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Frank, Susie Gharib, Diana Olick, Phil LeBeau, Andrea Day>
Business; Transportation; Donald Trump; Elections; Government>
ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue Herera.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Request denied. Apple (NASDAQ:AAPL) makes it official, formally saying it will not help the FBI, intensifying this very public fight.
TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Travel bargain? Not if you`re flying. Why fares are rising even as jet fuel costs fall.
HERERA: President and CEO? If Donald Trump wins the White House, can he still manage his company? The surprising answer tonight on NIGHTLY BUSINESS REPORT for Thursday, February 25th.
MATHISEN: Good evening, everyone, and welcome.
Exactly -- Apple (NASDAQ:AAPL) did exactly what it said it would. The world`s most valuable public company formally opposed the court order to unlock the iPhone used by one of the San Bernardino terror attack shooters. Apple (NASDAQ:AAPL) made the argument that the government`s request is "unprecedented" and violates among other things the company`s First Amendment rights that protect against compelled speech.
On the other side of the corporate story that`s capturing the world`s attention is FBI Director James Comey who earlier today testified on Capitol Hill.
(BEGIN VIDEO CLIP)
JAMES COMEY, FBI DIRECTOR: I love encryption, I love privacy. When I hear corporations saying, "We`re going to take you to a world where no one can look at your stuff," part of me thinks, "That`s great, I don`t want anybody looking at my stuff." Then I step back and say, you know, law enforcement, which I`m part of, really does save people`s lives. Rescue kids. Rescue neighborhoods from terrorists. And we do that a whole lot through court orders that are search warrants and we do it a whole lot through search warrants of mobile devices.
So, we`re going to move to a world where that is not possible anymore? The world will not end, but it will be a different world than where we are today.
(END VIDEO CLIP)
MATHISEN: Eamon Javers has been following the story from Washington.
Eamon, welcome.
What exactly did Apple (NASDAQ:AAPL) say in its filing today? I`ve read some of it. I thought it was interesting that they cited a First Amendment right calling basically code speech.
JAVERS: Yes, that`s exactly right, Tyler. This is officially called a motion to vacate. They filed it today.
They also used a First Amendment argument and a Fifth Amendment argument here, arguing that they shouldn`t be conscripted here by the federal government to write that code which they say is in effect speech of theirs.
Here`s what Apple (NASDAQ:AAPL) said in the filing making these constitutional arguments. They said, "No court has ever authorized what the government now seeks. No law supports such unlimited and sweeping use of the judicial process and the Constitution forbids it."
So, clearly, Tyler we`re getting the sense here that this is a fight that`s going to go all the way to the Supreme Court.
HERERA: We heard a little bit in that sound bite from the FBI director, but in his testimony today, how did FBI Director Comey say he was approaching this particular case?
JAVERS: He was very careful, Sue. This was not a guy who wanted to come out and lambast Apple (NASDAQ:AAPL). In fact what he said was, he offered a few words of praise for Apple (NASDAQ:AAPL), talking about how they`d cooperated with the FBI before this process became an absolute dispute that went public last week.
So, the FBI director here very careful to say he sees both sides of the argument as we saw in that clip but ultimately he`s got to stand on the side of law enforcement here. There`s a terrorism investigation and they need access to that phone.
MATHISEN: You know, Eamon, it seems to me that Apple (NASDAQ:AAPL) fundamentally has been saying to the FBI, you just don`t understand it, you say that you just want a key to this one individual phone identified by serial number. But if we do that and you don`t even want the key, you just want the contents, we can keep the key -- but that in doing that, effectively they have to create a key that would unlock all phones that run that same operating system, right?
JAVERS: Yes, that`s exactly what Apple (NASDAQ:AAPL) CEO Tim Cook said in an interview on national television last night. He said ultimately this affects hundreds of millions of users, potentially, around the world if we create this software -- he called it akin to a cancer. Just the existence of this software could be so dangerous if it got out into the wider world here, you know. Apple (NASDAQ:AAPL) is not immune from attacks from hackers even though they are very, very good at keeping secrets as those of us who cover them know.
This is a company that is under attack all the time by hackers. It`s also under assault by nation states and spies from China and Russia and other places. Would this get out into the world? That`s their concern.
MATHISEN: All right. Eamon, thank you very much. Eamon Javers in Washington.
HERERA: Well, the correlation between stocks and oil has not been broken. On Wall Street today, equities rallied as crude prices rose. The Dow Jones Industrial Average gained 212 points to 16,697, the NASDAQ climbed 39, the S&P 500 added 21. And as for oil it reversed course to settle up nearly 3 percent.
But it wasn`t just oil that got stocks moving higher. Comments from a Fed official may have also contributed to the optimism.
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HERERA: James Bullard, the same James Bullard who long pushed the Federal Reserve to begin raising interest rates, reversed course last week and is backing that stance this week.
JAMES BULLARD, FEDERAL RESERVE BANK OF ST. LOUIS PRESIDENT: One of the things I want to do is get away from trying to predict how many increases there`s going to be in a year. We want to be data independent, I think we want to better coordinate with market on the idea that, you know, we will move but we`ll move on good news.
HERERA: What, if anything, does that tell us about the state of the U.S. economy? If the data does not warrant another rate hike should we be worried about a recession? On the one hand, Bullard says --
BULLARD: No, I don`t think the probabilities are particularly highlight now.
HERERA: But on the other hand --
BULLARD: Of course, you always face risk and we are at a lower trend growth rate, so you could always argue that there might be a higher probability of recession because your trend growth rate is now lower than it was historically in the U.S.
HERERA: And that low growth rate is just what worries Citibank, which says, "We are in a highly precarious environment for global growth caused by a large increase in the uncertainty about the advanced economy`s outlook notably for the U.S."
Globally, the usual suspects are worrisome. The slowdown in China, rising debt, sinking commodities, and now a new player.
DAVID CAMERON, BRITISH PRIME MINISTER: Somehow if we vote to remain in --
HERERA: A possible Brexit in which a UK departure could unravel the entire European Union. Still, Citi says global growth should top 2 percent this year but that growth is driven by the United States. Any slowdown here puts the global economy at risk.
The IMF which had forecast 2016 growth to top 3 percent also warned this week that it may have to lower expectations.
(END VIDEOTAPE)
MATHISEN: And in that IMF report, the agency said China`s slowdown was adding to those global economic persons. The world`s second-largest economy which is growing at the slowest rate in 25 years is also hosting the G-20 summit in Shanghai. That`s where we find Eunice Yoon.
(BEGIN VIDEOTAPE)
EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: G-20 finance ministers and central bank governors have arrived in Shanghai to discuss ways to support global economic growth. The IMF earlier this week called for the G-20 nations to take bold action and conversations have large by centered around fiscal policy or the use of structural reforms to try to offset some of the pressure on monetary policy as well as exchange rates.
Now, China has come up as largely a risk, the slowdown, of course, has roiled the markets over the past several months. I spoke to the PBOC, Chinese central bank`s chief economist, who said investor concerns have largely been overblown.
MA JUN, PEOPLE`S BANK OF CHINA CHIEF ECONOMIST: The investors are overly nervous about various aspects of the Chinese economy. But if you look at the more fundamental aspect of real economy, for example, the consumption, it`s actually quite robust. What I saw recent statistics is that during the Chinese New Year, retail sales were growing 11 percent, quite an impressive number.
YOON: Market volatility front and center, as we saw in the Shanghai markets on Thursday, down by 6 percent. Some of that`s because of liquidity concerns, as well as overall fragile sentiment in the stock market.
For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Shanghai.
(END VIDEOTAPE)
HERERA: And slowing demand from China is one of the issues pressuring the oil market -- in addition, of course, to excess supply. And today, San Francisco Fed President John Williams said he expects oil prices to stay low for a few more years, simply because supply and demand is so out of whack.
MATHISEN: And those falling crude braces are taking a toll on yet another engineer company, Halliburton (NYSE:HAL), cutting 8 percent of its workforce, or roughly 5,000 positions. The second-largest oil field services company has already slashed 25 percent of its staff since 2014.
HERERA: With the win in Nevada earlier this week, Donald Trump has inched closer to the Republican nomination. But taking it one step further would president Trump have to relinquish management over his companies if he does win the White House? Or could he be both CEO and president?
Robert Frank takes a look.
(BEGIN VIDEOTAPE)
ROBERT FRANK, NIGHTLY BUSINESS REPORT CORRESPONDENT: When Donald Trump announced his run for president, he managed to promote his book, his real estate, and his golf courses.
DONALD TRUMP (R), PRESIDENTIAL CANDIDATE: I have the best courses in the world. I have one right next to the White House.
FRANK: Now, with Trump inching closer to the nomination, the question is, could Donald Trump serve as promoter in chief and CEO of his companies while also being commander in chief?
The answer surprisingly is yes. According to U.S. statutes, there is no law that would prevent Donald Trump from owning and running his companies if he`s elected president. There are detailed criminal laws preventing executive branch employees from participating in a government matter or negotiation that would benefit them or their families, but under a different statute, the vice president and the president are both exempt.
JOHN WONDERLICH, SUNLIGHT FOUNDATION: Most people would find it ludicrous that the amount of power we give to the president, the American president, everything that represents, that we don`t have better laws preventing a conflict of interest or the kind of abuses that we see so often in other countries around the world.
FRANK: So Trump would be able to keep his company, remain on the board, and promote his hotels, golf courses, and condos while in the White House. Now Trump says he might let his children run the business if he`s elected and he says his business is, quote, "peanuts" compared to the more important job of running America.
But he hasn`t promised to sell his ownership in his companies. And he probably couldn`t since he`s so closely tied to the brand and the licensing deals.
His businesses are incredibly complicated, with over 500 different entities. Along with his companies in the U.S. he has projects in Dubai, Scotland, South Korea, India, Turkey, and Panama. And some say Trump`s corporate conflicts of interest would simply be difficult to untangle if he became president.
WONDERLICH: As wealth becomes more and more centralized, the way we view the presidency, as being trustworthy and objective and separate from personal interests, it`s going to have to come into focus in a different way.
FRANK: Yes legally speaking, Trump could be the country`s first CEO and president.
For NIGHTLY BUSINESS REPORT, I`m Robert Frank.
(END VIDEOTAPE)
MATHISEN: And with Super Tuesday just a few days away, the presidential candidates are doing their best to define themselves to voters and show off their leadership qualities.
Joining us to talk about traits that make great leaders great is Susie Gharib, senior special correspondent at "Fortune" and contributor to NIGHTLY BUSINESS REPORT.
Welcome. You`ve been speaking to lots of CEOs exploring the traits that are associated with leaders. What do those CEOs tell you is the key to being a good leader?
SUSIE GHARIB, NIGHTLY BUSINESS REPORT CONTRIBUTOR: First of all, Tyler, one thing I`ve learned in all of this is that there is no formula to leadership, there`s no right way to lead. But in all my interviews, whether with Warren Buffett and a lot of other CEOs, 60, 70 CEOs of the Fortune 500 I`ve been talking to, the one thing when I say, what makes them an exceptional leader, is vision.
And Warren Buffett kind of sums it up for all of them. He said, you know, you have to have a clear vision of where you`re going so you can convince people to follow you. It has to be an inspiring and appealing vision, not something that you just make up as you go along.
And on that point, Mary Barra of General Motors (NYSE:GM) said, it`s not enough just to have the vision. If you haven`t won the hearts and minds of people, if they`re not with you, you won`t go too far.
HERERA: Right. Does that go to the core qualities that you`ve found and were there any common core qualities? Vision is one, obviously. But you have to have I would assume passion?
GHARIB: Passion, trust, integrity, credibility, some humility. I mean, you know, trust is the one that comes up all the time. And when I was talking to the CEO of Wells Fargo (NYSE:WFC), John Stumpf, who`s a down to earth guy, I thought he said it best.
He says, the DNA of leadership is trust, whether it`s in family relationships, in business, in government. You can be smart and fearless and bold, but people have to trust you.
And I`d add in there too, authenticity. You know, it sounds kind of obvious. But is he or she real? Or are they phony? So, those are some of the keys.
MATHISEN: The best leaders I`ve worked with have been individuals who have established a firm culture in the corporation and have set standards. Standards of conduct, standards of business relationship, so forth.
Were there any surprises that came out of your interviews?
GHARIB: Well, I think the surprise is not so much -- everybody talks about the right thing to do and ethics and all of that. But the one thing that kept coming up was failure, making mistakes, the importance of making mistakes. And this goes to the trait of resilience.
And Jack Welch, former CEO of General Electric (NYSE:GE), you know him well, would say whenever he was interviewing someone for a leadership position, he wanted people who had one or two really tough situations they went through, the kind that knocked the wind out of you, because it shows their ability to regroup. And I think what`s important for voters is when choosing a president, you want him or her to have had that experience because in crisis time, too late to learn that.
HERERA: Right.
MATHISEN: Susie, thanks very much.
GHARIB: Good to see you.
MATHISEN: Susie Gharib, special correspondent of "Fortune" and an NBR contributor.
HERERA: All right. As Super Tuesday does approach, the 12 states holding elections were not only less affected by the housing crisis but now have stronger housing markets than most other states in the nation.
So, Diana Olick takes a look now at the housing in those states and how it`s fared in the last four years.
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DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Political candidates have said precious little about housing in the race so far but maybe they don`t have to, especially come Super Tuesday. Why?
Well, here are some super stats. Those states saw half as many foreclosure sales as a percentage of all sales between 2008 and 2012 than nonvoting states, according to a new report from Trulia. Even better the median price of homes listed for sale today in those states is up about 50 percent over the last four years and is almost 8 percent higher than the rest of the country.
Take Texas. Prices are up 50 percent in the last five years and Colorado, they`re up 40 percent. But there are some Super Tuesday states that are underperforming in the housing recovery. The median home price in Vermont has seen no gains in the last five years, although it`s down less than 1 percent. Home prices in Alabama and Arkansas are up 7 percent and 8 percent respectively, but those are below the double-digit gains seen nationally.
Bottom line, housing is not in a crisis anymore, so it`s not a huge priority for voters. Sure, affordability is getting worse, but that`s more about the state of a heating housing market and not public policy.
For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.
(END VIDEOTAPE)
MATHISEN: Still ahead, an air travel conundrum. Why are fares rising as jet fuel prices are falling?
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HERERA: Declining sales of mobile devices hurt Best Buy`s results. The biggest U.S. consumer electronics chain reported a drop in sales in the fourth quarter and the company expects that trend to continue through the first half of this year.
And as Courtney Reagan reports, it`s not what you want to hear from a retailer undergoing a turnaround.
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COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Best Buy (NYSE:BBY) didn`t have the best holiday quarter. The consumer electronics retailer reported a sales drop for November and December and January wasn`t enough to push sales above last year`s levels. In fact, fourth quarter sales fell more than 4 percent, though in line with analyst expectations.
Mobile phones and computing products make up more than 40 percent of Best Buy`s revenue and sales in those categories were weak. What`s worse, the retailer thinks the softness will continue. However, it did raise its quarterly dividend and issue a special dividend along with a billion-dollar stock buyback.
Best Buy (NYSE:BBY) has been undergoing transformation since 2012, cutting costs, exiting its China division, investing for the long-term, and cutting prices to better compete. The problem is now that the bulk of those actions have been taken, growth has to come from sales and that`s getting harder to do.
The retailer is heavily dependant on the product cycle for consumer electronics, from smartphones to TVs. But the pipeline of new, innovative, must have consumer electronics has been pretty dry. Consumers aren`t replacing smartphones as often. Tablet sales have plunged. And TVs just keep getting cheaper.
But there is value in being the last big consumer electronics retailer. It`s just questionable what that value is.
CHRIS HORVERS, J.P. MORGAN RETAIL ANALYST: Best Buy`s going to stick around. But because of the nature of the category, being very big ticket and very product cycle dependant, demand becomes very volatile. So, the way we look at it is, there`s always a trade in best buy, a long-term investment scenario is something that is much more questionable.
REAGAN: Best Buy (NYSE:BBY) CEO Hubert Joly also said the company will use cash for strategic acquisitions to drive growth. And while Wall Street may be skeptical of any upside surprise in the near future, the general consensus is management is at least making the best moves to right the ship.
For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan.
(END VIDEOTAPE)
MATHISEN: Sears (NASDAQ:SHLD) reports a wider than expected loss for its fourth quarter and that is where we begin tonight`s "Market Focus."
Like its competitors, sales at Sears (NASDAQ:SHLD) were dragged down by the unseasonably warm start to the winter. The retailer said increased competition during the holiday season resulted in higher than expected markdowns but Wall Street liked the news that one of the company`s biggest shareholders is taking a seat on the board. As a result, Sears (NASDAQ:SHLD) shares rose more than 3 percent to $17.50.
Department store Kohl`s (NYSE:KSS) said it would close 18 of its underperforming stores this year. The news comes after the retailer reported a 20 percent drop in profit in its latest quarter and said it expects revenue for 2016 to fall below expectations. Shares of Kohl`s (NYSE:KSS) rose more than 2.5 percent to $46.67.
And Domino`s Pizza (NYSE:DPZ) saw shares surge today after the company`s quarterly profit jumped more than 30 percent, thanks to strong domestic sales, 30 percent. Domino`s also hiked its dividend to 38 cents a share from 31 cents. Shares were up 13 percent to $132.90.
HERERA: SeaWorld reported a wider than expected net loss for its fourth quarter. The company also warned of a tough first quarter due to soft attendance. Adding to the misery, the amusement park operator admitted it had asked its employees to pose as animal rights activists to spy on critics, a practice it says it has ended. Shares fell 9 percent to $18.01.
Dynegy (NYSE:DYN) says it has collaborated with a private equity firm to buy power plants in the U.S. that are owned by the French utility NG. The plants were worth more than $3 billion. Dynegy (NYSE:DYN) says the deal will give its company a stronger presence throughout the nation. The shares popped 14 percent to $9.49.
And Bankrate, the personal finance company, saw its shares plunge today after its profit fell sharply and it missed estimates. The company cites less ad visibility rather on Google (NASDAQ:GOOG) and lower ad revenue and said it couldn`t give full-year guidance yet. As a result, several analysts slashed their price targets on that company. Bankrate shares had their worst day ever. They plunged 43 percent to $7.28.
MATHISEN: If you`re getting ready to book a trip for this spring or summer get ready also for a little bit of sticker shock. Airfares are going up, and it`s a trend that could continue over the next several months.
As Phil LeBeau reports this comes even as jet fuel prices have fallen almost 50 percent over the past year.
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PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s getting costlier to take a flight. In fact, less than two months into this year, airlines have already raised fares more than they did all of last year. So far, airlines have succeeded in raising domestic airfares three times this year for a total increase of $22 round trip, well above the airfare hikes in 2015.
What`s behind the increase? Strong demand. Airlines are filling more seats on more flights. In fact, it`s not uncommon to find many flights to be completely full.
So, the airlines have pricing power, and they`re taking advantage of it. That may not sit well with passengers who see airlines paying far less for jet fuel. In fact, jet fuel prices are down 48 percent in the last year.
But if you think airlines will pass along those savings and cut ticket prices, think again. Over the last 15 years, airfares, inflation adjusted, have been going down and hover around $375 round trip. Some of that is because low-cost carriers have pushed down fares on many routes.
How much higher will airfares go this year? Nobody`s quite sure, but as long as the economy remains relatively strong with low unemployment, Americans will want to fly. And that will keep airfares from falling.
Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.
(END VIDEOTAPE)
HERERA: Coming up, Ponzi schemes targeting middle-class Americans are on the rise. A crime and punishment report, next.
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MATHISEN: We all know the name Bernie Madoff. His Ponzi scheme netted billions of dollars, attracting wealthy investors. But there are many other schemers who target the middle class, including one who was sentenced yesterday in federal court. And like Bernie Madoff, he used investor cash to fund his lavish lifestyle, including a vacation home, cars, and designer goods.
Andrea Day has the story of crime and punishment.
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POLICE OFFICER: Police, search warrant!
ANDREA DAY, NIGHTLY BUSINESS REPORT CORRESPONDENT: By the time federal agents raided the firm`s office, investigators say the Agape scheme pulled in more than $370 million, one of the largest Ponzi schemes in the nation`s history that left thousands of investors stunned.
VICTIM: My parents, friends, family --
DAY: Now, the Ponzi`s biggest moneymaker has been sentenced to nine years in prison, 38-year-old broker Jason Kerik, who was also ordered to pay $179 million in restitution.
During Kerik`s trial, prosecutors testified the broker sold bogus Agape World investments, promising investors huge returns for short term bridge loans. But in reality, investigators say payments came from new investor money in a classic Ponzi.
According to prosecutors, Kerik took nearly $9 million in commissions. Kerik is just the second person to be sentenced in the case. Seven others have been convicted and are waiting to be sentenced.
Agape`s founder Nicholas Cosmo was sentenced to 25 years behind bars.
(END VIDEOTAPE)
MATHISEN: And Andrea Day is with us now.
Andrea, you said -- welcome first.
DAY: Thank you.
MATHISEN: You said thousands of people who were victimized here. How did this guy manage to rope in so many?
DAY: Well, Tyler, they didn`t have to work very hard to rope in investors. This was a case where word spread through brokers, friends and neighbors, all telling each other they were making a lot of money. In fact, one of the brokers actually had a nail salon in the past, so she used all of those connections too.
Now, the heartbreaking part of this case that is we`re talking about a ton of regular people from all walks of life, in many cases they took out home equity loans, they spent college funds, just to invest in this thing, really scraping the money together. It was very tough on them, and then, of course, losing out in the end.
HERERA: That is so tragic. You know, the lessons I guess that we learn from this is you really have to be aware. But certainly are there ways to protect yourself? So this doesn`t happen to you?
DAY: Certainly. In fact, in this case, if any of these rick victims had checked into the founder, Nicholas Cosmo, before investing, listen to this -- they would have discovered that he was convicted of fraud a few years before starting this business, Agape, even spent time in jail.