Transcript: Nightly Business Report – March 9, 2016

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR:  Turning 7.  Stocks have
tripled since the 2009 lows.  But is the tide starting to turn for one of history`s greatest bull market                                                                               runs?

Wage rage?  Are stagnant paychecks fueling the frustration of Americans
this election cycle?  And what are the proposals to fix it?

Attention shoppers.  Amazon (NASDAQ:AMZN) is going old school for the
YouTube generation.

All that and more tonight on NIGHTLY BUSINESS REPORT for Wednesday, March
9th.

Good evening, everyone.  I`m Sue Herera.  Tyler Mathisen is on assignment
this evening.

Well, happy anniversary.  Seven years ago today, the stock market bottomed
in the depths of the Great Recession.  Seven years later investors have
witnessed the third longest stock market upswing in history.  The blue chip
index, Dow index, increased more than 150 percent, putting $16 trillion
into the pockets of investors according to Wilshire Associates.

Dominic Chu takes a look at the stocks and sectors driving this bull run.

(BEGIN VIDEOTAPE)

DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT:  For some, it seems
like so long ago, and for others, the wounds from the financial crisis are
still fresh.  But the market has come a long way since bottoming out on
March 9th, 2009, and that was the day, remember, stocks hit a closing low
during the crisis.

Since that day, the Dow Jones Industrial Average is up close to 160
percent.  The S&P 500 index has gained about 190 percent.  And the NASDAQ
composite is up a staggering 265 percent.

Taking a closer look at the industries and sectors that have really been
driving the gains, it`s been consumer discretionary or retail-oriented
stocks that have really led the way higher, followed by financials and then
industrials.  Each of those sectors is characterized as cyclical, meaning
companies within them are closely tied to the up and downs of the overall
economy.

So, take a stock like coffee giant Starbucks (NASDAQ:SBUX).  At the crisis
lows, it was worth around $4 a share after adjusting for stock splits.
Today, it`s around about $57.

Or athletic apparel maker Under Armour (NYSE:UA).  Back then, it was close
to $3 on a split-adjusted basis.  Today, it`s around 80 bucks.

The laggers have been defensive sectors or the ones that aren`t as linked
to economic growth, like telecom stocks and utility stocks.  Now, given the
huge drop in oil prices over the last couple of years, the energy sector
has lagged the most of the major sectors.

Oil and gas drilling company Transocean (NYSE:RIG) was worth close to $50 a
share back then.  Today, it`s worth closer to $12.

Now, we know where the leadership`s been, but as we head into what could be
the eighth year of this bull market, a lot of questions remain about
whether the run can continue.

For NIGHTLY BUSINESS REPORT, I`m Dominic Chu.

(END VIDEOTAPE)

HERERA:  And one prominent investor says the recent rebound in the stock
market is done.  DoubleLine`s Jeffrey Gundlach, who has been negative on
stocks, late yesterday said he sees plenty of reasons to be pessimistic,
including relatively high valuations, lackluster economic growth and
falling profit margins.

(BEGIN VIDEO CLIP)

JEFF GUNDLACH, DOUBLELINE:  This is one of the reasons I think we`re not
out of the woods relative to risk.  The fundamentals really aren`t that
good.  The rally has been the characteristic of a bear market rally.

(END VIDEO CLIP)

HERERA:  He also said he does not expect a further rally in commodities and
that gold could go to $1,400 an ounce.

So, now, let`s turn to our bull and bear guests for their opposing views on
this market.

Kevin Nicholson is chief risk officer at Riverfront Investment Group and
he`s our bull.  He says this bull market does have more room to run.

And our bear is financial journalist Ron Insana, who sees many risks for
the market ahead.

Gentlemen, welcome to both of you.

Kevin, I`ll start with you.  You know, Mr. Gundlach seems to disagree with
you.  Make the bull case for me.

KEVIN NICHOLSON, RIVERFRONT INVESTMENT GROUP:  Well, this market that we`re
in right now is highly correlated with oil, and as oil on production has
been cut here in the U.S. and OPEC is now starting to talk about cutting
oil, I think that you`re going to get opportunities to see the market go
higher because as oil has stabilized, the market has begun to rally.

HERERA:  All right.  Ron, you`re a little bit less optimistic about the
market.  You think this upcoming year we`re in, the year we`re in now is
going to be a lot tougher than last year.

RON INSANA, FINANCIAL JOURNALIST:  Yes, and I think, you know, I agree with
Jeff Gundlach a great deal, insofar as I think we are in the midst of a
cyclical bear market in stocks.  It`s not a big deal.  It`s not 2008.
We`re going to go down 20 percent in the averages.  Most stocks have gone
down, 60 percent of the S&P has gone down 20 percent.  I think you got the
Fed possibly raising rates, you`ve got the rest of the economy weakening.

Clearly, European Central Bank, People`s Bank of China, Bank of Japan are
all going to do more to ease.  I`m just not sure that`s going to stimulate
demand to such an extent that the world grows more quickly and that the
U.S. stock market doesn`t have difficult digesting all this news.

HERERA:  What about that, Kevin?

NICHOLSON:  Well, I think that, you know, as I said, with oil, you know,
it`s going to — if oil goes up, that`s going to help emerging market
economies.  That`s also going to change the sentiment as far as global
growth is concerned.  I do believe that as far as the fed is concerned, you
know, they only have one hike on the table now.

You know, earlier this year it was four, but I think that you will get the
economy to be stimulated by the ECB and the Bank of Japan as they are
easing in their economies.

HERERA:  What about, Ron, the fact that if there is one more Fed hike, then
our Fed is doing the opposite of most central banks around the world.

INSANA:  And this policy divergence is very important.  The more the Fed
raises rates, the stronger the dollar and the more we restart the cycle
that we saw last summer and again early this year.  So a stronger dollar
drives commodity prices back down.  It creates a dent in U.S. exports,
multinational corporate profits and doesn`t help the stock market in any
way, shape or form and we have political risk and geopolitical are risk to
throw on top of that this year in a manner we haven`t seen in a while.

So I think there are more headwinds for the market than tailwinds, hence I
think it`s going to be a tougher year than people expect.

HERERA:  Kevin, what about the political risk?  I mean, it`s been an
absolutely wild political season, certainly, and the market generally does
not like uncertainty.  But I don`t see that as something you`re concerned
about, at least in my notes.

NICHOLSON:  No, I`m not concerned about the political risks right now
because when you look at the economic data that has been coming out, you`ve
been seeing nonfarm payrolls that surprise to the upside.  You saw retail
sales very strong the last time it came out.

So, it`s our belief that the improving economic data in the U.S. is going
to help the economy really weather any type of rate increase.  And let`s
just be honest, at this point the Fed is pretty much on hold while the rate
increase is on the table, it probably will not come until the second half
of the year if at all.

HERERA:  Would you agree with that, Ron?

INSANA:  Well, I don`t know.  I mean, it depends if inflation keeps moving
to the Fed`s target, as oil rebounds, that`s one of the factors in the
inflation outlook and that could push the Fed to do more rather than less
which would be a mistake.  I would prefer they`re on hold.

But when you look at the rest of the world, Sue, you know, China`s exports
fell 25 percent in February.  Their car purchases also fell internally.
So, they`re not strong internally, not strong externally.  The rest of the
world is effectively in recession.  I would prefer the Fed does nothing.

But if we start to see this commodity rally continue and inflation move
towards the 2 percent target the Fed has, they raise rates based on what
they`ve been telling us for quite a long time and a policy error like that
could upset the apple cart.

HERERA:  Very quickly, Kevin, you know, does China worry you?  It seems to
worry the market on almost a daily basis when we get data that`s weaker
than expected or surprising.  But does it factor into your investment
philosophy for the market?

NICHOLSON:  Well, we look at China, but China hasn`t really worried me
because I kind of equate China to how Japan was back in the `90s.  You
know, they were a big exporter as China has been, but China doesn`t buy
anything from the U.S., and so from our standpoint, the U.S. consumer is
what`s important.  We`re not seeing, you know, recessionary levels here.

You`ve seen the high yield markets even tightened by 150 basis points in
just a 2 1/2-week period.  So, I think that when you look at everything
that`s going on here in the U.S., you know, things will be OK, and that the
consumer will weather this storm.

HERERA:  OK.  On that note, Kevin Nicholson with Riverfront Investment
Group, thank you.  And Ron Insana as well — thank you, Ron.

All right. Stocks mostly higher, choppy trading today, though.  Oil prices
rose as investors looked ahead to a meeting of the European Central Bank
tomorrow and possible easing markets as we mentioned.

By the close on this seven-year anniversary of the bull market, the Dow
Jones Industrial average rose 36 points to 17,000.  The NASDAQ added 25.
The S&P 500 gained 10.

As Dominic Chu reported earlier in the program, the stock market has come
roaring back since the depths of the great recession.  S&P 500 has nearly
tripled, gaining more than 190 percent.  That`s been good for just about
under half of the adult population.

Bankrate reported last year that 48 percent of Americans have money in
stocks.  For those that don`t, they depend on wages which haven`t grown as
fast as the stock market has.  The Bureau of Labor Statistics shows that
since early 2009, average hourly earnings have increased about 15 percent.
And that discrepancy may be one of the reasons why voters are being
described as angry in headline after headline this election cycle.

Joining us now with his thoughts is Andrew Friedman with the “Washington
Update.”

Andrew, good it have you here.  Welcome back.

ANDREW FRIEDMAN, THE WASHINGTON UPDATE PRINCIPAL:  Thanks, Sue.

HERERA:  Would you agree with that, that the income inequality equation is
part of what`s driving the anger?

FRIEDMAN:  Absolutely.  I think it`s going to be the issue of the campaign
once we get to the general election.  Both parties acknowledge income
inequality is a problem.  Paul Ryan came out with a large report on it a
couple of years ago about what had to be done.  And I think this will be
the issue.

And the question is, you know, how do we reconcile what the two sides are
going to say which are very different?

HERERA:  I was just going to say, they have very different approaches as to
how to solve income inequality or whether they actually can.

FRIEDMAN:  Yes.  I mean, if you look at the Democrats, their view is
capitalism has hard edges, government has to step in to try to smooth out
those edges and programs that create jobs and provide education raise the
minimum wage, all of that will help income inequality.  The Republicans say
just the opposite.  Republicans say 50 years of these kind of programs
haven`t helped and what we need is to take the government shackles off and
let businesses grow.  And then if you look at the tax side, it mirrors what
I just said.

Democrats say more programs requires more revenue, taxes need to go up on
the wealthy.  Republicans say it`s the exact opposite.  You need to drop
taxes so entrepreneurs can grow.

If I could just —

HERERA:  How —

FRIEDMAN:  Sorry, Sue.

HERERA:  Go ahead.

FRIEDMAN:  One last point — just on the statistics, income inequality is
the worst it`s ever been in the history of the country and that makes a big
difference.  Like 22 percent of all income is earned by the top 1 percent.
That`s pretty staggering.

But on the other hand, the Republicans note this, 37 percent of all taxes
is paid by the top 1 percent.  So, maybe raising taxes isn`t the right
answer.

HERERA:  Right.  How much of this anger, which is — which is fueling kind
of wild election cycle right now, also has to do with not just the
candidates, themselves, but — and the economy, but Congress?  I mean, if
you have a Democratic president but the Republicans, you know, hold the
Senate, what`s going to get done?  I mean, there`s a lot of issues dealing
with the congressional side of things, is there not?

FRIEDMAN:  No question.  If you look at what Donald Trump has tapped into,
it is dissatisfaction primarily by working-class white voters who feel
they`ve been left behind economically and culturally in this political
correctness question.

So, they feel the Democrats haven`t helped them.  The Republicans haven`t
kept their promises.  And so, obviously, Congress bleeds into this problem.
It becomes part of the problem.

And we — as you point out, if you get a Democratic president, we know
we`re going it have a Republican House, how`s anything going to get done
and how are these people going to feel if they continue to be left behind?

HERERA:  Exactly.  We will see.  Thank you, Andrew.  Appreciate it.

FRIEDMAN:  Thanks for having me on.

HERERA:  Andrew Friedman with “The Washington Update.”

And still ahead, Amazon (NASDAQ:AMZN) takes an old idea and adds a new
twist.  But will it attract millennials and increase sales?

(MUSIC)

HERERA:  Amazon (NASDAQ:AMZN) signed a deal to lease 20 Boeing (NYSE:BA)
aircraft.  That deal is part of Amazon`s strategy to handle more of its own
deliveries and in turn cut costs.  The planes are being leased from Air
Transportation Service Group.  As part of that agreement, Amazon
(NASDAQ:AMZN) has the right to buy 19.9 percent of Air Transport stock over
five years at $9.73 a share.  And that sent shares of Air Transports
soaring more than 16 percent.  Amazon (NASDAQ:AMZN) fell fractionally.

And Amazon (NASDAQ:AMZN) as of late has been the retailer that others
follow, but now, it`s flipping the script a bit taking some plays from
veteran retailers` playbooks.

Courtney Reagan has that story.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE:  We love your collection.  I love it.

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  It`s a tactic
media properties HSN (NASDAQ:HSNI) and QVC have benefited from for years.

UNIDENTIFIED FEMALE:  You have to preserve your skin.

REAGAN:  TV personalities selling everything from jewelry to body lotion
and beyond.

Now, Amazon (NASDAQ:AMZN) is in on the game, too.

UNIDENTIFIED FEMALE:  Welcome to “Style Code Live” from New York.

REAGAN:  Amazon (NASDAQ:AMZN) launched its 30 minute live streaming
Internet show, “Style Code Live” last night.  The hosts talked fashion and
beauty trends, live chat with viewers and, of course, the products are
available for purchase immediately on Amazon (NASDAQ:AMZN).com.  A clear
strategy to prop up Amazon`s newly launched private-label brands.

Private-label brands are notable because they`re cornerstones for many
traditional retailers.  Think Costco`s Kirkland brand and JCPenney`s St.
John`s Bay.  Such names capture higher margins and appeal to consumers for
exclusivity.

ED YRUMA, KEYBANC CAPITAL MARKETS:  Private label is a great way for Amazon
(NASDAQ:AMZN) to fill out gaps in their current product portfolio.  We also
think it helps them go a long way in establishing credibility in apparel.
Private label is a big business for most apparel retailers.  And so, for
Amazon (NASDAQ:AMZN) to be serious about apparel, private label makes a lot
of sense.

REAGAN:  Yruma estimates Amazon`s apparel push could pay off for investors
estimating the segment could add at least 25 cents to earnings in 2017.
But should mainstream retail and home shopping networks be worried?

YRUMA:  I think Amazon (NASDAQ:AMZN) is targeting a younger consumer.  But,
you know, clearly, you know, QVC and HSN (NASDAQ:HSNI) will have to watch
very closely.  That said, in some ways it validates their model.

We also think we have a tremendous amount of data they collect and can
collect on their consumer base, which can certainly help them buy better.
And so, we think Amazon (NASDAQ:AMZN) could be a real disrupter in apparel.

REAGAN:  Account and company surveys show the number of consumers buying
apparel on Amazon (NASDAQ:AMZN) rose 25 percent in February over last year,
which means Amazon (NASDAQ:AMZN) is likely taking share from apparel
retailers like Macy`s (NYSE:M) or Gap (NYSE:GPS), companies that have built
their entire business on selling clothing, but are struggling lately to
grow sales.

So, as more consumers turn to Amazon (NASDAQ:AMZN) for clothes, its new
style show is poised for that extra sales push.

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan.

(END VIDEOTAPE)

HERERA:  Square reports quarterly results for the first time and that is
where we begin tonight`s “Market Focus.”

The mobile payment company saw a more than 49 percent rise in profit since
going public, but that wasn`t good enough to beat analyst expectations.
The company did, however, beat revenue targets.  CEO Jack Dorsey said he
expects the company to become profitable this year and outline the
company`s top priority.

(BEGIN VIDEO CLIP)

JACK DORSEY, TWITTER CO-FOUNDER & CEO:  Our main focus is on making sure
our sellers can accept any form of payment, including people`s phones and
we`re seeing that behavior shift very, very quickly.  And we`re taking full
advantage of it by putting ourselves first.

(END VIDEO CLIP)

HERERA:  Shares of square initially rose in after-hours trading.  They
close the regular session up nearly 5 percent to $12.03.

Cloud storage company, Box, posted a narrower than expected loss and
results that topped analyst estimates.  The company also issued guidance
for the year that came in above street expectations.  Box shares rose more
than 10 percent following the after hours news release.

During the regular session, shares were up 4 percent to $12.52.

And a robust holiday shopping season lifted profit and same-store sales at
Express (NYSE:EXPR), beating analyst targets.  Revenue, however, lagged.
The fashion retailer`s CEO said the company is optimistic about this year
and issued an upbeat forecast.  Shares rose more than 3 percent to $19.66.

An employee at a Massachusetts Chipotle Restaurant has tested positive for
norovirus.  The store was closed yesterday after several employees reported
feeling sick.  It`s expected to re-open tomorrow.  Chipotle has been trying
to recover after a rash of health scares around the country in recent
months.

Shares of Chipotle fell nearly 3.5 percent.  That`s off the worst level of
the day to $506.63.

Are you planning a trip?  Well, Google (NASDAQ:GOOG) wants you to do it on
your phone and launched a new service to get you all the information you
need in one spot.

But as Simon Hobbs explains, Google (NASDAQ:GOOG) is not necessarily on a
mission to shake up the traditional business of online travel.

(BEGIN VIDEOTAPE)

SIMON HOBBS, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Google`s worked hard
to make destinations as streamlined a product for mobile as possible.  Pull
up the normal Google (NASDAQ:GOOG) search bar and type, say, Europe
destinations.  The two most popular search solutions pop up.  More if you
press the blue down arrow.

For each, you get the best travel dates, best airfares, and average hotel
prices.  It attaches videos, ideas on local tourist sites.  You can even
price cap your search to browse only those vacations that are within your
budget.

For Google (NASDAQ:GOOG), huge potential profits lie in drawing in members
of the public, identifying what elements of a holiday each might buy,
where, and on what date, and then funneling or selling those qualified
leads to supplier to be inventory who bid in real-time for the business.
Google (NASDAQ:GOOG) hopes its new destinations product will make it the
platform that people naturally turn to, to search for travel.

ROB TORRES, GOOGLE MANAGING DIR. OF TRAVEL:  You can look at when is the
best time to go based on weather information.  You can actually look at
itineraries from folks who have taken these trips.  You may not know where
you want to go or when you want to go, but we can also show you for the
next six months based on what prices are available.

HOBBS:  Google`s Destination will compete with Kayak, owned by industry
giant Priceline, and Trivago, owned by the other industry giant, Expedia
(NASDAQ:EXPE).  Ever since Google (NASDAQ:GOOG) took over, mayor data
provider ITA software six years ago, the industry has been bracing for
Google`s big move.  The DOJ even recently allowed Expedia (NASDAQ:EXPE) to
take over more rival brands in anticipation.

The negative impact that Google (NASDAQ:GOOG) Destinations will have on its
rivals is far from certain.  Google (NASDAQ:GOOG) needs its partners like
Priceline and Expedia (NASDAQ:EXPE) to buy its qualified leads and Google
(NASDAQ:GOOG) isn`t involved in consumer-facing parts of the industry like
consumer health lines or people wanting to cancel their travel and it`s
certainly not dealing with local hotel owners.

Both Expedia (NASDAQ:EXPE) and Priceline are.  And in fact, they`ve
employed thousands more people to increase their presence in that area.

TORRES:  If we went down to transit action engine route, it would be a
very, very different business model.  And we have great partners we work
that do a great job when you want to transact and have great customer
service.

HOBBS:  In other word, if Google (NASDAQ:GOOG) Destinations can
substantially increase the share of the travel market it`s able to sell
onto its partners, it`s a potential win/win for all involved.

For NIGHTLY BUSINESS REPORT, I`m Simon Hobbs in New York.

(END VIDEOTAPE)

HERERA:  Coming up, the Internet`s dark side.  Where your personal
information can be sold to hackers.

(MUSIC)

HERERA:  Here`s what to watch for tomorrow.  The European Central Bank may
announce new easing measures at its meeting tomorrow.  It is the deadline
for the government to file its legal response to Apple (NASDAQ:AAPL).
American Express (NYSE:EXPR) (NYSE:AXP) whose shares are down 15 percent
this year hosts its annual investor day meet.  And that`s what to watch for
on Thursday.

The dark web, it`s a term that refers to a collection of hidden websites
where users remain anonymous.  It`s a place where illicit business deals
get done and where you do not want to find your personal information
because once it`s there, it can be used by people looking to commit tax
fraud.

Andrea Day has our crime and punishment report.

(BEGIN VIDEOTAPE)

ETAY MAOR, IBM SECURITY EXECUTIVE ADVISOR:  We`re talking about millions of
records in just one website on the dark net.

ANDREA DAY, NIGHTLY BUSINESS REPORT CORRESPONDENT:  This is Etay Maor.  His
job is to help IBM stay one step ahead of the hackers.  He`s taking us into
the dark web, where criminals go to sell and buy personal information.
Info they can use to steal your tax refund.

MAOR:  It`s exactly like going —

DAY:  Today`s dark web is frighteningly easy to use.

MAOR:  Criminals actually take the time to write reviews about their fellow
peers and how good the information they sold were.

DAY:  To get on, hackers download a special browser that allows them to
search the dark web.

MAOR:  This guy`s selling full information about your victims, name, birth
date, Social Security number, address.

DAY:  The data for sale stolen by hackers around the globe.  Sometimes
making its way here just minutes after an attack.

According to Maor, the number-one target last year, health care records
packed with sensitive medical info and even your Social Security number.

MAOR:  So just last year, over 100 million health care records were stolen.

DAY:  And those records unlike credit cards aren`t likely to expire any
time soon.

What`s the hottest ticket for criminals to find in the dark web?

MAOR:  Credit cards go for about $1.  Sometimes they`re given out for free.
When you talk about Social Security numbers, date of birth, more personal
information will go to $15.  When talk about health care records, those
there $60.

DAY:  A big concern for the IRS, hackers using stolen info to file fake
returns.

MAOR:  The IRS are saying in 2013, they said they stopped $24.2 billion
worth of fraudulent tax returns, but they didn`t stop $5.8 billion and
they`re expecting that number to hit over $20 billion in 2016.

DAY:  That`s why Maor says it`s so critical to safeguard your information
even at your doctor`s office.  His advice?

MAOR:  Every time you give information to any entity, you`re actually
exposing yourself in one way or another.  If your doctor asks you for your
Social Security numbers, you should not be afraid to ask why, why do you
need that information to take care of me?

DAY:  And he says, in most cases, they don`t really need that information.
Now, if the doctor insists on having your Social, always suggest using a
PIN number instead to ID the account.

I`m Andrea Day for NIGHTLY BUSINESS REPORT.

(END VIDEOTAPE)

HERERA:  And that is it for NIGHTLY BUSINESS REPORT tonight.  I`m Sue
Herera.  Thanks for watching.

We want to remind you — this is the time of year your public television
station seeks your support and we appreciate it.  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) 2016 CNBC, Inc.

 

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