Transcript: Nightly Business Report- November 10, 2015

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

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PREET BHARARA, U.S. ATTORNEY: By any measure, the data breaches of these firms were breathtaking in scope and in size.

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SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Massive bust. Criminal charges filed in the biggest bank breach ever, involving the nation’s biggest bank and compromising the data of 100 million people.

No frills. Why one home builder’s strategy to go back to basics is paying off.

And, $1 trillion price tag. That’s what Alzheimer’s could potentially cost the economy in the coming years, straining the finances of caregivers and Medicare.

All that and more tonight on NIGHTLY BUSINESS REPORT for Tuesday, November 10th.

Good evening, everyone. Ty is off tonight.

It’s one of the biggest cyber security busts of all time. And it involved the nation’s biggest bank by assets. Federal prosecutors allege that three men ran a sprawling cyber criminal enterprise, hacked into JPMorgan (NYSE:JPM) and other financial institutions, stole data from 100 million customers, and generated millions in illegal profits.

Eamon Javers has more on what prosecutors describe as securities fraud on cyber steroids.

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BHARARA: Today, we announce criminal charges in one of the larges cyberhacking schemes ever uncovered.

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: In a conference in Europe Tuesday, U.S. attorney Preet Bharara announced the take down of a breathtakingly sophisticated cybercrime ring. It was a globe spanning criminal enterprise the U.S. government says with defendants living in the United States, Israel and Russia. It included an alleged corrupt bank account in Azerbaijan, a compromised computer server in Egypt, and hundreds of millions of dollars in illicit profits routed through banks in Cyprus and Switzerland. The crimes involved allegedly hacking into JPMorgan (NYSE:JPM), media companies including “The Wall Street Journal,” software firms and even an investigative firm hot on the trail of the hackers themselves.

And that’s not all. According to the indictment, the cybercrime ring was involved in stock market manipulation, illegal online gambling, illicit credit card processing for illegal pharmaceutical suppliers, and an unlawful bitcoin exchange.

The three men allegedly in charge: Jerry Shaloan, described as the founder of the sprawling global ring, and his principal deputies, Ziv Orenstein, who were arrested in Israel earlier this year and await extradition to the United States. Also U.S. citizen Joshua Samuel Aaron charged with helping in computer hacking and securities markets manipulation. The U.S. says Aaron is fugitive, whereabouts unknown.

BHARARA: The conduct alleged in this case showcases a brave new world of hacking for profit. It is no longer hacking merely for a quick payout, rather it is hacking in support of a diversified criminal conglomerate. It is hacking to locate victims. It is hacking to spy on the competition. It is hacking to maximize profit. In short, it is hacking as a business model.

JAVERS: Prosecutors today said that most globally complex cyberhacking schemes go unsolved and the perpetrators get off. But today, they said, thanks to the cooperation of the FBI, the Secret Service, U.S. intelligence agencies and law enforcement officials around the world, this alleged criminal enterprise is out of business.

For NIGHTLY BUSINESS REPORT, I’m Eamon Javers in Washington.

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HERERA: A mixed day on Wall Street and it was in part because of Apple (NASDAQ:AAPL), which pressured the NASDAQ and capped gains in the blue chip down index. Shares of this widely held stock fell 3 percent after Credit Suisse lowered its earnings estimates for the company, citing growth concerns. The Dow climbed just 27 points to 17,758, the NASDAQ dropped 12 and the S&P 500 gained three.

Dow component McDonald’s (NYSE:MCD) won’t spin off its real estate assets, a move some shareholder had pushed for. In an investor meeting today, the CEO of the world’s largest restaurant chain said that spinning its property into a real estate investment trust would add excessive risk to its business model. The company is also increasing the number of franchise owned restaurants and will hike its dividend by 5 percent for the fourth quarter.

Separately at McDonald’s locations nationwide, there were demonstrations. Fast food workers and others demanded pay of $15 an hour. Organizers say they want to draw attention to the 64 million workers who earn less than that. Strikers also hoped to gain union rights.

In all, 270 demonstrations were planned not only outside of McDonald’s (NYSE:MCD), but also at Wendy’s and Burger King and KFC restaurants as well.

Wages and spending, of course, are important parts of the economy, but so is trade. And today, the Labor Department reported that imported goods fell for fourth straight month in October and the decline was half a percent. It was sharper than expected and it’s being attributed to the strong dollar, slow global growth and cheap oil.

Well, cheap oil may be here for quite a while to stay. According to the new report from the International Energy Agency, prices are forecast to remain relatively low until 2020 when they could possibly hit $80 a barrel. Now granted that level is above where prices stand today at around $44. But still, it’s below levels of last summer.

Jackie DeAngelis has more on the IEA’s world energy outlook.

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JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT: The recovery in oil prices will be slow. The Energy Information Agency saying that the market is rebalancing and prices will tick higher, but they won’t surge any time.

The current low price environment is actually slowing supply, because the low prices have caused some producers to curb production, taking supply off the market. On the demand side, China is the main driver. The IEA forecasting global energy demand to grow by one-third by 2040 and this takes into account the incorporation of more energy efficient technologies.

But that demand won’t enough to get prices rallying. The report looks at several scenarios, including one where prices stay lower for longer. But for that to happen, low cost producers like ExxonMobil (NYSE:XOM) and BP, they must be able to hold out and weather the storm of a low cost environment. It also depends on whether the Middle East scales back pumping.

The bottom line — $80 oil in four to five years — well, some analysts were calling that price at the end of this year. The main theme here is lower for longer and that seems to be here to stay.

For NIGHTLY BUSINESS REPORT, I’m Jackie DeAngelis.

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HERERA: Those falling commodity prices are hurting the railroads. In particular, declining demand for coal has resulted in less volume being shipped. And as we reported last night, that’s on reason why a major rail company is reportedly looking to buy up another.

Morgan Brennan has more on the potential for consolidation in the industry.

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MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The railroad industry may be ripe for another round of consolidation. At least one company thinks so.

Canadian Pacific has reportedly set the sights on a new takeover target: Norfolk Southern (NYSE:SO). According to reports, the two freight railroads have held preliminary talks with CP starting to raise funding for a deal that could top $24 billion. Both companies have declined to comment, but it wouldn’t be unlikely. Since Canada’s number two railroad’s pursuit of CSX (NYSE:CSX), Norfolk’s eastern U.S. rival, went off the tracks a year ago.

CP CEO Hunter Harrison has pushed for consolidation, arguing it would reduce congestion, particularly in Chicago, a notorious bottleneck and improve service. Analysts say it could also spur growth and that it’s time when a commodity collapse and strong dollar have pressured earnings.

MARK LEVIN: The overall commodity environment, the muted GDP environment that we live in today and could live in for many more years to come has to play some type of role in this. The reality of it is, is it’s very difficult to grow the top line in an environment like the one we find ourselves in.

BRENNAN: A deal between Canadian Pacific and Norfolk Southern (NYSE:SO) would create a transcontinental railroad with little overlap and almost 35,000 miles of track, stretching from Vancouver, Canada, all the way to Miami, Florida.

But some have questioned whether major rail M&A activity is even viable. Including Norfolk CEO Jim Squires, who suggested earlier this year that transcontinental mergers could be a, quote, “mistake”.

LEVIN: Step one is getting the Norfolk Southern (NYSE:SO) board to agree that this is a good idea at this moment in time. Hunter Harrison and CP I think correctly figured that they can’t do a hostile deal in this environment. So, it’s imperative to get the other player to play ball.

BRENNAN: And that would be the biggest hurdle. Getting a deal cleared by regulators. After several decades of massive consolidation, there are only seven major rail carriers left, including CP and Norfolk, and that group accounts for more than 90 percent of industry revenue. Meaning, a major merger could be vulnerable to derailment.

For NIGHTLY BUSINESS REPORT, I’m Morgan Brennan.

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HERERA: The Department of Justice is suing to block a proposed slot deal between United Airlines and Delta. That deal would give United 24 of Delta’s takeoff and landing slots at Newark Liberty International Airport. Officials are concerned that such an agreement would result in higher prices and fewer choices for consumers.

Also in Washington, the Supreme Court today took up a case that could change the landscape of class action lawsuits and it pits labor against management. At the center of the case is Tyson. One of the world’s leading producers of meat and poultry.

Hampton Pearson has more.

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HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Tyson Foods (NYSE:TSN) wants the Supreme Court to overturn a $6 million judgment involving some 3,000 workers in a pork processing plant in Iowa. At the heart of the dispute is just how much and how many workers should be paid for the extra time spent putting on and taking off protective gear.

Tyson lawyers argue those Iowa workers had more than 400 different jobs and not all of them were eligible for the special overtime pay.

CARTER PHILLIPS, TYSON FOODS ATTORNEY: The key to this case is whether or not you can bring together people who have very different jobs, very different donning and doffing of their protective work and sanitary work clothes and lump them together as a class and prove your ability to recover based not on any individual’s assessment of the situation, but rather on the averages across all of these activities.

PEARSON: Justice Anthony Kennedy, oftentimes the swing vote on the high court, challenged Tyson not keeping accurate records, tracking the overtime issues. It’s the third time in recent weeks that the justices have heard arguments seeking new limits on class action lawsuits. Pro-labor groups and consumer groups however are cautiously optimistic about this case.

SCOTT MICHELMAN: It’s potentially very significant in both of those areas. If workers of the kind who sued here, that is factory workers who are doing very similar jobs under the same policy, can’t band together and enforce their rights as a group, then it’s going to be very hard for workers to recover their wages when they’re unlawfully denied.

PEARSON: The Supreme Court is being asked to decide what’s the best mechanism for settling the claim: should it be just the few workers that might directly be involved or an entire class? The difference for Tyson’s: millions of dollars in potential damages.

For NIGHTLY BUSINESS REPORT, I’m Hampton Pearson at the Supreme Court.

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HERERA: Still ahead — adding up. Why the cost of caring for someone with Alzheimer’s is so much higher than for other diseases.

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HERERA: The former Treasury Department official who managed the $700 billion rescue of the banks in 2008 was named the next president of the Minneapolis Fed. Neel Kashkari oversaw the Troubled Asset Relief Program or TARP during the financial crisis. He takes over for Narayana Kocherlakota on January 1st.

Alibaba kicked off its Singles Day online shopping event with millions of dollars in sales recorded almost immediately. The sales started at midnight and within the first minute, the Chinese e-commerce company recorded $150 million worth of transactions that’s the equivalents of 1 billion yuan. Within the first 90 minutes, $5 billion worth of goods were sold. Singles Day is held annually on November 11th. It is similar to Cyber Monday here in the U.S.

The nation’s largest home builder D.R. Horton (NYSE:DHI) exceeded expectations in its fourth quarter earnings. New orders and closings all saw solid gains from a year ago and that sent the shares 8 percent higher. And this home builder is tapping into the market that few others are.

And as Diana Olick explains, it’s paying off.

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DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Express (NYSE:EXPR) Homes, they’re turning a quick profit for D.R. Horton (NYSE:DHI) which swung to the quarterly gain of 64 cents a share for the fourth quarter of 2015. An entry level no frills product launched in 2014, Express (NYSE:EXPR) is growing geographically and in units, accounting for now 22 percent of the company’s sales.

ROBERT WETENHALL, RBC ANALYST: We love targeting the first time home buyer. And they did a phenomenal job of capturing the return of the first time home buyer. And they have a terrific geographic footprint in the golden horseshoe, California, Texas, Florida, Arizona, Nevada, but especially in the core Texas market. There’s been a lot of concern about the impact of lower oil prices on demand.

OLICK: Other builders like competitor Pulte Homes say they are also going after first time home buyers, but not necessarily low priced entry level buyers.

RICHARD DUGAS, PULTE HOMES: A lot of our investment in the last few years has gone into the move up category. In fact, we are a diversified builder, but a lot of our investments based on where we see demand is for that upper end buyer, that Pulte brand buyer. And you’re talking price points of $400,000, $500,000 in many cities.

OLICK: By contrast, D.R. Horton’s average sale price for a home like these is just under $289,000 but its express price is $191,000.

Affordability in the existing home market is weakening as home prices rise faster than incomes and faster than inflation. And mortgage rates rise ahead of a possible rate hike. It all adds up to consumers watching the price tag ever more closely.

WETENHALL: There are some concerns, interest rates, labor shortages, leading to construction delays. But when you look at the order growth the Horton to live today, up 18 percent year over year. That just tells you, the consumer is coming back to housing.

OLICK: Or at least the consumer may want to come back, but at what price?

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

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HERERA: We begin tonight’s “Market Focus” with another home builder that’s surged in today’s session.

Beazer Homes saw its earnings rise when compared to the previous year. The builder was helped by higher revenue and says it expects stronger growth in future quarters. Shares were about 5 1/2 percent higher to $14.25.

Monsanto (NYSE:MON) slashing its guidance for the fiscal year as it has been impacted by restructuring costs and pricing pressure. The troubled global farm economy is also taking a toll on the agricultural economy — company, I should say. The stock fell 1 1/2 percent on the news to $92.86.

Wayfair posted a loss but it wasn’t as steep as what analysts were expecting. The home furnishings retailer saw sales surged in its most recent quarter, and the firm improved its cash flow. Despite that, shares tumbled 14 percent to $39.41.

SunEdison posted a wider than expected loss. The results raising concerns about the firm’s ability to fund its operations and acquisitions. The firm also saying it would stop selling projects to the yieldcos, which are bundles of energy assets spun into dividend-paying public companies. That weighed on its shares which fell 22 percent to $577. Also, its yieldco’s which are TerraForm Global and TerraForm Power also tumbled today.

Dell’s $67 billion plan to take over EMC (NYSE:EMC) may face a tax burden. That’s according to a Re/code report. The company could end up having to pay a tax bill of up to $9 billion. Part of the problem could stem from the structure of the deal, as Dell (NASDAQ:DELL) is proposing to use a new type of stock to help pay for the company. Shares of EMC (NYSE:EMC) fell more than 2 percent to $25.25, and Dell (NASDAQ:DELL) is privately held.

According to the Alzheimer’s Association, there are now 5.3 million Americans 65 and older living with dementia. The total direct cost of caring for someone with this disease has reached a staggering $226 billion, with Medicare picking up half the cost. But research shows that delaying the illness by five years could help decrease MedIcare spending.

Riesa Sperling is director for the Center of Alzheimer’s Research and Treatment at Brigham and Women’s Hospital, and she joins us now.

Doctor, welcome. It’s nice to have you here.

RIESA SPERLING, BRIGHAM AND WOMEN’S HOSPITAL: Thanks for having me.

HERERA: Put this in perspective. I mean, those are pretty stunning numbers. But as we try and solve the problem of dementia, where do you think we are in that process?

SPERLING: Well, I think we’re making a lot of progress in treating the disease, but the greatest progress has been able to start treatments before people reach that stage of dementia that’s so expensive. So, the emphasis is really shifting towards prevention of Alzheimer’s disease. And I think that will have the greatest public health impact.

HERERA: If we put it in the five year time frame, I know there are a number of companies that are working on drugs and other s for dementia and specifically for Alzheimer’s. How optimistic are you that we will see a breakthrough or considerable progress in that five-year period of time?

SPERLING: I’m fairly optimistic that we will have a treatment that at least bends the curve of decline within five years. I suspect that the first couple of drugs won’t be a full breakthrough — meaning we won’t find a cure. But if we can slow progression, particularly if we start early, that really will have an impact both financially and emotionally for families.

HERERA: Now, in terms of cost, some of these treatments — we mentioned a lot of it is being picked up by Medicare, but there are a lot of experimental drugs. There are trials, there are all sorts of treatments that are in process, but there are also very costly.

SPERLING: Yes, it is true that a lot of the treatments that are being tested right now such as antibodies will be somewhat expensive. But if you compare that to the average cost for Medicare and out of pocket expenses for these families, it’s still a fraction that it takes right now to care for someone. Again, if we start those therapies early enough, we can prevent the expensive part, such as nursing home care and needing supervision.

HERERA: Where do you think this is in terms of the radar of the major drug companies and the government? Because that will have a lot to do with how soon we get either breakthroughs or new developments or encouraging developments in this disease. Is it high on the radar? Or not so much?

SPERLING: Well, I think you’re absolutely right that we need to bring Alzheimer’s disease way up on the radar. It is increasing, I have seen that a lot in the past year, but if you think of this, Alzheimer’s disease is the only one of the top 10 leading causes of death for which we don’t really have a successful treatment.

And because our population is ageing at such a quick rate, we really have to bring this up to the top of the radar for public health problems.

HERERA: All right. We’ll leave it there. Thank you so much, Dr. Sperling. We appreciate it.

SPERLING: Thanks for having me.

HERERA: Riesa Sperling with Center for Alzheimer’s Research and Treatment at Brigham and Women’s Hospital.

Coming up tonight, the once hot art market. Is it suddenly showing signs of cooling off?

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HERERA: Here’s a look at what to watch for tomorrow:

It is the deadline for the potential merger between SABMiller and Anheuser-Busch InBev. They’ll have to have a definitive agreement hammered out. Apple’s latest product, its iPad Pro, will be available to order online. And we’ll find out how many billions were spent during the busiest one day shopping spree in the world known as Alibaba’s Singles Day.

And that’s what to watch for, for Wednesday.

Well, a painting that never sold at auction before did last night and it went for a near. The piece “Reclining Nude” was done by the Italian artist Modigliani. And just as this artwork is fetching top dollar, others are not.

And as Robert Frank explains, that has some wondering if hot market is starting to turn.

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ROBERT FRANK, NIGHTLY BUSINESS REPORT CORRESPONDENT: The art market is experiencing extreme highs and extreme lows, sometimes on the same night. At a Christie’s sale last night, this painting by Amedeo Modigliani sold for more than $170 million. Making it the second most expensive painting ever sold just behind Picasso’s “Les Femmes d’Alger” that was also sold by Christie’s in May for just under $180 million.

Though Modigliani’s “Reclining Nude” was estimated at $100 million, but after nine minutes of bidding it was finally sold to a Chinese billionaire Liu Yiqian who started off as a taxi driver and is now a billionaire. He and his wife plan to put it their private museum in Shanghai.

Also fetching a stunning price was Roy Lichtenstein’s “Nurse” which went for $95.5 million more than expected. But of the 34 works that came up for auction last night, 10 failed to sell, including a Lucian Freud, and a Picasso. The mixed results follow similar patterns at Sotheby’s sales last week, and they have art experts and collectors wondering whether we are seeing a slow deflation of an art bubble or simply a healthy adjustment in prices, as part of a longer term boom.

ANDREW FABRICANT: We learn that the market is in flux. There’s basically been a down round as evidenced by the softness in the sale and certain softness last night. And what you’re seeing is a very discerning market.

FRANK: More than $2 billion worth of art to be sold during the fall action season in New York. Still to come, a prized portrait of Mao by Andy Warhol. That could fetch well over $40 million, a great irony for the founder of communist China.

For NIGHTLY BUSINESS REPORT, I’m Robert Frank.

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HERERA: Well, when you think of start-ups, you probably think of Silicon Valley. But many small businesses are also taking root in Washington, D.C.

Kate Rogers (NYSE:ROG) reports from an entrepreneurial conference in our nation’s capital called Iconic, a partnership between CNBC and Inc. Magazine. Tonight, she profiles three finding success whil also challenging conventional thinking.

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KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Washington, D.C. isn’t just for regulation and policy, it’s also a hot bed for start-ups. From defense to health care and even food delivery, entrepreneurs are finding success and inspiration in the nation’s capital.

Start-up DroneShield is helping clients track nearby drones just by listening to them. Their products start at $2,000 and the company has raised just over $1 million to date.

JOHN FRANKLIN, DRONESHIELD: We have developed technology to detect consumer quadcopters and multicoptERS. It’s a microphone that’s recording ambient noise and what we do is we take that sound and we process it using algorithms to compare it to a database of known drone signatures.

ROGERS: The company’s clients include corporations, governments, and even citizens concerned about drones invading their privacy.

For expecting moms-to-be, there’s Babyscripts. They’re using technology and the Internet of things to improve care for expecting moms during their pregnancies.

ANISH SEBASTIAN, BABYSCRIPTS: The way we do it through two parts, one is a mobile app. The other is a kid, it’s called a mommy kit in which we have blood pressure cuff and a scale and essentially remotely monitor elements of pregnancy. Through this process, we’re able to create a healthy pregnancy, happy patients and also happy doctors.

ROGERS: In less than a year, the company’s products are in 60 percent of the hospitals in the D.C. area.

And for those who are working full-time and may not have the time to cook dinner each night, there’s Galley. The start-up is delivering hundreds of chef prepared healthy meals each day inspired by the cofounders’ long hours and lack of free time.

ALAN CLIFFORD, GALLEY: We have a team of chefs. They’re making options from scratch. You can go on our mobile app or Web site, choose what you like. And in a 30-minute window or on-demand, we deliver it out to you, ready for you to do one quick finishing in a microwave or oven. It has the consistency of a home cooked meal without doing any of the shopping, cutting, cooking, et cetera.

ROGERS: They deliver to most of Washington, D.C. and have since expanded to Baltimore and Bethesda, Maryland.

And while all three companies may have gotten their start right here in Washington, D.C., they’re looking to take their products and services nationwide in the future.

For NIGHTLY BUSINESS REPORT in Washington, D.C., I’m Kate Rogers (NYSE:ROG).

(END VIDEOTAPE)

HERERA: And that is NIGHTLY BUSINESS REPORT for tonight. I’m Sue Herera. Thanks for watching. Have a great evening, everybody. And we’ll see you right back here 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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