Transcript: Nightly Business Report – February 26, 2018

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

extending last week`s advance as they recoup a large chunk of their recent


WARREN BUFFETT, BILLIONAIRE INVESTOR: If you had to choose between buying
long-term bonds or equities, I would choose equities in a minute.


HERERA: Warren Buffett says, stick with stocks. And there`s one in
particular that he`s bought more than anything else in the last year.

School safety. Security systems are being re-assessed, but it doesn`t come

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Monday,
February 26th.

Good evening, everyone, and welcome. I`m Sue Herera. Tyler Mathisen is
off tonight.

Stock pullback? What stock pullback? The market has reclaimed a big chunk
of its most recent losses, thanks in part to today`s nearly 400-point gain
on the Dow. Concerns over rising interest rates have taken a backseat, as
investors refocus on global growth and corporate profits.

Today, the Dow Jones Industrial Average advanced 399 points to 25,709 led
by financial and technology shares. The NASDAQ added 84 and the S&P 500
was up 32.

Bob Pisani has more on the day`s rally on Wall Street.


to the week with the Dow up over 200 points at the opening, closing up
almost 400 points. Last week, stocks started strong every day, but faded
late in the day. That began to reverse on Friday, when stocks closed at
their highs and it continued today.

This week was all about Fed Chairman Jay Powell`s testimony o Congress on
Tuesday and Thursday, but the markets are telegraphing they`re not
concerned he`ll be overly aggressive about raising rates. The markets are
very different in the last two weeks than in the first two weeks, when
stocks dropped about 10 percent in early February on concerns about higher
interest rates, partly.

But since then, the S&P has recovered about 75 percent of its losses. It`s
a sign investors still seem to have confidence in the global economic

Indeed, the sectors with the strongest recovery has been technology stocks,
led by Apple (NASDAQ:AAPL), Intel (NASDAQ:INTC), and Cisco (NASDAQ:CSCO),
and industrials led by 3M (NYSE:MMM) and Boeing (NYSE:BA), both sectors
that are very sensitive to the global economic recovery.

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


HERERA: One day ahead of Fed Chair Powell`s testimony, Federal Reserve
Governor Randall Quarles today reaffirmed his support for gradual interest
rate increases and offered an optimistic view of the economy. Quarles
suggested that the economy may be on the verge of a sustained period of
faster growth.

And Goldman Sachs (NYSE:GS) is keeping its eye on interest rates. An
economist at the firm said that if the yield on the ten-year treasury hits
4.5 percent, stocks could move sharply lower by as much as 20 to 25
percent. The economy it, says, would also suffer a sharp slowdown, but
that`s the worst case scenario. The firm`s best case calls for a yield of
3.25 percent by the end of the year.

And, of course, the housing market is also rate sensitive. Today, we
learned that sales of new single-family homes in January fell for a second
straight month and hit a five-month low. The number was way down by steep
declines in the Northeast and the South. As we`ve been reporting, a
shortage of homes is pushing up prices and sidelining some first-time

General Electric (NYSE:GE) is making more disclosures. That company
revealed a Justice Department investigation into its now-defunct subprime
mortgage lender. GE also plans to re-state 2016 and 2017 earnings, after
adopting a new accounting standard. The restatements were expected,
although some say they could make it difficult for GE to reach its 2018
financial forecast.

General Electric (NYSE:GE) also nominated three new directors to its
slimmed down board. After trading lower for most of the day, the stock
turned around and it finished up more than 1 percent.

Berkshire Hathaway`s Warren Buffett said that he was staggered by GE`s
financial lapses and the size of the charge that it took earlier this year.
The billionaire investor has mostly sold his holdings in GE and said he
hasn`t purchased any recently. That was just one of the many comments that
he made during a wide-ranging interview with Becky Quick.

She filed this report from Omaha.


takeaways from Warren Buffett and his letter to shareholders this year is
that Berkshire Hathaway (NYSE:BRK.A) is sitting on $116 billion in cash.
That is money that Buffett would like to put to work, but when he looks
around to buy businesses, he says prices are just too high. He`s not
finding anything that he likes at the right price.

However, that does not mean that he thinks stocks, as a whole, are
overpriced right now.

WARREN BUFFETT, BERKSHIRE HATHAWAY CEO: The stock market, relative to the
long-term bond market, people have three choices pretty much if they`re
going to be in marketable securities. They can own reasonably long-term
bonds, they can own equities, or they can keep it in short-term cash
equivalents. And if you had to choose between buying long-term bonds or
equities, I would choose equities in a minute now.

Now, that doesn`t mean I think the stock market is going to go up or
anything else, but if I were going to own a 30-year government bond or own
equity for 30 years, I think equity is a little — considerably outperform
that 30-year bond, over the 30 years.

QUICK: It sounds confusing. The idea that Buffett can`t find any prices
he likes for businesses, but he thinks stocks are not overvalued. There is
a way to match all of this up.

BUFFETT: You can buy small pieces of businesses for less than you can buy
whole pieces of businesses.

QUICK: But the premium you would have to pay if you were buying the whole

BUFFETT: Yes, so you would get a bargain at an investor compared to what I
can get in terms of buying the whole business. People, they just think of
stocks as pieces of business, they would be so much better off than
thinking of them as little things that move around as price.

And I think with Berkshire, we have an unusual number of people, the
shareholders, that just look at Berkshire as a savings account. They put
money in 20, 30, 40 years ago, we retain it and reinvest for them. But
we`re they`re savings account. That`s the way I look at my own stock.

QUICK: Of course, the question that Warren Buffett most frequently gets
asked is what stock is his most important favorite stock in the entire
world. It`s trick trying to get an answer out of him, and when we asked
him, he said Berkshire Hathaway (NYSE:BRK.A), because that`s where he has
99.8 percent of his money. We dug a little deeper than that, though.
Listen in.

BUFFETT: If you look at our holdings, you would assume we like them in the
order in which they rank by dollar value of holdings. But if you look at
them in terms of recent purchases, you know, over the last year, we took
more Apple (NASDAQ:AAPL) than anything else.

QUICK: Can I take and run with that as a headline, that Apple
(NASDAQ:AAPL) is your favorite stock?

BUFFETT: No, because I haven`t told you what I might be buying in the last
week or month.

QUICK: If you actually look at the top holdings for Berkshire as of the
end of the year, filings will tell you that the number one stock they hold
is Wells Fargo (NYSE:WFC) at $29.2 billion worth. Number two is Apple
(NASDAQ:AAPL), it comes in at $28.2 billion.

For NIGHTLY BUSINESS REPORT, I`m Becky Quick in Omaha, Nebraska.


HERERA: Lots to talk about. Let`s talk more about Warren Buffett with a
familiar face to all of us. Susie Gharib is with us, senior special
correspondent with “Fortune” magazine.

It`s always great to have you here, Susie. Welcome back.

great to be here. Thanks, Sue.

HERERA: So Becky was talking about all of this cash that Mr. Buffett has
on hand. You`ve been talking to money managers today to find out what
their reaction is. What are you hearing on that?

GHARIB: You know, first of all, it`s so fascinating that all of these
money managers who really know the company so well and know Warren Buffett
were just shocked at the size of how much cost, $116 billion. That`s a
huge amount of money. And the company keeps throwing up another $30
billion every year.

But as Becky just said, you know, they can`t find companies that don`t have
such high price tags on it. So I asked them, where would you tell Warren
to put his money? And they said, buy more Apple (NASDAQ:AAPL) following —

HERERA: Following on that.

GHARIB: On that, or, you know, buy more Berkshire Hathaway (NYSE:BRK.A)
stock with all of that money.

But in terms of actual businesses, you`ve got to look at, what goes well
with the Berkshire portfolio? And it`s steady-eddy companies. They`re not
necessarily exciting companies.

HERERA: Yes, they`re not flashy.

GHARIB: They said industrials, like the one company they mentioned was
Cummings Engines, they make engine parts and engines. But on the consumer
product side, global brands, maybe Estee Lauder is an amazing company,
maybe Staples (NASDAQ:SPLS). We`ll see.

Warren Buffett is going to come up with something to do with that money.
But all the money managers I talked to, don`t put the money in a dividend.
Sit on the cash.

HERERA: Interesting. Sit on the cash instead of go for the — that`s

He also addressed the health care alliance that he and Jeff Bezos of Amazon
(NASDAQ:AMZN) and Jamie Dimon of JPMorgan (NYSE:JPM) Chase have put
together. And he said it`s about much more than just lowering health care
costs, which is what the street assumed it was about in the beginning.

What did you make of those comments?

GHARIB: Well, I think everybody has been wondering what this venture that
these three powerful men from three powerful companies are really going to
do. And until today, we really didn`t know — have any details. So, a
couple of things we learned from Warren Buffett is, one, they do want to
get the costs down.

You know, they want to do more than just shave off a little bit. But also,
their job number one is to find a world-class CEO. And he said, we`ve
really got to get the right person in there, he or she. And he didn`t let
on, you know, whether it be somebody from an established health care
company or somebody outside of health care that might be more disruptive,
because you know, Sue, for all the disruption we see around us, like the
Ubers and the Airbnb`s —

HERERA: Absolutely.

GHARIB: — you don`t see it in health care.

HERERA: You don`t. You really don`t.

Very quickly, he`s 87 years old. What about succession?

GHARIB: The only thing new on it, they`ve tapped two people to be vice
chairman. The guy who`s in charge of insurance and the guy in charge of
all of the energy operations, Greg Abel and Ajit Jain, the vote is probably
Greg Abel on.

But 87 today, I thought he looked great, I don`t know —

HERERA: Absolutely.

GHARIB: But he got up early to do that interview. Pretty good for 87
years old.

HERERA: He probably had a Coca-Cola (NYSE:KO), too, before he did.

GHARIB: You`re absolutely right about that.

HERERA: Thanks, Susie, always great to see you.

GHARIB: Thank you for having me.

HERERA: Susie Gharib.

Well, in that interview today, Warren Buffett, who once publicly shunned
the airline industry, also said he would not rule out owning an entire
airline. And that comment sent the shares of the big carriers higher in
today`s trading session.

It is time to take a look at some of today`s upgrades and downgrades.

Target`s rating was initiated at outperform by Credit Suisse. The firm
cites the retailer`s aggressive strategic changes as strengthening consumer
and potential market share gains. The analyst has an $86 price target.
The stock rose nearly 2 percent today, to $76.90.

And the rating on Guess was upgraded from buy to neutral at B. Riley FBR.
That firm sees significant earnings upside over the next several years, as
the new CEO executes his strategy. The analyst price target on the
retailer is $20 a share. Guess was up more than 5 percent to $15.87.

And another retail upgrade, this one for Finish Line. Its rating was
raised from positive to neutral at Susquehanna. The analyst there cites
better than expected sales and promotional trends and the firm also raised
its earnings estimates on the athletic apparel retailer. The price target
is now $14 and the stock rose 5 percent to $11.04.

Still ahead, which companies could lead the coming wave of a new, more
advanced era in technology?


HERERA: Across the Atlantic, global technology companies are showing off
what they think will be the next big thing.

Jon Fortt reports tonight from the Mobile World Congress in Barcelona.


and a scramble to rewrite the rules of business ahead of a new tech wave.
That`s the story of this year`s Mobile World Congress.

Let`s start with the phones. The surprises were in the software when
Samsung took the wraps off of its hotly anticipated and heavily leaked
Galaxy S9. This has AR features, it`s got a fresh new camera that`s used
for personalized features and for new filters.

On the outside, the S9 and S9 Plus don`t look much different from last
year`s model. Inside, they boast new camera features like super slow-mo
and dual aperture. That`s the latest trick to take better pictures in low
light and sharper action shots and take the fight to Apple`s iPhone X.
They`re available March 16th at $720 for the S9 and $840 for the Plus.

The backdrop to this is a sobering reality in the mobile world. The
smartphone business isn`t growing anymore. Meanwhile, there`s a lot of
hype around so-called 5G wireless networks, which should arrive in the real
world at the end of this year and bring trillions of dollars of new growth
from a world of connected cars and cameras and medicine.

But it`s still not clear how 5G will become a reality. The iPhone and its
offspring brought us this far, but what`s going to be the iPhone of 5G?

RAMI RAHIM, JUNIPER NETWORKS CEO: Ultimately, the initial deployment might
be driven by a need for proving out the technology, proving out the market
demand, but ultimately, it won`t scale without a real need from enterprises
or from consumers. And I think that transcends any sort of political
influence. And ultimately, I think, like I just said, there will be market
demand for it. It`s just going to take a period of time.

FORTT: The move to 5G is a global race. Independent analyst Chetan Sharma
points out the U.S. has some the natural advantages because of the way the
smartphone revolution was born, in Silicon Valley. But with China
determined to make its mark and Europe eager to catch up, it`s not over

For NIGHTLY BUSINESS REPORT, Jon Fortt in Barcelona.


HERERA: Dean Foods (NYSE:DF) gives a disappointing full-year outlook, and
that`s where we begin tonight`s “Market Focus”.

Increased competition and a glut of milk caused quarterly results of dairy
producer to miss estimates. The company, which gave a weak profit
forecast, also said it plans to consolidate its manufacturing operations,
which it expects will result in significant cost savings. But shares of
Dean Foods (NYSE:DF) fell 13 percent to $8.81.

The consumer products company Spectrum Brands is merging with majority
shareholder HRG Group in a deal valued at $10 billion. Spectrum, which
owns brands like Black & Decker and George Foreman, says its current
management will maintain their positions at the combined company. And as
you can see right there, they finished modestly to the upside in spectrum
and sharply higher in HRG Group.

After the bell, Tenant Healthcare said the new tax law caused it to report
a wider loss. Quarterly revenue at the hospital operator improved and the
company raised its earnings outlook for 2018. Shares initially popped in
after-hours, but finished the regular day down 1 percent to $19.07.

And Fitbit said that fewer sales of its fitness devices during the holiday
period caused that company to report a surprise loss and weaker revenue.
The company said it expects overall sales to fall as much as 20 percent in
the current period. It plans to combat that weakness with cost cuts and a
focus on smart watches, a category Fitbit said is gaining popularity with
its customers and consumers. Shares initially fell in after-hours, but
ended the regular day up nearly 5 percent to $5.54.

As a growing number of companies cut business ties with the National Rifle
Association, billionaire investor Warren Buffett says he will not boycott
gun makers. His company, Berkshire Hathaway (NYSE:BRK.A), does not own
shares in gun manufacturers, but says there`s no rule that it couldn`t do
business with one.


BUFFETT: I think you should be pretty careful before a company takes —
takes a big political opinion and something society has decided that they
say, well, we`re going to have a different view. Now, I also think people
individually should very much express their views. I think what the kids
are doing there is very admirable. But I don`t think Berkshire should say,
we`re not going to do business. That I think would d be ridiculous.


HERERA: So let`s talk more about this. When it comes to social issues,
should companies take a public stance?

Joining us to talk about that and more is Kellie McElhaney. She`s director
of the Institute for Business and Social Impact at the University of
California-Berkeley Haas School of Business.

Welcome. Nice to have you with us this evening.


HERERA: Let`s start with the broader issue of, should companies be taking
a stand or putting out an opinion on social issues?

MCELHANEY: My belief is that, yes, they should, but as Mr. Buffett said,
it`s not for the faint of heart. They need to do it very carefully,
strategically, and well thought out. But you know, companies are a
collection of humans and I think we forget that. It`s not a disconnected
entity. CEOs are humans. And they — you know, they have the entire and
responsibility to really satisfy demand and employees are demanding that
their company, that their CEO, that their leader speak up and speak out.

HERERA: And is it important that it comes, whatever the message is, from
the CEO herself or himself, rather than putting out a press release or a

MCELHANEY: I absolutely believe, Sue, that it is. We need to hear this,
not from a black and white press release, that is so long that most of us
won`t read past the first two sentences, but from a human being, where they
can tell a better story, they have passion, they have, you know,
inspiration and opinions.

HERERA: We set this segment up with a sound bite from Warren Buffett, and
he obviously was referring to the debate that is raging across the country
right now on gun control. It is a highly charged debate. Is it a higher
risk for a company to take a stance on a social issue that is so
politically and emotionally charged? And how do they navigate that?

MCELHANEY: It is certainly a risk, so I think they navigate this by
calculating that risk up-front. By engaging with stakeholders with around
what those stakeholders believe. I think it`s pretty difficult for most
people in this country to not have some sort of heart-based reaction to 17
kids being killed.

HERERA: Now, the other issue is, if you don`t take a stand, if you play
it, quote/unquote, safe. And other companies, especially other companies
in your niche do take a stake, is that a risk that you are not making a
statement on a social issue?

MCELHANEY: That is a real risk. And while I know for CEOs, it`s awkward
to take a social stand, I think it`s incumbent on them now, if for no other
reason, than other companies are doing it, so that it becomes a competitive

HERERA: Very quickly, before we wrap up, a public company versus a
privately held company, but one that perhaps is used by a lot of consumers.
Is it a higher risk for a public CEO?

MCELHANEY: It is. It`s much higher risk. It`s less risk for consumer-
facing brands. And it`s less risk. The really important thing is for CEOs
to speak up en masse, because it`s much better to have a collection of
voices, rather than just one sort of loan person out there speaking up on
controversial issues like this, gun control.

HERERA: Right.

Kellie, thank you so much. Appreciate it.

MCELHANEY: Thank you, Sue.

HERERA: Kellie McElhaney with the University of California Berkeley Haas
School of Business.

Well, students at the Marjory Stoneman Douglas High School in Florida
return to class this week. And across the country, school administrators,
teachers, parents, and students are reassessing their school`s security
systems. But hardening a school doesn`t come cheap.

Scott Cohn reports from Newark, California.


1,900 students and 100 staff members is in Newark, California, but it could
just as easily be in Newark, New Jersey, or Newark, Ohio. Every school
district in the country is facing the same issue.

safety is always our biggest concern. If I had to pick one question that
we get from anyone is really, how safe are schools? That`s kind of the
question that people ask before we even get to academic questions.

COHN: Security is already robust here. Fencing, signs, guards.
Superintendent Patrick Sanchez says they not only have cameras, but also a
sound system that can detect and locate gunshots anywhere on campus. But
they still could use more.

SANCHEZ: In a district this size of about 6,000 students, personnel alone
increase would probably be $3 million.

COHN: Plenty of companies are happy to help. Indiana-based Allegion
specializes in systems that can lock classrooms at the first hint of

DAVID PETRATIS, ALLEGION PRESIDENT & CEO: Our industry, and Allegion, is
willing to partner with every schoolhouse in the nation to review
procedures, capabilities that will help drive awareness and planning for
high school security.

COHN: The industry helps fund a nonprofit, the Partner Alliance for Safer
Schools, which says at the very least, schools should consider upgrading
their lighting, windows, and doors and cameras. The group says that basic
security would cost around $100,000 for a typical grade school, $170,000
for a typical high school.

Of course, the organization is ready with more expensive ideas for any
district that asks. Even though some other experts say physical security
only goes so far.

issue of fortifying your front entranceway and throwing up some additional
cameras. It`s what`s behind that fortified entranceway in terms of the
school climate, the culture, the training, the people-side of school safety
that really makes school safety different and more — and more important
and meaningful.

COHN: No argument here in Newark, where the superintendent says the best
deterrent to violence is making sure students are better educated in the
first place.

For NIGHTLY BUSINESS REPORT, I`m Scott Cohn in Newark, California.


HERERA: Coming up, businesses are jumping on China`s push to create a
winter sports industry ahead of the next Winter Olympic Games.


HERERA: The Weinstein Company is moving closer to bankruptcy. The
studio`s board of directors said a $500 million deal to sell the company
fell apart. The movie studio`s co-founder, Harvey Weinstein, was fired
late last year after being accused of sexual assault and harassment by
dozens of women. Weinstein has denied any non-consensual encounters.

The Winter Olympics in Pyeongchang may have just ended, but already, some
business owners are looking ahead to the next Winter Games in China. And
they see opportunity.

Eunice Yoon has our story.


is four years away, but Austrian businessman Gerhard Flatz is preparing
today for one of China`s newest fascinations. His sportswear company KTC
bought a Swiss brand called Mountain Force which he hopes will one day
attract the country`s up-and-coming skiers.

GERHARD FLATZ, KTC MANAGING DIRECTOR: It`s a massive opportunity,
especially for the Chinese market.

YOON: Traditionally, Chinese people haven`t taken a whole lot of interest
in Winter Sports. But with the Beijing Olympics coming up, the government
is making a big push to promote sports like skiing.

Thousands of children like 9-year-old Xi Yuqi are being taught how to ski
and snowboard at this resort in Chongli, the town hosting most of the
Olympic events.

I watched some videos of snowboarders doing flips in the air, she says. It
looks exciting.

Other students in China are being required to get excited, as part of
Beijing`s ambitious plan to put 300 million Chinese on the slopes by 2025.
The government is even subsidizing ski trips for nearby schools.

In this city, every primary school has a certain allotment for students
that come here, this instructor said. Ever since the government created
the slogan 300 million people on snow, kids have been loving this.

FLATZ: The Chinese like a little bit the glamour and the glitter.

YOON: Businessman Flatz believes the grand effort will mean increasingly
affluent Chinese demanding increasingly stylish ski wear.

FLATZ: We see very much that the affluent Chinese consumers are ski
interested and they take pictures with this brand and that will definitely
help us to boost the awareness on the Chinese market.

We got a bit more, see a bit of retro, modern, a lot of innovation and

They`re absolutely dry.

YOON: Do you think Chinese people will like this?

FLATZ: Absolutely. They will love it.

YOON: Why?

FLATZ: Because it keeps them warm and they`re looking good.

YOON: For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Xiapeng (ph), China.


HERERA: And before we go, another look at how stocks fared today. The Dow
advanced 390 points to 25,709, led by financial and technology shares. The
Nasdaq added 84, and the S&P 500 was up 32.

And that is NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera. Thanks
for joining us. Have a great evening and we will see here tomorrow.


Nightly Business Report transcripts and video are available on-line post
broadcast at 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) 2018 CNBC, Inc.


This entry was posted in Transcripts. Bookmark the permalink.

Leave a Reply