Transcript: Nightly Business Report – November 30, 2016

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

(BEGIN VIDEO CLIP)

STEVE MNUCHIN, TREASURY SECRETARY NOMINEE: I think we can absolutely get to sustained 3 to 4 percent GDP. And that is absolutely                                                                       critical for the country.

WILBUR ROSS, COMMERCE SECRETARY NOMINEE: It’s also not true that all jobs are created equal. A guy who used to work in the steel mill now flipping hamburgers, he knows it’s not the same.

(END VIDEO CLIP)

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Economic team. Donald Trump names his top money men who have plans to reshape the economy, redo trade and reimagine the tax code.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: November gains. Stocks limp into the month, but finished with a roar, as the major indexes mark a number of milestones.

MATHISEN: Sudden surge. OPEC does something it hasn’t done since 2008, and oil prices soar.

Those stories tonight on NIGHTLY BUSINESS REPORT for Wednesday, November 30th.

HERERA: Good evening, everyone. And welcome.

President-elect Donald Trump’s economic team is taking shape. Former Goldman Sachs banker, Steven Mnuchin, was tapped to be the next treasury secretary. Investor Wilbur Ross, the next commerce secretary. Together, the two will work to boost the economy and tackle some of the most contentious issues.

The agenda is long and it includes overhauling the tax code, renegotiating trade policies, bringing jobs back to the U.S. and increasing overall economic growth. Today, investors heard their action plan.

And Steve Liesman has the details.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Wall Street appears to have heard a lot of what it wanted to hear in CNBC interviews with the new leaders of the economic team President-elect Donald Trump named today. Treasury Secretary designate Steve Mnuchin and Commerce Secretary designate Wilbur Ross both appear to walk back from some of Trump’s most extreme rhetoric from the campaign.

Mnuchin talked about aiming for growth of between 3 percent and 4 percent, rather than north of 4 percent.

MNUCHIN: Our most important priority is sustained economic growth. And I think we can absolutely get to sustained 3 to 4 percent GDP. And that is absolutely critical for the country.

And to get there, our number one priority is tax reform. This will be the largest tax change since Reagan. We’ve talked about this during the campaign. Wilbur and I have worked very closely together on the campaign. We’re going to cut corporate taxes.

LIESMAN: Mnuchin added that the new administration would aim to eliminate parts of the regulatory reform bill Dodd-Frank that reduce lending that the wholesale scrapping of the bill.

And Ross said the tariffs were a last resort and said Trump’s trade policy would aim to remove tariff and non-tariff barriers to U.S. exports. The two even praised Fed chair, Janet Yellen.

ROSS: I think that she dealt with a very difficult situation and did a reasonably good job.

INTERVIEWER: She may serve out her term. Will she be renominated?

ROSS: Well, that’s really a question for her and the president. Not a question for us.

MNUCHIN: But I will say, we have two governor spots to fill and that will be high on the priority list.

LIESMAN: The details are yet to come and the key will be the actual policies proposed and those that can pass into law through Congress. But for the moment, president-elect Donald Trump’s designees on the economy, some closer to the center than candidate Trump did.

For NIGHTLY BUSINESS REPORT, I’m Steve Liesman.

(END VIDEOTAPE)

MATHISEN: The president-elect’s economic team led by Mr. Trump himself predicts a kind of golden era of American growth.

Our next guest has a more restrained view. He’s Lakshman Achuthan, co-founder of Economic Cycle Research Institute.

Lakshman, welcome. Good to have you back again.

LAKSHMAN ACHUTHAN, ECRI CO-FOUNDER: Thank you.

MATHISEN: You know, it’s not uncommon for incoming administrations to have very sunny predictions about what they’re going to be able to do economically. But you see economic growth at 1 percent long-term, not 3 percent to 4 percent. What do you see team Trump not understanding about the fundamentals?

ACHUTHAN: Well, look, some of the things they’re talking about doing are probably good things. But the fundamental building blocks of growth are just not there to get us to 3 percent or 4 percent growth. Let’s call it 3.5 percent growth to split the difference.

When you look at how you get potential long-term GDP growth, what is it made of, it’s made of potential labor force growth, how many people are there growing in the economy to work, and productivity growth. Where is that running? You add those two together, and you — what comes out is the potential GDP growth. That’s just the simple math that any administration is fighting against here.

And when you look at demographic growth, that’s really set in stone. Just under half a percent for the next five or more years, and when you look at productivity growth, labor productivity growth, for the last six years, that’s been running at about half a percent.

And so, I have to do the math. You add a half percent, plus a half percent, and you get around 1 percent. That is a far cry from 3.5 percent. We’re just not going to be able to get there, given everything that we have seen.

We have to have extremely strong productivity growth. And just to put it in perspective, about six times more productivity growth than we have now, and I know Mr. Mnuchin was relating the tax cuts, the biggest since Reagan. And that’s all good. And that will likely help.

HERERA: Right.

ACHUTHAN: However, we would be looking for twice the productivity growth that President Reagan’s administration had.

HERERA: Let’s talk about manufacturing, because that’s another part of the stool, if you will, the three-pronged stool that the incoming administration has talked about. And they say, yes, manufacturing certainly has changed over the years. But we still need to bring back more manufacturing jobs. And that will be part of the economic growth engine.

ACHUTHAN: Well, certainly. That is — again, that’s going to help. It’s not that this is a bad thing. That is a good thing.

But to close the gap between 1 percent growth and 3.5 percent growth, I’m not sure that that’s going to be able to do it, certainly on the job front. When we think about what’s happening with jobs, we certainly, as China and other emerging markets have come on to the world stage, we have lost a lot of jobs to their lower cost workers abroad. That’s a fact.

To bring those — what’s happening right now, to look at what’s happening there, those low-cost jobs aren’t low-cost any more. The prices have risen in wages in China, so much so that everybody is going to automated factories. I think if a business was going to bring production back to the United States, a good deal of the production will be automated. There may be some higher-paying supervisory jobs, but, again, probably not in the numbers that we need.

MATHISEN: Lakshman, quick thought on tax cuts, and whether they can materially change that very elegant equation that you had of labor force growth and productivity growth. Can fiscal stimulus change? Quick answer, please.

ACHUTHAN: Quick answer is as long as it impacts productivity growth. That is key. So, any of these policies, tax cuts, other fiscal spending and infrastructure, what does it do for productivity growth? If we can figure out how to raise productivity growth, we can start talking about shifting long-term trend growth up. But I just don’t see it yet.

MATHISEN: All right. Lakshman, thanks very much. Lakshman Achuthan —

ACHUTHAN: Thank you.

MATHISEN: — with the Economic Cycle Research Institute.

HERERA: There are also reports tonight that Goldman Sachs’ president is being considered for a top finance position. Gary Cohn met with the president-elect, and could possibly be tapped as director of the Office of Management and Budget. A separate report said Mr. Cohn is considering leaving Goldman Sachs after 25 years.

MATHISEN: The president-elect also said he will leave his business to focus on the presidency as concerns grow about how a global businessman can quarantine his personal interests from the nation’s.

Robert Frank now with what we know about the incoming president’s evolving personal business plan.

(BEGIN VIDEOTAPE)

ROBERT FRANK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Donald Trump tweeting this morning that on December 15th, he will announce he’s officially stepping away from the Trump organization. Quote, “While I am not mandated to do this under the law, I feel it is visually important as president to in no way have a conflict of interest with my various businesses. Hence legal documents are being created, which take me completely out of business operations.”

Now, Trump is referring to the fact that ethics rules that apply to cabinet members and other government officials do not apply to the president. But there has been a wave of publicity in the past week about his meetings after the election with business partners overseas and talks with politicians in countries where he or his company does business.

Now, the Trump Organization has operations or deals in more than 20 countries, and at least with the federal government on the old Post Office building in Washington, D.C., which is now a Trump hotel.

There were no details in the tweets about exactly how he plans to step away, but there are three possibilities. First, he could sell the business. Second, he could turn it over to a truly independent board and CEO. Or he could put his stake into a trust and turn all the management over to his kids.

The fact that his children will be at the press event and he uses the word, quote, “operations” in the tweet, not ownership, that implies he may stick to his original plan of doing the trust and turning the whole thing over to Ivanka, Eric and Donald Jr. to run the company.

And given that Ivanka has already been sitting in on Trump’s meetings with foreign officials and her husband, Jared Kushner, will be a Trump adviser, the questions about Trump’s conflicts of interest will likely continue well after December 15th, and indeed well after his inauguration.

For NIGHTLY BUSINESS REPORT, I’m Robert Frank.

(END VIDEOTAPE)

MATHISEN: And as Robert Frank just reported, the president-elect made that announcement in a tweet. Later in the program, we will look at Mr. Trump’s use of Twitter and what that could mean if it continues when he’s in the White House.

HERERA: What a month. It started out slow, but then stocks took off after the election, on bets that the new administration might loosen regulation, cut taxes and ramp up fiscal spending. The Dow even saw its first close above 19,000. But on the final day of November, there was a bit of a giveback. The Dow Jones Industrial Average rose just about 2 points to 19,123. The NASDAQ lost 56. The S&P 500 was off five. For the month, the Dow logged the biggest gains of more than 5 percent as treasury saw their worst month since 2009.

Bob Pisani has more on the record-setting month.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: It was a quiet and tumultuous month. The S&P 500 and the small cap Russell 2000, essentially historic highs. Russell is up more than 11 percent this month, its best one-month-show in five years. Financials up 12 percent, also best showing in five years. Industrials also had a great month up 8 percent. Materials up 7 percent.

It’s all about hopes for an improving economy and lower taxes and infrastructure spending. But that improvement in financials, industrials and materials has come to the expense of interest rate-sensitive groups like real estate and utilities, as well as consumer staples. So, Colgate, Kraft, Pepsi all down on the month.

The biggest drag on the markets have come from big-cap names. Facebook, Qualcomm, Cisco, Alphabet and even Apple, all tech makes down on the month. The problem traders believe they’re using technology stocks as sources of funds to buy more attractive sectors like industrials and banks and energy stocks.

As for December, historically, here’s the problem — market is expensive now. Stocks are expensive because 2017 will see higher earnings partly because the economy has been improving but also because they believe Trump’s agenda of lower taxes, less regulations, fiscal stimulus will be a powerful engine to rev up revenue growth.

Well, maybe. But right now, no one is changing the 2017 earnings estimates, at least not until they see more details.

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

(END VIDEOTAPE)

MATHISEN: Positive news on the jobs front. Private employers hired more workers than expected in November. Payroll processor ADP said the private sector added 216,000 new jobs this month. And the report showed job growth across the board among small, medium and large businesses.

HERERA: Americans’ personal income rose in October, at the fastest pace in six months. And as incomes rose, so did spending, though not as much as expected. But the rise could bode well for the upcoming holiday season and the economy more broadly, since spending accounts for about 70 percent of economic activity.

MATHISEN: Federal Reserve says the economy continued to grow across much of the country, according to its latest and aptly named Beige Book, which is an anecdotal look at regional conditions. The central bank reported moderate to modest growth from early October through mid-November. In some areas, however, the report found continued uncertainty following the presidential election.

HERERA: A Fed official is backing an interest rate hike, echoing comments made by other policymakers. Dallas Fed President Robert Kaplan said the labor market and inflation are making progress. But he also said the central bank would keep an eye on the new economic policies out of Washington.

(BEGIN VIDEO CLIP)

ROBERT KAPLAN, FEDERAL RESERVE BANK OF DALLAS PRESIDENT: I believe that we’re moving toward meeting our 2 percent inflation objective. We’ll see how the new policies evolve and develop, but — and we’ll be analyzing them. But if they help accelerate that, then that will give the Fed more operating room and we’ll have to adjust our stance and our path to future rates accordingly.

(END VIDEO CLIP)

HERERA: Mr. Kaplan is not a voting member of the central bank’s policy committee this year, but he will be next year.

MATHISEN: Oil prices, of course, can have a huge effect on the economy and today, those prices soared. OPEC, a cartel of 13 major exporters, agreed to cut output, ratcheting down production by more than 1 million barrels per day in an effort to end the record glut of crude. That sent the price of domestic oil up 9 percent.

Steve Sedgwick was in the room where it happened in Vienna.

(BEGIN VIDEOTAPE)

STEVE SEDGWICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: An absolutely huge day in Vienna, a huge day for world oil markets and OPEC actually has done something that many people thought was absolutely impossible. They have come together to form a deal to curb production not only in the group but also non-OPEC, as well.

I spoke to the Saudi oil minister after the meeting to see what he thought of that deal.

KHALID AL-FALIH, SAUDI ARABIA’S ENERGY MINISTER: We are extremely happy with the deal (INAUDIBLE). It brings stability back to the market. It will ease volatility and it will give an impetus for investment flows to come to a healthy level into the market.

SEDGWICK: They have managed to take 1.2 million barrels off the table within the OPEC grouping. So cuts across the board and a holding of production levels from Iran, which was a very thorny issue. But also, the added achievement, they believe they’ve got a deal with non-OPEC to cut another 600,000 barrels from world oil markets. And that non-OPEC cut will be lead by Russia as a big meeting next week on the 9th of December to thrash out the details.

There are questions that remain, questions about compliant, questions about what happens if one or two members backtrack. What does that mean for the others? How long will this deal last and will it bring balance back to a market which many say is oversupplied, as well?

So big questions remain. But for now, oil markets absolutely rallying very aggressively with WTI and brink going around the $50 a barrel on the back of what is a momentous day in Vienna for OPEC and the oil markets.

This is Steve Sedgwick in Vienna for NIGHTLY BUSINESS REPORT.

(END VIDEOTAPE)

HERERA: Still ahead, how Donald Trump sealed the deal to keep Carrier from moving jobs from the U.S. to Mexico.

(MUSIC)

HERERA: President-elect Donald Trump has reached a deal with Carrier, their air conditioning manufacturer that earlier this year said it would move jobs from its plant in Indianapolis to Mexico. The agreement will keep workers in the U.S. and fulfills one of Mr. Trump’s campaign promises.

Phil LeBeau is covering the story for us. He’s in Chicago.

Good to see you, Phil, as always.

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: You too, Sue.

HERERA: So how does this deal get done, and is it unusual for a president-elect to do something like this?

LEBEAU: It is unusual. How many times have you seen people running for office, whether it’s president, whether it’s governor, senator, whatever it might be, and they say, we’re going to keep your jobs here and in the end, they really don’t keep the jobs there?

We don’t know the specific details or at least we don’t know many of them regarding why the Trump administration was able to convince Carrier to keep that plant in Indiana. But if you read between the lines, it’s pretty clear that United Technologies, the parent of Carrier, which has $6.5 billion in federal contracts, mostly with the Defense Department, they didn’t want to start off the new administration, start off a relationship on the wrong foot. So, that’s part of this.

A statement issued today by Carrier, you know, they don’t get into details, but they issue some platitudes in terms of how they’re able to see things eye-to-eye with the Trump administration. The incoming Trump/Pence administration has emphasized to us that its commitment to support the business community, and create and improve more competitive U.S. business climate, the incentives offered by the state were an important consideration. Those incentives, it’s been reported by a couple of outlets to be $700,000 but that’s a drop in the bucket to a company like United Technologies.

The bottom line is this, guys — you do not want to see a new administration starting and having an attitude of about a particular company if you’re the CEO of United Technologies, and that’s why I think they ultimately said, let’s make a deal to keep this plant open.

MATHISEN: Big event tomorrow at Carrier’s headquarters. What can we expect?

LEBEAU: A lot of congratulations, a lot of hand-shakes and smiles. And a lot of workers — and we’ll be there talking with them — a lot of workers saying, “Thank you, Donald Trump, for keeping this plant here.”

H
HERERA: What about other companies that perhaps had considered moving some of their plants to Mexico? He was very — the president-elect was very critical of Ford.

LEBEAU: Right.

HERERA: Do you expect a change in attitude on a broader corporate level, Phil?

LEBEAU: I think it depends on the company. Sue, we reached out to six different companies that have either started the process of moving plants down to Mexico or going to be moving some jobs in production there.

The companies we reached out to all said the same thing. We haven’t been contacted by the Trump administration. Now some of these are smaller manufacturers. Is it likely that the Trump administration is going to call every single company and say, what are you doing moving this plant down there?

A big company like United Technologies, which was a big target during the campaign, that’s a different story. I think it’s going to depend on the company.

HERERA: Phil, thanks so much. We appreciate it.

LEBEAU: You bet.

HERERA: Phil LeBeau Chicago.

MATHISEN: American Eagle Outfitters sees coal in its holiday stocking and that is where we begin tonight’s “Market Focus”.

The teen apparel retailer issued a weak holiday quarter profit forecast, citing inconsistent foot traffic and a tough retailer climate. The company did post a rise in same-store sales in its latest quarter but not at the clip analyst expected. Shares down 12 percent to $16.56.

Go Pro will cut about 15 percent of its workforce as it tries to achieve profitability. The decision affects 200 employees, and all open job positions. The maker of cameras and wearable devices also plans on closing its entertainment business, and said its president will step down by the end of the year. Shares up 1 percent to $9.98.

HERERA: Valeant will reportedly maintain ownership of its stomach drug division after it failed to reach a deal with Takata Pharmaceuticals. Several reports said the drug makers couldn’t settle on a price for that unit. Shares were off nearly 8 percent to $15.79.

And Disney raised its semi-annual dividend by 10 percent to 78 cents a share. That puts the yield at more than 1.5 percent. Disney shares were off 59 cents to $99.12.

MATHISEN: Coming up, unchartered waters. President-elect Donald Trump is a prolific tweeter. Have you heard about that? And that is raising questions as he prepares to be sworn in.

(MUSIC)

MATHISEN: The government is on track to forgive more than $100 billion in student debt in the coming years, according to the Government Accountability Office, the Obama administration’s plan to help borrowers is more costly than first thought. The report also said the Department of Education’s accounting methods understated the costs by tens of billions of dollars.

HERERA: A growing number of subprime auto loans are delinquent according to new data from the New York Fed, third quarter figures show the number at its highest level since 2010. New auto loans to borrowers with credit scores below 660 have nearly tripled since the end of 2009.

MATHISEN: Twitter is, of course, not a new social media platform. President Obama established some protocols for sitting presidents. But the incoming president is, if nothing else, his own man with his own way of employing Twitter.

Julia Boorstin takes a look.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: President-elect Donald Trump has a massive following on Twitter, with 16.4 million followers, 2 million more than President Obama. Trump’s Twitter following has grown by 13.5 million since he announced his candidacy. And he’s tweeted around 8,000 times since then at all hours, and on a range of topics, from his opinions on “Saturday Night Live” to alleged voter fraud to his political nominations.

Venture investor Eric Hippeau says Trump’s tweeting style is uncharted waters after President Obama established certain protocols for Twitter.

ERIC HIPPEAU, LERER HIPPEAU VENTURES: He established the rules. We don’t know what President-elect Trump will do with those rules. I suspect that he’s going to want to continue to tweet, simply because it’s so popular.

BOORSTIN: Popular and under scrutiny by investors as well as world leaders, which is why there are questions about the security of Trump’s account.

Jack Dorsey and Mark Zuckerberg have both seen their accounts hacked, as were Jeep and Burger King’s accounts back in 2013. And when the A.P.’s Twitter account was hacked in 2013, alleging an attack on the White House, it moved the stock market by $136 billion.

Twitter tells me it has protocols in place for verified accounts, such as Trump’s, working to make sure those tweeters implement account safety, encouraging them to embrace best practices, like two-factor authentication.

Industry watchers say the company’s role is simply to take steps if an account is hacked and to provide an open platform.

JESSICA LESSIN, THE INFORMATION: I think we have to look at it not as information, but as, you know, what this man is saying, and people are going to have to decide for themselves, based on educating themselves in a lot of different ways.

BOORSTIN: And we’ll see whether Trump changes his approach on Twitter once he’s inaugurated.

For NIGHTLY BUSINESS REPORT, I’m Julia Boorstin in Los Angeles.

(END VIDEOTAPE)

HERERA: And before we go, here’s another look at the market’s November gains. The Dow with the biggest rise of more than 5 percent.

And that does it for NIGHTLY BUSINESS REPORT tonight, I’m Sue Herera. Thanks for watching. We want to remind you, that this is the time of year your public television station seeks your support.

MATHISEN: And I’m Tyler Mathisen. Thank you for your support. Have a great evening, everybody. We’ll see you back here tomorrow night.

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.

This entry was posted in Transcripts. Bookmark the permalink.

Leave a Reply