Transcript: Nightly Business Report – March 30, 2017

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Investor disconnect? Why
confidence is high and optimism is soaring even as the economy appears to
be just okay.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: New approaches. Could
flashing lights treat Alzheimer`s? Some radical ideas to tackle one of
medicine`s biggest challenges.

HERERA: Rising fast. How can Amazon`s Jeff Bezos become the world`s
richest person?

Those stories and more tonight on NIGHTLY BUSINESS REPORT Thursday, March
30th.

MATHISEN: Good evening, everybody, and welcome.

For a record day for the NASDAQ today, it was a big one. But we begin
tonight with the American economy, which is meandering along, just so-so.
A new report on economic growth is nowhere near the level that many want to
see, gross domestic product, the economy`s total output of goods and
services, expanded at an annual rate of 2.1 percent in the final three
months of last year. Now, that was a slight improvement from the previous
estimate, but not enough to change growth for all of last year, which came
in at just 1.6 percent.

And while GDP and other economic data are meddling along, indicators that
measure optimism are soaring. Take consumer confidence, just the other
day, we told you that it stands at the highest level since all the way back
in 2000. And there`s margin debt, the amount of money borrowed to buy
stocks. It`s an all time high, and that means investors are feeling pretty
optimistic about the prospects for the market.

HERERA: So, we were wondering, why are investors feeling so good when some
of the other economic data like overall growth that Ty just mentioned is
just OK?

Here to explain the disconnect and take us inside the investor`s psyche is
Dr. Doug Hirschhorn. He is a trading psychology coach for portfolio
managers and hedge funds, the guys who maybe manage some of your money.

It`s good to see you, Doug. Welcome.

DOUG HIRSCHHORN, PHD, TRADING PSYCHOLOGY COACH: It`s great to be back.
Thank you very much.

HERERA: Why is there that disconnect? You have some really interesting
theories about why the numbers empirically may be saying one thing, but
investors are feeling and doing differently.

HIRSCHHORN: Right. So, investors have a sense of optimism that grows
overtime. And one thing that we`ve noticed in the field of sports
psychology is what we call the new coach transition. So, you can have a
mediocre team, but if you bring in a new head coach, it`s new beginning, a
fresh start, everyone naturally thinks about the optimism, the
possibilities for the future. And I think it`s what we are seeing now with
the markets, with the transition of the new administration.

MATHISEN: Can — is the danger in that, that you as an investor, then,
become overconfident that the new coach is going to deliver, and sometimes
the new coach is great and does, sometimes they`re not exactly Belichick.

HIRSCHHORN: Well, let`s keep it in mind, it`s just the coach. You still
have the same team. And that`s the part that people get mistaken with is
that, behavioral finances taught us that people are historically
overconfident in their skills and it`s been shown repeatedly in research.

And what we see with the markets and especially during these times with
optimism is that investors become overconfident in their skills as
investors, and they think it`s going up, it`s going to keep on going up,
and I want to be a part of this. I`m feeling great, and I`m hearing about
it, reading about it. And we got the herding mentality which adds fuel to
the fire.

HERERA: Right. How much also has to do with the message that is being put
out by the new coach, the administration? You know, we are going to tackle
tax reform. We are going to tackle immigration. We`re going to tackle the
deficit. All of those things?

HIRSCHHORN: Right. So, I refer to this as the Jedi mind trick. President
Trump, it isn`t a political conversation, but he`s charismatic, he`s
engaging, he uses great compelling words like fantastic and great and
wonderful. And those words stick in our minds, and then we move forward
with that analogy in our head.

It`s the same example if I said to you, whatever you do, don`t think of
pink elephants, all of a sudden you are thinking of pink elephants. They
don`t even exist. But I put that image in your head, and President Trump
has done that with the economy and the market.

MATHISEN: An effective communicator for sure. So, give me some advice as
an investor what to be on guard about in not letting my emotions take over
and translate that into action.

HIRSCHHORN: Sure. So, go back to the data and the best thing you can do
is to recognize that you are having this over anxious or overconfident
feeling, and then go back to data points and look for pros and cons, break
it down to an objective list of pros and cons. Another great tool you can
use is, look at who you are having conversations with, what chat rooms or
blogs you are reading. And so, if you are surrounding yourself with like
minded people, that is a red flag that you lost objectivity in what`s going
on around you.

Ask yourself about what`s the counterargument, the total opposite side.
Why is this not a great market? What`s wrong with the economy? Ask
yourself those tough questions, and you equalize your mentality.

HERERA: Good advice. Doug, thank you. It`s always nice to have you.

HIRSCHHORN: My pleasure.

MATHISEN: Good to see you.

HIRSCHHORN: Doug Hirschhorn joining us tonight.

MATHISEN: All right. As we mentioned, the NASDAQ set a closing high
today. That makes you feel optimistic.

(CROSSTALK)

MATHISEN: All right.

As technology and stocks and financials led to the broader market higher.

Let`s get right to the numbers, folks. The Dow Jones Industrials Average
up 69 points to 20,728. NASDAQ record added 16. S&P 500 was up nearly 7.

HERERA: And to the job market, the number of Americans filing for
unemployment benefits fell less than expected last week. According to the
Labor Department, initial jobless claims dropped 3,000 to 258,000. Though
the drop was less than expected, claims have been below 300,000 for the
longest stretch since 1970, and, of course, the labor market back then was
much smaller.

MATHISEN: America`s federal debt burden will hit a record over the next
three decades if current policies are maintained, that according to long-
term projections for the non-partisan Congressional Budget Office. The
forecast says the debt held by the public will balloon to 150 percent of
economic output by the year 2047. Most of the increase is projected to
come from those entitlement programs, Social Security and Medicare.

HERERA: When it comes to trade, a draft memo shows that the trump
administration may take a much more conventional approach to negotiations,
and not the tough stance the president once called for.

Ylan Mui is in Washington.

Ylan, the memo may be the first look at the president`s plan. So, what is
the administration hoping to change when it eventually renegotiates NAFTA?

YLAN MUI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Sue, this is really an
outline of broad principles to what the administration wants to accomplish.
Some of the things that are in that letter include leveling the playing
field when it comes to tax treatment. It also includes potential tariffs
that they could impose on imports from Mexico or Canada, if those imports
start to hurt American businesses.

The goal of all of this is to shrink the trade deficit that the U.S. has
with Mexico. So, these are some of the big ideas that are in there. But
the negotiations have yet to start and you know the devil is always in the
details.

MATHISEN: How does this draft letter, Ylan, match up with what the
president said or seemed to say on the campaign trail?

MUI: Well the president was very clear on the campaign trail. He said he
wanted to rip up NAFTA, rip up this trade deal. This trade deal is not
getting ripped up in this letter. It`s being renegotiated.

So, what you are really seeing here is an evolution of America`s trade
stance rather than the revolution that the president had called for, now if
the talks don`t go well, we`ll see what happens then. Right now, it`s more
of a phase in than a full scale rejection.

HERERA: As you mentioned, the talks haven`t started yet, but is there a
time line for it?

MUI: So, the administration has to send a letter to Congress to notify
lawmakers that it wants to begin those negotiations.

Commerce Secretary Wilbur Ross was on CNBC earlier today, and he says he
hopes to send that letter to Congress by the Easter recess, and once that
happens, there will be a 90-day waiting period. And then, Secretary Ross
also says he believes the talks could be wrapped up within a year. So,
we`ll see if that happens.

HERERA: Indeed we will. Ylan, nice to see you again, as always. Thanks
for joining us.

MUI: Thanks, Sue.

HERERA: Ylan Mui in Washington.

MATHISEN: Well, rumbling just beneath the market is Russia, some call it a
significant geopolitical risk to global stocks.

And today, Geoff Cutmore has a chance to talk directly to the leader of
that country, Vladimir Putin, while chairing a panel discussion at the
International Arctic Forum in Northern Russia.

(BEGIN VIDEOTAPE)

GEOFF CUTMORE, NIGHTLY BUSINESS REPORT CORRESPONDENT: This Russian
organized International Arctic Forum is primarily about showcasing energy
resources in the Arctic and showing Russian plans for developing this
region whilst taking care of the environment. But while I had the
opportunity to question the Russian president, I asked him about the
ongoing investigation in the United States as to whether Russia interfered
with the U.S. presidential election process. The president`s answer,
categorically, we did not.

VLADIMIR PUTIN, RUSSIAN PRESIDENT (through translated): Ronald Reagan,
once, when debating about taxes and addressing the Americans, said, “Watch
my lips, no.”

CUTMORE: When asked why this process was taking place, the Russian
president said, there was growing anti-Russian sentiment for domestic
reasons. He accused those criticizing Russia of telling lies.

PUTIN: We perceive and regard the United States as a great power, with
which we want to establish a good partnership relations. All those things
are fictional, illusory, and provocations, lies. All these are used for
domestic American political agendas.

CUTMORE: Up to this point, relations between Moscow and Washington are at
a low ebb. There is the whole issue of sanctions and continued concerns
about militarization. There may be some opportunity, though, to make
progress if the two presidents are to meet. At this stage, there are no
plans for anything to happen ahead of the G-20 meeting in Germany in July.
But President Putin used this opportunity to say he would be willing to
meet earlier than that in any city the U.S. administration would care to
choose.

This is Geoff Cutmore in Arkhangelsk, Russia, for NIGHTLY BUSINESS REPORT.

(END VIDEOTAPE)

HERERA: Still ahead, the new radical ways researchers are trying to tackle
Alzheimer`s. Our “Modern Medicine” series is next.

(MUSIC)

HERERA: The best performing sector so far this year is technology. We
talked about that yesterday. Today, with just one day left in the quarter,
we look at the second best performing sector, health care.

Bertha Coombs has our beat check.

(BEGIN VIDEOTAPE)

BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT: While the White
House and Congress struggled to repeal Obamacare, investors didn`t shy away
from health care. The sector gained more than 8 percent this quarter,
outperforming the overall market. Some of the biggest gainers, like
insurer Centene up 27 percent, stood a lot to lose from the GOP bill`s
Medicaid cuts.

DAVID WINDLEY, JEFFERIES MANAGING DIRECTOR: I think the rollback of
coverage and the potential loss of coverage in, obviously, the most
vulnerable fragile population was a very difficult thing to stomach.

COOMBS: Hospital stocks like Community Health surged even more, short
sellers betted heavily against the shares of the debt laden hospital
operator and Tenet Healthcare, its rival, because they could see big losses
if GOP Medicaid cutbacks are passed. But short-sellers passed out when the
GOP bill failed, and the hospital sector rallied.

SHERYL SKOLNICK, MIZUHO SECURITIES DIRECTOR OF RESEARCH: For the case of
these companies, now the decisions they`ve made to deploy capital and to
continue along the kind of patient care initiatives that have been
innovative, in part, enabled by the ACA, all of those things can continue.

COOMBS: Bio pharma is also in the crosshairs for reform. The president
has pledged the pursue drug price negotiations, but the sector has seen its
best quarterly gain in two years.

So, is the market betting Republican reforms will stall long term? Not
entirely. Mizuho`s Sheryl Skolnick says part of the health care sectors
gains are coming from investors betting that the Trump administration`s
other priority, tax and regulatory reform, will help push more profits to
help firm`s bottom line.

Still, Obamacare and reform will be a big theme again in the second
quarter, when insurers submit 2018 exchange rate plans.

David Windley thinks Anthem may cut its overall participation.

WINDLEY: It is big and that they are the largest Blues license holder out
there, but I think the trend is fairly well established.

COOMBS: For now, with change still up in the air, analysts say it`s
business as usual for health care and its individual company fundamentals
that count.

Bertha Coombs, NIGHTLY BUSINESS REPORT.

(END VIDEOTAPE)

MATHISEN: After decades of research, Alzheimer`s is one of the biggest
unanswered questions in medicines. Five millions Americans are currently
thought to have the disease and that number is expected to triple by 2050.
As we reported yesterday, there is a debate within the medical community
over the best way to target the disease.

And tonight, as part of our modern medicine series, Meg Tirrell looks at
some new approaches to Alzheimer`s.

(BEGIN VIDEOTAPE)

MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: What goes wrong in the
brain in Alzheimer`s disease is one of the great mysteries of medicine.
New research out of MIT mystery may shed light on the problem.

LI-HUEI TSAI, MIT PICOWER INSTITUTE NEUROBIOLOGIST: Human brain contains
billions of neurons and other supporting cell types and these neurons make
trillions of synopses with each other to form this intricate brain circuit
or network, much like a computer, but more powerful.

TIRRELL: And studying those synopses is opening new doors in Alzheimer`s
research.

TSAI: One fascinating property of our brain is that a large number of
connected neurons can fire synchronously together to produce this rhythmic
oscillations or waves of different frequencies.

TIRRELL: One frequency known as gamma is associated with higher order
brain functions like perfection, attention and the formation of memory.
Researchers shown those brain rhythms are impaired in Alzheimer`s disease.
So, a team led by MIT`s Dr. Li-Huei Tsai set out to restore those rhythms
in mice. They found that exposure to flashing led lights at the gamma
frequency restored that brain rhythm. And what`s more, resulted in a
reduction of the brain plaques associated with Alzheimer`s.

TSAI: It was unbelievable. With just one hour of light flicker exposure
we saw that amyloid level was cut almost in half.

TIRRELL: The brain was not only creating less beta amyloid, it was also
stimulating brain immune cells known as microglia back into action,
clearing the plaque, all due to a simple flickering light. The researchers
cautioned these results need further testing to insure safety before moving
into potential human studies, which may be a few years away.

Young biotech companies are also taking new approaches. Voyager
Therapeutics aims to use viruses to vary treatments into the brain. It`s
an approach known as gene therapy, delivering genetic information to create
proteins to correct what`s going wrong in disease.

DR. STEVE PAUL, VOYAGER THERAPEUTICS PRESIDENT & CEO: The cool thing about
this approach is that because the vector gets into brain cells, neurons or
glia, it sets up shop and with a single injection, we can produce antibody
for many, many years.

TIRRELL: Voyager is still a few years from testing in humans as well,
given the great need in Alzheimer`s for effective treatment. Everyone in
the field is hopeful that more advanced studies such as those from Biogen,
Roche, Lilly and Merck will bear fruit.

PAUL: Clearly, there have been failures and that has caused a number of
companies to pause and perhaps invest elsewhere. But there is still a
number of big companies and small companies that are willing to take this
problem on head-on. And my feeling is that we are just one positive
clinical trial away from many, many other people getting very actively
involved.

TIRRELL: After decades of failure in Alzheimer`s drug developments, one
success would make a big difference.

For NIGHTLY BUSINESS REPORT, I`m Meg Tirrell.

(END VIDEOTAPE)

MATHISEN: To read more about the new approaches to treating Alzheimer`s
disease, head to our website, NBR.com.

HERERA: ConocoPhillips sells most of its Canadian assets. That`s where we
begin tonight`s “Market Focus”.

The oil giant said Canada`s Cenovus Energy would buy its oil sands and
natural gas assets for more than $13 billion, that is more than Cenovus`
entire market cap. ConocoPhillips said the move will allow the company to
trim debt and double its share repurchase program to $6 billion. Conoco
shares jumped nearly 9 percent to $50, but Cenovus fell more than 13
percent to $11.29.

Apparel and footwear company VF Corp. unveiled its growth plans for the
next couple of years. The distributor of brands, including the North Face
and Wrangler, said it will reshape the company`s brands portfolio and move
towards a consumer and retail centric model. VF also expects to return $8
billion to shareholders to 2021. VF shares down more than 3.5 percent to
$54.13.

MATHISEN: Dell Technologies, which is the holding company for Dell, said
it`s fourth quarter PC sales were the best it`s had in six years. The
company still reported a quarterly loss but said overall results were also
helped by strength in its client`s business. Shares of Dell Tech added 9
cents to $63.99.

And the health insurer Anthem may be dropping a large number of its markets
where it serves customers under the Affordable Care Act. An analysts
report from the investment banking firm Jefferies said the company is
leaning towards exiting a high percentage of the 144 regions it currently
participates in. Anthem shares up more than 1 percent on the day to
$167.08.

HERERA: AT&T has been chosen by the Commerce Department to build out a
national wireless network to help first responders communicate in a time of
crisis. An independent arm of the Commerce Department called First Net
will provide spectrum and $6.5 billion over the next five years. AT&T will
spend about $40 billion over the 25-year agreement.

(BEGIN VIDEO CLIP)

RANDALL STEPHENSON, AT&T CHAIRMAN & CEO: This is a model for not just
telecommunications and first responder networks, here is a model as I said
that`s going to attract a lot of private investment. This is a model that
can work for air traffic control. It can work for airports, and roads, and
bridges. It seems like a logical model to apply, if you want to really get
infrastructure investment moving in this country.

(END VIDEO CLIP)

HERERA: The network build-out is expected to begin later this year.

MATHISEN: Coming up, Bill Gates is the world`s richest person, but he
better not look over his shoulder. We`ll explain.

(MUSIC)

MATHISEN: Emerging markets have been on a tear despite all of the trade
saber-rattling.

Seema Mody here to explain what`s been going on.

And, really, Seema, it has been almost all of the emerging markets have
been doing quite well.

SEEMA MODY, NIGHTLY BUSINESS REPORT CORRESPONDENT: That is exactly right,
Tyler, markets in Asia, Argentina, sort of broader Latin America, China,
too, joining the rally. And what`s very interesting is that Wall Street
was not expecting this out performance from emerging markets because of
this protectionist view from Washington, potentially tougher stance on
trade, of course, these type of policies would impact emerging markets and
emerging markets and their economies.

But what we`ve seen is the exact opposite over the past couple of weeks, a
softer stance on protectionism, a weaker dollar, which is also very
beneficial to these emerging market nations that are sitting on a high
level of dollar denominated debt. So, when you have a weaker dollar, that,
of course, makes that debt easier to compensate for.

HERERA: We`ve also had a number of analysts on this program say that
they`re a little nervous the U.S. market is getting a little frothy. And
so, they`re deploying their cash into the emerging markets, almost as a
hedge against the U.S. markets.

MODY: Yes, that`s exactly right. Evaluation is a big story as well. In
fact, the recent global fund manager survey that came out of Bank of
America Merrill Lynch this morning shows that valuations in the U.S.,
highest level since 2000. So that, in itself, is driving investors to look
overseas for opportunities, not just in emerging markets, I should say. I
mean, Europe as well —

HERERA: Europe.

MODY: — has been doing quite well.

And, of course, the economic story there has been a big catalyst for
equities in Europe, the ECB finally potentially looking at stealing back on
quantitative easing. So, those two factors helping European stocks.

(CROSSTALK)

MATHISEN: We`ve had to wait a while for emerging markets to come online
here.

MODY: We have.

MATHISEN: It`s been a while. And they were hurt, of course, because of
them are commodity-based, right?

MODY: Exactly. Especially when you look at Latin America. They`re so
relying on oil and coal.

HERERA: Right.

MODY: And these commodities are finally coming back because China is
playing a pivotal role there with their reforms. So, that resurgence in
commodity prices helping Latin-American economies. And, of course, the big
question is, is if it can continue?

HERERA: Right. You know, you mentioned Europe, Seema, and one of the
hiccups, potentially, that we`re hearing about is, you know, Article 50,
which triggers the U.K. starting its negotiations to leave the European
Union. That two-year timetable is now under way.

MODY: Right.

HERERA: What is the possibility that that can create some jitters, because
other countries are talking about leaving the E.U.? Scotland wants to stay
in it.

MODY: Right.

MATHISEN: They leave Great Britain. Leave the U.K.

HERERA: Right, exactly.

There`s just a lot of cross-currents going on, on those particular topics.

MODY: It`s political uncertainty that will likely be a cloud that sits
over the U.K. for the next two years, to your point, Sue, and that, of
course, is keeping a lot of investors on edge, are just simply saying,
we`re going to put that to the side and wait for a final confirmation on
how this Brexit deal actually plays out, and then we`ll figure out how to
put our money to work in that country.

But, of course, the pound, just such a great example of the type of
weakness, that economists are projecting in the U.K., the pound now at 123
(ph). It`s a five-year low. So, that, of course, tells the story.

And, of course, that populist threat will be something that we`ll be
watching, not just in the U.K., but across Europe, with France and Germany,
pivotal elections there.

MATHISEN: Well done. Seema, thanks.

MODY: Thank you.

MATHISEN: Seema Mody.

HERERA: Thanks, Seema.

Well, senators voted to eliminate and Obama era requirement — retirement
regulation I should say. That move rolls back a rule that allowed states
to create retirement accounts for private sector workers, whose employers
do not offer their own plans. The measure passed by a 50-49 vote.

Republicans say it was an example of federal overreach. Democrats say
states need flexibility to help workers save for retirement.

MATHISEN: North Carolina`s governor signed the repeal of that
controversial so-called Bathroom Bill, which restricted the ability of
transgender people to use the restroom corresponding to therapy gender
identity. The bill sparked a big financial backlash. Companies pulled
expansion plans, sporting events have been moved, concerts cancelled. “The
Associated Press” recently said the law could cost North Carolina nearly $4
billion.

HERERA: Move over, Warren Buffett. Amazon`s founder and CEO, Jeff Bezos,
is now the second richest person in the world, thanks to a rapidly rising
stock price. So, what might it take him to move to the top spot?

Robert Frank takes a look.

(BEGIN VIDEOTAPE)

ROBERT FRANK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, Bill Gates
better watch his back. Jeff Bezos is on his way to becoming the richest
man in the world.

Amazon CEO just passed Warren Buffett to be number two on the world`s rich
list. The surge in Amazon stock price over the past week has added $2.5
billion to Bezos` misfortune. That makes him $700 million richer than
Buffett.

So, here`s how they all stack up. Gates has $86 billion. Bezos with $76
billion. Buffett at $75 billion. These numbers according to Bloomberg
billionaire`s index.

Now, in the past year alone, Bezos has added $22 billion to his fortune.
That worked out to $66 million a day or $42,000 per minute.

It`s been a bit of a long rides for Bezos to get here. He made his debut
in 1998 after Amazon`s IPO with a net worth of only $1.6 billion. By 2013,
his net worth was $27 billion.

All right. So what would it take for Bezos to be number one in the world?
Well, assuming that Microsoft stock remains constant, Amazon stock would
have to increase 13 percent for Bezos to top Gates` $86 billion. Now, Bill
Gates has held the title of the richest man for 18 of the last 23 years.

For NIGHTLY BUSINESS REPORT, I`m Robert Frank.

(END VIDEOTAPE)

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

MATHISEN: I don`t get paid $42,000 a minute.

I`m Tyler Mathisen. Have a great evening, everybody. We`ll see you
tomorrow.

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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