Transcript: Thursday, August 7, 2014

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

stocks slump as concerns over Europe`s economy and possible escalations in
Ukraine and Iraq weigh on the markets. How global turmoil could — could –
– end up helping U.S. stocks and bonds.

and more reports surfaced of data breaches and computer hacks, are
passwords becoming a thing of the past?

MATHISEN: And a heavy burden. Companies have drugs that might save
some people`s lives. But they have to say no. The difficult decisions and
the reasons behind them — as we continue our three-part series, “Desperate

All this and more for Thursday, August 7th.

And good evening, everybody. I`m Tyler Mathisen. Welcome.

HERERA: I`m Sue Herera, filling in tonight for Susie Gharib.

Well, global concerns over — one over positive news here in the U.S.
Investors choosing to focus on Europe`s economy and conflicts in Ukraine
and Iraq. European Central Bank President Mario Draghi warned tensions
between Russia and the West over Ukraine could threaten Europe`s economy.
And with Italy officially in recession, that set a bad tone.

And then reports surfaced that the U.S. may be considering airstrikes
against Muslim extremists in Iraq, in addition to air drops of humanitarian
aid. Should that situation escalate, markets are sure to react.

That overshadowed data here showing first-time jobless claims fell to
a more than eight-year low. Stocks managed to bounce off of the lows of
the day and here is how they looked at the close. By the end of the
session, the Dow was down 75 and sitting right around a three-month low.
The NASDAQ down 20, and the S&P was off by 10.

MATHISEN: In what`s widely being interpreted as a flight to safety,
the yield on the U.S. 10-year note closed at its lowest level this year.
In fact, the closing yield of 2.41 percent is the lowest since June of
2013. German and British bond yields slid, as well.

Let`s get some perspective on how global tensions are hitting the
markets from Nick Colas. He`s chief market strategist at Convergex.

Nick, welcome. Good to have you here.


MATHISEN: I hear a sort of intellectual tension between individuals
who say, on the one hand, the U.S. economy is pretty strong, some of the
signs are very good, corporate earnings are good, valuations are not overly
stretched and yet, other people say the international tensions could be a
real fracture point for the market in at least the short term.

Where do you stand?

COLAS: That`s a very good summary of the tension that we hear from
our institutional clients, as well. There is no doubt the U.S. economy is
kind of second gear moving into third year, but the problem is Europe is
still in first gear. That`s a real slow down on the global economy and
then we have shock potential items, both in the Ukraine and in Iraq and
let`s not forget Libya, as well.

The good news, I think, so far is that oil prices have not yet spiked
due to the degree that you would see with geopolitical risk. We`re still
below $100 a barrel. That`s good news for the consumer.

HERERA: You know, Nick, to Tyler`s point, it might actually make the
U.S. market look more attractive, more of a safe haven, because there
aren`t many other places around the globe to allocate cash at this point.

COLAS: That`s actually quite true. And it is a bit of an anomaly,
but it is accurate. If you look at Europe, for example, we still see
clients interested in European equities, but they are getting more
defensive because they see the European economy not gaining traction and
same for Japan to some degree, and among the larger developed markets, the
U.S. then becomes a better place to look for value.

MATHISEN: One of the news items today had to do with Russia
identifying some of the company`s and country`s against which they are
taking retaliatory sanctions and many of those are food companies,
agriculture companies that do a lot of business in Russia and European
companies, I should say.

Could that further weaken Europe if one of their big markets, i.e.,
Russia, is foreclosed to them?

COLAS: It`s a tough call and I`ll tell you why. On the one hand,
those sanctions are damaging to the medium term prospects of the companies
that you mentioned. On the flip side, if we`re talking about sanctions
that at least we`re not shooting at each other, and a hot war in the
Ukraine would still be a lot worse for Europe and European equities and
economy than the sanctions we`re talking about. Sanctions can get lifted.
Once you take the next step into a full-blown conflict, it`s a lot harder
to unravel.

HERERA: What do you make of the drop in bond yields that some say is
a canary in a coal mine, telling us that there is something out there,
that`s about to change dramatically. I mean, we saw the lows today at 2.41
percent, but it was a global move down in yields.

COLAS: That`s right. I`ll tell you, yields around the world, but
particularly in the U.S., are the great anomaly of 2014. The consensus was
rates would rise this year and they have done the opposite. They have
fallen, on the backs of I think incremental concerns about geopolitics,
which is very accurate, but also still a search for yield from a population
that`s getting older and looking for fixed income instruments. I don`t
expect this trend to end anytime soon.

MATHISEN: If I`m a U.S. investor, Nick, give me two ideas on places
to put my money for the next six months.

COLAS: The two areas we like the best are U.S. technology stocks,
large cap technology stocks. But it`s still pretty good growth because of
the U.S. economy, and consumer non-durables, the food and staples companies
that can generate some good yield and have pricing power if we do see
inflation pick up.

MATHISEN: Creative ideas. Nick, thank you.

COLAS: Thank you.

MATHISEN: Nick Colas with Convergex.

HERERA: Some of the nation`s top names reporting same-store sales for
July and they were mostly better. L Brands, formerly Limited Brands
(NYSE:LTD), said sales rose 6 percent, easily beating estimates. Gap
(NYSE:GPS) saw its sales up 2 percent and Costco (NASDAQ:COST) posted a 5
percent jump but that missed expectations. Here is a look how those
companies finished the regular trading session.

And as brick and mortar retailers gear up for the big back to school
shopping season, many are finding an unlikely ally as they try to lift
their sails, it`s called “webrooming”.

Courtney Reagan will explain.


Video may have killed the radio star, but the web hasn`t killed the retail
store. In fact, recent surveys indicate it may be helping. Showrooming or
consumers browsing in store but buying online has driven retailers like
Best Buy (NYSE:BBY) and Target (NYSE:TGT) to price match both physical and
online competitors. And now, the initiative may be turning the trend to
webrooming, instead. Shoppers browsing online, but buying in store.

According to surveys from Accenture and the international counsel of
shopping centers, around 3/4ths of back to school shoppers plan to research
products online first but will still buy goods in physical stores, making
sure the item is in stock, seeing and touching the products and avoiding
shipping costs are among the top reasons why consumers are webrooming.

CHRIS DONNELLY, ACCENTURE: Even if your retailer is selling 5
percent, 10 percent, 15 percent, 20 percent of your goods online, the
converse of that is 80 percent, 85 percent, 90 percent, 95 percent of your
goods are still being sold in store. So, the store is still very

And what we`re seeing then is online, via the webrooming is having a
very big influence on the in store purchases. So, you can`t think about
store and online as separate. You have to think how they influence each

REAGAN (on camera): The National Retail Federation forecast the
average family with children enrolled in grades K through 12 will spend
$669 on back to school this year. That`s up 5 percent from last year. The
average back to school spending for a college student is expected to raise
10 percent to $916. But the spending increase for both is due more to the
fact that goods are pricier now and not necessarily that shoppers are
buying more.

(voice-over): Still, for stores and e-commerce alike, the fact
consumers are spending is welcome news heading into the all important
second half of the year.



MATHISEN: Earnings out today from two government-run mortgage giants.
Profits took a plunge but both made money. Fannie Mae made $3.7 billion
over the past three months, the 10th straight quarterly profit. Freddie
Mac took in $1.7 billion. It`s 11th straight profitable quarter.

As part of their 2008 bailout terms, profits of both go to the
Treasury Department as a dividend, even though both have already paid back
their loans in full.

And one of the biggest complaints in the housing market today is that
there is simply not enough out there to buy. Sellers are underwater and
staying put, or they are waiting for prices to go higher.

But something else is adding to the lack of listings — and our real
estate correspondent Diana Olick explains.


Shelley and Keon Burley are loving their new home in suburban Baltimore.
It is four times the size of their last home in the heart of the city, the
home they are now renting out.

SHELLY BURLEY, HOMEOWNER & LANDLORD: It really wasn`t worth it to
take the $30,000 hit when we could get someone to rent the property, have
them pay down the mortgage, and, you know, get to a place where we could
either get out for the same price or, you know, eventually maybe make a
profit off of it, if we rent long enough.

OLICK: Thirty thousand dollars, that`s how far under water they were
on the downtown home`s mortgage. Rather than take the hit, they took the
rent, like so many others are doing across the country.

to move and sale, individuals, they are also turning into landlords by
choice, and that is definitely having a dent in the inventory numbers.

OLICK: The supply of homes for sale is finally starting to rise, but
it is still tight, which is pushing home prices higher. Rents are also
rising and that was enough to convince the Burleys that being landlords was
worth it.

SHELLEY BURLEY: They put it on Craigslist and had people responding
to the ad instantly.

KEON BURLEY, HOMEOWNER & LANDLORD: I was probably more stressed than
my wife.

OLICK: Three months later, they agree it was the right choice, even
after putting 20 percent down on the new house and now carrying two

KEON BURLEY: We just cut out non-essentials and we were able to
stockpile the down payment quicker so we could move up and move into this
lovely home.

OLICK: The Burleys kept their old home because they were underwater.

(on camera): But others are choosing to become landlords for just the
opposite reason. They have gained so much equity in their homes recently,
they can use that to buy a new home and still earn rental income on top of

RICHARDSON: Some of them are all cash. Our agents are seeing a lot
of people come through their door with cash in hand to buy that next place.
A lot of them, obviously, don`t need that equity in their former home where
they are able to tap some of it out and use it to buy the next place.

SHELLY BURLEY: You want me to look up movie time.

OLICK (voice-over): Whatever the case, Richardson says the trend is
growing and in turn, shrinking the supply needed to keep the recovery in
home sales going strong.

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


HERERA: Coming up, if you`re like many of us, you probably have
several passwords for your various online accounts. But with security in
ever increasing concerns, is the era of the password dead?


HERERA: Facebook (NASDAQ:FB) is looking to make your personal online
information more secure. The social networking giant is buying a company
called Private Core, which helps protect computers and data centers that
power Internet services from hackers and harmful spyware. No terms of the
deal were disclosed.

MATHISEN: Securing data on the Internet may be more important than
ever, especially after Russian hackers stole more than a billion
confidential user names and passwords off thousands of Web sites. That`s
raising questions whether the era of the password may be over.

Eamon Javers joins us now with more from Washington.

Are passwords passe, Eamon?

Tyler. Passwords may be about to be a thing of the past. There is a major
cyber security conference going on right now called Black Hat and DEF CON,
and the big topic of conversation there is what happens after the password,
how are we going to get consumers to the point where they don`t have to
remember five or six extremely complicated passwords with capital letters,
numbers, all those things that keep us so confused all the time as computer

A couple things that are on the table for discussion, one is Web sites
that don`t require a password but instead will simply send you an e-mail.
So, you go to the Web site and instead of typing in the password, you say,
I`d like to log in. It sends you an e-mail to your e-mail address and if
you click on that e-mail, it assumes that it`s in fact you.

Another one is wearable tech, a bracelet or some kind of wearable
device that when you bring it in proximity with your device, it will know
it`s you and let you log in without a password.

A lot of that work is being done there. There are thumbprint analysis
devices out there right now, and there is even an Android app which will
allow you to log into the Android device if you have your Bluetooth and
your Wi-Fi on, and you`re in proximity of the device. And it assumes
again, based on the accumulation of the other devices, that it`s really you
and lets you in without a password.

HERERA: You know, passwords we know have their problems, Eamon but do
any of the methods that they just outlined for us, have their own separate

JAVERS: Yes, they do. I mean, one problem with biometrics, is when
you think about using a thumbprint, which some people are advocating, that
downside to that is if your thumbprint, is compromised, it`s awfully hard
to get a new one, right? You can always get a new password, it`s very
tough one to get a new thumbprint, right?

So, when you think about an Iris scan for your eye or a thumbprint,
those are some of the challenges they have to work through, and some of
this will be done by behavior analytics, that is analyzing your activity
once you`re inside the system to make sure it is you.

Is your device located in your house or work or places you usually
are? Are you logging in at the times of day you normally log in and doing
the types of things you normally do?

All that behavior monitoring will say, hey, wait a second, there`s
somebody in Kazakhstan just logged in as me, it`s probably not me.

MATHISEN: All right. That would be true in my case.

Eamon Javers, thank you very much.

JAVERS: You bet.

HERERA: Mixed results from the eye network is where we begin
tonight`s “Market Focus”. Revenue came in short as the media giant took a
hit because it lost rights to broadcast the NCAA college basketball semi
finals. Despite that, CBS (NYSE:CBS) is doubling its share buyback program
to 6 billion and increasing the dividend to 15 cents per share. Shares
fell initially during the regular trading session the stock was off 1
percent to $56.90.

NewsCorp out with weaker than expected fourth-quarter earnings after
the bell. The publisher of “The Wall Street Journal” said revenue came in
a bit above forecasts, but the number was down from last year as
advertising sales were weak. Shares didn`t move much after the report.
During the regular trading day the stock was down nearly one percent to

And generic drug maker Mylan (NASDAQ:MYL) missed earnings estimates,
with revenue falling short as well. The company also cut its earnings
guidance for the current quarter, blaming higher expenses and delays in FDA
approval for key products. That sent shares down about 3 percent to

MATHISEN: Watch out, Amazon (NASDAQ:AMZN). Maybe.

Google (NASDAQ:GOOG) and Barnes & Noble (NYSE:NE) (NYSE:BKS) are
joining forces to deliver books. Starting today, the book buyers in a few
locations will be able to get same-day deliveries from local Barnes & Noble
(NYSE:NE) (NYSE:BKS) stores through what`s known as Google (NASDAQ:GOOG)
Shopping Express (NYSE:EXPR). The partnership could help Barnes & Noble
(NYSE:NE) (NYSE:BKS) build an online presence since its brick and mortar
business has struggled. Class A shares of Google (NASDAQ:GOOG) were off
slightly at $571.81. Barnes & Noble (NYSE:NE) (NYSE:BKS) was 2 1/2 percent
higher at $21.75.

Wendy`s served up second-quarter earnings that more than doubled. The
fast-food chain continued to benefit from the sale of some of its
restaurants and the company said it`s going to continue the strategy and
offer up more of its franchises. To top it all off, the special sauce is
that the company reaffirmed its guidance. Shares were up 2 percent to a
big $8.15.

Shares of Zynga (NASDAQ:ZNGA) tanked right after it reported late
disappointing results. The social gaming company announced weaker than
expected revenue as it is struggling to increase users. Also its guidance
was significantly short of estimates. After hours, the stock initially
plunged. You can see it dived right there. During the regular session
shares were higher by 4 1/2 percent to $2.92.

HERERA: Well, despite some isolated heavy rains last week, there has
been no substantial relief for the portion of the country mired in a multi-
year drought. In fact, the Department of Agriculture`s weekly drought
monitor shows 1/3 of the nation is considered under moderate to severe
drought. And as you can see, the western and southern Plain States are hit
particularly hard.

And the 3-year drought in California is now officially the worst on
record for that state. But as Josh Lipton tells us now, some growers and
utilities are turning to where else for help, but Silicon Valley.


residential use to agriculture, the water worry is on in California.


LIPTON: Lise Asimont is the director of grower relations for the
Francis Ford Coppola Winery in Geyserville, California. She says if the
three-year drought turns into a four or five-year drought there will be

ASIMONT: It could be a compounding issue for us that could keep
continuing on and if that should happen, perhaps in a couple years, we
would really see the impact on wine grapes.

LIPTON: That`s why she teamed up with tech start up TerrAvion. The
company flies planes over farm land and gives growers thermal images like
these that can show farmers potential trouble spots when it comes to

ASIMONT: After having that technology, we can fine tune it so
finally, we have so much more confidence and comfort in how we irrigate.
It`s changed everything for us.

LIPTON: The startup now has about 100 customers and says demand for
its service is strong.

CORNELL WRIGHT, TERRAVION CTO: We see a lot of interest from growers
because of the drought and it definitely helps them find irrigation leaks
and manage water more effectively.

LIPTON: But it`s not just on the farm where tech startups and big
name investors are hoping to help when it comes to this water crisis.
WaterSmart software is one of those startups, which has received funding
from the likes of the Wesley Group and Menlo Ventures.

UNIDENTIFIED MALE: So, this a home water report.

LIPTON: The company works with water utilities to supply detailed
information to customers on water use, showing how much water one home may
be using versus another of the same size.

JEFF LIPTON, WATERSMART: You can in some ways think of WaterSmart as
a virtual reservoir as people are prompted to the social comparison
approach, to use less water, to improve the water efficiency. You`re
effectively creating more reserves in the reservoir for other people to

LIPTON: And as this water crisis continues, more help from Silicon
Valley may be on the way.

SCOTT BRIAN, IMAGINE H20 COO: As our water resources are squeezed,
we`re going to see more interest from investors and entrepreneurs. I think
that`s a good thing, the challenge is it going to be too late?

LIPTON (on camera): This drought has already cost the state of
California some $2 billion and 17,000 jobs but startups like TerrAvion and
WaterSmart software are hoping to ease this water crisis.

Josh Lipton, NIGHTLY BUSINESS REPORT, Geyserville, California.


HERERA: Up next, why companies with potentially life-saving drugs
have to turn away people who desperately need them.


MATHISEN: Tonight in the second of our three-part series “Desperate
Measures”, on the challenges terminally ill patients and what their
families face and the only thing left to try is experimental drugs.

But drug makers often won`t allow new unproven medications to be used
citing risk to the patient and to the drug companies themselves.

Meg Tirrell has the story.


years into her battle with the rare form of cancer, Nathalie Traller and
her family think they may be close to something that could help.

NATHALIE TRALLER, CANCER PATIENT: When we found this new promising
medicine, PD-1, we definitely wanted to participate in the trial.

TIRRELL: PD-1 is part of a new class of experimental drugs called
immunotherapies. The Trallers and their oncologists have asked makers
Genentech, Bristol-Myers Squibb (NYSE:BMY) and Merck (NYSE:MRK) for access.
They`ve all said no.

TRALLER: It was only including people 18 and up, and since I`m only
15, they wouldn`t let me in. And we asked for compassionate use, but they
denied it.

TIRRELL: Compassionate use is a way for companies to provide
experimental drugs outside of clinical trials for patients with no other
options. Nathalie and countless others fit that description.

But for drug companies, it`s a complicated issue.

process to go through.

TIRRELL: Doug Williams leads research and development at Biogen Idec
(NASDAQ:BIIB). Two years ago, the company was working on a therapy for Lou
Gehrig`s disease. With compassionate use requests pouring in, Biogen
prepared enough supply to give 5,000 patients, if the drug proved to work
in clinical trials.

WILLIAMS: An individual situation while difficult and heart-wrenching
has to be weighed against the backdrop of what the ultimate goal is, which
is to bring these drugs to market to treat the broadest cross-section of
the population as quickly as we can possibly do it.

TIRRELL: There are risks for both patients and drug makers.
Nathalie`s doctor worries about the safety of an unproven medicine.

DR. LARA DAVIS, OHSU SARCOMA SPECIALIST: These drugs are not benign.
I have concerns about using potentially using a medication that we have no
information on because the side effects can be very serious, potentially

TIRRELL: The companies also worry about side effects.

Bioethicist Art Caplan has advised drug makers on compassionate use.

ART CAPLAN, BIOETHICIST: People who take experimental drugs are often
really, really sick. The odds of them getting better are tiny. It happens
but it`s rare.

TIRRELL: And there`s a concern that a bad outcome in a patient much
sicker than others could affect the drug`s chances of approval.

Another factor companies must consider, supply.

CAPLAN: They might have as much as a tiny thimble-full of that drug
and if they give it to a dying person, they can`t complete the trial that
the FDA wants them to do to get the drug out of the market to get to
anybody who has this disease.

TIRRELL: Companies also cite not having enough data in different
forms of cancer, including in kids, an issue that has set Nathalie back.

There are also ethical considerations.

WILLIAMS: Who do you say yes to? Who do you say no to?

TIRRELL (on camera): Companies say that making drug available through
compassionate use could deter patients from enrolling in clinical trials,
would they risk getting a placebo, potentially slow a drug`s pass to market
and there is always a concern a drug won`t work.

Biogen`s compound for Lou Gehrig`s disease ultimately failed.

WILLIAMS: They are not real drugs yet. We want to them from a
situation where it`s just hope to being real hope to patients and we want
to prove that something is actually false hope.

TIRRELL: For a patient like Nathalie, the proof may not come soon


MATHISEN: Complicated questions.

Meg Tirrell joins us now with more.

Meg, whether a patient is involved with a compassionate use exception
or involved in an experimental trial, how do the companies handle legal
liability there? If I`m enrolling in one of these things or taking one of
these drugs, do I basically absolve the drug company of any liability?

TIRRELL: Yes, it`s complicated and there are fears about that, of
course. But talking to Nathan Traller, Nathalie`s dad, he says, as a
parent you read through the consent forms and you don`t hold anybody
accountable, you don`t hold anybody liable if something goes wrong. So,
you know, it`s a scary thing, and there can be side effects to these drugs.

But another thing that companies consider is not just liability issue,
but does a bad outcome in somebody who might be much sicker that other
patients kind of disrupt an entire clinical trial program. Some companies
say, you know, if there are any side effects, of course, we want to know
about them. But other folks say, wait, could that be a concern? Could
that slow down enrollment in the clinical trial or the FDA`s evaluation of
the clinical trial results? So, these are all concerns.

HERERA: You know, so many people in your piece and out there are so
vested in finding treatments — all the way down to Nathalie`s physician,
Lara Davis, who you said shaved her head.

TIRRELL: Yes, she has short hair in support of cancer research.

HERERA: Which is amazing.

And you look at the commitment that all of these scientists and all of
these physicians have, are there changes buying put in place to the system
to make it more workable, or is that not an option?

TIRRELL: There is a lot of pressure building on the system to change,
something that I learned. There have been laws discussed in several
states, called right to try. There`s conflicting views on whether those
will actually help the system, which we explore in another piece I think
you`ll be airing tomorrow.

But also, there`s questions about — is there enough communications
between the FDA and companies? Did the FDA know what`s going on? And
could there be a way of having a two-track system for companies so that
they can provide compassionate use, but also run their clinical trial
program, and if something goes wrong on one end, it won`t affect the other

HERERA: All right. Meg, terrific series. We look forward to the
third installment.

TIRRELL: Thanks.

HERERA: And for more on Meg`s series about compassionate use, please
go to our Web site,

And that will do it for NIGHTLY BUSINESS REPORT for tonight. I`m Sue
Herera, in for Susie Gharib. Thanks for joining us.

MATHISEN: And thanks from me, as well. I`m Tyler Mathisen. Have a
great evening, everyone. We hope to see you right back here tomorrow


Nightly Business Report transcripts and video are available on-line post
broadcast at The program is transcribed by CQRC
Transcriptions, LLC. Updates may be posted at a later date. The views of
our guests and commentators are their own and do not necessarily represent
the views of Nightly Business Report, or CNBC, Inc. Information presented
on Nightly Business Report is not and should not be considered as
investment advice. (c) 2014 CNBC, Inc.

This entry was posted in Transcripts. Bookmark the permalink.

Leave a Reply