Transcript: Nightly Business Report – December 15, 2017

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

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Race to the finish.
Lawmakers unveiling tonight the final version of the biggest tax revision
in three decades. What`s in, what`s out, and what it could mean for your
money.

Record finish. The three major stock indexes closed the week at new highs
as investors cheer a tax bill that will boost corporate profits.

Prescription videogames. The future of medicine may be taking place in a
laboratory unlike any you`ve ever seen before.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Friday,
December 15th.

Good evening, everyone, and welcome. I`m Tyler Mathisen. Sue Herera has
the evening off.

Well, that big tax bill is all set now. Republicans releasing tonight
their final signed-off draft of the most sweeping tax rewrite since 1986.
And it appears tonight that some last-minute deal-making flipped some no
votes to yes, securing what is evidently enough GOP support to turn the
503-page overhaul into law.

The holdout, Marco Rubio of Florida, got on board when the childcare tax
credit was expanded. Tennessee`s Bob Corker did the same, saying he
believes the bill was a once in a generation opportunity to help the
economy.

Tax reform? Some say it isn`t exactly that. But what it is for sure is a
huge $1.5 trillion tax cut with much of the benefit flowing to U.S.
corporations. And on that, the major stocks indexes rose to record highs.

So what`s in, what`s out?

Ylan Mui knows it all. She`s covering the story from Capitol Hill — where
I think you`ve pitched a tent the past few days, Ylan. Good evening.

YLAN MUI, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s been some long days.

MATHISEN: You bet.

MUI: And some long nights as well, Tyler.

Republicans just filed that legislation. This is a major achievement for
them, a major victory for that party.

Here are some of the top line numbers: the corporate rate is 21 percent.
And it would take effect in 2018.

For individuals, they would still have seven tax rates. The top rate would
be lowered to 37 percent. It would affect individuals who make more than
$500,000 or couples who make more than $600,000.

Also, the deduction for mortgage interest. If you own a home, that will be
allowed for loans up to $750,000. And for past-through businesses, they`ll
be allowed to take a deduction of 20 percent.

As you alluded to, there was some drama here on Capitol Hill. Senator
Marco Rubio initially threatening to vote against the bill. But then
Republicans expanded the child tax credit in order to get him on board.

Also a surprising flip, Senator Bob Corker of Tennessee, who had been the
lone Republican in the Senate to vote against a previous version of the
bill. He said he now supports it.

And now, we`re hearing from Susan Collins of Maine who says that she
applauds the changes in the tax bill. A little short of saying she
actually will vote for it but that she does seem supportive of the version
of the bill that was just filed.

Now, this looks like it will sail, though, to passage. The House is going
to vote on this legislation on Tuesday. The Senate will follow afterward.
All indications are that the president will be ready to sign it.

Back over to you, Tyler.

MATHISEN: All right. Ylan, thank you very much. Ylan Mui, covering it
for us. Go get some rest. You got another week ahead, I`m sure.

So, what will the final version of the tax bill mean for you and your
investments?

Andrew Friedman is the principal at “The Washington Update”. And he joins
us to discuss.

It looks, Andy, like the Senate and the House have threaded a needle here
to keep people happy, to come in under that $1.5 trillion number that made
them able to pass it with just simple majorities.

ANDREW FRIEDMAN, PRINCIPAL, THE WASHINGTON UPDATE: That`s true. And
you`ve really encapsulated what was going on here. Under the Senate rules,
this legislation couldn`t lose more than $1.5 trillion over 10 years. The
corporate tax cut, which is the centerpiece of this bill, dropping the tax
rate from 35 percent to 21 percent, costs about $1.5 trillion over 10
years.

So, they got what they need, which was to cut taxes on corporations, which
the Trump administration at least believes will expand the economy and help
workers as well. Everything else in bill was a tradeoff. For every dollar
of taxes cut, there had to be a dollar of taxes increased to stay within
that number.

MATHISEN: So, you point to, and I think most people agree with you, that
this is mostly a big tax cut for businesses and large corporations.

FRIEDMAN: Yes.

MATHISEN: The individuals get some cuts as well, low and middle income,
but those tax cuts sunset a few years from now.

FRIEDMAN: That`s right. In order to make this all work, and to keep it
within the parameters, there wasn`t a lot left over for individuals. So,
there is a small tax cut for up and down the income line for individuals.
But those had to expire to make the numbers work.

The key was to keep the corporate tax cut permanent. The administration
said that was necessary because businesses have to plan many years in the
future. Individuals, they said, well, when the time comes, we think
Congress will extend those cuts as well.

But we have to leave those in the wind, if you will, in order to make it
work now.

MATHISEN: One of the gnarliest areas in those corporate tax cuts has to do
with the international side of the business. Number one, being able to
bring back some of the profits that are held overseas, trillions of dollars
there.

FRIEDMAN: Yes.

MATHISEN: And also going to a different kind of regime that the
administration and the GOP believe will cause more companies to stay
domiciled in the U.S.

Explain. And do you agree?

FRIEDMAN: Yes. Let me just talk for a second about what`s going on there.
Right now, as of today, before this new law, we have a very unusual tax
system. If you`re a U.S.-based company, you set up a subsidiary overseas
to sell your product. So, Coca-Cola (NYSE:KO) sets up a company in France
to sell soda. The earnings of that subsidiary aren`t taxed in the U.S., as
long as they remain with the subsidiary overseas.

But if that subsidy repatriates the earnings back to the U.S. parent
company, right now we impose a 35 percent tax. That means that companies
are leaving their earnings overseas to avoid that tax. And that`s
presumably not as good for our economy.

So, what the tax bill does, it does two changes here. First, with respect
to future earnings overseas, from the beginning of the year on, those can
be brought back now without any tax whatsoever. Big benefit for
multinational companies, bring back future earnings. With respect to
existing earnings, those will be brought back at a lower tax rate, say
around 14 percent or so. That brings in a little revenue for the
government that they weren`t going to t anyway, and it also brings the
money back here.

MATHISEN: Andy, thank you very much. Appreciate the explanations.

FRIEDMAN: Sure.

MATHISEN: Andrew Friedman with the Washington update.

FRIEDMAN: Thanks, Tyler.

MATHISEN: On Wall Street, the Dow reached its 69th record close of the
year, the most since 1995. The Nasdaq and the S&P 500 closed at all-time
highs as well, driven by gains in financials, health care and technology,

Here are the final numbers for you. The Dow Jones Industrial Average
gained 143 points to 24651, Nasdaq added 80, S&P 500 rose 23. The Dow and
the S&P 500 now have logged four straight weeks of gains. And all of the
indexes were up this week.

Well, investors do like the idea that companies will get to keep more of
their profits under the GOP tax bill. And as Andrew Friedman was just
saying, multinationals will get to bring back earnings stored overseas at
extremely favorable rates.

So, that begs the question, which sectors could benefit the most from the
change in the corporate tax code?

Dominic Chu did some digging for us.

(BEGIN VIDEOTAPE)

DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT: If you`re wondering
what kinds of companies might actually benefit the most from potential tax
reform legislation that cuts corporate taxes, check out these industries.

The folks at Goldman Sachs (NYSE:GS) took a look at the S&P 500 and the
sectors within it and looked at who pays the most in taxes effectively. So
let`s take the number ten into the spectrum here, the ones that pay the
most in taxes. Possibly beneficiaries if taxes get cut, the bigger
beneficiaries.

The highest taxes are paid by the energy sector, 35 percent effective
rates. Telecom, 33 percent. Industrials, 32 percent. Utilities, 31
percent. Consumer discretionary, 30 percent. These are five-year median
average effective tax rates.

Take a look at the next batch. Consumer staples, 30 percent. Number four,
financials, 28. Number three, materials, 27. Number two, health care at
26 percent.

And then the sector in the S&P that pays the least in terms of taxes
overall on average, the technology sector, at only 24 percent. So, if
you`re looking for the outsize beneficiaries of possible tax cuts, it`s the
ones that already pay a lot of taxes right now, that`s energy, telecom,
utilities and industrials, that side of things.

Now, as for some of the stocks that could benefit, Goldman also has a
basket of around 49 names that they call their high tax basket, the ones
that pay the most in terms of effective tax rates. Among the names on that
list, ConocoPhillips (NYSE:COP) on the energy side, 49 percent, Goodyear,
46 percent, JB Hunt, 38, and Zions Bank Corp., 35.

Those are among the names on the list, that`s a sampling to give you an
idea of the kinds of stocks that we`re talking about. Still, as investors
look towards tax reform and how to play it, so to speak, some of the
beneficiaries, if taxes get lowered, could be the ones that are on these
lists here, guys.

For NIGHTLY BUSINESS REPORT, I`m Dominic Chu.

(END VIDEOTAPE)

MATHISEN: And still ahead, if you`re in a rush to find a rental, maybe a
robot can help you.

(MUSIC)

MATHISEN: TD Ameritrade (NASDAQ:AMTD) will start offering bitcoin futures
on Monday, just one week after they debuted on the CBOE (NASDAQ:CBOE). To
trade, you must have a minimum balance of $25,000 and post margin or
collateral. That`s more than what the CBOE (NASDAQ:CBOE) requires. TD
Ameritrade (NASDAQ:AMTD) has the largest futures operation of any online
brokerage.

Well, the president of the Chicago Fed is concerned about the low level of
inflation in the U.S. Charles Evans said today that`s why he voted against
raising interest rates at the most recent Fed policy meeting. Inflation
has been below the Central Bank`s 2 percent target for much of the economic
expansion. Evans and the president of the Minneapolis Fed were the two
dissenters at that last meeting.

In an unusual move, the vice chair of supervision for the Federal Reserve
will recuse himself from matters related to Wells Fargo (NYSE:WFC). Randy
Quarles says he has repaid a business line of credit with the bank and sold
company stock he owned. Quarles wants to avoid a potential conflict of
interest and added that his decision is voluntary, not legally required.

Well, today is the last day you can sign up for health insurance under the
Affordable Care Act. A shorter enrollment period and a reduced marketing
campaign will likely result in fewer enrollments this year. The final
numbers for the federal exchange won`t be known until next week at the
earliest. Figures from the states that run their own marketplaces could
come even later.

Well, if you are a parent, you probably worry about the time your kids
spend playing videogames. But as an emerging area of medical research is
happening right now, it is looking at whether the effects in some cases can
be used to treat certain conditions.

Meg Tirrell has our latest story on modern medicine.

(BEGIN VIDEOTAPE)

MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: These aren`t your
typical drug developers. Instead of Petri dishes and beakers, the team at
Akili Interactive works with coding, music, art and algorithms. They`re
programming videogames as potential medicine.

My prefrontal cortex feels very exercised.

EDDIE MARTUCCI, AKILI INTERACTIVE CO-FOUNDER & CEO: We want this to be on
the proverbial shelf next to pharmaceuticals.

TIRRELL: Akili, a Boston area biotech, is developing video games that it
hopes can be prescribed to treat conditions from ADHD to depression. The
company reported results last week from a late stage clinical trial in
ADHD, which affects more than 6 million kids in the U.S. The study showed
that the Akili`s game improved kids` attention and inhibitory control.

DR. ADAM GAZZALEY, NEUROSCAPE LAB DIRECTOR, UCSF: The results I think
showed us that pretty clearly, we can have a significant impact on
attention function.

TIRRELL: Dr. Adam Gazzaley has been working on this idea for a decade at
his Neuroscape Lab at the University of California, San Francisco.

GAZZALEY: The original hypothesis was if you could challenge your brain at
this high level that activates the prefrontal cortex, the most evolved part
of our brains, and its network with the rest of the brain, you could have
improvement in other aspects of cognition like how we sustain attention.

TIRRELL: Currently, treatment options for ADHD include behavioral therapy
and drugs like Adderall, Ritalin and Vyvanse, a market that generates about
$4 billion a year. Experts say new options would be welcomed, as long as
they`re validated.

DYLANN GOLD, NYU LANGONE HEALTH: The idea of a child sitting down and
playing a game is remarkable and would very much kind of change the
landscape. But I would want us to kind of look at it from a skeptical
lens.

TIRRELL: Akili plans to file for FDA approval early next year. One thing
working in its favor: fewer serious side effects than traditional drug
treatment. The main issues reported in this study were headache and
frustration.

These games which couldn`t be shown in detail as the studies are ongoing
aren`t easy, as I learned when I tried out some demos.

For NIGHTLY BUSINESS REPORT, I`m Meg Tirrell.

(END VIDEOTAPE)

MATHISEN: Shares of CSX (NYSE:CSX) get derailed as the company`s CEO takes
a medical leave. And that is where we begin tonight`s “Market Focus”.

The railroad company announced its CEO, Hunter Harrison, will take medical
leave because of complications from a recent illness. The company`s COO,
Jim Foote, will serve as the acting chief in the interim. Shares of CSX
(NYSE:CSX) fell more than 7.5 percent on the news to finish the day at
$52.93.

Starting next year, Sirius XM Radio (NASDAQ:SIRI) will pay more for the
music it plays. The copyright royalty board raised the satellite radio`s
rates to 15.5 percent of gross revenues for the next five years, up from 11
percent now. Investors in Sirius XM tuned out. Shares dropped 5 percent
to $5.37.

Adobe reported record revenue in its fourth quarter. The software maker
posted revenue of $2 billion, that`s up 25 percent year over year. Adobe
CEO attributed the growth to continued strength of its digital media
business which houses its creative cloud product.

(BEGIN VIDEO CLIP)

SHANTANU NARAYEN, ADOBE CEO: People are now really focused on ensuring
that the engagement that they have with customers, whether that be through
the Internet of devices, whether that be through digital screens and retail
stores, whether that be through autonomous cars, is a personalizing for age
and experience. And we`ve identified that as one of the big growth
opportunities for us.

(END VIDEO CLIP)

MATHISEN: Shares of Adobe rose nearly 1.5 percent to $177.51.

And after the bell tonight, activist investor Elliott Management disclosed
6-1/2 percent stake in cloud services provider Akamai Technologies
(NASDAQ:AKAM). The hedge fund says it plans to consider strategic
alternatives for the company, including a sale. Shares of Akamai spiked
following the news, adding on to a nearly 2 percent gain during the regular
session where shares closed at $57.76.

Well, our market monitor tonight likes companies he says can continue
growing their dividends and has names he says could benefit from any
potential tax cut. It is his first time as a market monitor. He`s Eric
Ervin, president and CEO of reality shares.

Mr. Ervin, great to have you with us. Don`t be nervous here, it`s just
your first time, we`re friendly, we don`t bite.

What do you think about this tax cut and how it`s going to help
corporations? Just broadly speaking.

ERIC ERVIN, REALITY SHARES PRESIDENT & CEO: Yes, just generally, it`s more
cash to the company, which means more cash to the shareholders in one way
or another, whether it comes in the form of dividends or whether it comes
in the form of reinvestment back into the business. So it`s a great thing
for shareholders for sure. If you think about it in general, you know,
whether we get it from the repatriation where we have a trillion dollars
overseas in repatriated potential dollars, or in just overall growth rates
of these companies growing, you know, because right now, the market is a
little stretched. So, we need to look for growth right now.

MATHISEN: All right. Let`s get to your picks, shall we, leading off with
MasterCard (NYSE:MA). Tell me why you like it.

ERVIN: You know, we`re a dividend shop. We like to focus on companies
that can grow those dividends significantly. We found that to be one of
the biggest drivers and MasterCard (NYSE:MA) is an excellent grower in that
category.

They grew their dividend almost 53 percent per year for the last five
years, that`s per year, and their return on equity is off the charts, it`s
73 percent ROE. And they have almost $5 of free cash for every dividend
they pay out.

So, we feel like that`s the kind of company that can grow their dividends
quite a bit. And not to mention they`re really getting involved in this
Blockchain technology and really, that could be a massive wave of
innovation for them as well. So, we`re excited about that.

MATHISEN: All right. Let`s move to your second choice in the tech area,
would be Texas Instruments (NYSE:TXN).

ERVIN: Yes, also a strong company, good, high free cash flow dividend to
ratio, almost $2 of free cash flow for every dollar of dividend. So,
really strong in that regard, 25 percent dividend growth year over year.
Texas Instrument is, you know, a one of these sleepy tech companies that we
don`t think about too much.

But really, it`s a strong, strong stock that`s innovating in a number of
different categories. Also kind of in that Blockchain arena as well. So,
we`re just keeping an eye on that technology.

MATHISEN: You know, a lot of people love Nvidia and you`re one of them.

ERVIN: Yes, and Nvidia has been in our portfolios for now a little over a
year. And it made it into the cut this year. Every year, we rebalance our
portfolios.

And Nvidia is one of those stocks that as you buy it, you wonder, am I
paying too high a price? But when you dig down and look at the numbers,
these growth rates are just off the charts. Eighty-one percent earnings
growth last year, averaging 50 percent dividend growth, return on equity,
44 percent, and $4 of free cash for every dividend that they pay.

So, it`s not only a growth stock, but it`s a growth stock that`s a high
quality earner. So, you know, if you`re going to pay up in a multiple, do
it with a stock company that can grow its earnings. And Nvidia is one of
those.

MATHISEN: You`re in San Diego. It`s 27 and snowing in New York.

Eric Ervin, I envy you. Eric is with Reality Shares. Appreciate your time
tonight.

ERVIN: Thank you, you bet.

MATHISEN: Well, if you`re shopping a rental home and you need to see one
right now, this minute, there may be a robot ready to show it to you. A
California rental management company is offering home tours at a moment`s
notice. Just don`t expect anybody to be there when you get there.

Diana Olick explains.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Avisheh Madani is a
millennial. So, she`s used to doing everything on an app.

But this was a first.

AVISHEH MADANI, POTENTIAL RENTER: Robbie, it`s nice to meet you.

OLICK: She took a rental home tour with a robot. Kind of a robot, a robot
with a rental agent. Yes, even in the bathroom.

It`s the latest high tech offering from Zenplace, a San Francisco-based
rental management company.

RAHUL MEWAWALLA, ZENPLACE CEO: What our robots really do is reduce the
musing period and cut down vacancy times for owners and make it an easier
process for tenants who can go now literally go from seeing a place that
they like to renting it out in a matter of minutes, versus the days and
weeks of traditional tech.

OLICK: Zenplace developed the app for the robot. There is a human agent
on the other side. But the robot can also provide the customer with real-
time data on the neighborhood, amenities, and rental trends. It also has a
lease application built in to apply on the spot.

MADANI: Thanks, Robbie.

It was fun. It was definitely weird.

OLICK: Weird, perhaps. But efficient.

MADANI: I`ve gone to be more used to having to do everything through apps
and technology. So, it`s kind of nice to make it convenient, I didn`t have
to wait on anybody else, I was able to do it on my own time frame.

OLICK: The technology allows people who might just be driving by a home to
see it immediately. Of course, it only works for rentals because they`re
usually empty, that is, nothing to steal. But it does raise the question
of safety for the potential renter, walking into a home alone.

MEWAWALLA: We ask you to quickly take a picture of your ID, and then we
instantly verify who you are and check your background. If it all comes
clear, we send you a unique code that you can then enter into our
smartlock.

MADANI: It didn`t even feel like there wasn`t somebody there, because she
was in the room with me.

MEWAWALLA: Zenplace currently offers the robot rental service in
California but will soon put it in rental homes in five other states,
including New York and Florida. If it catches on, it could open the door
to more robots in real estate.

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

(END VIDEOTAPE)

MATHISEN: To read more about robot driven home tours, head to our Website,
NBR.com.

Well, coming up, feeling the force. The big money behind and in front of
the latest box office blockbuster.

(MUSIC)

MATHISEN: Here`s a look at what to watch next week. Housing will be in
focus with the release of existing and new homes sales, as well as housing
start numbers. FedEx (NYSE:FDX) reports earnings Tuesday. FedEx
(NYSE:FDX) is often viewed as a bellwether for economic conditions, and
Friday is the deadline for lawmakers to pass a funding bill that would
prevent a government shutdown. That, folks, is what to watch next week.

Well, SpaceX successfully launched a refurbished rocket. The company`s
previously flown Falcon 9, along with a used cargo capsule are headed to
the International Space Station. It is the first time this has been
allowed by the government. Reusing space hardware is the crux of SpaceX`s
business model. It`s at the center of the new space race since of course
it helps lower cost. SpaceX`s founder is Elon Musk, who is also the CEO of
Tesla.

Well, “The Last Jedi” stormed into the box office today. And the company
behind one of the most successful movie franchises ever could see an
enormous payday.

Julia Boorstin follows the force.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Disney`s “Star
Wars: The Last Jedi” grossed $45 million in North American theaters in
Thursday night previews. That`s the second biggest Thursday night opening
ever, after only “Star Wars: The Force Awakens” two years ago.

The box office benefitted from more than 1,300 fan and marathon events last
night. And today, the movie is expanding to nearly three times that number
of theaters in North America. This puts “The Last Jedi” on track to bring
in over $200 million in North America this weekend, which would make it one
of the biggest opening weekends ever, bolstered by rave reviews including a
93 percent positive critics rating on Rotten Tomatoes.

ERIK DAVIS, FANDANGO MANAGING EDITOR: I think it will definitely stay on
top of the box office through the holidays into January. That`s what we`ve
seen previously with “Star Wars” movies like “Rogue One” and especially
“The Force Awakens.” And I think what it says for Disney (NYSE:DIS) is
that, you know what, this “Star Wars” brand is very strong and you can
continue investing in it, you know, year after year.

BOORSTIN: And “The Last Jedi” success this weekend should be even more
valuable to Disney (NYSE:DIS) once its acquisition of Fox, announced
yesterday, goes through. Fox owns the rights to the original “Star Wars”
trilogy plus the prequel trilogy.

Disney (NYSE:DIS) CEO Bob Iger saying the company is looking forward to
reuniting all of the “Star Wars” movies.

Disney (NYSE:DIS) could mine characters from those first six films to fuel
its consumer products powerhouse. “Star Wars” is already the biggest toy
brand ever with $3 billion in total license merchandise sales projected
this year, according to TTPM, further growing the brand`s appeal to
multiple generations of fans.

DAVIS: A lot of those adults that are taking their kids are the adults
that grew up with this franchise, with the original trilogy. And that is
what these new films are harkening back to. And so, those adults have
kids, they`re taking their kids, getting their kids excited about it. So,
it just continues the life cycle of “Star Wars.”

BOORSTIN: Plus, the original six films could be valuable to the two “Star
Wars” lands opening in 2019, Disney (NYSE:DIS) investing over $1 billion in
each of them. Plus having all the “Star Wars” movies will boost the appeal
of the Disney (NYSE:DIS) branded streaming app launching in fall of 2018.

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

(END VIDEOTAPE)

MATHISEN: I wonder if “The Last Jedi” will really be the last Jedi?
Whatever.

That`s NIGHTLY BUSINESS REPORT for tonight, everybody. Thanks for joining
us. I`m Tyler Mathisen. Have a great weekend, everybody, and we will see
you back here on Monday.

END

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