Transcript: Nightly Business Report – May 31, 2017

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

helped lift the NASDAQ in May, recording its seventh straight monthly gain.
But what might happen in the weeks and months ahead?

Health care battleground. Lawmakers are back in their districts, and the
debate over Medicaid expansion is playing out far from the capital.

Rise of the machines. Well, not so fast. Why some say robots will not
steal jobs and that they may in fact create them.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Wednesday,
May 31st.

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

The month of May is in the books. And what a month it was. Earnings
results were upbeat. The global economy steadied. And volatility was
subdued, except for a slide mid-month driven by political turbulence out of

As investors look for growth, they plowed money into the NASDAQ which saw
gains more than double that of the Dow and the S&P 500. But, today, stocks
closed lower, pressured by financials and energy shares.

The Dow dropped 20 points to 21,008, the NASDAQ was off four and S&P 500
fell one. The decline in energy shares trapped the price of crude, which
touched a three-week low to settle below $50 a barrel.

So, tonight, it`s time for a new segment we`re going to debut. It`s called
“Investors Edge.” We`ll help you see what the pros see by highlighting the
information they use so you can make investment decisions like the pros.

Here to help us do that, we`re joined by Jon Najarian, founder of the
Najarian Family Office.

Welcome, Jon.


HERERA: Great to have you with us.

NAJARIAN: Thank you.

HERERA: This basically is a way for the long term investor to see what the
big guys on the street are doing and where they`re moving their money,

NAJARIAN: True, because what we do, Sue, is we follow institutional
trading and hedge funds. And by that I mean trades of usually $10 million
or more, which is usually bigger than most of the rest of us are making
trades —

HERERA: We aspire to do that.

NAJARIAN: Exactly. And if you follow these guys, maybe you will, because
a lot of the bets that they`re making are basically bets based on what has
the best upside potential from that particular point.

HERERA: So you follow the money —

NAJARIAN: Yes, we`re following the fast money.

HERERA: — in the simplest form, you`re following the fast money.

NAJARIAN: Exactly right.

HERERA: So, where is that money going at this juncture? Because May is in
the books and we`re looking at the summer.

NAJARIAN: Well, and you just led in with, crude oil is down for the month,
and had I think three weeks of declines within the month, breakdown $50 a
barrel. The crude oil stocks, the stocks that make money from crude oil
being higher were getting hit much harder than the commodity itself. So,
we think a lot of the fast money right now is betting on a rebound.

I know Tom Lee has made a similar call. And it`s a little bit of an
outlier but that`s where the really big institutional money, Sue, is going
right now, into big stocks like ExxonMobil (NYSE:XOM), which I do not own,
but into that group, as well as the fracking stocks, fracking stocks were
down even harder than the big stocks this month, and they`re betting on a

HERERA: You say they`re also looking at the steel sector, which is much
smaller than energy. So, your choices as an individual investor are
somewhat more limited.

NAJARIAN: Yes, and these two, I own both of these, U.S. Steel and AK
Steel. U.S. Steel is symbol X, AK Steel is AKS. And both of these have
been seeing some decent money flow after a big selloff.

I mean, they were betting on the infrastructure spending that President
Trump talked about. It didn`t happen. They came all the way back down to
where they were before the election. And now, people are betting maybe
something happens in the second half of the year, and they want to get in
for the last month of the second quarter.

HERERA: So, as we say, this is to give the investor an edge. But do you
then follow those fund flows or that money flow? And how quickly do you
usually change? I mean, because those are big money trades.


HERERA: They tend to trade more often than the individual investor.

NAJARIAN: Exactly. We try to parse through, sue, the very short term
trades. In other words, derivative trades, options that are out there.
Just two or three weeks into the future, that`s not a long term trade, but
the options that are out there in September and December, which we`re
seeing now in bigger and bigger numbers in both energy and steel stocks,
those are the ones we`re following.

So, I think you can, you know, sort of follow the fast money without
risking quite as much as they had to buy coat tailing on them.

HERERA: All right. Jon, great to see you, thanks so much for joining us.

NAJARIAN: Thank you, Sue.

HERERA: Jon Najarian with us tonight.

Well, a weak report on housing pressured the market today as well. And
that`s because prospective buyers are being hurt by a one-two punch — low
inventory and rising prices. Pending home sales, which are homes that are
under contract but not yet closed, fell for the second straight month in
April during what should be the strong spring selling season.

Diana Olick has more.


if you can`t find a house for sale. That`s the problem plaguing the
housing market this spring. The number of buyers signing contracts to buy
in April fell 1.3 percent. Some were expecting a slight gain. These so-
called pending home sales which close in a few months are now down over 3
percent compared to a year ago, according to the National Association of

The trouble is, too little for sale just as demand is growing. More
listings came on the market in April. But supply is still down 9 percent
from a year ago. Realtors say they do not expect the situation to improve
much this summer as homebuilders are still operating well below historical

The hotter months are unlikely to cool demand, which is why home prices
continue to sizzle.



HERERA: The Federal Reserve says the economy grew in April through late
May with most regions describing growth as moderate to modest. In the
central bank`s latest survey of economic conditions, the labor market is
being characterized as tight, with companies citing worker shortages across
a range of occupations. The Fed also said that wages are rising, but that
inflation was little changed from its previous reports.

President Trump has not yet made a final decision on whether to withdraw
from an international pact aimed at slowing climate change. The president,
who met with his EPA chief today, is expected to make a decision soon. But
some reports say he`s leaning towards withdrawing from the so-called Paris
accord. And that pressured shares of both solar stocks and also coal

The solar industry says it expects to thrive no matter what the decision.
But some coal companies are concerned that an exit could lead to a global
backlash against that industry. Meantime, big business is urging the
president to stick with that agreement. Those companies include Chevron
(NYSE:CVX), Exxon, ExxonMobil (NYSE:XOM), I should say, Walmart, Microsoft
(NASDAQ:MSFT), Apple (NASDAQ:AAPL), and Nike (NYSE:NKE), among others.

As we mentioned earlier, oil prices today touched a three-week low as
rising Libyan production fueled concern that the OPEC-led output cuts are
being undermined. But the dynamics in the oil industry could change.
Venezuela, one of the largest oil producers, is in economic crisis in large
part because of the drop in prices of oil over the past couple of years.

Jackie DeAngelis explains why the energy market is watching Venezuela so


economy has been teetering on economic collapse with widespread shortages
of just about everything, including food and medicine. So, lower oil
prices could be catastrophic for the country, that`s because Venezuela sits
on more oil reserves than Saudi Arabia, roughly 300 billion barrels.

And production is little more than 2 billion barrels a day, accounting for
about 95 percent of the country`s export revenues. Oil money is Maduro`s

But with oil revenues down and unrest on the streets, the government has
less money to invest in the upkeep of its oil fields and refineries and
less to invest in new technology and projects.

get a handle on the turmoil, we`re simply going to see this — they`ll have
an inability, utter inability to produce almost any oil. Given that it`s
95 percent of their export revenues, that`s a horrible recipe for the

DEANGELIS: The situation is teetering and analysts expect that it could
worsen quickly. Some suspect a mass exodus of oil field services that
could cause production problems. Some models calling for scenarios where a
million barrels per day are lost rapidly.

Meantime, what happens in Venezuela isn`t contained there. These events
could also impact the overall oil market. A loss of a million or possibly
2 million barrels a day could be a black swan event that spikes prices
globally just as they settle around $50.

NATIONS: We`ve seen crude oil has come back into a trading range, about
$45 on the bottom, $52 on the top. Absent some sort of catalyst, I would
expect it to stay in that range through the end of the summer.

DEANGELIS: A drop in Venezuela`s production plus OPEC`s recent cuts would
be enough to burn through some of the global glut. The worst case scenario
may not pan out, and if it does, it may not be tomorrow, but it`s
definitely rising on the radar. At the same time, if a regime change
occurred, many anticipate re-investment in the oil industry to ramp quickly



HERERA: Still ahead, unclear prognosis. Why a cabdriver in Little Rock is
watching Washington closely.


HERERA: New York City is the latest metropolitan area to cut ties with
Wells Fargo (NYSE:WFC). The mayor and the comptroller say that they will
vote to bar agencies from renewing or expanding contracts with the bank.
They will also support the move to end Wells Fargo`s role in managing bond
sales. New York City is one of the largest bond issuers in the country.
The decision is in response to the bank`s fake account scandal.

Ohio`s attorney general sued five drug companies today. The office is
accusing them of misrepresenting the risks of prescription opioid
painkillers. The companies are also being accused of committing Medicaid
fraud. This is the second suit of its kind brought by a state, after

The five companies being sued are units of Purdue Pharma, Johnson & Johnson
(NYSE:JNJ), Endo Health Solutions, Teva Pharmaceuticals and Allergan

In response, Purdue said it shares the attorney general`s concerns about
the opioid crisis. Johnson & Johnson (NYSE:JNJ) called those allegations

The maker of EpiPens may have overcharged the government more than a
billion dollars for EpiPens. The Department of Health and Human Services
said that between 2006 and 2016, the U.S. government may have overpaid
Mylan (NASDAQ:MYL). That dollar amount is nearly three times a proposed
settlement that the company announced in October. Mylan (NASDAQ:MYL) says
the company continues to work with the government to finalize that

North Carolina`s largest health insurer may increase rates by more than 20
percent for the second year in a row. The hike is tied to uncertainty over
subsidies for low income enrollees.


situation. And we simply need to know what the rules of the game are going
to be for 2018 in order to hit affordability as well as stability.


HERERA: If those cost sharing subsidies are funded next year, Blue Cross
of North Carolina says it will still need to raise rates but by only about
8.5 percent, not 20 percent.

Lawmakers are back in their districts this week. But as Senate Republicans
work on their version of the health care bill, there`s one issue that looms
large. What will happen to the expanded Medicaid program for low income

And as Kayla Tausche reports, that debate is playing out in Little Rock,


drives a cab for a living, but struggled to pay for health care as his
asthma worsened and the cost of his medication got higher.

anywhere from $400 to $600 a month.

TAUSCHE: Coleman is one of 330,000 Arkansans whose incomes made them newly
eligible under the state`s expanded Medicaid program.

COLEMAN: Actually, I`d had been born to believe that you work for what you
get. And whatever it is that I get, I want to earn it. But this is
something that is beyond probably my means.

TAUSCHE: Governor Asa Hutchison says the popularity has made the program
too costly to maintain.

GOV. ASA HUTCHISON (R), ARKANSAS: We estimated 250,000 that would go on
the expansion. And that soared to 330,000.

TAUSCHE: This month, the state moved to pare it back, adjusting the
qualifying income levels to reduce enrollment by 60,000 people.

HUTCHISON: We`re curtailing those numbers as a cost saving measure. And
it`s not an easy thing to do.

I think we`ve laid the groundwork here for reform in Arkansas that will be
sustainable over the long term under the status quo.

TAUSCHE: For Arkansas hospitals, the status quo works. Here at the
University of Arkansas for Medical Sciences, the number of uninsured
patients fell 80 percent. The clinic turned a profit and hired more than a
thousand people. What`s more, the state as a whole saw no hospital
closures. But with looming cuts to these health care programs, Dr. Dan
Rahn says that stability and growth is at risk.

about long term capital investments. No community can experience economic
development in the future if it does not have sufficient health care
resources in that community.

TAUSCHE: Medicaid expansion is dividing Senate Republicans as they draft a
new bill, pitting lawmakers from states like Arkansas that expanded
coverage against those who didn`t.

President Trump tweeting today: Republican senators, whom he called good
people, should pass their proposal quickly.

Arkansas is trying to make its program last either way.

For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche, Little Rock, Arkansas.


HERERA: Michael Kors is tightening the purse strings as sales fall. And
that`s where we begin tonight`s “Market Focus”.

The handbag retailer missed same store expectations, saying its product
offerings didn`t appeal enough to consumers. The company posted a loss and
saw overall revenue fall, but those results still beat expectations.
Michael Kors plans to shutter as many as 125 stores over the next two years
as it focuses on improving profitability. Shares fell more than 8 percent
to $33.18.

Shares of molecular diagnostics company Exact Sciences surged after news
last night that UnitedHealth Group (NYSE:UNH) will cover the company`s
colon cancer screening kit. UnitedHealthcare said patients between 50 and
75 will be allowed to use the test once every three years. Exact Sciences
shares popped 11 percent to $36.47.

After the bell, cybersecurity company Palo Alto Networks (NASDAQ:PANW)
reported revenue that grew thanks to more customers. Those results came in
ahead of expectations. The company also saw profit come in above estimates
and it gave strong guidance for the quarter. Shares initially surged after
hours and also ended the regular session up 1 percent to $118.59.

The Federal Aviation Administration accused United Airlines of flying a
plane it says wasn`t air-worthy. The FAA is proposing to fine united
nearly half a million dollars for failing to inspect a newly installed fuel
pump switch back in 2014, and then allowing the plane to make 23 flights
before inspection. United says it`s working closely with the FAA. United
shares were up a fraction to $79.67.

Coming up, think a robot is going to take your job? Well, you might want
to think again.


HERERA: Whirlpool (NYSE:WHR) is renewing allegations that its South Korean
rivals illegally undercut prices on washing machines. The company said it
plans to make a filing with the International Trade Commission against
Samsung and LG Electronics. The issue has been simmering for a while. If
the Trade Commission decides in Whirlpool`s favor, it could recommend that
the White House step in and put tariffs on the rivals` products.

JetBlue may soon start to scan your face. The airline is testing facial
recognition software in an effort to streamline the boarding process.
Passengers will step up to a camera, and the kiosk will compare the facial
scan to the passport photos in the U.S. customs database. The system will
start next month for flights from Boston to Aruba.

And innovations in technology is all the talk now at the annual invitation
only code conference. It was created to bring together some of the biggest
names in business to discuss the future impact of digital technologies.

Julia Boorstin talked with the head of Netflix (NASDAQ:NFLX) about his
business and where the industry is headed.


(NASDAQ:NFLX) has grown to over 100 million subscribers around the world.
But it faces more competition than ever, as Amazon (NASDAQ:AMZN) and Hulu
invest in original content and YouTube and others launch streaming

Of all these rivals, Reed Hastings tells me he`s scared of Amazon

REED HASTINGS, NETFLIX CEO: They`re so scary. Everything Amazon
(NASDAQ:AMZN) does is so amazing. I mean, how are they doing so many
business areas so well? It`s like they`re trying to repeal the basic laws
of business of limited capability. So, we`re continuing to watch them and
be impressed with them. And they`re helping to grow the industry because
they`re investing in the content.

BOORSTIN: While Hastings says he`s scared of Amazon (NASDAQ:AMZN), he
tells us he`s not going to try to out-Amazon (NASDAQ:AMZN) Amazon
(NASDAQ:AMZN). He won`t buy sports rights just because Amazon
(NASDAQ:AMZN) is investing in NFL games.

There are a number of media giants here talking about how they`ll compete
and reach consumers in the crowded digital age, including the editor of
“The New York Times (NYSE:NYT)” and the CEO of Time Warner (NYSE:TWX). But
Hastings tells us he`s focused on growing Netflix`s library and continuing
its global expansion.

HASTINGS: We`ve done awfully well in Latin American, in Europe, and, of
course, in North America. So, we`ve learned some things. But we have a
lot of room to grow in Asia and a lot to figure out still.

BOORSTIN: What about China? You`re licensed in China, but are you still
trying to launch there or is that off the table?

HASTINGS: I think that`s off the table for the next couple of years.

BOORSTIN: And Hastings says that Netflix`s success is not at the expense
of the traditional television business.

HASTINGS: Very few people have cut the cord. We`re about 50 million
people in the U.S. and we`ve seen maybe 2 million or 3 million of 50
million cut the cord. So, don`t think of it as a big overlap. We`re
driving cord cutting, that`s probably mostly from pricing.

And in general, if you look at cord cutting, it`s like 2 or 3 percent per
year, like broadcast ratings over the last 30 years. So, it will be a very
long, slow, secular decline, no big calamity. And then they`ll adjust the

BOORSTIN: Whether it`s “The New York Times (NYSE:NYT)” embracing Twitter
or Netflix (NASDAQ:NFLX) bringing its movies to theaters, old and new media
giants are here in Southern (NYSE:SO) California debating the best way to
connect with billions of consumers.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Rancho Palos Verdes,


HERERA: And speaking of the code conference, venture capitalist Marc
Andreessen says robots are not stealing jobs. That, of course, is contrary
to what some are predicting will happen more and more in the labor market.
He used concerns over self-driving vehicles as an example, arguing that
this new industry will create many sub-industries and, also, therefore


MARC ANDREESSEN, ENTREPRENEUR: It`s a recurrent panic that happens every
25, 50 years, people are all amped up that machines are going to take all
the jobs and it never happens. The jobs that were created by the
automobile and the second, third, and fourth order effects were 100X, and
1,000X the number of jobs that blacksmith has had.

So, this goes to kind of the fundamental kind of flaw in the logic, that
they call the lump of labor fallacy, which is technological change causes
productivity growth. Productivity growth lets us produce more of what we
already make with less resources. And then lets us create — that`s what
frees up the spending power to create lots of new things, create lots of
new demand. And that`s what creates new industries and that`s what creates
new jobs.

And then 100 years later, we look back on it and we`re like, I can`t
believe anybody was ever a blacksmith.


HERERA: Well, we have two guests now with opposing views on whether or not
robots are stealing jobs or will steal them in the future. Amol Sarva is
professor at Columbia University. He says robots are not stealing job.
Wendell Wallach believes that they are and that it could get much worse in
the next few decades. He`s a scholar with Yale University`s
Interdisciplinary Center for Bioethics.

Welcome, gentlemen. Nice to have you here.

Wendell, I`m going to start with you because we`ve kind of set the segment
up with that comment from Mr. Andreessen. You obviously would not agree
with what he says, but it`s an interesting theory, is it not?

but it`s a backwardly-looking theory and it really doesn`t look at the
kinds of technologies that are coming online now. I would argue, actually,
that automation is already putting downward pressure on wage growth and job
growth. We see that. Technology, yes, contributes to productivity, but
it`s a slow, anemic contribution. And real wages for goods-producing
workers have been flat for almost 50 years now.

HERERA: Amol, what about that? There`s no doubt that we`re seeing
innovations in technology, the 3D printers that are now creating all sorts
of different things that humans used to have to work on. Why do you argue
that robots are not going to take jobs?

talking about the impact over the last hundred years, it is a story of
change. I mean, none of us tries to be a train engineer or a blacksmith
anymore. There`s been massive change.

And actually, millions and millions of jobs have been created driving those
cars that got invented, or airplanes, or mechanics or designers, or
builders for all those sorts of things. And we`re in the midst of
inventing all these platforms now. Those are the millions of jobs of the

HERERA: You know, Wendell, is it as simple as certain industries may be
more vulnerable to others? To Amol`s point, new technologies create sub-
industries that create jobs.

WALLACH: For sure.

HERERA: But there are other industries where that is not happening.

WALLACH: Exactly. I mean, consider now that you have 3.5 million truck
drivers in the United States. Self-driving trucks are going to appear on
U.S. highways long before self-driving taxis appear in U.S. cities.

So, what are those truckers going to do when they lose their jobs to trucks
that have been told to be self-driving?

So, I think sometimes we miss the point that the jobs that are being
created are not the same as the jobs that are being lost. And you can`t
always move the same people in the workforce from one segment to another.

HERERA: You know, Amol, to that very issue, we`ve talked a lot about the
fact that if indeed robots do start to displace, not necessarily replace,
but displace some workers, one of the issues is the lack of retraining for
those new sub-industry jobs that may be created.

SARVA: It is a point that`s often made and I think it`s a point that`s
often overlooked exactly on this, which is we don`t have enough people. We
don`t have enough people in America to keep on growing and doing all the
great things we did for the last hundred years in this country.

If you look at 2070, where we want to be 50 years in the future compared to
1970, let`s say, about 50 years ago, for our country to expand and grow and
make lives better so our children are living better, we`ll need two to
three times as many people in the labor force as we have now. We`re a
country that`s actually shrinking its labor force in the long run due to
aging. The same technology that`s been making infant mortality disappear
and extending people`s lives is taking people relatively speaking,
proportionately out of the workforce.

We`ll have relatively fewer workers in 2050 or 2070 than we have older
people that need to be supported and younger people that are alive. And
technology is the only thing we can turn to, to try to boost our
productivity and make people more effective to grow just this economy. All
these things we need to do and yes, displacement. I know displacement is
going to be painful.

HERERA: Very interesting point.

Wendell, what do you think about that? We don`t have enough people at this

WALLACH: Well, I think that`s not quite true. I think there`s a large
segment of the workforce that does not have jobs right now. That`s
projecting that we`re going to stay on the same course that we were in the

But the important thing to note, and let`s be clear from the outset, both
sides cherry pick their statistics here, the important thing to note is
there`s a decoupling between productivity growth and wage and job growth.
So, productivity growth continues where the other two have stayed
relatively flat. So, that`s an important thing to keep in mind when we`re
talking about the creation of new jobs, particularly when we`re going to
see the disappearance of jobs from technicians that read X-rays, from
paralegals that do searches on who owns various properties.

HERERA: Gentlemen, thank you so much. We appreciate it.

Amol Sarva with Columbia University, Wendell Wallach with Yale University.

SARVA: Thank you.

HERERA: And that does it for NIGHTLY BUSINESS REPORT. I`m Sue Herera.
Thanks for watching. We`ll see you tomorrow.


Nightly Business Report transcripts and video are available on-line post
broadcast at The program is transcribed by ASC Services II
Media, 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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