Transcript: Nightly Business Report – October 23, 2017

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

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Win streak snapped. Stocks
take a breather from their record run as investors gear up for a very busy
earnings week.

Retirement crisis: 401(k) plans may be safe for now, but that does not
change the fact that many Americans have little save for their later years.

New bellwethers. You know, GE used to be one, but there may be other
companies that better reflect current economic trends.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for this Monday,
October the 23rd.

Good evening, everybody. I`m Bill Griffeth, coming to you tonight from the
New York Stock Exchange. Both Tyler Mathisen and Sue Herera are off
tonight. So, it`s just you and me. Let`s do this, shall we?

Here on Wall Street, stocks pulled back from record levels to start this
week. The Dow snapped its six-day win streak as shares of General Electric
(NYSE:GE) weighed on investor sentiment and saw their biggest decline in
six years. We`ll have more on that story in a moment.

But, first, the closing numbers. The Dow did hit an intraday high today in
record territory, but finally fell 54 points at the close to 23,273. The
Nasdaq was down by 42 points, the S&P fell by 10.

The prospects of tax reform has long been a big driver for this stock
market, but one tax proposal that got a lot of a buzz over the weekend was
changing popular 401(k) retirement plans. That`s likely not going to
happen.

But the president this morning tweeted: There will be no change to your
401(k). This has always been a great and popular middle-class tax break
that works and it stays.

There had been reports that Republicans in Congress were weighing a
proposal that would significantly reduce the income that workers could save
in these accounts as a way to offset lost revenue with tax reform.

And all that talk about retirement just highlighted one major problem right
now: most Americans don`t have enough save for their later years.

Bob Pisani has the grim details for us tonight.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The dust-up over 401(k)
is a good opportunity to remind everyone how bad the state of the average
person`s retirement plan isn`t cutting 401(k)s. That only make it worse.

The good news the total value of investment in 401(k)s and other defined
contribution plans are at a new high, thanks to the stock market rally.
The bad news is the numbers are still terrible. Americans don`t save
enough for their retirement with or without 401(k)s.

According to Vanguard, 94 million Americans are covered by defined
contribution accounts like 401(k)s. Assets are in excess to $7 trillion.
Oh, sounds like a lot of money. Well, it is.

But when you really drill down, there`s not a lot in the accounts. The
median account for 35 to 40-year-olds has only $23,000 and 65 and over,
only have $60,000.

Let`s assume at 65, you`re going to live another 20 years, $60,000 isn`t
much to live on spread out over 20 years. We need personal savings because
the contributions from Social Security and pensions are modest. It`s about
$13,000 a year for Social Security right now, a little more than $10,000
per year from private pensions, but only a third of Americans collect
pensions, so private savings are critical for helping people through
retirement.

But most people don`t even contribute the maximum out to their 401(k)s
likely because they either can`t afford to or they`d rather spend the
money. There`s been other proposals floated to help investors save money.

A universal savings account where investors contribute after-tax money, but
the gain on the accounts are tax-free, has been successfully implemented in
Canada and the U.K. Investors could take out money at any time without
paying taxes or penalties.

One thing`s for sure, if we don`t find some way to get people to save more,
a lot of people are going to work into their 80s or they`re going to
outlive their money.

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

(END VIDEOTAPE)

GRIFFETH: All right. Here to talk more about this retirement crisis and
what you can do maybe to maximize your savings, joining us tonight, Diane
Oakley is executive director at the National Institute on Retirement
Security. Eric Aanes is president of Titus Wealth Management.

Folks, thank you both for joining us tonight.

Diane, I well remember when defined contribution plans were introduced back
in the 1980s, with IRAs and 401(k)s. Here we are at 30 years later, and we
see here that the median amount saved by a 65-year-old today is only
$60,000.

What happened?

DIANE OAKLEY, DIRECTOR, NATIONAL INSTITUTE ON RETIREMENT SECURITY: You
know, I think what happened is a lot of Americans just couldn`t afford to
say if we hear from people saying that with their salaries being somewhat
constrained and not growing that much, they just can`t save enough.

GRIFFETH: Eric, what do you think? I mean, people are told, save a
certain amount, and then let the money grow. But was that a flawed message
to Americans?

ERIC AANES, PRESIDENT, TITUS WEALTH MANAGEMENT: Well, people need to start
earlier and save longer that`s really the message. In the old school of
defined benefit plans where company took care of you, they`re just no
longer exist and I think it`s all about education and making sure that
really people understand what — as Albert Einstein call it the eighth
wonder of the world, compound interest — understand what you`d have today
and what you could end up in the future if you`re diligent with your plan.

GRIFFETH: But what about Diane`s point that people just can`t afford to
save as much as they should right now?

AANES: Well, that`s a — that`s a whole another animal. The end result is
you`re going to have to do better budgeting. You`re going to have to
figure out where you can make some modifications to your budget and make
hard decisions if you do indeed want to reach your retirement goals.

GRIFFETH: Dianne, the current camp now for a 401(k) to be — for you to
save is, what, $18,000 year? Is that what it is now?

OAKLEY: Yes, it is.

GRIFFETH: And they`re talking — they were talking, I don`t know, they
still haven`t taken this back yet that may be reducing that sharply to
$2,400. What would that do to the average person saving for retirement
right now?

OAKLEY: You know, the average person just doesn`t have that much to save
as it is, and if you cut that back so much when they get towards their
later years where maybe the kids have gotten through college and they`ve
got an ability to save, and they could finally max out, if they`re going to
max out and the new max is $2,400 where it used to be $18,000, and it`s
hard to catch up for what they lost over those years.

You know, people today tell you, you got to start in your 20s saving
fifteen percent of your pay. If you don`t do that until you`re 35 or 40,
you`ve almost got to do 30 percent of your pay.

And most people —

GRIFFETH: Right.

OAKLEY: — can`t afford their bills today and do that kind of saving for
retirement.

GRIFFETH: And, Eric, it`s been a sort of a double whammy because we can`t
be saved by the bond market, the fixed income market, because interest
rates have been so low for the last decade and there`s no sign they`re
going to rise that appreciably in the near future, right?

AANES: That`s true and that`s why you really want to reverse-engineer your
plan and that that comes back to the fact of if I`m 25 or 30 today, and I`m
going to retire and I`m 65, well, how much do I need to save and what kind
of rate do I need to earn and really taking a look at your time horizon to
make sure that you can — you can maybe be a little more aggressive as you
said, you know, fixed income if rates do rise. It doesn`t — doesn`t sound
like a wonderful time for bonds. So, folks may have to get a little more
aggressive.

GRIFFETH: I suspect we`re preaching to the choir with our audience here on
the NIGHTLY BUSINESS REPORT they`re very savvy investors to begin with.

But, Eric, let`s assume we`ve got a 65-year-old out there who has saved the
median of $60,000. What do they do now?

AANES: Well, that`s a great question, Bill, because the safe and secure
method of investing just doesn`t exist anymore. You can`t get anything at
the bank, and if you put it in bonds, the yields are pretty low. So, they
do have to kind of venture into, you know, a bull market that maybe kind of
in the third or fourth quarter here. So, that makes the decisions even a
little bit harder, but if your time horizon is long enough having a
diversified plan can still make some sense for you.

GRIFFETH: Diane, there are many types of plans these days, you know, with
the Roth IRAs that are out there, in addition to the traditional IRAs, the
catch-up IRAs. I mean, is it too complicated for the average person who
just doesn`t pay that much attention to investments these days?

OAKLEY: You know, it is complicated. It used to be simple when grandpa
had a pension plan, and it actually worked pretty well for grandpa. The
real question is, as you`re looking at retiring and you`ve got different
products to save, if you don`t have it through your employer, it makes it
that much harder because you don`t have the convenience of having money
come right out of your paycheck and go right into your retirement account.

And so, that`s a key and an important thing to make sure that people have
the access through an employer, and I think if you go to a low cap, you`d
end up taking away the incentive for employers to offer plans.

And quickly before we go, I know some states for small business owners that
can`t afford to offer a plan of some kind Oregon, for example, now has
these retirement plans much like a college savings plan. Is that a good
idea to get into if you can?

OAKLEY: It is actually a good — I think a lot of these states are
starting to look at the fact of how many people have nothing saved. If you
look at the group of people aged 64 to 55, those individuals, you`ve got
about 60 percent of them who have less than one times their salary saved.
So, how do we get people to nudge into retirement savings by having it be
automatic like the plan is in Oregon. And it is in about six other states
that are looking to bring these plans on board.

GRIFFETH: Folks, thank you. Diane Oakley with the National Institute on
Retirement Security and Eric Aanes with Titus Wealth Management, thanks for
joining us tonight.

AANES: Thanks, Bill.

OAKLEY: Thank you, Bill.

GRIFFETH: As we mentioned, one stock weighing on the market today was
General Electric (NYSE:GE). Shares of GE saw their biggest decline in six
years today, a number of brokerages cut their price targets on the stock,
citing higher chances of a dividend cut following that disappointing
earnings report last Friday. The stock was off more than 6 percent on
heavy volume.

GE was once considered a bellwether for the economy and whether it still is
or not is up for debate right now. But today, some are looking to a new
batch of companies that they say are more reflective of the changing times.

Dominic Chu has our story tonight.

(BEGIN VIDEOTAPE)

DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT: According to the
Merriam-Webster Dictionary, bellwether is defined as one that takes the
lead or initiative, also an indicator of trends. Now trends in the stock
market change over time and so do the bellwethers of the market. In
today`s environment, it`s easy to see Apple (NASDAQ:AAPL) as a market
bellwether. That`s what Jones Trading chief market strategist Michael
O`Rourke says. Not only is it the biggest company out there, it`s also a
blend of technology and retail, which means it could be viewed as an
indicator of the consumer.

It`s why Northern Trust (NASDAQ:NTRS) chief investment strategist Jim
McDonald says he picked Walmart. He says the U.S. is a consumer-led
economy and Walmart is a good measure of consumer spending. Some
estimates, of course, have over two-thirds of our economy driven by
consumer spending.

Speaking of economic activity, Wunderlich Securities chief market
strategist Art Hogan says today`s bellwether is FedEx (NYSE:FDX). Simply
put, he feels like it`s impossible to hide economic activity from
transportation companies like FedEx (NYSE:FDX), so it acts as a good
indicator.

And when it comes to a conglomerate, look no further than Berkshire
Hathaway (NYSE:BRK.A). Huntington Private Bank chief investment officer
John Augustine thinks Warren Buffett`s company has a set of businesses that
are basically a smaller sample of the American economy, with everything
from insurance to retail to railroads to energy, et cetera.

Now, everyone has a different view on what companies are the best
indicators of the market or economy right now, but one thing is for
certain, America and its top companies will always have to evolve with the
times.

For NIGHTLY BUSINESS REPORT, I`m Dominic Chu.

(END VIDEOTAPE)

GRIFFETH: This is the busiest week for earnings, with more than 170
members of the S&P 500 reporting results this week, twelve Dow components
among them. And that includes McDonald`s (NYSE:MCD), which has seen its
stock rise about percent just this year, and now, investors want to know if
there`s a golden opportunity that could send that the shares even higher.

Kate Rogers (NYSE:ROG) tells us what to look for when McDonald`s (NYSE:MCD)
reports first thing tomorrow morning.

(BEGIN VIDEOTAPE)

KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Hurricanes Harvey and
Irma could have an impact on McDonald`s (NYSE:MCD) results when the fast-
food giant reports earnings. The fast food chain has a large presence in
both Florida and Texas, but many say that impact could be temporary and are
focusing instead on delivery driving sales growth. McDonald`s (NYSE:MCD)
has been testing delivery in the U.S. via its McDelivery partnership with
UberEATS, which is now in countries and locations and could positively
impact same-store sales growth.

R.J. HOTTOVY, MORNINGSTAR: It has potential to add maybe a point, maybe
two points of same store sales growth in this quarter particularly with the
average transaction size being larger than in-store transactions. That`ll
be the big number I think a lot of people be looking for is, you know, what
kind of contribution this quarter and more importantly what can we expect
going forward.

ROGERS: Another thing to keep an eye on our sales performance of newer
menu items, including buttermilk chicken tenders and the company`s
continued push into fresh beef in 2018. Last quarter the company offered
in earnings beat, thanks in part to discounts on McCafe beverages and
sodas, that national value promotion again will be in focus for tomorrow`s
report.

HOTTOVY: Delivery, the experience of the future kiosk ordering and mobile
order and pay, we need to see validation that this is on track and can be a
major contributor in the future. Last couple quarters, we`ve seen benefits
from these programs internationally, and now start — and now it`s time for
those to start materializing in the U.S.

ROGERS: Also look out for any mention of the experience of the future he
asks should be in 2,500 locations by the end of the year and mobile
ordering should be nationwide.

For NIGHTLY BUSINESS REPORT, I`m Kate Rogers (NYSE:ROG).

(END VIDEOTAPE)

GRIFFETH: And still ahead, is big tech moving in on the turf of big banks?

(MUSIC)

GRIFFETH: It turns out that Amazon (NASDAQ:AMZN) has received — get this
— more than 230 proposals from cities and regions around the country,
hoping to be the home of the company`s second headquarters. Proposals were
due last week. Amazon (NASDAQ:AMZN) says that tax breaks and grants would
be a big deciding factor and that it promises to bring 50,000 new jobs and
to spend more than $5 billion on new construction. The proposals came from
states as well as Washington, D.C. and Puerto Rico, three Mexican states
and six Canadian provinces.

So, how often do you use cash these days? Probably a lot less than you
used to, and that`s because more payments are going digital. But it`s not
necessarily the banks that are leading the way, but instead big technology
firms.

Deirdre Bosa reports from the Money 2020 Conference in Las Vegas.

(BEGIN VIDEOTAPE)

DEIRDRE BOSA, NIGHTLY BUSINESS REPORT CORRESPONDENT: The future of money
big banks aren`t leading the way technology companies are. That`s why some
of the biggest speakers that this year`s Money Conference are from Apple
(NASDAQ:AAPL), Amazon (NASDAQ:AMZN) and Facebook (NASDAQ:FB).

Apple`s vision of the future includes buying and selling things through the
iPhone and sending money through iMessage.

Amazon (NASDAQ:AMZN) sees you ordering from restaurants using its app and
paying with the information already stored in your account this was all
once the turf of traditional banks but if technology companies have their
way, that won`t be the case for very long. Tech giants are increasingly
moving further into payments, especially as banks lag behind in the
development of technologies like cloud computing, artificial intelligence
and big data analytics.

It`s still early days for tech giants and financial services, but they`re
growing fast and a big question: would they want to actually become banks
and face the same regulations the banking industry does?

MAX LEVCHIN, AFFIRM FOUNDER AND CEO: As any one of these companies decides
to get into anything from banking to a simpler universe of lending or
payments, they have to prepare for the entirety of the business to be
impacted by the regulatory oversight. I think that that`s a very complex
choice.

BOSA: An Accenture study found that one out of three consumers globally
would consider using Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOG) or Facebook
(NASDAQ:FB) for banking services.

UNIDENTIFIED MALE: I think big tech represents an opportunity for the
banking industry to partner and capitalize on a lot of the innovation
that`s available in the market, that the banks may not have the ability to
innovate around themselves.

UNIDENTIFIED FEMALE: Yes, they will offer some banking services, but they
don`t have to be a bank to do that because you have regulations and, you
know, the regulatory authorities and if the regulations are so strict, it`s
hard to be a bank.

UNIDENTIFIED FEMALE: If you can become a trusted — it`s around trust,
right? If you can establish the trust with a consumer, and I think both of
those have the brands and the depths and the history to actually — to
actually establish that trust with consumers, and they don`t compromise
that trust, then absolutely, they could become banks, because banks are all
built on trust.

BOSA: Even as companies like Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN)
push further into financial services, banks are relying on them more
heavily for their expertise, and it could prove difficult for them to catch
up with those capabilities if the competition heats up.

For NIGHTLY BUSINESS REPORT, I`m Deirdre Bosa, Las Vegas.

(END VIDEOTAPE)

GRIFFETH: Cisco (NASDAQ:CSCO) strikes a deal with BroadSoft (NASDAQ:BSFT)
and that`s where we begin tonight`s “Market Focus”.

The networking technology company is paying nearly $2 billion to acquire
BroadSoft (NASDAQ:BSFT), which makes cloud-based communication software.
The deal is aimed at growing Cisco`s subscription-based revenue and
expanding the company`s services. Cisco (NASDAQ:CSCO) shares closed
fractionally higher today to $34.35, shares of BroadSoft (NASDAQ:BSFT) rose
more than one-and-a-half percent to $54.80.

Meanwhile, toy maker Hasbro (NYSE:HAS) reported stronger than expected
earnings despite saying the results were hurt by the bankruptcy of its
biggest customer. That would be Toys “R” Us. But the maker of Monopoly,
which sold nearly 10 percent of its inventory through Toys “R” Us in the
quarter warned that sales in the future would be pressured during the
holiday shopping season because of that Toys “R” Us bankruptcy, and as a
result, Hasbro (NYSE:HAS) shares felt more than percent today to close at
$89.75.

Under Armour (NYSE:UA) is reportedly considering exiting some of its
smaller categories. “The Wall Street Journal” says that the athletic
apparel maker is exploring getting out of the tennis outdoor gear and
fishing, in an effort to combat falling sales. Under Armour (NYSE:UA) also
said that its co-founder Kip Fulks will take a sabbatical from the company.
Shares were up more than 3 percent today to close at $16.85.

Restructuring charges cause profits to miss the mark at specialty metals
maker Arconic. The company topped analyst revenue expectations, also
lifted its guidance for the full year. In addition, Arconic named former
GE executive Charles Blankenship as its new CEO. But Arconic shares fell
by 10 percent, finished the day at $24.35.

And during a wide-ranging interview earlier today, Saudi billionaire
investor Prince Alwaleed bin Talal said the shares of Citigroup (NYSE:C)
could go above $100 and the Tesla`s valuation is as he put it too
exuberant. Mr. Alwaleed runs Kingdom Holdings, a massive conglomerate
based in Riyadh. He also floated the idea that Saudi Arabia could list
more than 5 percent of the state oil giant Saudi Aramco in the coming
years.

But the comments getting the most attention had to do with bitcoin. He
says the cryptocurrency we told you about recently, he told Andrew Ross
Sorkin, he`s not a fan.

(BEGIN VIDEO CLIP)

PRINCE ALWALEED BIN TALAL, KINGDOM HOLDING COMPANY: I just don`t believe
this bitcoin thing. I think it`s just going to implode one day. I think
this is Enron in the making.

ANDREW ROSS SORKIN, CNBC: Really? Enron in the making.

BIN TALAL: I just don`t believe in bitcoin it completely.

SORKIN: Because?

BIN TALAL: It just doesn`t make sense. You know, this thing is not
regulated. It`s not under control. It`s not under the supervision of any
federal — any, you know, United States Federal Reserve or any other
central banks. So, I just — I don`t believe this whole thing at all.

(END VIDEO CLIP)

GRIFFETH: Enron — of course, the prince was referring to the massive
accounting fraud that took Enron, the energy trading company, into
bankruptcy in 2001.

And while the Saudi prince and others are skeptical of bitcoin, it is
getting a lot of buzz lately due in part to its recent surge in value. But
it`s been slow to take hold as a way to actually buy things. But that may
be about to change as a couple of bitcoin investors use their gains to
purchase expensive real estate.

Diana Olick has that story for us tonight.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): You see
it in some restaurants and in some retail. Now, bitcoin is buying into
real estate. Over the summer, a Sotheby`s agency in Austin was behind the
first single-family home sale in Texas involving a cryptocurrency.

J. KUPER, KUPER SOTHEBY`S INTERNATIONAL REALTY OWNER: So, we knew that,
you know, bitcoin is cryptocurrency. It`s like any other currency. It has
an exchange rate. It can be exchanged for U.S. dollars. So, the challenge
which actually wasn`t all that challenging was to figure out who would do
an exchange that large.

OLICK: They turned to bitpay, which did the exchange because the seller, a
custom homebuilder, didn`t want bitcoin. He wanted dollars.

KUPER: We had a brief amount of conversation about that, but bitcoin on
some level is new to most consumers. So, accepting bitcoin was just not
something that they wanted to do.

OLICK: That will not be the case in Lower Manhattan where one developer is
converting this old rental building into new condos. He had several
potential buyers who want to pay in bitcoin and he wants to keep the
currency think.

BENJAMIN SHAOUL, MAGNUM REAL ESTATE GROUP PRESIDENT: I`ll be able to use
it both personally and as a developer, but I think it`ll become a long-term
means to make payment. I`ve been buying some artwork a recent, and
personally for me, I`ve had a bunch of sellers of artwork asked me to pay
them in bitcoin.

OLICK: Shaoul says that in a hot market like Manhattan, accepting bitcoin
gives him a competitive edge over other sellers.

SHAOUL: It`s a price point building in the $700,000 to $1.5 million range.
There is not a lot of that inventory in the marketplace and, you know, you
try to always work and get one extra edge over someone else, and we think
the cryptocurrency in offering that to our buyers is certainly an edge.

OLICK (on camera): It sounds pretty simple now, but the deals so far have
been all bitcoin sales, no mortgage. Bringing bitcoin to your average
neighborhood where most buyers need a home loan will be a much bigger deal,
with far-reaching implications not just for real estate but for banking and
borrowing.

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

(END VIDEOTAPE)

GRIFFETH: Coming up, why this watch is considered the Holy Grail of
timepieces.

(MUSIC)

GRIFFETH: Welcome back.

This watch certainly does more than tell time, it has a history — a
history that belongs to the late actor Paul Newman, and the mystery
surrounding it could help it become one of the most expensive watches ever
sold.

Robert Frank has the fascinating story.

(BEGIN VIDEOTAPE)

ROBERT FRANK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Paul Newman was
always in a race against time, as an actor, as a race car driver and as a
philanthropist. And now, his wristwatch which some considered to be the
holy grail of sports watches is coming up for sale, and it could become one
of the most expensive watches ever sold.

Newman`s Rolex Cosmograph Daytona will be auctioned off by Phillips on
Thursday in New York. Watch collectors say it could fetch between $5
million and $10 million, possibly challenging the current highest price for
a wristwatch of $11 million.

Newman wore the watch every day of his life between 1969 and 1984, and used
it to time his car races. It is inscribed on the back with a message from
his wife Joanne Woodward with the words “Drive Carefully, Me”.

Now, in 1984, Newman gave the watch to James Cox who at the time was dating
Newman`s daughter Nell. Cox kept the watch and is now selling it with some
of the proceeds going to Nell`s charity. Newman made the Rolex Daytona one
of the most sought-after watches in the world. Vintage Daytona`s like his
have sold for millions at auction.

Now, watch hunters have searched for Newman`s Daytona for decades, creating
a source of mystery and legend in the watch world. Now, the watch worn by
Cool Hand Luke is coming on to the auction block, proving once again that
Paul Newman is one of Hollywood`s truly timeless.

For NIGHTLY BUSINESS REPORT, I`m Robert Frank.

(END VIDEOTAPE)

GRIFFETH: And that is NIGHTLY BUSINESS REPORT for tonight. I`m Bill
Griffeth. Thank you for watching, everybody. Have a great evening. We`ll
see you tomorrow.

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.
(c) 2017 CNBC, Inc.

 

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