Transcript: Nightly Business Report – March 8, 2016

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

(NYSE:CVX) increases its dividends for the 28th straight year, while other energy companies slash                                                                           theirs.  How safe are the very things that                                                                                             some investors want the most?

corporates to munis, to CDs, where you can find income now without taking
on a lot of risks?

HERERA:  From first to worst.  Unhappy shareholders are fed up with
United`s poor performance and they`re pushing for a shake up.

All that and more tonight on NIGHTLY BUSINESS REPORT for Tuesday, March

MATHISEN:  Good evening, everyone, and welcome.

The Dow and the S&P 500 snap their five-day win streaks.  More on that in a

But we begin tonight with Chevron (NYSE:CVX), the second largest oil
company in the United States outlined a new strategy as executives try to
manage through the changes that roil the oil these days.  Crude prices,
which are expected to stay lower for longer are making it for difficult for
the largest energy companies to invest their capital, spend on improvement
and follow through on ambitious profits, yet alone make profits.

Chevron (NYSE:CVX) shares fell 2 percent its new plan was outlined at an
annual analyst meeting.  But as Morgan Brennan reports, the CEO made it
clear that Chevron (NYSE:CVX) is doing whatever it takes to protect its


CEO and Chairman John Watson outlining three major points to maintain a
growing dividends while slashing spending and ramping up production.

JOHN WATSON, CHEVRON, CHAIRMAN & CEO:  We have a number of projects that
are coming on stream which will add revenue to our bottom line.  But also,
as we finish these projects that are under construction, we`ll be able to
take our spend down.  And between those states, we`ll stay pretty balance
in our cash flow.

BRENNAN:  The number two U.S. energy company cutting capital, spending
targets for 2017 and 2018, to $17 billion to $22 billion per year, down by
as much as a third from earlier guidance.  That as major liquefied natural
gas project in Australia and Angola come online.

2016 capex guidance of $25 billion to $26 billion however staying the same.
Yet, despite less spending, the energy giant expects production to grow
through 2020.  The game plan: focus on shorter cycle, higher return
investments, mainly more drilling in Texas Permian base and other shale
formations, rather than long term megaprojects that are uneconomical at
current prices.

The company says all of this will enable it to guarantee its dividends
through 2017, assuming Brent crude oil recovers to $52, a sizable jump from
nearly $40 today.

even if oil prices do not improve, they have very good credit and they also
have very strong balance sheet.  I think the dividends is very safe.

BRENNAN:  As with other major oil companies, Chevron`s nine-year-old
dividends has been a huge draw for investors.  The company has increased
that payout which current yields about 5 percent for 28 straight years.
Watson saying industry conditions are, quote, “tough right now”, but they
will improve.  And Chevron (NYSE:CVX) is betting that that recovery will
begin to shape early next year.



HERERA:  While Chevron (NYSE:CVX) may be protecting its dividend but the
same is not true for other energy companies.  Jackie DeAngelis takes a look
at the pressure to cut the payouts.


than 30 percent since lows hit this mid-February.  But where prices will go
from here will have big implications for dividends in the energy space.
Recently, Kinder Morgan, Marathon, Noble (NYSE:NE), Chesapeake and
ConocoPhillips (NYSE:COP), they all slash their dividends.  The majors are
still paying.  Exxon`s yield, 3.5 percent.  Hess (NYSE:HES), 2 percent.
Chevron (NYSE:CVX), a little less than 5 percent.

Still, number of companies cutting dividends nearly hit a 12-year high in
2015, topped only in 2009.  And the energy sector led the S&P 500 in
dividends cuts last year, with payouts dropping more than $6 billion.  At
this point, energy dividends could be tied to oil prices and dividend
payouts in all energy subsectors, production, exploration, even pipelines
are at risks.

this a bottom for oil.  Certainly, we`ve had a nice bounce off the lows.
Demand hasn`t changed.  Fundamentals haven`t changed.  We`re still very
well-supplied.  And production is still too high for this market to stay in
these prices.

DEANGELIS:  Credit Suisse sees oil prices at $50 by May.  Barclays saying
$45 by year end.  But Goldman Sachs (NYSE:GS) is saying the recent rally
maybe overdone.

There are some also risks to the upside.  Equities, the Fed, Asian markets,
Europe, all issues that have jostled this market and they do impact oil.

GRISANTI:  I don`t think the rally in crude oil can be sustained.  When we
traded down to the 30-dollar level, some frackers came out of the game, may
stop producing, but they`re still around.  They`re still waiting on the
sidelines.  And if we trade to the $40 level, $45 level, then you`re going
to see these frackers come back on the market and start producing again.

DEANGELIS:  Seasonality indicates that higher prices will be sustainable.
But remember, there`s still a big supply glut out there.  Will the demands
pop be enough?  And also as prices rise, producers will ramp production.
Will that in and of itself start to push those prices back down?



MATHISEN:  Investors are attracted to dividends because they provide
income.  But that`s not the only place investors can find it with
relatively low risk.

James Camp with Eagle Asset Management has some ideas you may want to
consider in the ultimate quest for yield for income.

James, welcome to good to have you with us.

JAMES CAMP, EAGLE ASSET MANAGEMENT:  Tyler, good to be with you tonight.

MATHISEN:  You know, a lot of people want to get income out of their
portfolio because they`re retired and they have to live off that income or
they just want it as a way to stabilize their portfolios.  I know you like
bonds.  My first question is, if I have sufficient capital, tell me how
much that might be.  To get ample diversifications, do you prefer that an
individual invest in individual, securities, funds, or ETFs?

CAMP:  Well, it`s a great question, Tyler and I much prefer having
separately managed assets or individual security just particularly in this
environment.  Remember, we`re exiting quantitative easing.  We`re exiting
accommodation, a little bit in this country.

And so, the folks that you cued up a minute ago that sort of chase yield, a
lot of them in the oil patch, are turning out to be an investments that
look good, that it had yield characteristics but don`t perform as expected
in the fashion that they would prefer.  So, you`re going to get exit.
You`re going to get rotation and you`re going to get some credit strains in
a lot of the ATF, and a lot of the mutual funds.  If you own your own
assets, you clip your coupon, you have a finite term, and you`re not
necessarily beholden to anybody else`s actions.

HERERA:  What about high yield?  We hear a number of analysts come on our
program and others and say they`re finding high yield attractive.  Are you
in that Camp yet?

CAMP:  Sue, not yet.  In fact, last year, we completed exited high yield in
favor of treasuries, which was actually a give yield trade, if you think
about it.  We actually sacrifice near term yield for performance.  The
problem with high yield is oil, as you mentioned, it`s a credit event.  The
wave has crashed.  It hasn`t hit shore yet.

And until default pick up off that 3 percent, in which they`re going to,
and we start to see a real recognition that commodities are a create event
and spreads really get wider even as generous as they are, you don`t need
to enter the high yield space.  You`re going to get an incredible
opportunity in credit and high yield, but be patient.  The wave has not
crashed the shore yet.

MATHISEN:  Your first choices are in two categories.  High grade corporate
bonds and longer term municipal bonds.  Tell me where you`re looking this
high grade corporate specifically and what kind of munis you`re looking at?

CAMP:  Well, Tyler, first, corporate bonds have gotten more generous in
terms of yield.  The investment grade universe is almost doubled in yield
differential or yield spread, almost to recessionary type spread levels.

MATHISEN:  Differential vis-a-vis treasuries?  Differential vis-a-vis
treasuries?  In other words, the amount they pay in —

CAMP:  Right.

MATHISEN:  — excess of the risk-free treasury.

CAMP:  Precisely.  So, the levels gotten quite a bit more generous.  So,
for us, anything is an a rated free cash flow solid balance sheet and this
you mentioned earlier, some of these companies are cutting dividends to
protect bond orders, it`s not often we get the front seat of the table but
the bond investors are being protected to protect investment grades and
some of these are very generous.  So, a five to seven-year term with an IG
investment grade name makes a lot of sense right now.

MATHISEN:  A-rated five to seven-year term.  And longer term munis again
high rated.

CAMP:  Absolutely.  The thing about municipal bonds, remember that even
though the term might be longer, the yield ratio or something that measures
the amount of extra income you get relative to treasury is in excess of 100


CAMP:  And municipals, Tyler, they don`t behave like treasuries.  They`re
not beholden to central bankers.  There`s 10,000 people a day retiring, as
you mentioned.  The demographics are supportive.


CAMP:  Supplies actually net negative.  It`s been a great performing asset
class and we still recommend them highly going forward.

MATHISEN:  James, we`ll have you back soon.

James Camp with Eagle Asset Management.

HERERA:  We just mentioned oil.  Well, oil prices retreated following six
days of gains.  Another of things pressuring the commodity today.  Goldman
Sach suggested the rally was unsustainable.  The Energy Information
Information cut its forecast for world oil demand growth this year, and
Kuwait said it would only freeze output if all the other major producers

So, today, domestic crude fell nearly 4 percent.  The drop in oil prices
along with the weaker than expected Chinese trade data weighed on stocks.
The Dow Jones Industrial Average fell 109 points to below the 17,000 mark
at 16,964.  The NASDAQ was off 59 and the S&P 500 down 22.

MATHISEN:  Sabine Oil and Gas won a key court ruling.  New York court says
the bankrupt energy producer can shed certain pipeline contracts.  Pipeline
companies, which we were reported on last week, were once thought to be
insulated from the decline in oil prices, since they had locked in long
term contracts.  This ruling potentially exposes those pipeline companies,
companies that transport oil and gas, exposes them to the swings in oil

HERERA:  Activists are creating some turbulence over United Continental.
Two hedge funds disappointed with the stocks` poor performance, want to
shake up the board and elect their own members.  That sent shares two
percent lower and they are down more than 15 percent over the past year.

And as Phil LeBeau reports, they`ve enlisted a former insider to help their


Airlines under pressure now that the carrier finds itself in the midst of a
proxy battle over who will be on the airline`s board of directors.  PAR
Capital and Altimeter Capital, which own 7.1 percent of the shares of
United Airlines, are putting forth a slate of six candidates to join the
United board of directors, including former Continental CEO, Gordon

PAR Capital and Altimeter Capital say that United`s board is like a country
club and it has lacked direction.  That`s why it has trailed other
competitors in the airline industry.  Bethune believes it`s time for new
leadership at United.

first place instead of last place.  United has the best employees and the
best fleet, the best route system.  How come they`re in fourth or fifth
place?  I heard your data, but they`re not running against draft horses.
These are races horses.  And they need to race.

LEBEAU:  In response to PAR Capital and Altimeter Capital, United`s board
of directors issued a statement saying a proxy fight could distract the
company from executing on Oscar`s strategic plan.  Oscar being Oscar Munoz,
the CEO of United Airlines, according to Gordon Bethune, is doing the right
thing as CEO.

Their issue, PAR Capital and Altimeter Capital, their issue is not with
Oscar Munoz, they say.  They believe it`s with the other leaders at United
Airlines and it`s time for fresh leadership on the board of directors.  By
the way, United added three new board members earlier this week.

Shares of United have lagged competitors over the last five years.  It will
be interesting to see how this board battle shakes out over the next couple
of months.


HERERA:  Still ahead, is the political climate stunting growth in small
business, the engine of job creation?


MATHISEN:  A new NBC/”Wall Street Journal” poll shows the race on the
Republican side tightening.  Donald Trump holds narrow three-point lead
over Ted Cruz in the Republican contest for the presidential nomination.
Latest figures come as four states cast ballots in primaries or caucuses
today.  Michigan, Mississippi, Idaho and Hawaii hold Republican contests
while Democrats Hillary Clinton and Bernie Sanders face off in Michigan and

John Harwood, as always, following the campaign for us.

John, let`s start with that poll.  That three-point lead must be a
national, nationwide poll.

What do you make of these latest numbers?

know what to make of numbers because primary polling is difficult because
those are family fights and attitudes can shift.  They are pretty volatile.

And so, for example, we got this NBC/”Wall Street Journal” poll showing
Trump up three points over Cruz.  It was a “Washington Post (NYSE:WPO)”/ABC
poll that showed Trump up nine points over Cruz.  And there`s an NBC online
poll that we do with Survey Monkey that showed Trump with 19 points lead.

So, it`s hard to know what to make of the national numbers.  What we do
know, though, Tyler, is this is about states now.  We have four states
voting tonight, Michigan, Mississippi, Idaho and Hawaii.

And Donald Trump wants to get wins to sustain his momentum going forward.
He`s on a path to the nomination.  He`s trying to stay that way.

HERERA:  So, I guess that question is how does the Republican race change
after tonight.  You answered it a little bit, but tell me more.

HARWOOD:  Well, interestingly, Sue, next week, we go from a situation where
delegates are awarded proportionally.  That`s what happens tonight.  So,
even if you lose, you get — if you run close, you`ll get almost as many
delegates as the guy who run the race.

But next week, it goes to winner-take-all.  That`s really important because
you`ve got big states, Ohio and Florida voting, Sue.  And if Donald Trump
can win those, he may be on track to having enough delegates that he can`t
be stopped.  But if John Kasich in Ohio, Marco Rubio in Florida, can beat
Donald Trump, they can stash away a large chunk of delegates and perhaps as
the establishment Republicans hope, deny Donald Trump a majority at the
convention and set the stage for some sort of brokering.

MATHISEN:  Quickly, Trump is favored tonight in Michigan, what do the polls
say about Ohio and Florida next week?  Does he have a lead there?

HARWOOD:  Donald Trump is leading in both places, but recent polls have
shown his lead narrowing over Rubio and over Kasich in Ohio.  Both single
digit races, potentially.

MATHISEN:  All right.  John Harwood, thanks very much.  We`ll know more
later tonight.

HERERA:  And the race for the White House is playing out on Main Street.
Small business owners say they are more reluctant to expand.  And according
to the latest survey from the National Federation of Independent
Businesses, the reason is partially due to the political climate.

Kate Rogers (NYSE:ROG) follows small business.  She`s with us now.

Kate, is this the first time that we`ve kind of seen the mention of
politics directly impacting Main Street during this political season?

We cover this index month to month.  This is the first time politics got a
big shout out here.

And there`s a lot of uncertainty as far as who the nominees are going to
be.  When you look more broadly at small businesses and the things that
concern them, it`s always the economy, government regulations and red tapes
and taxes.  So, I think they are hoping to find out who the nominees are
going to be on Republican and Democratic sides and see those issues
addressed on the campaign trail, and that will kind of lead to a little bit
more certainty and stability.

MATHISEN:  Did this survey asked, do we know whether these small business
owners have coalesced around any candidate on either side?

ROGERS:  So, this particularly survey doesn`t address individual
candidates.  And the NFIB historically doesn`t endorse a candidate.  But
Manta, which is a small business platform, did ask.  And they found no
surprise that Donald Trump was the leader on the Republican side, Hillary
Clinton, the leader on the Democratic side.

But if the two were to face off, Trump did get the edge over Clinton with
about 60 percent of the vote.

HERERA:  Interesting.  What about a longer term sentiment?  Because this is
a month-to-month rating as you mentioned and you follow it for us every
month.  But what about a longer term view?

ROGERS:  So, this obviously ebbs and flows month to month.  The historical
average is at 98.  This is at 92.9.  It`s a two-year low.  So, post-
recession, we have been trending higher. But we`ve seen it take a dip,
which is interesting, because oil has been really low.  Well, gas prices
often give a nice boost to Main Street.  We`ll keep watching it.  But it`s
been trending higher which is always good news.

HERERA:  All right.  Thanks, Kate.  Appreciate it, as always.

ROGERS:  Thank you.

HERERA:  Kate Rogers (NYSE:ROG).

MATHISEN:  The hedge fund manager Whitney Tilson shorts Lumber Liquidators
once again, and that`s where we begin tonight`s “Market Focus”.

Tilson ended his short position on the beleaguered flooring company back in
December.  Today, said he received new information.  Information he
believes will cause the company`s stock to fall.  He also said the recent
news that the Centers for Disease Control revised its cancer risks on some
of the company`s flooring played a big role in his decision.


WHITNEY TILSON, KASE CAPITAL:  That — when   you associate a business with
the word formaldehyde that`s bad, when you associate it with the word
“character”, that`s devastating.  So, in the last two weeks, according to
my most reliable source, Lumber Liquidators business has just gone off a


MATHISEN:  And today, so did the stock.  Shares of Lumber Liquidators fell
15 percent to $11.77.

Barnes and Noble (NYSE:NE) Education posted a lost, driven by a
restructuring cost and lower overall revenue, and same store sales.  The
college bookstore operators which was spin off last year says it will
outsource operations for its digital textbook platform and to cut the staff
for the platform to save expenses and shares of Barnes and Noble (NYSE:NE)
Education drops 15 percent in $9.69.  >

HERERA:  Citigroup (NYSE:C) CFO says first quarter revenue is expected to
drop 15 percent from a year ago.  He said investment banking revenue is
also expected to be down 25 percent.  The company, like the whole sector,
has been hit by volatility, low commodity prices and exposure to energy
loans.  Shares of Citigroup (NYSE:C) down more than 3.5 percent to $41.05.

Vivint Solar has cancelled its more than $200 billion merger agreement with
Sun Edison, saying Sun Edison`s financial issues kept it from fulfilling
the terms of the deal, calling it a, quote “willful breach of the
agreement.”  In July, Sun Edison agreed to buy Vivint, the deal immediately
criticism from investors.  Shares of Vivint fell 20 percent to $4.17.  Sun
Edison rose 5 percent to $2.

General Mills (NYSE:GIS) raises its quarterly dividend 4 1/2 percent to 46
cents per share, including the new payment the company`s dividend this
fiscal year, is up 7 percent from the previous year.  Shares made
fractional moves on the announcement which was issued after the closing
bell.  The stock closed the regular session at $59.95.

MATHISEN:  Coming up, paying a price.  How damage is the Maria Sharapova
brand, and what can the world`s most marketable female athlete do to
restore it?


MATHISEN:  Dick`s Sporting Good reported a big earnings miss.  Profits down
17 percent of the most recent quarter.  Revenue lower than expected.  The
company gave downbeat guidance for the current quarter.

The sporting goods retailer blamed warmer than usual weather for the
disappointing results.  The CEO said he`s gong to look at taking over
leases of closing sports authority stores, following that rival retailers
filing for bankruptcy last week.

HERERA:  Major corporations are distancing themselves from tennis pro Maria
Sharapova after she failed a drug test at this year`s Australian Open.
Porsche, Tag Heuer, and Nike (NYSE:NKE) is suspending their relationship
with the world`s highest paid female athlete.  Avon has, so far, declined
to comment.

But what does this mean for the Maria Sharapova brand longer term?

Brand consultant Dean Crutchfield is the Dean Crutchfield Company joins us

Welcome back, Dean.  Good to have you here.

Sue.  Always good.

HERERA:  What does it mean to her brand longer term?  She took
responsibility for the banned substance, which incidentally was just put
into ban status in January.  Did that help her?

CRUTCHFIELD:  Yes.  I mean, you know, typically a crisis can bring down a
reputation in a single battering like this.  It`s deeply concerning that he
was on these drugs.  But, you know, we have to say recently that they`ve
suddenly been made illegal.  So, we give her some road for that.

MATHISEN:  What`s her best move now?

CRUTCHFIELD:  Her best move now is to give relevant, timely and valid
knowledge with options so gossiping consumers and gossiping businesses can
be satisfied in terms of their questions.  At the moment, it really hasn`t
been answered.  We know it`s possibly heart conditional so, but what is it?
We need to know now so that we can feel comfortable and confident that this
isn`t cheating.

HERERA:  She said that she does have some health concerns.  She mentioned
pre-diabetes, and that runs in her family, a heart condition, et cetera,
which drug is licensed outside the United States to treat.  Do you think
that these major corporations were too swift to distance themselves or
smart to distance themselves?

CRUTCHFIELD:  No, I think they were smart.  They need to kind of
recalibrate and assess things.  We`re seeing situations like with Phelps,
where, you know, obviously, that was illegal drugs.  But, nonetheless,
people forget most things, they don`t forget drugs.  So, you don`t want to
be associated with that.  And it`s cheating.

MATHISEN:  Do you think the companies will ever take her back?

CRUTCHFIELD:  I believe so.  It depends on the details.  Once we`ve
actually get that information that we may be getting.  You know, long drawn
out bureaucratic responses don`t help anybody.  This is an urgency.  This
is a crisis.  It needs immediate information and we need to understand and
know that we`re confident that she has not been cheating.

HERERA:  Now, if indeed she does — they haven`t issued any kind of
punishment yet, but if indeed it is a long suspension, there`s speculation
that she won`t be able to play again because she would not have been on the
circuit.  How damaging is that to the brand?  How does she start to repair
her reputation?

CRUTCHFIELD:  I think, you know, the important thing again is hide nothing
tell all.  That`s how you handle a crisis.  Tell everything as soon as you
can so we get to understand and get a perspective on what`s actually
happened, and that`s kind of creeping out here in a little bit there.  And
I think it`s very smart and very wise that these big brands have taken a
word of caution to back off.

Now, you know, if we look at Tiger Woods and other situation that occurred,
you know, his games never really come back.  You know, would that be the
case for Sharapova?

HERERA:  We will find out.  Dean, thank you.

CRUTCHFIELD:  Thank you.

HERERA:  Dean Crutchfield of the Dean Crutchfield Company.

And that does it for NIGHTLY BUSINESS REPORT tonight.  I`m Sue Herera.
Thanks for watching.  And a reminder, this is the time that your public
television station seeks your support.

MATHISEN:  And we thank you for that support.  I`m Tyler Mathisen.  We`re
very grateful to you.  Have a great evening, everybody.  We`ll see you back
her tomorrow night.


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) 2016 CNBC, Inc.



This entry was posted in Transcripts. Bookmark the permalink.

Leave a Reply