Transcript: Nightly Business Report – June 23, 2017

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

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: New tech leaders. The
hottest sector this year has been led by the best known mega caps, but now,
there are new names leading the way.

Record highs. Newly built homes are more expensive than ever, and builders
are having a tough time breaking ground. But there may be a solution.

Diving in. Why private insurers are getting into the flood insurance
market, after a 50-year absence.

Those stories and a lot more tonight on NIGHTLY BUSINESS REPORT for this
Friday, June 23rd.

Good evening, everybody. TGIF. I`m Bill Griffeth. Tyler Mathisen and Sue
Herera are both off tonight.

Technology is back on top. The same sector that led the way this year
earlier posted its first weekly gain in three this week. The NASDAQ
climbed today for the fourth straight session and energy shares helped the
S&P snap its losing streak. The Dow, when all was said and done, fell by
2.5 points today, to 21,394. The NASDAQ added 28 though. S&P rose by
nearly four points. And as you can see, the NASDAQ easily outperformed the
other major averages for the week.

But there`s a switch happening within the tech sector. The run up this
year had been led by the big names. You know, the FANG stocks, the
Facebooks and Amazons and Googles.

Now, a new group of names are taking charge.

Kim Forrest, the senior equity strategist of Fort Pitt Capital joins us
tonight to talk about that.

You know, Kim, we had almost two weeks ago, that tech wreck and I guess
maybe people looking elsewhere for new leadership. Where are they looking?
What are they looking for, do you think?

KIM FORREST, FORT PITT CAPITAL SR EQUITY STRATEGIST: Well, I think anytime
you`re investing, you`re looking for growth. And if you`re investing in
tech, you`re really looking for growth. So, some of the themes that are
behind this, have what in common? Growth.

So, I think a couple of the leaders have to do with online paycheck or pay
stub calculations, that sort of thing. So, that would be ADP and Paycheck.
And I think people are looking for more hiring to go on this year and that
would be a logical conclusion if you`re buying those stocks.

GRIFFETH: Other stocks that you`re looking at that you consider new
leadership here, Gardner Group. Why that one?

FORREST: The Gardner Group. Well, they`re kind of interesting, because
they`re tech-related. And what they do is they give advice to businesses
who are going to put in new technologies, and just like the rest of us,
even though they might have a staff of IT people, you need some help.

So, they`re kind of like the consumer reports for technology and for
business and again, if you`re going to be putting a lot of money into your
business tech, why not get a subscription to Gardner and get the right
stuff the first time.

GRIFFETH: Citrix, an enterprise software. There are a bunch of companies
in that category. Why that one?

FORREST: They are. Well, I think Citrix has a real leadership and what it
allows you to do is to remotely connect to your servers back at the mother
ship wherever you work. And even though we are going to the cloud, some
things just don`t translate that well. So, Citrix does have leadership and
connecting kind of older servers to people that are mobile.

GRIFFETH: And then a common name we often hear, but AMD. Why are you
picking them right now?

FORREST: AMD? AMD is a — well, they`re kind of second banana to Intel
(NASDAQ:INTC).

GRIFFETH: Right.

FORREST: But they have a new technology that seems to be beating Intel
(NASDAQ:INTC). And, you know, again, we love any kind of growth. So, AMD,
whose fortune had been pretty bad, you know, they`ve turned it around
because of a new product line and a lot of people seem to be buying their
chip, instead of Intel (NASDAQ:INTC).

GRIFFETH: Kim Forrest at Fort Pitt Capital — always good to see you.
Thanks for joining us tonight.

FORREST: Thank you.

GRIFFETH: You bet.

You know, most would agree one of the hottest parts of the economy has been
housing and today, we learned that prices of newly built homes hit a
record. Sales rose in May, despite a shortage of homes for sale. Builders
say that they would like to put up more homes, but they`re facing tight
regulations on land use, which is only driving their costs even higher.

But a new trend in town homes could be the solution.

Diana Olick has our story for us tonight.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: They may not be as
swanky as single family homes, but town homes — they`re taking off in
today`s tight real estate market.

STEPHEN PAUL, MID-ATLANTIC BUILDERS: It seems to be a general philosophy
by local governments to increase density and be more efficient with land
uses.

OLICK: Like here in this Maryland suburb south of the nation`s capitol,
where empty land is scarce. Mid-Atlantic Builders is taking advantage of
every square foot.

PAUL: So, they`re really encouraging more town home and even products
where you have rental mixed in. Higher density because the typical
suburban single family homes are going to be harder and harder to find land
for. Particularly in maturing metropolitan areas like Washington.

OLICK: Demand for newly built homes is high, especially as the number of
existing homes for sale keeps hitting new lows. Builders are increasing
production slowly, but are still well below historical levels. The median
price of a home sold in May hit a new record high despite builders claiming
they`re targeting the first time buyer. Clearly, they can`t afford to.

Builders say new regulations not only add huge costs, but slow the process
as well. Permitting can take months, especially in major metropolitan
areas like here in D.C. Town homes are a way around that, as local
governments encourage builders to put up more units on less land.

Town homes may be less private, but they are more affordable for both
developers and buyers. In today`s tight market, that`s something to build
on.

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

(END VIDEOTAPE)

GRIFFETH: Elsewhere, a Federal Reserve official said the Central Bank can
hold off on further interest rate increases until it is clear that
inflation is heading higher and when there`s more clarity on fiscal
policies out of Washington.

James Bullard says that he sees little reason to rush the process and he`s
not worried about the tight labor market triggering higher inflation
anytime soon.

General Motors (NYSE:GM) has reached a settlement to resolve lawsuits over
his defective ignition switches. According to a court filing, that deal
addresses some more than 200 plaintiff cases. Terms of the settlement,
though, are confidential, but it could also resolve hundreds of other
claims. The ignition switch defect has been linked to more 100 deaths and
hundreds of injuries and it prompted recall that began early in 2014. To
date, GM has paid about $2.5 billion in penalties and settlements related
just to that defect.

Health care stocks were big winners this week, rising more than 3 percent.
As we reported, most of the gain came yesterday when the Senate released
the draft version of is own health care bill and today, the draft was
examined even further.

As our Bertha Coombs reports now, winners and losers are emerging.

(BEGIN VIDEOTAPE)

BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Senate plan
repeals individual and employer taxes which funded Obamacare`s expanded
coverage. That benefits those with higher incomes. The plan leaves many
of the Affordable Care Act`s provisions in place but with less generous
funding.

President Trump may have put it best.

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: It`s a very complicated
situation from the standpoint you do something that`s good for one group,
but bad for another. It`s a very, very narrow path.

COOMBS: Among the losers, adults who gained coverage under Medicaid
expansion. The Senate plan would maintain funding through 2020, but then
make states pick up more of the tab before ending it.

Middle income earners making above 350 percent of federal poverty, about
$41,000 for an individual this year, would get no premium tax credits after
2020.

For older adults, that could mean a triple whammy. The Senate plan would
allow insurers to charge them five times more than younger people. Right
now, rates are capped at three times more. The bill also increases how
much older people have to chip in for premiums, from 9.5 percent of their
income to as much as 16 percent, while tax credits would be lower, index to
the lowest tiered bronze plans rather than more generous mid-tier plans
now.

People with preexisting conditions would not face a premium surcharge under
the Senate plan and some shut out would get a new benefit. Among the
winners, the working poor would be eligible for tax credits, filling the
gap for 2.6 million people who were in less than poverty level, but weren`t
covered when their states chose not to expand Medicaid.

Insurers would be able to offer young adults lower premiums and skinnier
plans in states that opt out of a central health benefit and people with
health savings accounts would be able to nearly double savings to $6,600 a
year for individuals and 13,300 per family, more in line with high
deductible costs. An industry spokeswoman says those measures will help
the industry offer more affordable plans. Critic argue lower subsidies and
the end of the mandate will cancel that out.

BILL GEORGE, HARVARD BUSINESS SCHOOL: You`re going to get a lot more
people in these plans, but they`re going a lot sicker and you`re going to
have a lot fewer healthy people in the plan. So, they`ll be no balance.
So, you`ll see very rapid increases.

COOMBS: The Congressional Budget Report estimated the House plan would
result in 23 million people being uninsured by 2026. The CBO score of the
Senate bill is due Monday.

Bertha Coombs, NIGHTLY BUSINESS REPORT.

(END VIDEOTAPE)

GRIFFETH: And still ahead, are you up for a challenge?

Picking stocks while the market is near record levels is never easy, but
our market monitor tonight has some ideas you might want to consider.

(MUSIC)

GRIFFETH: Boeing (NYSE:BA) is cutting 200 jobs at a plant in South
Carolina. That`s the same plant where President Trump gave a speech a few
months ago. The company says the layoffs are part of a company-wide plan
announced back in December and they come as competition intensifies with
rival Airbus. Boeing (NYSE:BA) has been reducing staff since the start of
this year primarily through buyouts and attrition.

Hurricane season brings renewed attention to flood insurance. You know,
for decades, the flood insurance program has been solely run by the
government. But that`s starting to change.

Morgan Brennan explains.

(BEGIN VIDEOTAPE)

MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Private insurers
are taking the plunge into the turbulent waters of flood insurance. For
the first time in five decades, the companies are underwriting coverage for
homes and businesses, marking a potential shift if for a marketplace solely
run by the government since 1968.

JAMES LYNCH, INSURANCE INFORMATION INSTITUTE: It`s a very strong business
opportunity. Technology has changed. The industry is much better at
measuring risk on flood insurance than they were years ago and as a result,
they`re very interested in pursuing that opportunity. So, it could grow
and grow.

BRENNAN: Better tech, but also more favorable regulations. That started
in 2012 with the Bigger Waters (NYSE:WAT) Act, the last big attempt to
reform the federal flood insurance program.

House lawmakers are now looking to build on that with five bills that would
make it easier for insurers to compete, a move that could at least in
theory, bring down rates and prevent more taxpayer losses.

It`s a more than $3 billion opportunity on 5 million properties, many
underpriced or even subsidized that are covered by the troubled government
program.

LYNCH: Right now, because of Hurricane Katrina and Hurricane Sandy and the
losses from that, the federal flood insurance program has a deficit of $25
billion to the U.S. Treasury. By contrast, the private insurance market in
the United States has $700 billion that for any in private flood insurance
would be available to help pay claims if anything came in.

BRENNAN: AIG`s Lexington insurance began offering policies last year. It
currently touts 10,000, but expects that to double over the next 12 months.

Chubb (NYSE:CB), Allianz and Swiss Re have also jumped in. And just this
week, HCI announced plans to expand operations beyond Florida, to nine more
states.

And it isn`t the low risk properties that are even the most attractive.
For many insurers, it`s the ones that have already experience big rate
hikes since companies say they can now better compete, offering comparable
rates, speedy service and even more coverage.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan.

(END VIDEOTAPE)

GRIFFETH: Weak enterprise sales hurt results of BlackBerry and that`s
where we begin tonight`s “Market Focus”.

The software maker posted an unexpected profit, but that news was
overshadowed by a sales miss that left investors wondering if the company`s
turnaround strategy is actually working. Looking past the disappointing
revenue, the company did say it is open to considering acquisitions in a
couple of areas.

(BEGIN VIDEO CLIP)

JOHN CHEN, BLACKBERRY CEO: So, I think the whole security, especially the
whole newer area of machine learning as related to cybersecurity, we`re
already a leader in that space and, you know, we really would like to add
more capability and features.

The other area is about expanding the channel and the reach for our auto
business and tracking business.

(END VIDEO CLIP)

GRIFFETH: Clearly, Wall Street wasn`t buying it though. They sent shares
down 12 percent to $9.71 in today`s trade.

Sales edged lower at finish line as the footwear retailer struggled with
getting a steady flow of customers into their stores. Those results missed
expectations, but it`s profit matched analysts estimates. The company`s
largest shareholder is Sports Direct International, which is the U.K.
biggest software retailer, is also pumping its stake in finish line to
nearly 20 percent. Finish line shares ended the day up about 7 percent to
$13.65.

And the FDA approved Portola Pharmaceutical`s blood thinner that is
intended to help prevent deep vein thrombosis and pulmonary embolisms in
patients who are at risk for those conditions. The company said the
treatment is the first of its kind and, boy, did the market embrace that.
Today, shares soared by 46 percent, closed at $56.06.

Analysts at Deutsche Bank cut their rating on heavy equipment maker
Caterpillar (NYSE:CAT) first thing this morning to hold from buy, citing
concerns over whether the Trump administration`s $1 trillion infrastructure
plan will actually take effect. The bank said that without an
infrastructure stimulus, there is little prospect for continued instruction
growth right now. Caterpillar (NYSE:CAT) shares though rose fractionally
on the day to $104.11.

Now to our market monitor who is saying that he is finding investment
opportunities both here in the U.S. and overseas. Steve Dudash is with us
tonight. He`s president of IHT Wealth Management.

Steve, good to see you again. Welcome back.

STEVE DUDASH, IHT WEALTH MANAGEMENT PRESIDENT: Hey, Bill. How are you
doing?

GRIFFETH: Good.

It`s interesting. Just a few minutes ago, we were talking with another
money manager about the tech wreck we saw a couple of weeks ago, and how
she sees new leadership in technology. But you`re sticking with one of the
primary FANG stocks right now.

Even at these near all time highs, you like Amazon (NASDAQ:AMZN) here, why?

DUDASH: Two and a half years ago, I was on the show with you guys and we
were talking about Amazon (NASDAQ:AMZN) and we were talking about how it`s
really expensive and overvalued and all that, and we were being contrarian
in saying you got to buy in. They`re a disrupter. See past the pricing.
Everything they get into, they take over and they grow from that area.

Fast forward two years, the stock is up 50 percent and the arguments are
the same, it`s too expensive. The reality is they changed the markets that
they get into, and you know what should be watching their backs is Whole
Foods, because they`re coming for — or not Whole Foods, but Walmart
because they`re coming for them.

Everything they touch grows. So, yes, it`s expensive, yes, it`s a tough
stock to swallow the pricing that you`re getting into it. But the reality
is, if you want growth and you can handle the risk, there`s literally no
better stock out there than the growth areas in the world right now that
has the potential to continue to grow in the next couple of years.

GRIFFETH: All right. And Walmart did say today that they are not going to
make a competing bid for Whole Foods against Amazon (NASDAQ:AMZN).

DUDASH: I know.

GRIFFETH: We should point that out.

Now, there is at least one sector you like that`s not at all time highs,
that`s the banks. You`re here to make the case for a certain bank ETF.
Why. Why now?

DUDASH: You know what? Let me start by this. I want to compliment you
guys for taking the time to talk about the ETF world. You`re leading the
mark. This is what the industry going towards. Most people aren`t stock
picking anymore. They`re buying ETFs.

So, for you guys to be talking about it I think is wonderful. But yes, the
fundamentals are changing on them. Interest rates are rising, which we all
know, which is a good thing and it helps the smaller banks a lot more than
that had been struggling through it. But two, about a year and a half ago,
we were on this show and we`re talking about the regulatory market that we
were in, with that all time highs of strictness that was going on with
these banks. That pendulum has definitely swung. Now, it hasn`t swung as
much as we would have guessed with the Republican president and Republican
Congress, but it`s going back in that direction and that on top of rising
interest rate is going to help those bottom lines.

So, we`re shying away from the big banks right now because of some of the
headline risks with it, but if you look an ETF, regionals, spread your risk
out within that sector, that might be one of those sectors that`s going to
be in the biggest gainers in the next couple of years.

GRIFFETH: OK. Got to see rates rise, though, and to help them out though.

Now, dividends are obviously very popular, especially I think with our
audience, but you`re looking for dividends not here in the U.S., but
overseas in Europe. You`re talking about a European dividend fund. Tell
us about it.

DUDASH: OK, let`s be honest. U.S. market is probably overvalued right
now, OK? We fundamentally like strong balance sheets. We like dividends.
We like growing dividends. You look overseas right now, you can buy into
some companies at a much cheaper discount than what`s going in the U.S.
They`re in the middle of the QE cycle.

So, you take advantage of the fact that they`ve got a couple more years
worth of growth just off that end of it, and Brexit isn`t going to affect
Europe. Britain is never really a part of Europe in that sense any way.
The rest of those countries aren`t breaking off. You`re going to have some
headline risk, you`re going to have some political risks from time to time.
You`ve got to grin and bear it, but you want to buy into large-oriented
dividend growth stocks and four-year portfolio as opposed to overpaying for
U.S. stocks.

It`s a wonderful idea if you can stomach having more of your money
overseas.

GRIFFETH: Right. Some good ideas tonight.

Steve, always good to see you. Thanks for joining us.

DUDASH: Thanks, Bill. Take care, guys.

GRIFFETH: Steve Dudash of IHT Wealth Management.

Coming up, hidden cash that`s hiding in your closet.

(MUSIC)

GRIFFETH: Sears (NASDAQ:SHLD) is closing another 20 stories. A real
estate investment trust owns those 20 properties. It includes 18 Sears
(NASDAQ:SHLD) and two Kmarts. These closures are in addition to the more
than 200 store closures that were announced earlier this year. Sears
(NASDAQ:SHLD) isn`t the only brand closing stores these days.

The total number so far across the industry is triple what it was the same
time this time last year. So far, 5,300 store closures announced in 2017.

If it`s time to clean out your closet, there`s a way to make some cash in
the process.

Courtney Reagan compares two different companies that pay you back when you
declutter.

(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Looking to refresh
your summer wardrobe but don`t have the cash? Well, look no further than
your closet. There are plenty of websites that will help sell gently used
by still in style clothes.

I decided to do an unscientific test of two popular methods. An app called
Poshmark and website Thread Up to see which would earn me more money.

After spending some quality time in my closet, I picked nine pieces from
brands like J.Crew, Diane von Furstenberg, and Club Monaco.

Now, time to sell these clutters.

I discovered Poshmark works more like eBay (NASDAQ:EBAY) and Facebook
(NASDAQ:FB) combined. Each item has its own listing and creating one is
time consuming. It took hours to take pictures of the clothes, sometimes
with me wearing them, then upload the images and set the price.

And to sell, you need to be social, following others, commenting and
sharing your listings. Ultimately, I got offers on four items on Poshmark.
Both the J.Crew sweater and pants, the Diane van Furstenberg dress, and the
Karen Milan cardigan.

Thread Up is considerably less work. You order a bag for 10 bucks and when
it comes, you fill it up. The time consuming part of Thread Up was the
waiting. I took eight weeks to get the total from my bag. In the end,
Thread Up accepted three times. The Club Monaco dress and same J. Crew
sweater and pants Poshmark shoppers made offers on.

So, what were payouts? Poshmark takes a $2.95 commission for sales under
$15, and 20 percent commission for sales over that. And the buyer pays the
shipping. Factoring in all that, my net profit on Poshmark came to $144.

Thread Up pays in two ways. An upfront payout for in season items or a
percentage of the sale price ranging from 5 to 80 percent for offseason
clothing sold on a consignment model. My net profit on Thread Up came to
$13.

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan.

(END VIDEOTAPE)

GRIFFETH: Entrepreneur Toni Ko tapped into the multibillion dollar beauty
market when she was just 25 years old. And she`s built a cosmetic empire
worth $500 million. Now, she`s eyeing the sun glass industry.

Tyler Mathisen has her story in tonight`s “How I Made My Millions”.

(BEGIN VIDEOTAPE)

TYLER MATHISEN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Today, entrepreneur
Tony Co is looking through rose-colored lenses.

TONI KO, ENTREPRENEUR: I`m very grateful and I`m very happy.

MATHISEN: It took her just six months to launch her second business.
Perverse Sunglasses, part on the heels of the half billion sales of her
first company, the beauty empire, NYX Cosmetics. A remarkable rise by a
college dropout who immigrated from South Korea to L.A. when she was only
13 and didn`t speak a word of English.

KO: I had to learn a whole new language and a whole new culture. You feel
inadequate.

MATHISEN: When she wasn`t in school, Ko was behind the counter at her
mom`s cosmetics store.

KO: I used to sell perfume.

I worked for her from 14 years old to 25. So that`s like 11 years of free
employment for her. She never paid me.

MATHISEN: The shortage of pocket change led Ko to discover a gap in the
market between high-end cosmetics and drugstore make up.

KO: Blue eye shadows were never blue. Red lipsticks did not come out red.

MATHISEN: Ko thought she could do it better. So, in 1999, she dropped out
of school and started NYX Cosmetics.

KO: My mom had good advice for me. She said, even if you fail, it`s
better to have that experience when you`re younger than when you`re older.
And then she wrote me the first investment check.

MATHISEN: Those years of free labor finally paid off, with $250,000 from
her mother, Ko developed her first products, $1.49 eye and lip pencils.

KO: This color, 183, plush red, was one of the original colors.

MATHISEN: In just 12 months, Ko sold 3.2 million of them. Entirely on her
own.

KO: I was a receptionist, the secretary, the president, the designer.
People had no idea that it was a one 26-year-old running the whole show.

MATHISEN: And often, before meeting her, no idea that she was a woman.

KO: Every (INAUDIBLE) was Mr. Toni Ko. And then I show up and like, hi,
I`m Toni. You should see the shock on their faces.

This is an industry where you`d think there would be a lot of female
executives. Really, it`s not.

MATHISEN: But Ko had one advantage in a boy`s world. She was the ultimate
consumer.

KO: I really wanted to make product that I was proud to use, and that my
friends were proud to use.

MATHISEN: Instead of spending on marketing like her competitors, Ko
focused on making high quality products she could sell at very low prices.
And in the mid 2000s, a poorly performing product got a boost from an
unexpected source. A YouTube makeup tutorial.

KO: We just went ding, ding, ding, this is the reason why this item is
selling out now.

MATHISEN: By 2014, NYX made $120 million in annual revenue. Just 15 years
after launching, Ko sold NYX to L`Oreal for about $500 million.

A non-compete prevented her from working in cosmetics for five years. So,
Ko set her sights on another industry she loved — sunglasses.

KO: I`m really good at delivering really great quality at a really low
price point, and I`m just going to stick with it.

(END VIDEOTAPE)

GRIFFETH: Ko is hoping to nurture other female entrepreneurs as well
through an investment company that she started called Butter Ventures.
That`s NIGHTLY BUSINESS REPORT for tonight.

I`m Bill Griffeth. Have a great weekend, everybody. See you Monday.

END

Nightly Business Report transcripts and video are available on-line post
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Business Report is not and should not be considered as investment advice.
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