Transcript: Nightly Business Report – June 7, 2017

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

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Holding pattern. It`s the
eve of two big events: testimony from former FBI director, and the British
elections. And investors still face a number of unanswered questions.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: On the waterfront. The
president wants to fix our water-based infrastructure. But who ultimately
pays for public/private partnerships?

GRIFFETH: Price of admission. What would it cost to make college
affordable for everyone? The price tag might surprise you.

We have those stories and more tonight on NIGHTLY BUSINESS REPORT for this
Wednesday, June the 7th.

Good evening again, everyone, welcome. I`m Bill Griffeth, in tonight for
Tyler Mathisen.

HERERA: And I`m Sue Herera.

You could call it perhaps a sigh of relief, at least for now. The stock
market, which traded in a narrow range ahead of former FBI Director James
Comey`s testimony, rose slightly today when his prepared remarks were
released and there appeared to be no smoking gun, though more could come
out during the full hearing tomorrow.

Mr. Comey recalled a number of meetings and conversations and one where the
president said he needs and wants loyalty. His testimony was detailed but
it was interpreted by the market at least today as being less damaging than
perhaps originally feared.

So, when all was said and done, the Dow Jones Industrial average added 37
points to 21,173. The NASDAQ was up 22 and S&P 500 gained three.

Capping the gains, though, was an unexpected rise in crude inventories,
which sent the price of oil tumbling, resulting in its worst one-day
performance in three months.

GRIFFETH: Investors are also looking ahead to tomorrow`s general election
in the United Kingdom. The outcome could impact the economy, trade and the
country`s exit from the European Union.

Wilfred Frost is in London for us tonight.

(BEGIN VIDEOTAPE)

WILFRED FROST, NIGHTLY BUSINESS REPORT CORRESPONDENT: The U.K. goes to the
polls in a crucial vote in a matter of hours. And inside the pubs of
London, it`s the talk of the after-work crowd.

UNIDENTIFIED MALE: I`m probably going to vote conservative, mainly because
I don`t trust Corbyn.

FROST: Indeed, that is how Theresa May hoped the election would play out.
Back in April when she called the snap poll, she had a nearly 20-point
lead. But a widely criticized campaign has seen that lead shrink.

UNIDENTIFIED MALE: I`ll be honest with you, I`ve changed my mind. I mean,
I`m kind of siding now more to the labor vote.

UNIDENTIFIED MALE: I think I`d enjoy Jeremy Corbyn being prime minister.
I think that would stir things up, it would be a new approach.

FROST: That said, according to the latest average of polls by “The
Financial Times,” Theresa May still has a six-point lead and in the last
day or so, her slide has stopped, in part because of the recent terror
attacks.

So, overall, where do we stand overall?

SIR MARTIN SORRELL: Most people are looking I think for a 50, 60-seat
majority for the conservative party. And that`s I think generally where
people are settling in.

FROST: That would mark a victory after all for Theresa May and a result
that Sir Martin Sorrell framed as positive for business.

For NIGHTLY BUSINESS REPORT, I`m Wilfred Frost, London.

(END VIDEOTAPE)

HERERA: The global outlook is improving, everywhere that is, except here
in the U.S. That`s according to a new report from the Organization for
Economic Cooperation and Development. The group is calling for the fastest
global growth in about six years. But the organization downgraded its
estimates for the U.S., citing delays in Washington`s plans to push ahead
with fiscal policy proposals like tax cuts and infrastructure spending.

GRIFFETH: Well, improving the nation`s infrastructure was the message that
the president took to Ohio today. His focus was on the nation`s waterways
and the critical role that they play in our economy.

Morgan Brennan has more for us.

(BEGIN VIDEOTAPE)

MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: In Cincinnati,
President Trump talked levies, dams, locks and ports, from the Ohio River,
the latest focus of his infrastructure week.

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Up to 25 percent of the
nation`s energy cargo relies on these channels and the refineries along
their shores. But these critical corridors of commerce depend on a
dilapidated system of locks and dams that is more than half a century old.
And their condition, as you know better than anybody, is in very, very bad
shape.

BRENNAN: The inland waterways, nicknamed America`s Water Highway,
compromised 12,000 miles of freight network used by tugboats and barges to
ship commodities like steel, coal, and grain. They`re in such bad shape
because of many of the locks and dams were built during the Great
Depression. That means more maintenance and gridlock, with nearly half of
all commercial vessels experiencing delays.

To fix this, Congress has authorized 24 projects. But only four have begun
so far. And it will take nearly $9 billion to fund the rest. The
Waterways Council, an infrastructure advocacy group, said the river network
says currently, it will take more than two decades to fund, unless the
president can deliver on his plan.

MIKE TOOHEY, WATERWAYS COUNCIL PRESIDENT & CEO: We are very excited about
the president`s proposal to build these projects over the next ten years
rather than the current 20 to 25 years. It will take, with the current
public/private partnership.

BRENNAN: But the devil is in the details. Commercial operators already
pay a fuel tax matched by the government. Trump`s current budget proposal
would double that. And there`s also been talk of implementing a toll
system. The council and those who use the waterways warn that could push
up a cost and dampen demand, further denting an industrial sector that`s
already been struggling in recent years.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan.

(END VIDEOTAPE)

HERERA: So, fixing the nation`s crumbling infrastructure is a major focus
for the White House. And according to “The New York Times (NYSE:NYT),” the
administration is promoting the benefits of having local governments work
with private corporations to fix our ailing roads, bridges, and airports.

Matthew Goldstein wrote about it for the paper and he joins us now.

Welcome, Matt. Nice to have you here.

MATTHEW GOLDSTEIN, NEW YORK TIMES BUSINESS REPORTER: Good afternoon.

HERERA: You know, on the surface, it sounds kind of like the perfect
solution to aging infrastructure. But there`s more to it than that, right?

GOLDSTEIN: Yes. I mean, there are these public/private partnerships that
they call P3s which have gone around the country. In just the New York
area, the Goethals Bridge is being built with one. But there`s just a
limited track record. In the U.S., some have worked and some haven`t.
It`s a very mixed bag at this point in time.

GRIFFETH: I always thought the point of municipal bonds, that was the
whole point of that was for, you know, municipalities to raise funds for
infrastructure, and especially now with historic low interest rates, it
would seem more attractive. But is the attraction of public/private
partnerships that it speeds up the process? Is that how that works?

GOLDSTEIN: Well, that`s in part the theory, that you cut out a lot of the
red tape because you`re outsourcing a lot of it to a private company to
oversee it, and they can move quicker on contracting type of situations.
But again, it doesn`t always work.

One of the things my colleague and I, Patty Cohen, we reported on was when
the deals in KentuckyWired, they`re trying to bring broadband, high speed
broadband throughout Kentucky, and they brought in Macquarie, you know, big
investment bank out of Australia to oversee the project. And that project,
at least about a year or so going behind schedule right now for a variety
of reasons.

So again, sometimes these things work, and they don`t work out as well as
planned. And, you know, Europe has a much better track record with this.
Part of that is because as you said, they don`t have a vibrant municipal
bond market as we have, which has been the main way to sort of do the
financing for this.

HERERA: So, the bottom line is the fees basically have to come from
somewhere. Even if you have a public/private partnership, consumers may
still end up paying, either through tolls or parking or something along
those lines. They pay either way.

GOLDSTEIN: Right. There are going to tolls on it because eventually the
money has to be paid back some way. I mean, some of the equity will come
in from the corporations. But the tolls are going to go up.

The Indiana toll road, which is a very famous example, where the state got
a big up-front payment of $3.8 billion. But now, it actually ended up
going bankrupt, the initial partners in that. But the tolls have just
recently gone up, they`re doubling now because the state had subsidized
them. And now, to pay back the new operators of it, they`ve been able to
increase the polls by double.

And obviously, that just happened a few days ago. So, I`m sure that will
have some impact, obviously, on motorists there and will remain — I`m sure
it`s going to be a big jolt for a lot of them.

GRIFFETH: Before we let you go, quickly, besides the president, you know,
pounding his bully pulpit to encourage these kinds of partnerships, are
there other incentives that can be provided to get private companies to
participate with municipalities on certain infrastructure programs?

GOLDSTEIN: You know, it`s not totally clear, because a lot of the
proposals are not really laid out, exactly how they`re going to work. I
mean, already, you`ve seen, obviously, BlackStone is gearing up.

GRIFFETH: Right.

GOLDSTEIN: They`re raising a $40 billion fund. Lloyd Blankfein tweeting
yesterday, that clearly Goldman wants to get in on this.

There`s obviously a lot of interest. But, you know, I talked, this didn`t
get to our story, but I talked to one money manager I know, and they
recommend to a lot of high worth investors, they actually don`t go into a
lot of these infrastructure funds because they don`t think the returns are
often as good as they seem.

In, often, a lot of cases, these projects don`t end up panning out and
getting funded. So, I don`t know. I think it can be a solution. I don`t
think it can be the full solution.

HERERA: Right.

GOLDSTEIN: We do have a major infrastructure problem, obviously.

HERERA: Yes, and the devil is in the details.

GOLDSTEIN: Yes.

HERERA: Matthew, thank you very much.

GOLDSTEIN: Thanks.

HERERA: Matthew Goldstein with “The New York Times (NYSE:NYT).”

GRIFFETH: In Kansas, by the way, the legislature voted to raise tax rates,
essentially putting an end to a series of cuts there. Republican lawmakers
broke ranks with the governor and overrode t bill to increase taxes. As we
reported, Kansas overhauled the state`s tax system back in 2012, and it was
billed as a real live experiment in conservative governance. But the
economic recovery from those tax cuts never materialized, and the state
found itself unable to balance its budget and fund its public schools.

HERERA: Still ahead, how much would it cost to make college affordable? A
new study has the answer.

(MUSIC)

GRIFFETH: After numerous reports earlier this year suggested that auto
dealers and lenders were writing too many loans to those with spotty credit
records, a new report now paints a different picture. In fact, lenders hit
the brakes on the number of subprime auto loans that they issued in the
first quarter, sending them to a near ten-year low.

Phil LeBeau has more on the changing dynamics of who is buying a car and a
truck right now.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: With auto sales
starting to slow down, there is a greater focus on who`s buying cars and
trucks right now, and can they afford the loans they`re taking out. Over
the last two years, more borrowers with the poorest credit records have
been unable to make payments. And they`ve been defaulting on their loans.

Perhaps that`s why lenders have hit the brakes on subprime loans. They
plunged in the first quarter while lenders did more business with those who
have the best credit ratings.

MELINDA ZABRITSKI, EXPERIAN: We`ve been hearing just here and there, over
the last year, year and a half, various lenders coming out and saying that
they were really going to restrict subprime. And as those lenders came out
and made those statements, it seemed to trickle down into other lenders in
the industry. And others seemed to follow suit.

LEBEAU: Tighter credit in the showrooms comes as automakers are adjusting
their production schedules and the supply of vehicles rolling into
dealerships. While inventory levels are slightly higher than normal, this
is an industry showing greater discipline than it has in the past.

And that`s changing how aggressive dealers can be when it comes to writing
loans, especially since 25 percent of all auto loans are to subprime
borrowers.

But make no mistake: dealers are still trying to come up with payments the
customer can afford. Increasingly, that means extending how long it takes
to repay the loan so the monthly payment is as low as possible.

ZABRITSKI: On both new and used cars, we see the most common loan term is
72 months. But the percentage of loans, both new and used that are
financed between 73 and 84 months continues to grow.

LEBEAU: Right now, the average monthly payment for a new vehicle is $508,
according to Experian. For used vehicles, it`s $363. Both are slightly
lower than what subprime borrowers pay each month.

But for everyone, the monthly payment keeps moving higher, because the cost
of cars and trucks, new and used, continues to rise.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

GRIFFETH: And to read more about auto loans and the car market right now,
head to our website at NBR.com.

HERERA: And from auto loans to home loans. Mortgage rates dropped last
week to their lowest level since the presidential election. That caused a
mini rush on lenders, not just for traditional 30-year fixed loans but also
for adjustable rate loans.

Diana Olick has more from Washington.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Borrowers saw an
opportunity in the mortgage market and jumped right in. Despite all the
talk of rising interest rates, rates have actually been falling lately and
last week dropped even more. The average rate on the popular 30-year fixed
came down to 4.14 percent.

Now, just as a reference point, rates jumped from 3.77 percent to 4.16
percent in the two weeks following the election last November. The drop
last week caused a big rush from potential buyers. Those mortgage
applications jumped 10 percent for the week.

Refinances got a small boost, too, up 3 percent, but they`re far more rate
sensitive and rates were lower for the bulk of last year when so many
people already refi.

Interesting in the numbers, a big jump in those borrowers applying for
adjustable rate loans, up 26 percent from a year ago. ARMs carriers lower
interest rate, so this is a sign that borrowers are really trying to use
every tool available to afford today`s pricey homes. One caveat, these ARM
loans are not the super risky, no-documentation loans of the past. ARMs
are fully underwritten today, with strict credit and debt limits, they are,
of course, riskier than a 30-year fixed.

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

(END VIDEOTAPE)

GRIFFETH: And from home loans to student loans now, a new report out today
from the State Higher Education Executive Officers Association says it
would cost $34 billion to make college financially accessible to all
students.

David Tandberg is principal policy analyst and author of this report. He
joins us now to discuss his approach to college affordability.

David, thanks for joining us tonight.

DAVID TANDBERG, STATE HIGHER EDUCATION EXECUTIVE OFFICERS ASSOCIATION: A
pleasure to be here.

GRIFFETH: Now, as I understand it, affordability is defined as 10 percent
of a person`s income going to pay off a student loan. That`s when it`s
considered affordability. So, this $34 billion, it sounds too good to be
true that it would make college affordable for all students.

How would that work?

TANDBERG: Well, to clarify, we`re focused on lower income individuals.
We`re talking about folks that reach no more than 200 percent of federal
poverty levels. And so, those are the individuals we identify as having a
particularly difficult time paying for college. And so, we costed out what
it would take to bring them within that 10 percent threshold.

HERERA: You also took a look at states and the differing characteristics
of those states, that some of which do allow for basically tuition-free
college. New York has been very aggressive on that front. Other states in
your study were not as effective as providing that.

Why is there such wide disparity from state to state?

TANDBERG: That is — that is a great question. We`re an organization of
chief higher education officers in each of the states. And so, we
recognize and feel it`s important to recognize the diversity of the states.

And so, when it comes to college affordability, these factors are driven by
state economies, demographics, culture, history. And so, in some states,
they have robust need-based financial aid programs, and you highlighted
one, being New Mexico, right? Others haven`t had a strong tradition of
providing financial aid to low income students and may not have mechanisms
to keep tuition low.

And so, we find they`re further off from that affordability threshold.

GRIFFETH: Where would the $34 billion come from?

TANDBERG: That`s a great question. We consider it a federal/state
partnership. And, you know, in some states, they`re a long ways off. And
so, it`s going to take a number of years for them to come up with their
half of that cost.

In other states, they`re much closer. And so, it would only take, say, on
average, nationally, about a 5 percent increase in what states are already
providing. If they did that 5 percent increase over four years,
nationally, we would reach college affordability for those low-income
students. Now, that`s not the case in every state.

GRIFFETH: Right. Well, it is something to think about.

David Tandberg, thank you. He`s with the State Higher Education Executive
Officers Association — thanks for joining us tonight.

TANDBERG: Yes, thank you.

HERERA: The strong dollar gives Brown-Forman a hangover. And that`s where
we begin tonight`s “Market Focus”.

Profit and revenue fell at the spirits company, with both missing analysts`
targets. Brown-Forman said the sale of its Southern (NYSE:SO) Comfort hit
results. Despite the miss, the distiller did note that demand was strong
for Jack Daniels Whiskey. Brown-Forman shares, maybe investors needed some
whiskey today, they were off 3 percent to $50.70.

Sales rose more than expected at home decor retailer At Home, with the
company saying it saw strength across new and existing categories.
Earnings also gains and matched estimates. The company also raised its
revenue guidance for fiscal 2018. Shares took off. They rose more than 21
percent to $22.53.

Biopharmaceutical company AbbVie said it saw promising results for its
experimental rheumatoid arthritis drug in a clinical trial. The treatment
is intended for patients with moderate to severe forms of the disease who
have not responded enough to certain drugs that slow the progression on
joint damage. AbbVie shares were up 1 percent to $68.75.

GRIFFETH: Truck and engine maker Navistar reported a wider than expected
loss as weaker truck sales were a drag on those results overall. Revenue
was lower, but it was still good enough to top expectations. And the
company acknowledged it does have some improvements to make. But it
expects industry conditions to improve in the second half of this year.
After all that, shares fell by 1 percent almost to $29.64.

UnitedHealth Group (NYSE:UNH) hyped its quarterly dividend 20 percent to 75
cents a share. The yield on that stock now is 1.7 percent. And shares
gained 1 percent following the news to $183.21.

And after the bell, Tailored Brands posted profits that topped street
forecasts but revenue came up short. The owner of Men`s Warehouse and Jos.
A. Bank reaffirmed its full year earnings for this year. Shares were
volatile in extended hours, ended the regular session, though, up more than
5 percent to $11.22.

Coming up, what`s worrying the job creators of America? Small business
owners will tell us, next.

(MUSIC)

HERERA: Here`s a look at what to watch for tomorrow. As we reported,
former FBI Director James Comey will testify before Congress as part of the
investigation into Russia. Voters will head to the polls in Great Britain
to select their prime minister. Members of the Central European Bank will
meet to discuss monetary policy. And that`s what to watch for on a busy
Thursday.

GRIFFETH: Could it be any busier tomorrow?

Meantime, Goldman Sachs (NYSE:GS) is raising rates for savers. The Wall
Street bank`s consumer arm is raising the rate. It offers customer on
deposits to 1.2 percent. That makes Goldman the highest interest-paying
bank right now, according to Bankrate.com.

The firm is trying to increase its deposit base and attract Main Street
clients. By the way, the average rate right now for savings accounts is
not a whole lot, currently 0.06 percent.

HERERA: Small business owners are considered the backbone of the economy.
According to the Small Business Administration, this group has provided
about two-thirds of all new jobs since the 1970s. And today, innovators
and entrepreneurs are in New York talking about the current state of
business.

And Kate Rogers (NYSE:ROG) was there.

(BEGIN VIDEOTAPE)

KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Entrepreneurs from
around the country gathered in New York City Wednesday for CNBC and “Inc.
Magazine`s” iConic Tour 2017. The topic at hand: how to grow your
business, find the right people, and thrive.

In fact, one industry veteran dropped an important reminder: it`s never too
late to get started.

ARIANNA HUFFINGTON, JOURNALIST AND ENTREPRENEUR: I`m 66. And I don`t
think there is any age limit to entrepreneurship. I think in fact when
you`re older, as I am, it`s just a great time to launch something new. And
that is one of the sort of motivations for me. If I`m going to do it, I
have to do it now.

ROGERS: With small business optimism holding at historically high levels
post-election, some small business owners in attendance said they were
feeling confident about their business prospects and the economy under
President Trump.

KIMBERLY A. FERGUSON, K-FERG TRAINING: I`m absolutely optimistic. I`m
making sure that people are more efficient and just good at what they do.
It`s so important right now that in spite of some of the things that are
going on politically, it`s so important for our organization.

JAYME SMALDONE, MIGHTY MUG FOUNDER AND CEO: As long as you`re in an
affordable price range and it`s not a luxury item, I think there`s always
going to be people that are looking for something that`s fun, that`s
innovative, that`s unique.

ROGERS: Others have concerns about potential changes the new
administration may bring in terms of new regulation.

GREG MONDSHEIN, SOURCE CODE COMMUNICATIONS: I want there not to be an
immigration ban, primarily, because when companies are started, they`re
started by everybody. And, you know, that creates business for the
marketing services industry.

ROGERS: But some, like Cole Austin, whose business is rooted in the arts,
are hopeful that political headwinds may help to bring people together.

COLE AUSTIN, COLLAB FOUNDER AND CEO: When you have so many polarizing
topics that exist right now in the world, it`s the best way to kind of —
the most catharsis thing to do is to continue to create and to share your
opinions and perspectives. So, I think it actually, as unfortunate as it
may be in the political space, it`s actually great for community and self
expression.

ROGERS: For NIGHTLY BUSINESS REPORT, I`m Kate Rogers (NYSE:ROG) in New
York City.

(END VIDEOTAPE)

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

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

GRIFFETH: I`m Bill Griffeth. We do thank you for your support. 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 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.

 

This entry was posted in Transcripts. Bookmark the permalink.

Leave a Reply