Transcript: Nightly Business Report — August 13, 2015

NBR-ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and
Sue Herera.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Shell shocked. Egg
prices cracked records, making breakfast a lot more expensive and it could
be a while before prices recede.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Solid sales. Americans
went shopping in July and there`s one item that could save the retailers.

MATHISEN: Economic ripple. Why calculating the full cost of the
damage from that Colorado mine spill could be a very tricky task.

All that and more tonight on NIGHTLY BUSINESS REPORT for Thursday,
August 13th.

HERERA: Good evening, everyone.

As you know, it is widely expected that the Federal Reserve will raise
interest rates sometime this year. And today we got another batch of
economic data that bolsters that case.

But there`s one piece that`s been missing from that equation:
inflation. And that`s where a new government report comes in on the prices
something near and dear to all of us — egg prices.

The Department of Agriculture reports the prices are at an all-time
high following the worst outbreak of bird flu in decades. It`s basically
classic supply and demand: fewer eggs, higher prices.

And as Morgan Brennan reports from Des Moines, Iowa, the shortage not
just for eggs may be far from over.

(BEGIN VIDEOTAPE)

MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Avian flu,
officials now call it the worst animal virus outbreak in U.S. history.
It`s been more than two months since the last case was detected but the
damage is done. Forty-eight million chicken and turkeys had to be
destroyed, the lion share in Iowa. After months of uncertainty, state
officials are finally lifting the quarantines affecting so many parts of
the state. And now, some farmers are starting to restock.

The first in Iowa to welcome new birds is Brad Moline, whose 43,000-
turkey farm became infected in May.

BRAD MOLINE, CALHOUN FARM OWNER: It was a huge relief, no question
about it.

BRENNAN: His new turkeys will begin hitting the market later this
fall. Farms in Minnesota are beginning to repopulate as well and so far
it`s turkey operations and not yet egg facilities which suffered the
steepest losses.

RANDY OLSON, IOWA EGG COUNCIL: We`ll anticipate there will be birds
back in barns as early as September in some cases, certainly ramping up
through the end of this year and really strong egg production coming back
on the start of 2016.

BRENNAN: Still, it will take about 12 to 18 months for U.S.
production to return to normal. In the meantime, egg prices have soared.
With the wholesale price for a dozen Midwest large eggs up more than 140
percent since April.

Analysts expect prices to remain elevated into 2016. But even as
farmers begin to get back to business, the entire industry is bracing for
more bird flu this fall when waterfowl carrying the virus fly south.
Producers, state officials and the USDA are scrambling to prepare.

DR. JOHN CLIFFORD, USDA ANIMAL AND PLANT HEALTH INSPECTION: We are
preparing for the fall and spring. We`ve got a lot of planning going on
within USDA but also within the states themselves, especially all of the
major poultry producing states and with the industry.

BRENNAN: Farmers are beefing up bio security and performing routine
tests on flocks and in many poultry producing states including Georgia and
North Carolina which haven`t been hit by bird flu response drills.

The USDA says it will also have a vaccine ready if the need arises.

But it`s not just farmers and consumers feeling the impact of bird
flu. The ripple effects extend here to the Iowa state fair, which normally
has 1,000 poultry exhibits. Because of bird flu, fairs across the U.S. are
banning live birds and instead filling the space with pictures and
educational displays.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan in Des Moines, Iowa.

(END VIDEOTAPE)

MATHISEN: As for that economic data, we referred to a moment or so
ago, the number of U.S. workers filing new applications for jobless
benefits rose slightly in the past week but at a level still consistent
with a strengthening labor market. Jobless claims increased 5,000 to a
seasonally adjusted 274,000 the average for the past month fell to its
lowest level in 15 years.

HERERA: Retail sales rebounded in July suggesting, the economy is
growing solidly in the third quarter. June`s retail sales were also
revised higher to unchanged from its original 0.3 percent drop. The strong
sales were due to increased purchases of everything from automobiles to
furniture.

MATHISEN: Change of pace on Wall Street today after numerous triple
digit moves. Stocks ended basically near flat. A drop in energy shares
did offset the positive economic news we just mentioned and those stronger-
than-expected results from Cisco (NASDAQ:CSCO) we told you about last
night.

By the closing bell, the Dow Jones Industrial average was up five
points to 17,408, NASDAQ lost 10, the S&P 500 fell 2.

The big story was in the oil pits today. The price of crude tumbled
to a 6 1/2-year low midday on a big rise in U.S. stockpiles. By the
settle, crude was off 2 1/2 percent to $42.23.

HERERA: Eight banks have reportedly agreed to pay $2 billion to
settle lawsuits claiming they rigged the currency markets. That`s
according to Reuters. The banks include Barclays, Bank of America
(NYSE:BAC), Citigroup (NYSE:C) and Goldman Sachs (NYSE:GS) and others.

Speaking of Goldman Sachs (NYSE:GS), the firm will also pay more than
$250 million to settle a mortgage-related lawsuit. The suit claimed that
the bank defrauded investors about the safety of mortgage-backed securities
purchased in 2007 and 2008. That time, of course, leading up to the
financial crisis.

As part of the agreement, court papers show that Goldman denied
liability.

MATHISEN: The brokerage firm Edward Jones will pay $20 million to
settle claims it overcharged muni bond customers. The settlement was made
with the SEC which said that Edward Jones didn`t offer new bonds at the
initial offering price and instead took the bonds into their own inventory
and then sold them at a higher price. The agency also described this
settlement as the first of its kind.

HERERA: Authorities have reportedly launched an investigation into
the former chairman of Dean Foods (NYSE:DF), the country`s largest milk
processor. As reported by “The Wall Street Journal”, they`re looking in to
whether Thomas Davis leaked inside information to a professional gambler,
who then may have tipped off golfer Phil Mickelson.

Kate Kelly is here. She`s been following the story for us all along.

So, can you explain briefly, Kate, what this is all about?

KATE KELLY, NIGHTLY BUSINESS REPORT CORRESPONDENT: So, Sue, just
simply put, insider trading involves an individual using nonpublic and
material information, information that actually could move a stock once
it`s out and trading upon it at a time when most other people other than
company, board members and so on don`t have the information.

It`s illegal in many cases, although it`s a bit of a gray area in
terms of U.S. case law.

The allegation being investigated here, and we don`t know what really
happened, we don`t even know if a case will be brought, is whether or not
this board member who was nonexecutive chairman for a time passed on
information ultimately to the golfer Phil Mickelson, about what was in 2012
a deal the company was doing. And whether or not Mickelson, who got the
information ostensibly second hand from a middle man, this professional
gambler, was able to trade upon that and we don`t know if he even traded
for a profit. But that`s what they looking into, that is the SEC as well
as the Justice Department.

MATHISEN: A couple of quick questions. What do we know about the
former nonexecutive chairman and Mr. Mickelson? How did Mickelson get the
information?

Would Mickelson have had to have known both the guy and that the
information was protected to be guilty of any charges or to face some kind
of charge?

KELLY: Great questions. So, Thomas Davis from — based on what I`ve
read did know this gambler Billy Walters and there was some — I don`t know
whether it was a friendship, a business relationship — some relationship
there according to the newspaper. And Walters knows Phil Mickelson.

So, it isn`t clear whether or not Davis and Mickelson directly know
each other, and that could potentially be a problem if the feds try to
bring an insider trading case. Why? To make a long story short, recent
judges` decisions have suggested that there has to be, if you will, a quid
pro quo between the provider of the information and the person who uses it,
which in this case is Davis and Mickelson. Some understanding on the
provider`s part, on Davis` part, that he`s benefiting Mickelson and vice
versa.

That isn`t there. It could be difficult to bring a case.

HERERA: What about the average investor? Does this case have
implications for the average investor or perhaps not?

KELLY: So, the whole problem with insider trading, Sue, is the idea
that it makes the markets unfair for other people. So, if you have a lead
on some information that I don`t have and you`re able to trade profitably
upon it, and I`m not, that`s an uneven playing field.

So, what the government has tried hard to do in recent years is to
root out some of these cases to serve as deterrents to people who might do
this in the future.

Now, again, it`s early days on this case but if the facts are proven
and if it is a classic insider trading case, the idea would be that someone
like Phil Mickelson perhaps had an unfair information advantage make due to
his connections and wealth that average investors didn`t have and that
moved the stock in a way that may have disadvantaged others.

HERERA: Others, right. Kate, thank you very much.

KELLY: Thank you.

HERERA: Keep following the story for us.

KELLY: Will do.

MATHISEN: Days after an EPA-led team accidently released 3 million
gallons of toxic sludge from an abandoned mine into a Colorado River, the
economic damage is just starting to be tallied.

And as Scott Cohn reports from Durango, Colorado, there are thousands
of mines just like that one throughout the west.

(BEGIN VIDEOTAPE)

SCOTT COHN, NIGHTLY BUSINESS REPORT CORRESPONDENT: To look at it, it
seems like things are back to normal. The sickening orange sludge has
dissipated but the economic impact along the Animas River has not. The
river is still closed to recreation because officials are worried about
people picking up the sediment that`s left in the riverbed and the rocks,
and that`s just the start of the economic impact here in the thick of the
tourist season.

Downstream in New Mexico, the EPA is trucking in emergency water
supplies for irrigation and feeding livestock. And it`s also reinvigorated
the controversy about tens of thousands of abandoned mines throughout the
west. The Navajo Nation, which says that this still has affected its very
way of life, says it is suing the EPA, and says that this site should be
designated a superfund site freeing up billions of dollars of federal
cleanup money.

The problem, though, in an area that`s heavily dependent on tourism is
the idea of designating this as a superfund site. There`s always been a
delicate balance between politics, science and the economy. This spill may
have shifted that balance somewhat and, again, revived the debate.

Scott Cohn, NIGHTLY BUSINESS REPORT, Durango, Colorado.

(END VIDEOTAPE)

HERERA: Still ahead, Cuba is one of the least connected countries in
the world. So, why is Airbnb which relies on the Internet making a big
push into the island nation?

(MUSIC)

MATHISEN: Earlier in the program, we told you about the rise of
retail sales in July, one item people are buying more of is denim. That`s
good news for apparel retailers since there`s a lot of money in jeans.
Just last year, global jeans market was worth more than $1 billion by some
estimates.

And as Courtney Reagan tells us the fashion trend is picking up steam
right before the key back-to-school shopping season.

(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Heart of
Target`s back-to-school messaging insists denim is a school supply, and
this year, the retailer might be right. While the back-to-school season is
historically one of the most important for denim, last year, sales of jeans
wear dropped dramatically as athletic wear sales soared, leading many to
declare the death of denim. But now, there are signs that denim isn`t so
dead after at all.

Investment bank FBR conducted an online search survey and found that
the number of consumers searching for denim online increased 5 percent
compared to a drop last year. And analysts say it`s because manufacturers
have reinvented the back-to-school staple.

SUSAN ANDERSON, FBR RETAIL ANALYST: This is denim`s way of fighting
back. They`re adding more innovation. They`re adding more synthetic
fibers and fabrics to the denim, not just cotton, and that`s making it, you
know, more softer, more stretch, and also they`re adding new washes in
denim, too, to just make it more appealing, something different so the
consumer doesn`t feel like they`re buying the same thing.

REAGAN: New demand is particularly good for retailers benefiting from
back to school. Tracking group NPD says millennials represent the largest
dollar segment when it comes to jean sales, and the group is showing
renewed interest in denim after years of skinny jeans beings it denim
trend, retailers like American Eagle and Abercrombie are turning to a new
style.

ANDERSON: They are trying to bring back that wide-leg denim. You
know, I think they tried to bring it back a couple years now but the
consumer just hasn`t accepted it, but it sounds like they feel like this
could be the year and they are stocking it in much bigger present this
year.

REAGAN: On its earnings call, Ralph Lauren execs said it had a
terrific consumer response to denim offerings across all of its brand
tiers. While Macy`s (NYSE:M) results were mostly disappointing, the
department store`s CFO called for a resurgence in denim, a strong point for
the quarter.

VF Corp, the company that owns jean brands Wrangler, Lee, and 7 for
All Mankind says global jeans wear revenues were up 6 percent in the most
recent quarter and up mid-single digits in the Americas, signaling
challenges in the mid-tier U.S. denim market have begun to abate.

But unlike the athleisure clothing market, which most think is more of
a fundamental lifestyle switch than just a fad, the denim resurgence may be
more short-lived.

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan.

(END VIDEOTAPE)

HERERA: We begin tonight`s “Market Focus” with a late earnings beat
from Nordstrom (NYSE:JWN). The retailer announcing an increase in
quarterly sales, thanks partly to a recent acquisition, and its Canadian
stores performance. The company also raising its annual sales growth
guidance. Shares were initially higher in after-hours trading. In the
regular session the stock was off a fraction to $74.92.

A disappointing quarter from El Pollo Loco. The chicken restaurant
chain missed on the top line, while earnings were pretty much in line with
forecasts. Shares slid initially after the close. During regular trading
session, the stock was up about 3 percent to $18.36.

A tough day for shares of Kohl`s. The retailer missing earnings and
revenue estimates. It blamed a late back-to-school start and a sales tax
holiday that shoppers took advantage of. Shares tumbled almost 9 percent
to finish at $56.11.

MATHISEN: Mixed quarterlies from Dillard`s. It beat on the bottom
line, while revenue missed analyst estimates. Weakness came from its home
and furniture categories, while shoe sales were strong. The stock rose 2
percent to $97.03.

A boutique investment bank called Houlihan Lokey made its Wall Street
debut today. And shares today priced a dollar below the firm`s range at
$21 a piece. The company raised $220 million in that offering. Shares up
more than 6.5 percent today to $22.40.

A management reboot at Coca-Cola (NYSE:KO). The Dow component named
James Quincey president and chief operating officer today. That spurred
speculation that the long-time company veteran could take the top spot at
the soda maker one day. The stock fell a fraction today to $41.10.

HERERA: Samsung hopes sleeker sells. The company introducing a host
of products to fend off the gains being made by Apple (NASDAQ:AAPL). And
it`s not just a new device that Samsung is banking on but a new way to pay
for things, creating a direct challenge to Apple (NASDAQ:AAPL) Pay. But is
it enough to dominate that industry?

Jon Fortt reports.

(BEGIN VIDEOTAPE)

JON FORTT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Samsung today in
New York City with three pretty big announcements. One was phones. We
were expecting the Galaxy Note 5 and we got it. But we also got a version
that`s curve. It`s not called the Note Edge. It`s the Galaxy S6 Plus
Edge, but it`s a 5.7-inch screen, same display quality which is
independently judged to be at the top of the industry and the screen.

Of course, Samsung had trouble delivering those curve screens early in
the year. That caused some problems with revenue at the company. But CEO
J.K. Shin here doubling down on his bet on that.

Of course, that comes ahead of an expected iPhone launch next month.
Samsung getting out ahead of that, trying to hold down its ecosystem. As
part of that, Samsung also announced Samsung Pay. It`s like Apple
(NASDAQ:AAPL) Pay being able to use your phone for contactless payments at
various retailers, but this uses a magnetic field technology instead of
what Apple (NASDAQ:AAPL) uses, which is called NFC, and that means this
payment system should work everywhere you can swipe a credit card.

We spoke to MasterCard (NYSE:MA) and Visa (NYSE:V) today. Both of
them say it is secure. Of course, hackers are sure to attack this because
it`s able to be used many more places, but Samsung taking a bold step here
in payments, along with phones, and then finally also live streaming
something that they staked out.

You heard of Periscope, well, they are doing live streaming through
YouTube with these new phones as well. The older phones being able to do
some of this as well with software updates, but Samsung making a mark in
the U.S. now ahead of Apple`s launch that`s expected next month the
smartphone season and the competition is heating up.

For NIGHTLY BUSINESS REPORT, I`m Jon Fortt.

(END VIDEOTAPE)

MATHISEN: Coming up, how 96 million little black balls can help
combat California`s record drought.

(MUSIC)

HERERA: And here`s a look at what to watch for tomorrow. The
producer price index is out and that, of course, is an important measure of
inflation. A read on industrial production as well. And also on the data
front, a check on the health of the consumer with the consumer sentiment
report. And that is what to watch for Friday.

MATHISEN: Secretary of State John Kerry will be in Havana tomorrow to
raise the American flag and formally reopen a U.S. embassy in Cuba. It`s
another step to normalize diplomatic and economic ties between the two
countries and as relations thaw, many companies are looking to do business
in Cuba.

As Michelle Caruso-Cabrera reports from Havana, no company has been
more aggressive than Airbnb, the online room rental site.

(BEGIN VIDEOTAPE)

MICHELLE CARUSO-CABRERA, NIGHTLY BUSINESS REPORT CORRESPONDENT: These
four women are visiting Cuba from Oakland, California, as a birthday
celebration for Tiaja Hacks. When they tried to book a hotel, they found
there was a problem.

TIAJA JACKS, AIRBNB GUEST: You can`t really use your credit card to
book online —

CARUSO-CABRERA: At hotels?

JACKS: — at hotels. So that was the major challenge.

CARUSO-CABRERA: U.S. credit cards still don`t work in Cuba. So,
enter California-based Airbnb, an online booking site that allows people to
rent private homes and apartments. The women chose to stay at this
beautifully restored neoclassical home which sleeps four, costing them $100
a night. And they paid in advance on their credit card on Airbnb.

Airbnb launched in Cuba last April and within two months had more than
1,000 homes listed, including apartments like this one from Marta Virtote.
It turns out Cubans like Marha have been renting rooms in their homes for
decades, because it was one of the only private sector activities permitted
by the communist government.

When Fidel Castro seized power in a coup in 1959, he quickly took over
every business. So, there was plenty of supply from people who wanted to
make extra money legally. What Marta likes from Airbnb she gets paid no
matter what, even if the client doesn`t show up, which used to happen a lot
in the past.

MARTA VIRTOTE, AIRBNB HOST: To Airbnb, it`s like a miracle.

CARUSO-CABRERA: Jordi Torres is the Airbnb executive in charge of
Cuba.

Airbnb is based on the Internet. This is a country with hardly any
Internet. How do you overcome that hurdle?

JORDI TORRES, AIRBNB GENERAL MANAGER, LATIN AMERICA: Cubans are
really entrepreneurs and they have (INAUDIBLE). And for those that don`t
have Internet, they have found ways to leverage local connections to
represent many.

CARUSO-CABRERA: Here in Cuba, there`s a sort of gray market for
Internet access. Those lucky few that do have a legal connection to the
Internet manage the Airbnb listings for those who don`t.

Airbnb says Cubans who have rented out their homes have received on
average $90 for each day. It`s a huge amount of money in a country where
the average salary is only $20 per month.

For NIGHTLY BUSINESS REPORT, I`m Michelle Caruso-Cabrera in Havana.

(END VIDEOTAPE)

HERERA: And in drought-stricken California, reservoirs have turned
black and officials want them that way, black plastic balls are covering
water sources in the Los Angeles area as a way to preserve that precious
resource.

Jane Wells has our story tonight.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Three, two, one. Shade balls away!

JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: In California`s
epic drought, no idea is too crazy. Not even releasing into L.A.
reservoirs plastic balls you might find at a McDonald`s (NYSE:MCD) play
area.

UNIDENTIFIED MALE: We started putting shade balls on here about 2 1/2
years ago.

WELLS: This week, the L.A. Department of Water and Power released the
last of 96 million so-called shade balls on top of open reservoirs.
Originally, the drought wasn`t the reason for the balls. The EPA ordered
open reservoirs covered to improve water quality by avoiding bad chemical
reactions and algae from direct sunlight on the water. But along the way,
the DWP discovered the shade balls also keep 300 million gallons water a
year from evaporating.

RICHARD HARASICK, LADWP DIRECTOR OF WATER OPERATIONS: That`s
equivalent for us to about 2,700 average homes here in Los Angeles. That`s
enough water to fill almost five rose bowls full of water every year. So,
it`s a dramatic amount of water.

WELLS: The idea of the shade balls came from a department biologist
who saw them being used at airports in between runways where water was
paddled to cover the water and keep the birds away. And it`s a lot cheaper
than the original idea for this reservoir to buy the world`s largest pool
cover which would have cost hundreds of millions of dollars and would have
required the building of a temporary reservoir while this one was fitted.

This idea is almost 90 percent cheaper.

ERIC GARCETTI (D), MAYOR OF LOS ANGELES: We came up with the idea of
putting these balls manufactured here locally, shade balls, 96 million of
them at a cost of just $35 million.

WELLS: California is mandating other changes to save water like low-
flow showerheads but nothing has gotten as much attention as the shade
balls which are supposed to last a decade.

Will the rains return by then? Maybe sooner. El Nino is coming and
new images from NASA show the warming Pacific in red and white ahead of the
drenching El Nino of 1997 so strong they`re giving the new one a nickname
Godzilla.

For NIGHTLY BUSINESS REPORT, Jane Wells, Los Angeles.

(END VIDEOTAPE)

MATHISEN: And finally tonight, a story brought to you by the letters
H, B, and O. The pay TV network owned by Time Warner (NYSE:TWX) has agreed
to a five-year partnership with the nonprofit behind the children`s
television program “Sesame Street.” Starting this fall, new episodes of
the show will air first on HBO, before appearing on PBS nine months later.
The deal allows “Sesame Workshop” to double the number of new episodes it
makes yearly and gives HBO a bigger foothold in children`s programming.

HERERA: And it`s so competitive, that particular niche. It`s growing
by leaps and bounds.

MATHISEN: Cookie Monster on HBO.

HERERA: Cookie Monster and Big Bird going to HBO.

MATHISEN: Yes.

HERERA: All right. That will do it for NIGHTLY BUSINESS REPORT for
tonight.

I`m Sue Herera. And we want to remind, this is the time of year your
public television stations seeks your report.

MATHISEN: I`m Tyler Mathisen. Thank you for your support. Thanks
for watching. And have a great evening, everybody. We`ll see you
tomorrow.

END

Nightly Business Report transcripts and video are available on-line post
broadcast at http://nbr.com. 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) 2015 CNBC, Inc.

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