Transcript: Nightly Business Report – March 15, 2018

ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Bill Griffeth and Sue
Herera.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Mixed markets. The Dow
climbs, but the rest of the market falters as the bulls struggle to gain
momentum.

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Rule rollback. The Senate
votes to ease banking rules, marking the first rewrite of Wall Street
reforms enacted following the global financial crisis.

HERERA: The sale of the century. A rare look at the Rockefeller family
collection, which will be auctioned off potentially for record amounts.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Thursday,
March 15th.

GRIFFETH: Good evening, everybody.

A tug war took place on Wall Street today. There wasn`t one thing that
drove stocks but instead many, sending them up, and down, and back up
again. Keeping a cap on gains today was a report from the “New York Times
(NYSE:NYT)” out midday that said that special counsel Robert Mueller has
subpoenaed the Trump organization as part of his Russia investigation.

Then, there was the announced elimination of a key tax benefit for some
pipeline companies by the Federal Energy Regulatory Commission, and that
sent shares of energy companies south. But in an interesting turn of
events, it was trade talk that helped lift some sectors.

So, when all was said and done, it was the Dow that was the lone gainer
among the major indexes today, advancing 115 points to 24,873. The Nasdaq
lost 15. The S&P was down two.

HERERA: Industrial stocks gained today, when the White House adviser
played down the risk of trade war. Peter Navarro, the director of the
White House Trade Council, says when it come the trade, the president may
be firm in his convictions but he can also be flexible.

(BEGIN VIDEO CLIP)

PETER NAVARRO, NATIONAL TRADE COUNCIL, DIRECTOR: Let me just say one
thing. We come in peace here. The thing everybody on Wall Street needs to
understand is just relax. If you look at the negotiating posture of this
country, all these countries that are running huge trade surpluses with us
have no incentive to rock that boat. All we`re doing is standing up.

(END VIDEO CLIP)

HERERA: Navarro said that by slapping tariffs on steel and aluminum, the
White House is acting in the nation`s economic and national security
interests.

GRIFFETH: Also in Washington, the Treasury Department imposed sanctions on
Russian organizations and individuals in retaliation for interfering in the
2016 presidential election and for malicious cyber attacks. Those
sanctions target the same Russian groups that were indicted last month by
special counsel Mueller. The sanctions block them from traveling to the
U.S. They freeze any assets in the country and bar American businesses
from doing business with them. The Trump administration also accused
Russian government hackers of targeting the American energy grid.

HERERA: Oil prices edged higher today, helped by signs of growing global
demand. The International Energy Agency expects that more demand will
offset increased U.S. shale production, keeping the oil market balanced
pretty much this year. The report comes one day after OPEC raised its
forecast for shale production. The price of domestic crude settled above
$61.

GRIFFETH: Well, the market has found some support from economic data
today. In the weekly jobless claims, they fell last week by 4,000,
clinging to a near 50-year low, reinforcing the strong labor market
perceptions. A report from the Philadelphia Fed said that firms in the
mid-Atlantic region reported difficulties finding workers and that more
than half the firms were raising wages to address those shortages. Other
data showed an increase in the price of imported goods last month as the
dollar weakened and the commodity prices rose.

HERERA: There was also new housing data released. It comes at a he could
time of the year for the real estate market. Home builder confidence fell
for the third month in a row as builders complained about the higher costs
for labor, land, and lumber. According to Freddie Mac, mortgage rates fell
for the first time this year.

GRIFFETH: Let`s turn to our guest for more on the housing market as we
approach the big spring selling season. Aaron Terrazas is senior economist
of Zillow. Cole Smead is portfolio manager at Smead Capital.

Aaron, are we in a situation where we have tight inventories, not enough
homes for sale, and so much demand still out there? Is that the idea?

AARON TERRAZAS, ZILLOW SENIOR ECONOMIST: That`s correct, supply has been
the story of past two years. Unfortunately, it`s just getting worse. You
look at existing home sales. They are down about 5 percent over the year.
New home sales are down 1 percent in the year.

At this point in the housing market cycle with prices rising so much and
demand is out there, you would expect home builders to be building for than
they currently are. But as you noted they are facing costs — labor, land,
materials, raw materials, lumber are all going up.

HERERA: So, Cole, how do you factor that in when you look at the housing
sector and you want to invest in it? How do you pick those stocks given
the backdrop that Aaron just laid out for us?

COLE SMEAD, SMEAD CAPITAL PORTFOLIO MANAGER: And what Aaron is talking
about, it`s particularly bad in places like Seattle where Aaron and I are.
Those are some of the worst markets, Seattle, San Francisco, et cetera.
The problem is, as you laid out with land, the land is most abundantly
available in the southern part of the United States.

And so, as we kind of look at this, that`s all dealing with supplies.
Supply is as tight as it has been going back 34 years. When you look at
actual building, though, building on the per capita basis is below
depression levels in the last 60 years. So, the real big question is, in
effect, when will millennials finally be marginally dominating the housing
market in a way that people are really excited about housing. They`ve
showed up, and that`s showing up in the data.

GRIFFETH: Right.

SMEAD: I would also tell you that builders are always worried about land
prices. The bigger thing they are seeing an effect on is labor inflation.

GRIFFETH: Cole, let`s talk about specific stocks. Let`s start with Home
Depot (NYSE:HD). You know, it`s long been considered a proxy for the
housing market. It hit a high, up $207 in January and it has been falling
ever since. Today, around $176.

Is it trying to tell us something about the housing market?

SMEAD: Well, in the interim, that`s how some people could read it. If you
look back 10 years, though, Bill, I mean, it`s gone from the mid-20s 10
years ago to $210 and now back to $178 roughly.

So, people have made sevenfold on their money in ten years. We`ve finally
seen a period where they decided to sell and take it to lower price.

GRIFFETH: So, you are saying it`s profit-taking not so much trying to
foreshadow a crumbling housing market.

SMEAD: Correct, because Home Depot`s best environment is not when we`re
building all these homes, you know, going forward to meet the supply that
Aaron talked about. It`s when those homes are already in place and every
30 to 50-year-old woman out there wants to watch Chip and Joanna Gaines,
you know, their show on fixer upper and go make their house like that. And
that is when housing can be horribly profitable Home Depot (NYSE:HD).

If you look at fixed real estate investment, as a percentage of the GDP,
which is something they often quote on the quarterly earnings calls —

GRIFFETH: Right.

SMEAD: — we are still below an average period of people spending money on
houses.

HERERA: Before we get to some of the other stocks, Aaron, let me ask you,
the one thing we haven`t talked about is the prospect of higher interest
rates. What impact is that going to have on the housing market?
Especially since now there are some on the street and I would be interested
to hear your projection who were looking for three, now maybe four
increases in interest rates, given how healthy the economy is.

TERRAZAS: Look, interest rates are rising. They are up about 50 basis
points over since the start of the year. And, you know, certainly, that
does increase your typical home buyer`s monthly mortgage payment. But, you
know, beyond kind of the tales of kind of some financially savvy
individuals, people buy houses because life is happening, because they are
having kids, because they got a new job. So, that`s a situation to rent
versus buy, millennials are out there. They`re buying houses, they`re
having kids. They`re getting along with their lives finally after waiting
so many years.

The question is, are their budgets going to be tighter? And, you know, for
however tight their budgets may get, they are bidding for those scarce
homes that are available. So, they want homes. And, you know, mortgage
rates will be a about it of a head wind but until they are up to 6 percent,
6.5 percent, I don`t know it`s going to have a meaningful impact.

GRIFFETH: Cole, before we go, we have just a couple of seconds. Do you
like any of the home builders stocks right now?

SMEAD: We owned NVR (NYSE:NVR) and Lennar (NYSE:LEN). NVR (NYSE:NVR) is
more in your guys` neck of the woods, Mid-Atlantic, and then Lennar
(NYSE:LEN) is coast to coast. And we own Home Depot (NYSE:HD), too. It`s
a tough business because they usually borrow money for the land we talk
about, and that can make the cyclical down swings really tough.

But there is a great runway to this. Housing is a great place to make
money in the next ten years.

GRIFFETH: By the way, here`s a 60-year-old man who is a fan of Chip and
Joanna Gaines as well. So —

SMEAD: There we ago. Hey, I am too. Thank you.

GRIFFETH: There we go. Thanks both for joining us tonight.

Aaron Terrazas is from Zillow. Cole Smead from Smead Capital.

SMEAD: Thank you.

HERERA: Wells Fargo (NYSE:WFC) is reportedly facing some more legal
trouble from regulators. According to “Reuters”, officials are now said to
be preparing sanctions for the bank for receiving commissions on auto
insurance policies that were forced on more than 500,000 drivers. Wells
Fargo (NYSE:WFC) had earlier blamed a third party vendor for that issue. A
separate report shows that CEO Tim Sloan made more than $17 million last
year, about $4 million more than that in 2016.

GRIFFETH: Last night, we told that you the Senate was voting on
legislation that would ease restrictions on banks that were put in place
following the financial crisis of a decade ago. The chamber did pass that
representing the most significant change to those rules in the time since
the crisis. But at the timing it through the House could be tricky.

Kayla Tausche reports for us tonight.

(BEGIN VIDEOTAPE)

KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Efforts to relax
financial crisis regulation on banks moved forward this week but are
stalled just before the finish line.

UNIDENTIFIED MALE: The bill, as amended, is passed.

TAUSCHE: The Senate passed a bipartisan bill that eliminates strict
oversight of banks with less than $250 billion in assets. But it requires
the House to sign off before sending it to the president`s desk. House
Financial Services Chair Jeb Hensarling says he`s not just going to rubber
stamp it.

That leaves two options. Pursue a contentious conference process between
the two chambers, an option House leadership does not favor, or hash out
differences in private and produce a joint bill both sides of Capitol Hill
can pass. Hensarling has assembled a package of more than two dozen
provisions he wants the Senate to consider, including, and he expects to
speak with his Senate counterpart soon, though there is no deadline by
which the two must move forward.

For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche in Washington.

(END VIDEOTAPE)

GRIFFETH: Time to look at some of today`s upgrades and downgrades.

Dow component ExxonMobil`s rating was raised two notches to a buy at HSBC.
The firm cited a stronger outlook for the company. Cash flow growth and
the potential for a significant share buybacks. The analyst`s price target
raised to $82.50. That stock rose 1 percent to $74.42.

Meanwhile, Viacom`s rating was upgraded to a buy at Needham. The firm
cites valuation and the company`s efforts to diversify away from linear
television. The analyst`s price target is $40. Viacom (NYSE:VIA) shares
rose a fraction to $32.83.

HERERA: The price target on Goldman Sachs (NYSE:GS) was raised to $280 by
J.P. Morgan. That firm calls Goldman the best bank on Wall Street and says
it will benefit from improving market conditions. The analyst sees better
trading business as well later this year. The stock was up a fraction to
$266.61.

It was a downgrade for match group to neutral from buy at UBS. The firm
says the core brand will not return to positive year over year growth this
career. The price target: $48. The stock was off a fraction to $46.71.

Still ahead, wait until you see this, the ultimate billionaire yard sale.

(BEGIN VIDEO CLIP)

ROBERT FRANK, NIGHTLY BUSINESS REPORT CORRESPONDENT: It is the billionaire
yard sale of the century. The Rockefeller Center selling off more than 2
million objects. We will take you inside the family treasures of what
could become the most expensive auction ever in history.

(END VIDEO CLIP)

(MUSIC)

HERERA: Investors were rattled a bit today when Walmart was sued by a
former executive who was accusing the world`s largest retailer of unlawful
conduct in its e-commerce business. The whistleblower alleges that Walmart
mislabeled products so that third party vendors were paid lower commissions
amid growing pressure from Amazon (NASDAQ:AMZN). He said he was fired
under false pretenses in January of last year.

Walmart says it intends to vigorously defend the firm against those claims.
You can see the decline in the shares when the news was released.

GRIFFETH: Toys “R” Us is asking a bankruptcy judge for approval to stop
paying suppliers as it tries to find buyers for its international business.
As we reported last night, the retailer does plan to liquidate its U.S.
operations. Hasbro (NYSE:HAS) says it expect the pending liquidation to be
disruptive in the near term. Toys “R” Us after all accounted for about 9
percent of Hasbro`s global sales last year and about 11 percent of Mattel`s
sales. Shares of Mattel (NASDAQ:MAT) and Hasbro (NYSE:HAS) were both lower
again today.

HERERA: The nation`s largest radio broadcaster is filing for bankruptcy.
After years of trying to manage its $20 billion debt load, iHeartMedia says
it has reached an with creditors to cut its debate by more than half.
iHeartMedia faced competition from the streaming rivals Spotify and
Pandora.

GRIFFETH: The Bayer and Monsanto (NYSE:MON) merger may face regulatory
hurdles and that is where we begin tonight`s “Market Focus”.

Bloomberg is saying that Bayer`s proposed $66 billion acquisition of
Monsanto (NYSE:MON) has raised competition concerns with the U.S.
government. The report says that Bayer has agreed to sell some of its
businesses but the Justice Department apparently would like to see even
more. Shares of Monsanto (NYSE:MON) fell more than 4 percent today to
$117.20.

And discount retailer Dollar General (NYSE:DG) reported same store sales
that rose at a robust pace last quarter and gave upbeat earnings guidance
for the full year. Dollar General (NYSE:DG) also hiked its dividend by 12
percent to 29 cents a share. It was among the best gainers on Wall Street
today, gaining almost 5 percent to $93.44.

Investors were not so kind to Sears (NASDAQ:SHLD) Holdings, though, today.
After the bell yesterday, the owner of Sears (NASDAQ:SHLD) and Kmart posted
its first quarterly operating profit in three years. But here`s the catch.
It came from tax benefits. Comp store sales at both chains fell by double
digits over that time frame. Shares fell 6 percent to $2.26.

HERERA: Barnes & Noble (NYSE:NE) (NYSE:BKS) gave guidance for fiscal 2019
that topped analyst`s estimates. The book retailer said it expects
earnings to be helped by cost cuts and improved sales trends. Shares of
Barnes & Nobles finished 6 percent higher to close the day at $5.10.

And after the closing bell, Broadcom (NASDAQ:BRCM) reported results that
beat estimates, thanks to stronger demand for its chips. The company which
recently dropped its Qualcomm (NASDAQ:QCOM) offer after the Trump
administration blocked the takeover also gave an outlook for the current
quarter that was pretty much in line with estimates. Shares were initially
higher in after-hours trading and then they fell. They ended the regular
day up more than 2 percent to $267.76.

GRIFFETH: The legendary collection of the late David Rockefeller is
scheduled to be auctioned off at Christie`s next month. Items range from
famous paintings to fine china. They are expected to fetch a record
amount, as you can imagine, with all, by the way, of the proceeds going to
charity. Many say this could be the auction unlike any seen before, and
maybe ever.

Robert Frank got a rare look at the pieces and he spoke exclusively to
David Rockefeller Jr.

(BEGIN VIDEOTAPE)

FRANK: No other name in American history symbolizes great wealth and
status like the Rockefellers. Now, to their achievements in business and
philanthropy, the Rockefeller family is about to add another, the largest
auction ever. In May, Christie`s and the Rockefeller family will sell off
the entire collection of the late David Rockefeller who passed away last
year at the age of 101.

The sale is likely to set a new record for an auction of a single
collection, estimated a more than $500 million.

UNIDENTIFIED MALE: Sold at $29 million.

FRANK: In a rare interview at family farmhouse in Upstate New York,
David`s son David Rockefeller Jr. said he hopes the family treasures will
find new homes around the world.

DAVID ROCKEFELLER, JR.: I love the idea of thinking about these pieces in
many other people`s homes. It`s like a grand recycling.

FRANK: Aside from being the yard sale of the century, it`s also a rare
window into a family that for all of its public good has maintained almost
obsessive privacy. David Rockefeller was the grandson of John D.
Rockefeller, the controversial oil tycoon who became America`s first
billionaire in 1916.

David was the chairman and CEO of Chase Bank and served on countless
charities, museum, and educational boards.

ROCKEFELLER: I hope that many of the buyers will have that sense that they
are buying stories and buying taste, and buying something homey as well as
something very beautiful.

FRANK: They are unmatched flat wear collection including Napoleon`s
favorite sugar bowl and dessert service. There are rare Asian buddhas,
porcelain collections and carved birds. Plus, family heirlooms including a
13th century Syrian incense burner that sat on David Rockefeller`s desk at
Chase Manhattan.

He probably liked to burn incense every day to set the mood.

ROCKEFELLER: It would be great to think that.

FRANK: This piece is expected to sell for I think over $200,000.

ROCKEFELLER: That`s what I hear.

FRANK: The star of the sale is a Picasso. It could fetch over $100
million. There`s a Matisse nude that could sell for as much as $90
million. And Monet that`s estimated at up to $70 million. While David and
Peggy always said they bought for beauty, not profit, their art also became
a great investment.

ROCKEFELLER: My father, when he was looking back at all the sectors of his
investment, his real estate, his stocks and bonds, his art, he actually had
a colleague of his measure how well they had done as generic asset classes.
And art won.

FRANK: During his lifetime, David gave away nearly $1 billion. All the
proceeds from the auction will go to a dozen non-profits selected by David.
The Rockefellers are now in their seventh generation. Their financials are
kept private. Forbes put David`s net worth at around $3 billion but he was
just a beneficiary of a trust that will now get passed down.

David Jr. says the sale of so many family treasures is bittersweet.

ROCKEFELLER: There are members of the family who really sad about that.
I`m saddest about the idea of going into an empty house that used to be a
beautiful house full of all of these amazing pieces of art. My dad taught
me not to look back.

FRANK: But you don`t have to be a millionaire to live like a Rockefeller.
David Rockefeller`s martini cuff links are being offered with an estimate
of between $400 and $600. And a ceramic cheetahs are estimated at around
$200. Christie`s is storing most items in a secret Manhattan basement and
is taking some of the top lots on a world tour.

The auction says the Rockefeller brand has a global appeal and hopes to
inspire today`s new billionaires to follow the Rockefeller model.

MARC PORTER, CHRISTIE`S CHAIRMAN, AMERICAS: I think that sets an example
for rich Americans in terms of both being involved in business and also
being involved in the community and understanding what a serious commitment
you have to have to make things change in a positive way.

FRANK: David Jr. says it also reminds us while great wealth can come and
go, noble causes endure.

ROCKEFELLER: If you get too attached to material things, it takes your
focus off of all of the other important things in life, including
relationships and global peace, and all of those other important issues.

So, at the end of the day, it`s not the things themselves that matter in
life.

FRANK: For NIGHTLY BUSINESS REPORT, I`m Robert Frank in Upstate New York.

(END VIDEOTAPE)

HERERA: We`ll keep you posted as to how that auction goes. Great stuff.

Coming up, hoop dreams. There`s a lot of money in college sports. But
should the players get paid?

(MUSIC)

GRIFFETH: In case you hadn`t heard, the NCAA March Madness tournament is
underway again. And with it comes once again a focus on the big money
behind college basketball. I mean, the schools get a lot of money and
attention. Coaches get a lot of money, but players get no payment. Should
they?

Eric Chemi is with us to talk about this controversial topic that comes up
again and again.

Is this gaining any traction? How is this working?

ERIC CHEMI, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s coming up again
and again. But this year in particular because of the FBI investigation
into bribery, financial advisers, all kinds of weird things going on, with
shoe companies to agents.

GRIFFETH: Right.

CHEMI: So this year, rumors are out there the FBI may drop another
bombshell during the tournament or soon as the tournament ends. So, it`s
getting a lot of steam that maybe the players should get paid to get rid of
the black market. That`s really what this comes down to.

HERERA: So, that`s one of the incentives to go to a school, if you are
going to be paid, right?

CHEMI: One of the incentives would be to get to a direct salary. Other
people have ideas that say, don`t get paid from the school but we`ll allow
you to get endorsement money. That way the schools don`t have to pay you.
But if you are good enough to get an autograph deal or a shoe deal, at
least that`s a side income for you, but it doesn`t cost the school
anything. That`s another option out there.

GRIFFETH: Is this a zero-sum game for winners? There are also losers?

CHEMI: A lot of people will say that there`s many winners if you allow
this to not be in the black market. Shoe companies are definitely win
because instead of going through all these secret ways to funnel kids to
the schools that they sponsor for their shoe deals, you can just pay those
kids directly. It would probably be a loss for the colleges because now,
you may have to pay students. So, that`s going to be a big cost for you.
Maybe you have to cut other sports that you were subsidizing through these
revenues.

HERERA: So, that`s one of the side effects, right? I mean, it`s not an
unlimited pot. It is a big pot but it`s not an unlimited, right?

CHEMI: Right. Maybe the coaches` salaries aren`t $3 million. Maybe they
need to be $1 million because you got to pay the $2 million up to the
players. So, there`s money, it`s a limited pie, it has to go somewhere.

GRIFFETH: But you know, it might keep kids in college, though. They leave
after one season because they got dollar signs in their eyes going to the
pros.

CHEMI: Or it might like be more like baseball, where if you`re going to go
to the pros, you just go straight to the pros, you got to stay in college
for three years so then you`re committed to sticking in college as opposed
to leaving after one or two.

HERERA: All right.

GRIFFETH: Good to see you, Eric. Thank you. Eric Chemi joining us
tonight.

HERERA: All right. Let`s take a look before we go at how the market fared
on this up and down and kind of sideways day. The Dow Jones Industrial
Average advanced 115 points to 24,873. The Nasdaq lost 15. The S&P 500
was down just a little bit over two points.

And tomorrow is Friday.

GRIFFETH: Yes, indeed.

HERERA: Yay.

All right. That does it for us tonight. I`m Sue Herera. We`d like to
remind you that this is the time of year your public television station
seeks your support. Thanks for joining us.

GRIFFETH: I`m Bill Griffeth. And we do thank you for that support. Have
a great evening. See you tomorrow.

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) 2018 CNBC, Inc.

 

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