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DONALD TRUMP, PRESIDENT OF THE UNITED STATES: We are going to be cutting taxes massively for both the middle class and for companies.
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TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Setting the agenda. President Trump’s first official meeting with the country’s most prominent CEOs, pledging to growth the economy and jobs.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Trade deal trumped. The U.S. withdraws from a sweeping multilateral agreement. But what happens next?
MATHISEN: And merger blocked. A federal judge calls Aetna’s proposed takeover of Humana anti-competitive and comes as the industry faces an uncertain regulatory future.
Those stories and more tonight on NIGHTLY BUSINESS REPORT for Monday, January 23rd.
HERERA: Good evening, everyone, and welcome.
President Trump got to work on his first formal day in the White House. The president welcomed the chief executives of some of the country’s most well-known companies. With business leaders around the table, he pledged to cut taxes, wipe out regulations, and fast track U.S. factories. But he also threatened a border tax.
Eamon Javers reports tonight from the White House.
EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: President Trump started his first work day in the White House by delivering a carrot and stick message to a dozen of the nation’s top manufacturing CEOs. The group included Elon Musk of Tesla, Marillyn Hewson of Lockheed Martin, and Andrew Liveris of Dow Chemical, among others.
The new president’s message to CEOs: if the CEOs create jobs in the United States, they can expect expedited approval for new factories and considerably lower taxes. But they were also warned about moving factories out of the country.
TRUMP: A company that wants to fire all of its people in the United States, and build some factories someplace else and then thinks that that product is going to just flow across the border into the United States, that’s not going to happen. They’re going to have a tax, a border tax. A substantial border tax.
JAVERS: President Trump also pledged to cut regulations by 75 percent or more.
TRUMP: We’re going to be cutting regulations massively. Now, we’re going to have regulation and it will be just as strong and just as good and just as protective of the people as the regulation we have right now. The problem with the regulation that we have right now is that you can’t do anything.
JAVERS: On a day when the president signed an order to full United States out of the Trans Pacific Partnership trade deal, the CEOs looked past the trade and tariff issues that could negatively affect their companies and said they were optimistic about working with the new administration.
ANDREW LIVERIS, DOW CHEMICAL CHAIRMAN & CEO: He’s not going to do anything to harm competitiveness. He’s going to actually make us all more competitive, recognizing there’s a transition here in terms of you can’t get things done overnight.
JAVERS: The CEOs left the White House today with a homework assignment from the president of the United States. They’ve been told to return to the White House in 30 days with a list of suggestions of how to improve manufacturing here in the United States.
For NIGHTLY BUSINESS REPORT, I’m Eamon Javers in Washington.
MATHISEN: Well, if the administration and Congress follow through with a tax cut for both the middle class and corporations, along with rolled back regulations, will that help the stock market move higher?
The head of the investment group joins to us discuss.
Charlie Bobrinskoy, vice chairman and the head of the investment group at Ariel Investments joins us to discuss.
Charlie, I want to work my way back to tax cuts and regulatory reform and so forth. But I was struck by one of the things in the notes from you today. And that is that the under-focused story right now may well be the return of inflation. And you recommend that people have at least a portion of their portfolios positioned to take advantage and to protect from that.
Why and how?
CHARLES BOBRINSKOY, ARIEL INVESTMENTS: Well, because I think there are not as many reports on inflation as there should be. We have a tighter labor market. We have an unemployment rate that’s under 5 percent. We have big deficits right now that are going to get bigger. Trump is going to be spending money on infrastructure. He doesn’t seem to want to do much cutting of entitlements. He’s going to have tax cuts.
So, all those produce more deficits and that tends to be inflationary and just fundamentally, the data is showing that we already have some inflation. Wages were up 2.9 percent in the last jobs number. Energy prices have been moving higher, rents have been moving higher, health care costs have been moving higher. So, I think after a period of benign inflation, it’s starting to come back.
HERERA: And to Tyler’s second question, how would you — how would you protect or hedge against that?
BOBRINSKOY: It’s very interesting because commodities and stuff in the ground has been one of the worst performing asset classes for the last four or five years. And yet, I think that’s going to change. There are a lot of traditional hedges for inflation. But in general, on this one, I would spread your hedges out. So, things like farmland, oil, even some gold and precious metals are good ways to hedge yourself.
And then, what you shouldn’t do is to buy a lot of long term bonds because long term bonds do very badly in the inflationary environment.
MATHISEN: All right. Let’s go back to the sort of the topic we began with, and that is the possibility of regulatory reform and lower tax rates on the middle class and on corporations. All other things being equal, I assume you think that’s good for investments and companies.
BOBRINSKOY: It is. And what’s important here is not what I think but what the stock market thinks. And the stock market really does believe that lower corporate taxes, less regulation and, frankly, a little bit more consumer confidence are all going to be good for the economy, good for corporate profits and maybe those P/E multiples that look a little higher right now will end up not being so high in retrospect.
HERERA: But does the market have too much priced in? If not priced in, are they anticipating too much? It’s a very aggressive agenda by the new president. No one really believes he’s going to get everything through, but it seems the stock market thinks he’s going to be able to accomplish quite a bit.
BOBRINSKOY: Yes. I think that’s fair. I think if you and I were going to say how much will he cut taxes, we might not be sure. Will he get all the way to 15 percent for a corporate rate? Probably not. But he’ll be able to make some cuts.
And those cuts when do you the math can produce significant improvements in corporate earnings, particularly for U.S. based companies. Not so much for global companies. A company like even Apple that has a lot of their operations outside the U.S. won’t benefit as much as some U.S. based companies.
MATHISEN: And we’ll save the whole question of the border tax for another conversation.
Charlie, thanks again.
BOBRINSKOY: Thanks for having me.
MATHISEN: Charlie Bobrinskoy with Ariel Investments.
HERERA: As Eamon reported just moments ago, President Trump today signed an executive order ending the country’s participation in the Trans Pacific Partnership. And at an afternoon with union leaders, he said he’s doing it to put a lot of people back to work.
John Harwood is covering that story for us from Washington tonight.
Good evening, John.
So, what are the implications, not only for workers but also for economic the economic position with Asia?
JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, first of all, it had been widely assumed, Sue, that the Trans Pacific Partnership was not going to be approved. So, there is a limited immediate impact. However, some former Obama administration officials who very much wanted this to go through and some Republican who did think it is going to be a blow to American influence in Asia and a boon, a gift to China, which is trying to make its own regional trade pact.
John McCain put out a statement saying that this was a strategic mistake that will hurt the United States for years. Nevertheless, Donald Trump signaled it and the question now is, what steps in in place of the TPP that the administration might do and that China might do.
MATHISEN: All right. Let’s talk about NAFTA. Anything said or done about that today?
HARWOOD: No. And I have to say, the pro-NAFTA analysts I talked to today were somewhat more positive about the potential for renegotiation. That that maybe having more benign effect on American business and on the American economy. President Pena Nieto of Mexico, President Trudeau, or Prime Minister Trudeau of Canada, that they are going to be able to make some sort of arrangement with President Trump.
And remember, part of the Trans Pacific Partnership was to accomplish a renegotiation of some aspects of NAFTA itself. So, the Obama administration was for that. We’ll see what the negotiations produce. They break down. Then the question is, does the Trump administration just outright withdraw?
HERERA: All right. The president also signed — he was busy today — also signed an executive order putting a freeze on federal employee hiring. What are the details of that?
HARWOOD: Not many details. It is an order that exempts the military. Just like the regulatory freeze which was signed on Friday, exempts urgent situations that departments decide that they have to do.
In the past, hiring freezes have not actually produced much results beyond headlines. There was a GAO study after both President Carter and President Reagan instituted hiring freezes in early 1982 that said a lot of companies then hired part time workers and they might have even incurred costs from disruption of the operations. So, maybe one of those things that looks good when you say it, but doesn’t have a big impact on tax players.
HERERA: All right. John, thanks so much. John Harwood in Washington for us tonight.
HARWOOD: Well, of course, any changes to trade agreements, especially NATFA, going to impact the auto industry. And tomorrow, the president meets with the CEOs of the big three automakers. Today, the heads of Ford and Tesla were at the White House.
But can the president get carmakers to build more vehicles in the U.S.? And if it does happen, how much could it drive up the cost of cars and trucks here in the U.S.?
Phil LeBeau takes a look.
PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Meeting in the Roosevelt Room of the White House, President Trump told dozen of CEOs, it’s time to build more in the U.S.
TRUMP: We want to start making our products again. We don’t want to bring them in. We want to make them here.
LEBEAU: For the auto industry, building more cars and trucks in America would mean a dramatic change. Last year, just 57 percent of the cars and trucks sold in the U.S. were built here. Of those imported, most came from Mexico, Canada and Japan, a county where the big three have long struggled on sell cars due to Japanese regulations.
TRUMP: If, as an example, we sell a car into Japan and they do things to us that make it impossible to sell cars in Japan, and yet they sell cars to us and they come in like by the hundreds of thousands of biggest ships I’ve ever seen — we have to talk about that. It’s not fair.
LEBEAU: It’s too soon to know if President Trump will succeed in driving more auto production to the U.S. The CEO of Ford, whose company dropped plans for an assembly plant in Mexico following harsh criticism from the president, is encouraged by the discussion.
MARK FIELDS, FORD MOTOR CEO: It’s very, very positive. And I think very positive meeting for the United States of America and manufacturing in general.
LEBEAU: If the automakers import fewer vehicles and are forced to build more in the U.S. where labor costs are higher, analysts say prices for cars and trucks would likely go up. How much is unclear. And how willing are automakers to add assembly plants for small cars and crossovers that have thin profit margins.
After bankruptcies rocked the auto industry during the last recession, many automakers and part suppliers are cautious about adding costs. But they also realize the U.S. auto market is the most lucrative one in the world and competing here could increasingly mean building here.
Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.
MATHISEN: Ford will take $2 billion charge because of the change in the way it values pensions and retiree benefits. The automaker is now counting them in the year they occurred. It used to account for them over a number of years and the change will be reflected in Ford’s 2016 net income.
HERERA: On Wall Street today, stocks closed lower as investors looked for more details on the president’s policies. Stocks were also dragged down by energy shares and a so-so quarter from McDonald’s. We’ll have more on that a bit later in our program. The Dow Jones Industrial Average dropped 27 points to 19,799, the NASDAQ was off 2, and the S&P 500 down 6.
MATHISEN: A federal judge today blocked the $37 billion merger between Aetna and Humana. The court said the takeover would unlawfully threaten competition. That sent shares of Aetna lower and Humana higher. The ruling comes just days after President Trump’s executive order that allows the federal government to start dismantling the Affordable Care Act.
Bertha Coombs takes a look at the big changes and the growing uncertainty in the health care industry.
BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Justice Department hailed today’s ruling blocking Aetna’s acquisition of Humana as a victory for seniors. A federal judge rejected the deal, saying the proposed merger is likely to substantially lessen competition and Medicare Advantage, making it unlawful, because it would all but kill competition in more than 350 counties nationwide, despite Aetna’s bid to divest some of the plans.
Aetna says it is seriously weighing an appeal, but Leerink’s Ana Gupte thinks it will be tough to save the $37 billion deal.
ANA GUPTE, LEERINK PARTNERS: Aetna has the option to appeal. But they have to have Humana on board, and if there are other bidders, it picks up the value of the company.
COOMBS: Gupte believes Anthem and Cigna who also went to court to fight antitrust charges will likely see a judge block their merger as well, setting the stage for a whole new round of health insurance deal-making. While 18 months ago, insurers were trying to get bigger to compete under the Affordable Care Act, now, the prospect of less regulation under the Trump administration has them hoping for greater long term stability in the insurance market.
The President Donald Trump signed an executive order giving government agencies authority to release regulatory burdens of the law, such as waving penalties for individuals who are not insured.
Analysts don’t see an immediate big impact for individuals or insurers when they act, but say it’s a first big step toward repeal.
GUPTE: I don’t think it has changed what is likely to happen. But essentially, I think the action will be in Congress, starting with House, in collaboration with the Senate.
COOMBS: For insurers and those covered under the ACA now, the big question remains, just how the administration and the Republican Congress will go about with repeal plans to ensure a smooth transition.
Bertha Coombs, NIGHTLY BUSINESS REPORT, New York.
HERERA: The new president also recently made it clear that he is not happy with how drug companies priced their medicines. But even though he is applying pressure, prices are still rising.
Meg Tirrell has that part of the story.
MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: Donald Trump moved quickly to dispel any expectations he’d go easy on the drug industry for its pricing practices, saying in his first press conference this month, the drug industry is, quote, “getting away with murder.”
TRUMP: Pharma. Pharma has a lot of lobbies, a lot of lobbyists, a lot of power. And there’s very little bidding on drugs. We’re the largest buyer of drugs in the world and yet we don’t bid properly. And we’re going to start bidding and we’re going to save billions of dollars over a period of time.
TIRRELL: Biotech stocks lost almost 5 percent of their value since those comments, as investor anxiety rose about who Trump would target first and how.
CHRIS RAYMOND, RAYMOND JAMES: We’ve seen a lot of tweets and one-liners in terms of interviews, but not a lot of substance.
TIRRELL: And though anxiety is up, drug price increases are still happening. This month, Celgene raised the price of its $7 billion cancer drug Revlimid by 8 percent. There were almost identical increases for blockbuster arthritis drugs Humira from AbbVie, and Enbrel from Amgen. Also striking, the prices of Enbrel and Humira have risen significantly and in lockstep for years, rising also last summer, last winter and the summer before. A pattern repeating time after time for almost ten years.
RAYMOND: That has opened both companies up to definitely scrutiny and actually, quite surprising it hasn’t happened already.
TIRRELL: Senator Bernie Sanders has honed in on similar price increases taken by makers of insulin, calling for a federal investigation of collusion. The drug makers are saying no such practices take place.
So, what can Trump do? Beyond tweets, he may end to give Medicare the power to negotiate drug prices. That would require working with Congress to pass legislation.
The industry is responding, today, starting a new campaign to try to change public perception.
STEPHEN UBL, PHRMA CEO: We have a great story to tell and we’ll do a better job telling it.
TIRRELL: A major push from the drug industry to show it’s not the sole beneficiary of price increases. Industry group PhRMA said last week that more than a third list prices go back to insurers or the government or to other entities in the health care system such as pharmacy benefits managers.
This battle is certainly not a new one. And some companies’ responses pledging to limit price increases, for example, are not new either. According to “The New York Times”, more than a dozen large drug makers promised to keep their drug increases on average in line with the consumer price index. That was in 1993 — in response to President Bill Clinton’s health plan.
So, to many, it feels like the same old song.
For NIGHTLY BUSINESS REPORT, I’m Meg Tirrell.
MATHISEN: Still ahead, more investors are putting their money in ETFs and now, the industry trying to figure out the best investments for a Trump administration.
HERERA: The Consumer Financial Protection Bureau fined units of Citigroup more than $28 billion for giving mortgage borrowers the run around. The bank allegedly withheld information about options to avoid foreclosure. Citi says it is pleased to have resolved the matter.
MATHISEN: Well, Yahoo topped expectations and that is where we begin tonight’s “Market Focus”.
The company also said that it now expects to close its deal with Verizon in the second quarter, and not the first as previously thought. Separately, “The Wall Street Journal” reported the Securities and Exchange Commission is investigating whether Yahoo’s two disclosed breaches were reported to investors in a timely manner. Yahoo shares were volatile in afterhours trading following the earnings news. They finished the day up 35 cents at $42.20.
McDonald’s said domestic same store sales fell in its latest quarter but the results were still good enough to beat estimates and profit and revenue at the fast food chain also came in above expectations. Shares though off just a bit at $121.38.
Halliburton posted adjusted earnings ahead of Wall Street target, as the second largest oil field services company was held by an increase in drilling in the U.S. But revenue fell 20 percent and Halliburton warned of weakness outside North America. Shares down 3 percent to $54.80.
HERERA: Sprint said it will take a one-third stake in rapper Jay-Z’s music streaming company called Title. Several reports say Sprint paid $200 million for that stake. Under the deal, Sprint’s 45 million customers will have access to Title’s offerings and sprint CEO will join Title’s board of directors. Sprint shares rose nearly 3 percent to finish at $9.18.
And Amazon is reportedly making a move into the do-it-yourself auto parts business. “The New York Post” says the ecommerce giant recently signed contracts with several auto parts manufacturers to grab a piece of that $50 billion industry. The news sent Amazon shares up 1 percent to $817.88. While the auto parts retailers were all down 2 percent or more.
MATHISEN: Well, the ETF industry is approaching $3 trillion in assets under management and that’s small compared with the $16 trillion mutual fund business, but it’s growing fast, as demand for this type of investment tool hits a record. And at the largest traded fund conference, industry growth wasn’t the only hot topic.
Bob Pisani reports from Hollywood, Florida.
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: It’s the biggest ETF gathering yet with close to 2,500 participants spread out over four days of meetings. This one hot topic on everyone’s mind down here: Trump ETFs. That’s right, Trump ETFs.
The topic came up at a panel I moderated. And while you can’t just buy an ETF that consists of stocks that might benefit from a Trump presidency — at least you can’t yet — there’s plenty of discussion around constructing portfolios of ETFs.
So, here’s one basket of Trump ETF’s floating around. The aerospace and defense ETF, ITA, go long on that, go long PKB, the building and construction ETF, which would benefit from more infrastructure spending. If you believe a Trump presidency will see higher volatility, higher inflation, maybe more debt, go long GLD, that’s the gold ETF.
Now, there’s a hot of disagreement about whether Trump will be bullish or bearish for the dollar. There’s been very heavy volume and upside bets for the dollar like UUP. Now, some have been floating contrarian plays. Most popular is go long Europe, EFA is the big one here, as a short on the dollar, on improving economy in Europe and based on four years of underperformance in Europe against the S&P 500.
The worry with Trump is that a long term traditional sector bet may be very tricky. That’s why some here are telling clients to gear up for Trump headline investing by using narrower sector and thematic bets, like the oil and gas exploration ETF, at XOP, or the defense and aerospace ETF, or the pharmaceutical, that’s PJP.
The most unusual investing idea I’ve heard here is that Twitter should sell co-location services to high frequency traders so they can be as close as possible to Twitter services, so they will get news of any Trump tweets before anyone else. Now, there is an original investing idea.
I’m Bob Pisani, CNBC News, Florida.
HERERA: You never know.
Coming up, one high profile entrepreneur has a few things to say about the new president’s unusual style.
HERERA: Kroger is adding its name to the list of companies creating U.S. jobs. The supermarket chain plans to hire 10,000 permanent employees across its different chains, such as Ralph’s, Dillon’s and Harris Teeter. Kroger currently employs about 430,000 workers nationwide.
MATHISEN: Main Street businesses also want to increase hiring and many are looking to Washington and policy changes from the new president to help them expand. One high profile entrepreneur has his own take on our new government and its potential impact on business.
Kate Rogers spoke to Daymond John.
KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: President Trump is on a mission to spur American job growth. While Trump’s direct negotiations with companies maybe unusual in American politics, fellow businessman-turned-reality star Daymond John thinks the new president may be on to something.
What’s your take on that? You’re a very successful businessman yourself.
DAYMOND JOHN, BLUEPRINT & CO. FOUNDER & CEO: I love that.
ROGERS: You do? Why?
JOHN: Absolutely. You know why? Because he — because I’m sitting here with you because I will be here every day myself, and not give to it an assistant. And he’s not like have your people call my people. No more hiding behind anything, and that’s what people do.
ROGERS: The “Shark Tank” and entrepreneur behind the Fubu street wear empire says he is keeping an open mind about Trump and his administration, which is already put in a regulatory freeze and vowed to eliminate burdens and hurdles that stand in the way of American business growth.
JOHN: Well, I can only hope this is good for business. You know, I’m an American and my fellow Americans elected Mr. Trump. And I think that he is a brilliant business person no matter what we may think about him. His name is around the globe. And that means he obviously knows how to work with people.
ROGERS: While Trump’s focus as of late has been on keeping manufacturing jobs here in America, John said that’s not enough.
JOHN: I want to see education. I want to see all of our fellow Americans who are suffering from unemployment and things of that nature, I don’t necessarily know if I want to see more factories. Factories are good, but, you know, it’s a kind of, you know, give a man a fish instead of teaching how to fish.
But if you teach education and teach everybody what to do, then somebody has to program them. Somebody has to build them in different ways. So I think education is key. So, as long as our government is trying to educate people, then we don’t have to outsource to China and India and all these other countries.
ROGERS: Having served as a presidential ambassador for global entrepreneurship under the Obama administration, John said he is also more than willing to pick up where he left off for President Trump if asked.
JOHN: I never thought about it like that. I’m just waiting for Cuban to run because then, I’ll be able to sleep in the White House one day.
ROGERS: So far, no word yet on whether or not Mark Cuban plans to throw his hat into the ring.
For NIGHTLY BUSINESS REPORT, I’m Kate Rogers.
MATHISEN: To read more about Daymond John’s view of the new president and the entrepreneurial environment these days, head to our website, NBR.com.
HERERA: That will do that for us on NIGHTLY BUSINESS REPORT tonight. I’m Sue Herera. Thanks for joining us.
MATHISEN: And I’m Tyler Mathisen. Thanks for 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 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) 2017 CNBC, Inc.