on whether the good economic news of the last few months lasts. >> reporter: we've got a lot of momentum in the early part of 2012. given current rates of growth, it doesn't suggest that the fed would implement another round of quantitative easing. the economy would have to slow meaningfully from here to actually do that. >> reporter: it's not yet clear how far the federal reserve's openness policy will go. analysts are split on whether chairman bernanke and his colleagues are ready to give a more formal statement detailing their preferred levels for inflation and unemployment. darren gersh, "nightly business report," washington. >> tom: the successful federal reserve effort to keep interest rates low has pushed pension funds to look for profits in places other than bonds.
public pension funds, like those for teachers, have more than more than $100 billion invested in private equity firms. those firms have come under fire in the republican presidential nomination race. we spoke with ronnie jung, the former executive director of the teacher retirement system of texas. we began with what role private equity plays with public pension investments. >> in the long run we think private equity helps us diverse fight our overall portfolio and makes us a little bit less dependent totally on the flow of the public markets. >> 12% of the assets of 9 texas teaches retirements are in private equities. dow expect that to grow in the years ahead. >> i think the prave at equity allocations probably going to be stable for a while. we are increasing our allocation in hedge funds. >> how does a fund as large as the teacher retirement system in texas balance its financial obligations to its retirees to any moreal
obligations it may have to local economies? >> we're aware that. we will monitor them. but we generally try to look at it from the economic impact to the local economy and to the system as a whole. so but we don't actually get involved in the day-to-day management of the partnerships. >> to extend it, it fits in our portfolio we can add value, i think we would do it, but it's not the overarching driving thing. our number one priority is to other members. >> what has been the impact of the low-interest rate environment we've sean over the past several years. and with the federal reserve pledging to keep interest rates low to the middle of next year had on public pensions? >> i think the low interest environment has forced everybody to look at their allocations differently. because they are always trying to maximize it. so you kind of have to-- you can't control the markets so you have to deal with them. so i think the default is that there is more increase and looking for ways to add value other than public markets. and pretty much everybody has tried to reduce their
dependency on public equities. >> are we moving toward a day when public pensions in the u.s. are having less invested with american companies? >> i think more and more pension funds will go to global equity versus u.s. and international. and u kn, emerging markets-- but i think this is becoming a global economy and despite a lot of the talks about jobs, i think the reality is that we're all going to have to earn money and figure out where to do it. so i think global equity will become a more traditional allocation rather than u.s. equity versus internationally. >> some critics have pointed out big concerns with pension obligations in the years ahead. how concerned are you about any coming dark days for u.s. pensions? >> i think some of the pension funds will need major revisions. eithers-- others will need tweaking. we will need a challenge when the economy is bad. if inflation pick up that helps out the pension funds although reduce the value of liabilities.
>> the former member of the teachers retirement system of text a thank you very much. >> tau very much, appreciate it. >> enjoyed it. >> thank you. >> susie: jury selection got underway in houston today in the trial of alleged ponzi schemer allen stanford. the billionaire is charges with orchestrating a $7 billion fraud. andrew schneider of kuhf public radio in houston has the latest. >> judge david-- interviewed 80 potential jurors today. about half of them he requested to see separately in his chambers afterwards or requested to speak with him separately out of concerns they might not be able to potentially rule impartially. at issue 14 potential counts against robert allen standford ranging from conspiracy to commit mail and wire fraud, actual counts of mail and wire fraud, conspiracy to commit money laundering and obstruction of federal investigation into his banking separations. the judge predicts that the
case will take somewhere up to six weeks. this is andrew schneider reporting for nightly business report, houston. here on wall street a slow day waiting to see what the fed is going to do this week, also waiting for news. no big earnings today, no major economic reports. so nothing out of europe so, it's been a day of waiting and watching. >> tom: it's kind of what was expected happened today. now we did get some after the close earnings that provided for a bit of news after the close. but clearly we're going have to wait for tomorrow to see the big impact of that. let's get you updated though with tonight's market focus. the major stock indices finished mixed after some volatility this morning. we begin witinaday. stockstarted strong, rlyg for the first hour before
falling to their worst levels of the day around noon eastern time. prices slowly improved into the closing bell. ending with a fractional gain. energy stocks were back on top as natural gas futures staged a sharp rally. after hitting decade lows last week, nat gas popped today as several firms announced plans to reduceupply. first, the commodity, natural gas. prices have been crushed, down 40% just since early december. a mild winter and record-high supplies have driven prices lower. but today, futures jumped more than 8% on the prospects of less of it on the market. chesapeake energy stock shot up 6% after announcing an 8% cut to its nat gas production, and it said it may double that reduction. other natural gas producers were popping. southwestern energy rallied 10%. range resources was up 9% and e- q-t jumped 8%. one more note from energy, producer apache will pay almost
$3 billion for the private firm cordillera. it ia ca-andtock deal for energy wells near the texas- oklahoma border. apache stock was up a fraction. up 1.6%. but investment firm r.w. baird says the apache purchase increases the value of forest oil's assets in the same area. forest shares rallied almost 9%. bank of america continues its turn-around efforts. according to bloomberg, the second stage aims to reduce its annual expenses by $3 billion. the first phase went after $5 billion in costs. b. of a. stock was the biggest gainermong dow indtrial stocks, th i 2.5% rally. this is the stock's highest close since just before halloween. details of the second round of cuts will come in april. including possible job cuts. this is another peak week for earnings and we saw several technology firms turn in financial report cards.
semiconductor maker texas instruments came in three cents short of estimates. it's been dealing with weak demand, but it thinks demand is bottoming. ahead of the rults, shares fell%, b rebounded more than 3% in after hours as the firm announced it was closing two plants. on in houston. but its profit forecast was less than anticipated. disk drive maker western digital rallied off its closing price after much-stronger-than- expected revenues and earnings, and software firm vmware made up all of its lost during the regular session after strong earnings growth and better margins.
>> tom: if there's one strategy stock investors have been flocking to for more than a year, it's a payback strategy. that brings us to tonight's word on the street, "dividends." david peltier is a portfolio manager at thestreet.com. david, always nice to see you, welcome back. >> thanks for having me, tom. >> tom: with interest rates at historic low, the federal reserve meeting this week, does the dividend stock craze run the risk of hurting investors it's so popular? >> i'm going to take other
side of that. i think actually the dividends can still help. we've already seen really solid games in the market in january. s&p up about 5% or so. but i really expect just moderate gains this year going forward. so with that in mind you want to diversify and make sure you have some dividends in your portfolio to add that extra income. >> tom: all right, and you've got kind of a quick back of the envelope formula on how to judge the stability and how to grow dividends, what is it? >> historically the companies in the s&p 500 have paid about 50% of their earnings out in dividends. so i look for two times earnings coverage. so if a company pays about a $1 dividend, i want to see earnings of about $2 a share. >> tom: so you look back on the annual reports to find that a couple of those that meet that requirement will begin with the multinational drugmaker pfizer. pfe the ticker symbol yauld being 4%, twice what the u.s. government treasuries are yielding for ten years. what about the future growth of the by, is it enough to buy it for its dividend yield? >> companies actually growing. i think this is the first
time in the last decade that the branded drug companies, you actually like the fact that their pipelines are very strong versus the generic. so the company just raised its dividend back in deechlts i think this company can continue to grow. even though the stocks is at a 52-week high. i think you can make a double-digit return on this stock in 2012. >> pretty significant. but what about the ability for this company to continue to fund acquisitions or research, could that take away, drain money away from potential future dividend growth? >> at some point yes but when you look at the balance sheet, the company has an a-rated balance sheet by all the major credit agencies. i think that's very strong going forward. >> all right, you also like utilities which was really the trade back last year. duke energy your choice here at 21 and change, yielding 4.7%. with the big rally we saw last area are you late to the party? >> a little bit, yes. but when you look at the market this is the most oversold sector in the whole entire market right now. when i look at duke i really like the 4.6% dividend yield. and really, this is a
company that will grow above average earnings relative to the rest of the group. so i think the company can raise its dividend once again coming this summer. >> tom: a stock like duke in that sector, utilities known to pay dividends, after that nice run that we had last year in this space, what's a good yield that you are looking for to protect against a potential pullback in the stock price. >> again, the balance sheet is very safe here so you get a good 4 or 5% yield. i think you can double that move in the stock and again get a good double-digit return with relatively less risk. that's the key here. >> and coming you have a a year where we saw an unchanged year overall for the s&p 500, not bad, how? how about discloseures. do you have positions, can you have positions, david? >> i cannot and i do not. >> tom: you can find david's articles thestreet.com, a link on our web site as well. its word on the street tonight with david pelletier with thestreet.com. >> susie: here's what we're watching for tomorrow: as we mentioned, the federal reserve kicks off a two-day policy meeting and president obama delivers his state of the
union speech. also tomorrow, the latest quarterly results from two of the world's biggest brands, mcdonald's and apple. we'll see how their brands are doing around the globe. rupert murdoch's news corp is taking on the u.s. spanish television market with the launch of "mundofox." the new network will debut this fall. it's a joint venture with colombian broadcaster rcn television. mundofox hopes to reach 75% of u.s. households. it would become the third alternative for the nation's 50- million spanish-speaking viewers, currently served by the univision and telemundo networks. >> tom: macy's is taking martha to court, now that she's being courted by j.c. penney. macy's today sued martha stweart living omnimedia for breach of contract. it's upset over stewart recently signing a new deal to sell products at j.c. penney. macy's wants an injunction to stop that tie-up, claiming it has an exclusive right to make and sell certain martha stewart products.
she's maya macguineas, president of the committee for a responsible federal budget. >> we are going to be hearing more about taxes in the coming months, and given that it's campaign season, much of what you hear will be more politics than good tax policy. that said, here is what i would like to hear: we are going to need more revenues. the government faces a huge fiscal hole, and as much as we need to cut spending, new revenues will have to be part of the solution. promises about not raising taxes are just not realistic and they stand in the way of fixing our huge fiscal mess. second, marginal tax rates should go down, not up. this goes for corporations too. yes, if we get rid of many existing tax breaks we can actually lower rates, while raising more revenues in a way that will be good for the economy. pushing for higher marginal tax rates is counterproductive. and third, when we finally do face reality that we will need more revenues, it's not going to be only millionaires who pay.
those who can afford to should pay more, but we are all going to have to pay something. election season doesn't tend to lead to good policy discussions, but looking at our tax code and fiscal mess, we sure could use one. i'm maya macguineas. >> susie: and finally tonight, a familiar face offering a serenade to mark the start of the chinese new year. ♪ ♪ yes, that's billionaire investor warren buffet singing "i've been working on the railroad" on china's national television station, cctv. buffet's ukelele strumming ended with a quick thank you in mandarin. and tom, it's the year of the dragon. the last time it was year of the dragon, back in the year 2000, berkshire hathaway's class a shares surged 30%. >> i hope they do just as well in this year of the
dragon. >> tom: finally one more item, a happy anniversary here, susie, yesterday marked the 3 3rd anniversary, the beginning of nightly business report t began here in south florida on local television, a 15 minute report so, on this evening here, susie, here is to another 33 more years. >> susie: at least, maybe 50. >> tom: that is nightly business report this monday, january 23rd. i'm tom hudson, susie v a great evening. >> susie: and thanks a lot, tom. i'm susie gharib. hope to see all of you again tomorrow night. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org