Transcript: Nightly Business Report – March 8, 2017

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

Funded in part by —


sector added nearly 300,000 jobs in February, shattering expectations and
raising the stakes for the Federal Reserve.

tonight on a new report accusing Caterpillar (NYSE:CAT) of carrying out
deliberate tax fraud to prop up its stock price.

HERERA: Plugging in. How Tesla`s battery packs are generating power for
the island of Kauai.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Wednesday,
March 8th.

MATHISEN: Good evening, everyone, and welcome.

A blowout month for private-sector job creation. The nation`s employers
went on a hiring spree in February, beefing up payrolls by a lot more than
expected. Private payroll processor ADP says 298,000 jobs were added last
month. The estimate was 188,000. That makes February the third-best month
for job growth since the recovery began back in 2009.

And now, as Steve Liesman reports, the bar is high for the Labor
Department`s employment report due out Friday and, of course, next week`s
meeting of Federal Reserve policymakers.


getting a Trump bump? Jobs look to be getting stronger and economists are
trying to figure out whether it`s a temporary blip or a new trend that
means more growth and maybe faster interest-rate increases.

The payroll company ADP reported today it expects private payrolls to rise
by 298,000 in February. It`s much followed estimate for the government
jobs report on Friday was more than a hundred thousand higher than what
Wall Street has estimated.

MARK ZANDI, MOODY`S ANALYTICS: It`s a big number. You know, it`s three
times the rate of job growth necessary to absorb the growth in the working-
age population. So, you know, any slack in the labor market is being
absorbed very rapidly.

LIESMAN: If the strong growth is confirmed on Friday will mark a reversal
of the slowing trend from earlier in the year, and it comes when claims for
jobless insurance have been running at levels not seen since the early
1970s. It raises the question, is confidence brought on by the expected
policies of the Trump administration already showing up in hiring?

ZANDI: I do think businesses are feeling — anticipating a lot of good
stuff, tax cuts, less regulation. The bottom line is the economy is
fundamentally strong. It was fundamentally strong before the election.
It`s fundamentally strong after the election.

LIESMAN: Now, another factor, warm February weather, leading to lots of
construction hiring and jobs in leisure and hospitality, and it looks like
for the first time in awhile, global growth is helping not hurting U.S.

For some on Wall Street, it means the Fed is going to have to get more

contributing. You have jobs contributing, and then you also have the
potential what`s going to happen here domestically regarding any policies
that the Trump presidency puts in place.

LIESMAN: What that means if job growth stay strong, the Fed may be raising
interest rates as many as four times this year, or a full percentage point,
double what the market was looking for in January.



HERERA: With the increasing likelihood of a Fed interest rate hike and
concerns that this bull market maybe getting a little long in the tooth,
what should you do to protect your retirement savings?

Reed Fraasa, financial planner at Highland Financial Advisors, is here with
us to talk about that.

Good to see you again, Reed.

see you.

MATHISEN: Good to see you.

HERERA: You`ve been one who has been expecting higher rates for some time
now. We are finally beginning to get a little inkling of it, but does that
move by — the possible move by the Fed to raise rates, does that translate
to higher interest rates in the market itself?

FRAASA: Not necessarily. I mean, we`ve been expecting rates to increase
for a while. It`s a natural course of events for the economy. The — no
relationship, though, between this. So, we`ve seen the federal overnight
target rate about zero percent for many years.

HERERA: Right.

FRAASA: In 2013, without any movement in that rate, we saw about a hundred
basis point or one percent increase in 10-year treasuries. Likewise after
the election, we saw about an 80 basis point, about 28 percent increase in
10-year treasuries without any change in the federal funds rate. And then
in mid-December, we saw the federal funds rate go up and really no reaction
from the bond market.

HERERA: Right.

MATHISEN: So what do you expect — so the Fed may not be influencing the
marketplace in rates for bonds, but what do you expect the market to do to
those rates and if I must save her and an investor and I`ve got bond funds,
what should I be doing now?

FRAASA: Well, first of all, we`re big proponent of using bond funds to
counter the risk of stocks. So, in a balanced type portfolio, that`s a
natural function. When people are concerned about stocks, they fly to
quality. Quality are going to be what we say the sweet spot of bonds is
the three to five-year duration bonds, high-quality government triple-A
rated, that`s where the money goes —

MATHISEN: To a fund that invests in those?

FRAASA: Yes, better off being fund that knows at all times, knowing full
well that if interest rates go up and they will eventually, they get a
slight, you know, effect of that, little risk there with interest rates.

HERERA: You know, a lot of people who are nearing retirement, the old
formula was that you moved out of a large equity position, pared it down
and moved into fixed income.

But you`ve made the argument that with interest rates as low as they`ve
been, perhaps that that old formula needs to be revisited. So, if you`re
getting closer to retirement in this market environment, what would you
recommend people do?

FRAASA: So, we think it`s an antiquated solution to depend on fixed income
for your lifestyle. People are living longer today. Although inflation
has been low, inflation is a real thing. So, the only thing that`s going
to help you keep pace with rising incomes is to have exposure to stocks.

So, again, a balanced type portfolio with high-quality bonds. As the stock
go up over time, what we recommend people to do is to find out the income
you need, segregate that amount of money for say two years worth of income,
keep that in a reserve account, keep your portfolio invested.

So, depend on a liquid cash account to pay your income. We call it income
distribution planning, using a reserve account because a balanced portfolio
has never taken more than two years to recover.

MATHISEN: Quickly, this has been a really brutal time for savers. Do you
expect savings rates to go up in any meaningful way, on CDs and bank

FRAASA: They will eventually. They lag. So the federal overnight rate is
going to go up in time because they`re going to use it to manage the
economy. You know, they have the job mandates and the inflation mandate.

Eventually, those will start affecting short and intermediate term rates.
Banks are going to — they`re the last to lag in that.


FRAASA: So, we`ll probably see our mortgage rates go up a little bit
before we —


MATHISEN: They charge you more before they pay.

FRAASA: That`s right.

MATHISEN: Reed, thank you.

HERERA: Reed, thank you.

FRAASA: Thank you.

HERERA: Reed Fraasa with Highland Financial Advisors.

MATHISEN: All right. On Wall Street, the strong report on jobs was not
enough to lift the market. It was pulled lower by energy shares. Oil
prices declining sharply after a new report showed that production cuts by
OPEC and other exporter`s have not been enough to reduce supplies,
inventories up.

Dow Jones Industrial Average down 69 points, finishing at 20,855. NASDAQ
did get a gain in today of about three points, six-one-hundredth of a
percent. You`re not going to get rich on that. The S&P lost five.

Now, let`s talk about crude. Worst day for oil in more than a year, it was
off 5.4 percent.

HERERA: A tough day for Caterpillar (NYSE:CAT). Shares fell after a
report accused the Dow component of tax and accounting fraud. The report
was published by “The New York Times (NYSE:NYT)” and it comes just days
after law enforcement officials raided the headquarters of the Fortune 100
company. The stock was the worst performer on the blue chip Dow index.

Morgan Brennan has more on Caterpillar`s latest twist and turn.


(NYSE:NYT)” reviewed the report which has not yet been made public and said
it was commissioned by the U.S. government, which has been investigating
Caterpillar`s activities tied to a Swiss subsidiary for several years.

The author of the report, Leslie Robinson, an accounting professor at
Dartmouth`s Tucker School of Business, concluded, quote, “Caterpillar
(NYSE:CAT) did not comply with either U.S. tax law or U.S. financial
reporting rules,” adding, quote, “I believe that the company is non-
compliance with these rules was delivered and primarily with the intention
of maintaining a higher share price. These actions were fraudulent rather
than negligent.”

They`re strong words, and as “The Times” points out, was rarely used to
describe major multinational companies.

JESSE DRUCKER, NEW YORK TIMES REPORTER: When you bring the money back to
the U.S., you`re supposed to pay tax on it with a credit for whatever
you`ve already paid overseas. And the professor`s analysis in her view,
Caterpillars bring billions of dollars back to the U.S. without paying tax
and without accounting for it for tax purposes and its financials, even
though it didn`t have the ability to do that based on her analysis of what
was going on offshore.

So, the bottom line is that she — her position that the company owed
billions of dollars in tax on money brought back to the U.S. and didn`t pay
for it and didn`t account for it.

BRENNAN: No charges have been filed. It`s unclear whether the government
agrees with the findings or even intends to act upon them. For its part,
Caterpillar (NYSE:CAT) has yet to comment, telling “The Times” that hadn`t
yet seen the report itself. Though just last night, Caterpillar (NYSE:CAT)
CEO Jim Umpleby reiterated the company stands on the investigation.

JIM UMPLEBY, CATERPILLAR CEO: We were surprised by the actions of last
week because, in fact, we have been cooperating with authorities and we are
cooperating and we look forward to a resolution of these matters.

We`re Caterpillar (NYSE:CAT). We`ve been in business for almost a hundred
years. We`re an honorable company. We live by a code of conduct and a set
of core values. If something appears to violate that code, we take
appropriate action.

BRENNAN: And it all begs the question, what will happen next? Will
Caterpillar (NYSE:CAT) ultimately have to pay a penalty and what we`ll all
of this mean for the stock?

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan in New York City.


MATHISEN: Rebuilding our nation`s infrastructure one of the topics of
conversations today in the nation`s capital. The president met with a
number of business leaders to discuss the need to increase spending on
roads, bridges and airports.

Ylan Mui reports tonight from the White House.


working lunch with business leaders today to discuss infrastructure
investment. He`s got a trillion-dollar plan to improve America`s roads and

And among the attendees today was Elon Musk, CEO of SpaceX and Tesla.
Also, real estate developers Steven Roth and Richard the Lefrak, and a
representative from the environmental advocacy group Nature Conservancy.

The meeting was closed press, but Sean Spicer did give some details about
how it went during his White House press briefing.

SEAN SPICER, WHITE HOUSE PRESS SECRETARY: The government has wasted too
much of the taxpayers money on inefficient and misguided projects.

MUI: Spicer talked about the importance of rolling back regulations, but
one big unanswered question is how to pay for all of this. Now, that`s
plenty of money waiting in the wings, according to pitch book, there are 69
infrastructure funds already set up. Two of the biggest are run by Global
Infrastructure Partners. They have a fund that`s worth $15.8 billion and
another one that`s worth about $8 billion.

So, lots of potential money there to go into these public-private
partnerships that are a cornerstone of President Trump`s infrastructure

Now, there is also pushed back however from Capitol Hill. Some
conservatives are worried about the impact of these public-private
partnerships on their community. I talked to Senator John Barrasso of
Wyoming and he`s worried that rural neighborhood will get left behind in
this proposal. And Senator Marco Rubio of Florida told me that he is
concerned that this proposal could, quote, “explode the debt”.

So, everyone is in favor of improving America`s infrastructure, but no one
can agree on how to pay for it.

For NIGHTLY BUSINESS REPORT, I`m Ylan Mui in Washington.


HERERA: Still ahead, jobs at risk? Why a number of lawmakers are urging
the president to take a tough stand with one airline.


HERERA: The productivity of the American workforce recorded its smallest
annual gain since 2011. It comes despite a recent pick up in manufacturing

For all of 2016, productivity, which measures output per hour work, eked
out just a point 2 percent increase, the smallest in five years. Now,
economists are struggling to understand the reason for the slowdown in
productivity gains, which are considered important for economic prosperity,
because in theory, when workers are more productive, employers can afford
to pay them more.

MATHISEN: Weak mall traffic dense results at Express (NYSE:EXPR), and that
is where we begin tonight`s “Market Focus”.

The apparel chain also said discounts contributed to the company`s lower
profit and revenue. Despite the decline, sales still beat estimates while
profit was in line. But same-store sales did not impress. They fell more
than expected. Express (NYSE:EXPR) says planned product launches and the
reintroduction of the customer loyalty program will help drive future
results. Shares down 10 percent at $9.51.

On the other hand, Children`s Place reported higher than expected profit
and doubled its quarterly dividend to 40 cents a share. The kids apparel
companies revenue missed street targets, but same-store sales were better
than expected. The company also sees full-year earnings ahead of
estimates. Shares spiking more than 18 percent to $118.15.

Bob Evans Farms (NASDAQ:BOBE) missed estimates but the food distributor
said it gained market share in key product categories. The company which
is selling its Bob Evans restaurant business sees strength ahead and raise
its earnings outlook for the full-year. Shares up 3 percent to $58.59.

HERERA: MGP Ingredients (NASDAQ:MGPI), which is a supplier of premium
distilled spirits, posted better-than-expected fourth-quarter. The company
said stronger demand a premium alcohol offset a sales drop of lower-margin
industrial alcohol. Shares were up 10 percent to $49.16.

Despite swinging to a profit in the latest quarter, networking company
Ciena missed expectations. The network technology company also said
revenue grew but it wasn`t at the pace that analysts were expecting. Ciena
shares fell more than 8 percent to $23.97.

And Camping World said strong demand for recreational vehicles drove its
latest results. The company earnings and revenue rose but only profit was
good enough to top expectations. After hours, the shares dipped initially
following the news, but they ended the regular session a fraction higher to

MATHISEN: Politicians from New York and New Jersey are calling on
President Trump to stop Gulf-based Emirates Airline from starting round
trip flight between Newark, New Jersey, and Athens, Greece, this month. In
a letter released late Tuesday, the group contends that Emirates and other
Gulf airlines have an unfair advantage over American air carriers because
they received billions in government subsidies, subsidies they say are
costing Americans jobs.

Congressman Donald Payne Jr.`s signature is on that letter and he joins us

Congressman, welcome. Good to have you with us.

REP. DONALD PAYNE, JR. (D), NEW JERSEY: Well, thank you for having me.

MATHISEN: I assume lots of airlines get some form of government subsidy or
another, and it`s not new news that Emirates may or may not get those
subsidies. Sue`s going to follow up with that in just a minute.

But why now? Why are you objecting to this one if Emirates has been doing
business, I flew them from New York to Milan two years ago?

PAYNE: Well, you know, it really is a serious issue for us I have more
airport in my district and we feel it is unfair competition that they are
subsidized to the extent that they are $50 billion is quite a subsidy, and
it really gives been unfair access for Emirates in this — in taking this
flight from Athens to Newark.

HERERA: Congressman, on the Emirates` website, they basically made a
statement disputing your claims and saying that the thought that they are
receiving subsidies is patently false, their words. They say what U.S.
legacy carriers really want is protection from competition.

What do you say to that?

PAYNE: Well, no, we`re actually trying to make sure that there is
competition. As we stated, these subsidies are dramatic. It gives them an
unfair advantage and that`s what we`re trying to espouse.

HERERA: Even though they deny it?

PAYNE: Even though they denied. They can deny it, but — I mean, you
know, the facts are the facts. They are subsidized to this degree and it
causes unfair competition.

And what it does for us really back here, you know, for every — every
flight of that distance that we lose American carrier impacts 1,500 jobs.
And so, that`s very serious and we`re going to do everything we can to make
sure that we have a fair playing field for our carriers up throughout the

MATHISEN: We have an open skies agreement with the UAE. How does that
figure into this, number one? Number two, have you looked at the price
differential between what Emirates proposes to charge on these flights —
which I think begin maybe even this weekend — and what a U.S. carrier
flying the same route would charge?

PAYNE: I don`t have the exact cost but I know it`s not competitive, and it
goes back to once again them being subsidized. So, it just continues to
harken back to that one point. But we are going to be in Newark airport
this Sunday to show our support for American carriers. Several members of
the New Jersey and New York delegation will be there Sunday.

MATHISEN: All right.

PAYNE: And we`re going to continue to fight this issue because it`s very
important to jobs and the GDP of this country.

MATHISEN: Congressman Payne, thank you very much. Congressman Donald
Payne, Jr. of New Jersey.

And coming up, Tesla`s solar farm in paradise.


farm and energy storage the key to cutting utility costs here in Hawaii?
I`m Phil LeBeau. That story coming up on the NIGHTLY BUSINESS REPORT.



MATHISEN: And here`s a look at what to watch tomorrow:

The bull market turns eight, making it the second longest aged bull in
history. The American Society of Civil Engineers will release its report
card on America`s infrastructure and its estimate on how much money is
needed to maintain our roads and bridges. And jobless claims are going to
be released, the final piece of jobs data before the monthly employment
report will be released Friday.

That`s what to watch Thursday.

HERERA: The state of Hawaii is the first to challenge the president`s new
immigration order. Attorneys are asking a federal judge to issue a
temporary restraining order blocking the order`s implementation. President
Trump signed the action Monday. It bans foreign nationals from six Muslim-
majority countries from entering the U.S. for 90 days and bans all refugees
for 120 days.

MATHISEN: In Hawaii, the electric car maker Tesla is powering up its plans
for energy storage. In fact, its industrial battery packs now helping a
utility in Hawaii generate enough electricity for an entire island.

Phil LeBeau traveled to the island of Kauai for our story.


LEBEAU: As energy projects go, Kauai maybe the perfect lab. Just over
70,000 residents and a utility trying to end its use of diesel generators
when the island is not basking in the sun.

GOV. DAVID IGE (D), HAWAII: This project is a prime example of being able
to generate energy from clean solar and being able to deliver it at night
when the consumer wants it.

LEBEAU: Tesla says its power packs are cheaper to use than diesel
generators and that ultimately will cut power generation cost on this

The key to Tesla`s program here in Kauai this huge solar farm nearly 55,000
solar panels spread over 50 acres generating electricity that will be
stored in 272 Tesla power packs. Those power packs are discharging
electricity used by Kauai`s utility company.

JB STRAUBEL, TESLA CHIEF TECHNICAL OFFICER: We`re able to show that we can
directly absorb solar power throughout the day into these batteries and
then discharged it back at night and stabilize it, even though we might
have clouds coming over even though it might not line up directly with when
people want to use the energy. This can solve that problem.

LEBEAU: Tesla`s gigafactory where the company makes electric batteries for
its cars and industrial power packs for utilities is at the heart of CEO
Elon Musk`s vision for sustainable energy, including the company`s
acquisition of SolarCity.

But analysts aren`t sure Tesla`s growth in clean energy projects like
Hawaii will move the needle compared to Tesla`s was rapidly growing auto

ADAM JONAS, MORGAN STANLEY: Even both cases for Tesla energy and the
utility storage, for example, might be worth two or six percent of the
value of the company. It`s kind of partially because the company so
valuable already and because the automotive opportunity just by comparison
just dwarves energy in our opinion.

LEBEAU: JB Straubel disagrees.

STRAUBEL: I do think he`s wrong, but you know, we see huge potential in
this, and we think the chance for growing the sales and growing of the
amount number of projects were doing here is incredible. We`re just at the
beginning of deploying storage and solar as well in mass numbers.

LEBEAU: Storing solar energy to power in island in the growth of the
company betting on utilities going green.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Lihue, Hawaii.


HERERA: Today is being promoted as a day without a woman. Rallies took
place across the country to bring attention to the economic power that
women hold.

Here are some numbers for you: women account for 47 percent of all U.S.
workers. They earn 79 cents for every one dollar made by men on average,
and only 4 percent of Fortune 500 companies have a female CEO.

On that note, that`s NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera.
Thanks for joining us.

We want to remind you, this is the time of year your public television
station seeks your support.

MATHISEN: And we appreciate that support. I`m Tyler Mathisen. Thanks
again for helping us. Have a great weekend — evening, everybody. I wish
it was the weekend.

HERERA: I wish it was the weekend.

MATHISEN: We`ll see you tomorrow.


Nightly Business Report transcripts and video are available on-line post
broadcast at The program is transcribed by CQRC
Transcriptions, LLC. Updates may be posted at a later date. The views of
our guests and commentators are their own and do not necessarily represent
the views of Nightly Business Report, or CNBC, Inc. Information presented
on Nightly Business Report is not and should not be considered as
investment advice. (c) 2017 CNBC, Inc.


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