Transcript: Nightly Business Report – September 14, 2017

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

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: The hunt for yield. The
Dow closes at a fresh record. But where else can investors find return as
the market inches higher?

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Rise of the machines.
Artificial intelligence is transforming the job market. Now, one city
considers a tax on robots.

MATHISEN: Hitting a wall. Flipping houses has been hot. But now, those
same flippers are flipping out.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Thursday,
September 14th.

HERERA: Good evening, everyone, and welcome.

The Dow extends its hot streak. The world`s most recognizable stock market
index closed at a record for the 38th time this year, even as the other
major averages were off slightly. The Dow`s advance today wasn`t big. But
it was enough to put it at levels never seen before.

The blue chip index added 45 points to 22203, the Nasdaq fell 31, and the
S&P 500 was off two.

The run to records for the Dow was gradual and kind of quiet, as if the
index was just crawling along. But something is helping lift that part of
the market.

And Bob Pisani explains what it is.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Dow notched its
third record close of the week today even as the NASDAQ and S&P closed
slightly lower. The Dow remains on pace for its best weekly gain since
April. That was nearly five months ago.

Crude topped $50 per barrel for the first time since August 10th, sending
energy stocks higher. Leaders included Devon Energy (NYSE:DVN), Cabot
(NYSE:CBT) Oil, Schlumberger (NYSE:SLB) and Anadarko.

But there was some weakness out there. Other sectors that had been strong
last week ran out of steam today. So, for example, bank stocks had been up
3 to 5 percent for the week, but most closed lower by about 1 percent
today.

And retailers which has also been strong, having a great week, they also
declined today. Tiffany (NYSE:TIF), for example, was down nearly 5
percent. The Qatar Investment Authority sold 4.4 millions, that`s over
$400 million in a single sale, though Qatar still retains a nearly 10
percent stake in the company. The move wipes out a nearly two-week rally
in the jewelry maker.

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

(END VIDEOTAPE)

MATHISEN: So, with the U.S. stock market closing at yet another record
high today, where should you be looking for performance and return now?

James Camp is managing director of fixed income at Eagle Asset Management.

Mr. Camp, welcome. Good to have you with us.

JAMES CAMP, MANAGING DIRECTOR FIXED INCOME, EAGLE ASSET MANAGEMENT: Tyler,
good evening.

MATHISEN: That`s terrific.

You know, when the market gets high, as it is these days by some measures,
often what happens then is that the income portion of your total return
becomes ever more important than the capital appreciation portion of it.
So, does that argue that I need to be looking at different kinds of
securities, whether it`s preferreds or high dividend-paying stocks or even
some fixed income today?

CAMP: Yes, Tyler, we`re a big believer that we want to invest in companies
that are sharing the good fortune that they`ve had over the last couple of
years with shareholders. More and more to us, on the income side of the
equation. That`s to be an owner of the company versus a lender to the
community.

So, when we look at yield and income oriented investors, for us right now,
given the relatively low pay ratios versus history, the relative health of
the risk markets for a variety of reasons, we do favor the ownership side
of the balance sheet versus being a bond holder.

HERERA: What about going outside of the United States and looking perhaps
at higher yielding instruments in, say, either emerging markets or Europe,
which has been doing quite a bit better than a lot of people thought it
would?

CAMP: Yes, Sue, I would say the risk side of the European market is
certainly productive. The valuations are better for the equity markets
over there. They seem to have turned the corner.

We are very skeptical however on the financial system and the indebtedness
of the European banking system. So, we might stay away from pure debt
instruments overseas and remind ourselves, sovereign yields are still
largely negative, even in the Eurozone. So, it`s a difficult animal to be
an income-oriented investor overseas right now.

MATHISEN: You said you prefer the equity or ownership side of the balance
sheet over the debt side. That said, where are you finding value? What
categories or kinds of stocks?

CAMP: Well, the screens for us really are yields that are above market.
The S&P right now is around 2 percent. We like to have about a 50 percent
premium to that, so around a 3 percent yield. Names that are falling into
our purview are some of the technology names that are now more mature and
are passing through cash flow.

But, you know, as Bob mentioned on the first part of the discussion
tonight, there is a tearing that`s going on in the equity markets, there
are winners and losers now. And we`re beginning as central banks start to
change the rate markets, to separate —

MATHISEN: Right.

CAMP: — really good from really bad, and that`s creating good value
opportunity for some of the stocks that were frankly under-yielding a few
months ago.

MATHISEN: All right. Very quickly, how are you doing in St. Petersburg,
Florida?

CAMP: Appreciate you asking. We`re doing very well here at the home
office. A lot of associates are still without power. So it`s a difficult
slog.

But Florida is ready and we`re all rallying around each other. We
appreciate your thoughts.

MATHISEN: Good to see you bouncing back. James Camp with Eagle Asset
Management.

CAMP: Thanks.

HERERA: Some of the weakness in today`s market came from concern over
inflation. Prices last month rose, thanks to higher housing and gas costs,
which are likely to fall as rapidly as they advanced because of heavy
damage to major refiners in the Houston area following Hurricane Harvey.
The consumer price index advanced 4 percent in August, it`s not biggest
increase since January. But surprising many in that report was a
deceleration in the cost of medical care, rising at its slowest pace since
1965.

MATHISEN: There were mixed messages today on immigration, an issue watched
very closely by businesses. Hang on here because it`s a twisty story.

Late last night, there were reports the president and Democratic leaders
had come to some sort of agreement on the Deferred Action for Childhood
Arrivals or DACA program. That`s the Obama era plan the president
cancelled a week or so ago. It deferred deportation for children brought
illegally into the U.S. by their parents.

But this morning, the president tweeted that no deal was made last night on
restoring DACA. Then he said that he and congressional leaders were fairly
close to an agreement, provided it was paired with massive border security.
Later, touring hurricane damage in Florida, he said, quote: If there`s not
a wall, we`re doing nothing. He also said wall funding needn`t be a part
of the DACA agreement.

Still later in the day as he reboarded Marine One, he said he remains
committed to finding a way to reinstate some variant of the program.

Separately, House GOP Speaker Paul Ryan distanced him from the idea that
any deal had been struck.

HERERA: And the president also said today that the tax reform package
being crafted by lawmakers will be revenue neutral if economic growth
spurred by the legislation is taken into consideration. On Capitol Hill,
the first hearing on tax reform took place. But at the start, the chair of
the Senate Finance Committee had a blunt message. He made it very clear
that negotiators from the White House, Senate, and House, would not dictate
tax reform to his committee.

(BEGIN VIDEO CLIP)

SEN. ORRIN HATCH (R), UTAH: Anyone with any experience with the Senate
Finance Committee knows that we are not anyone`s rubber stamp. A bill,
particularly on something as consequential as tax reform is going to pass
in this committee, but the members of the committee will have to be
involved in putting it together.

(END VIDEO CLIP)

HERERA: Senator Hatch said any tax framework is only a guidepost and not a
binding commitment.

MATHISEN: The Treasury Department imposed financial sanctions today on
Iran. Eleven people have been sanctioned for supporting Iranian activity
the White House considers hostile, including cyber attack against U.S.
financial institutions. The action freezes any assets that people and
companies hold in the U.S. and bars U.S. citizens and residents from doing
business with them.

HERERA: The Trump administration late yesterday blocked a Chinese-backed
investor from buying Lattice Semiconductor (NASDAQ:LSCC). It`s the fourth
time in a quarter century that the president has prevented foreign takeover
of an American company. And China is not happy.

Eunice Yoon reports from Beijing.

(BEGIN VIDEOTAPE)

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: China has what`s
become a standard reaction to any steps that foreign government takes to
try to curtail Chinese business activities overseas. It cried
protectionism.

At a regular press briefing, the commerce ministry expressed its concerns,
saying, we believe that conducting a security review for an investment deal
in sensitive sectors is a country`s legal right, but it should not become a
tool to promote protectionism. We hope the relevant, the U.S. in this
case, can see such normal business activities objectively and fairly and
provide fair treatment.

The state press went one step further with the idea that China is the one
that`s being treated unfairly. The communist party paper “The Global
Times” pointed out in an editorial that China is not in the top ten
compared to the U.K., Japan, or Germany, when it comes to foreign direct
investment in the U.S., but that nearly one quarter of CFIUS cases involve
Chinese companies. CFIUS is the committee that reviews foreign investments
in the U.S.

The paper said it`s disturbing to see the U.S. plan to expand CFIUS reviews
of Chinese investment in other so-called sensitive technologies such as an
artificial intelligence. And it went on saying, as more Chinese companies
seek to investment abroad, the U.S. may regret a lost opportunity if it
insists on protectionism.

There is an implicit threat in those comments, and China has made threats
repeatedly but so far, Beijing has not announced any actual countervailing
steps after Trump`s decision.

For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.

(END VIDEOTAPE)

MATHISEN: Still ahead, taxing robots? Sounds crazy. But one city says,
if they`re taking jobs, why not?

(MUSIC)

HERERA: The head of Moscow-based Kaspersky software will be heading to
Capitol Hill. Eugene Kaspersky has agreed to testify later this month
about the security of the cyber firm`s products as long as he can get an
expedited visa. As we reported yesterday, Kaspersky`s antivirus software
was ordered off government computers by the Department of Homeland
Security.

MATHISEN: The Federal Trade Commission is investigating the massive data
breach at Equifax (NYSE:EFX). The FTC doesn`t normally comment on ongoing
investigations but the agency`s acting director of public affairs confirmed
the probe in light of the intense public scrutiny. Shares of Equifax
(NYSE:EFX) were off another 2 percent today and are down more than 30
percent over the past week.

HERERA: Senator Al Franken has some concerns over Apple`s new iPhone which
can be unlocked with a scan of your face. The Minnesota senator asked the
company to provide more information about how facial recognition will
affect users` privacy and security. The senator also wants to know what
happens to that face scan data and how Apple (NASDAQ:AAPL) plans to respond
to requests from law enforcement for access to the facial recognition
system. The senator asked for a response by October 13.

MATHISEN: It`s a radical idea, taxing robots. Bill Gates first suggested
it earlier this year. And now, a big California city is taking it one step
further.

Aditi Roy is in Cupertino, California.

(BEGIN VIDEOTAPE)

BILL BEYER, HOTEL GUEST: Hey, can I get some water?

ADITI ROY, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Bill Beyer
is traveling for work this week. He came back to his hotel room after a
run and realized he needed some water. But when he opened the door —

BEYER: Oh, sweet. Thank you.

ROY: — he got his water and a surprise. A robot at his door.

Beyer`s just one of the customers benefitted from the Robot Butler or
Butler as he`s affectionately called at the Aloft Hotel in Cupertino,
California. Butler runs deliveries to customers which the hotel`s general
manager says frees up the front desk person to do other things.

ANDY EVERS, ALOFT CUPERTINO GENERAL MANAGER: It just makes it easier for
the staff, it takes up menial tasks. So, deliveries, things like that,
allows us to have — people stay at the desk and stay engaged with our
customers.

ROY: Butler cost about $24,000 a year, about $6,000 less than what an
average front desk worker makes in a year at the Aloft. That doesn`t
include things like vacation time and benefits. And remember, people often
get raises over time. While the cost of robots will get cheaper as they
become more common.

But some believe robots like Butler are hurting the U.S. economy by taking
jobs away from humans.

JANE KIM, SAN FRANCISCO BOARD OF SUPERVISORS: If we don`t prepare now, and
if we don`t support the automation that`s going to happen, I think that it
could potentially be an incredible disaster with 37 to 47 percent of jobs
that currently exist displaced by robots.

ROY: Jane Kim is a supervisor in San Francisco. She`s worried about
robots and automation displacing workers and wants to do something about
it. Inspired by Bill Gates` endorsement of a robot tax in an interview
earlier this year, Kim has created a committee to explore the idea. If a
robot tax is implemented, robots could be taxed just like people are.
Business owners who use them would pay income tax, even Social Security.

Eventually, Kim hopes to have a ballot initiative for California voters or
a bill for legislators to decide upon.

KIM: I believe it`s going to be a portfolio of policies that are going to
help us prepare our workers for the future of work.

ROY: I a subject that`s sparking increasing controversy, as more and more
robots do things that people do, in factories, research labs, some are even
making pizza.

One recent report from Forrester found that automation would lead to a net
loss of nearly 10 million jobs in the U.S. by 2027. But critics say a
robot tax is flawed, because it kills innovation. And with so much
automation around us, it`s too hard to define exactly which robots would be
taxed. Butler`s creator says, I believe automation will create more jobs
than it eliminates.

While the hotel`s GM says Butler isn`t taking away any jobs from humans,
Beyer says he didn`t mind talking to a robot instead of a human.

BEYER: I feel the robot had a personal touch of its own. And I would
rather be prepared to deal with other people than to just get surprised,
especially in an intimate setting like your own room.

ROY (on camera): If a robotax is passed, Kim hopes that the money raised
will go towards worker retraining or education.

Here at the Aloft Hotel, the general manager tells me Butler makes between
15 to 20 deliveries a day, making him just as productive as a human worker.

For NIGHTLY BUSINESS REPORT, I`m Aditi Roy, Cupertino, California.

(END VIDEOTAPE)

HERERA: Mark Hamrick with Bankrate.com joins us to talk about this.

Mark, welcome. Nice to have you here.

MARK HAMRICK, SENIOR ECONOMIC ANALYST, BANKRATE.COM: Nice to be back, Sue.

HERERA: Aditi kind of highlighted this. But, you know, this is a little
bit of a slippery slope, if you decide to tax, quote/unquote, robots,
what`s the difference between robots and automation on an auto assemble
line? I mean, it`s kind of murky, isn`t it?

HAMRICK: It`s a great question, Sue, because first of all, we have to ask
the question, what is it we actually want to tax? Are we trying to tax
something that looks like a human, that`s coming to the hotel room, or are
we talking about the broader aspect of automation, which is very present
now in our everyday lives?

And so, in the piece, we heard the figure about $6,000. It will be curious
to see what they think, for example, the amount of tax should be attached
to that. And then what do you do with the revenue? Because if you don`t
take the revenue and apply it to helping the workers who are displaced,
then you`re really causing a bigger problem.

MATHISEN: Yes, I don`t want to quarrel with Bill Gates, he`s a heck of a
lot smarter than I am. But this does feel like a tax on progress, like
taxing cars because they put a lot of horses out of work.

HAMRICK: Right. And, you know, I don`t think Cupertino wants to be — or
San Francisco wants to be hostile to technology. But there is a looming
potential problem on the horizon, because I think, you know, we watched the
advance of technology these days, and it seems to be accelerating. And
that means if nothing else, the displacement of workers by that technology
is accelerating. And we know that that has caused some unintended
consequences in the United States, as has globalization.

HERERA: How much of this do you think is stemming from the fact that if a
robot or automation displaces a human, cities are not getting the tax
receipts and the monies coming in from that human that is paying their
state and local taxes?

HAMRICK: Yes, and robots don`t vote against taxes, right?

HERERA: Right.

HAMRICK: So, they`re a convenient target. I think about, we`re here in
Washington, D.C., there`s a massive casino nearby that costs about $1
billion to build. Cities all across the country have embraced that revenue
really as a means of, you know, trying to capture more dollars for their
government. And they`ve sort of lowered the standard on whether they think
that`s a problem or not.

I do think this is going to be a growing issue because automation and
robots are here to stay. That`s going to launch a growing debate, the
debate not going to go away anytime soon.

HERERA: On that note, Mark, thanks so much. Good to see you again.

HAMRICK: Thank you so much.

HERERA: Mark Hamrick with Bankrate.com.

MATHISEN: A rise in the cloud helps results at Oracle (NASDAQ:ORCL), and
that`s where we begin tonight`s “Market Focus”.

After the bell, the software giant reported stronger than expected earnings
in sales and attributed those strong results to strong momentum in the
company`s cloud business. Shares initially rose in after hours trading,
but ended down a penny.

And Pfizer (NYSE:PFE) said it saw positive trial results for an
experimental prostate cancer drug. The medication, when used in
combination with another medicine, helped patients live longer than if they
underwent just the standard treatments. Pfizer`s shares up by nearly 2
percent to $35.73.

And the Food and Drug Administration approve Amgen`s cancer treatment.
That`s a biosimilar to an existing drug made by Roche. It is the first FDA
approved biosimilar for use in oncology. The agency said the approval of
biosimilars can help spur competition and lead to lower health care costs,
ultimately. Amgen`s shares fell $189.44.

HERERA: The venture capital firm Social Capital Hedosophia raised $600
million in its initial public offering on the New York Stock Exchange.
Social Capital is known as a special purpose acquisition company or SPAC.
It plans to invest in private tech companies that are the no yet public.

The company`s CEO said Social Capital has found a way to appeal to tech
companies that want to go public without taking the traditional IPO route.

(BEGIN VIDEO CLIP)

CHAMATH PALIHAPITIYA, SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CEO: What we`re
going to use the SPAC for is to curate, which we did, about 25 extremely
well-known, thoughtful investors who we believe represent the best of the
best. Neutral funds, sovereign wealth funds, extremely well-known blue
chip hedge funds. And now together what we`re going to try to do is to get
to a better understanding of great companies, and then help those companies
exist in a more stable context in a public market.

(END VIDEO CLIP)

HERERA: Shares of Social Capital rose 3 percent in their debut to $10.31.

The car safety supplier Autoliv (NYSE:ALV-Z) (NYSE:ALV) said that it is
weighing the decision as to whether or not to separate into two listed
companies. Autoliv (NYSE:ALV-Z) (NYSE:ALV) said it is considering
splitting its electronics components business from the division that
focuses on airbags and steering wheels. Autoliv (NYSE:ALV-Z) (NYSE:ALV)
said that the move would allow its electronic segment to better compete in
a market that`s seen more innovation in autonomous driving technology.
Shares jumped 12 percent to $127.15.

And the homebuilder Lennar (NYSE:LEN) said it expects home deliveries to be
delayed this quarter due to impacts from Hurricanes Harvey and Irma. The
areas impacted by the two storms make up about 40 percent Lennar`s annual
home building revenue. Shares were off fractionally to $50.89.

MATHISEN: President Trump went to Florida to survey the damage from
Hurricane Irma today. He met with local officials and first responders to
thank them for their work. And he got an update on the recovery from
Florida governor

(BEGIN VIDEO CLIP)

GOV. RICK SCOTT (R), FLORIDA: We`re working hard to get power back on.
We`ve restored over 4 million homes already. We`re down to about 25
percent of our homes. And every person in the state wants his power back.
We all want our power back.

But I want to thank them for what they`re doing so far. We have high
expectations. We want the power back as fast as possible.

(END VIDEO CLIP)

MATHISEN: One of the hardest hit parts of the state, of course, the
Florida Keys, famed Duvall Street, lined with debris, homes and businesses
damaged, some severely. Others, of course, completely destroyed.

HERERA: So, as the cleanup efforts get under way, freight companies are
trying to get operations up and running, so goods can get to where they
need to be. Morgan Brennan has our story.

(BEGIN VIDEOTAPE)

MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: On the heels of two
hurricanes, transportation carriers are scrambling to get freight moving
once again.

CHRIS WETHERBEE, CITIGROUP GLOBAL MARKETS: It actually happens quicker
than you think. The companies are already staging or staged prior to the
weather, you know, all of the resources they need to, you know, repair and
rebuild. And they do it essentially immediately, as soon as they can get
in.

BRENNAN: Ahead of Irma, shippers diverted ocean cargo to ports further
north along the coast, and trucks and trains were moved out of the storm`s
path. But as infrastructure is assessed and repaired, companies are
getting back to work and shipping demand is spiking.

EILEEN HART, DAT SOLUTIONS: Major storms in two contiguous regions of the
country are creating a lot of more demand for trucks to serve those areas.
Both in terms of resupplying the areas with supplies that are needed, in
addition to supporting the U.S. economy. Immediately after the storms,
there is a resurgence or a need to get supplies, refrigerated goods,
foodstuffs into those areas. And then in the longer term, as those areas
start to rebuild, construction and other materials need to go into those
areas.

BRENNAN: Trucking rates soared in the week between Harvey and Irma,
according to DAT Solutions. While it`s still too soon to know the full
impact of Irma, rising diesel prices and demand for materials as recovery
commences are expected to propel rates even higher.

Some carriers are already sending convoys into Florida. Warner Enterprises
deployed 100 big rigs south, filled with hurricane relief supplies from
Home Depot (NYSE:HD).

The interruptions to business and damage to infrastructure will dent
transport stocks` earnings in the near term especially since some shipments
will never are recouped.

WETHERBEE: It`s really all about sort of the disruptive aspect of not
having any volume for a period of time to move. And then there`s going to
be some repair and damage dynamic that runs through the cost side. And
then as we move forward over the course of the next few weeks, we would
expect sort of a gradual recovery. It doesn`t happen all right away. But
we should start seeing volume growth again in the next couple of weeks.

BRENNAN: So it`s back to work, even for the railroads, which are fixed
networks most vulnerable to damage. As companies directly in the
hurricane`s path get tracks fixed and trains running, it`s good news for
investors and also consumers, since the peak holiday season is already in
sight.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan.

(END VIDEOTAPE)

HERERA: Coming up, why home flippers can`t flip like they used to.

(MUSIC)

MATHISEN: Mortgage rates remained at their lowest level of the year,
according to Freddie Mac. The 30-year fixed rate mortgage averaged 3.78
percent last week. The 30-year is the most widely held type of U.S. home
loan.

HERERA: House flipping has seen a huge run-up in the past few years, of
course as investors take advantage of tight supply in the market and also
those fast rising home prices. But something is now holding those
investors back.

Diana Olick explains.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): House
flippers are running into high home prices and that`s hitting their bottom
line. After two straight years of gains, the rate of home flipping,
defined as buying and selling a home in the same calendar year, flattened
in the second quarter of this year, according to a new report from ATTOM
Data Solutions.

Nationwide, close to 54,000 single family homes and condos were flipped in
the second quarter, which is more than 5.5 percent of all home sales during
that period. The rate was down from about 7 percent in the previous
quarter and unchanged from a year ago.

So, why the slowdown? A drop in profits. Home flippers saw an average
gross return of more than $67,000 in the second quarter, representing a 48
percent return on investment. That`s down from nearly 50 percent compared
to a year ago. It also marks the lowest return in nearly two years, after
peaking at 51 percent in the fall of last year, average grows flipping
returns nationwide have decreased for three consecutive quarters.

Flipping used to be an all cash business. But in order to compete in a
market with higher and higher home prices, more flippers are now using
mortgages, upping the ante and the risk in an already risky real estate
game.

I`m Diana Olick in Washington.

(END VIDEOTAPE)

HERERA: And that does it for us tonight on NBR, I`m Sue Herera. Thanks
for joining us.

MATHISEN: And thanks from me as well. I`m Tyler Mathisen. Have a great
evening, everybody. And we will see you back here tomorrow night.

END

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