Transcript: Nightly Business Report – August 9, 2017

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Change in tone stock flips
gold gains and investors turn cautious as tensions mount between the U.S.
and North Korea.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Game changer? Why Disney
(NYSE:DIS) may have taken the first step in changing television as we know
it.

HERERA: Empowering patients. Older Americans sometimes need health care
related health in their home. Enter, Alexa, Amazon`s voice-activated
assistant.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Wednesday,
August 9th.

MATHISEN: Good evening, everyone, and welcome.

Well, the old cliche about stocks is that they climb a wall of worry and
there`s been plenty of things to worry about this year. And for the most
part, the stock market has stayed true to the cliche. It kept on climbing.

But in the past 24 hours, as U.S.-North Korea tensions heightened, the wall
of worry got steeper, too steep in fact for some investors. They pulled
out of stocks today, continuing yesterday`s late day retreat and moved ever
so slightly into textbook safe havens like gold and bonds.

The moves were not big. There was no panic selling. But North Korea is on
investors` radar now and as one strategist put it, geopolitics is splashing
some cold water on the markets.

Today, the Dow Jones Industrial Average dropped 36 to 22048, Nasdaq fell
18, the S&P 500 was off a fraction. Earnings had been the focus of the
market for some time and while they are still very important, investors are
also paying attention to some bigger, broader issues.

Bob Pisani explains.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: There`s a rare event —
stock market drop today, largely on concerns about North Korea, but also
partly on a spate of poor earning. So far this summer, it`s been a Teflon
market, nothing has altered the slow upward force of stocks. Is today`s
action just a blip or is the market finally shifting focus?

For the moment, the market seems to believe that the risks that this will
elevate into a full-blown crisis are small. The major industries were down
only fractionally and measures of market fear and volatility were only
slightly elevated. So, North Korea, the problem is, is not the only big
issue. Congress has authorized an increase in the debt ceiling when it
returns from its recess in September.

Raising the debt ceiling is not necessarily a big issue. It`s been done
before. But it`s more complicated this time because there`s a good chance
Congress won`t pass a clean bill that just raises the debt ceiling. They
might pass the bill with all sorts of conditions on it that will create a
political stalemate. That`s a problem.

If the debt ceiling is not raised, there`s a small but significant
possibility the U.S. treasury could default on its debt. Even without
default, a long fight over raising the debt ceiling is a bad idea. This
happened in 2011. A similar fight led Standard & Poor`s to downgrade the
credit rating of the United States. That proved to be very costly.

Raising the debt ceiling is, by the way, distinct from adopting a U.S.
budget and that too has to be addressed right after the debt ceiling issue.
The conservatives are already demanding cuts in the budget and if they
don`t get assurances the cuts will be forthcoming, they may not support
raising the debt ceiling. You see, it`s all a complicated mess, and it
makes forecasting the stock market moves in the fall a lot more difficult
than it normally would be.

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

(END VIDEOTAPE)

HERERA: So, what will the shift in focus in the markets mean for you and
your investment?

Patrick Chovanec is the chief strategist with Silvercrest Asset Management
and he joins us now.

Welcome. It`s nice to have you with us tonight, Patrick.

PATRICK CHOVANEC, CHIEF STRATEGIST, SILVERCREST ASSET MANAGEMENT: Hello.

HERERA: I`d like to pick up what Bob Pisani mentioned, which is the debt
ceiling, because you also think that that may be an issue for investors and
for the market as a whole.

CHOVANEC: It`s certainly something that`s on our radar screen, you know?
It`s something that in the past we`ve always fixed and often they fixed it
at the 11th hour. But it doesn`t fix itself and Congress has already
missed one deadline that it`s set for itself, which was to do it before
August recess. And when they get back in September, they`ve got about a
month before Treasury says that it`s going to run out of money and may
start missing payments, which was very serious indeed.

MATHISEN: Do you sense — I mean, we made a point to point out that the
selling today in the equity markets was relatively minor. It was certainly
nothing. It was not a torrent of selling. But do you think that people
looked at the rising tensions with North Korea and those who were inclined
to sell saw that as the excuse or the precipitating reason to do so?

CHOVANEC: So, we`re already seven or eight years into a bull market and
the price of stocks right now is closer to what it would be like near the
end of a bull market than near the beginning. So, there aren`t a lot of
deals out there. So, people look for a reason. They look for a reason to
maybe get out of the market.

Remember, just in the past two years, there have been two big selloffs,
both of which were triggered by China, but then the market rebounded. So,
unless, you actually have the thing that people are worried about — unless
it actually follows through into a recession or something longer lasting,
the market tends to rebound.

HERERA: So, are you finding places to put money to work? We have —
there`s a big divergence on the street as to whether the market is fairly
valued or overvalued. Which camp would you be in?

CHOVANEC: You know, it`s tough right now because like I say, eight years
into a bull market, there aren`t a lot of deals out there. But relative —
the thing to remember is relative to safe harbors like treasuries, which
are paying barely above the rate of inflation, compared to that, stocks are
still relatively cheap historically. That doesn`t mean that they`re cheap.
It just means that you`re missing a lot of return if you go and look for a
safe harbor right now.

HERERA: All right. On that note, Patrick Chovanec, thank you very much.
Patrick is with Silvercrest Asset Management.

MATHISEN: Well, the worst-performing stock on the blue-chip Dow index
today was Walt Disney (NYSE:DIS). The company of — this following the
company earnings we told you about last night. But we also told you that
Disney (NYSE:DIS) plans to launch standalone streaming subscription
services for ESPN and Disney (NYSE:DIS) movies and TV shows, and the move
could usher in a big change for television as we`ve come to know it.

Julia Boorstin explains.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Disney (NYSE:DIS)
CEO Bob Iger announcing what he calls a strategic shift to bring Disney
(NYSE:DIS) content direct to consumers and reduce the company`s reliance on
the TV bundle, planning to launch a new direct-to-consumer ESPN
subscription service early next year. Disney`s also using a technology to
move away from Netflix (NASDAQ:NFLX), pulling all of its Disney (NYSE:DIS)
and Pixar content from Netflix (NASDAQ:NFLX) in 2019 to launch its own app
that year, an app that will include the highly anticipated sequels of
“Frozen” and “Toy Story 4” as Disney (NYSE:DIS) looks to own the value of
its content and its customer relationships worldwide.

BOB IGER, DISNEY CHAIRMAN & CEO: The investment we`re making this platform
is significant. Not everyone has another all companies have access to that
kind of product. It`s very, very — it`s vital to what we`re doing and not
all companies have the kind of brands that we have, whether it`s ESPN or
Disney (NYSE:DIS) or Pixar. So, I think that obviously gives us and quite
a competitive advantage.

BOORSTIN: The question is what competitive advantage the new ESPN service
has. ESPN has been in the spotlight, the most expensive channel in the TV
bundle. It was two years ago that Iger warned that cord cutting was
hurting ESPN`s revenue, a comment that said all media stocks reeling.

And though ESPN`s core content won`t be available as part of the new sports
subscription app launching early next year, Disney`s leaving the door open
to offer its traditional product direct to consumers down the line.

Analysts say this first step with ESPN, the new service, is just the
beginning.

BARTON CROCKETT, FBR CAPITAL MARKETS: This accelerates this balkanization
wave that is seen as a threat to the traditional TV bundle. As you get the
Disney`s of the world giving you better and better quality online, over-
the-top subscription services, sports separated from the entertainment,
others will respond. FOX doesn`t kind of sit still. They`ll respond to
this. Discovery is responding. CBS (NYSE:CBS) is responding.

BOORSTIN: Disney (NYSE:DIS) isn`t the only one betting on going direct to
consumer. On Monday, CBS (NYSE:CBS) boasting about its CBS (NYSE:CBS) All
Access and Showtime streaming services, on track for 4 million subscribers
this year, faster than expected. CBS (NYSE:CBS) CEO Les Moonves saying its
upcoming “Star Trek” show will help add new subscribers. The show will
only be available on its app, not on traditional TV.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.

(END VIDEOTAPE)

HERERA: Revenue from 21st Century Fox`s cable division rose double digits
in the most recent quarter, and that offset a decline in revenue at its
movie studio. The company, which is controlled by Rupert Murdoch, saw
overall revenue rise more than 1 percent. Profit edged past analysts
estimate, so shares of 21st Century Fox were pretty volatile in after-hours
trading.

MATHISEN: And still ahead, the high-tech push to keep you healthy.

(BEGIN VIDEO CLIP)

AUTOMATED VOICE: How do you feel?

BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT: I feel great.

AUTOMATED VOICE: Got it. Thanks for taking your assessments.

COOMBS: Coming up on NIGHTLY BUSINESS REPORT, I`ll show you how a Boston
startup is using voice assistance for healthcare.

(END VIDEO CLIP)

(MUSIC)

MATHISEN: The Foxconn plant in Wisconsin is not yet a done deal as we
reported. The Taiwanese electronics manufacturer has pledged to invest $10
billion to build a factory in that state, potentially creating thousands of
jobs. But the $3 billion in incentives promised by the governor must be
approved by the Wisconsin legislature. Today, the Republican leader in the
state Senate reportedly said it doesn`t look like he has the votes needed
to approve the incentive package.

HERERA: FBI agents conducted a raid on the home of President Trump`s
former campaign manager. Authorities executed a search warrant on Paul
Manafort`s home in late July, shortly after he registered as a foreign
agent. The raid stems from the ongoing investigation by special counsel
Robert Mueller into Russia`s meddling in the 2016 presidential election,
and possible collusion between the campaign and the Russian government.

A spokesperson for Manafort says he has been cooperating with law
enforcement.

MATHISEN: In Washington, the White House and congressional leaders say
they want to create a simpler tax code that eliminates a lot of deductions
for both individuals and businesses. Many of those deductions are very
popular especially for the people and companies claiming them.

But how much do they cost the government? Which means you the taxpayer?

Ylan Mui crunched the numbers.

(BEGIN VIDEOTAPE)

YLAN MUI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The White House wants to
simplify the U.S. tax code by closing a laundry list of loopholes. There
are roughly of them and getting rid of them would raise an estimated $18
trillion over the next decade. The Tax Foundation ranked the biggest
carve-outs and it found that most of the benefit by far goes to households
not corporations, $15.6 trillion versus just $2.7 trillion over the decade.

The largest loophole for individuals is the ability to exclude employer
contributions to your health care premiums from your income. In other
words, you`re not taxed for the money that they pay towards your medical
benefits and that`s worth an estimated $2.9 trillion. The mortgage
interest deduction which always gets a lot of attention, that`s actually
number on our list at $895 billion.

On the corporate side, the giant loophole is multinationals that defer
taxes on their foreign income. The Tax Foundation estimates that cost $1.3
trillion in federal revenue. Accelerated depreciation is worth $164
billion. And there`s also an incentive for companies to manufacture in
America. That`s worth about $152 billion.

Now, those are the biggies but they`re just the tip of the iceberg.
There`s also carve outs for railroad retirees, student loans, even foster
care. The White House says that wiping out these loopholes will free up
money to pay for and across-the-board tax cut instead.

But it`s extremely unlikely that they`ll all go away. That`s because
there`s a very vocal and often very valid constituency to fight for each
one and that`s why they exist in the first place.

For NIGHTLY BUSINESS REPORT, I`m Ylan Mui in Washington.

(END VIDEOTAPE)

HERERA: Office Depot (NYSE:ODP) struggles to bring in customers. That`s
where we begin tonight`s “Market Focus”.

The office supplies retailer said traffic stalled in the latest quarter,
and that shoppers who did make purchases spent less. That led to lower
earnings which missed expectations. The company also said it continues to
expect lower sales for the full year. Shares plunged almost 26 percent
$4.53.

Vitamin Shoppe (NYSE:VSI) posted a loss and called its latest results
disappointing. The company also suffered a greater than expected drop in
sales as its products in the sports category faced heightened competition.
Vitamin Shoppe (NYSE:VSI) also cut its same store sales outlook for the
year, but said it is making progress on initiatives to improve performance.
Investors didn`t want to hear it, sending shares down 36 percent to $6.10.

And after reporting results that missed expectations, the drug maker Mylan
(NASDAQ:MYL) cut its profit outlook for this year and next. The company
cited falling generic drug prices and regulatory delays, hindering new drug
launches. As a result, the company is pushing back all major product
launches until next year. Nonetheless, Mylan (NASDAQ:MYL) shares rose
almost 1 percent to $32.08.

MATHISEN: The French telecom giant Altice reportedly preparing to an offer
to buy Charter Communications (NASDAQ:CHTR). CNBC said Altice, which is
long wanted to expand in the U.S., hasn`t officially presented Charter with
a bid just yet. Shares of Charter rose nearly 3 percent to $400.90.

Wendy`s said it had fewer company-owned restaurants in operation in the
latest quarter. That caused revenue to slip. But a rise in franchisee or
franchisee revenue helped offset that decline as results top estimates.
Profit at the fast food chain also beat streak targets and shares pop
nearly 4 percent to $15.81.

The kid`s clothing company the Children`s Place missed sales estimates
despite higher revenue, but the company beat earnings expectations and
declared a quarterly dividend of 46 cents a share. Shares of the
Children`s Place off 4 percent to $112.60.

And the watchmaker Fossil (NASDAQ:FOSL) saw weakness in all of its product
categories as it reported a loss, along with weaker global same store
sales. Fossil (NASDAQ:FOSL) said it sees revenue falling as much as 8-1/2
percent this year. That`s much more than previously thought and shares —
get this — down a quarter today, losing 25 percent of their value to
finish at $8.87.

HERERA: As we`ve been reporting, some of the country`s biggest tech
companies are making a big push into healthcare. Companies like Google
(NASDAQ:GOOG) and Apple (NASDAQ:AAPL). And now, it`s Amazon`s turn.

That company is trying to help older Americans stay healthy with its voice-
activated assistant Alexa.

Bertha Coombs has our story.

(BEGIN VIDEOTAPE)

YVONNE MEYER, TRIAL PARTICIPANT: What are my activities for today?

AUTOMATED VOICE: Your activities today include two medication reminders.

COOMBS (voice-over): Yvonne Meyer was skeptical when her Los Angeles home
health care team signed her up for a trial using an Echo Dot.

MEYER: I didn`t understand why I needed this.

COOMBS: The 81-year-old soon became a fan of how much easier it is to get
help when she needs it.

MEYER: If I`ve fallen I have this button I can push, but it often times
takes a while for them to answer and find out what my problem is. But with
Alexa, it`s no time at all.

COOMBS: Nurses and health aides at Libertana Home Health testing the Alexa
program say it`s helped them be more responsive to clients needs and to
family caregivers.

DEBRA HARRISON, LIBERTANA NURSE: We can get access to the family members,
the same access we have to be able to check and see how the clients are
doing. So, how their mom is doing, to free up time to socialize with their
families and not worrying about their medical care.

COOMBS: The program was designed by a 2-year-old Boston startup.

UNIDENTIFIED MALE: Alexa, start Orbita.

AUTOMATED VOICE: Welcome back to your support assistant.

COOMBS: Orbita, a voice platform developer working with healthcare firms.

BILL ROGERS, ORBITA CEO: Voice is becoming that next wave of how can we
engage because it really — it really means that you`re lowering the
friction for people to be able to interact with something.

COOMBS: They`re working with programs with clients like hospitals to track
patient health at home and drug makers to collect data from trial
participants.

ROGERS: You ultimately have to make the information that your collection
actionable. And so, our system can notify electronic health record
systems.

COOMBS: They`re not working on consumer health apps. But Scripps Health`s
Eric Topol thinks Amazon (NASDAQ:AMZN), Google`s barely, and Apple`s voice
technology, combined with machine learning, could prove to be a game-
changer in consumer health.

DR. ERIC TOPOL, SCRIPPS HEALTH CHIEF ACADEMIC OFFICER: The ability to
interact with an individual consumer with their data and the world`s
medical literature, no one has done that yet. The question is, ultimately,
I think there`ll be a race between the likes of Amazon (NASDAQ:AMZN), Apple
(NASDAQ:AAPL) and Verrilli to get there first, as well as perhaps a couple
of hundred startups.

COOMBS: To do it, they`ll have to address security issues with always-on
devices.

TOPOL: What we`re seeing is going to be a whole new look at privacy HIPAA
regulations.

COOMBS (on camera): It`s still early days, but a number of the major
insurers say they are looking at possibly using the technology with their
Medicare population to help seniors page and plays at home and not in a
facility.

(voice-over): And feeling connected like Yvonne feels having Alexa at the
ready.

MEYER: I think of her as a person, but she`s really just a machine.

COOMBS: One who helps her reach the people she needs.

Bertha Coombs, NIGHTLY BUSINESS REPORT.

(END VIDEOTAPE)

HERERA: And for more on how Amazon`s Alexa and the other tech companies
are getting into healthcare, head to our Website, NBA.com.

MATHISEN: He`s a top venture capitalist who has invested in some of bio
tech`s biggest success stories. Now, he`s in a race for a cure, raising
money to try to save his own life and the lives of others.

Meg Tirrell has our story.

(BEGIN VIDEOTAPE)

MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Making
smart bets on potential new medicines is how healthcare venture capitalist
Jonathan Silverstein built a 20-year career. And mistakes just got a lot
more personal.

JONATHAN SILVERSTEIN, HEALTHCARE VENTURE CAPITALIST: And it wasn`t until I
saw movement specialist when I noticed that a slight tremor in my left leg,
that he was able to put it all together and say they`re all symptoms of
Parkinson`s disease.

TIRRELL: Diagnosed at age 49, Silverstein discovered he has a genetic form
of the disease known as Parkinson`s with GBA. Like for other forms of
Parkinson`s, there are no drugs approved to cure it or even slow its
course.

So, Jonathan and his wife Natalie decided to take action.

NATALIE SILVERSTEIN, SILVERSTEIN FOUNDATION CO-FOUNDER: Given the fact
that Jonathan works in this space, we`re just sort of uniquely positioned
to potentially make a difference.

TIRRELL: They founded the Silverstein Foundation with $10 million of their
own money.

J. SILVERSTEIN: I sent out a thousand letters to venture capitalists, the
CEOs, to hospitals, to research labs. They came back with literally dozens
of ideas.

TIRRELL: He`s been traveling the world, meeting with researchers, even
donating blood tissue and stem cells.

J. SILVERSTEIN: I had a letter from guy named Mike in Ohio. He sent me a
check for $18, and he said, I`ve got Parkinson`s with GBA. You know, let`s
get it done.

N. SILVERSTEIN: Right.

J. SILVERSTEIN: And that is as good a motivation as anything.

N. SILVERSTEIN: Right.

TIRRELL: Silverstein knows firsthand how difficult drug development is,
but he`s also helped fuel advancement of successful medicines before.

J. SILVERSTEIN: I`ve seen miracles happen and now I got to create another
miracle.

TIRRELL: Silverstein knows time isn`t on his side, but in his quest for a
cure, he`s moving at lightning speed.

For NIGHTLY BUSINESS REPORT, I`m Meg Tirrell.

(END VIDEOTAPE)

MATHISEN: And you can read more about Mr. Silverstein story on our
Website, NBR.com.

HERERA: Still ahead, why the threat of Amazon (NASDAQ:AMZN) looms large
over Blue Apron`s first earnings report.

(MUSIC)

MATHISEN: And here`s a look at what to watch tomorrow. Retailers will be
in focus. Macy`s (NYSE:M), Kohl`s (NYSE:KSS), Nordstrom (NYSE:JWN), they
all report earnings. On the economic front , we`ll find out if inflation
is ticking higher with the release of the Producer Price Index. And the
president of New York Fed will speak on wage inequality. That`s what to
watch Thursday.

HERERA: Well, there`s one more thing to watch tomorrow and that is
earnings from Blue Apron. It`s the first time the meal kit company will
update investors since it started trading publicly in late June. Since
then, investors have taken a cleaver to Blue Apron shares, which have
fallen more than 40 percent, in large part because of Amazon (NASDAQ:AMZN).

Aditi Roy has more.

(BEGIN VIDEOTAPE)

ADITI ROY, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Blue
Apron`s top brass seemed jubilant as they rang the opening bell at the New
York Stock Exchange on the day the company went public. But things turned
rocky quickly.

In the nearly six weeks since Blue Apron`s initial public offering, shares
of the meal kit company have plunged and are now trading about 40 percent
below their IPO price. Less than a month after the company went public,
co-founder Matthew Wadiak stepped down from chief operating officer to
senior advisor.

Some investors also worried about competition from Amazon (NASDAQ:AMZN),
which announced its deal with Whole Foods shortly before Blue Apron went
public and has also launched its own meal kit service. On the day Blue
Apron stock started trading, CEO Matt Salzberg addressed Amazon`s
acquisition of Whole Foods.

MATT SALZBERG, CEO, BLUE APRON: I think in some ways, Amazon (NASDAQ:AMZN)
is an ally for us in this fight. And if you know — if you think about one
of the biggest challenges that Blue Apron has had since the beginning of
time when we started Blue Apron, it`s convincing people who are
traditionalists to go to the grocery store week over week, touch their
food, feel their food before they buy it and go home with it, that when you
go to a Website and you buy it online, it will be fresher and better and a
better value.

ROY: Analysts are still bullish on the stock, pointing to the market
potential estimated to be as high as $1.3 trillion dollars. Some are also
hopeful that Blue Apron will tap into that potential by expanding its
customer base and increasing its customer retention.

(on camera): To that end, analysts will be closely watching those customer
growth and retention numbers in tomorrow`s earnings report. They`ll also
be listening for any expansion to the company`s meal offerings and added
flexibility to their plans as a way to attract more customers.

For NIGHTLY BUSINESS REPORT, I`m Aditi Roy, San Francisco.

(END VIDEOTAPE)

MATHISEN: I`ve used the competitor to Blue Apron.

HERERA: Yes, I know.

MATHISEN: I like the meals. They`re very, very good. The only problem is
they tell you it`ll take them ten minutes to prepare or 25 minutes.

HERERA: And that`s not quite —

MATHISEN: It`s a lot more than that.

HERERA: Yes.

MATHISEN: At least for me it is.

HERERA: I think it would be for me, too.

That does it for us tonight. We got to get home and do the meal kit.

MATHISEN: Yes.

HERERA: I`m Sue Herera.

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

And I`m Tyler Mathisen. We 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
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and commentators are their own and do not necessarily represent the views
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Business Report is not and should not be considered as investment advice.
(c) 2017 CNBC, Inc.

 

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