Transcript: Nightly Business Report – August 12, 2016

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

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Marking milestones. Two
straight record closes for the NASDAQ. The Dow and S&P 500 hovering near all time highs and there may                                                                     be more to come.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Taking a breather. Consumers
gave their credit cards a rest and that has some concerned that economic
growth may not pick up as much as hoped.

MATHISEN: Priced out. As some home prices soar in Silicon Valley, even
those with high powered jobs can`t afford to stay.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Friday,
August 12th.

HERERA: Good evening, everyone, and welcome.

What a week, and what a six months. Today was the NASDAQ`s second straight
record close. Just yesterday, we saw all three major indexes settle at new
highs on the same day, something that hasn`t happened since 1999.

It was the ninth record close for the S&P this year. The eighth for the
Dow, and that`s something that would have seemed almost impossible this
year got off to their worst start ever.

So, despite today`s small move, stocks remain near all time thighs. The
Dow Jones Industrial Average fell 37 points to 18,576, the NASDAQ added
four and S&P 500 dropped one. And for the week, all the major indexes eked
out small gains.

MATHISEN: But don`t let the small moves fool you. Our next guest says
there will be rewarding opportunities for investors in the coming months.
He`s Paul Schatz, president of the Heritage Capital.

Paul, you`ve been a lifelong bull. Has anything you`ve seen lately changed
your point of view?

PAUL SCHATZ, HERITAGE CAPITAL PRESIDENT: Absolutely not. In fact, you
know, the moves out of the Brexit low in late June, early July, just added
more confirmation to what we saw coming out of the February bottom, that
this bull market has been rejuvenated. 2014 and `15 were pause years.
They were digestion years.

But this is a brand-new, refreshed, recharged bull market and as I`ve been
saying since 2010, it`s not going to end until we get to a minimum of Dow
20,000. Probably in the first quarter of 2017.

HERERA: Now, there are those out there, Paul, who say that the elections
looms large and there are some global issues with emerging markets and even
some developed countries that could put a halt to the Dow`s advance. You
obviously disagree with that.

SCHATZ: Yes, Sue, a lot of the issues that the bears have really hung
their hats on has been issues for 2016, and `15 and `14, and all the way
back. The markets have a great way of digesting and pricing in and
accepting the known issues. So, most of this is all priced in. I`ll say
this, the election we need to worry about is not November of 2016. The
election we need to worry about is France and Germany in 2017.

The markets pricing in Hillary Clinton as president, I think it`s 70
percent likelihood today, but even if Trump got back to the margin of
error, I think all you`re going to see is low to mid single digit pullback
that would just further recharge the market for a run above 20,000 next
year. So, there`s — unless there`s some exogenous, really crazy, horrific
event in this country, the market`s long and strong and I think people
should be continuing to invest in it now.

MATHISEN: Our Bob Pisani has been remarking in recent days about the
rotation within sectors and within stocks and certainly, we`ve seen that
this year, which is typically a sign of a fairly healthy market. So, it`s
not all concentrated in one sector.

Do you see it that way?

SCHATZ: I think, I agree with Bob. Look, you`ve had the defensive, the
yield chasers leading the market. You had utilities, staples, REITs and
telecom. They were the leaders , and that was concerning to the bears all
along and the bears were wrong. Now since Brexit, you`ve got
discretionary, you`ve got materials, semis, software. You`ve got these
really more fuel-driven sectors that are leading the market.

While it may be a little too far too fast, it`s not something I`d worry
about. Even have banks — I mean, I haven`t talked about banks since 2006.
Banks — and even energy is kind of rejuvenating itself.

So, you`ve got this really broad based, very powerful, very strong rally.
Typically, it does not dissipate overnight. The AD lines making new high,
junk bonds are strong, things are pretty good.

Bears, come on in. The water`s warm.

MATHISEN: That`s an enthusiastic call there, Paul. Thank you very much.
Paul Schatz with Heritage, have a great weekend.

SCHATZ: Thank you.

MATHISEN: Well, have a great weekend.

HERERA: Well, one of the reasons though that stocks were a bit lower today
was because of the disappointing retail sales report. Americans cut back
on discretionary spending last month, potentially tempering expectations
that overall economic growth may pick up.

Steve Liesman has more.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: After spending in a
solid clip in June, consumers gave their credit cards a rest in July. The
government`s retail sales report show that spending was flat last month
after an upwardly revised 0.8 percent gain in June. The concern among
economists is whether this was just a pause of consumers who have been
singlehandedly holding up the economy might be ending their spending ways.

Sales fell across the broad swath of categories for the month, clothing,
sporting goods and department stores saw declines along with grocery stores
and restaurants. Gasoline stations fell a sharp 2.7 percent, but that was
mostly the result of price declines. In fact, some economists wondered if
part of the declines came from overall lower prices in some industries.
Retail sales are not initially adjusted for inflation.

Auto sales surged more than 1 percent and online retailers bucked the trend
and saw sales increase. Consumer spending grew in the second quarter while
business investment and government spending fell, that led to just 1.2
percent in overall growth.

Now, it`s not unusual for a strong spending month to be followed by a soft
one, but if spending stays flat in August, there would be concerns the
economy might not be growing at all, or even that it`s entering recession.
So far, marquee retailers like Nordstrom (NYSE:JWN) and Macy`s have
reported better sales. Earnings for Target (NYSE:TGT) and Walmart, they`re
going to be watched closely next week. The Fed`s going to be watching,
too, saw consumer spending as another reason for caution in raising rates.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.

(END VIDEOTAPE)

MATHISEN: The prices paid by businesses fell in July. And producer price
index dropped .4 percent from a month earlier, and that is the largest one-
month decline in nearly a year. Producer prices have been picking up over
the past few months, but a decline in energy prices weighed on the index
this time around.

HERERA: And oil prices keep climbing. Domestic crude was up 2 percent,
settling at a three-week high. One day after the International Energy
Agency said world production is falling behind demand.

And as we reported last night, Saudi Arabia is also playing a role in
crude`s recent rally.

Jackie DeAngelis reports.

(BEGIN VIDEOTAPE)

JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Crude oil prices
are climbing higher on hopes that the world`s largest oil producer is
considering a production freeze. Earlier this year, similar conversation
between OPEC members brought no results. But some analysts are saying
there`s a $2 trillion reason why this time maybe different. That reason is
the sovereign wealth fund Saudi Arabia wants to launch. The kingdom`s
deputy crown prince has talked about taking Saudi Aramco, the state oil
company, public, in an effort to raise some capital for that massive funds.

While an Aramco IPO isn`t expected until next year or even 2018, oil in the
30s isn`t helpful when you`re trying to raise cash. A freeze would in
theory increase prices and be more supportive of a successful deal.

ALAN HARRY, HARRY RE TRUST CEO: We`re talking $2 trillion. There`s a lot
of money on the line. So, if you look at it from this angle, if they get a
freeze in place and they are at record production, you multiply the record
production times the higher increase in crude oil price and they have a
great IPO, possibly raising even more than $2 trillion.

DEANGELIS: A freeze hasn`t happened so far because the Saudis and the
Iranians haven`t agreed. The Iranians are ramping production to pre-
sanction levels and don`t want to stop. In a game that`s all about market
share, the Saudis can feel pressure to keep up.

But oil price fluctuations in the last two years have been all a result of
supply/demand economics ,specifically oversupply and not enough global
demand to meet it. Total non-OPEC production is down nominally year over
year, helping to rebalance. But according to OPEC`s latest monthly
bulletin, the cartel is pumping a million barrels a day more than it was
last year. That`s why a freeze is so crucial right now.

The OPEC talks are expected to take place on the sidelines of an energy
conference in Algeria in late September. Until then, crude oil pricing
could be volatile.

For NIGHTLY BUSINESS REPORT, I`m Jackie DeAngelis.

(END VIDEOTAPE)

MATHISEN: Stocks tend to get a lift overall when oil prices do rise, but
this year, stocks haven`t always been performing the way many expect them
too. And it is turning Wall Street`s conventional wisdom, some of those
cliches you hear, upside down.

Bob Pisani takes a look at the reasons why.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The old Wall Street
chestnuts aren`t working or are they? Several traders have inquired while
the old chestnuts don`t seem to be working. As goes January, so goes the
year, but the S&P is up 7 percent so far this year. Or sell in May and go
away. But the S&P is up nearly 6 percent since the end of April. And
August is the weakest month of the year, but the S&P is up fractionally.
Though it`s still early.

Now, what`s going on? There`s another major factor here. The presidential
election years have been an outside influence on the market and when you
layer in those signals, the markets are behaving in a fairly predictable
manner.

For example, the last seven months of election years have tended to be
strong, which is two losing streaks out of 16 elections since 1952. What
about August being the weakest month? While August has been the weakest
month for the S&P 500 since 1987, it`s just opposite in presidential
election years. It`s the fourth best month for the S&P according to Jeff
Hirsch at the Stock Traders Almanac. This may have to do with a post-
convention bounce.

How about sell in May and go away? It`s not that simple. The correct rule
is, don`t sell in May in the third and fourth year of the presidential
election cycle. That`s how important it is.

What about as goes January, so goes the year? The interpretation of this
rule is that every down January in the S&P 500 since 1950 has resulted in
either a new or extended bear market, a flat market or a 10 percent
correction, one of those three.

Hirsch insists that the January barometer did work with the correction that
followed in January and in February.

For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.

(END VIDEOTAPE)

HERERA: To politics now, Democratic presidential nominee Hillary Clinton
and her running mate Tim Kaine have leased their tax returns and the move
was intended to ratchet up the pressure on Donald Trump to do the same.

John Harwood joins us from Washington.

Good to see you, John.

So, what did Mrs. Clinton`s returns show and what were her sources of
income?

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, let`s talk
about the top line numbers. Bill and Hillary Clinton made about $10.5
million in adjusted gross income in 2015. That`s less than half of what
they made in the year before and that`s because she stopped making speeches
and Bill stopped making speeches once she became a candidate. They paid an
effective federal tax rate of about 34.2 percent, gave 9.8 percent of their
income to charity. Almost all of that was $1 million donation to the
Clinton Family Foundation.

And for the sources of income, $5 million was Bill Clinton`s speechmaking
income, $1.6 million was his consulting income. She made $3 million as an
author, $1.4 million on speeches before calling it quits and becoming a
candidate.

MATHISEN: Her running mate, John, Tim Kaine, also released his returns.
What did we learn other than he does not make anywhere near the money the
Clintons do?

HARWOOD: Just like Joe Biden, Tim Kaine is one of the least wealthy
members of the United States Senate. He and his wife, Ann, had an income
in 2015 of $313,000. They paid an effective tax rate of about 20.3 percent
and over the ten years of the returns they released today, the Clinton
campaign said that they had paid about 7.5 percent of their income in
charitable donations.

And as Sue noted at the top, all of this was about trying to put pressure
on Donald Trump to release his. We know that he`s worth $10 billion or he
claims to be worth $10 billion. We know that in some past years, he has
not had income tax liability at all. And the Clinton campaign is trying to
put front and center the questions of how much does he make, how much does
he give away, and how much federal taxes does he pay?

HERERA: I`m sure they`ll be talking about that over the weekend, John.
We`ll see what happens. Thank you, John Harwood in Washington.

HARWOOD: You bet.

MATHISEN: Still ahead, Silicon Valley exodus. What happens when a city
gets too expensive for even a CEO?

(MUSIC)

MATHISEN: There are reports tonight that General Motors (NYSE:GM)
expressed interest in buying the ride-hailing company Lyft, all of it.
According to the technology website, The Information, Lyft rejected GM and
instead, opted for a new round of funding. GM, which is not commenting,
has a minority interest in that startup.

HERERA: Silicon Valley real estate is hot, and for some, it`s too hot.
Earlier this week, we told you that the median price of a home in San Jose
hit $1 million last quarter and that`s pricing people out.

Aditi Roy reports from San Francisco.

(BEGIN VIDEOTAPE)

ADITI ROY, NIGHTLY BUSINESS REPORT CORRESPONDENT: The San Francisco Bay
Area is famous for its beautiful scenery and infamous for the price to live
in it. Just this week, Two Bay area residents with high powered jobs say
skyrocketing housing costs are driving them out of the area.

San Francisco Federal Credit Union`s CEO Steven Stapp is taking another job
in Portland in large part because he pays $5,000 a month to rent a 1,500
square foot home in San Francisco.

STEVEN STAPP, SF FEDERAL CREDIT UNION CEO: As we looked at it, the money
really goes a long ways in a city such as Portland, Oregon, and we`ve been
very much challenged here in San Francisco to look at something that was
affordable.

ROY: He says in Portland, he can buy a home three to four times as large
for half as much in mortgage. He`s not the only one. Last year, more than
12.5 percent of Bay Area residents who moved elsewhere ended up in
Portland.

Earlier this week, Kate _Downing, a member of Palo Alto`s Planning
Commission, announced on a media posts she was quitting her position and
moving to Santa Cruz because she and her family can`t afford the $6,200
rent of the house they share with another family. She`s also a lawyer and
her husband is a software engineer.

Zillow reports home values in San Francisco are up nearly 8.5 percent from
this time last year. Home values have risen nearly 5.5 percent year to
year.

One solution that`s been proposed is increasing the inventory of homes.
But that`s touched off a lot of debate. Currently, there`s a bill in the
California legislature that would allow people to build homes in their
backyards, but that`s been met with opposition from residents who worry
that it will create crowded neighborhoods and parking supply issues.

For NIGHTLY BUSINESS REPORT, I`m Aditi Roy in San Francisco.

(END VIDEOTAPE)

MATHISEN: JCPenney reports a smaller than expected loss. That`s where we
begin tonight`s “Market Focus”.

The chain store said strong demand in company`s Sephora beauty business and
its footwear helped results. Revenue and same store sales rose, but both
did come in a little bit shy of analysts` estimates. The company also
reiterated its full year guidance. Wall Street liked the overall picture.
Shares higher by 6 percent at $10.55.

The Department of Justice said it is open to receiving settlement offers
from Anthem regarding its proposed merger with Cigna. Last month,
regulators sued to block the proposed acquisitions citing antitrust
concerns. The trial is set to open in November and conclude by year`s end.
Shares of Cigna up 5 percent at $133.31, Anthem up 1 1/2 percent to
$130.19.

HERERA: Acacia Communication said strong demand for its technology
products helped to lift results. The company which makes high speed
devices for communication networks easily topped profit and revenue more
than double in the last quarter in fact. And that sent shares soaring 41
percent to $95.67.

Dick`s Sporting Good said its chief financial officer has stepped down.
The athletic apparel retailer`s current COO is expected to take on the role
until a replacement is found. The company did not give a reason for the
departure. Shares rose fractionally to $54.73.

MATHISEN: This week`s monitor has three picks for your portfolio that he
thinks are poised to improve the next two quarters. He`s Mark Luschini,
chief investment strategist at Janney Montgomery Scott.

During his last appearance in March, did pretty well. Mark recommended
P&G, up 5 percent, AT&T (NYSE:T) up 14 percent, and Eaton (NYSE:ETN) which
is higher by 16 percent.

Welcome, Mark. Are you still sticking with those three? You still like
them?

MARK LUSCHINI, JANNEY MONTGOMERY SCOTT: Certainly two of the three, Tyler.
Particularly, Eaton (NYSE:ETN) and AT&T (NYSE:T) attracted dividend yields,
still very reasonable valuations. I wouldn`t necessarily bail out of the
Procter and Gamble, but the fact of the matter is, it`s trading at about 20
times forward earnings and I still think has some prospects for changing
portfolios products to help to improve growth rates.

But that would be the one I`d be inclined to perhaps remove in order to
make some room for today`s three picks.

HERERA: Well, let`s get right to that. We start with the iShares Biotech.

LUSCHINI: Well, Sue, that`s the space we found recently very attractive.
Several weeks ago, we went long exposure to biotech stocks rather than
trying to pick the best house in the neighborhood, we`re just trying to get
the neighborhood right, so we came at it through the IBB, the ETF
represents biotech stocks.

The fact is, health care, obviously, has strong demographic underpinnings,
but on top of that, there`s increases M&A activity in that space. A lot of
the drug companies are looking for ways to reach out and sort of ignite
their R&D efforts to acquisition as opposed to intercompany investments and
we think that space ought to be able to prosper. It did well last year.
Got completely slaughtered and now, trades at reasonable valuation in our
view. So, I think the prospects are good.

MATHISEN: Your next pick is a little small, obscure, small cap in Redmond,
Washington. Tell us about it.

LUSCHINI: Perhaps your viewers have heard of it, Tyler. It`s called
Microsoft (NASDAQ:MSFT), sitting on bundles of cash. A company that`s
growing rather nicely and it`s a cloud place. So, as companies continue to
outsource their computing databases, they`re looking for firms not just
Microsoft (NASDAQ:MSFT) but Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOG) and
others to do that for them.

The difference between the others and Microsoft (NASDAQ:MSFT) is, Microsoft
(NASDAQ:MSFT) trades about 20 times earnings, on a go forward basis, which
is reasonable when compared to many companies in the tech space, let along
their cloud-based counterparts. In addition, it pays just above a market
dividend yield so you get a coupon (ph) as you own a cloud based computing
company that`s doing a good job and is an iconic brand.

HERERA: And Cisco (NASDAQ:CSCO) rounds out the three.

LUSCHINI: Yes. Again, here`s an iconic technology company, been a favor
for a long time. But what we`re seeing is telecommunication co e
underinvested in communications equipment.

You mentioned another on today`s news are starting to see the benefits of
the underinvestment, now, finally, turnaround where these telecoms, the
AT&Ts and Verizons of the world are trying to repair and restore their
communication network capabilities. And so, Cisco (NASDAQ:CSCO) is a
beneficiary of that, trading at just 13 times forward earnings a market
multiple of 17 times, and once again, a slightly above market dividend
yields.

MATHISEN: All right. Mark, thank you very much. As always, good to have
you with us. Mark Luschini with Janney Montgomery Scott.

LUSCHINI: Thanks, Tyler.

HERERA: Coming up, the big weekend for sports, and a big hello on one
coast and a big goodbye on the other.

(MUSIC)

MATHISEN: More big earnings on the agenda for next week. Here`s a look at
what to watch. Tuesday, the Dow component Home Depot (NYSE:HD) reports its
quarterlies. We`ll find out if it`s still benefiting from a strong housing
market.

Wednesday, the Dow component Cisco (NASDAQ:CSCO), which Mr. Luschini just
mentioned, out with earnings. And on Thursday, it`s Walmart`s turn, focus
will be on what the world`s largest retailer says about the consumer and
that is what to watch next week.

HERERA: The wait is over. Football is finally returning to Los Angeles.
And it could help the nation`s second largest market score a financial
touchdown.

Jane Wells calls the plays from L.A.

(BEGIN VIDEOTAPE)

JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s been over 22 years
since Los Angeles had a professional football team and 37 years since the
coliseum was decked out in Rams colors.

But the Southern (NYSE:SO) California football drought is over.

Are you nervous about Saturday?

KENNY BRITT, RAMS WIDE RECEIVER: Never.

WELLS: Wide receiver Kenny Britt may not be nervous about the preseason
opener against the Cowboys on Saturday, but a lot of other people are.

JEFF FISHER, LOS ANGELES RAMS COACH: There`s pressure on me every single
day. But I never in my career looked over my shoulder.

WELLS: The move west took years to achieve, with the owners Sam finally
convincing other owners earlier this year to let him bring the Rams back
for two other reasons. The team could make a lot more money in Los Angeles
than St. Louis, benefiting all of them, and he would privately finance a
$2.6 billion stadium which could host future Super Bowls.

Meantime, the Rams will have to spend at least three seasons in their old
home, the Los Angeles Coliseum. But tomorrow`s first preseason game is
sold out and even with over 90,000 seats, they`re going to add seat to
accommodate fans.

Rams tickets are also doing much better on the resell market, averaging
$235, according to Vivid Seats, up from 125 bucks a year ago in St. Louis.
That has moved the Rams up from 23rd place to seventh in resell ticket
value. But Coach (NYSE:COH) Jeff Fisher has yet to produce a winning
season, something the Rams haven`t had in 13 years.

Do you think you have a sales job in this town?

FISHER: No. I`m just — I`m the head coach. I coach. Players play and
we`ll do our best to win games. Winning games sells tickets.

WELLS: L.A. is ready for some football. How long it will wait for a
winner is up in the air.

For NIGHTLY BUSINESS REPORT, Jane Wells, Los Angeles.

(END VIDEOTAPE)

MATHISEN: From football to baseball, where Alex Rodriguez plays his final
game today as a Yankee, after more than a decade with the team. His tenure
includes the big contract becames the biggest at the time he signed it, and
even bigger controversies. The question now, did the Yankees investment in
Rodriguez pay off?

Morgan Brennan takes a look.

(BEGIN VIDEOTAPE)

MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: A-Rod has earned
more than any other major league player in history, inking too at the time
record breaking contract that in total grossed $416 million over the course
of his career, according to Spotrac.

But was he worth it?

MIKE OZANIAN, FORBES MEDIA EXECUTIVE EDITOR: He had a good agent. Scott
Boras, who really showed owners that A-Rod was no only good on the field
but was a draw at the gate. If you look at the Yankees` first two seasons
with A-Rod, their attendance increased 8 percent each year in 2004 and in
2005. And in 2005, they went over the 4 million mark in attendance, which
is an incredible feat.

BRENNAN: But his marketability eroded as the use of performance enhancing
drugs resulted in an unprecedented suspension for the entire 2014 season.
Heading into A-Rod`s final game, his publicist Ron Berkowitz says his
client`s image has come a long way from where it was two years ago.

RON BERKOWITZ, BERK COMMUNICATIONS PRESIDENT: Fox Sports move the game of
the week. I don`t know if that`s ever been done before, from Saturday to
Friday night and cleared their Fox programming schedule and put this on up
against the Olympics, you know, for the most part because he is such a big
player, a megastar in the game.

BRENNAN: Rodriguez will retire with more than a year left on his contract,
with the Yankees paying out the remaining $27 million and retaining him in
special advisory. The Yankees are by far the most valuable baseball
franchise, worth an estimated $3.5 billion according to Forbes.

So, what does this strategy yield the team? Well, room for new talent and
prospective mentors for those up and coming players. And, of course, a
revenue bump from tonight`s home game which is almost sold out. Just
before Sunday`s retirement announcement, the average ticket was $76,
immediately following, the announcement, that soared 500 percent. But has
since declined with an average price of $149 as of midday Friday.

By comparison, the average ticket fellow for Yankee Derek Jeter`s final
home game was almost $770.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan.

(END VIDEOTAPE)

HERERA: Before we go, here`s another quick look at how the markets closed
this record week on Wall Street. The Dow fell 37 points. NASDAQ added
four and S&P 500 dropped on.

We made it through.

MATHISEN: We certainly did.

HERERA: That`s NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera.
Thanks for joining us.

MATHISEN: Stay cool this weekend.

HERERA: I know, it`s hot.

MATHISEN: All right. I`m Tyler Mathisen, y`all stay cool as well. Have a
great weekend. We`ll see you Monday.

END

Nightly Business Report transcripts and video are available on-line post
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