Transcript: Nightly Business Report – January 6, 2017

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

Funded in part by HSS.

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TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Three for three. The Dow,
NASDAQ and S&P 500 all hit new highs. But that Dow 20,000 mark remains oh
so elusive. So, with stocks at record levels, what`s next?

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Show me the money. Job growth
slowed to end 2016. But were paychecks grew the most in seven years.

MATHISEN: And safe swim. How one man hopes his surfer`s bracelets will
cause sharks not to take the bait.

All that and more on NIGHTLY BUSINESS REPORT for Friday, January 6th.

HERERA: Good evening, everyone. Welcome.

A triple play on Wall Street with all three indexes hitting new highs after
today`s jobs report. We`ll have more on that in just a couple moments.
The NASDAQ, the S&P 500 close at records, while the Dow came tantalizing
close to that 20,000 mark. In fact, it was just a third of a point away.
And to put that into perspective, the index was 5 cents, yep, one nickel
away from that 20,000 milestone. But in the end, the Dow couldn`t break
free and had to settle for the intraday high.

So, here`s a look at the numbers for you. The Dow rose 64 points to
19,964. The NASDAQ rose 33. The S&P 500 added just about eight.

Bob Pisani has more.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: No Dow 20,000, but we
did get a triple record day. The Dow Industrials, S&P 500 and NASDAQ all
record highs.

What moved us up today and this week were two groups that were strong after
the election but have lagged recently. Bank stocks like Goldman Sachs
(NYSE:GS) and J.P. Morgan, and industrials like Boeing (NYSE:BA) and the
United Technologies (NYSE:UTX).

One disappointment, oil stocks. Exxon and Chevron (NYSE:CVX) were down
this week, even though oil remains near 18-month highs.

Now, the report of that terrible shooting at Ft. Lauderdale Airport mid-
afternoon did not cause any big selling but it did likely, understandably,
dampen any buying interests.

Now, the markets have been essentially sideways since the Trump rally ran
out of steam in mid-December. Investors are hopeful that when earnings
season kicks off next week, corporations will give positive guidance for
the 2017 earnings outlook. Stocks have already moved on that hope. So, a
lot is riding on the outcome for this year.

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

(END VIDEOTAPE)

MATHISEN: Let`s turn now to our two guests for their perspectives on the
markets. We`re lucky to have with us tonight, David Lebovitz, global
market strategist at J.P. Morgan Asset Management. And Jack Ablin, chief
investment officer at BMO Private Bank.

Welcome to both of you.

We`ve got a good long stretch here where we can really get to stuff.

David, you say you believe that there`s still upside to equities in 2017.
Jack, I don`t know whether you say that or not, but you do say that you
think the S&P 500 would be lower a year from now, and that there`s too much
good news built into the market.

David, make your case and then, Jack, rejoin.

DAVID LEBOVITZ, J.P. MORGAN ASSET MGMT. GLOBAL MARKET STRATEGIST: So, we
do think that there`s upside in 2017. But what I would say is that that
upside for the most part is really dependent on the ability of corporate
profit growth to reemerge after being, you know, relatively hidden for the
better part of the past two years.

So, multiples feel a little bit stretched. It does feel like there`s a lot
priced into this market. But it feels like earnings growth is back in 2017
and as a result, we think that equity returns will mirror those of the cash
flows that the stocks are generating.

MATHISEN: Jack?

JACK ABLIN, BMO PRIVATE BANK CIO: Yes. I would agree. I think there`s a
lot built into expectations. Analysts as a group are expecting it to rise
13.5 percent in 2017 and that`s a bit of a stretch. I think that — you
know, and that`s currently built into prices.

One of the things I`m going to be watching for is this current earnings
experience just started a day or so ago to see how much momentum are we
going to have going into 2017 and will these margins, you know, predicated
on tax cuts and regulatory rollbacks be offset by higher interest costs?

HERERA: You know, David, there are a lot of people who do feel that the
rally after the election is maybe getting a little thin and that the
expectations — and, Ty has made this point a number of times — the market
seems to be thinking everything on the new administration`s agenda is going
to get done quickly. It`s all perfect.

I mean, that may be the case but if not, is that going on put a chink in
the market?

LEBOVITZ: So, I would agree with you that the market is engaged in a
little bit of wishful thinking right now. I`ve been telling clients that
the stock market is pricing Donald Trump polling at hundred, right,
everything according to plan.

We forget that at the end of the day, we are talking about Washington. And
even if Donald Trump starts to try to take action on day one, you know,
best case we see some of this stuff come through in the second half of
2017. I would add, it`s going to be far easier to make progress on tax
reform than it is on infrastructure spending or deregulation.

So, I agree, there`s a lot priced into this market right now. And
unfortunately, we`re just going to have wait and see what actual policies
look like next year.

MATHISEN: Jack, I know you`ve had your eye — we spoke earlier today on
one measure without getting too technical, it`s the price to sales ratio of
the stock market right now. And you see it as stretched as it`s been since
the tech bubble. Explain it in sort of freshman economics terms for me and
why are you concerned about?

ABLIN: So, you have prices, the price of the market, and you have sales.
And you essentially just look at the total number of sales outstanding and
compared to the price. And right now, prices are trading at roughly two
times revenues. On average, if you go back to 1993, we normally traded
around 1.2 times revenues. The last time we were at or above two times
revenues was 2000, with the tech bubble.

So, I do worry that — at least from that perspective, we are a bit
stretched. I will say, though, keep in mind, that when I`m looking at
revenues, I`m looking at trailing revenues. I`m looking at the last 12
months. And a lot of what is baked into this market is hope for the next
12 months.

So, it`s possible that if we do get a big ramp up on revenues, then that
two times goes down some. I don`t think it goes back down to 1.2, though.

HERERA: So, David, if you do see opportunity in this market, and things
get done in Washington like the market anticipates they will, where do you
see the best opportunity?

LEBOVITZ: So, we like the more cyclical parts of the market relative to
the more defensive parts of the market. The one thing that I`m most
certain about for what will happen this year is that interest rates will
head higher. Whether that comes from, you know, an increase in the
deficit, more inflation, better real growth, the bottom line here is that I
think rates are headed up. So, that should be good for financials.

We also like technology and we like consumer discretionary, but we like
consumer discretionary with a bit of a caveat. We like discretionary as
long as wages are growing faster than inflation. But if for some reason,
that relationship flips on its head, then we see consumers losing
purchasing power and we`re not quite as optimistic on those stocks. What
we`re staying away from again are the defensives.

So, the staples, the telecoms, the utilities, which have the high
sensitivity to interest rates, and as we saw going into the end of 2016, it
came under quite a bit of pressure when rates rose.

MATHISEN: Thirty seconds. Where should I take profits now if I`ve got
some? What should do I quickly for 2017?

ABLIN: Sure. You know, again, I`m not looking for a plunge. In fact,
there`s a lot of cash ready to step in if we do pull back. But I would
say, you know, if you got profits in S&P, U.S. large caps, that`s certainly
not a bad place to take.

I would redeploy it in cheaper markets and emerging markets. You know, all
we have to do is read the water sideways and I think emerging markets does
well. It`s when if we get a call and start to head down the emerging
markets are going to go the other way. You know, like I said, there`s a
lot of cash on the sidelines.

MATHISEN: Gentlemen, thank you very much for your insights tonight. David
Lebovitz with J.P. Morgan Asset Management. Jack Ablin, BMO Private Bank.

HERERA: Hiring slowed a bit in December but wages rose to end the year at
their fastest clip since 2009. Average hourly wages rising a dime last
month to $26 and that brings the growth a tick under 3 percent for all of
2016. And as for jobs, the economy added 156,000 in December. That was
below the expected increase of 178,000. The unemployment rate rose by a
tenth to 4.7 percent.

The report was final one under President Obama and represented the 75th
straight month that employers add jobs.

And as Eamon Javers tell us, it set the bar for the new administration.

(BEGIN VIDEOTAPE)

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: The jobs number came
in a little lighter than expected today with the most robust sectors being
employment and health care which added 43,000 jobs and social assistance,
which includes home rehab workers and daycare employees, adding 20,000
jobs.

Food services and drinking places added 30,000 jobs, but other sectors saw
job losses, including mining, and logging, construction and information,
which includes book publishers and the media. Average hourly earnings
increased by 10 cents to $26 after edging down in November.

THOMAS PEREZ, LABOR SECRETARY: Was the wage growth is the best wage growth
we`ve seen in the recovery. So, that`s the most important part of this
report.

JAVERS: The release marks the final jobs report of the Obama era, in which
the monthly jobs announcement became a political football as the country
struggled to emerge from recession.

JOHN BOEHNER (R), FORMER HOUSE SPEAKER: Where are the jobs?

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The American economy has now
created in the private sector jobs for the past 21 months in a row.

BOEHNER: Where are the jobs?

OBAMA: Business once again added jobs for the 30th month in a row.

BOEHNER: Where are the jobs?

OBAMA: This is the strongest job growth that we have seen since the 1990s.

JAVERS: That had officials in a reflective mood today.

PEREZ: Eight years ago, Elaine Chao was here telling the American people
that we lost almost 800,000 jobs. The unemployment rate was heading toward
10 percent. The economy was in the tank. Here we are now, the
unemployment rate is 4.7 percent.

JAVERS: But Speaker Paul Ryan posted a GOP message saying, “After eight
years of Obama`s economic policies, too many Americans still do not feel
better off.”

So, how does Barack Obama stack up against other recent presidents?

Ronald Reagan created nearly 16 million jobs. Bill Clinton, nearly 23
million was the highest. George W. Bush just over 2 million and Barack
Obama created over 11 million jobs.

Obama`s total is the bar the next president, Donald Trump, will likely try
to beat in his eight years in office if he gets them. This week, Donald
Trump tweeted the fourth decision on create 700 new jobs in the United
States is just the beginning. Much more to follow.

For NIGHTLY BUSINESS REPORT, I`m Eamon Javers in Washington.

(END VIDEOTAPE)

MATHISEN: On the same day, Congress certified Donald Trump`s Electoral
College win as president, the nation`s top intelligence officials briefed
Mr. Trump on their findings on the investigation into Russia`s hacking
attempts to interfere with the election. In a written statement afterward,
the president-elect praised the intelligence community, called the meeting
constructive but did not embrace the conclusion that Russia and Russia
alone was behind the cyber meddling. He also said hit no effect on the
election`s outcome.

Mr. Trump also plans to appoint a team to come up with a plan to combat
cyber attacks within 90 days of taking office.

HERERA: And the president-elect also said Mexico will reimburse the U.S.
for the cost building a border wall between the two countries. After a
report last night saying he will ask Congress for money to build the wall
as soon as April, Trump tweeted this this morning, quote, “The dishonest
media does not report that any money spent on building the great wall for
the sake of speed will be paid back by Mexico later.”

MATHISEN: One area that is looking to hire right now is the U.S. border
patrol, but it`s struggling to do so.

Kate Rogers (NYSE:ROG) is in Artesia, New Mexico, to show why the agency is
having such a tough time finding recruits.

(BEGIN VIDEOTAPE)

KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: If you are looking for
a challenging career and have a desire to serve and protect, look to the
nation`s borders. The U.S. Customs and Border Protection Agency is
actively recruiting.

MARK MORGAN, U.S. BORDER PATROL CHIEF: We are looking for men and women
that really have an innate set of core values, of honesty, of integrity, of
dedication, of respect.

ROGERS: The agency needs to bring on around 1,700 new border patrol agents
in the near future to help protect 6,000 miles of the country`s land border
and more than 300 points of entry. However, many job applicants don`t make
it through initial screening.

MORGAN: It`s hard to get in. We expect a lot of it. For every 175 that
apply, one border patrol agent gets hired.

ROGERS: Among other challenges in recruiting and retaining, the job is
dangerous and often requires agents to deal with harsh terrain and weather
conditions and relocate to remote areas.

MORGAN: Generally, we`re not in major metropolitan cities and that can be
a negative aspect for some folks, but I think that the mission that we have
outweighs that.

ROGERS: New agents like 23-year-old Jose Ramirez attend the training
academy in Artesia, New Mexico, for roughly four months. They`re recruited
in prior backgrounds and prior law enforcement experience isn`t necessary.

For Ramirez, it is a chance to serve the country and continue the legacy of
his older brother who died in the line of duty.

JOSE RAMIREZ, JR., U.S. BORDER PATROL ACADEMY TRAINEE: Being in the
academy is a challenge. But I know that every step and everywhere I am, I
know my brother`s foot steps were there. So, every time I come to a
struggle or anything, I think of him.

ROGERS: Trainees get full board and they`re paid at around $50,000 a year,
but the training process is rigorous. I spent the day at the Border Patrol
Academy to find out what it takes to prepare for the complexities of
becoming a border patrol agent.

New agents learn the law and how to process legal and undocumented border
crossers. they practice techniques and go through demanding fitness
training. They learn Spanish to be fluent by the time they graduate and
trains riding off-road to be ready for the southern border`s harsh terrain.

They also get combat training.

UNIDENTIFIED MALE: Extend the right hand to the neck. Yes, give it to
him. Give it to him. Harder, harder, harder. Now, throw him.

ROGERS: And have to be ready to fight in the dark.

UNIDENTIFIED MALE: Good, good, good. To go your right. Excellent.

ROGERS: Water safety is also a must, including climbing Jacob`s ladder.
Dangling 25 feet in the air and being ready to take plunge.

For NIGHTLY BUSINESS REPORT, I`m Kate Rogers (NYSE:ROG) in Artesia, New
Mexico.

(END VIDEOTAPE)

HERERA: She`s such a good sport.

Coming up, why this week`s market monitor thinks staying domestic might be
the best thing for your portfolio this year.

(MUSIC)

HERERA: Boeing (NYSE:BA) misses its target for new orders in 2016 and
that`s where we begin tonight`s “Market Focus”.

The aircraft maker said it received fewer orders last year, just 668 of
them. The company hoped that number would match all of its total
deliveries but it didn`t. It was Boeing`s weakest year for orders since
2010. Boeing (NYSE:BA) shares finished the day, though, up 39 cents to
$159.10.

Greenbrier Company posted lower profit and sales in its latest quarter, as
the maker of railroad freight car equipment cited fewer deliveries and a
challenging operating environment. But the company reaffirmed its guidance
for this year and declared a quarterly dividend of 21 cents a share.
Shares soared 16 percent to $46.70.

MATHISEN: Goldman Sachs (NYSE:GS) added Fiat Chrysler to its conviction
buy list, and raised its price target to $17.50. Evercore also said it was
raising its stock rating from sell all the way to buy. Now, both financial
firms cited Fiat`s ability to reach its profit target. Fiat Chrysler
shares rose 6 percent. They finished at $10.42.

And late last night, a federal judge ruled that Amgen`s rivals Sanofi and
partner Regeneron infringed upon Amgen`s patent for its cholesterol
treatment. Under the ruling, Sanofi and Regeneron are banned from selling
their cholesterol drug. Amgen (NASDAQ:AMGN) shares up 2 percent, $156.78.
Shares of Sanofi and Regeneron were lower as you see there.

HERERA: Our market monitor likes domestically oriented stocks, and he has
names he says are poised to take advantage of faster growth here in the
U.S. this year. The last time he was on in June, he recommended the CME
Group (NASDAQ:CME), which is up 23 percent. TD Ameritrade (NASDAQ:AMTD),
which gained 52 percent. And Schlumberger (NYSE:SLB), which is about 8
percent higher.

Joining us is Michael Mussio, portfolio manager at FBB Capital.

Welcome back, Michael. Nice to see you here.

MIKE MUSSIO, FBB CAPITAL PORTFOLIO MANAGER: Thanks for having me.

HERERA: And you like the financials. Let`s get right to your pick.

PNC you say has basically a great plan for new growth.

MUSSIO: Yes. So, the company is a regional bank. Not one of the big money
centers, but a regional bank that has planned to expand their footprint and
that footprint is a branch network on the east coast that is moving west
and south. And most focus domestic revenue and profits, which is what we
like in a rising rate environment. And rising short term rates should help
in terms of profitability as well.

MATHISEN: And it`s a bank that actually does banking, right?

MUSSIO: That`s right.

MATHISEN: A banker`s bank.

MUSSIO: Yes.

MATHISEN: Extra Space Storage (NYSE:EXR). Who wouldn`t want extra space?

MUSSIO: So, this is for the folks who have more stuff than they do space.
This is the second largest —

MATHISEN: You`re talking to me.

MUSSIO: That`s right. This is the second largest self storage real estate
investment trust. A little bit more smaller, only about a $10 billion
market cap, but they pay a nice dividend, and the leases are actually
relatively short term, Tyler, like around a year. So, as rates rise and
inflation rises, they can reset the rates and we think they`re going to
benefit from that going forward in a rising rate environment.

HERERA: And your third is a play on energy, a specific niche of energy,
though — Enterprise Partners LP.

MUSSIO: Yes. So, Enterprise pipeline company. We think it`s kind of —
has one of the cleaner balance sheets of the pipeline companies. They`re
branching out into some other areas of storage and transportation. Again,
healthy dividends, a solid balance sheet and 100 percent — almost 100
percent domestic revenues. And, again, in a rising rate environment going
forward, is better to be home rather than abroad with revenues.

MATHISEN: Let`s get your thoughts broadly on this day where all three of
the major barometers hit record highs.

MUSSIO: Yes. I mean, we can call it 20,000, can we, Tyler?

MATHISEN: I think we can.

MUSSIO: I mean, inside of one point. Pretty impressive. But there is —
some of your other guests have talked about, you know, getting actual
policies passed and I think we`re factoring in some positivity that has yet
to come through.

And I think the sales comments going forward in materials of price of sales
is key as well. We really haven`t seen sales growth in the market writ
large. That`s why we like to stick a little bit more toward individual
companies that we think are growing and relatively low growth environment.

HERERA: All right. Michael, thank you very much.

MUSSIO: Thanks, guys.

HERERA: Michael Mussio with FBB Capital.

Coming up next, how one entrepreneur hopes to give a whole new meaning to
the phrase, “jumping the shark”.

(MUSIC)

MATHISEN: We seem to hear more and more these days about shark attacks,
whether here or in Australia or anywhere. Scientists believe that`s partly
because more people are spending more time in the water than ever before.
Surfers are the victims of roughly half the attacks here in the U.S. and
that`s why one California surfer decided to develop a device that he
believes can reduce the chances of a shark attack.

(BEGIN VIDEOTAPE)

MATHISEN: If you live through a shark attack, like Nick Valounis is did in
2005, you surely have quite a story to tell.

NICK VALOUNIS, PHYSICAL THERAPY TRAINER: I was taken by the foot and
ankle, external stitches here and natural force of the shark pulling me
under is what broke my ankle.

MATHISEN: Friends took Valounis to a South Carolina hospital. He needed
about 40 stitches and four months to heal.

VALOUNIS: Considering the foot is still there, I can still use it. And
surf with it. Yeah. Very fortunate.

MATHISEN: Now, he lives and surfs in California. Near a childhood buddy,
Nathan Garrison, out in Santa Barbara. Garrison wasn`t there when the
attack happened, but it haunts him to this day.

NATHAN GARRISON, SHARKBANZ: Quite a few times by sharks. We thought we
had seen them. Maybe we saw a fin, maybe saw a tail.

MATHISEN: So, Garrison set out to develop a wearable device to deter shark
attacks.

GARRISON: It had to be simple. It had to be affordable. And it had to be
stylish.

MATHISEN: But how exactly would it work?

In 2012, Nathan`s father David Garrison did some research and came upon
shark defense. A New Jersey company run by scientists who back in 2006
discovered that sharks are extremely sensitive, believe it or not, to
magnetic waves. Sharks have a network of gel filled black dots on their
snouts called Ampullae of Lorenzini, so sensitive that they pick up weak
electrical signals produced by muscle movements, even the heartbeats of
their prey. The Ampullae act as electroreceptors, sensing magnetic waves
and sending information to the shark`s brain about electrical activity.
When sharks approach a person wearing magnets, they sense a stronger than
normal magnetic field, unpleasant enough to make many sharks turn and swim
away.

GARRISON: It is like you get blasted in the eye with a super bright light
in a dark room. So, it`s uncomfortable, it`s unpleasant, but it`s not
harmful.

MATHISEN: David Garrison got a first hand look at the technology with
Patrick Rice, a marine biologist who worked with shark defense. Garrison,
having reviewed some of the 15 research studies on the science, was so
impressed, he licensed the magnet technology from shark defense, agreeing
to pay a percentage of future sales for a shark deterrent made by a new
company he and his son formed named Sharkbanz.

Nathan Garrison got busy. Four months and about $50,000 later in 2014, he
and his dad joined Rice in the Bahamas to test a prototype.

Nathan, having never seen it work in person was going to shoot video
underwater with sharks swimming nearby.

GARRISON: I was nervous. We`re looking at each other like, is this really
a good idea?

MATHISEN: Garrison`s video shows Rice wearing shark bands and he`s safe.
On another trip, a dummy. Bernie, they named him, wore Sharkbanz. His
legs stuffed with bait.

Garrison`s video shows sharks appearing to avoid Bernie. When Sharkbanz
were removed, a shark took the bait. To be sure, there`s still healthy
skepticism about the science behind Sharkbanz. Garrison admits his product
is merely a deterrent, that it won`t stop a hungry shark if it really
decides to attack.

Last week, a Florida teenager said he was bitten by a shark while wearing
Sharkbanz. He said it happened after a wave knocked him off the surfboard.
That he may have landed in the water near a shark. The teen took more than
40 stitches but is expected to fully recover.

Nathan Garrison who knows of no other such incidents stands by his product,
e-mailing NIGHTLY BUSINESS REPORT to say, quote, “Ultimately, Sharkbanz are
like any safety device, designed to reduce the risk of injury but never 100
percent.”

GARRISON: If I can create device that would even make me 10 percent less
likely to get attacked, then why would not I wear it?

(END VIDEOTAPE)

MATHISEN: Interesting point.

Scientists are still researching the science behind Sharkbanz. And there
are other types of deterrence, of course, on the market. Some of which use
chemicals. Still, more than 35,000 Sharkbanz have sold in a little more
than two years.

HERERA: Well, before we leave you tonight, let`s take a final look at this
record-setting day on Wall Street. All three indexes hitting new highs.
The Dow rose 64 points to 19,964. The NASDAQ rose 63. The S&P 500 added
just about 8.

MATHISEN: OK, my Packer fan.

HERERA: Oh gosh, that`s right.

MATHISEN: I got the Giants. You got the Packs.

HERERA: I got the Packs.

MATHISEN: I`ll see you Monday.

HERERA: You got it. I may be wearing a cheese head. You never know.

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

MATHISEN: I`m Tyler Mathisen. Have a great weekend, everyone. And we
will see you Monday.

HERERA: Or maybe you`ll be wearing the cheese head, depending on who wins.

END

Nightly Business Report transcripts and video are available on-line post
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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) 2017 CNBC, Inc.

 

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