Transcript: Nightly Business Report – March 20, 2017

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

Funded in part by —

(COMMERCIAL AD)

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Spring cleaning. How you can
spruce up your investments even as the market seen frozen.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Free trade, fair trade.
Political leaders drop a pledge against protectionism while business
executives expressed some concern.

HERERA: And taking off. Why you may have to pack a little extra patience
when traveling this spring.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Monday, March
20th.

MATHISEN: Good evening, everyone, and welcome.

Well, a new season is here, a new beginning , but there were few signs of
spring on Wall Street today. Stocks barely budged, continuing a trend over
the past week or so.

Comments from Federal Reserve officials and developments from the weekend`s
meeting of the group of 20 industrialized nations in Europe were not enough
to move the market decisively in either direction today. The Dow Jones
Industrial Average fell eight points to 20,905, the NASDAQ was up a half
point, meanwhile the S&P500 fell four.

HERERA: Despite the frozen markets, it`s finally spring, and it is also
the time of year when many investors look for ways to get their financial
house in order.

Our guest has some ideas that could help you with your investment
portfolios. She is Lazetta Braxton, founder and CEO of Financial
Fountains.

Nice to see you again Lazetta, welcome back.

LAZETTA BRAXTON, FINANCIAL FOUNTAINS FOUNDER AND CEO: Thank you, Sue.
Good to be back.

HERERA: So, spring — obviously you think about spring cleaning. So, it`s
kind of like opening up that that laundry room door and saying you know
what, I have to rearrange the closet. You`re rearranging your portfolio.

BRAXTON: Absolutely. It`s a good time to think about what you did last
year and I say that because it`s tax time and when you wrap up your taxes
from 2016, you have a great idea of what you did well or not so well. So,
it`s right in front of you to plan for 2017 now.

MATHISEN: Let me ask you about 401ks and other similar defined
contribution plans and a lot of people have. A lot of people have multiple
employers. They may have multiple past plans where they still have open
accounts. Is this a good time of year to take all of those stray for 401ks
to which you`re no longer contributing and roll them over into one
consolidated account?

BRAXTON: Absolutely yes, for several reasons. One, your previous
employer, you don`t know how long they`re going to be around you`re not in
touch to what`s going on.

So, bring over your 401k to your current employer. But before you do that,
also make sure that you understand your existing 401k in the fees that
you`re paying as well too. So, consolidating your assets, this makes it
very easy to know where your money is, how it`s being managed and having
multiple accounts sometimes it seems overwhelming for people.

HERERA: You know, you also make the point that it`s a good time to
rebalance your retirement account perhaps this year more than most, because
we`ve had such a huge run up in this market since right after the election
and the first of the year. Do you take some money off the table and
reallocated? How would you go about looking at your portfolio and deciding
how to rebalance?

BRAXTON: So, first, yes, the run-up has been going on for quite some time,
so not just because of the recent election, given that the run-up has been
at least eight, nine years now, yes, take some of those games and reinvest
them, particularly for those who are approaching retirement, looking to
turn some of that capital gains into income.

So, shaving yet some of the capital gains will be something to consider as
you rebalancing your portfolio.

MATHISEN: So, quick answer. As I rebalance, if I want to sell stock or
equity holdings, should I look at that have a profit in them should I look
first at doing so in a tax-sheltered account where I won`t be creating any
taxable event?

BRAXTON: You`re absolutely right. So it`s good to know, retirement
accounts, tax sheltered, no capital gains.

MATHISEN: Uh-huh.

BRAXTON: Absolutely, and that`s a part of the great thing of rebalancing
and deferring those taxes.

HERERA: All right. Thank you so much, Lazetta. Nice to have you with us.

BRAXTON: Thank you.

HERERA: Lazetta Braxton with Financial Fountains.

MATHISEN: Well, a lack of inflation was the reason why the head of the
Minneapolis Fed was the lone vote against an interest rate hike at the
Central Bank`s meeting last week. In an interview today, Neel Kashkari
said inflation is still below the central bank`s 2 percent target.

(BEGIN VIDEO CLIP)

NEEL KASHKARI, FEDERAL RESERVE BANK OF MINNEAPOLIS PRESIDENT: For coming
short on inflation and the job market shows more signs of slack, my
question is: why do anything — why not allow this to continue until we see
that we`re actually reaching maximum employment?

(END VIDEO CLIP)

MATHISEN: Mr. Kashkari said inflation can rise above 2 percent without
creating worries about an overheated economy.

HERERA: Another relatively new voting member of the Federal Reserve also
said he`s okay with inflation running a little bit above that 2 percent
level. But as Steve Liesman reports, it`s otherwise hard to pinpoint where
exactly the head of the Philadelphia Fed stands.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s been an 18-
month Fed mystery when Philadelphia Fed President Patrick Harker took over
from Charles Plosser in mid-2015, the question was whether he would
continue in his predecessors hawkish path. Today in his first CNBC
interview, Harker revealed he`s not going to be so easily digit hold.

The former University of Delaware president who is voting for the first
time this year said he supports two more rate hikes but it isn`t in a hurry
to do more than that.

PATRICK HARKER, PHILADELPHIA FED PRESIDENT: Coming into this year, I
thought that three rate increases made sense. I`d like to phase those out.
That is I don`t want to get behind the curve but we`re not in any rush
either. So, I think we have time to increase over the course of this year.

LIESMAN: If Donald Trump passes a broad range of pro-growth stimulus,
Harker says more rate hikes are possible. But he`s also in no hurry to
react to the effects of policies that haven`t been passed yet.

HARKER: If we have corporate tax reform, which makes sense to me, but we
also raise trade barriers that might hurt some industries here in the U.S.,
what`s the net effect of that? Well, the devils in the details, right?
Until we see the details of what that all means, it`s hard to factor it
into a forecast.

LIESMAN: Finally, if a Harker were a hardcore hawk, he said the 2 percent
inflation rate is a ceiling and wouldn`t want to go any higher. But Harker
says he`s OK if the inflation rate goes over that level for a while.

HARKER: So, I think we`re there and we`re moving in the right direction.
There will be a little bit of an overshoot and that`s OK and that`s
appropriate.

LIESMAN: Harker may yet end up following his predecessors course, but for
the moment, he looks set on a route firmly in the middle of the typical
hawk dove flight path.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman in Philadelphia.

(END VIDEOTAPE)

MATHISEN: United Kingdom will start the process of leaving the European
Union next week. Prime Minister Theresa May will invoke Article 50, the
mechanism for leaving the bloc. It`s never been used before. It will
launch two years of complex negotiations to untangle Britain from European
economic integration.

HERERA: Trade tensions pressured stocks across the globe following the
weekend`s G20 meeting. Finance ministers from the world`s largest
economies dropped a pledge against protectionism, a move push by Treasury
Secretary Mnuchin and globalization was the topic of conversation at a
meeting of business executives in China.

Eunice Yoon in Beijing has that part of the story.

(BEGIN VIDEOTAPE)

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: While G20 policymakers
dropped a pledge to freer trade over the weekend in Germany, here in China,
one of the most exclusive conferences, elite business leaders, and
government officials reiterated their hopes to promote globalization. Many
of them expressed disappointment in the talks at Baden-Baden.

STEPHEN ROACH, YALE UNIVERSITY PROFESSOR: It`s pretty disappointing when
you get finance ministers for the leading countries of the world who out of
the blue are unable to validate the commitment to anti-protectionism, which
is a underpinning of globalization.

VOLKMAR DENNER, BOSCH CEO: Germany has supported the negotiations on free
trade agreements, be it in Asia of the TPP or the TTIP in — with the
Western world, and we see that it`s getting difficult to realize these free
trade agreements.

YOON: President Trump`s America first agenda has raised concerns about
possible trade wars, though the CEO of Dow Chemical (NYSE:DOW) and a member
of President Trump`s manufacturing council tried to allay some of those
concerns.

ANDREW LIVERIS, DOW CHEMICAL CEO: This is not a zero-sum game. We know
we`ll know that. People who trade in the global system, we know what has
to happen here, and to satisfy population`s feeling of inequity,
globalization hasn`t been fair.

MOOS: Even so, people have been telling us that a meeting between
President Trump`s and China`s President Xxi Jinping in Mar-a-Lago could
result in a better relationship.

LI DAOKUI, TSINGHUA UNIVERSITY: The most important objective is to butte
(ph) chemistry, is to meet the person right and to shake hands, to touch
the person, to know what the person is really about, rather than going
through the various kinds of channels like tweet, like Internet, like
traditional media.

YOON: For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.

(END VIDEOTAPE)

MATHISEN: Still ahead, what the rolling back of some housing rules could
mean for both buyers and sellers.

(MUSIC)

MATHISEN: Customers are not opening new accounts at Wells Fargo
(NYSE:WFC). Checking and credit card openings fell more than 40 percent in
February from a year earlier, extending a trend that started after the
banks fake account scandal last summer.

But there was some good news. Wells Fargo (NYSE:WFC) saw an increase in
average consumer and small business deposit balances.

HERERA: CEO pay is at a record. According to “The Wall Street Journal”,
median pay for chief executives that some of the biggest U.S. companies
rose nearly 7 percent last year, to $11.5 million. That`s more than offset
the pay cut that they took the previous year. The increase is attributed
to the rising stock market, along with higher dividends and buybacks,
because stock awards are becoming a bigger part of total compensation.

MATHISEN: As we`ve been reporting, the deregulation and prospect of
deregulation has been a powerful force in the stock market. And tonight,
we look at what it could mean in the housing industry. Lenders and
builders are excited about its potential.

And as Diana Olick reports, rule changes could also have a big impact on
buyers, sellers, and the health of housing overall.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: If you`re shopping for
a home this weekend, you probably already know the pickings are slim.
There are very few existing homes for sale and the home builders aren`t
adding enough. Why not? They blame in part regulation.

STEVEN HILTON, HERITAGE HOMES CHMN. AND CEO: There`s just too much
government interference, too much regulation, which drives up the cost of
housing and lowers the builders` profit margins.

OLICK: Local, state and federal regulation compliance costs now make up
about twenty-five percent of the cost of a new home, according to the
National Association of Homebuilders. That`s up over thirty percent in
just the last six years. Builders are looking to President Trump to lower
their costs.

HILTON: Some of the regulations that were enacted on the last
administration are at least starting to be talked about being rolled back.
There was a couple have actually happened, but I think that is going to be
a big, positive impact for our industry and we`re pretty excited about it.

OLICK: So excited in fact that a monthly reading of home builder sentiment
in March jumped to the highest level in 12 years, even though builders are
still selling historically few home. That divide between sentiment and
sales is wider than ever.

And that confidence could come right back down. Home builders are still
facing a severe shortage of land and labor and mortgage rates are rising.
But lenders say that`s another area where deregulation could help.

ANTHONY HSIEH, LOANDEPOT CHMN. AND CEO: As an industry, we`re hopeful that
softening of regulations will promote liquidity coming back into to the
mortgage market that would be good not only for the industry as a list
volume, but it`s going to provide greater credit availability to consumers.

OLICK: Mortgage rates are still historically low, down considerably in the
past decade. The difference today though is that most of the mortgage
market is government-backed, with very strict credit requirements to get
the loan at all. Deregulation could change that.

HSIEH: So, I think you really look at — look for opportunities where
Fannie and Freddie FHA and V.A. just do not serve the consumer, and you
come up with new programs that ultimately will satisfy that customer
experience, because not everybody fits into that box.

OLICK: Which is why so many today still can`t buy a house.

For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.

(END VIDEOTAPE)

HERERA: Caterpillars sees retail sales improve and that`s where we begin
tonight`s “Market Focus”.

The industrial equipment maker said machine sales fell during the latest
three month period, but still, the decline was the smallest in more than
four years. And as for construction sales, they were positive for the
first time in almost three years. So, shares rose more than two and a half
percent to $95.40.

The drugmaker Esperion said the Food and Drug Administration thinks the
company`s cholesterol treatment could be approved based off of results from
an ongoing study. The company said it plans to submit a new drug
application in 2019. Shares took off. They soared 74 percent to $41.22 on
the trading session.

International drilling contractor Borr said that it signed a letter of
intent with rival Transocean (NYSE:RIG) to acquire 15 of its oil rigs for
more than $1 billion. The deal includes 10 of Transocean`s current rigs
and five that are under construction. Transocean (NYSE:RIG) shares fell
two percent to $12.22.

MATHISEN: Dominion Diamond said it is turned down a more than a billion-
dollar unsolicited takeover offer it received in February from private
conglomerate Washington Companies. The Canadian miner said the proposal
didn`t recognize the full value of the company, but that it was prepared to
engage in further discussions. Washington Companies owns a group of mining
and industrial businesses.

Dominion shares — Dominion Diamond shares, I should say, pop nearly
twenty-three percent to $12.20.

Watchmaker Movado posted a drop in quarterly sales and profit while
forecasting a challenging year ahead. The company also said it would cut
its workforce mainly affecting operations in North America and Switzerland.
Movado said that move along with other cost-saving initiatives will help
improve profitability. Shares rose almost six percent to $25.

And the organic chain Sprouts Farmers Market has reportedly been involved
in preliminary talks with supermarket operator Albertsons regarding a
potential merger that would take Sprouts private. Albertsons is owned by
the private equity firm Cerberus Capital Management. Shares of Sprouts
fell a fraction to $21.83.

HERERA: A key executive is leaving Uber after just six months on the job.
Jeff Jones who was president of the fast-growing ride-hailing company told
tech news sites Recode that his approach to leadership is inconsistent with
what he saw at Uber, and this is just the latest in a string of other
recent controversies for the company.

In January, Uber was the subject of a consumer boycott which saw an
estimated 200,000 users delete the Uber app. A former employee published
allegations of sexual harassment at the company, and Google`s self-driving
arm Waymo filed a lawsuit against Uber, alleging it`s technology was
modeled off of stolen intellectual property.

CEO Travis Kalanick was also recorded having an argument with an Uber
driver and a “New York Times (NYSE:NYT)” report said Uber used the secret
tool to avoid regulators.

MATHISEN: So, if you run a fast growing private company facing
controversies like Uber, is it better to remain private or go public?

Erik Gordon is a professor at the University of Michigan`s Ross School of
Business.

Professor Gordon, welcome, and congratulations on the Wolverines run
through the tournament so far.

ERIK GORDON, UNIVERSITY OF MICHIGAN`S ROSS SCHOOL OF BUSINESS: Ah, go
blue!

MATHISEN: Go blue. I knew I`d get you there.

Let`s talk — I know why companies go public. It enables the founders and
the investors to cash out. But beyond that, I really don`t see why anybody
would do it. You`ve got to deal with Wall Street and pesky shareholders.

GORDON: Yes, you know, and a lot of company founders are starting to agree
with you. We`re seeing fewer and fewer IPOs, kind of ironically, because
the law changed and made them easier. Nevertheless, you know the hassle of
dealing with activist shareholders, equity analysts and the ongoing
expenses made a lot of them say you know maybe we`ll do it never or more
realistically, we won`t do it until we have to.

HERERA: So, what about staying private then? What are the advantages and
the disadvantages of keeping your company off of the public market?

GORDON: Well, you never have to worry about an activist showing up. You
don`t have to do this kind of dog and pony show every quarter where you try
to convince people that every quarter is good, every quarter is going to be
better than the last quarter.

You can plan for the long term. You can do some stuff that equity analysts
would think is crazy, things that people like Jeff Bezos at Amazon
(NASDAQ:AMZN) have been able to do. Even though it is public, he has kind
of a setup that lets them act as if he`s private. You can build the long-
term value of your company and you have a lot more privacy.

You know, when you go public, your next-door neighbor can look up your
salary and not everybody is interested in that.

MATHISEN: Let`s talk a little bit about the capital side of the business.
If you own a private company and let`s say you can`t raise capital any
other way to expand, to build a factory, or maybe do an acquisition, I can
see there that the issuance of shares to be very helpful.

GORDON: So, that`s what pushes you to go public even if you don`t want to.
It has something to do with capital, either you need new capital to grow
because you`ve outgrown your present sources of capital, or you want to
acquire a big company and you don`t want to use all cash or the people who
put capital in want their capital back. People like venture capital funds
don`t stay with you forever. They actually need the cash back, so
sometimes they`re pushing you to take them out.

So, it`s — you know, sometimes you`re getting pushed and you`re doing it
even though this is not what you want to do. It`s like your friends
pushing you into the swimming pool.

HERERA: Well, that doesn`t sound good. And I would assume that venture
capitalists basically have a set amount of time before they expect their
money back. That`s pressure on a privately held company, is it not?

GORDON: Yes. Sue, that`s exactly right. I mean most venture capital
funds only last 10 years. If they invested in you in their third year, you
know, after seven years, they want their money back and usually a lot
earlier because they`re doing another fun.

HERERA: Yes.

GORDON: So, you get kind of a conflict of interest what the venture
capitalists want and what the founder wants can be very different.

MATHISEN: Professor Gordon, thank you very much. Erik Gordon is with the
University of Michigan`s Ross School of Business. See you soon.

Well, some sad news tonight on the passing of a Wall Street legend. David
Rockefeller was the last living grandson of the oil tycoon John D.
Rockefeller. His father John D. Jr. built New York City`s Rockefeller
Center during the Depression. During a long career that blended
philanthropy, diplomacy and finance, David Rockefeller was for many years
the chairman and CEO of Chase Manhattan Bank. He reportedly gave away
nearly $2 billion in his lifetime. David Rockefeller was 101.

HERERA: And coming up, why a lot of high-profile sporting goods seemed to
vanish without a trace.

(MUSIC)

MATHISEN: After weeks of mystery, investigators seem to have found Tom
Brady`s missing Super Bowl jersey. It was allegedly in the possession of a
Mexican newspaper editor who had a media credential for the event. Other
game day gear from Brady (NYSE:BRC) and another player apparently also
recovered. But lots of valuable sporting equipment, tradable jerseys,
helmet, shoes and the like seemed to go missing and stay that way.

Andrea Day has that story.

(BEGIN VIDEOTAPE)

KEN GOLDIN, GOLDIN AUCTIONS FOUNDER: This is literally the shirt off his
back. It is the ultimate football prize.

ANDREA DAY, NIGHTLY BUSINESS REPORT CORRESPONDENT: The ultimate prize
valued at a half million dollars finally back. It was six weeks ago when
the jersey was swiped right out of the patriots locker room.

TOM BRADY, PATRIOTS QUARTERBACK: I put it in my bag and then I came out
and it wasn`t there anymore.

DAY: According to an NFL statement, it was found in the possession of a
credentialed member of the international media. They also recovered the
jersey Brady (NYSE:BRC) wore in Super Bowl 49 worth a quarter million.
Investigators from Houston PD say both were found in Mexico.

ART ACEVEDO, HOUSTON POLICE CHIEF: Videos are part of the investigation.
The suspect had access to the event and I`m not going to take this any more
specifics other than he had legitimate access to the event, and it wasn`t
as a ticket holder.

DAY: But Ken Goldin, the owner of Goldin Auctions, thinks it could be part
of a small network of underground criminals for hire.

GOLDIN: These people to me are being hired to given a list and told, go
take this and here`s your price, so they know going in, you know, it`s
professional criminals and they go in and they take specific items and they
have it sold prior to ever doing it.

DAY: And he says that theft of high ticket sports items is getting huge.

GOLDIN: It`s been an epidemic in the past months. You`ve had the
obviously Tom Brady (NYSE:BRC) jersey stolen. You have had the Roger Maris
Museum broken into, and even the Boxing Hall of Fame has been robbed, all
within a 15-month period.

DAY: Those items almost impossible to sell in the open market, according
to Goldin, most likely stay hidden with private collectors.

GOLDIN: They probably have a safe room in their house that, you know, has
a vault entry and they go in there and they watch their sports games and
it`s their personal enjoyment.

DAY: And he says the sports collectible market is so hot right now that
every day, he hears about somebody new who wants to get in on the action.
And last year, he says his auction house did $25 million in sales. That`s
up from just $750,000 in 2012.

I`m Andrea Day for NIGHTLY BUSINESS REPORT.

(END VIDEOTAPE)

HERERA: Aare you planning on a getaway this spring? A new report shows a
record number of people will be flying. In fact, Airlines for America
estimates million travelers are expected to take a flight in March or in
April.

Phil LeBeau has more on why so many are taking off and what they should
expect when they board that flight.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: If you`re traveling
this spring, pack a little extra patience. There will be more people than
ever flying, nearly 90,000 more every day. That means crowded planes and
airports.

This continues a trend that has pushed the number of people flying on U.S.
airlines to an all-time high, topping 800 million last year. Why are so
many taking to the skies? Well, consumer confidence is close to a record
high, so people are more comfortable taking a trip, especially with the
economy gaining strength while unemployment remains low. And right now,
airfares remain relatively cheap.

But the website Hopper.com which tracks airfares says domestic tickets will
rise between now and June, when the average ticket will go for $256.
That`s a slight increase compared to last year. Airlines have been adding
planes and flights to prepare for the growing number of people flying this
spring.

In addition to carrying more passengers, the airlines are looking forward
to the spring because many are expected to show positive growth when it
comes to passenger revenue per available seat mile, that along with the
expectation of pure regulations under the Trump administration explain why
airline stocks have been outperforming the rest of the market for most of
the last year.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

MATHISEN: And finally tonight, there are more than 2,000 billionaires on
the planet for the first time ever. According to “Forbes”, Bill Gates is
the world`s richest person for the fourth year in a row. Fortune: $86
billion. Gates` buddy Warren Buffett, second spot, and moving into the
third spot for the first time, Amazon`s Jeff Bezos.

HERERA: And that is NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera.
Thanks for watching.

MATHISEN: And thanks for me as well. I`m Tyler Mathisen. Have a great
evening, everybody. We`ll see you back here tomorrow night.

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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