Trnascript: Nightly Business Report – December 8, 2016

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

rally is reaching just about every corner of the market. So what should you do with your money                                                                             now?

(NASDAQ:SHLD), once America`s top retailer, sees its sales spiral. As more
stores close, the challenges are only getting tougher.

MATHISEN: Thirty years of picking stocks. What are the Beardstown ladies
investing in now? We went for a visit.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Thursday,
December 8th.

HERERA: Good evening, everybody. And welcome.

Four indexes, four new highs. The Dow, NASDAQ, S&P, and small cap Russell
all closing at record levels. After a quiet morning, momentum picked up
midday, thanks to gains in financials and basic material stocks. Investors
had been buying stocks since Election Day, betting that the new
administration`s policies would support growth and inflation.

Today, the Dow added 65 points to 19,614. The NASDAQ advanced 23. And the
S&P 500 was up four. One of the hottest groups since the election has been
the transportation sector.

And tonight, Morgan Brennan explains why.


trucking, driving the surge or prospects for stronger economic growth.
Infrastructure spending and corporate tax reform, which investors seem to
believe outweigh the risk of more protectionist trade policies.

But it isn`t just about the election. The Dow Jones Transportation Average
has rebounded more than 40 percent off its January lows when economists
were warning of recession. And for the year, it`s poised to gain 25

The biggest winners: trucking names including Landstar, Ryder and J.B. Hunt
and rail stocks like CSX (NYSE:CSX) and Union Pacific (NYSE:UNP). Many of
them are companies with big exposure to industrial production, mining, and
manufacturing, which has shown signs of stabilization in recent months.

CHRISTIAN WETHERBEE, CITI: I think some of the gains have been pulled
forward. So, this group, particularly the domestic group, benefits a lot
from tax reform. So, I think that has the potential to drive significant
earnings power as well as free cash generation.

But I also do think that we are coming off a bit of a bottom from a freight
perspective. So, we have seen a rally in the late summer through fall.
So, volumes are up a bit. There`s a fundamental underpinning of this as

BRENNAN: After a year and a half long freight recession, volumes are
beginning to grow. A closely watched index ticked higher for the first
time in 20 months in October with domestic fright shares climbing nearly 3
percent compared to last year, in a reading considered better than a normal
seasonal surge. Though still well off their peaks, data readings from hard
hit rail and trucking companies are showing early signs of recovery as
well. And at least one analyst says soaring tonnage is a clear signal that
consumers are ramping up spending.

It`s all fueling a transport rally. One that experts warn comes with
risks, including higher oil prices, rising interest rates, and the trade
impact of a strong dollar.



MATHISEN: Let`s look at how far the market has climbed. In the past
month, the Dow is up 7 percent. Small cap Russell 2000 Index has soared 15
percent. Now, those are big moves by any measure.

But look at the market`s performance since the lows of February. The Dow
is up 25 percent, NASDAQ 27 percent, the S&P 500, 23 percent. The small
cap Russell index, a sharp 44 percent.

Timing, folks, it`s all about timing.

HERERA: Speaking of which, what should you be doing with your money at
this time?

Let`s get some answers from Brian Jacobsen, chief portfolio strategist at
Wells Fargo (NYSE:WFC) Funds.

Brian, nice to have you here. Welcome.

having me.

HERERA: If I`m sitting at home and I have not committed new money to this
market at this point, is it too late? Or do I just have to be very
selective and continue putting money in?

JACOBSEN: Yes, it`s unfortunate. I do talk to a lot of people who seem
like they`ve been sitting on the sidelines. It seems like there`s almost a
risk gauntlet that people have been running through. You know, you`re kind
of get hit on every side, whether it`s Brexit or China`s currency
devaluation, the presidential election. But we`ve made it through each of
these, and I think that`s kind of a key message is.

The market is pretty adaptive. A lot of times, you have to ask yourself
what`s priced into the markets. Right now, I think that actually, we`ve
just had a general re-pricing or re-flation of assets to pretty reasonable
levels. From a valuation perspective, I don`t think that anything really
worries me all that much in the near term or even for the long term.

So, the key thing I think is the focus on the long term, and actually try
to get your portfolio back in line with your long term investment
objectives. That`s a hard thing to do, because everybody wants to try to
time the market. But the fact is, sometimes you think have to bite the
bullet and do it.

MATHISEN: What do I do, Brian, with my bonds, if I`ve been investing in
bond funds as so many Americans have over the past half decade or so? And
now, they`re going to look at their statements and they`re going to see
some down months. What should I do?

JACOBSEN: Yes, they`re going to see some down months. Put those down
months into perspective as far as the magnitude. Oftentimes, the drawdown
in bonds is significantly smaller than the drawdown that you get in stocks,
because stocks are inherently riskier than the fixed income investments.

And so, remember the role that bonds play in your portfolio. They`re there
to diversify away some of the risks that are inherent in the stock market.
They`ve actually done a pretty good job of that. As the equity market has
gone up, bonds, unfortunately, the prices have gone down.

That`s the problem with diversification, sometimes it works against you.
But having it as a central part of your portfolio to diversify, add some
stability, and generate income. What I`ve been really looking at,
encouraging people to consider, is looking at shorter duration strategies,
short term, especially high yield bonds.

Those are the ones that some people call them junk bonds. I want to speak
highly of them so I don`t want to call them junk bonds. I want to call
them high yield. So, you`re paid to take a little bit of that credit risk
and that can hopefully offset decline in price as a result of an increasing

HERERA: All right. Brian, thank you. Brian Jacobsen with Wells Fargo
(NYSE:WFC) Funds.

MATHISEN: One popular investment strategy that gets a lot of attention at
the end of the year is the so-called “dogs of the Dow”, the ten stocks in
the Dow with the highest yields. If you bought shares in these bowwows at
the start of 2016, you`re probably pretty happy right about now.

Dominic Chu explains.


year when many investors start looking at the dogs of the Dow investing
strategy. Now, basically what this is, is looking at the 30 stocks in the
Dow Jones Industrial Average, picking out the ten with the highest dividend
yields, buying those stocks in equal dollar amounts, holding them for a
year, and then re-doing the same thing again next year.

Now, the strategy doesn`t always outperform, but it has in a big way this
year. And the idea is to really get investors to focus on perhaps beaten
down names in the Dow and the ones that give bigger dividend payments. If
you look at the list this year, it`s an interesting one. And we have some
real gainers, ones that really propelled the Dow Jones Industrial Average.
And, of course, the dogs of the Dow to be outperformers.

If you look at the biggest gainer in this dog strategy — it`s construction
equipment maker Caterpillar (NYSE:CAT), one of the most beaten up stock in
the Dow last year, now up huge, if you factor in dividends, it`s up 49
percent. Oil and gas, big laggard last year, oil prices have recovered,
Chevron (NYSE:CVX) up 32 percent if you factor in the dividend payment as
well. IBM, another laggard last year and has been for a few years now, but
Big Blue is now up 24 percent this year if you factor in dividend payments.
And then, Walmart and Merck (NYSE:MRK) kind of round out some of the
biggest gainers in the dogs.

Now, what about next year? As it stands right now, you take a look at some
of these, Verizon (NYSE:VZ), Pfizer (NYSE:PFE), Chevron (NYSE:CVX), IBM,
Exxon, Coca-Cola (NYSE:KO), Caterpillar (NYSE:CAT), Procter and Gamble and
Merck (NYSE:MRK). These are the ten highest yielding stocks if the Dow and
the dogs were named right now before the end of the year.

If you take a look overall, check out these, because according to analysts,
these are the ones that have the biggest percentage to gain — Pfizer
(NYSE:PFE), Merck (NYSE:MRK), Coke, Caterpillar (NYSE:CAT) and IBM because
they`re big games now, perhaps laggard.

So, as we talk about the dogs, keep in mind those stocks and the analyst
outlooks for next year.



MATHISEN: Are you feeling richer? Well, maybe you should be, because
household wealth in the United States has hit a record. According to the
Federal Reserve, a buildup of both real estate and stocks helped drive
American wealth to more than $90 trillion in the third quarter. And the
number is likely even higher now, since the market has rallied over the
past month.

HERERA: The outgoing chair of the Securities and Exchange Commission warns
against rolling back Wall Street reforms. Mary Jo White said the rules
implemented following the financial crisis are indispensable to investors
and to markets. And in her view it would be a grave mistake to weaken or
dismantle them.

MATHISEN: The House of Representatives passed legislation that averts a
government shutdown. The measure provides funding for government agencies.
It now goes to the Senate for passage. A provision in the bill will make
it easier for Donald Trump to win confirmation of General James Mattis to
be defense secretary. The former marine needs a special exemption that
lets him skirt a requirement that ex-military officials need to be out of
the service seven years before becoming the Pentagon chief.

HERERA: There are also reports that Donald Trump has chosen a fast food
executive to be his secretary of labor. Andy Puzder is the CEO of CKE
Restaurants which owns the burger chains Carl`s Jr. and Hardees.

John Harwood is following the developments from Trump Tower in New York

Good to see you as always, John.

So, what do we know about where Mr. Puzder stands on some of those labor

Sue, just before we came on air, it was officially announced that Andy
Puzder will be the labor secretary of Donald Trump. What we know is that
he is a long time Republican, staunch foe of regulation, somebody who has –
– he backed Mitt Romney in 2012 and he expressed on CNBC earlier this year
the view that the accelerating cost of labor is going to increasingly push
businesses to reduce labor and use robots instead.

Take a listen.


ANDREW PUZDER, CKE RESTAURANTS CEO: The working class needs a period of
transition. We need to be able to train them. We need to be able to set
people up for better jobs. We need to revamp the education system so
people actually are qualified to do the jobs that exist. What`s happening
now is, the cost of labor is accelerating at such a pace that it really
moves up how fast you want to automate.


HARWOOD: Now, in a different interview, Andy Puzder indicated that the
attraction of those robots and automated devices is they don`t take sick
days, they don`t have slips and falls, they don`t need vacations. All of
that is part of the broader trend in the American workforce. And, of
course, the question is going to be for Donald Trump is, as the candidate
who has run as a populist to help workers, how are he and Andy Puzder going
to do that?

MATHISEN: You know, John, the former Ford CEO did a marvelous there. Alan
Mulally apparently scheduled to meet with the president-elect today. Do we
know why and what he might be talking about?

HARWOOD: It`s a little unclear. Some reports have Alan Mulally as a
candidate for secretary of state, others for United States trade
representatives. We didn`t get any confirmation on that from Donald
Trump`s aides today.

But clearly, he`s looking to corporate America as somebody who brings a
business resume into the Oval Office. He`s looking to two really unusual
sources or unusually robust sources of potential cabinet members, both the
military, the marine generals like James Mattis that you mentioned, but
also corporate America.

HERERA: John, we`ll let you go, thank you so much. John Harwood at Trump
Tower in New York City.

MATHISEN: And still ahead, Sears` slump. Sales plummet and problems
deepen at this one-time titan of American retail.


HERERA: It was an iconic American retailer. But Sears (NASDAQ:SHLD) lost
its way. And things aren`t getting any better. The losses continue to
mount. And today the company said there is no guarantee as to when it will
return to profitability.


HERERA: It started in the 1880s, when Richard Warren Sears (NASDAQ:SHLD)
began selling watches. It quickly added appliances, groceries, sporting
goods, even automobiles to a booming and really ubiquitous mail order
catalogue business. It was essentially Amazon (NASDAQ:AMZN) for early 20th
century America, becoming the country`s largest retailer, until Walmart
claimed the top spot in 1989.

Sears (NASDAQ:SHLD) owns iconic brands. Craftsman for power tools, DieHard
products for your car, and Kenmore home appliances.

At one time, it would have been silly to ask a passerby whether they
shopped at Sears (NASDAQ:SHLD). Now?

UNIDENTIFIED MALE: I used to go more for appliances, but not as much

UNIDENTIFIED MALE: We just kind of don`t really shop there.

UNIDENTIFIED MALE: What are the options? We have Kohl`s (NYSE:KSS), we
have promotions.

UNIDENTIFIED FEMALE: And then the other thing is I do a lot of shopping

HERERA: In 2005, Series was bought by Kmart and hedge funder Eddie Lampert
took over the new Sears (NASDAQ:SHLD) Holdings. But that company has been
on a downward spiral, sales dropping from $41 billion in 2012 to an
estimated $24 billion this year. The stock price is down too, more than 40
percent this year, and down more than 70 percent in three years.

is like the mythical headless horseman, wandering aimlessly in the night,
looking for its lost, never to be found head.

HERERA: The number of stores, now 1,500, is less than half what it was ten
years ago. At one time, Sears (NASDAQ:SHLD) anchored many malls. But now,
when its stores close, malls are often left with dead space, putting the
malls themselves and many jobs at risk.

COHEN: Sears (NASDAQ:SHLD) is probably hived off well over 100,000 jobs
since Lampert took over.

HERERA: There is value in sears` stock. It might be able to sell the real
estate it owns, more than 160 million square feet of retail space, and its
iconic brands, Kenmores and Craftsmans, are now sold in a lot of places.
But with only two profitable quarters in four years, Sears (NASDAQ:SHLD)
will likely struggle to get top value selling its assets.

footprint shrunk. And because the sales of these brands have been
diminished, in order for it to be worth a considerable amount of money,
they need time.

HERERA: But the irony is Sears (NASDAQ:SHLD), an American icon that
started out selling watches, could be on the clock.


HERERA: Shares of sears may have been higher today, but over the past five
years, they are down 70 percent.

MATHISEN: Last year, we reported on a company called Insys Therapeutics.
It`s being investigated in at least six states. The allegations range from
health care fraud to off-label marketing and kickbacks for its main drug,
Subsys. That`s a highly addictive opioid, a fentanyl spray, basically,
that the FDA says should only be used with cancer patients with severe

Today, we learned that several Insys executives and managers, including the
former CEO Michael Babich have been arrested, charged with leading a
nationwide conspiracy to bribe medical practitioners.

Dina Gusovsky who first reported on that story for us is here tonight.

Why would they charge? What were they charged with?

we`re talking about former executives was because we have sort of seen this
exodus of high level employees from Insys ever since we reported on that
story a year ago, including former CEO Michael Babich, after which
billionaire founder of Insys, Dr. John Kapoor, took over.

Now, my sources say that it was really John Kapoor who sort of orchestrated
all of these alleged schemes that we heard in the complaint, everything
from health care fraud to kickback schemes, trying to persuade doctors to
not only write prescriptions of this highly addictive opioid for patients
who did not have cancer, which is against FDA rules, but also to keep
upping that dosage so they get more reimbursement from the insurers.

And so, it`s interesting that Dr. Kapoor was not named today. But I do
want to mention that I spoke with the U.S. attorney`s office in
Massachusetts who filed the complaint, and they told me that this is still
an ongoing investigation. The matter is still not closed.

And so, it`s going to be very interesting to see what happens.

MATHISEN: And so, is there proof he did what your reporting suggests he

GUSOVSKY: John Kapoor has not been named yet. Now, in terms of Michael
Babich, yes. Most of the things that reported on —

MATHISEN: These are allegations now.

GUSOVSKY: These are allegations. He`s been arrested and he`s been
charged. But, obviously, he`s going to, you know, like everybody else,
have a fair trial. But it`s also interesting because there were so many
different government agencies that had to come together for this, including
the FBI, the Department of Veterans Affairs, the Department of Health and
Human Services.

Insys, I reached out to the company, they did not respond to my requests
for comment.

HERERA: Hopefully they will.

MATHISEN: To be continued.

Dina, thanks very much — Dina Gusovsky.

HERERA: Well, investors like the way Tailored Brands looks. And that`s
where we begin tonight`s “Market Focus”.

The owner of Men`s Warehouse turned a profit in the latest quarter, beating
analysts` estimates, as well as revenue expectations. Tailored Brands also
says it expects to see sales improve at its Jos. A. Bank Brand. Shares
skyrocketed more than 39 percent to $26.44.

Lululemon shares continued to soar today following the company`s better
than expected earnings and a $100 million share buyback program that we
told you about last night. Following those upbeat results, several firms
upgraded the yoga apparel maker`s stock today. So, Lululemon`s shares rose
15 percent to $68.84.

And Horizon Pharma said it was terminating a drug trial of a medication
intended to treat a rare neuromuscular disease. The biotech company said
the drug, which has already been FDA approved to treat other diseases,
failed to present a statistically significant benefit over the placebo
during testing. Shares plunged 22 percent to $15.03.

MATHISEN: Express (NYSE:EXPR) Scripts saw its shares fall after short-
seller Citron Research tweeted that the pharmacy benefit manager was the
culprit behind drug price gouging. Citron also gave Express (NYSE:EXPR)
Scripts a $45 price target and suggested that President-elect Trump may
target the company when he takes office. Expresses Scripts fell 6 percent
on the day to $70.75.

According to a report by the “South China Morning Post,” China will impose
ATM withdrawal limits at casinos in Macao, which is the world`s largest
gambling market. Starting Saturday, account holders will only be able to
take out 600 U.S. dollars. Following the news, Wynn Resorts (NASDAQ:WYNN),
MGM Resorts (NYSE:MGM), Las Vegas Sands (NYSE:LVS) and Melco Crown
Entertainment (NASDAQ:MPEL) were all sharply lower.

Restoration Hardware beat street targets in its latest quarter, but the
home furnishing company gave guidance for the holiday season that was
sharply below estimates. Shares were punished after-hours, initially
falling more than 15 percent after they finished the regular session up
more than 2 percent at $38.99.

HERERA: Forget the North Pole. Warehouses are holding a growing number of
holiday gifts as shoppers move online and retailers ship more goods than
ever before. And that means big growth for the companies that own those
properties. Warehouse REITs are now some called them a hidden buy for
investors looking to cash in on the gains since Election Day.

Diana Olick explains.


Jersey, developers are taking down this office building and planning to
replace it with a warehouse. Demand for warehouses, especially close to
major metropolitan areas, is skyrocketing. And so is the potential for
real estate investment trusts or REITs that own these spaces.

ERIC FRANKEL, GREEN STREET ADVISORS: In contrast to real estate commercial
sectors where we see a deceleration of tenant demand, in industrial, you`ve
seen an acceleration due to e-commerce.

OLICK: REITs stocks have lagged to the rest of the booming stock market
because investors tend to buy them when interest rates are low. REITs
offer high yields in the form of big dividends. But investors then sell
them as rates are rising, as they are now.

HAMID MOGHADAM, CEO PROLOGIS: I think usually you see in reaction to a
rate increase, REITs falling. And then six months later, they come right
back because the better economy improves operations for REITs.

OLICK: Moghadam is CEO of the largest industrial warehouse REIT in the
nation, Prologis. E-commerce represents just 10 percent of its portfolio
but makes up nearly one-third of its current growth. Tenants include FedEx
(NYSE:FDX) and Amazon (NASDAQ:AMZN). Prologis is developing the largest
warehouse park in the nation, an hour outside San Francisco.

The idea is to be as close as possible to major metros as e-retailers drive
to deliver goods in hours rather than days.

MOGHADAM: What I call the last 30 or 50-mile business, where we`re
building large warehouses in major metro areas that cover the entire metro
area for major e-commerce players.

OLICK: Other warehouse players like DCT industrial trust have a similar

FRANKEL: They`ve positioned their portfolio so that most of their
warehouses are now located in margin metropolitan areas, which has seen a
disproportionate increase in demand from e-commerce.

OLICK: The stocks of warehouse REITs have fared better than other sectors.
And while they might look expensive, they`re still selling at a discount to
underlying values.

The one wrench, however: trade. Warehouses rely on two things: trade and
consumption. If trade sinks under the Trump administration, so too could
the value of these REITs.

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


HERERA: Coming up, the Beardstown ladies. They`ve been picking stocks for
decades. Tonight, they`ll tell us what sectors they like as the market


HERERA: Remember the Beardstown ladies? Well, they`re one of the best-
known investment clubs. After picking stocks for more than 30 years, Kate
Rogers (NYSE:ROG) went to visit the group to see what they make of this
market rally.



have seen it all, from the stock market soaring in the 1980s to the housing
collapse in 2008 and the recession that followed. Through it all, they`ve
continued to meet once a month in Beardstown, Illinois, contributing a
modest $25 each for what they call the three E`s: education, enjoyment, and

ups and downs. We`ve seen the market go up and we`ve all smiled at the
meetings. When it goes down, we don`t get sad. We look for bargains.


TILLITT-PRATT: It`s a sale. It`s like a discount sale in a department

UNIDENTIFIED FEMALE: Black Friday, let`s go shopping.

ROGERS: After launching in 1983, the ladies rose to fame in the 1990s, but
they fell out of public eye after a mathematical error inflated their rate
of return. They kept at it though with 16 members who today range in age
from their early 30s to late 80s, and come from different walks of life.
There is a retired hog farmer and a funeral homeowner in the mix.

UNIDENTIFIED FEMALE: Seventy-five percent of our members are descendants
of the original club.

UNIDENTIFIED FEMALE: And we have every age decade presented in our club,
which I think is awesome too.

UNIDENTIFIED FEMALE: It`s called diversification of our portfolio.


ROGERS: The strategy has been simple: buy to hold and invest in things you
know. But do your homework.

Today, the portfolio has expanded to 17 companies and over $450,000.



UNIDENTIFIED FEMALE: Berkshire B. I can`t afford the A.


UNIDENTIFIED FEMALE: Thank you. We have Apple (NASDAQ:AAPL). We have
Starbucks (NASDAQ:SBUX).



UNIDENTIFIED FEMALE: Johnson & Johnson (NYSE:JNJ). Worldwide Wolverine
Shoe Company.
You know, ladies love shoes.

ROGERS: Aside from investing in what they know, the ladies are also paying
close attention to the election of Donald Trump and the market rally that`s

elected. And we watched that market go down one day and it came right back
up. We`re looking at stocks that perhaps are going to be helped by adding
more to the military and defense stocks. So, this is the type of thing
we`re looking at to consider buying.

ROGERS: Since their return scandal, the ladies won`t reveal how their
portfolio is performing. But they believe they`ll end the rear in the
green. Aside from that, they`re not making any calls about 2017.

You don`t want to make any predictions?


TILLITT-PRATT: If we did, we would not be sitting here. We would be in
Aruba, on a beach.

ROGERS: For NIGHTLY BUSINESS REPORT, in Beardstown, Illinois, I`m Kate
Rogers (NYSE:ROG).


HERERA: That`s great for them.

MATHISEN: Got to love it.

HERERA: Absolutely.

MATHISEN: They`ve got a great successful book back when, we remember.

HERERA: I remember covering them in the `80s, I know you do too.


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

MATHISEN: And I`m Tyler Mathisen. Thanks from me as well.

Have a great evening, everybody. We`ll see you back here tomorrow night.


Nightly Business Report transcripts and video are available on-line post
broadcast at The program is transcribed by CQRC
Transcriptions, LLC. Updates may be posted at a later date. The views of
our guests and commentators are their own and do not necessarily represent
the views of Nightly Business Report, or CNBC, Inc. Information presented
on Nightly Business Report is not and should not be considered as
investment advice. (c) 2016 CNBC, Inc.


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