Transcript: Nightly Business Report – February 3, 2017

ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue
Herera.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: We`re bringing back jobs.
We`re bringing down your taxes. We`re getting rid of your regulations. I
think it`s going to be some really very exciting times ahead.

(END VIDEO CLIP)

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Music to the market`s ear.
The Dow has its best day of the year. As the Trump administration`s
financial deregulation efforts get going.

Hiring spree. Job creation was hot in January. Wages were not — giving
the Fed little reason to pick up the pace of likes.

Trash talk. Lots of people do it while watching sports. But add in some
emojis and you have the bright idea to start a business.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Friday,
February 3rd.

Good evening, everyone. And welcome. I`m Tyler Mathisen. Sue Herera is
off tonight.

Well, Wall Street levitated into the weekend. Stocks got a big lift on
what investors see as gifts from Washington.

First, regulatory rollbacks. The White House took the first steps to scale
back rules put in place after the financial crisis to govern bank behavior.
Those rules criticized by bankers as too complex, too restrictive, aimed to
keep taxpayers for becoming the ultimate back stops for bad risk-taking.

Then, there was a wide-ranging and clearly friendly discussion between
President Trump and U.S. top business leaders. Add to that, a strong month
for job crease and, boy, do you ever have a recipe for a triple digit gain.

The Dow Jones Industrials rose 186 points. Back above 20,000, at 20,071.
NASDAQ closed at a record high of 30. And the S&P 500 added 16.

Meanwhile, back at the White House, those first deregulatory steps came in
the form of an executive directive. President Trump signed actions, signed
an action today that directs Treasury Department and regulators to come one
a plan to revise some of the banking rules under the so-called Dodd-Frank
legislation. They were putt in put in place in 2010.

And, of course, Wall Street likes less regulation. And there, the
president showing off his order. That signature helped lift financial
stocks today which in turn helped the broader market.

Separately, the Labor Department is now looking into delaying the
implementation of a new retirement rule. This after President Trump today
called for a review that could ultimately lead to scrapping it.

The rule in question was developed under the Obama administration and calls
for retirement advisers to work solely in the best interests of their
client — the so-called “fiduciary standard”. It sounds simple but it`s
actually very controversial.

Dominic Chu explains.

(BEGIN VIDEOTAPE)

DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT: There are a lot of
ways people save for their retirements and there are a lot of financial
products and investments that serve that purpose. But when it come tonight
investment advice size of things, there are currently two acceptable ways
for professional to give it to you — based on suitability and/or based on
your best interests.

Currently brokers, insurance agents and some others advise clients on their
investments based upon what`s suitable given things like their yearly
income, their tolerance for risk among other things. They typically get
paid some kind of commission or sales charge for facilitating the
transaction.

Other investment advisers have to put clients only into investments they
think are in a client`s best interest, based on things like fees or
complexity of the investments. These advisers typically charge a fee based
on the amount of assets they help advice on. Enter the Labor Department`s
proposed “fiduciary rule” which would require anyone advising on retirement
investments to only act in the client`s best interests. Seems like a slam-
dunk, right?

But consider this: proponents of fiduciary standard say that it will help
save retirement investors a lot of money on commissions and reduced
conflicts of interest when brokers get paid to sell certain types of
products. Opponents say that the rule takes away a slew of investment
options currently available and force many investors to pay a fee based on
assets managed, no matter how many trades are made, as opposed to just a
sales charge when trades actually happen. Now, are just a handful of the
many arguments being made on both sides of this debate.

For NIGHTLY BUSINESS REPORT, Dominic Chu.

(END VIDEOTAPE)

MATHISEN: Well, now, that fiduciary rule is in question, what it will mean
for investors and their retirement accounts?

Todd Rosenbluth is director of ETF and mutual fund research at CFRA joins
now to discuss.

Todd, welcome. Good to have you with us.

Let`s step back just a little bit here, because some people might find it
curious that the Labor Department is involved rules governing my financial
assets. Why is that?

TODD ROSENBLUTH, CFRA DIR. ETF & MUTUAL FUND RESEARCH: So, because
retirement programs are often part of a 401(k) plans are part of what you
have while being employed. I have that at my company. I`m sure you and
your viewers have it as well.

It`s something that falls under them and it`s really something investors
need to be mindful of what`s happening in their environment portfolios,
because retirement is coming sooner rather than later for many of them.

MATHISEN: What about the criticism, that Dom just touched on? This
fiduciary standard, the result will be less choice for investors, number
one. Number two, there will be fewer kinds of investments available to
them. And number three, that some people, particularly lower income
people, won`t be able to get investment advice.

ROSENBLUTH: Right now, we`ve got about 2,000 mutual fund share classes.
We`ve got 23,000 — I`m sorry, 2,000 ETF share classes, 23,000 mutual share
classes. There`s a lot of choices out there. Reducing some of that and
taking away the more expensive and underperforming products away from those
clients would be in their best interests.

So, this would be a good thing if it found cheaper alternatives, more index
based alternatives that`s out there, and you can still choose those
products if you do it on your own. So, yes, you may have to work on your
own and build your own portfolios without a financial adviser but there are
lots of programs, robo advisers that are out there that can help you to do
that as well.

MATHISEN: Now, let me just — you favor the idea that this standard ought
to stay in place as general rule. Forgive me for being cynical here, Todd,
but I wonder at the bottom of it all is a concern on the part of financial
practitioners, that if this standard were put into place, that they are
going to be the target of one lawsuit after another if they put an investor
into a higher priced investment that doesn`t work the way it might
theoretically be told to work.

Is that really what`s driving that?

ROSENBLUTH: So, there`s certainly is that fear that`s out there. And the
way to perhaps overcome that fear is to make sure as an adviser, you`re
doing your homework. You have done the due diligence you`ve got. A lot of
supporting information to be able to justify to your client why you have
that.

And whether this rule is in place or not, that`s what an end investor
should be looking for. That the end products in their portfolio suit their
needs, whether there`s a Department of Labor rule or not, knowing what`s
inside your portfolio and how it`s going to help you achieve your goals is
extremely important.

MATHISEN: All right. Todd, thank you for the clearer explanation. We
appreciate it. Todd Rosenbluth with CFRA.

Well, as we said at the top of the program, the first employment report
released under the Trump administration showed solid gains. The economy
created 227,000 jobs in January. More than expected, the largest gain in
four months, by the way. The unemployment rate did edge higher to 4.8
percent, but wages rarely budged, rising just 0.1 percent.

And as Hampton Pearson reports, the latest report points to a tightening
labor market.

(BEGIN VIDEOTAPE)

HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Two weeks after
taking oath of office, president Donald Trump got some good news about the
Main Street economy.

TRUMP: Two hundred and twenty-seven thousand jobs. Great spirit in the
country right now. So, we`re very happy about that. I think that it`s
going to continue big league.

We`re bringing back jobs. We`re bringing down your taxes. We`re getting
rid of your regulations. And I think it`s going to be some really very
exciting times ahead.

PEARSON: Headline unemployment went up to 4.8 percent but that was because
nearly half a million people who had been on the sidelines started job
hunting in January, enough to boost the closely watched labor force
participation rate to 62.9 percent, the highest since September.

JAN HATZIUS, GOLDMAN SACHS CHIEF ECONOMIST: There`s more in the economy
and it predates the election. I think we have seen — you know, it was
convincingly strong jobs number, both in the establishment survey and in
the household survey.

PEARSON: The private sector led the way with employers making 237,000 new
hires, and the job gauges were widespread. Retailers adding 46,000
employees. Construction up 36,000 new workers. Restaurant and food
services, another 30,000. Only the government sector saw a decline, losing
10,000 employees.

KEVIN HASSETT, AEI ECONOMIC POLICY ADVISER: The construction number is
squint the view that we`re making America great again, right? That we`ve
got a friendly-business climate and people want to come back and start
operating their businesses here and you`re starting to see that in the
data.

PEARSON: For all the positive trends, wage trends remain a weak spot.
Average hourly earnings barely rose last month, and December`s average was
revised downward, despite the fact that some 19 states increased the
minimum wage at the start of the year.

AUSTAN GOOLSBEE, UNIVERSITY OF CHICAGO ECONOMIST: The last two years have
actually been pretty strong wage growth for let`s call it at the middle of
the income distribution for the first time in 25 years or something. And
it will be interesting to see whether this continues.

PEARSON: Now, the early consensus among Fed watchers is that lack of wage
pressure has lowered the odds for a rate like in March. But today`s jobs
numbers shows improving prospects for more jobs and, yes, higher wages.

For NIGHTLY BUSINESS REPORT, I`m Hampton Pearson in Washington.

(END VIDEOTAPE)

MATHISEN: Well, also in Washington, the businessman turned president met
with the people who runs some of America`s biggest business today. On the
agenda, issues that President Trump campaigned on like taxation,
regulation, job creation.

Eamon Javers reports from the White House.

(BEGIN VIDEOTAPE)

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: A president who
campaigned as a titan of business welcomed his fellow moguls to the White
House today for the first meeting of his business focus, strategic and
policy forum.

TRUMP: We`re looking forward in a little while, in a few moments on
discuss all of the things that you think we can do to bring back our jobs,
to get taxes even lower than we`ll be cutting them. We have a great plan.
But I want to have your input on the plan in particular and to do what we
have to do in terms of regulation.

JAVERS: That`s music to the ears of many in attendance at today`s meeting,
which included the executives from Walmart, IBM, General Motors (NYSE:GM),
JPMorgan (NYSE:JPM) and even Tesla.

JACK WELCH, JACK WELCH MANAGEMENT INSTITUTE: I`ve been coming down here
since 1980 in these meetings. And this is the first one where I had an
engaged president, keep bringing into it. This is the most exciting
presidential meeting I`ve ever been in.

JAVERS: But not everyone wanted to be in the room with President Trump.
The day before, the Uber CEO Travis Kalanick announced he would drop out of
the CEO group in the wake of controversy over Uber`s response to the
president`s executive order on immigration.

STEVE SCHWARZMAN, BLACKSTONE CEO: I think Travis was in a really difficult
spot. His business was being very adversely affected. He had discontent
among his employees. And this group actually takes a lot of time.

And, you know, he basically said, I`m encountering too much in the way of
headwinds. And would you mind if I step down?

JAVERS: The executives said the group would be convened monthly at first,
then quarterly as a way to keep ideas coming to the Trump White House on
everything from taxes to immigration to trade.

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

(END VIDEOTAPE)

MATHISEN: The Treasury Department today imposed new sanctions on Iran.
This as the new president moves to punish that country for a recent
ballistic missile test launch. The sanctions apply to 13 individuals and
entities based in Tehran, the United Arab Emirates, Lebanon, and China.

In response, Iran said it will take action against a number of American
individuals and companies. It did not, however, name the targets of its
sanctions.

The Department of Defense and Lockheed Martin (NYSE:LMT) have agreed on an
$8 billion deal for 90 F-35 fighter jets. That is the lowest price today
for the Pentagon`s program. The deal brings the price per jet below $95
million for the first time ever for a total savings of more than $700
million.

And still ahead, a trip to Louisiana to see where the jobs are.

KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Donald Trump`s plan to
invest in American infrastructure is welcome news for the already booming
construction industry. That`s coming up on NIGHTLY BUSINESS REPORT.

(MUSIC)

MATHISEN: Fixing our aging infrastructure. It`s a big promise of the
Trump administration. And if everything goes as many hope, all that
spending will create a lot of demand for workers.

Kate Rogers (NYSE:ROG) went to Hackberry, Louisiana, to see where the jobs
are.

(BEGIN VIDEOTAPE)

ROGERS: President Trump is promising to rebuild America in a big way.

TRUMP: Our infrastructure is in serious trouble. We will build new roads
and highways and tunnels and railways across the nation.

ROGERS: These promises are good news for the already booming construction
industry, which is as optimistic as it`s ever been. According to a recent
survey, 73 percent of general contractors plan to add workers this year but
that`s only if they can find skilled labor.

KENNETH SIMONSON, ASSOCIATED GENERAL, CONTRACTORS OF AMERICA: There are no
longer a lot of experienced workers sitting on the sidelines. Now
contractors hiring people without construction experience, or first time
job entrants.

ROGERS: Chicago Bridge and Iron has been at the forefront of the boom of
energy infrastructure construction in the Gulf Coast.

Operations like this $6 billion Cameron Liquefaction Project requires
thousands of workers and underscores CB&I`s hiring needs. In fact, this
year, they plan to bring on 15,000 workers in the Gulf Region alone.

PHILIP ASHERMAN, CB&I CEO: The workload is increasing. We envision about
$40 billion more spend over the next few years. In fact, this wave of
demand for workforce should continue well beyond 2020 into 2025.

ROGERS: CB&I CEO said the company has around 100,000 people in its
database, but finding workers with the right skills can still be a
challenge. To close the skills gap, the company has been expanding its
veteran recruiting as well as partnering with technical and vocational
schools to create customized programs.

ASHERMAN: We have roughly an 87 percent graduation rate and have made
offers to 75 to 78 percent on our jobs.

ROGERS: Stay-at-home mom Theresa Horner participated in a welding course
at the community college a little over a year ago, graduating top of her
class. Today, she makes more money than her husband as a structural welder
for CB&I.

THERESA HORNER, CB&I STRUCTURAL WELDER: You can make some really good
money and be able to support a family. And, heck, you`re going to be
independent if you`re that kind of woman.

ROGERS: Horner says the potential for more infrastructure spending gives
her a sense of stability that she`ll be employed for years to come.

Now, workers like her and the industry in general are waiting to see if the
president`s words will translate into action.

SIMONSON: There`s the potential for seeing a lot more construction,
figures as high as $1 trillion over ten years. I think there`s a strong
“let`s see how it would be structured and how it would be financed”
attitude.

ROGERS: For NIGHTLY BUSINESS REPORT, Kate Rogers (NYSE:ROG), Hackberry,
Louisiana.

(END VIDEOTAPE)

MATHISEN: To read more about the future of construction jobs, head to our
website, NBR.com.

Well, Macy`s (NYSE:M) and Sax could soon be under the same roof, and that`s
where we begin tonight`s “Market Focus”.

Yesterday, we told you that Macy`s (NYSE:M) might be for sale, and today,
multiple reports say that the Canadian-based Hudson Bay, which owns Sax and
Lord & Taylor, has entered into early talks with Macy`s about a potential
buyout. The two companies are also said to be discussing other ways to
work together, including a possible real estate transition transaction.
Shares of Macy`s surged 6 percent to $32.69.

The oil refiner Phillips 66 said challenging market conditions caused the
company to post a profit that was sharply lower than estimates. But
revenue did rise and that beat expectations. Shares, though, off 1 percent
at $79.95.

Hershey posted a better than expected profit but saw sales come up short,
as the company faced weak demand in its China market. The makers of
Reese`s Peanut Butter Cup and Hershey`s Kisses also said it would roll out
new products this year and gave upbeat earnings guidance for 2017. Shares
up 1 percent at $106.98.

AutoNation (NYSE:AN) said it had record earnings for the quarter, but
results still missed estimates by a penny. The nation`s largest auto
retail chain also posted weaker than expected sales. Shares down nearly 4
percent at $49.77.

Now to our market monitor who likes companies he says are experiencing
growth in what he calls a lackluster economic environment. This is his
first time joining us on the program.

Bernie Williams, welcome. He is the chief investment officer of Investment
Solutions at USAA. Bernie, good to see you again. We`ve met before
separately.

BERNIE WILLIAMS, USAA INVESTMENT SOLUTIONS CIO: Uh-huh.

MATHISEN: Let`s go right to your stock picks, a couple of them have a
common thread. But let`s start with Inuvasive which is a med tech company
What does it do? Why do you like it? Do you have a price target on it?

WILLIAMS: Yes, Inuvasive. It is a med tech company. What they do is
manufacture proponents for spinal surgery, specifically, minimally invasive
spinal surgery, along with some software that allows the physicians to more
finely align the spine during the surgery. They`re growing about twice the
market for that. That`s one reason we like it.

The other reason we like it is because they`ve got a new CEO and the
company has been under managed in the past. So, there`s a lot of
opportunity for margin expansion. And so, you have a company that has
grown twice as fast as the market. Good opportunity for margin expansion.
And, as you said, med tech, so they`re not in that bull`s eye of worst
storm of pharma pricing right now. So, that`s why we like this.

MATHISEN: And the next two picks are basically chip equipment maker.

Let`s begin with pick number one which is Lam Research (NASDAQ:LRCX).

WILLIAMS: Yes. So, Lam Research (NASDAQ:LRCX) is a semi-equip
manufacturer. They make equipment that enables 3D, NAND, and DRAM chips.
These are chips that go into among other things, cellphones. And so, what
you`re seeing is, is a big trend, especially in 3D NAND for increasing
memory ability. So, you see phones, cell phones that have 356 gigabytes,
they rival laptops and PCs right now for memory capability.

We still think that market is expanding next year. Now, realize this is a
cyclical industry. But we see good potential for this market through 2017,
given the expansion of the cell phone market and the Chinese, which are
expanding their manufacturing in this.

MATHISEN: Pick number three is another equipment maker, Applied Materials
(NASDAQ:AMAT) or AMAT. They`re in a different sliver of the market.

WILLIAMS: They do. Now, they have the same exposure 3D NAND and such.
But they also make equipment for the OLED or organic white emitting diode
market. So, this is the surface that goes on to the Samsung phone ands
will go on the new iPhone 8. At least that`s the rumor.

But what`s also interesting is this will actually, this is coming out in
TVs. LG has a TV out with this right now. Sony (NYSE:SNE) has announced
one in 2017 and I think this is where a lot of TV manufacturers will move
to in the coming years. I think this has a long tailwind to it as
consumers adopt it. And it is materially better technology than the
current LCD technology that is in 4K TVs.

MATHISEN: Bernie, great to see you.

WILLIAMS: Thank you.

MATHISEN: Thanks so much. Bernie Williams with USAA.

All righty. Coming up, meet a former college football player who wanted to
cash in on his love of sports but instead tapped into the emotions of fans
everywhere. And that was his bright idea on how to start a business.
We`ll tell you about it.

(MUSIC)

MATHISEN: Some positive news on retirement, savings are at an all time
high. According to Fidelity Investments, the average 401(k) balance hit a
record of $92,500 at the end of last year. Fidelity attributes the
increase to rising stock prices, they always help, and more contributions.

Well, it has come to this. Friday night, Super Bowl weekend and one young
entrepreneur from Miami, still in his mid 20s, who got the bright idea to
give fans using his app to help them find the latest sports news, a chance
to communicate with their friends, trash talk with fellow fantasy leaguers,
using animated emojis representing some of the biggest names in sports.

(BEGIN VIDEOTAPE)

VICENTE FERNANDEZ, SPORTSMANIAS CEO AND CO-FOUNDER: I was thinking about
myself as a sports fan.

MATHISEN: Vicente Fernandez loved sports. But this former high school and
college football player was surprised when his mom called early in his
freshman year at the University of Chicago.

FERNANDEZ: She is not the biggest sports fan I know. And she calls me and
he said, hey, Vicente, I want to start a sports site together.

MATHISEN: His mother, a Cuban immigrant, who grew up in Miami is a career
advertising exec.

AYMARA DEL AGUILA, SPORTSMANIAS COO AND CO-FOUNDER: One of the most
coveted audiences for marketers is a sports fan, because a sports fan is so
loyal and so fanatical. Every top tier brand will try to tap in to that.

MATHISEN: So they launched Sportsmanias in 2012. Fans follow any teams
they want for free and get a personalized feed. Mostly tweets from media
sites, from writers and from teens. In 2013, they added an app, then came
the hard part.

FERNANDEZ: Getting someone to download an app is not easy. That`s
incredibly valuable real estate in a person`s life.

MATHISEN: It wasn`t until 2015 when Fernandez noticed the NBA`s Atlanta
Hawks had an emoji board.

FERNANDEZ: It was the first time I ever heard of anything like this.

MATHISEN: So, he added NFL emojis in 2015. They didn`t move until a
promotional video showed them moving the familiar poses. His customers,
sports maniacs, began clamoring for them.

Within weeks, Fernandez built what he says is the world`s first animated
emoji keyboard. Texting with Aaron Rodgers doing his championship belt.
No problem. Facebook (NASDAQ:FB) message with Odell Beckham, Jr. Why not?

FERNANDEZ: We saw so much success, we`ve expanded it beyond football.

MATHISEN: Sportsmanias began ranking with the big boys, CBS (NYSE:CBS)
Sports, ESPN, the NFL on Super Bowl Sunday in 2016. For one day,
Sportsmanias beat them all.

FERNANDEZ: At that point, we knew we hit something that was going to
change sports media industry.

MATHISEN: Almost overnight, the customer base grew from tens to hundreds
of thousands. The NFL Players Association partnered, introducing
Sportsmanias to the hat maker which now pays Sportsmanias so it can
embroider them on caps. And why not?

The emojis were shared more than 2.5 million times during NFL`s regular
season. Most popular, Carolina Panthers quarterback Cam Newton. Beckham
was second, Atlanta`s Julio Jones tied for fourth.

In the playoffs, Jones and Tom Brady (NYSE:BRC) are leading.

FERNANDEZ: That`s literally how he walks around.

MATHISEN: Through a new partnership with the National Football Foundation,
there are college football Hall of Fame emojis like Marty Lyons, an Alabama
star in the 1970s.

MARTY LYONS, MARTY LYONS FOUNDATION CHMN AND FOUNDER: I just turned 60. I
think this is neat. Give to it a 7-year-old, they`re going, wow, that`s
really neat. So the range that you can connect with is endless.

MATHISEN: This weekend, Papa John`s pizza is buying in, sponsoring not
tonight NFL and Super Bowl 51, but also the Sportsmanias emoji key board.
It`s not yet profitable but the potential is there to build a business with
global reach.

FERNANDEZ: We got a request for a Lebanese soccer team emoji and a South
Korean soccer team. From all quarters of the world, these sports fans
come.

(END VIDEOTAPE)

MATHISEN: Well, he`s already got some European soccer emojis, and
literally hundreds. But only one designer making them. It is located in
Georgia and one of 18 full time employees scattered around the country.
App users can even make emoji request like this one.

Let`s get some motion there. Wow! I love it.

That`s NIGHTLY BUSINESS REPORT for tonight. I`m Tyler Mathisen. Sue is
off. Have a great weekend, everybody. Enjoy your weekend, enjoy the
football game if that`s your pleasure. We`ll see you 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) 2017 CNBC, Inc.

 

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