Transcript: Nightly Business Report – June 9, 2017

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR:  Tech tanks.  And the sharp
move lower seems to come out of nowhere.

Retirement rule.  A new one takes effect today and it could mean big
changes for your savings.

Tipping point.  If you`re in the market for a new house, a new report says
you might want to think twice.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Friday, June
9th.

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

The best performing sector of the year had one of its worst days in a
while.  After hitting a record early in the day, the mood shifted suddenly
and without warning.  And those same stocks that accounted for more than 40
percent of the S&P 500`s advance this year reversed course.  By the end of
the day, Amazon (NASDAQ:AMZN), Facebook (NASDAQ:FB), Alphabet, Apple
(NASDAQ:AAPL), and Netflix (NASDAQ:NFLX) all lost 3 percent or more.

In the end, it was a tale of two markets.  The Dow Jones Industrial Average
closed at a record, up 89 points to 21,271.  The NASDAQ lost 113 points.
And the S&P was off two.

Bob Pisani takes a look at the hit the tech stocks took.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Finally, we got a
little volatility as some traders came forward to begin to question the
valuation of some of these big tech names.  So, Facebook (NASDAQ:FB) and
Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT)
and Alphabet, they were down about 3 to 5 percent today.  Goldman Sachs
(NYSE:GS), in a note this morning, made a very simple but important point.
These big tech names are traditionally cyclical growth stocks.  In other
words, they`re volatile.

But everyone has been acting like they`re boring consumer staple stocks,
which is usually not volatile, and everybody has bought them aggressively
assuming they would go up with no risk at all.  They warned that the stocks
have gone up so much that the trend could quickly reverse.

And they`re right, it`s a good point.  And, in fact, that`s exactly what
happened today, to all these the big names, as well as some of the big
semiconductor names that have also had big run-ups.  For example, Nvidia
and Advanced Micro.

So, what does all this mean?  Well, it means kind of what it always means
on Wall Street.  When you have stocks that keep going up, it attracts a
whole other class of buyers.

We call them momentum players.  And essentially these momentum players are
just along for the ride.  Then something fundamental happens, you have the
mildest of earnings or guidance disappointments, or in this case someone
with influence like Goldman Sachs (NYSE:GS) writes something that says, you
know, fellas, this doesn`t make too much sense, and you get a selloff that
suddenly accelerates.

All right.  So, is this a cause for concern?  For the moment, no.  I think
it`s a relief.  There are some signs traders are taking the money and
buying less-loved sectors like banks and energy stocks.  That would be a
healthy rotation using overbought tech stocks as a source of funds to buy
under-owned bank and energy names.

So, the verdict so far: at least for the moment this does not appear the
start of an overall correction.

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

(END VIDEOTAPE)

HERERA:  The election results in the United Kingdom could impact the single
biggest economic issue that that country faces — Brexit.

Wilfred Frost gave us the preliminary results last night.  He is back for
us tonight from London.

(BEGIN VIDEOTAPE)

WILFRED FROST, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Uncertainty struck
the United Kingdom overnight as the initial results from the general
election revealed the U.K. was headed for a hung parliament, where no party
wins a clear majority.

The pound plunged in response and Theresa May`s opponents called for her
resignation.

JEREMY CORBYN, LABOUR PARTY LEADER:  The prime minister called for the
election because she wanted a mandate.  Well, the mandate she`s got is lost
conservative seats, lost support, and lost confidence.  I would have
thought that`s enough to go, actually, and make way for a government that
will be truly representative of all of the people of this country.

FROST:  But as the final results emerged, Theresa May did win enough seats,
along with the help of the small Northern Irish DUP Party to return to
Downing Street.

Prime minister, but her standing much diminished, as she failed to increase
her majority as planned.

THERESA MAY, U.K. PRIME MINISTER:  I wanted to achieve a larger majority.
But that was not the result that we secured.  And I`m sorry for all those
candidates and hard working party workers who weren`t successful, but also
particularly sorry for those colleagues who were MPs and ministers who
contributed so much to our country and who lost their seats and didn`t
deserve to lose their seats.  And as I reflect on the results, I will
reflect on what we need to do in the future to take the party forward.

FROST:  The other big takeaway was the Brexit negotiations would begin as
planned in ten days` time, but with the U.K.`s negotiating team much
weakened by this grueling election.  That might explain why European
Council President Donald Tusk was so keen to get started.

In a letter to Theresa May today, he spoke of their shared responsibility
and named it an urgent task to begin negotiations.  He also reiterated the
March 2019 cutoff date.  He even expressed his congratulations on her
reappointment.  That line no doubt written with a wry smile on his face.

The bottom line, May is weaker.  The U.K. is weaker.  The pound weaker as a
result.

For NIGHTLY BUSINESS REPORT, Wilfred Frost, London.

(END VIDEOTAPE)

HERERA:  Leaders of the House Intelligence Committee say they have asked
the White House counsel to see whether there are any records of the former
FBI director`s conversations with the president.  The panel also asked
James Comey for his notes and memos of that same conversation.

And in a fiery news conference, the president forcefully accused Mr. Comey
of not being completely truthful.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES:  We were very, very happy and
frankly, James Comey confirmed lot of what I said.  And some of the things
that he said just weren`t true.

(END VIDEO CLIP)

HERERA:  The president also said he would be glad to state his case to the
special counsel overseeing the Russia investigation.

A consumer protection aimed at retirement advisers is set to go into effect
today, at least for now.  The Labor Department is still reviewing the
regulation and is expected to make some changes later.

Kayla Tausche has more on the effect of the new rule.

(BEGIN VIDEOTAPE)

KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT:  The so-called
Fiduciary Rule keeps retirement advisers from favoring their commission-
based products over their customers` interests.

As of today, they have to abide by the spirit of the rule.  Large
brokerages have already made changes.  For instance, Merrill Lynch gave
customers a choice to move to a different platform or pay a fee.  Wells
Fargo (NYSE:WFC) offering fewer products.  UBS is changing broker
compensation to eliminate the conflict.

Smaller broker deals have made big changes.  Ameriprise has dropped
hundreds of funds, and LPL Financial revamped its pricing.  Some
independent firms have frozen assets while the rule is under review.

Clients are affected if their retirement account and 401ks are managed by
commission-based adviser or commission-based accounts.  Money managers may
ask (ph) customers to opt back into these accounts to ensure they actually
want to be in them.

The Obama administration estimated the rule would save Americans $17
billion in fees.  But it will likely change again before a final January
deadline.  The Labor Department still reviewing it and the department has
38 political appointments vacant that will be important here.

Asset managers also are traditionally regulated by the FCC.  That agency
will want a say in how it`s written and enforced and the industry has
requested the agency`s involvement too.  The wild card, how Congress
tackles large scale financial reform and if they decide to roll back the
rule completely.

For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche, New York.

(END VIDEOTAPE)

HERERA:  Chris Carosa joins us now to discuss what that new fiduciary rule
as it stands now will mean for you.  He is founder and fiduciary expert at
Carosa Asset Management.

Good to see you, Chris.  Welcome.

CHRIS CAROSA, CAROSA ASSET MANAGEMENT FOUNDER:  Hi, Sue.

HERERA:  So, bottom line this for me, what are consumers going to see and
investors going to see that will look or appear or be different?

CAROSA:  Well, it`s likely that they won`t see anything dramatic right
away.  Over time, primarily those who are rolling over IRAs from their
existing retirement accounts will begin to see new language in the
agreements, which is called a best interest contract exemption.  And that
discloses to the new rollover that there may be an opportunity for the
provider to offer products that would normally contain what`s called
conflict of interest fees.

And this is a way for the client to sign off on that and allow them to do
it provided it`s still in their best interests.

HERERA:  Although it`s not necessarily, it doesn`t sound like it`s written
in an easy way to understand.

CAROSA:  Maybe, maybe not.  There`s no really formal template for how this
language will appear.  My thinking is it will probably be maybe a paragraph
or two.  But that doesn`t mean that`s how it will be.

HERERA:  OK.  What questions do investors need to ask, as this rule rolls
into effect?  As you say, we won`t see the changes immediately, but as we
get closer to the final version and it does go into effect, what questions
should they be asking their financial fiduciary?

CAROSA:  Remember, the actual name of the rule is the conflict of interest
rule.  And I think that`s what investors should focus in on.  They should
ask their adviser, what types of fee arrangements do we have?  Are they
traditional conflict of interest fees such as commissions, 12B-1 fees or
revenue sharing?

These are the type of fees, sometimes they`re disclosed in the mutual fund
but not all times, because the SEC doesn`t require a clear disclosure for
revenue sharing.  So, you`ve got to ask the adviser if that`s the type of
fee that you`re paying.  And then you might want to consider whether or not
that`s the type of fee you want to pay, because you don`t have to.

HERERA:  And I assume that you need to ask those questions, because when
you look at your statements and when you look at your financial plan,
sometimes, it`s a little bit difficult to find out where those fees and
those other exemptions are in the physical document.

CAROSA:  That`s true.  In 2012, the DOL came out with a rule called the
401(k) mutual fund fee disclosure which was supposed to address this.  But,
unfortunately, again, they didn`t provide a template, so we have all
different forms of disclosure, which are often very difficult to read, even
for professionals.

HERERA:  Well, on that note, that means we`ll have to have you back when
they finally finish it up and we get the final product.

Chris, thank you very much.

CAROSA:  Thank you.

HERERA:  Chris Carosa with Carosa Asset Management.

Still ahead tonight, the 51st state?  Investors will be watching a key vote
this weekend.

(BEGIN VIDEO CLIP)

LESLIE PICKER, NIGHTLY BUSINESS REPORT CORRESPONDENT:  We spoke with
residents, investors, and government officials here in Puerto Rico about a
big statehood vote this Sunday.  We`ll tell you all about it, coming up on
NIGHTLY BUSINESS REPORT.

(END VIDEO CLIP)

(MUSIC)

HERERA:  An historic vote in Puerto Rico this weekend.  One hundred years
after being granted U.S. citizenship, Puerto Ricans will vote on whether to
become the 51st state.  And it comes at a time of deep financial
uncertainty for the island.

Leslie Picker is in San Juan.

(BEGIN VIDEOTAPE)

PICKER:  Flags adorning the bright rows of colonial buildings underscore
the sentiment of statehood here in Puerto Rico.  Oftentimes, you`ll find
the Puerto Rican flags next to American one, the blue part of the flag
matching.  But then you`ll also see Puerto Rican flags by themselves, with
a lighter shade of blue.  That signifies independence.

This question of status will be the focus of a vote taking place on Sunday.
Puerto Ricans will go to the polls to determine whether or not they want to
become a U.S. state, sovereign nation, or remain a commonwealth, which is
something in between.

Puerto Rico has been in a recession for 10 years and is grappling with $120
billion of debt and unfunded pension liabilities, that caused it to seek
bankruptcy protection last month.  About 40 percent of U.S. municipal bond
funds have exposure to Puerto Rican bonds, with billions of dollars worth
of exposure.

Tensions here are high.  Residents we spoke with said becoming a state
could solve their economic problems.  Others blame the U.S. for the mess on
the island and would prefer to keep their commonwealth status or seek
sovereignty.

SOCORRO OLIVENCIA, PUERTO RICAN RESIDENT:  There is the feeling, you know,
that you can`t trust that anymore.  That is very hard.

PICKER:  And not everyone in the U.S. is in full support, wary that they
would have to take on the burden of a bankrupt municipality if Puerto Rico
votes for statehood.  But according to government officials on the island,
Vice President Mike Pence has pledged to support the Puerto Rican statehood
should residents vote that way.

Governor Ricardo Rossello who campaigned on the promise of statehood before
winning election in November defended Puerto Rico`s rights.

RICARDO ANTONIO ROSSELLO, PUERTO RICO GOVERNOR:  We wouldn`t want, you
know, a bailout.  I`m no fan of bailouts.  I think we need to assume
responsibility for what`s going on here.  Statehood is an equal playing
field for U.S. citizens that reside on the island.

PICKER:  Puerto Ricans are U.S. citizens but they don`t have the same
access to benefits as those on the mainland.  While they can serve in the
military, they can`t vote for their commander in chief.  The topic is so
important to elected officials here, they`ve spent $7 million on this
weekend`s election, despite being bankrupt.

The Justice Department was supposed to provide $2.5 million in exchange for
a say over the wording on the ballots.  But that money has yet to arrive.

JENNIFER GONZALEZ-COLON, PUERTO RICO CONGRESSWOMAN:  This is not about the
money.  I mean, this is more than that.  So keep the money.  Let us express
ourselves.  That`s what we`re going to have on Sunday.

PICKER:  Gonzalez is confident that residents will vote for statehood, but
it wouldn`t be the first time.  Puerto Rico had a similar vote five years
ago.  But it`s up to Congress to write a statute welcoming Puerto Rico to
becoming the 51st state.

So far, there hasn`t been willingness in Washington to do that.

For NIGHTLY BUSINESS REPORT, I`m Leslie Picker, San Juan, Puerto Rico.

(END VIDEOTAPE)

HERERA:  And you can read more about what`s at stake when Puerto Rico goes
to the polls on our website, NBR.com.

The U.S. is mostly clear to provide unfair support to Boeing (NYSE:BA).
That`s where we begin tonight`s “Market Focus”.

The World Trade Organization rejected claims by the European Union and
Airbus that Boeing (NYSE:BA) had benefitted from billions of dollars of
illegal subsidies.  But it also ruled that the U.S. failed to eliminate a
tax break in a key state.  Both Boeing (NYSE:BA) and Airbus claimed victory
over that decision.  Shares of Boeing (NYSE:BA) were basically unchanged at
$190.03.

The Federal Trade Commission staff is advising the agency to prepare a
lawsuit to block Walgreen`s nearly $10 billion deal to buy Rite Aid
(NYSE:RAD).  That`s according to a report by the trade publication “Capital
Forum”.  Walgreen`s initially bid for its smaller drugstore rival back in
2015.  Shares of Walgreen`s dropped 48 cents to $80.99.  Shares of Rite Aid
(NYSE:RAD) plunged 15 percent to $3.

Sirius XM will make a $480 million investment in the music streaming
company Pandora.  The satellite radio company cited Pandora`s large user
base and personalized music experience as tremendous assets.  Shares of
Sirius XM dropped 20 cents to $5.20.  Pandora rose 10 cents to $8.52.

The FDA has requested Endo Pharma pull its opioid painkiller Opana ER off
the market.  This is the first time the agency has asked to remove a
currently marketed opioid drug due to public health consequences of abuse.
Shares of Endo Pharma dropped more than 16 percent to $11.49.

Time now for our market monitor, who says he`s finding value in some
underappreciated names in the stock market right now.  It`s not the first
time on the program for him but it is as market monitor.

Let`s welcome back Timothy Lesko, portfolio manager with Granite Investment
Advisers.

Welcome back, Tim.  Nice to have you here.

TIMOTHY LESKO, GRANITE INVESTMENT ADVISORS PORTFOLIO MGR:  Thanks for
having me.

HERERA:  So, you`re saying that the market in certain sectors may look
fairly valued or maybe fully valued or a little overvalued.  But that`s not
true of the overall market.

LESKO:  Right.  And that`s typical of the market.  Usually you have certain
sectors leading the marketplace.  Over the past few years, that`s been a
combination of the high flying technology stocks and some of the consumer
staple stocks that pay a higher dividend.  That has really left sectors
like financials and like energy kind of in the dust.  So, we find value in
a lot of different areas in the market.

HERERA:  You`re also looking at the so-called old tech.  One of your picks
tonight is Oracle (NASDAQ:ORCL).  Why?

LESKO:  Well, I think that the market over the past seven years has really
been searching for secular growth stories, and leaving behind those
cyclical stories that have been undervalued.  So, while Facebook
(NASDAQ:FB), Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX), and Google
(NASDAQ:GOOG) kept going up, you saw stocks like IBM, or Microsoft
(NASDAQ:MSFT) for a period of time, Apple (NASDAQ:AAPL) at different
periods of time, lagging the market.  And Oracle (NASDAQ:ORCL) has been
making a long term transition from selling software to people to selling
software as a service.

And feel like that finally, that transition is in place and you might start
seeing some top line growth, which the market has been so desperate for
across technology.

HERERA:  You`re wading into the energy sector, a fascinating sector to
watch but not always an easy one to invest in this year.  Royal Dutch Shell
is your pick in that particular area of the market.  Why do you like it?

LESKO:  Well, that`s a great analogy, wading into the energy space.  You
like feel at times that you`re drowning in oil.  That`s been the concern in
the marketplace, is that we have an oversupply issue.

And we think that will work itself out.  Oil demand really hasn`t wavered
over the past three or four years, despite some predictions by the
governing agencies.  As well as concerns about economic growth across Asia.
So, as demand continues to move forward, we think it will soak up excess in
the marketplace.

And Royal Dutch pays you a nice close to 7 percent yield while you wait for
that market equilibrium to hit.  So, it`s been a nice place for value
investors like us to at least get some revenue while we wait for, you know,
the oil market to right itself.

HERERA:  And you`re going a little broader with your last week, Walmart and
that`s based on their distribution.

LESKO:  Right.  And that to me is one of the favorite stories to talk to
people about, really only because in a world where every retailer fears
Amazon (NASDAQ:AMZN), there are few people that can compete with what
Amazon (NASDAQ:AMZN) is really good at, and that is the logistic side of
it, where Walmart already has those products in place in your geography.
And as the world moves toward, whether it be same-day delivery via Uber or
Lyft, or drones are going to land on your doorstep, Walmart has those
products in your neighborhood already.

So, they probably have a leg up on a lot of their competition.  And they`ve
been a logistics juggernaut for years.  And now, they`ve just had to figure
out the Internet side of it.  And some of the recent acquisitions have
really helped them do that.

HERERA:  On that note, Tim, thank you so much.  Have a great weekend.

LESKO:  Thank you for having me.

HERERA:  Timothy Lesko with Granite Investment Advisers.

And coming up, is it better to buy or rent in this market?  What a new
report says about one of the biggest financial decisions you`ll ever make.

(MUSIC)

HERERA:  It seems more Americans are not paying off their credit card
bills.  In the past two quarters, banks reported a steep rise in charge-
offs, which is debt that they cannot collect from their customers.
According to a report from Moody`s (NYSE:MCO), the increase is the largest
since 2009 and is especially unusual since the job market is improving.

Well, if you`re planning on house hunting this weekend, you might want to
do a little math first.  For several years, it has been cheaper and more
lucrative to buy a home than to rent.  But that equation apparently is
shifting quickly.

Diana Olick shows us where that change is happening the most.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT:  After the housing
crash, when home prices plummeted, it fast became not only cheaper to buy a
home than rent, but it was also a better investment to own in terms of
wealth accumulation.

Now, with home prices still rising quickly, and rents starting to ease, the
math is shifting.  Nationally, the rent versus buy equation is heading
steadily into the rent territory, according to an index from Florida
Atlantic University, which factors in home prices, rents, mortgage rates,
as well as alternative investments to gain wealth.

Of 23 cities that the index measures, 11 are still in “buy” territory, some
very clearly, like Chicago, Cincinnati, and Cleveland.  Nine, including
South Diego, Philadelphia, and L.A., hover right around zero, meaning a
toss-up.  Three cities, Dallas, Denver, and Houston, are in historically
high territory for renting being the better option.

The main thing is that all of the cities are steadily moving toward rent,
because home prices are so high, mortgage rates are expected to rise, and
other investments are giving better returns.  This may be why another
index, measuring home buyer sentiment, is falling.  The monthly Fannie Mae
survey found those who said now is a good time to buy fell to its lowest
level ever.  In addition, fewer people were confident about holding onto
their jobs.

Clearly, affordability in housing is weighing on the market as more
millennials age into their home buying years, demand will surely increase.
But affordability may still stand in the way.

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

(END VIDEOTAPE)

HERERA:  And finally tonight, Powerball fever.  The jackpot has grown to
more than $400 million.  So, we decided to take a moment and daydream about
what all that money could buy.

Here`s Robert Frank.

(BEGIN VIDEOTAPE)

ROBERT FRANK, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Well, if there is a
winner for Saturday`s Powerball jackpot, the lifetime payout would be $435
million.  The lump sum, which is recommended, would be $273 million or only
around $200 million once Uncle Sam takes his cut.  State and local taxes
and the federal bill later in April could bring the total to under $150
million, but that still leaves you with some good walking around money.

You could buy this house in Beverly Hills, California, with a gold
champagne room, a gold Rolls-Royce and a gold Lamborghini, and not one but
two pools.  That`s 100 million bucks.

If you want a little faster car, you can buy the new Bugatti Chiron which
tops 288 miles an hour for only around 3 million bucks.  Now, you could
have bought two of the most expensive diamonds ever sold, the pink star,
59.6 karats, pink flawless, for $71 million.

Now, if you want to quit your job and retire on that yacht, you can hop
aboard the $80 million silver fast.  It`s 250 feet.  It`s got an outdoor
cinema, eight-person glass Jacuzzi, dining table for 20, and, of course, a
helipad for going to and from the bank.

For NIGHTLY BUSINESS REPORT, I`m Robert Frank.

(END VIDEOTAPE)

HERERA:  And that`s it for us tonight.  I`m Sue Herera.

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

Thank you.  We`ll see you Monday.

END

Nightly Business Report transcripts and video are available on-line post
broadcast at http://nbr.com. The program is transcribed by 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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