Transcript: Nightly Business Report – May 27, 2016

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

new evidence the economy is improving.  And that`s one of the reasons why the most powerful woman in                                                                       America`s economy just gave a big hint on interest                                                                         rates.

(NYSE:VZ) and its almost 40,000 striking workers have agreed in principle
to end the biggest labor strike in years.


UNIDENTIFIED FEMALE:  The doctor really said, there`s nothing.  There`s no
medical treatment at


MATHISEN:  But groundbreaking surgery gave one mother hope, and her two
children their sight.  The third part of our “Modern Medicine” series
tonight on NIGHTLY BUSINESS REPORT for Friday, May 27th.

HERERA:  Good evening, everyone, and welcome.

If we learned anything this week, it`s that the economy is getting
stronger.  Today, we got even more evidence.  Economic growth at the start
of the year wasn`t really as bad as initially thought.  According to the
Commerce Department, the designation`s gross domestic product increased 0.8
percent.  Though still weak, corporate profits rose, and the decline in
business inventory investment was less severe.

Still, the needed proof that the economy is rebounding — well, listen to
what Federal Reserve Chair Janet Yellen said today.


JANET YELLEN, FEDERAL RESERVE CHAIR:  It`s appropriate, and I`ve said this
in the past, I think for the Fed to gradually and cautiously increase our
overnight interest rate over time.  And probably in the coming months such
a move would be appropriate.


HERERA:  She made no mention of overseas concerns, something that has kept
the Fed on hold in the past.  And with that, the chance of a June rate hike

The markets weren`t bothered by it.  The Dow Jones Industrial Average
gained nearly 45 points to 17,873.  The NASDAQ added 31.  The S&P 500 was
up almost 9.  For the week, all of the major indexes gained 2 percent or

HERERA:  So, an excellent week for U.S. stocks.  Can the rally continue?

Let`s ask Hank Smith, chief investment officer at Haverford Trust.

Hank, welcome.  Good to have you with us.

You know, Ms. Yellen said what she said, the markets little perturbed by
that or the prospect of higher interest rates.  Looks like the economy`s
getting better.  Is the stock market going to continue to get better?

HANK SMITH, HAVERFORD TRUST CIO:  Yes, I think the market is getting used
to the fact that we`re going to get a rate hike this summer.  We don`t know
if it`s going to be June or July.  If it`s — obviously, we have Brexit on
the 23rd of June before the Fed meeting.  So there`s a good chance they
might hold off.  And in that case, July would be the month.

HERERA:  You know, Hank, a lot of people think that we might get a spike in
volatility or some market unrest, if you will, depending on which way the
Brexit vote goes.  What do you think of that?

SMITH:  Well, look, I think clearly, the market wants to see Great Britain
stay in the E.U.  If it doesn`t, possibly there`s the sell-off, I think
that would be a buying opportunity for sure, just as every sell-off so far
in this 7-year-old bull market has been a wonderful buying opportunity.  I
don`t think it would be any different if we sell off because of Brexit.

MATHISEN:  Over the next few weeks, 12 weeks or so, the summertime here —
May — June, July, August — do you expect the market to trade sideways or
move higher?

SMITH:  We expect the market to gradually move higher in anticipation of
better corporate earnings in the second half.  Comparisons are to be much
easier.  You don`t have the dollar`s strength as a head wind that you did
last year, you don`t have super-low oil as a headwind.  Those are the two
major impediments to S&P 500 earnings.

And I think the market is an anticipatory animal.  It`s going to start
looking ahead toward that.  And I think a rise in the Fed funds rate is
going to be a vote of confidence in the economic environment being

HERERA:  Yes, you kind of took the words out of our mouth.  If they do
raise rates, it`s a sign they`re more confident about the economy.

Has the market kind of come around to that way of thinking rather than
being worried about a rate hike as they were a couple of months ago?

SMITH:  Right, well, and think about five months ago, we`re worried about
global recession, the U.S. going into recession.  How off was that worry?

So I think the other thing we need to take the Fed at its word is this is
going to be an extraordinarily gradual process.  And so, I don`t think
there are going to be any surprises for the market.  And — but the next
rate hike I think will be a vote of confidence in the economic environment
that we`re in.

MATHISEN:  Hank, thanks so much for being with us.  Hank Smith with
Haverford Trust, have a good weekend.

SMITH:  Thanks.

HERERA:  A tentative deal reached in one of the largest labor strikes in
years.  Verizon`s nearly 40,000 workers could be back on the job as soon as
next week.  The Dow component finished up almost 1 percent and was the top-
performing stock today.

Mary Thompson is covering it from the New York stock exchange.


strike since 2011 could be coming to a close.  Labor Secretary Thomas Perez
saying that Verizon (NYSE:VZ) and almost 40,000 workers have reached an
agreement in principle on a four-year contract.  In a statement he has said
he expects the workers to be back on the job next week.  Verizon (NYSE:VZ)
said it was pleased with the agreement in principle that will affect over
36,000 of its workers.

While a union involved in the strike issued a statement that said striking
CWA members have achieved our major goals of improving working families`
starts of living, creating good union jobs in our communities, achieving a
first contract for wireless retail store workers.  Perez said the contract
is in the process of being written and that it will go to union members to
be ratified.

Now, workers in Verizon`s wire line unit went on strike on April 13th.
They have been working without a contract since August as the two sides
were at odds on issues including pension benefits as well as the
outsourcing of call center jobs.  Effects of the strike could be felt in
the upcoming May jobs report.  It depends how many temporary workers
Verizon (NYSE:VZ) hired to offset the work there`s were on strike, and then
of course the impact will also be felt when Verizon (NYSE:VZ) reports its
second quarter results in July as its expected to have negative impact on
the telecommunications giant`s bottom line.

For NIGHTLY BUSINESS REPORT, I`m Mary Thompson at the New York Stock


MATHISEN:  In Japan, the group of seven leaders wrapped up their meeting
and pledged to address some of the challenges facing the global economy,
calling it an urgent priority.  Following the summit, President Obama and
Japan`s Prime Minister Abe visited Hiroshima, marking the first visit by a
sitting U.S. president to one of the two cities hit by atomic bombs at the
end of World War II.


own that hold nuclear stockpiles, we must have the courage to escape the
logic of fear.  And pursue a world without them.


MATHISEN:  President Obama did not apologize for the U.S. action in World
War II, nor was he expected to.

HERERA:  North Korea has been linked to the recent string of hack attacks
on Asian banks.  According to Symantec (NASDAQ:SYMC), the attacks can be
traced as far back as October of last year.

Eamon Javers joins us with more.

Good to see you, Eamon.

This report connects the North Koreans to the $81 million stolen from
Bangladesh`s central bank that you have been reporting on.  You have been
specifically.  Do we know that for sure?

that for sure despite what`s in the report you cited.  I`ve been talking to
people familiar with this ongoing investigation.

What they`ve told me is that there is an indication that a hacking entity
was inside the bank of Bangladesh`s servers and that that entity used
certain techniques and tactics that are very similar to the hack on Sony
(NYSE:SNE).  That hack was attributed ultimately to the North Koreans by
the U.S. government.

But it`s never been clear that the North Koreans actually did the Sony
(NYSE:SNE) hack themselves.  It`s always been a possibility out there that
they outsourced that hack to a third party enterprise, some kind of
criminal enterprise, somewhere else in the world.

What we may be seeing here, it`s at least possible, is that that third
party enterprise is out there doing other stuff as well.  So, it`s very,
very murky.  And investigators are trying to figure out now exactly who
this is.  And it`s a classic case of a whodunit.

MATHISEN:  I assume that none of the money has been recovered but what else
have researchers been able to discover here?

JAVERS:  Well, in addition to the fact that there`s this interesting
signature, they found that there were several different entities inside the
Bank of Bangladesh`s server.  So, this is a terrifying prospect for global
finance, because it`s not just the group that actually stole the money that
was in there.  Investigators have found there were several other groups
that were in their systems just monitoring all of the activity and watching
what was going on, perhaps for intelligence-gathering purposes.

And they`ve also now expanded their investigation to up to a dozen other
banks.  Not clear whether these are central banks or private banks, but a
dozen other banks with a focus on banks in Asia.  So, it may be that this
sort of thing is a lot more prevalent than we assumed going in.

HERERA:  Eamon, thank you.

JAVERS:  You bet.

HERERA:  Eamon Javers in Washington.

MATHISEN:  Still ahead, uncharted territory.  A relatively undeveloped
field and two siblings and what most of us take for granted: our vision.
The third part of our “Modern Medicine” series is coming up.


HERERA:  The largest every automotive recall just got bigger.  Eight
automakers today recalled more than 12 million vehicles in the U.S. to
replace potentially dangerous air bag inflaters made by the Japanese firm
Takata.  That brings the total number of vehicles recalled to nearly 70
million in the U.S. alone.

MATHISEN:  The Viacom (NYSE:VIA) board members could reportedly be replaced
very soon by the controlling shareholder Sumner Redstone who turned 93
today.  According to CNBC, there is a possibility that Redstone could
change the composition of the board of directors by calling a meeting of
shareholders and he, of course, is the controlling one.  A spokesperson for
Redstone said Redstone will act in the best interests of shareholders.

HERERA:  Hitting the road this weekend?  Well, if you are you`re likely to
stop at a drive-through to pick up food.  And you won`t be alone.  There`s
been a big uptick in sales of meals that you can get fast.

Susan Li reports from a rest stop in Ridgefield, New Jersey.


MCDONALD`S AD:  Introducing hot new deal at McDonald`s, introducing our new
4 for $4 –

bringing in the customers.

BURGER KING AD:  Burger King offers more for four with 5 for $4.

LI:  According to the NDP group tracking check of receipts, combo deals
help sell 100 million extra meals so far this year, and that`s up 20
percent from 2015.

R.J. HOTTOVY, MORNINGSTAR:  The key thing and why these combo meals have
been so successful, I think there`s still very much a large percentage of
the American population that is really driven quick-service restaurants for
value.  That`s a value proposition that works in today`s environment.

LI:  Fast food promotions are so popular with Americans that now one in
every three visits are to take advantage of them.

UNIDENTIFIED MALE:  Great deal, if you want to go that route.  For one
thing everybody`s looking for convenience.  Everybody`s looking for the
cheap deal nowadays.  Save money.  Something quick.

UNIDENTIFIED FEMALE:  It tends to be a consumer balancing the cost and what
it is they`re putting in their mouths.  So that tends to be a different
price that you end up paying for.

LI:  And that helps drive sales at McDonald`s which saw a first-quarter
increase of more than 5 percent.  Meantime, Burger King saw sales jump 4
percent last month.

HOTTOVY:  We`re slowly moving away from the dollar price point.  A lot of
the things we`ve seen are 2 for $2, 4 for $4.  That ultimately raises the
average check side.  So I think that you can start to see these meals for
long or proliferate over a longer period of time.  I expect to see them out
there for some time.

LI:  And it`s not just fast food restaurants noticing this bundling trend.
Starbucks (NASDAQ:SBUX) is now offering an $8 power lunch that includes a
sandwich, and salad, and chips.  TGIF has debuted a drink and dine
offering, and that includes an entree and drink for $12.

And with the Memorial Day holiday well under way, you can expect these
deals might bring in a few extra folks as they hit the roads.

In Ridgefield, New Jersey, I`m Susan Li for NIGHTLY BUSINESS REPORT.


MATHISEN:  And here`s a look at the performance of some fast food stocks
over the past year.  The fastest-moving has been McDonald`s (NYSE:MCD),
best with a 25 percent gain.  Yum Brands (NYSE:YUM) which owns Taco Bell
and KFC worst with a decline of 10 percent.

HERERA:  Our market monitor tonight is a classic stock picker who`s finding
opportunity in names that he says should be in your portfolio.  It`s his
first market monitor appearance on the program although we have had him to
talk about the markets on before.

John Buckingham joins us, chief investment officer at Al Frank Asset

Good to see you, again.  Welcome back.


HERERA:  So, given where we see the market, I guess the question is why
value?  And I know you like dividends.

BUCKINGHAM:  Right, it`s interesting.  Where interest rates are, I think
that dividends are extremely attractive.  I know people are worried about
the Fed raising rates.

But if you look at market history the 17 previous fed liftoffs we`ve had
value stocks and dividend-paying stocks have actually done really well.
Value stocks averaging 14 percent a year over the following one, two,
three, and five years.  So I think it`s a mistake to fear the Fed,
especially when rates would rise because the economy is improving.  And, of
course, the economy improving helps corporate profits.

MATHISEN:  And higher rates many people believe will help financial stocks
and one of your first choices is BB&T (NASDAQ:MSDXP) (NYSE:BBT) Corp, a
financial and one of the best run of the bunch.

BUCKINGHAM:  Right.  I really think it`s a quality name.  They`ve been
making acquisitions, you know, during the nuclear winter, if you will, for
the last six, seven years in the banking space.  Here you get a dividend
yield at 3.6 percent or so, or 3.2 percent.  And you have a P/E around 13.

So, I think it`s a classic value name but a quality name that`s really made
great acquisitions in my mind and is conservatively run believe it or not.

HERERA:  Next on the list, Total S.A., one of the world`s largest
integrated oil and gas companies.

BUCKINGHAM:  Right.  Well, same story as far as valuation goes.

The interesting thing about Total is they have a lot of their capital
expenditures are behind them.  They had a significant spend for six, seven
years.  And now that spend has been reduced.

And here again you have a low valuation, generous dividend yield, net of
taxes.  A yield about 4.5 percent.  I think that`s an excellent recipe for
success, especially given that the price of oil has rebounded somewhat.
And we think that earnings are going to accelerate for this company in 2017
and 2018.

MATHISEN:  And your third one is one that has been kind of in a lot of
investors` dog houses over the last 15 years.  But increasingly seems to be
performing, Cisco (NASDAQ:CSCO).

BUCKINGHAM:  Right.  Well, as a value investor, it is interesting that we
like Cisco (NASDAQ:CSCO).  But Cisco (NASDAQ:CSCO), today it`s trading at a
forward P/E ratio around 12, a dividend yield of over 3 percent.  and, of
course, management`s is very shareholder-friendly, buying back stock,
rewarding us with the dividend payout.

As the global economy rebounds, we think that Cisco`s poised to see
earnings start to reaccelerate in terms of growth.  And so, the fascinating
thing is pack in 2000, Cisco (NASDAQ:CSCO) was trading at a ridiculous P/E.
Even though stock`s gone nowhere, today`s the time to buy it because now
it`s a value stock.

HERERA:  Thank you, John.  John Buckingham with Al Frank Asset Management.

MATHISEN:  Big Lots (NYSE:BIG) lifts its earnings outlook for the year in
“Market Focus.”

The discount retailer saw profit rise 20 percent for the quarter with
results easily topping estimates.  Revenue and comparable store sales also
increased and were better than expected.  In addition, the company
announced a quarterly cash dividend of 21 cents a share, that`s nice.
Shares of Big Lots (NYSE:BIG) up 14 percent on the day to $50.95.

Game Stop saw its shares fall after it issued weaker than expected guidance
after the bell yesterday.  Despite the downbeat outlook, the video game
retailer did manage to top earnings estimates and reported sales in line
with target.  Shares down today nearly 4 percent, $28.80.

HERERA:  Thermo Fisher Scientific (NYSE:TMO) which makes laboratory
equipment will acquire microscope technology company FEI (NASDAQ:FEIC) in a
cash deal valued at more than $4 billion.  Thermo Fisher says the merger
will immediately bolster earnings.  The transaction is expected to be
finalized by early next year.

Shares of Thermo Fisher Scientific (NYSE:TMO) up fractionally to $152.13,
while FEI (NASDAQ:FEIC) soared on the news, over 14 percent higher to

Strong demand for beauty products drove profit and sales higher at Alta
Salon Cosmetics and Fragrance.  The results top the company`s forecasts and
analyst estimates.  Alta also lifted sales outlook for the year.  Shares
surged 9 percent to $233.15.

MATHISEN:  Imagine being told that your two young children would one day go
blind and there was little that could be done.  That is the story of one
family.  But thanks to some truly amazing genetic therapies, the two
children who got such a diagnosis can literally see a bright future.

Meg Tirrell has the third part of our series “Modern Medicine.”


UNIDENTIFIED BOY:  Let me see that.

Carper have been through more than your typical siblings.

ASHLEY CARPER, MOTHER OF TRIAL PATIENT:  I can`t imagine it being any
different than the two of them together going through this together, you
know, that had canes together, they`ve had to learn Braille together,
they`ve gone to school for the blind together.

TIRRELL:  Early in lives, they were both diagnosed with a rare genetic
retinal disease called LCA, or Leber congenital amaurosis.

CARPER:  The doctor really said, there`s nothing.  There`s no medical
treatments at this time.

TIRRELL:  Both Caroline and Cole were expected eventually to go blind.  But
their parents found an experimental treatment.  Two years ago, the kids
enrolled together in a clinical trial.  It was the Spark Therapeutics, a
young biotech company formed out of research from the Children`s Hospital
of Philadelphia.

JEFFREY MARRAZZO, SPARK THERAPEUTICS CEO:  The idea is that we are taking a
cracked functional copy of a gene and adding it back into the cells that
have dysfunctional or missing copy of that gene or blueprint.

TIRRELL:  It`s called gene therapy.  It`s relatively uncharted territory in
medicine.  The technology uses a modified virus to deliver a healthy copy
of a gene to make up for one that causes disease.  Scientists have been
working on it for decades.  But only now are the first gene therapies
approaching the market.

Sparks is among the most advanced.  Healthy genes are delivered through eye
surgery.  Once they`re in place, they`re designed to do the work of a
normally functioning gene, meaning patients only undergo treatment once.

MARRAZZO:  We`re doing is different.  We`re actually adding the blueprint
in and the cell then knows how to do the last step which is to make the
protein or the enzyme that might be missing.  And therefore, that is what
creates the potential for it to be a long-lasting effect.

TIRRELL:  In trials of 41 patients, the therapy is shown to improve both
vision and light sensitivity with no major side effects.

Caroline and Cole were no exception.  Before their surgeries, both kids had
trouble seeing in low light.  Now, though their vision`s not perfect, they
say they`re noticing big differences.


snowing.  And I was like, oh, I can see the snowflakes!  It was really
cool, like to actually see something that I`ve never seen in my life

TIRRELL:  Spark is one of several companies developing gene therapies,
targeting everything from hemophilia to sickle cell disease to other rare
disorders.  If they`re successful, it will be a new paradigm for medicine,
fighting genetic disease in just one treatment.

COLE CARPER:  I thought it was really cool how simple it was and how much
it changed my life.



MATHISEN:  To read more about gene therapy and the Carpers story, head to
our website

HERERA:  Coming up, turning up the heat.  The entrepreneur who followed his
gut literally and watched his business grow and grow.  You`ll meet him in
tonight`s “How I Made My Millions.”


HERERA:  Here`s a look at what to watch for next week.  On Monday, the
markets are closed for the Memorial Day weekend, but we`ll have a special
holiday edition of NBR.  On Wednesday, the big automakers release their
sales numbers for May.  And Friday, we get the economic release of the
week, May`s employment report.  And that is what to watch for coming up
next week.

MATHISEN:  Well, tonight, we meet an entrepreneur who has won 18
prestigious food awards for items like oatmeal cookie butter, masala
marinara, and hot mustard.  He`s perhaps best known for turning up the heat
on hot sauce.  He`s like a money-making mad scientist in the chili pepper

Here`s tonight`s “How I Made My Millions.”


MATHISEN:  Dave Hirschkop might act crazy, but it`s just one of the wacky
ways he promotes his insanely hot.

UNIDENTIFIED MALE:  Wow, I can tell it`s going to be hot.  That`s more than

MATHISEN:  Hot sauce.

like, that`s insane.  That`s crazy.  You`ve got to be nuts to make that or
eat it.

UNIDENTIFIED MALE:  If you don`t swallow it, it never gets bad.

MATHISEN:  From this blistering base he`s built an award-winning, multi-
million dollar specialty food brand, Dave`s Gourmet.

HIRSCHKOP:  That`s warm.

I`m so glad it happened.  I feel very lucky.

MATHISEN:  His luck began in the early 1990s when he decided literally to
follow his gut.

HIRSCHKOP:  California had a lot of taquerias.  The East Coast really

MATHISEN:  So, with the help of $35,000 from family and friends, he opened
a place called burrito madness in College Park, Maryland.

Dave`s biggest complaint?

HIRSCHKOP:  We had a lot of drunks coming in to the taqueria.

MATHISEN:  To teach them a lesson, Dave started spiking their food with
homemade hot sauce.

HIRSCHKOP:  Chilies are great because you`re going to hurt somebody without
injuring them.


HIRSCHKOP:  So it hurts and then 20 minutes they`re happy as a clam and
laughing about the experience.

MATHISEN:  He found success in extracts made from the inside of the pepper.

HIRSCHKOP:  Just amazing.  Then you could make the sauce taste all sorts of
ways.  And with super heat.  Like a different paradigm for making hot

MATHISEN: Next, he spent about $5,000 on bottling, airfare, and a
straitjacket and went blazing into the 1993 National Fiery Food Show with
his first extract-based product, “Insanity Sauce.”

HIRSCHKOP:  The heat was so much greater than what they had already
experienced.  People were floored.  And a couple people were literally,
literally floored.  The promoter of the show banned us which in the end
became a good thing.  We got a lot of publicity out of it.

Heard of Dave`s Insanity Sauce?

UNIDENTIFIED MALE:  Yes.  You`re Dave?



HIRSCHKOP:  We`d have stores selling 50 cases a week of sauce, which is

MATHISEN:  It was enough to make Dave sell the restaurant and move to
California, but not enough to quit his day job.

HIRSCHKOP:  I did the hot sauce as a hobby on the side.  But it just got to
be too big.

MATHISEN:  In less than a year he`d hired a small staff and was selling
sauces full-time.

Sales spiked the first four years, reaching roughly $2 million in revenue
in 1996, then slowed to a simmer.

So, in 2001, he started pumping out premium pasta sauces under the Dave`s
Gourmet label.  By 2009, the company was increasing sales and winning

HIRSCHKOP:  There were several reasons why we started to diversify over
time.  We`d just get bored.  We like the new and innovative.  That`s our

UNIDENTIFIED MALE:  Take it down a bit, it would be better.

MATHISEN:  All this tinkering has annual sales fired up to about $7 million
and Hirschkop says he`s got more heat up his straitjacketed sleeves.

HIRSCHKOP:  Big hot sauce companies, they could buy us between lunch and
dinner.  But I think what we`re doing is important still, because we`re
stretching the limit.



MATHISEN: Some like it hot.  Dave`s Gourmet products are carried by Target
(NYSE:TGT), Safeway (NYSE:SWY), Whole Foods, many regional chains.  And
true to his word, he has two new innovations coming out soon, a line of
creamy hot sauces and overnight oats.  I wouldn`t suggest you eat them
together, Sue.


MATHISEN:  The hot sauces — are you a hot food fan?

HERERA:  I like spicy food but not so spicy that you can`t taste the food.

MATHISEN:  That you`re sweating profusely.

HERERA:  Exactly.

MATHISEN:  All right.

HERERA:  That does it for us tonight.  I`m Sue Herera.  Thanks for joining

MATHISEN:  Have a great weekend everybody, I`m Tyler Mathisen.  We`ll see
you here on Monday`s special edition of NBR.


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