Transcript: Wednesday, June 11, 2014

ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and
Susie Gharib.

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Triple digit decline.
The Dow drops as the World Bank warns global growth will be slow. But are
Americans more upbeat about the U.S. economy?

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Stunning defeat.
Eric Cantor will step down as majority leader after a shocking primary
loss. Big business loses a friend in the House.

GHARIB: And, Uber uproar. Why a popular app with a possible
multibillion dollar valuation is causing traffic to come to a standstill in
some of the world`s biggest cities.

We have all that and more tonight on NIGHTLY BUSINESS REPORT, for
Wednesday, June 11th.

MATHISEN: Good evening, everyone. And welcome.

A warning today from the World Bank — global growth is slowing.
Economies everywhere are still reeling from the crisis in Ukraine, and the
brutal winter here in the U.S., with indications the recovery will be
delayed. And that changed investors` course today after a string of market
records today. They sold stocks.

But that probably wasn`t the only thing that pressured the major
averages. There was weakness in the Transports and Wall Street is still
digesting Majority Leader Eric Cantor`s defeat in a primary last night.

By the close, the Dow fell 102 points, the NASDAQ dipped 6, and the
S&P was off about 7 points.

But by — while World Bank downgrades the outlook for global growth,
Steve Liesman says many here in the United States are more upbeat about the
economy.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Slowly,
Americans are clawing back some of the optimism they lost during the great
recession and the tepid recovery. The CNBC all-America economic survey for
June shows the percent of Americans who say the current state of the
economy is poor, this after seven long years and a surge to 70 percent at
the height of the financial crisis, it`s now fallen back to its
prerecession level of 33 percent. More than a third are expecting an
increase in wages, the best since 2008.

And the percent of Americans looking for an increase in home values
hit its second best level since the recession. Better home values and wage
gains.

What`s not to like? Well, the expected increases are muted compared
to how optimistic Americans used to be. For example, before the crisis,
Americans regularly expected wage gains of 5 percent to 7 percent a year.
Now, it`s a good number when it`s 3.5 percent. And while fewer Americans
think the economy is poor, they don`t really think it`s as good as it was
before the crisis.

The survey, though, was in line with other data showing a return to
prerecession levels for things like the total number of jobs in the nation
and the steady March backup, small business optimism and other consumer
confidence surveys.

The bottom line may be this: Americans don`t see the economy as bad as
it was, but their optimism is taking what looks to be a permanent hit.

There is one good sign. Americans plan to spend as much this year on
summer vacation as they did — you guessed it — before the recession. So
they still know how to enjoy themselves.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.

(END VIDEOTAPE)

GHARIB: Investors were also watching political events and the
surprising defeat of House Majority Leader Eric Cantor in his Republican
primary. He`ll step down as House leader on July 31st.

Now, the defeat is believed to threaten congressional reauthorization
of low-cost lending through the export/import bank. Many businesses count
on that financing for exporting goods to international markets. One
analyst cited Boeing (NYSE:BA) as a big loser in this. Boeing (NYSE:BA)
shares fell almost 2.5 percent, making the aerospace giant the worst
performing stock in the Dow today.

And there are other issues in the business community that is now —
that they`re now concerned about, as well.

John Harwood joins us now from Washington to tell us about all of
that.

Let`s begin with just why does Cantor`s loss matter so much to
American businesses and Wall Street as well?

JOHN HARWOOD, NIGHTLY BUSINESS REPORT: Well, Susie, Eric Cantor was a
very conservative — is a very conservative member of Congress. But he was
also seen as one who balanced some of the zeal for conservative principles
with a pro-business tilt. He liked Wall Street, and Wall Street liked him.
Wall Street was one of his biggest sources of funds.

And on crucial fights, ranging from things like the Ex-Im Bank, things
like the reauthorization of the Commodities Future Trading Commission,
things like government shutdown, he was seen in the end as somebody who was
going to make sure that catastrophe didn`t happen. That is still likely
the case, because John Boehner is somebody like that, as well. But this
may make a difference on the margins.

MATHISEN: What would this mean, specifically, for that Export-Import
Bank reauthorization, and others that you just mentioned here? And
wouldn`t the individual who is likely to succeed him, Mr. Brat, go along
with these things, or would he not?

HARWOOD: Well, the issue isn`t Mr. Brat. He`s going to be just one
member. It`s going to be the House Republican leadership team and what
they can get their rank and file to do.

The problem, of course, is that that rank-and-file is scared to death
in the wake of this election result. So I would think that both Kevin
McCarthy, who is likely to succeed Eric Cantor as Republican leader and
Speaker Boehner, would try to win the reauthorization of the Ex-Im Bank,
but it becomes more difficult now that Cantor is not there.

GHARIB: And, you know, John, when this news came out today, there
were all sorts of things that appeared on the worry list. You mentioned
one of them. Government shutdown, debt ceiling debate. Even people were
talking about what this means for the credit rating for U.S. — you know,
U.S. debt.

Should we really be worried about those things?

HARWOOD: Possibility. We don`t know for sure.

The next debt limit runs out in early 2015, and that`s going to be the
initial test of this new leadership team`s ability now that the Tea Party
has gotten a second wind.

MATHISEN: All right, John Harwood, thanks very much. Interesting
story today in Washington and Virginia.

Also, in Washington, legislation that would have allowed people to
refinance their student loans was blocked in the Senate. The vote fell
short of the 60 need to advance the debate. The measure would have let
millions of borrowers, many with loan rates topping 7 percent refinance at
lower costs.

GHARIB: General Motors` CEO is heading back to Washington. Mary
Barra will testify before Congress next week about the defective ignition
switch that went undisclosed for more than a decade. Also testifying in
front of the House panel, former U.S. attorney Anton Valukas.

Now, he recently issued an investigative report on the delayed recall.
Lawmakers could have a lot of questions about that. The last time Barra
testified, she refused to answer some questions until the Valukas report
was complete.

MATHISEN: JPMorgan (NYSE:JPM) may be close to cutting compensation
and reducing jobs in its investment banks. Speaking at an investment
conference, the chief financial officer didn`t give a time frame, but said
it was a possibility if trading revenue doesn`t bounce back.

Last month, JPMorgan (NYSE:JPM) warned its second quarter fixed income
and equities trading would probably drop 20 percent from just a year ago.

GHARIB: Speaking of banks, talks between Bank of America (NYSE:BAC)
and the Justice Department have hit a snag. As we have been reporting, the
two have been negotiating a multibillion dollar settlement over the bank`s
mortgage investments. But now, according to “The New York Times
(NYSE:NYT),” the talks stalled after the banks offered to pay about $12
billion didn`t satisfy prosecutors. B of A faces numerous investigations
into the securitization of mortgage bonds before the financial crisis.

MATHISEN: International events are also grabbing investors`
attention. NATO ambassadors had a meeting to discuss the security
situation in Iraq, where militants took 80 Turkish citizens hostage.
Meanwhile, in Vienna, where the members of the organization of petroleum
exporting countries, OPEC, were meeting, Iraq`s oil minister said he did
not expect the violence in the north to spread to the country`s oil-
producing south.

Today, crude prices finished with a gain of 5 cents to $104.40.

Steve Sedgwick has more on the OPEC meeting from Vienna.

(BEGIN VIDEOTAPE)

STEVE SEDGWICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Here in
Vienna, OPEC ministers decided to leave production levels unchanged at 30
million barrels a day, that is roughly 40 percent of global oil supply.
They did that because prices appear to be in some form of equilibrium with
the supply and demand dynamics finally tuned at the moment. The price
which OPEC is getting for its oil in around $108 a barrel and they`re happy
with that price, as well.

But there are concerns on a country by country basis. Iraq has an
insurgency on its hands, protests in Libya means their production outfit is
a fraction of what it could be. Nigeria has issues and so indeed does
Iran. Iran, of course, looking to have the end of sanctions regarding its
nuclear program, so it can export as many barrels as indeed it hopes it can
going forward.

Now, there are other issues, including the role of secretary general,
Mr. El-Badri will continue in that role until the middle of 2015, after
replacement candidate — well, there just wasn`t one because we couldn`t
get a consensus amongst members.

This is Steve Sedgwick for NIGHTLY BUSINESS REPORT in Vienna.

(END VIDEOTAPE)

GHARIB: China is taking steps to bolster its economy and is ramping
up spending to do so. It`s planning big infrastructure projects, including
highways, rail networks and oil and gas storage and distribution centers,
in an effort to energize the world`s second-largest economy.

China grew at its slowest pace in 18 months in the first quarter, and
analysts say the Asian nation could likely announce more stimulative
measures.

MATHISEN: Big American companies with exposure to China are hoping
the stimulus measures work and get consumers in that country spending
again, because they have a lot at stake if spending continues to slow over
there.

Sara Eisen explains.

(BEGIN VIDEOTAPE)

SARA EISEN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Add this to the
laundry list of worries for corporate America right now. The Chinese
consumer is slowing down.

BILL ADAMS, PNC SENIOR INTERNATIONAL ANALYST: You see less investment
growth, less credit growth, and that`s passing through to less income
growth, particularly for households that own businesses.

EISEN: Watch for retail sales numbers out on Friday. Recently,
though, import numbers, along with Hong Kong retail sales and disappointing
results from Prada and other luxury brands all point to weakness.

In fact, in an effort to boost growth and business activity, China
Central Bank announced new plans to ease policy, cutting the lending rate
for banks to businesses and borrowers. But that could take a while to
work. And in the meantime, some American consumer giants could feel the
pinch.

Consumer Edge Research found that consumer staples companies are among
those in the cross-hairs. Of that group, Procter & Gamble (NYSE:PG) is the
most exposed to the Chinese consumer slow down, with 8 percent of total
sales coming from China. It`s followed by Anheuser-Busch at 7 percent and
Coca-Cola (NYSE:KO).

Food companies like Mondelez, General Mills (NYSE:GIS), PepsiCo and
the Hershey Company all get 2 percent of total sales from China. It may
not sound like much, but in a world where growth is hard to come by, that
could hurt the overall numbers and performance, at least in the short term.

Longer term, the outlook still looks bright.

ADAMS: If you looked at the most recent CPI (NYSE:CPY) report for
May, for example, the cost of getting the plumber to come into your home in
China is going up 7.3 percent in year ago terms. So, that`s a considerable
rate of increase in wages for middle-skilled workers in China. And that
should was through into higher consumer spending for mass market goods.

EISEN: China is the world`s second largest economy, and its consumer
is considered the Holy Grail for businesses around the world. That`s why
they have been pouring in recent years into the country with the hope of
fast growth and big spending.

But for now, it could prove to be a headache, and a headwind in next
quarter earnings reports. Luckily, economists say it is just temporary.

For NIGHTLY BUSINESS REPORT, I`m Sara Eisen.

(END VIDEOTAPE)

GHARIB: Traffic snarled in Europe, all because of a car service here
in the U.S. We`ll explain why, and what it might mean for Uber`s prospect
as a public company.

(MUSIC)

GHARIB: In capital cities all across Europe, horns were blaring,
people were protesting, and traffic slowed to a crawl, all to show their
disdain for a car-sharing service.

From London to Berlin, taxi drivers are venting their anger against
Uber. The privately held startup, which has recently been valued around
$18 billion, allows users to book a taxi using a smartphone. And as this
new up and comer tries to change the way the industry works, it`s not going
over well with taxi and limousine drivers.

Stephane Pedrazzi has the story from Paris.

(BEGIN VIDEOTAPE)

STEPHANE PEDRAZZI, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s the
second time this year that taxi drivers are blocking the streets of Paris
in order to protest against the competition from private companies, like
Uber. They believe it`s an unfair competition as they`re not facing the
same rules.

Taxi drivers, for instance, must pay a license of $300,000, while
private companies only pay a small registration fee every year.

The French government promised to regulate the sector, but it`s not
really planning to address the core problem, which is the lack of taxis in
the French capital. Over here, it`s not unusual on weekends to wait for up
to one hour in order to get a taxi.

But still, the majority of French people believe that taxi drivers are
right to take it to the streets. According to a recent survey, 56 percent
of them think that taxi drivers are right to go on strike. Not surprising,
after all, in a country where competition is a key word and where strike is
almost a national sport.

In Paris, for NIGHTLY BUSINESS REPORT, I`m Stephane Pedrazzi.

(END VIDEOTAPE)

GHARIB: Surprisingly, all those protests against Uber have actually
been good for business. The company said it saw an 850 percent jump in app
downloads compared to last Wednesday.

MATHISEN: So, how will all of this hoopla play out for Uber, both
financially and legally?

Let`s get some perspectives from our experts. Roger McNamee is co-
founder of Elevation Partners. And John Singer is a partner at the New
York law firm of Singer Deutsch.

Welcome, gentlemen, both of you.

Mr. Singer, let me begin with you.

As I understand it, and I have some sympathy with the taxi and
limousine drivers, who are subject in many cities around the world and
certainly, in this country to regulations and requirements, that they would
object to this upstart, a disrupter, coming in. And Uber`s answer — I am
told in part — is that we`re not really, really legally a car service.
We`re a matchmaker, putting together people who want a car and somebody who
has a car.

Is that a legal fiction, a fig leaf, or what?

JOHN SINGER, SINGER DEUTSCH PARTNER: Well, that`s been their defense
so far. They have claimed they`re just a filter, matchmaker, and arranger.
They`re not a private car company. They`re not a private transportation
service.

But if you look across the country, a lot of states and a lot of
municipalities have opined upon whether or not uber is legal or illegal —
New York, Massachusetts, California. Initially, they issued cease-and-
desist letters to the company and tried to preclude them from operating,
and then all of a sudden, after public outcry was such, they reversed
course.

Then again, you have municipalities like Austin and Miami, who have
said, you know what, this is illegal. And this violates a variety of
different regulations, both in the state and city level.

So, you know, it`s interesting. There`s no unanimity yet. But the
public outcry is so extreme in favor of Uber that I think eventually
there`s going to be unanimity and Uber is going to be allowed to enter all
jurisdictions.

GHARIB: Roger, let me ask you, as an entrepreneur, venture capitalist
who has invested in so many Silicon Valley companies. You know, why — why
is — what`s wrong with being a free market disrupter here? And what comes
to mind for me is FedEx (NYSE:FDX) taking on the Post Office. Napster
taking on the music industry.

In the end, is Uber going to prevail?

ROGER MCNAMEE, ELEVATION PARTNERS CO-FOUNDER: I think so. And I
think for precisely the reasons that the other guest was just speaking
about. That the service really works. And in many cases, at least in the
United States, they really are serving as a match maker for existing
limousine drivers and existing taxi drivers. It`s doing a much better job
of helping them find fares quickly than they were able to do under the old
systems.

I think the real challenge for investors in looking at Uber is what is
it worth? We`ve obviously got a stake in the ground placed by Fidelity and
others at $18 billion, which is a breathtaking number no matter how —

GHARIB: What do you think? Is it worth it?

MCNAMEE: I believe that — well, you know, I don`t think it`s — the
number will work if the company remains a reservation system only. But I
think their market opportunity is gigantic in the following context. We
have something developing in the United States, and I think around the
world called the sharing economy, where increasingly, consumers are
choosing to live in cities, and instead of borrowing a lot of money to buy
cars and to buy homes, they are using things on a pay-as-you-go basis,
effectively doing what businesses have been doing for 30 years. I think
that is a change that is fundamental and is going to last a long time. And
Uber is one of the core players there.

So, to me, if I were the CEO of Uber or its competitor, Lyft, I would
be taking this capital, the billions of dollars they`re able to raise at
essentially no cost, and I would go to General Motors (NYSE:GM) or to
Mercedes Benz and I would do a deal and buy a billion dollars worth of cars
at a huge discount, and I would become the primary owner of cars, because
in the long run, people are going to want to own cars. They`re going to
take their iPhone up to it, and rent it an hour or two at a time.

GHARIB: Right.

MCNAMEE: And Uber can be that player, and if their cost of capital,
they and Lyft have an open opportunity to make that work. And I know that
that`s not — owning capital goods is not a popular thing, but I know Wall
Street is going to love it. I`m with your other guest. I think consumers
have decided that Uber and its competitors are a better idea.

MATHISEN: They`re paying for the convenience of it.

John, I don`t know whether you were able to see the faint smile that
was on Roger`s face as he contemplated the possibilities here.

My question for you is — if I`m Uber, what is my ultimate legal
liability if I am involved in an accident, and with one of their riders, or
something bad happens on a trip here? They`re going to say, not me. I
just put you two together. That was a private compact contract between you
and this guy, I don`t know in Birmingham or Austin or London.

SINGER: They`ve already said that. I mean, there`s been several
wrongful death cases. There was one in California, where an Uber driver,
who was using the app at the time, had run over a family and had killed a
small child. And, of course, there`s been a wrongful death suit that was
then filed. And Uber said, well, you know, these people — these drivers
are not employees of the company. That is true.

At the same time, while they may be technically independent
contractors, it seems to me to be a very quasi employee/employer
relationship. There`s going to be — there is a tremendous proliferation
of the service right now. That means there is going to be a tremendous
increase in suits against the company, because things are going to happen.
Accidents occur. Criminal activities occur by the drivers.

And the company I think is not going to be able at the end of the day
to shirk liability. I think that`s going to be — not the class actions
they`re facing about tips. But I think the biggest liability area for them
is going to be in the traditional employer/employee relationship, and
whether or not they`re libel for their drivers` acts.

GHARIB: Right. And, Roger, let me ask you that. So, you`re in favor
of this Uber business model. But let`s say the company loses some of these
lawsuits, and has, you know, big legal fees that they have to pay. How
much does that risk this business model?

MCNAMEE: Well, the way I would characterize it, I think Jonathan is
absolutely right. They`re going to have to accept that liability is part
of the business. And frankly, because the convenience is so great,
consumers are showing a clear preference to pay a premium to Uber, right?

Uber is not a deep discount product. It`s a product with premiums
associated because convenience is so high. So, there is plenty of money in
the system to pay all of the costs of those things. I think they simply
need to, if you will, man up to it, recognize that it`s a cost of doing
business.

I think the — the reason I`m excited, three years ago when they got
started, it wasn`t obvious that they could get big enough to overwhelm the
civic opposition. They have clearly done that in the United States, they
seem to be doing it in Europe. And to my mind, the core thing now is to
convert from this very thinly veiled reservation model into recognizing
that they`re a transportation company and a delivery company, and that`s a
huge opportunity with big margins that they can explain.

MATHISEN: And just for the record, Roger, you have no stake in that
company, correct?

MCNAMEE: No, none at all. I wish I had one from about a year or two
ago, right?

(LAUGHTER)

MCNAMEE: Because I would be looking pretty good today.

MATHISEN: And finally, John, have you ever used it?

SINGER: I use it all of the time. I think it`s a fantastic service
in New York City, of course, where we live. There`s nothing better. It`s
quick. It`s reliable. And I think it`s a great company.

I do think there`s going to be a myriad of legal issues.

MATHISEN: It`s got everybody talking.

Roger McNamee, thanks very much. John Singer, we appreciate your
participation, as well.

MCNAMEE: Always a pleasure.

GHARIB: We begin tonight`s “Market Focus” with positive results from
H&R Block (NYSE:HRB). Shares of the tax preparer popped after posting
better than expected fourth quarter profits. It was helped by an increase
in online business and higher prices for services. Also, a late start to
tax season helped pull revenue into its latest quarter. The stock rose
more than 4.5 percent to $32.15.

Caterpillar (NYSE:CAT) is upping its quarterly dividend by 17 percent
to 70 cents a share. The machinery maker will pay back to shareholders at
the end of July.

Despite the move, though, shares fell a fraction to $108.69.

Shares of Orexigen Therapeutics (NASDAQ:OREX) tumbled on news of a
Food and Drug Administration decision about the company`s obesity drug.
Regulators are delaying their approval for the weight loss treatment for
three months, in order to consider post-marketing obligations and safety
monitoring. The stock fell more than 14.5 percent to $5.81.

MATHISEN: And the European Union has launched an investigation into
the tax relationships Apple (NASDAQ:AAPL) and Starbucks (NASDAQ:SBUX) have
with some European companies. The probe will address whether or not the
companies dodged any taxes and violated tax laws. Despite that, shares of
Starbucks (NASDAQ:SBUX) up a fraction today, $74.80 the close. Apple
(NASDAQ:AAPL), though, off a bit to $93.86.

Lululemon`s founder and biggest shareholder, Chip Wilson, turned on
the company`s board today. Wilson announced he voted not to reelect a
chairman and one other director. But despite Wilson`s opposition, the
retailer voted for both re-elections. Lululemon down today 2.5 percent at
$44.30.

Coming up — ready to renovate? Now, there is a new way to view and
plan your home improvement before you buy.

(MUSIC)

MATHISEN: Applications for home mortgages jumped more than 10 percent
last week. The weekly Mortgage Bankers Association Index, which includes
both refinancing and home purchase demand, hit its highest level since
January, even as mortgage rates went up a little.

GHARIB: And finally tonight, upgrading your kitchen, renovating your
bathroom, hoping the end result is the dream room you`ve always wanted and
not a costly nightmare. Well, now, one retailer is rolling out a new
virtual technology it hopes will change the whole process.

Diana Olick has more.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: We`ve all been
here before. Deep in construction, hoping that everything we chose for our
home renovation project looks the way we want it to when all the dust has
settled.

Americans spent $119 billion on home remodeling last year, and that
number is expected to rise 3.6 percent this year. And all we have to go on
are plans, pictures of fixtures and paint swatches. Well, what if we could
see it all — all finished before one hammer even hit a nail?

(voice-over): Deep inside a Lowe`s warehouse laboratory, Kyle Nel is
designing a virtual bathroom.

KYLE NEL, LOWE`S INNOVATION LAB EXECUTIVE DIRECTOR: Let`s drop in a
toilet here, which is pretty critical.

OLICK: From the fixtures to the finishings, he`s mapping the floor
plan, choosing from thousands of Lowe`s products, and placing those
products in the room. Then, thanks to a brand-new technology, he will walk
through it all in virtual reality.

NEL: The Holoroom is an augmented reality room. We`re populated this
augmented reality room with real Lowe`s products.

OLICK: It`s not a hologram but a Holoroom you see through the eyes of
an iPad.

NEL: So you can experience, full experience in an intuitive way,
walking around and looking around and feeling what these objects that you
could possibly buy would be like inside of your own space.

OLICK: And if you don`t like it, you move it, with no heavy lifting.

NEL: Let`s say that I don`t like the vanity here. I can just move it
this way and continue to move it around the room.

OLICK: It takes a lot of the risk and stress out of renovation.

NEL: When we started this project, we called it the marriage-saver.

OLICK: Once the customer is satisfied, they can then download the
room and take it home, along with, of course, a list of all the Lowe`s
products they might like to buy.

(on camera): But don`t go rushing to your Lowe`s stores just yet.
They`re going to be rolling this out first in Canada, testing it, and then
bringing it to the U.S. They`re partnering with a company called Sci-Fi
Futures, working to bring all this into the virtual world.

For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.

(END VIDEOTAPE)

GHARIB: And you can read more about virtual renovations on our Web
site, NBR.com.

You know, we both laughed when they said —

MATHISEN: The marriage saver.

GHARIB: The marriage saver. Boy, how many fights have you had?

MATHISEN: If I never see another paint swatch again, it would be
great.

GHARIB: I know the feeling.

That`s NIGHTLY BUSINESS REPORT for tonight. Thanks so much for
watching. I`m Susie Gharib.

MATHISEN: And I`m Tyler Mathisen. Fabric samples, too. Have a great
evening, everybody. We`ll see you back here tomorrow.

END

Nightly Business Report transcripts and video are available on-line post
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