Transcript: Nightly Business Report – March 17, 2017

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

Funded in part by —

(COMMERCIAL AD)

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: High stakes visit.
President Trump meets with German Chancellor Angela Merkel to seek common
ground and resolve tensions over trade.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Heart health. A new
cholesterol drug cuts your risk of a heart attack, but it`s raising a new
debate about cost.

MATHISEN: Lost and found. A few working moms had a simple idea to help
keep track of things their kids kept losing. And they turned it into a
multimillion-dollar business.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for St. Patrick`s
Day, Friday, March 17th.

HERERA: Good evening, everyone, and welcome.

We begin in Washington where the head of the world`s largest economy met
with the head of Europe`s largest. President Donald Trump hosted German
Chancellor Angela Merkel at the White House in their first face to face
meeting. The two discussed jobs, business, security, and at an afternoon
news conference, the focus was trade.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: I am a trader. I am a fair
trader. I am a trader that wants to see good for everybody worldwide, but
I am not an isolationist by any stretch of the imagination.

(END VIDEO CLIP)

HERERA: Earlier, the two leaders and business executives, both American
and German, held a round table discussion on how companies can better train
workers. Why was this meeting important? Because the economic
relationship between two countries runs deep. Germany is the U.S.`s fifth
largest trading partner. Exports to Germany from the U.S. totaled about
$49 billion in 2016, imports from Germany hit $114 billion.

Eamon Javers reports tonight from the White House for us.

Good evening, Eamon. And what did we learn about the future trade
relationship between the U.S. and Germany?

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, we learned that
both sides want to continue to engage in this relationship and they`re
talking about baby steps here at the White House today. You remember,
there was so much tension between these two nations because President
Trump, during the campaign, insulted Angela Merkel several times, saying
that she was ruining Germany and she was ruining their economy and he
didn`t know what she was doing in terms of bringing migrants into that
country.

So, today was a day all about sort of mending those fences and moving this
relationship past that. I think on those terms you have to say that this
was a success today. Both sides got the opportunity to deliver the message
that they came here to deliver.

MATHISEN: One of the points of — sort of question points has been about
NATO and the European Union and how the two powers relate on that. The
president was really directing his support of NATO. On the European Union,
not so much.

JAVERS: Yes. That`s right. He was also his request for European nations
to fund NATO, right? One of the problems that the United States has had
over the years is they feel that European countries are not contributing
enough in terms of defense spending to support NATO. The president had the
opportunity to deliver that message to Angela Merkel directly today.

In fact, we were told by a senior White House official before the press
conference even began that that was what the president said behind closed
doors. That gives you a sense of how important that was to the White
House, to let the world know that that message had been made. And also, we
heard Angela Merkel had the opportunity to tell the president that it`s
better that we talk to each other rather than about each other, perhaps a
veiled reference to the president`s criticism of her on the campaign trail
last year.

HERERA: Yes, indeed. We mentioned the earlier meeting that included CEOs
from IBM, Salesforce, as well as a number of CEOs from German companies.
What was accomplished?

JAVERS: Well, it`s not clear what was accomplished specifically. But they
got the opportunity to highlight something important to this White House,
which is the idea of apprenticeship. And, in fact, you even heard the
president during the press conference joke about “The Apprentice”, his
former reality TV show.

This is something that the White House thinks the United States can learn
from Germany. A lot of the blue collar training, vocational technology
training in Germany is done through apprenticeship and they think American
companies can really learn something here about educating workers of the
high-tech work force of the future. They want these American and German
companies to be talking about this and they want to see what lessons can be
learned are here for the United States.

HERERA: Eamon, thank you so much as always. Eamon Javers at the White
House.

JAVERS: You bet.

MATHISEN: On Wall Street today, stocks limped into the weekend with a
mixed finish, dragged lower by financial and health care shares. The Dow
Industrials fell 19 points to 20,914. NASDAQ was up a fraction after
hitting a new high mid-session. And the S&P 500 was off three. For the
week, the major averages eked out small gains.

HERERA: Manufacturing output expanded for the sixth straight month,
according to the Federal Reserve. The 0.5 percent gains matched the prior
month`s advance and marks the best back to back performance in three years.
The report underscores the rebound in the industry, even though overall
industrial production in February was flat.

MATHISEN: A gauge of future activity accelerated to its highest level in
more than a decade. The conference boards leading economic index rose for
the third straight month. Both business and consumer confidence have risen
since the presidential election on the prospect of less regulation and
lower taxes.

HERERA: One of the biggest stock losers today was Amgen (NASDAQ:AMGN).
It`s new costly cholesterol drug was shown to cut the risk of heart attacks
and strokes in patients with heart disease. Now, that sounds good but it
wasn`t enough for investors. And shares of Amgen (NASDAQ:AMGN) fell more
than 6 percent. And it dragged down the stock of other companies that make
similar cholesterol drugs.

Meg Tirrell explains the disappointment around the study.

(BEGIN VIDEOTAPE)

MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: Millions of Americans
have cholesterol levels high enough to put them at risk for heart disease.
That`s why drugs to lower cholesterol like Lipitor have been billion-dollar
blockbusters. But some patients aren`t helped enough by those drugs called
statins. That`s why a new class of medicines that lower cholesterol even
further approved in 2015 was expected to bring in big business.

Made by Amgen (NASDAQ:AMGN), Regeneron and Sanofi, the medicine sales
disappointed in their first years on the market. Despite price tags of
more than $14,000, they brought in just more than $100 million last year,
versus expectations from some of billions.

But new clinical trial results presented today were expected to change
that.

MICHAEL YEE, RBC BIOTECH ANALYST: Sales of this drug should grow from
hundreds of millions of dollars to multiple billions of dollars over the
long term of.

TIRRELL: Results from a more than 27,000 patient clinical trial showed
that Amgen`s drug Repatha reduce the risk of heart attacks and strokes by
about 20 percent. The result? Amgen (NASDAQ:AMGN) stocks sank.
Investors` expectations have been for an even bigger benefit.

YEE: All of the data suggests 20 percent to 25 percent magnitude of
benefit. The data ultimately showed a 15 percent to 20 percent magnitude
of benefit, depending on the exact end points.

TIRRELL: Proving a drug doesn`t just lower cholesterol but actually cuts
the risk of heart attack was expected to encourage insurers to increase
coverage. A key reason the medicines haven`t been used as broadly as
expected.

Despite Wall Street`s reaction, Amgen (NASDAQ:AMGN) says the results are
game changing.

SEAN HARPER, AMGEN RESEARCH & DEVELOPMENT EVP: If the patients who are
already FDA-approved for this drug, which is on the market, had received it
last year. If all of them had received it last year, in the United States
alone, we would have reverted more than 100,000 cardiovascular events like
heart attack and stroke.

TIRRELL: And it expects that insurers and pharmacy benefits managers will
increase reimbursement.

HARPER: Now we have the data. They`re crystal clear.

TIRRELL: The drug maker even offered a unique deal. Amgen (NASDAQ:AMGN)
says it will refund the cost of the drug if patients have a heart attack or
stroke.

For NIGHTLY BUSINESS REPORT, I`m Meg Tirrell.

(END VIDEOTAPE)

MATHISEN: Still ahead, hot hand. Our market monitor`s fund has
outperformed the stock market this year so far. And he`s now buying stocks
with a global play.

(MUSIC)

MATHISEN: One of the most powerful forces in the market right now is the
expectation of deregulation. Stocks have been moving on it. Corporate
executives have been talking about it. We`ve already seen the president
sign executive orders that target some of the rules governing the financial
and energy industries, and we`ve reported on the potential impact.

Tonight, we look at how scaling back rules and regs could impact the
broader market and the economy.

We begin with Bob Pisani at the New York Stock Exchange.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: There are two
components of the broad Trump rally: tax cuts and deregulation. Now, there
are many studies that indicate cutting corporate taxes could increase 8
percent or more, but studies on deregulation are much more difficult to do
because of the tens of thousands of different laws out there. It`s just
not possible to get a number right now.

But no matter, let me show why the street believes reducing regulations can
help on earnings and its close cousin, margins? Margins are probably the
single most important metric for those looking at profitability trends.
Thomson Reuters (NYSE:TRI) says S&P 500 margins have been stuck in roughly
the same range for the last several years, about 10 percent.

Now, why can`t margins improve at all? It`s a big issue for the street
right now. One of the primary problems is that sales growth has been
stagnant, while the cost of doing business, the cost of materials, for
example, and the direct labor costs used to produce the goods has been
rising. That`s the problem.

This is where excessive regulations show up indirectly on the income
statement. So if you look at big industrial names, Caterpillar (NYSE:CAT),
for example, fewer regulations help drive down cost of materials and labor.
That goes right to the bottom line. And bank could see a dramatic savings
from a reduction in their cost of employees. This could make a big
difference in a company like J.P. Morgan.

J.P. Morgan CEO Jamie Dimon has been railing for years about compliance
costs. There`s about 240,000 employees at J.P. Morgan, 18 percent of them
are in compliance. Think about this: one out of every five people at J.P.
Morgan are involved in looking at what the other four are doing.

The Commerce Department just began the first of many salvos to reduce
regulations on March 7th. They`re asking the public for information on the
most burdensome regulations for domestic manufacturers. You can submit
comments on regulations.gov. You will hear a lot more about this in the
coming months. But you can already see why Wall Street is enthusiastic
that a reduction in regulations is expected, crucial aspects of the Trump
agenda.

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

(END VIDEOTAPE)

HERERA: Most economists love deregulation, but figuring out if it will be
a growth driver is not an easy task.

Steve Liesman explains.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: To hear one side
tell it, regulations are the difference between smog-choked city skylines
and breathable air, between polluted rivers and clean running water. But
to hear the other side tell it, regulations depressed growth and kill jobs.

DONALD TRUMP, PRESIDENT OF THE UNTIED STATES: We have undertaken an
historic effort to massively reduce job-crushing regulations, creating a
deregulation task force inside of every government agency.

LIESMAN: President Trump has promised to eliminate two regulations for
every new one put this place. Professors at Duke and Stanford in a study
suggest regulation may have cost the U.S. economy $4 trillion. Measuring
from 1980 to 2012, they believe the economy could be 25 percent larger if
regulation hadn`t grown so much.

WILLIAM BEACH, MERCATUS CENTER: Increasingly, you have to hire people just
to comply with the regulations. These are folks that are not producing the
services or the goods where the profits come from. So, what our research
shows is that there is now almost an acceptably high cumulative cost of
regulation. It`s a burden.

LIESMAN: The study found a massive rise in the number of restrictive words
in the federal code. Words like “shall”, “may not” and “prohibited”.
These words now top a million, from under 600,000 in 1977.

But the professors acknowledge they didn`t look at the positive side of
regulation. They agree that health benefits of clearer skies and safer
workplaces and food may not show up in most growth measures.

JARED BERNSTEIN, CENTER ON BUDGET AND POLICY PRIORITIES: You know, you
really can`t find deregulation impacts in prices and growth. And it`s
really, really important not to forget the benefit side of the equation.
And that`s often missing in the research.

LIESMAN: To critics of deregulation, the financial crisis of 2008 is the
best example of the cost of going too far and loosening up too much. $11
trillion of what was lost in part because financial derivatives and banks
have been heavily deregulated.

The bottom line is economists believe regulation can keep out competition,
raise costs and reduce productivity and growth. But they also will say
there are benefits that should be counted before regulations are written
off.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.

(END VIDEOTAPE)

MATHISEN: Strength overseas helped Tiffany`s sparkle and that is where we
begin tonight`s “Market Focus”.

The luxury jeweler said strong sales in Japan and China, along with higher
prices, helped offset weakness in the Americas. Tiffany (NYSE:TIF)
acknowledged improvement still need to be made, but still gave an upbeat
forecast for the year. Shares up nearly 3 percent on the session to
$92.42.

Meantime, the enterprise software company MuleSoft, yes, MuleSoft, went
public on the New York Stock Exchange today, opening at $17 a share. The
company isn`t profitable yet but says it`s confident in the future of its
business.

(BEGIN VIDEO CLIP)

GREG SCHOTT, MULESOFT CHMN AND CEO: Our biggest thing is that we are
recurring revenue model. So, all of our software subscriptions are annual
or sometimes three-year contracts. And then we renew those contracts with
our customers and expand them dramatically over time. So, it`s the land
and expand model for our business that helps us be more productive from
sales and marketing standpoint.

(END VIDEO CLIP)

MATHISEN: And a nice debut it was. Shares soared more than 45 percent in
their market debut. They finished at $24.75.

HERERA: Biotech company AstraZeneca said the Food and Drug Administration
rejected its medication intended to treat high levels of potassium in the
blood, following an inspection of the company`s manufacturing facilities.
This is the second time the FDA has turned down the drug due to
manufacturing issues. Separately, AstraZeneca said it was partnering with
a British pharmaceutical company to develop and sell two respiratory drugs.
Shares were up a fraction to $30.69.

The private equity firm KKR (NYSE:KKR) and the Canadian Pension Fund will
jointly acquire Onex`s USI Insurance Services for about $2 billion. That
deal values the insurance brokerage at nearly $4.5 billion. KKR (NYSE:KKR)
shares fell 1 percent to $18.16.

MATHISEN: Our market monitor this week is a stock picker`s stock picker
who`s finding opportunities in some global names he thinks investors are
missing out on and are misunderstood by the market.

He`s David Marcus (NYSE:MCS), chief investment officer of Evermore Global
Value Fund, up more than 8 percent this year, beating the market and his
peer group.

David, welcome back.

DAVID MARCUS, EVERMORE GLOBAL VALUE FUND CIO: Thank you.

MATHISEN: You have some international choices here. Do I infer from that,
that that`s because you simply like these companies or because you think
non-U.S. markets are better priced than the U.S. market is?

MARCUS: It`s both. The fact is that the U.S. market has been hitting all
time highs, day after day after day. But that`s not the case outside the
U.S., especially in Europe. And so, you can get global players with huge
growth opportunities at value prices by buying ones that are based in other
markets like Europe.

HERERA: And you are a long term investor. You look for cheap companies.
But some of the soft picks you`re giving us have really decent dividends
too.
MARCUS: Yes.

HERERA: But you tend to hold on to your holdings for quite a while.

MARCUS: Absolutely. We`re not traders. We are investors. We take a long
term perspective. We don`t get rattled by short term issues with
companies. We really take a long term view because companies that are
going through change and transition, it takes time for their value to
really get out to —

MATHISEN: So, let`s get to your start picks, starting with Vivendi, a
company that is really a media company. NBC used to have a relationship
with them. How long — tell me about it and how long would you expect to
own a company like that?

MARCUS: OK. So, Vivendi a big media conglomerate. It`s based in France,
but it actually owns Universal (NYSE:UVV) Music, which is the largest music
company in the world, which is actually a U.S. business. So, they have
assets all over the world and we`ve owned it already about four years and
it`s —

MATHISEN: And you still love it.

MARCUS: I still love it. It`s one of our largest holdings. There`s just
so much opportunity. It was very undermanaged for many years and new
managers came in, and they`ve really been restructuring and refocusing.

And that`s the thing what we absolutely love, which is change that is
taking companies that have been mediocre managed and bringing in higher
quality managers. So, Vivendi is a perfect example.

HERERA: Your next stock is Marine Harvest. It`s a play on change, but
dietary change.

MARCUS: Yes, yes. So this is largest salmon company in the world. So,
the consumption of salmon is growing really exponentially. And so there`s
not enough fresh salmon out there, so people get it from these large farms.
And the fact is, you have a ten P/E, ten times earnings. You have a huge
dividend, over 6 percent, and this is biggest one and it swallows up some
of the smaller players in the industry.

MATHISEN: Where is domiciled?

MARCUS: In Norway.

MATHISEN: In Norway. I`m not stunned to hear that.

MARCUS: I even went to the fish farm to check it out.

MATHISEN: My people, my Norwegian — so, OK. Nothing fishy about that
one.

Let`s move on. Had to. The last one is Scorpio Bulkers. I assume it`s a
freight company.

MARCUS: Yes. This is a dry bulk career, and they`re moving goods, dry
goods, not oil, between basically U.S. and China and back and forth. And
the fact is when China started to slow down, this whole industry was
decimated.

HERERA: Right.

MARCUS: So, at that point, we started looking at the carnage. And Scorpio
is really a play on — one of the best players, but also, as global growth
starts to materialize again, this is a perfect example.

MATHISEN: Very quickly, I just saw that stock has tripled over the past
year. It still has room to go?

MARCUS: It does. It`s actually our largest holding today and we`re very
happy owning it.

MATHISEN: Money where your mouth is.

David, thanks.

MARCUS: Thank you.

MATHISEN: As always, good to be with you. David Marcus (NYSE:MCS) with
Evermore Global Advisers.

HERERA: And coming up, what started as a small basement business turned
into a multimillion-dollar venture. The story of how a few hardworking
women made their millions.

(MUSIC)

MATHISEN: By using an old fashioned stick-to-itiveness, a group of working
moms created a niche business and tapped into the multibillion dollar
global label market, which is expected to reach, get this, more than $43
billion by the year 2020. Their unconventional struggle from start-up to
brand name on tonight`s “How I Made My Millions”.

(BEGIN VIDEOTAPE)

JULIE COLE, MABEL`S LABELS CO-FOUNDER: Rise and shine. Time get ready for
school.

MATHISEN: To keep track of her kids` stuff —

COLE: Let`s go.

MATHISEN: Julie Cole puts their names on almost everything.

COLE: Give me your water bottles.

MATHISEN: A formidable task for all six of them. It helps that she is a
co-founder of the multi-billion dollar company Mabel`s Labels base in
Ontario, Canada. A business idea born in the early 2000s when Cole and her
sister, and another mom frustrated that their toddlers kept losing things
couldn`t find durable labels.

COLE: We saw masking tape, we saw permanent marker. And we just kind of
thought, you know what, there`s got to be a better solution.

MATHISEN: So they reached out to Tricia Mumby, a friend who worked in
printing.

TRICIA MUMBY, MABEL`S LABELS CO-FOUNDER: I thought this is ridiculous.
Tell your kids not to lose their stuff. Until you`re in a parenting
situation, you don`t realize this is a problem.

MATHISEN: Even before she became a mom herself, Mumby agreed to help, and
the four spent about two years researching how to make sticky labels.

MUMBY: That would go through the dishwasher, the microwave, be UV
resistant.

MATHISEN: And they did it while working full time and raising families.

MUMBY: My partners were persistent about it. They really want it, just
try something on their own, really just as an add-on business.

MATHISEN: All they really needed was a workspace, some printing machines
and money. But they decided against outside investors.

COLE: We were 100 percent cool with being like, hey, you have to help us
out. We`re doing a start-up.

MUMBY: We did a lot of bartering for things, like our website was built
and trade for a foosball table.

COLE: And run our production was out of my sister`s basement.

MATHISEN: In 2003, Mabel`s Labels launched online, selling packs of 45
durables, personalized labels for about $21 each. They received about 10
to 15 orders a day, and then out of blue, hundreds at one time.

MUMBY: So, I called the foosball guys/website developer, and said, we have
a virus. What`s going on? And he looked at and he said that there`s no
virus, those are orders.

MATHISEN: It turns out, their product had been featured in an e-mail
newsletter and things really started to stick.

MUMBY: I remember making myself count to five and then it and five for
refresh. And more order would come in, it was crazy. And we had to call
on sick to our day jobs and days and days afterwards to make these labels.

MATHISEN: Within four years, this part time business became a full-time
job for all of them. They moved out of basement into these 14,000 square
foot facility. And by 2016, Mabel`s Labels had 40 employees and sales of
about $9.5 million Canadian. That`s nearly $7.25 million U.S. bucks.

It caught the attention of one of the largest specialty packing and label
companies in the world, CCL Industries, which made them an offer.

COLE: They really understood our brand. They`ve been watching us for a
long time. So we sold the company for $12 million.

MATHISEN: That`s more than US$9 million.

Cole has continued to run public relations, while Mumby became general
manager. But their two co-founders cashed out.

Now, the business pumps out hundreds to thousands of label packs a day,
depending on the season and it runs almost 24/7.

MUMBY: There is something really special about starting this and building
and it selling it and knowing you did it all without a single loan.

I really do love to make labels.

(END VIDEOTAPE)

MATHISEN: Mabel`s Labels can be used on practically anything from sports
gear and luggage to shoes and phone skins and some even include bar code
technology. In case you lose it, it needs to be tracked. Cool.

HERERA: I could use that for my kids.

MATHISEN: Cool, very cool.

HERERA: They`re losing things all the time.

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

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

MATHISEN: And I`m Tyler Mathisen. Thanks so much for your support. Have
a great weekend, everybody. Happy St. Patrick`s Day.

HERERA: Yes.

MATHISEN: 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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