Transcript: Nightly Business Report – September 5, 2016

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Good evening, everyone, and
welcome to the special holiday edition of NIGHTLY BUSINESS REPORT. I`m Sue Herrera, Tyler                                                                                   Mathisen is off tonight.

It is Labor day and for all intents and purposes, summer is over.
Vacations are now a memory and that means it`s not only time for the kids
to go back to school, but it`s also time for you to get back to work and
focus on your investments, your personal finances and the market.

And that`s where we`re going to begin, the stock market. The summer saw
light volume as it usually does, but it also had a stretch of very low
volatility and for a while, the major averages traded in a tight range.
But that could change between now and the end of the year.

And as Dominic Chu tells us, there are some sectors that you may want to
pay attention to.

(BEGIN VIDEOTAPE)

DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT: For some experts, the
outlook for the rest of the year is somewhat promising.

BILL STONE, PNC INSTITUTIONAL ASSET MANAGEMENT: We`re looking for earnings
getting at least less bad and I think we`ll turn to the positive here by
the end of the year and you still have what we would argue is lower for
longer in terms of interest rates and what — whichever way you cut it,
lower interest rates do mean higher prices in the long run off her assets
and those assets include stocks.

CHU: But that doesn`t mean that the entire market is just going to start
soaring higher. There`s a debate as to what parts of the market will lead
the way, and which parts fall behind. Many strategists believe the sectors
like technology and healthcare will help drive things higher.

DANIEL SKELLY, MORGAN STANLEY WEALTH MANAGEMENT: I actually like
healthcare in particular because I think you have, frankly, stronger growth
and, frankly, you`re also tethered to longer-term secular trends, such as
the aging, the demographic dynamics in the U.S., aging boomers. In
technology, I think it was reassuring to see a lot of the sort of value
tech, big mega cab names performing fairly well through the most recent
earning season.

CHU: That might provide some fuel for an overall market move to the
upside. Technology and healthcare are two of the biggest parts of the S&P
500 and they had a good amount of success reporting better-than-expected
earnings so far this season.

As for where there`s less optimism, well, there are certain places out
there.

SKELLY: I think there are areas of utilities you need to be more concerned
about that frankly have very high valuations. There are areas of telecom,
particularly in some of our carriers, where you`ve got pricing competition.
And then there`s frankly areas of consumer staples that have long-term
secular concerns related to health and wellness and so for that I`d also be
cautious at these valuations.

CHU: As investors weigh future events like our presidential election and
whether the Federal Reserve will do anything with interest rates, how they
weigh different parts of the market could go a long way towards better or
worse returns heading into 2017.

For NIGHTLY BUSINESS REPORT, I`m Dominic.

(END VIDEOTAPE)

HERERA: So, what can we expect from the financial markets between now and
the end of the year and how could impact your investments.

Kristina Hooper joins us, senior investment strategist at Allianz Global.
And we`re going to talk about that.

So good to see, Kristina.

KRISTINA HOOPER, ALLIANZ GLOBAL INVESTORS SR. INVESTMENT STRATEGIST: Great
to see you.

HERERA: Thanks for joining us on this Labor Day.

Let`s start with what you expect the tone of the market to be between now
and the end of the year.

HOOPER: Our expectation is a lot more volatility. We expect the VIX to
pick up and that markets will be buffeted by a variety of different data
points and events.

HERERA: The VIX is the measure of volatility. It does tick up
occasionally, but are you looking for a highly elevated level or not so
much?

HOOPER: We do expect it to get fairly high, could easily get up to that 25
level that we`ve only seen a few times this year, just because there`s so
much going on this fall.

HERERA: What are you mainly focused on for the fall? Is it — is it the
economic data points? Is it the election? Is it the global environment or
maybe a combination of all?

HOOPER: It`s a potpourri of all those. So, our expectation is that the
Fed`s decision on whether or not to raise rates could have a significant
impact if it`s not expected — as could the presidential election if it`s
not expected, the outcome.

HERERA: Now, there`s a lot of rumors in the market that the Fed obviously
is data dependent. But they might be going in September instead of
December. Would you expect a September rate hike or not?

HOOPER: Well, we think a December rate hike is more likely and our
rationale is that we think the Fed is looking for a very compelling
evidence. So, if they don`t get that compelling data, and then they`re
much more likely to sit on their hands and wait until December to be sure.

But we think it`s an urban legend that they won`t act before the November
election.

HERERA: OK. So what about earnings? Let`s get to the fundamentals of the
stock market, a lot of people think it`s not overvalued but it`s pretty
fairly valued. Besides the data points, what do you think will be driving
the market or earnings going to be decent do you think?

HOOPER: Well, we think earnings will likely be flat through the end of the
year and so, in that kind of environment, there`s not a real catalyst.
There`s no fundamental reason for stocks to move materially higher.

HERERA: OK. Kristina, thank you so much for joining us.

HOOPER: Thank you for having me.

HERERA: Kristina Hooper with Allianz Global Investors.

September also means it`s time to go back to school and while kids across
America are getting ready to sharpen their number two pencils, parents are
buying them of course and a lot of other stuff.

Now, you might not know or realize it, but back to school spending is one
of the biggest shopping events of the year.

Courtney Reagan tells us which retailers may benefit from the spending
spree.

(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Back-to-school is
the second most important retail event of the year, though the National
Retail Federation says it`s really only strong every third year and this
just happens to be one of those strong years.

The NRF says families make do with leftover supplies and older clothing
stocking up only every three years. First data says back-to-school sales
do appear to be rebounding this year, with the strongest growth and
electronics.

Physical stores still reigns supreme. Survey data from the NRF show
discount stores like Wal-Mart (NYSE:WMT) remain the top shopping
destination, but online retailers are taking more shares than ever before.

UNIDENTIFIED FEMALE: I do a lot of shopping online because the brick-and-
mortar stores don`t really always have what you`re looking for, and online,
you really can just pretty much find anything that you`re looking for.

REAGAN: Regardless of where consumers are buying, price is key.

UNIDENTIFIED FEMALE: I`ll bring coupons or things like that. I usually
don`t like to try to spend full price on things. I usually try to get
things that are on sale.

UNIDENTIFIED MALE: I just got Old Navy because it`s affordable.

UNIDENTIFIED FEMALR: Definitely, we watch what we`re spending. We try to
see things in sales, what is a little bit cheaper than another.

REAGAN: And there`s good news for bargain hunters. According to First
Data, retailers are selling goods for less, that`s driving more foot
traffic and more transactions than last year, but it`s still early.

When consumers buy for back-to-school spending is harder to nail down.
Some consumers time shopping to take advantage of tax-free holidays, which
not every state offers and the timing varies.

Many families do at least some supply shopping early in the summer while
others wait to buy clothing until the school year begins partly so kids can
see what their friends are wearing, assuming someone buys first and partly
waiting on the weather to turn.

Most retailers reporting results in August said it was too early to tell
for back-to-school. However, Macy`s (NYSE:M) and American Eagle are seeing
strong denim sales, typically a key back to school item and cold soft
strength in young mens and juniors.

First Data says clothing and accessory sales were weak in July, but began
to take off in early August.

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan.

(END VIDEOTAPE)

HERERA: This is also the time of year when you may want to reassess your
money and freshen things up and make some changes.

Joining us now to discuss what you should be doing is Reed Fraasa,
financial planner with Highland Financial Advisors.

Welcome. Nice to have you here.

REED FRAASA, HIGHLAND FINANCIAL ADVISORS FINANCIAL PLANNER: Thanks, Sue.
Thank you for having me.

HERERA: So, not only is it back to school, as we just discussed, but it`s
kind of back to, you know, taking a look at your portfolio, your
investments.

What`s the first step?

FRAASA: First thing is really to make sure that you`re following process
and that`s really to look at the broad portfolio. We encourage people to
keep document, keep notes of why they have the portfolio, what`s the
meaning for it, what are their objectives, what kind of the comparative for
return portfolio to a benchmark, and simply just get a booklet start
writing down your thoughts, recording this. That`s the first step.

When you sit down this time of year, pull that booklet out and go through
it and remember why you own the portfolio, what`s the purpose for it.

HERERA: So, it`s not necessarily a change and you`re not advocating a
change in the overall plan, unless obviously your circumstances of change.

FRAASA: Correct, yes.

HERERA: But just kind of revisiting why you made the decisions that you`ve
made, and whether they`re still valid.

FRAASA: Yes, and we always tell people the same criteria you use to
establish your portfolio should be used to monitor the portfolio. A lot of
people make mistakes because they deviate from that plan.

HERERA: And is that emotion?

FRAASA: Emotion, absolutely, yes. Yes. So, we`re professionals, we don`t
have a motion attach the money, but that`s a big hurdle for people.

HERERA: Yes, I`m sure it is. And you also say that this is a time of year
when you can look at tax implications. That maybe kind of sophisticated
for some investors and very easy for other investors. What are those some
of the things that you should be taking into consideration?

FRAASA: Yes. So, we believe taxes are a tertiary concern. The first is
the broad allocation your portfolio, rebalancing it periodically, looking
at the individual investments and taxes are important. You can actually
look at an average portfolio, a taxable portfolio, tax consequences on that
will be typically about half a percent of one percent effective tax drag.
That`s the tax you pay on the activity in the portfolio.

With a little bit of effort, you can reduce that to less than a quarter of
a percent per year, doesn`t take a lot of effort. But again, those not
huge numbers, that`s why we say taxes should not be the main driver.

HERERA: Right. But it all adds up, right?

FRAASA: It does.

HERERA: Now, also, you can take a look at your traditional 401K and a Roth
401k. Walk me through some of the — some of the factors that make you
change —

FRAASA: Right.

HERERA: — that particular formula?

FRAASA: Right.

So, I was changing the way people look at tax planning. So, a lot of
people concerned with immediate taxes, but we encourage people to look way
in the future. So, by diversifying your tax buckets, it gives you more
options at retirement. Most people put their 401k money into a tax-
deductible traditional 401k. Many people today have the option to put it
into a Roth 401k. The Roth 401k, of course, you don`t get the deduction,
but it grows tax-free in the future.

Well, if you`re in the very bottom end of the tax bracket or the very top
high income earner, those tax deductions may not mean much to you. So, by
putting money into a Roth 401K, a married couple over about 10 years by
maximizing Roth 401Ks and Roth IRAs could accumulate about a half-million
dollars.

HERERA: Wow. All right. We`ll leave it on that optimistic note, Reed.
Thank you so much.

Reed Fraasa joining us tonight with Highland Financial Advisors.

Still ahead, the election could have a big impact on the markets this fall
and there`s one startup that`s trying to disrupt the political system.

(MUSIC)

HERERA: Congress will also be getting back to work, following it`s summer
break and there`s a lot on the agenda.

Eamon Javers is in Washington tonight.

Good to see you, Eamon, as always.

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Hi, Sue.

HERERA: It is election season. Is Washington going to get anything done?

JAVERS: Well, there`s not a lot of time to get it done, Sue. When the
Senate comes back, they`re going to have 43 days in session before the end
of the year. The House will only have thirty three days in session and as
you say, there is a lot to do, including passing appropriations bills to
keep the government funded.

At some point, if they can`t pass all the bills in the normal course of the
process, which we expect they won`t be able to do, they`ll have to pass one
of those continuing resolutions to keep the government running throughout
the fall and in the middle of an election season, it will be very
interesting to see if Democrats and Republicans can come together to do
that, when there`s so much animosity out there on the campaign trail.

HERERA: Absolutely. We also have the presidential debates coming up. It
has been an unconventional campaign to say the least. What are we
expecting?

Well, we don`t know what to expect just like we haven`t known what to
expect all along throughout this campaign season. In a traditional year,
you`d say you start to out you know look at the pluses and minuses of both
candidates as a debater, look at their past debate performances and say,
OK, we have some sense of what to expect here.

But in this case, the Donald Trump campaign hasn`t even completely
confirmed that Trump will debate Hillary Clinton that`s something that
still seems to be a little bit up in the air. There might be some
incentive for Trump to walk away from the debate, or at least threaten to
walk away from the debate, which he did a little bit during the primary
season.

And then the question of how Hillary Clinton on stage would respond to a
Donald Trump. This is somebody you know who was very, very tough on his
Republican competitors during the primary season, even engaging in personal
insults and nicknames and all that sort of thing. Hillary Clinton really
hasn`t been challenged that way one-to-one on live television before. And,
you know, we`ll see whether she handles it better than Jeb Bush and Marco
Rubio the others did last winner.

HERERA: It`s going to be very interesting, as it has been all the way
through.

JAVERS: That`s right.

HERERA: Eamon Javers in Washington — thanks, Eamon.

JAVERS: You bet.

HERERA: Well, one startup is trying to make a difference this political
season. The company wants to tap into this country`s current interest in
politics by starting an online forum for real people having constructive
discussions. It`s run by a pair of San Francisco entrepreneurs who hope to
one day turn it into a money-making venture.

Tyler Mathisen has their story.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Here`s one on whether or not the president should use
the term radical Islam.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Matt Mahan and
James Windon call their site Brigade. They also say it`s the world`s first
network for voters. Users share opinions and discuss hot button issues
like the presidential race, funding education or gun control.

In a little more than a year, users have shared more than six million
opinions. Those users come from all 50 states. The hope is that
discussions can help people to find out that Holy Grail, common ground,
from which to develop real solutions to pressing problems.

JAMES WINDON, BRIGADE CO-FOUNDER AND PRESIDENT: What this is about is
trying to enable people to self-organize, leverage relationships and get
things done.

MATHISEN: Signing up is free. You merely provide your home address to
help Brigade verify you. Users can see how their views stack up nationally
and locally.

MATT MAHAN, BRIGADE CO-FOUNDER AND CEO: I just felt like if anything was
going to make our politics work better, it would be social media.

MATHISEN: Mahan first got the idea as a student at Harvard back in 2004.
He lived down the hall from Mark Zuckerberg. Yes, that Mark Zuckerberg.

Mahan used the Facebook (NASDAQ:FB) still in its infancy to find other
students likely to join a protest aimed at ending Harvard`s investments in
two Chinese oil companies operating in Sudan during a genocide there.

In April 2005, Harvard divested.

MAHAN: So, Facebook (NASDAQ:FB) became a very efficient tool for figuring
out who was best connected, who was likely aligned with me, and then as a
tool to mobilize them to get behind a campaign.

MATHISEN: In 2007, Mahan went to work for a company called Causes, a
Facebook (NASDAQ:FB) app that helped people connect with non-profits.
That`s where he met Windon. At Causes, they saw 186 million people raise
$48 million for various organizations. Windon was sold on the power of the
digital platform.

WINDON: When we saw that compare sort of impact you could have through
technology in a matter of months or years, that`s changed my perspective.

MATHISEN: By 2013, though, Facebook (NASDAQ:FB) was moving away from third
party apps. Determined to make another go of it, Mahan and Windon teamed
with tech investors, big ones. Shawn Parker, Ron Conway and Mark Benioff
in 2014, betting Brigade could be both useful and profitable, but how?

Paul Rieckhoff runs the non-profit site Iraq and Afghanistan Veterans of
America. The IAVA test-partnered with Brigade last year. He thinks non-
profits will pay Brigade some day the same way recruiters pay to find
prospective employees on LinkedIn (NYSE:LNKD).

PAUL RIECKHOFF, IAVA CO-FOUNDER AND CEO: Brigade gives us an opportunity
to connect with someone who might be interested in gun rights or they might
be interested in immigration, or they might be interested in baseball. And
if we can inject veterans issues into that conversation, then we can expand
our market.

MATHISEN: For now, though, Brigade focuses on individual users like
Stephan Nicoleau, an infrastructure investor. Nicoleau thinks Brigade
might make money selling its data.

STEPHAN NICOLEAU, LAGUARDIA DEVELOPMENT PARTNERS: There stands to be an
opportunity to package that and make it available to folks who would have
an interest in using that data. So, think campaigns, think pundits, think
networks.

MATHISEN: Profit isn`t the driver just yet. Mahan and Windon believe
though that that path to the profit will become clear if they just stay on
point.

WINDON: At the core of politics, at the core of social change our
relationships and the technology layer that we`re seeking to build here is
simply meant to allow individuals to leverage those relationships more
efficiently, more effectively and ultimately, create more rapid change.

(END VIDEOTAPE)

HERERA: Brigade has recently given users some new tools. Now, you can map
your own district to see how your views aligned with those of other voters
and the politicians in your area.

Coming up, want to be your own boss? An electrician figured out how to do
it and now he`s sharing his secrets to success.

(MUSIC)

HERERA: In the spirit of Labor Day, we`re looking at the labor market and
the growing video game industry in particular. The Pokemon Go craze is
just the latest evidence of the increased appetite for gaming. That means
demand for designers and coders is more intense than ever.

Kate Rogers (NYSE:ROG) is in Salt Lake City.

(BEGIN VIDEOTAPE)

KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Fourteen-year-old
Nabeha Barkatullah isn`t spending her summer playing sports or hitting the
beach. She`s learning to make video games instead.

NABEHA BARKATULLAH, GIRLS MAKE GAMES STUDENT: A lot of the guys at school,
they would be like, “No way, you play games? You`re so weird.” I think
that`s the reason why a lot of girls don`t go into gaming.

ROGERS: Nabeha is part of Girls Make Games, a summer camp that`s trying to
introduce more girls to opportunities in an industry that`s long been
dominated by males. Over the past three summers, the camp has taught more
than 800 girls the fundamentals of programming and design.

BARKATULLAH: At first, I was like no idea how to code. Like what is
coding? But like after attending Girls Make Games, I`m pretty confident in
my coding.

ROGERS: During the camp, girls get to create team video games, pitch them
to industry experts and even get them published.

Fr founder Laila Shabir, it`s a chance to dispel the misconception that
women aren`t interested in video games, as well as to foster female talent
the game companies are now actively seeking.

LAILA SHABIR, GIRLS MAKE GAMES FOUNDER: They want a diverse workforce.
They want more ideas and more voices. And this is how they`re going to get
it.

ROGERS: These girls will be glad they got a head start in an industry
that`s booming. The global gaming industry is poised to hit $90 billion by
the year 2020, according to PWC, and experts within the industry say that
jobs could grow by about 10 percent in the next several years.

That growth is the reason companies like Salt Lake City-based WildWorks are
expanding. Beyond WildWorks, Salt Lake City is home to other big gaming
studios, including Electronic Arts (NASDAQ:ERTS).

JEFF AMIS, WILDWORKS FOUNDER: Right now, we`re looking for engineers or
programmers who have a background in the gaming industry.

ROGERS: With current staff of over 120, WildWorks is also looking for game
designers, artists and community managers.

And since the primary audience for their flagship game Animal Jam is Girl,
they`d like to hire more women.

AMIS: We want to continue to augment our female staff, because they bring
a perspective, a variety, an experience, especially as we make games that
resonate more with girls than with boys.

ROGERS: 3D artist Emily Vincent is new to the industry and feels
optimistic about its outlook.

EMILY VINCENT, WILDWORKS 3D ARTIST: You can definitely still feel a bro
culture kind of going on, but I think women are getting more and more
involved, as they realized that they can and be accepted.

ROGERS: Shabir is excited too.

SHABIR: How their eyes light up when they talk about their games and when
they say things like, I had no idea making a game was this easy, or making
games was this fun, I can`t imagine what they`re going to end up making and
I`m very excited for that.

ROGERS: For NIGHTLY BUSINESS REPORT, I`m Kate Rogers (NYSE:ROG), Salt Lake
City.

(END VIDEOTAPE)

HERERA: What does an electrician know about running a company? Well, some
know quite a bit, others not so much. And that`s why a New Jersey
electrician who once said there`s gotta be a better way and then figured it
out got the bright idea to share his business management knowledge for a
price, of course.

The way he sees it, he`s helping others create more jobs than he could ever
create on his own.

Tyler Mathisen has his story.

(BEGIN VIDEOTAPE)

MIKE AGUGLIARO, GOLD MEDAL SERVICE CO-FOUNDER: That`s a big deal

MATHISEN: Mike Agugliaro can get a charge out of people. And no wonder at
age 19, he became a full-time electrician. Three years later, he and a
partner started gold medal electrical contracting in central New Jersey.

They work long hours, did everything themselves, but like so many small
business owners, they did little else.

AGUGLIARO: We got so burnt out that my partner came to me one morning and
he said, Mike, I`m done.

MATHISEN: In 2004, after 11 years, it was either unplug the business or
find a better way. So, they invested heavily to learn how to actually run
a serious business.

AGUGLIARO: We spent over $800,000 on training the very best we could find.

MATHISEN: They started reading. They went to Disney (NYSE:DIS) to learn
about corporate culture. Zappos to become more efficient.

But one thing stuck out —

AGUGLIARO: Everything is marketing and marketing is everything.

MATHISEN: The simplest tweets helped turn their business and their lives
around.

AGUGLIARO: I did some study, and I found out, well, yellow is the first
color the “I sees”. So, it`s like, let`s have yellow trucks. Nobody had
yellow trucks out there.

And people were telling us, I see you everywhere. I was like, everywhere?
We have three trucks.

I was like, OK, we`re on thumbs and big right now.

MATHISEN: Very big, in a few years, gold medal added plumbing, heating and
cooling services. Now with 145 trucks and 190 employees, Gold Medal is on
track to hit $32 million in sales this year. He`s only in the office about
two or three times a week now, but he`s still busy because other service
company owners started asking how he did it.

That`s when he realized his knowledge, his experience, might be more
valuable to them even than it is to him.

AGUGLIARO: Nobody`s really stepping in and really serving these people, so
I said, why don`t we go out there and just change lives for anybody and any
type of service business.

MATHISEN: It was the germ of what would become a multimillion dollar idea.
Phone calls and Facebook (NASDAQ:FB) posts grew into a full blown
consulting business in 2013. One year in, another marketing change, a new
name for the consultancy, CEO Warrior. Annual sales, more than $3 million.

Eric Corbett became a warrior three years ago. He was about to buy his
brother out and take over the Maryland plumbing business their father
started in 1960. He signed up for a four-day Warrior event.

ERIC CORBETT, LARRY & SONS OWNER AND PRES.: We were pretty average at that
point. And we said, you know what, we don`t want to be average.

MATHISEN: Five times a year, Agugliaro hosts these events drawing a
hundred or so service oriented companies that pay about $7,500 each.

Corbett later upgraded to the Warrior fast track. That stepped up tier
costs $36,000, but gets you full time access to Agugliaro`s business
improvement. First hand looks inside gold medal, even a taste of martial
arts, a long time Agugliaro passion.

There are about 95 fast trackers like Corbett. In three years, his
business has grown from 22 employees to 30. Revenues were up from less
than $4 million a year to more than $4.5 million.

CORBETT: We`re really healthy as a company and positioned to have some
great growth here moving forward.

MATHISEN: That`s the kind of rewiring Mike Agugliaro likes.

AGUGLIARO: Why do I exist on this planet and it`s not to be an
electrician. It was never to do that. I knew there was a bigger part in
it and this is why for me — change lives.

(END VIDEOTAPE)

HERERA: Agugliaro has also written four books and he`s beginning to invest
in commercial real estate, following the advice he found himself giving to
other CEOs, to manage and protect their wealth by diversifying their
business interests.

And if you flew anywhere this weekend, you probably noticed the crowds.
More than fifteen and a half million people were expected to travel by
airplane this weekend and that is up four percent from last year.

That will do it for us thanks for watching this special holiday edition of
NIGHTLY BUSINESS REPORT. I`m Sue Herrera have a great evening and we will
see you all 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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