Transcript: Nightly Business Report – December 9, 2016

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Record week. Stocks have
their best week since the election. Will it usher in the return of the retail investor?

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Shakeup. The CEO of Coke
steps down. Now, the new CEO must figure out how to tackle a number of
major challenges.

HERERA: Picking stocks. Our market monitor says there are three companies
whose shares could rise double digits for the year. He`ll name them
tonight on NIGHTLY BUSINESS REPORT for Friday, December 9th.

MATHISEN: Good evening, everyone. And welcome.

The rally rolls on. Not only did stocks close at all-time highs today, but
the three major indexes advanced every single day this week — something
that hasn`t happened in five years. The gains extend a month-long rally as
investors become increasingly optimistic, and look for stocks that could
benefit from economic growth.

Here are the closing numbers for Friday. The Dow Jones Industrial Average
up 142 points to 19,756. It now sits just 1.2 percent from 20,000. The
NASDAQ added 27, and the S&P 500 was up 13. Stocks turned in their best
weekly performance since the election with all of the indexes gaining 3
percent or more.

Bob Pisani takes a look now at whether this wave of optimism will bring
back the average investor.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The markets keep
roaring to new highs and that`s impressive. Is it enough to light a fire
under the average investor? And get them back in the gain in 2017?

Now, everyone knows we lost a vast swath of the investing public after the
2008 financial crisis. And for the most part, they haven`t come back, even
as the stock market has come roaring back. How bad is it? It`s bad.

A recent Gallup poll said Americans invest in stocks, that matches a record
low. The high was 65 percent and that was way back in 2007.

And more and more stock ownership is concentrated in the hands of the
wealthy. In fact, about 8 percent of all stocks are owned by just the
wealthiest 10 percent of households. That`s it. This is the great
tragedy. The S&P 500 is u over 200 percent since bottoming in 2009, but
stock ownership has become concentrated in fewer and fewer hands.

Every rally we`ve had in the last several years has been met with outright
derisions. People just aren`t buying it, and many of them are just afraid
of losing money.

But there`s a couple of reasons that this particular rally might be a
little bit different than the other ones. The most important thing is that
investor enthusiasm has shot up. CNBC`s All America Survey just out today
shows more folks are willing to bet on the stock market now than before the
election. So, there could be cause for a little bit of hope.

Wouldn`t it be something if the largest source of demand for stocks in 2017
weren`t corporations buying back stocks but individuals trying to catch up
on a decade of indifference in hostility?

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

(END VIDEOTAPE)

HERERA: More evidence today that investors and consumers are feeling more
optimistic. The index of consumer sentiment hits its highest level since
January. Respondents cited the potential positive impact of new economic
policies and rising expectations that the economy and the job market will
strengthen in the coming years.

MATHISEN: And that new-found optimism was also evident in the most recent
CNBC All America Survey. Steve Liesman has the results.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The election of
Donald Trump brought a surge of optimism in the United States over the
economy of stocks not seen in years. The CNBC All America Economics Survey
for the fourth quarter finds that the percentage of Americans who believe
the economy will get better in the next year jumped an unprecedented 17
points to 42 percent. That compares with results before the election.

It`s the highest level since President Barack Obama was first elected in
2008. The surge is powered by Republicans and independents reversing their
outlooks. Republicans swung from deeply pessimistic with just 15 percent,
saying the economy would improve in the next year, to strongly optimistic
now with 74 percent believing in an economic up swing.

MICAH ROBERTS, PUBLIC OPINION STRATEGIES: Absolutely. Republicans are
pushing that optimism up. But guess what? So are independents and they
are an important part of the country, too. For so long, we have had
Democrats being kind of the lone voice of optimism, and that tends to shift
when you have — when you have a change in leadership, in Congress and in
the Senate, and in the presidency.

LIESMAN: The poll of 800 Americans around the country has a margin of
error of 3.5 percentage points. It found a majority of Americans say they
are, quote, comfortable and prepared to support a Trump presidency. Fifty-
six percent of respondents who now back the president-elect represent a
sharp change from the 43 percent who are asked the question just before the
election.

JAY CAMPBELL, HART RESEARCH ASSOCIATES: Coming out of an election that was
as angry and bitterly divided as any of us have seen in our lifetimes, it
is surprising, and honestly a little bit gratifying to see that a majority
of Americans are willing to give this new president a shot.

LIESMAN: The poll also finds 40 percent of Americans saying now is a good
time to invest in stocks. That`s up ten points from before the election.
Again, Democrats became somewhat more negative on stocks, while Republicans
grew significantly more optimistic.

The polls suggest the president-elect is on to something with his concern
over jobs in the U.S. Forty percent of Americans say keeping jobs moving
overseas should be his top priority. It`s the top choice for Republicans,
independents and Democrats.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.

(END VIDEOTAPE)

MATHISEN: And to read more about the rise in optimism since the election,
head to our website, NBR.com.

HERERA: Nancy Tengler joins us now to talk more about the enthusiasm
driving Wall Street, and whether or not she expects it to continue. She is
chief investment officer at Heartland Financial.

Nancy, welcome back. Nice to have you here.

NANCY TENGLER HEARTLAND FINANCIAL CHIEF INVESTMENT OFFICER: Thank you,
Sue. It`s good to be here.

HERERA: Let`s start with that basic question. I mean, this market run we
have seen has been pretty dramatic. Do you think it continues, or are you
getting a little nervous with the types of gains that we`re seeing?

TENGLER: Well, if you — I`m optimistic that it continues. I mean, it`s
not a straight shot to be sure. We`ll see ups and downs. But the market
is up about 4.7 percent since the election. I`m using the S&P 500.

After Reagan`s election two weeks out, it was up 8.3. So, I mean, while we
have had a nice move, it is not unprecedented. And the S&P multiple is not
too out of line. I mean, we`re at 19 times expected estimated earnings,
and I think if we get the corporate tax cuts and the things that we expect,
earnings growth for the S&P will continue as it did in the third quarter in
the double digit range. I`m optimistic.

MATHISEN: If I had money that I wanted to put to work, let`s say I`ve sold
a house or something, and I want to put it into equities, would you suggest
I put it in very quickly to catch this rally, or should I dollar cost
average in over a period of three, four, five months?

TENGLER: Hi, Tyler.

Listen, I feel so much better when I dollar cost average. All of the
research says you just put it in and you do much better, because stocks go
up more often than they don`t. But I feel better when I dollar cost
average. And that`s what we do with our 401(k)s.

MATHISEN: Right.

TENGLER: And so, it is a more comfortable way to invest. And we will get
pullbacks. I mean, that is the nature. Think of pruning a rose. You
prune it back, it grows stronger and more beautiful.

So, I do think that if you just want to take your time, you will get
opportunities to buy some stocks at lower levels. And we have seen really
dramatic sector rotation, so the pharmaceuticals are currently out of
favor, right? So, that`s an area that looks a little attractive right now.
And technology has started to come roaring back after President-elect Trump
sort of jaw boned some of the tech companies.

So, there will be opportunities. Never be in a hurry. Be disciplined.

HERERA: What would you stay away from? I know you`ve mentioned the S&P is
not out of whack in terms of its P/E ratio. But are there areas of the
market you think have run a little bit too quickly to the upside?

TENGLER: Well, yes. The financials have certainly moved very quickly.
And you`re looking at J.P. Morgan at $85 a share. It wasn`t too long ago
it was in the high 50s.

So, I — however, the fundamentals are behind continued appreciation and
financials. We have sold our holdings in electric utilities. We sold them
earlier this year, because they were overvalued. We didn`t move into REITs
when that sector was spun, you know, out separately.

So, I do think some of the super interest rate sensitive or negatively
interest rate sensitive stocks like electric utilities and REITs are areas
you don`t really want to jump into.

HERERA: On that note, Nancy, thank you. Appreciate it.

TENGLER: Thanks, Sue. Thanks, Tyler.

HERERA: Nancy Tengler with Heartland Financial.

MATHISEN: The head of the world`s biggest beverage company is handing over
the reins. The CEO of Coca-Cola (NYSE:KO) says he will step down next
year. Investors seem to like the move, sending shares higher by more than
2 percent.

Sara Eisen has more on Coke`s new leadership and the challenges ahead.

(BEGIN VIDEOTAPE)

SARA EISEN, NIGHTLY BUSINESS REPORT CORRESPONDENT: A change at the top, at
a time of great change for America`s biggest beverage company.

James Quincy, a 20-year veteran of Coca-Cola (NYSE:KO), taking over as CEO
May 1st. Mukhtar Kent will remain chairman of the board. He told me, “It
is one of my proudest days in 38 years with Coca-Cola (NYSE:KO). My
biggest legacy will be the success of James. This is the most orderly
transition in company history.”

His accomplishments include global expansion into new markets like Myanmar
back in 2012, growing seven of Coke`s brands into billion-dollar
businesses, including Fuze and Smartwater, and turning around declining
North American volumes and sales.

But Quincy will face some major challenges ahead. Soda consumption has
been declining for the last decade in this country, especially Diet Coke.
Rival PepsiCo has fought the trend by building up its Frito Lay snack
business.

The global economy is weak and that includes those once hot-growing
emerging markets where currency swings and consumer softness has hurt Coke
sales.

And finally, consumers have changed the way they shop, buying food and
beverages increasingly online and on their mobile phones. Quincy says it
is one of his biggest challenges ahead, digitizing the company.

For all of these reasons, Coke`s stock has underperformed the broader
market since Mukhtar Kent first took the reins back in 2008. But it has
still climbed about 60 percent.

One important investor, though, is congratulating Kent for a job well done,
and backing this new change in leadership, Warren Buffett whose Berkshire
Hathaway (NYSE:BRK.A) owns 9 percent of Coke shares and is the top investor
in the company, saying, quote, “I know James, and like him, and believe the
company has made a smart investment in his future with his selection.”

For NIGHTLY BUSINESS REPORT, I`m Sara Eisen.

(END VIDEOTAPE)

HERERA: Donald Trump is expected to ask Goldman Sachs (NYSE:GS) executive
Gary Cohn to head the White House National Economic Council. This despite
the president-elect`s past criticism of the banking sector`s power.

John Harwood is in Washington for us tonight.

Good to see you, John, as always.

How influential will Mr. Cohn be when it comes to formulating actual
economic policy?

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Very. This is going
to be an administration like most recent administrations where power is
concentrated in the White House. And Gary Cohn, who is the COO, as you
mentioned, of Goldman Sachs (NYSE:GS), is somebody who is going to be very
close to the president, trying to help him figure out how to finance some
of the things he wants to do, like that big infrastructure program.

And when you look at Gary Cohn at NEC, Steven Mnuchin, Goldman alum at
Treasury, Steve Bannon, Goldman alum as White House strategist, the firm
that was demonized by not just Bernie Sanders, but also Donald Trump, has
certainly got a big role in Donald Trump`s administration.

MATHISEN: Let`s talk about Rudolph Giuliani who is no longer in the
running for secretary of state and as of a few minutes ago, I saw a report,
John, indicating he has taken himself out of the running for any cabinet
position. Tell me about that, and who is the leading candidate for state
right now?

HARWOOD: Well, we`re trying to figure that out. First of all, on Rudy
Giuliani, this is somebody who was all-in as a surrogate for Donald Trump,
just like Chris Christie was, and it looks like both of them are going to
be frustrated. Chris Christie wanted to be attorney general. Rudy
Giuliani wanted to be secretary of state. He more or less openly
campaigned for the job. Donald Trump might not have liked that.

But he also faced resistance from Reince Priebus, the incoming White House
chief of staff, who has been pushing Mitt Romney for this job. There were
questions raised about Rudy Giuliani`s past work for foreign governments in
terms of his law firm and his speaking fees, things that might potentially
pose conflicts and all of that added up to him with drawing today.

HERERA: All right. As of this evening, the Senate is yet to pass a
funding measure that would keep the government from shutting down.
Deadline is midnight tonight. So, what`s going on?

HARWOOD: Looks like that impasse is going to be broken. We have been
waiting to have Joe Manchin, the senator from West Virginia, who had been
holding out for a longer duration for the health benefits for those coal
miners. And Mitch McConnell, who also represents a coal state, indicated
I`m with you in sentiment, but we`ve got to pass this bill with only the
four-month extension. Manchin is insisting on a dozen.

But late this afternoon, Manchin came out of his office and said my
intention was never to shut down the government. It looks like the ice
might be cracking and might be able to avoid a government shutdown.

HERERA: All right. John, thank you so much. Have a great weekend.

HARWOOD: You bet.

HERERA: John Harwood in Washington.

MATHISEN: President Obama ordered American intelligence agencies so
investigate Russian hacking and efforts to influence the election. The
review will encompass malicious cyber activity that dates back to 2008.
The White House says it will try to make as much of the report public as
possible.

HERERA: Still ahead, looking for stocks to buy as the market rallies to
new highs? Our market monitor has some names he says can go even higher
from here.

(MUSIC)

HERERA: A new study shows that only about half of 30-year-olds are making
more money than their parents. According to a team of researchers, that`s
a steep decline from the 1970s when more than 90 percent of 30-year-olds
earned more than their parents did. Some of the largest declines were
concentrated in the Midwest where manufacturing jobs have disappeared.

MATHISEN: Portland, Oregon, this week, became the first city to impose a
tax on companies based on CEO pay. It`s part of an effort to tackle income
inequality.

The measure says that if a chief executive makes more than 100 times its
median workers` wage, a 10 percent surtax will be added to the company`s
existing tax bill with the city. The CEO makes more than 250 times, the
surtax rises to 25 percent. The city`s revenue department says more than
500 publicly traded companies could be subject to the tax.

Companies like Walmart, GE, Wells Fargo (NYSE:WFC). The head of Portland`s
Chamber of Commerce says the requirement will make it more difficult for
businesses to invest in the area and it will have virtually no impact on
addressing income inequality.

HERERA: The Dallas police and fire pension system voted yesterday to
suspend all withdrawals and payments from its deferred retirement program.
Now, that decision stopped more than $150 million in withdrawals from being
distributed. Today, if those withdrawals had gone through, pension
officials say the funds reserved would have fallen below the level need to
keep that fund afloat. Since August, there have been withdrawals of more
than $500 million.

MATHISEN: Biogen`s experimental Alzheimer`s drug shows promise and that is
where we begin tonight`s “Market Focus”.

The biotech company said patients experienced less brain swelling when they
were given the medication in gradual increments, rather than fixed doses at
higher levels. The drug also reduced plaque in the brain, compared with a
placebo. Biogen shares fell a fraction to $287.77.

Federal Trade Commission said AT&T (NYSE:T) will shell out more than $88
million in the next couple of months to nearly 3 million customers who were
hit with unauthorized charges for things like ring tones and wallpaper for
their phones. It`s a practice known as cramming. The refunds, a part of a
settlement the telecom joint reached with the FTC in 2014. Shares fell 3
cents today at $40.38.

General Electric (NYSE:GE) raised its quarterly dividend by a penny to 24
cents a share. This is the company`s first dividend hike since 2014.
Shares were up a quarter to $31.78.

HERERA: Retirement services company, Athene Holding, raised just over $1
billion in its stock market debut. The company priced 27 million shares at
$40 each, which was the midpoint of the expected range. That values the
company at $7.5 billion. Athene Holdings shares surged 10 percent to
$44.05.

American airlines said it was lifting its unit revenue forecast for the
current quarter, thanks to a rise in average passenger fares. Unit
(NYSE:UNT) revenue compares sales to how many seats an airline has, and how
far it flies them. Shares rose 3 percent to $49.64.

And 21st Century Fox has reached a preliminary deal to buy the rest of
British satellite TV provider, Sky, for about $14 billion. Fox currently
holds a 39 percent stake in that company. Fox shares fell 1.5 percent to
$28.21.

MATHISEN: And now to our market monitor who has stock picks, he says could
rise between 10 and 15 percent over the next year. That`s pretty good.
Last time he was on in July 2015, he recommended Cypress Semiconductor
(NASDAQ:CY) down 2 percent. Intersil (NASDAQ:ISIL) Corporation, which is
up 92 percent, and Maxim Integrated is 24 percent higher.

He`s Don Wordell. He`s portfolio manager at Ridgeworth Capital Management.

Don, welcome.

Let`s start with Cypress, which is still on your list, one of your picks
this time.

DON WORDELL, RIDGEWORTH CAPITAL MANAGEMENT PORTFOLIO MGR: Absolutely. The
stock is underperformed because it went through an inventory cycle and, you
know, there was some turmoil in the management levels. We`ve gotten that
resolved. We`ve burned off that excess inventory, gross margins have
bottomed. They got a new CEO in place who`s going to restructure the
business, and we think that over the next 12 to 18 months, as they continue
to have some really great products for the — the Internet moves into your
car, they develop a lot of the Internet products for the Internet of things
for your car.

And this company burns — you know, gets the inventory situation right.
You`re getting paid a 4 percent dividend while you wait for all of this.
We think, ultimately, they could earn a buck 50 a share, put a market
multiple on that`s, which is still cheap to the group. And you`ve got a
stock that will be in the low 20s and trading in the mid 11s right now.
So, we think this is powerful one and stock we really like.

HERERA: You also like Cigna, and they are in a deal with Anthem. But you
say regardless of whether or not that deal closes, you still like the
stock.

WORDELL: Absolutely. You know, Cigna has not been buying back stock.
They have been — during this negotiation process, you know, since the deal
has been announced, they haven`t been buying back stock, just building up
cash in their balance sheet. And, you know, at the end of the day, whether
this deal happens or not, this company is going to — the deal happens,
you`re going to get a 30 percent pop on the stock in the next probably two
or three months when we get this resolved.

If the deal breaks, then you`re going — they`re going to get a big
windfall of cash from Anthem. They`re going to start buying back stock,
and get back to executing their business model. You know, I think in 2018,
you know, we`re looking at them earning probably, you know, $12 a share, if
not more.

And then, you know, again, put a 50 multiple just to be conservative, a
$180 stock on your hand. And it`s 130-something today. So, we think there
is tremendous up side in that one, as well.

MATHISEN: So, we started with chips, moved on to health care. We`re going
to close with paint. Tell me about it.

WORDELL: Oh, yeah. Man, we love paint. You know —

MATHISEN: Who doesn`t love paint!

WORDELL: Sherwin-Williams (NYSE:SHW) — I`m sorry?

MATHISEN: I said, who doesn`t love paint, man?

WORDELL: Oh, exactly. Sherwin-Williams (NYSE:SHW) is just a great
company. I mean, you know, all of these companies we`re talking about will
benefit from some of the things that are very important to investors now
with, you know, tax reform and the like.

But Sherwin-Williams (NYSE:SHW) is in the middle of a deal right now
themselves. They`re trying to acquire Valspar (NYSE:VAL). Sherwin-
Williams (NYSE:SHW) owns the paint distribution with their paint stores.
They do sell in some of the big box, but they`re able to be price-setters
and in their paint stores.

So, the market is a little concerned about the fact that the raw material
for paint is going up with the price of oil. And they`re able to offset
that with price increases. Volumes (AUDIO GAP). You know, if you get
Valspar (NYSE:VAL) done, be integrate — we see this company in the, you
know, up at least 15, 20 percent over the next 12 to 18 months.

And so, we`re very excited about paint, and, you know, it`s a really good
company all the way around.

MATHISEN: Well, Don, get out there and paint this weekend, OK?

Don Wordell with Ridgeworth Capital Management.

Coming up, why the rise of fake news may be sending a shiver through some
very well-known brands.

(MUSIC)

HERERA: And here`s a look at what to watch for next week. On Wednesday,
Federal Reserve policymakers are widely expected to raise short-term
interest rates. Also on Wednesday, Donald Trump is scheduled to meet with
CEOs from the tech sector, some of Mr. Trump`s loudest critics during the
campaign. On Thursday, the president-elect will detail how he plans to
separate his business operations from his job as president.

And that`s what to watch for next week.

MATHISEN: Safety regulators want Takata speed up its recall of defective
airbags, the largest recall, by the way, in U.S. history. The National
Highway Traffic Safety Administration says the recall will ultimately
affect about 42 million vehicles in just the U.S. New models are also
being added to the recall list, including the Tesla Model S, the Ferrari,
the Jaguar, Land Rover and McLaren.

Well, there is big money in fake news, and some of the most recognizable
brands may be inadvertently funding the sites with false or misleading
stories.

Julia Boorstin explains.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Fake news stories
are the latest evolution of click bait — juicy but entirely made-up
stories designed to generate clicks. Some users can`t tell the difference,
and neither can some of the algorithms that place ads.

Now, the “Wall Street Journal” and others are raising questions about the
fact that fake news stories are sometimes paired with ads for big brands,
such as this made-up article in a ad for Ram truck made by Fiat Chrysler,
thereby inadvertently funding fake news sites.

Fiat saying, “At this time, there is currently no truth filter technology,
and until the technology gets more sophisticated, we must work individually
on a site-by-site basis to exclude the growing list of URLs and domains
considered harmful.”

Secretary Hillary Clinton just yesterday raised concerns about real
consequences of fake articles after a man fired shots inside a Washington
restaurant that was falsely accused of harboring a child sex ring linked to
the former candidate. Clearly, brands wouldn`t want to be associated with
those kinds of stories.

HILLARY CLINTON (D), FORMER PRESIDENTIAL CANDIDATE: It`s now clear that
so-called fake news can have real-world consequences. This isn`t about
politics or partisanship. Lives are at risk. It`s a danger that must be
addressed and addressed quickly.

BOORSTIN: So, how did these ads end up next to fake news? In part, it`s
due to retargeting technology. An ad can follow a consumer into a fake
news website after he or she has visited a brand`s page.

And there are a number of middle men. Companies like AdRoll help
advertisers help place ads online, finding space on websites through
several partners. And AdRoll has partnered with Google (NASDAQ:GOOG), the
leading digital ad company, which said it would stop placing ads on sites
with deceptive or misrepresentative content.

But Google`s crackdown hasn`t entirely been working. Google (NASDAQ:GOOG)
saying, quote, “We`re in the process of implementing the new policy and
these early stages have demanded increased human review.”

And Facebook (NASDAQ:FB) chief operating officer, Sheryl Sandberg, also
weighed in on the controversies surrounding fake news, and the steps the
company is taking.

SHERYL SANDBERG, FACEBOOK COO: There have been claims that it swayed the
election. We don`t think it swayed the election, but we take that
responsibility really seriously, and we`re looking at things like working
with third parties, helping to label false news, doing the things we can do
to make it clearer what the hoax is on Facebook (NASDAQ:FB).

BOORTIN: And in the meantime, brands like Fiat`s Ram are taking steps to
make sure they are marketed in what they call brand-safe environments.

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

(END VIDEOTAPE)

HERERA: And that is NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera.
Thanks for watching.

MATHISEN: And I`m Tyler Mathisen. Thanks from me, as well. Have a great
weekend, everybody. And we will see you on Monday.

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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