Transcript: Nightly Business Report – August 24, 2016

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Lashing out. Mylan under fire from the White House for skyrocketing EpiPen prices, but it may be the drug company’s relationship with the government that’s really giving sales of the allergy                                                                           medication a boost.

Housing headscratcher. Why sales of existing homes are tumbling, while others are soaring.

Overwhelming glut. While Uncle Sam is stepping in to buy 11 million pounds of cheese.

Those stories and more tonight on the NIGHTLY BUSINESS REPORT for Wednesday, August 24th.

Good evening, everybody, and welcome. I’m Sue Herera. Tyler Mathisen is off tonight.

The chorus of critics is growing, the White House, the American Medical Association, Democratic presidential candidate Hillary Clinton, the committee on aging, they are all adding their names to the list of those concerned about the rising price of EpiPens, the medication that can stop life-threatening allergic reactions.

As the criticism grows, so does the pressure on shares of EpiPen maker Mylan. Shares fell 5 percent today and are down about 12 percent since Friday.

And as Meg Tirrell reports, Mylan’s relationship with Congress has played a big role in tteh growth of EpiPen sales.

(BEGIN VIDEOTAPE)

MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: The scrutiny of Mylan’s price increases on the EpiPen only heightened today, with Washington ratcheting up the pressure across the board.

JOSH EARNEST, WHITE HOUSE PRESS SECRETARY: Pharmaceutical companies that often try to portray themselves as inventors of life-saving medication often do real damage to their reputation by being greedy and jacking up prices in a way that victimizes vulnerable Americans.

TIRRELL: Press Secretary Josh Earnest said in response to a question about EpiPen price increases that the White House isn’t second guessing Mylan, but that prescription drug price increases can raise moral and ethical questions.

Presidential candidate Hillary Clinton also weighed in, tweeting that “EpiPens can be the difference between life and death. There’s no justification for these price hikes.”

The price of EpiPens has risen more than 500 percent to more than $600 for a pack of two in the past decade.

BILL GEORGE, HARVARD BUSINESS SCHOOL: Heather Bresch has stirred up a hornet’s nest.

TIRRELL: Industry leaders commented as well, with former Medtronic CEO Bill George criticizing Mylan Heather Bresch for the increases. But it shouldn’t end there.

The Senate aging committee sent a letter to Mylan requesting information about EpiPen pricing and briefing to committee staff within two weeks. That’s the same committee that held hearings on drug price earlier this year, focusing on Valeant Pharmaceuticals and Turing Pharmaceuticals. That’s the companies founded by Martin Shkreli.

Mylan said today in a statement, quote, “We have reached out to every member of Congress who sent us a letter and we look forward to meeting with them and responding to their questions as soon as possible.

Mylan’s government relationship may be important to supporting growth of EpiPen sales. The company successfully lobbied for the passage of the 2013 law, the School Access to Emergency Epinephrine Act, which provides incentives for schools to stop emergency supplies of Epinephrine, the key ingredient in EpiPens.

PAUL HOWARD, MANHATTAN INSTITUTE: So, Congress got in the middle of this, including a number of Democrats, including Senator Bernie Sanders and Elizabeth Warren and said, we want to do this but didn’t think about the market effects are going to be.

TIRRELL: Since 2013, EpiPen sales have grown by more than 25 percent, according to Cowan Research. From $843 million in 2013 to more than a billion dollars last year. Now, the drugmaker has been lobbying Congress for another bill, to require Epinephrine stocking on airplanes.

Government attention on drug pricing is never good for stock prices and drug makers felt the impact today. Not only did Mylan stock continue its decline, but pharmaceutical companies across the board ticked lower as Washington ratcheted up the pressure.

For NIGHTLY BUSINESS REPORT, I’m Meg Tirrell.

(END VIDEOTAPE)

HERERA: Pfizer spending spree continues, the Dow component has agreed to buy part of AstraZeneca’s antibiotics business for more than $1.5 billion. That acquisition would shore up Pfizer’s portfolio of older products that it sells. Earlier this week, we reported that Pfizer was buying Medivation, the maker of a prostate cancer drug for about $14 billion. Shares of Pfizer finished the day just slightly lower.

Health care stocks in general came under pressure, having their worst day since June, and that weighed on the broader market. The Dow Jones Industrial Average lost 65 points to 18,481, the NASDAQ dropped 42, the S&P 500 fell 11. And oil prices fell as well, about 3 percent after an unexpectedly large inventory build added to concerns about two much crude supply and not enough demand.

And now to that housing market headscratcher. A new report today stands in sharp contrast to one that was released yesterday. Today, we learned that sales of previously owned homes fell in July for the first time since February. Existing home sales tumbled more than 3 percent last month last month to a rate that was below and economists expectations. But just last night, we told you new home sales were surging, so why the discrepancy?

Diana Olick explains.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Newly build homes are failing, existing homes not so much. July sent a seemingly mixed message from the housing market, but it’s actually pretty straightforward.

Sales of existing homes fell because the number of homes for sale fell. Down 6 percent compared to a year ago. There’s just very little to buy and that is pushing prices higher, making homes that are for sale less affordable. Realtors say people just aren’t excited to shop in today’s tight market buyer traffic is slowing down. Newly built homes on the other hand are benefiting from the lack of existing supplies.

Also, the jump in July for builders was driven by huge gains in the South where builders are putting up more homes at cheaper prices.

New homes make up just under 10 percent, though, of all home sales today.

LAWRENCE YUN, NATIONAL ASSOCIATION OF REALTORS: If we have a housing shortage, the economic incentive should be there for the more buildings will leave that inventory. We’re not getting there.

OLICK: Because builders are up against permitting and labor issues and higher cost overall, especially in big cities, which is where most young buyers want to be.

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

(END VIDEOTAPE)

HERERA: Housing has been one of the bright spots in the economy and something that the Federal Reserve watches closely when making a decision on interest rates. And today, a Central Bank official says he expects the Fed to raise interest rates this year. Dallas Fed President Robert Kaplan did not say when he thought rates would go up, or by how much, but did hint that an increase may be getting closer.

And hints are just what investors will be looking for when Fed Chair Janet Yellen speaks in Jackson Hole, Wyoming on Friday.

But as Steve Liesman reports, many economists and strategists believe the path of interest rate hike is anything but clear.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: As the Fed meets at its annual retreat in Jackson Hole to debate policy, raging fire of 30 miles away obscures their way of the majestic Teton Mountains.

It’s an act of unfortunate metaphor for the Fed meeting itself, which is focused on finding a framework to decide on interest rates. But the CNBC Fed survey found that 60 percent of respondents say the Central Bank lacks a framework. Just 24 percent say they do, and 16 percent are unsure.

Meanwhile, 47 percent say current policy is made based on latest economic report rather than changes in the median term outlet.

Though some say the Fed has been inconsistent, because the data itself has been inconsistent.

EDWARD LAZEAR, STANFORD ECONOMIST: The problem has been that as they’ve been looking at the data, no matter which model you use, they haven’t had a consistent period in which they could actually act in a consistent way to raise rates.

LIESMAN: As it is, survey respondents have pushed back yet again their expectations for the next Fed rate hike, from December to January 2017. They now think that the Fed gets done hiking rates at a record low at 2.29 percent in early 2018. While rates are forecast to stay low, stocks are seen rising just modestly this year and next with the S&P hitting 22.75 in 2017.

Modest stock gains come with modest economic growth. GDP is seen gaining just under 2 percent this year and a bit above it next year — the main concern, the fallout for Brexit and overseas growth. Add to the uncertainties, the outcome of presidential election. It’s gotten so strange that for the first time this election, the CNBC Fed survey shows respondents now believe it’s best for the economy if a Democrat wins the presidential election. So, from uncertainty over U.S. and overseas growth to the outcome to the presidential election, and even how the Fed makes policy, the clouds looming over the outlook are big enough to hide a clear view of even the immediate horizon.

For NIGHTLY BUSINESS REPORT, I’m Steve Liesman.

(END VIDEOTAPE)

HERERA: And some of those clouds that Steve is referring to may be setting over the Clinton campaign. The Democratic presidential nominee is coming under increased scrutiny for her ties to the Clinton Foundation while Secretary of State, and new e-mails are raising even more questions about the possible combination of power and money.

Eamon Javers is following the story for us tonight.

Eamon, good to see you as always. What do we know about these emails and that where does the story go from this point?

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, the question here is whether or not donors to the Clinton Foundation were able to buy access to Secretary of State Hillary Clinton while she was secretary of state. That’s what the critics are charging.

And so, the problem for the Clinton campaign going into the fall election cycle is that there’s a whole series of data now that’s going to come out through the bunch of groups that are investigating this email scandal, including Judicial Watch, which is a conservative group, Citizens United, another conservative group. These are no friends to Hillary Clinton.

And also, you’ve got the State Department’s own internal investigation. And then you’ve got the FBI, which is out there looking for emails as well. All of those are going to be dumping data out there for the public to see, as they did this week, all throughout the next month, month and a half or so. So, basically, all the way into October, the Clinton campaign is going to be wrestling with new disclosures over e-mails, each of which is going to set off a particular batch of stories and media coverage.

HERERA: Absolutely. Now, you’ve been doing some reporting of your own and what have you found?

JAVERS: Yes, just in terms of the relationship between the foundation and the State Department, saw an interesting e-mail here from a foundation official back in 2012 to Huma Abedin, who was a key aide to Hillary Clinton, in which he offers Huma Abedin a ride on a private jet to go to on event in Little Rock, Kansas. Abedin apparently accepted that ride on a private jet that was operated by a donor to the Clinton Foundation. That’s something the State Department told us is allowed under State Department ethics rules.

Surprising, though, because riding around on private jets is not standard for other aides here in Washington, on Capitol, or at the White House or other places, but at the State Department, they say that ride by Huma Abedin on that private jet to Little Rock was allowed under their rules.

HERERA: That’s interesting in and of itself.

JAVERS: Yes.

HERERA: All right. Eamon, thank very much.

JAVERS: You bet.

HERERA: Eamon Javers in Washington tonight.

And still ahead, cracking the code. Why some promising students are landing high paying jobs in just a dozen weeks without going to college.

(MUSIC)

HERERA: It was a ruling ten years in the making and a district judge denied bail to the man at the center of one of the last remaining criminal cases from the dotcom era. Earlier this week, we reported that the founder of Comverse Technology was coming to the U.S. to face the music after nearly a decade in Africa.

Today, he was in court and Scott Cohn was there.

(BEGIN VIDEOTAPE)

SCOTT COHN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Kobi Alexander spent the last ten years fighting extradition from Namibia on 35 felony counts, but now, his attorney say he is back to face the music. Alexander pleaded guilty to a single count of securities fraud and a plea agreement and said he deeply regrets his conduct.

But then, his attorneys asked that he’d be freed on $25 million bail pending his sentencing. But the U.S. District Judge Nicholas Garaufis would have none of it, noting that he was the judge who signed the original arrest warrant for Kobi Alexander back in 2006. “Spare me,” he said. “I wasn’t born yesterday. He denied bail, saying that Kobi Alexander’s intelligence and his guile are clear indications that he can’t be trusted.

Benjamin Brafman is Alexander’s attorney.

BENJAMIN BRAFMAN, DEFENSE ATTORNEY: We are bitterly disappointed with the court’s decision, but he’s the judge and I’m not.

REPORTER: What does this portend for sentencing? The judge was pretty harsh, particularly at the end.

BRAFMAN: I don’t want to speculate. I think we’re going to be submitting a very strong sentencing recommendation in a form of memo which will hopefully convince the court that a reasonably lenient sentence is appropriate.

COHN: Kobi Alexander is set for sentencing, December 16. He faces up to 10 years in prison, prosecutors have indicated they plan to seek substantial time.

Scott Cohn, NIGHTLY BUSINESS REPORT, Brooklyn, New York.

(END VIDEOTAPE)

HERERA: Falling foot traffic results at Express, and that’s where we begin tonight’s “Market Focus”.

The apparel retailer posted a disappointing quarter, missing both profit and revenue estimates. The company also reported lower e-commerce sales and things are not expected to get better anytime soon. Express significantly cut its earnings forecast for the year. Shares fell 25 percent to $11.94.

Investors had their first chance to react to Intuit earnings. The maker of tax preparation software topped profit and revenue expectations, thanks in part to an increase in subscribers in the company’s QuickBooks online business.

CEO Brad Smith says he’s seeing strong result from the company’s cloud platform.

(BEGIN VIDEO CLIP)

BRAD SMITH, INTUIT CEO: We’re saving the individual about $3,500 a year in tax savings. And so, it’s a real win for them. It’s a very simple app and we have really good adoption going on with this product.

(END VIDEO CLIP)

HERERA: Shares finished the day down 3.5 percent to $109.85.

Williams Sonoma issued a weak outlook for the current quarter, citing a software retail environment. The kitchenware retailer reported earnings that were in line with estimates in the most recent quarter. Shares were unchanged in the extended session after they ended the day down 13 cents to $54.14.

Weaker printer sales dragged down profit and revenue at HP. The company is also forecasting profit growth below analysts’ estimates because of the slowing demand for printers. That news sent share down in afterhours. The stock finished the regular session down 1 percent to $14.40.

And PVH, which owns the Tommy Hilfiger and Calvin Klein brand, saw its profits rise, surpassing analysts’ estimates. Revenues at the company also rose and the retailer listed its full year earnings guidance. Shares rose just marginally in the extended session, after ending the day down 73 cents to $108.82.

Ride-hailing service Uber is now offering a new perk for some of its drivers. The fast growing start up is partnering with an online investment company called Betterment to help employee set up retirement accounts. The pilot program will help drivers in certain markets open up an IRA or a Roth IRA without a required minimum balance. The first year will be free. Silicon Valley-based Uber says it’s working with Betterment to roll out the plan nationwide.

And also in Silicon Valley, coding boot camp for getting the attention of promising software engineers which hoped to land a high paying job in just a dozen weeks.

And as Aditi Roy reports, some students are now choosing these programs over college.

(BEGIN VIDEOTAPE)

ADITO ROY, NIGHTLY BUSINESS REPORT CORRESPONDENT: These students are jam-packed into a room sitting elbow to elbow for up to 16 hours a day. Six days a week for 12 weeks. They’re part of Hack Reactors coding boot camp, one of dozens of schools across the country that within just a few months turn student into software engineers and catapult them into high paying tech jobs at companies like Google or Facebook.

Hack Reactor’s founder says the intensity of the program is the key to its success.

SHAWN DROST, HACK REACTOR CO-FOUNDER: I think people underestimate how much you can learn in a short time frame and you can really compare and contrast the difference between modes of learning if you’ve ever taken a language class in high school or college, versus actually going to that country and immersing yourself.

ROY: Ninety-eight percent of Hack Reactor students land jobs after graduating, the average salary, $105,000 a year. The tuition here is close to $20,000, one tenth of what students pay to go to elite colleges and many students are turning to coding camps instead of going to college are grad school.

One of them is Muhsin Abdul-Musawwir.

MUHSIN ABDUL-MUSAWWIR, HACK REACTOR GRADUATE: The Hack Reactor program was going to give me the skills that would translate directly into a job. The computer science route, while it’s something I may still explore later on, but it wasn’t necessarily what I felt was going to get me the job and get me work and give me the skills I need to work and also build up my own ideas.

ROY: He said he’s doubled his salary after the program, now working as a software engineer for Esurance. Hack Reactor says by 2017, it expects to graduate 4,500 students and have alumni at 500 companies.

DROST: People generally presume the way we get jobs for grads is through relationship building. We do a lot of that, and that is a really effective mechanism for placing students, maybe about a third of our students get offers through that mechanism, through relationship we built directly with people, who put them in touch directly. But mostly, our graduates are just good enough that they can walk in their front door.

ROY: Now, some students can even apply for federal grants and loans to attend certain coding boot camps, President Obama has called these camps the ticket to the middle class.

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

(END VIDEOTAPE)

HERERA: While big tech firms in Silicon Valley hire coders, small businesses in Cleveland are also adding to their payroll. The city has become a hot bed of start-up activity and as Kate Rogers reports, the growing number of entrepreneurs is helping put Cleveland on the come back trail.

(BEGIN VIDEOTAPE)

KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: With the historic NBA championship win for the Cavaliers and the recent Republican National Convention under its belt, Cleveland is proving it’s ready for the national spotlight. Now, the city’s start up scene rebuilt after being torn down by two recessions is fighting for a shot of its own.

Tom Lix, founder of Cleveland Whiskey, launched his business in 2013 after selling his software company in Boston. The startup uses new technology to accelerate the distilling process from years to days, something that may not have been as easy to build in a more crowded city.

Jumpstart Inc is helping local businesses that fund launched ten years ago and invested $35 million into nearly 80 companies that have gone on to generated $2 billion. Thirty percent of those investments are in women and minority-run business.

RAY LEACH, JUMPSTART INC CEO: A decade ago, places like Cleveland didn’t fully understand the importance of small and medium-sized companies. They maybe weren’t fully appreciated or understood a decade ago, but now, everyone believes it’s the future of our city’s economy.

ROGERS: Nationally, the Cleveland Metro ranked number 12 for small business growth according to the Kauffman Foundation with 1,100 small businesses for every 100,000 residents in eh area. Local groups like the Detroit Shoreway Community Development Organization have helped raise $30 million to revitalize once troubled neighborhoods like the Gordon Square art district. The organization helps mom and pop businesses with resources and real estate.

ADAM ROSEN, DETROIT SHOREWWAY ECON. DEVELOPMENT: Neighborhoods are getting stronger. People are moving back into the city, from the suburbs, from the other cities, there’s a strong desire to be here. It’s an affordable place to live. There’s a lot of amenities.

ROGERS: And people are moving here quickly. The downtown in Cleveland is being revitalized with billions of dollars in new construction and a new influx of residents. Since the early 2000s, they’ve seen a jump of nearly 80 percent in population and nearly 70 percent increase in millennials.

More people means more business and startups like Old City Soda are leaning on the support of locals as they continue to grow.

SEAN ADKINS, OLD CITY SODA PRESIDENT: The best part about starting here for us is being part of the revitalization and knowing that we’re part of that growth.

ROGERS: The country is watching and now, it’s time for Cleveland startup to shine.

For NIGHTLY BUSINESS REPORT, I’m Kate Rogers in Cleveland, Ohio.

(END VIDEOTAPE)

HERERA: Coming up, taking a bite. Why the U.S. government is buying tens of millions of dollars worth of cheese?

(MUSIC)

HERERA: A lot of cheese in America, too much of it apparently. That has caused prices to fall, hurting the country’s farmers. So, the government is stepping in, buying up a massive amount of it, and as Eric Chemi tells us, this isn’t the first time that Uncle Sam has helped give a mountain a boost.

(BEGIN VIDEOTAPE)

ERIC CHEMI, NIGHTLY BUSINESS REPORT CORRESPONDENT: There are mountains of cheese in America, so much so that the surplus is at a 30-year high. Now, the U.S. government is going to buy lot of it, 11 million pounds in all at a cost of $20 million.

What’s happening in the cheese market is a classic case of supply and demand. A couple of years ago, cheese prices were much higher. Farmers wanted to take advantage of that. So, they rapidly expanded production. As the supply of cheese grew, prices feel and dairy farmers suffered a 35 percent drop in revenue. That’s less than 1 percent of the cheese currently being stored in the U.S.

ZACK CLARK, NATIONAL FARMERS UNION: Our inventory is at a 30-year high right now. It’s sitting at about 1.25 billion pounds of cheese. The USDA just purchased 11 million pounds of cheese. So, we have to put that in perspective, but it could help.

CHEMI: The problem wasn’t just an increase of supply. Demand slowed as well.

China didn’t want as much of our cheese and Russia instituted a ban on Western dairy imports. Over 1,200 dairy farms shut down last year due to low prices. Sixty-one congressmen and senators wrote a letter to agriculture secretary Tom Vilsack asking for assistance.

The money comes from a program that’s part of the agriculture act of 1935. The government reserves a percentage of taxes on imports, setting it aside to make food purchases when needed to stabilize prices.

The food then goes to food banks, pantries, international aid and even prisons. In the past two decades, it has been used to buy dozens of different foods with some of the biggest purchases being peaches, pork, beef, salmon, cherries, potatoes, apples, raisins, blueberries and oranges.

Despite this relatively small purchases making in the domestic cheese inventory, experts were optimistic it might spur higher prices in the always volatile commodity trading markets.

For NIGHTLY BUSINESS REPORT, I’m Eric Chemi.

(END VIDEOTAPE)

HERERA: And as Eric mentioned, the government plans to give all that cheese to food banks and pantries across the country to assist families in need.

And on that note, that is NIGHTLY BUSINESS REPORT for tonight. I’m Sue Herera. Thanks for joining us.

We want to remind you this is the time of year your public television seeks your support and we appreciate.

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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