Transcript: Nightly Business Report – June 20, 2018

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

CONTESSA BREWER, NIGHTLY BUSINESS REPORT ANCHOR: The mouse chases the fox.
Disney (NYSE:DIS) ups its offer for Fox`s assets, escalating the bidding
war with rival Comcast (NASDAQ:CMCSA) (NYSE:CCS).

Drama in Vienna. Why the meeting with global oil producers is shaping up
to be one of the most contentious in years.

New factory opens. Foreign automaker puts down roots in the United States,
but it comes at a rather unusual time.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Wednesday,
June 20th.

Good evening, everyone. I`m Contessa Brewer. Bill and Sue are off
tonight.

Disney (NYSE:DIS) is raising the stakes in the fight for Fox`s assets, now
increasing its offer to $71 billion, topping Comcast`s all cash bid at $65
billion. That sent shares of all three companies higher in trading today,
and the bidding comes as media companies look to strengthen their own
positions against the likes of Netflix (NASDAQ:NFLX).

Julia Boorstin is at an advertising conference in Cannes, France, where the
fight for Fox was a big topic.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Fox and Disney
(NYSE:DIS) agreeing to a new, more expensive deal. Disney (NYSE:DIS)
paying $10 more per share than it had previously agreed to with Fox for a
deal worth over $71 billion. Disney`s new deal, a 50-50 split between cash
and stocks, about $6 billion more than Comcast`s all cash offer made last
week.

Disney (NYSE:DIS) CEO Bob Iger saying on an investor call that the company
has become more committed to the deal.

BOB IGER, DISNEY CEO: Distribution in terms of direct to consumer
distribution has actually become an even more compelling proposition in the
six months since we announced the deal. There`s just been not only a
tremendous amount of development in that space, but clearly, the consumer
is voting loudly that these new platforms are very compelling.

BOORSTIN: Iger saying on the call that he`s confident the deal will gain
regulatory approval and that Disney (NYSE:DIS) has a meaningful head start
on Comcast (NASDAQ:CMCSA) (NYSE:CCS).

IGER: We`ve been working with regulatory authorities, not just in the
United States but in jurisdictions across the world now for six months, and
we`ve made a lot of progress towards obtaining the regulatory approvals
that are necessary.

BOORSTIN: Disney (NYSE:DIS) saying the higher cost deal does not change
their plans to invest in Disney`s businesses, but that short term they
planned a more conservative approach to share repurchases and will not
complete the $20 billion share repurchase announced in December.

Rupert Murdoch, executive chairman of 21st Century Fox, saying, quote, we
remain convinced that the combination of 21st Century Fox`s iconic assets,
brands and franchises with Disney`s will create one of the greatest, most
innovative companies in the world.

As for what`s next, no word back from Comcast (NASDAQ:CMCSA) (NYSE:CCS) on
whether it plans to offer more for Fox.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Cannes, France.

(END VIDEOTAPE)

BREWER: The media merger activity lifted the mood on Wall Street. While
Netflix (NASDAQ:NFLX) and Facebook (NASDAQ:FB) closed at new highs, but
lingering trade tensions weighed on the Dow and stocks finished mixed. The
Dow Jones Industrial Average fell 42 points to 24,657. The Nasdaq rose 55
and the S&P 500 was up four.

Shares of General Electric (NYSE:GE) fell today as the company enters its
next chapter. After more than 100 years of the Dow component, G.E. will be
removed from the blue chip index as we reported last night. During its
time as a member of the Dow, G.E. saw some very high highs and some very
low lows.

(BEGIN VIDEOTAPE)

BREWER: G.E. literally changed the world from light bulbs to locomotives
to household appliances, power generation and jet engines. With a market
cap of $594 billion in the year 2000, it was the world`s most valuable
company, but its removal from the Dow Jones Industrial Index next week is
the latest symbol of how far it`s fallen.

DAN VERU, PALISADE CAPITAL MANAGEMENT: It`s clearly a sign of the
difficulties G.E. has had.

KEN KAMEN, MERCADIEN ASSET MANAGEMENT: The index has decided that it was
irrelevant.

BREWER: Now valued at $113 billion, G.E. is still bigger than United
Technologies (NYSE:UTX), which is staying in the Dow, but G.E.`s share
price is down more than 50 percent in a year. G.E. embraced change in the
20th century and grew, developing computer technology, and after Jack Welch
took over in 1981, it acquired NBCUniversal and later became one of the
country`s biggest banks.

But under Welch`s successor, Jeff Immelt, the company stagnated and began
to shrink. It shifted away from banking, sold off NBCUniversal and bought
oil services giant Baker Hughes (NYSE:BHI), just as oil sank.

With John Flannery in charge its once coveted dividend has been cut in
half. No wonder the company barely shrugged when its impending removal
from the Dow was announced.

G.E.`s statement says: We`re focused on executing against the plan we`ve
laid out to improve G.E.`s performance. It does nothing to change those
commitments or our focus in creating a stronger, simpler G.E.

Icons like G.M. and Alcoa (NYSE:AA) have left the Dow and survived. Now,
investors wonder if G.E. can find a way to bring itself back to life.

(END VIDEOTAPE)

BREWER: While now that General Electric (NYSE:GE) has been removed from
the Dow, let`s talk about whether that major index is still as
representative of the U.S. economy as it once was. We`re joined by David
Blitzer, who`s the managing director and chairman of the index committee at
S&P Dow Jones Indices.

It`s great to see you today.

DAVID BLITZER, S&P DOW INDICES MANAGING DIRECTOR: Good afternoon.

BREWER: Can you tell me what`s behind the change? I mean, why Walgreens?

BLITZER: Well, our change is based on what we feel the index needs and how
we will make the index even better and more representative of the U.S.
markets and the U.S. economy. So, the change is not about General Electric
(NYSE:GE).

Looking at the index, it is with G.E., where it is now somewhat
overweighted in industrials, the more industrials represented in the index
than would be balanced to the market, less consumer staple companies,
somewhat less health care companies. And all that suggested to swap an
industrial for something that was in consumer staples and maybe a tinge of
health care.

On top of that, G.E. price at about $13 a share has a very low weight in
the Dow. It was less than 1/2 of 1 percent. G.E. wasn`t doing very much,
was not having much impact on the Dow. So, rather than leave it there,
let`s take the opportunity to balance the index better, add a stock that
will have a bigger impact on it, and that`s in part or largely because the
Dow is price weighted, an unusual way to do indices, but probably the long-
time standard way.

BREWER: And, David, when you`re talking about which of the 30 companies
should make up the Dow, do you also have conversations about whether
weighting those companies by share price is still an accurate reflection of
the American economy? Is that still the right way for a modern index to
run?

BLITZER: Well, clearly in the last week we had a lot of these
conversations. We — first we do many other indices, including the S&P
500, which is weighted by market — quote, market cap, amount of shares,
the value of the shares that are in the market, and that is the more
typical way to do it. To change the Dow, we`d be tossing away about 125
years of financial history, longer series of history than just about
anybody else has that`s consistent and reliable.

We`d also have to rejigerate substantially and it would come out looking
very different and it would probably come out looking a lot more like the
S&P 500.

BREWER: And do you think —

BLITZER: So, I think we`re happy with the way it is. It`s not the only
way to run an index, but I think it is sort of a tried and true way to run
an index.

BREWER: Do you think that the fact that you`re operating the Dow Jones
Industrial without a giant like Amazon (NASDAQ:AMZN) or Netflix
(NASDAQ:NFLX) in it still represents the American economy?

BLITZER: Yes, I do. We have — we have a lot of technology representation
in it, we have a lot of consumer — consumer-oriented representation. So,
I think we`re doing a very good job representing the U.S. economy where it
looks right now. Amazon (NASDAQ:AMZN), if one looks at the financials and
everything, most of their business is retail. It comes from their Website.

Maybe the exciting stuff for Amazon (NASDAQ:AMZN) 10, 15, 20 years from now
is all going to be web services, but right now, it`s a retail company.
That`s where it belongs. So, I think the representation is good. Amazon
(NASDAQ:AMZN) and the Dow, because of the price weighting, if we added
Amazon (NASDAQ:AMZN), it would become the Amazon (NASDAQ:AMZN) index, not
the Dow index, and I don`t think that would serve anybody.

BREWER: David Blitzer with S&P Dow Jones Indices — thank you, sir.

BLITZER: Thank you. Have a good evening.

BREWER: Does G.E.`s removal from the Dow provide an opportunity for
investors to make portfolio changes?

We`re joined by Chad Morganlander to discuss. He`s a portfolio manager at
Washington Crossing Advisers.

Look, this stock, Chad, is widely in index funds, in mutual funds, in IRAs.
What happens now?

CHAD MORGANLANDER, PORTFOLIO MANAGER, WASHINGTON CROSSINGS ADVISERS: Well,
there may be short-term selling pressure as it leaves the index, but
overall for the long run, the company is going to be trading based off of
its fundamentals, and the fundamentals for this are somewhat cloudy at this
point. This company never recovered from the Great Recession.

BREWER: I mean, this is a stock that my grandparents have owned, my
parents have owned, I have owned. So, what indicators do you look for now
to say, yes, hold onto it, no, cut your losses and sell, or now is a great
time to get in?

MORGANLANDER: Right, management has to show that they`re keeping it
simple, that they`re going to reduce debt, they`re going to change the
properties and perhaps spin a couple of them off so it`s easier for
portfolio managers and individual investors to understand the business.
That`s part of the problem. It`s a too — the business model is too
confusing.

Yes, the health care business is running on full speed as well as the
engine business, the jet engine business, i.e., Boeing (NYSE:BA), but you
also have troubled groups within that property like, for example, oil and
gas. We need to see them spin those troubled groups out, the companies
that don`t — that are not really profitable or are not very predictable.

BREWER: And what`s your advice right now, sell?

MORGANLANDER: I would hold if I was a long-term investor, and if you start
to satisfy a transformation of the company, I would be more enticed to buy
it at higher prices knowing that there`s stability. They really need to
reduce their debt burden. It`s over $100 billion.

BREWER: Thank you so much, Chad, for giving us your expertise.

MORGANLANDER: Thank you, Contessa.

BREWER: Chad Morganlander with Washington Cross Advisers.

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

Citigroup (NYSE:C) was upgraded to buy from hold at Deutsche Bank. The
analyst says the Fed stress result should be positive for the bank. The
price target is $76. Shares closed up nearly 1 percent to $67.38.

Starbucks (NASDAQ:SBUX) was downgraded by a number of firms here, including
Morgan Stanley (NYSE:MS), which lowered its rating to equal weight from
overweight. The analyst points to the company`s sales warning. We told
you about it yesterday and asked whether management is really doing enough
to turn around this business. The price target was cut to $59. The stock
dropped 9 percent, its biggest one-day decline in nearly six years.

And today, Starbucks (NASDAQ:SBUX) CEO admitted the coffee`s chain growth
has slowed, but he says there`s a plan to get things back on track.

(BEGIN VIDEO CLIP)

KEVIN JOHNSON, STARBUCKS CEO: At our scale, I think we`ve got to be much
more disciplined in setting our priorities. We`ve got to be more data-
driven in terms of how we`re allocating resources and tuning the model, and
we`ve got to be much more agile as innovators. And so, what we did
yesterday was set the stage for that transition to a company that`s really
focused on growth at scale.

(END VIDEO CLIP)

BREWER: And as we reported, Starbucks (NASDAQ:SBUX) will open fewer stores
in the United States while closing many in larger cities.

Still ahead, why the price of oil is at the center of a landmark meeting.

(BEGIN VIDEO CLIP)

BRIAN SULLIVAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: I`m Brian Sullivan
in Vienna, Austria. And coming up, why the fate of oil prices may be
determined behind the doors of this 700-year-old palace. That`s next on
NIGHTLY BUSINESS REPORT.

(END VIDEO CLIP)

(MUSIC)

BREWER: In Washington, President Trump signed an executive order to keep
immigrant families together at the border. That order addresses what the
White House has called an unwanted side effect of the administration`s zero
tolerance policy on illegal immigration.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: It`s about keeping families
together while at the same time being sure that we have a very powerful,
very strong border.

(END VIDEO CLIP)

BREWER: The executive order comes just hours after major airlines told
government officials they did not want separated children transported on
their planes.

The meeting of OPEC members and other oil producers are shaping up to be
one of the most dramatic in years, and the gathering doesn`t start until
Friday.

Brian Sullivan reports tonight from Vienna.

(BEGIN VIDEOTAPE)

SULLIVAN: The amount you pay for gasoline in the future may be decided
within the walls of this more than 700-year-old palace in Vienna, Austria.
This is where OPEC is holding a two-day seminar ahead of their big general
meeting on Friday.

The big issue on the table, whether the OPEC nations will agree to increase
output which could possibly lower oil prices. A year and a half ago, OPEC
members agreed to cut production in an effort to firm up prices. That
largely worked as crude oil jumped by $10 a barrel since then and boosted
gasoline prices with it.

Now, Saudi Arabia is pushing to raise production, along with non-OPEC
member Russia. This coming on the heels of the Trump administration
reportedly requesting Saudi oil support and increased production in a phone
call to the kingdom just one day before pulling out of the Iran nuclear
deal.

Iran, which fears it will be huddled by upcoming renewed U.S. sanctions,
has condemned the move, calling on fellow OPEC members to rebuff Trump`s
call for increased oil output. They`re joined by Venezuela, which is
dealing with a disastrous economy and collapsing oil output. Iran`s
governor in OPEC is telling CNBC that if the Saudis and others want to walk
away from their current output agreement, it will be like President Trump
walking away from the nuclear deal.

HOSSEIN KAZEMPOUR ARDEBILI, IRAN OPEC GOVERNOR: What I`m saying is that it
is a valid argument. Everybody should honor it. If anybody wants to walk
out, they are most welcome. We are going to stay after the end of this
(INAUDIBLE).

SULLIVAN: You will honor the current OPEC deal because you believe the
deal is in place? What do you think about the people that are trying to
change the deal?

ARDEBILI: They can do that. They can walk out like Trump.

SULLIVAN: But it is drivers who may feel it the most if Iran walks away
from any deal here because as economies around the world improve, demand
for gasoline will rise and unless more oil comes to market, supplies will
get tighter.

That`s why the chairman of American oil company Pioneer Natural Resources
(NYSE:PXD) tells us he expects a deal will get done.

SCOTT SHEFFIELD, PIONEER NATURAL RESOURCES: They will have to because
we`re taking all the million barrels a day off the market from Venezuela
declining, plus the Iranian sanctions, and now you got Libya off 400,000
barrels a day. So, they have to add more barrels to the market. And then
you got the Permian is going to reach its capacity in the next three or
four months. And so, the U.S. is not going to grow as much over the next
12 months. So, they have to add some more supply to the market.

SULLIVAN: The cartel will ultimately announce its decision on Friday. The
outcome right now is unknown, but what we do know is that this is already
shaping up to be one of the most contentious meetings in many years.

For NIGHTLY BUSINESS REPORT, Brian Sullivan, Vienna, Austria.

(END VIDEOTAPE)

BREWER: Winnebago says demand is growing and that`s where we begin
tonight`s “Market Focus”.

The RV maker reported improved margins and stronger than expected earnings
as customers purchased RVs from the company`s new product lineup.
Winnebago said its brands are well-positioned to grow and continue to be
successful.

(BEGIN VIDEO CLIP)

MICHAEL HAPPE, WINNEBAGO CEO: We`re taking the material market share,
especially in the towable segment. We have two brands, Grand Design and
Winnebago, that are doing really good things. Their product lines are
healthy. Their relationships with dealers are healthy, and they`re able to
compete effectively in the market for their products.

(END VIDEO CLIP)

BREWER: Shares finished up nearly 15 percent to $46.35.

After the bell, chip maker Micron said strong demand for its smartphone and
computer memory chips helped overall sales rise and topped expectations.
Profits also climbed and beat estimates, but Micron shares were initially
lower in afterhours and also ended the regular session down just a fraction
to $58.95.

And American Outdoor Brands formerly known as Smith and Wesson reported a
drop in profits and sales, but the results were still ahead of estimates.
The company also gave strong guidance for the current quarter, but seized
performance for the year missing street estimates. Shares initially were
higher in afterhours and also finished the regular trading day up 1 percent
to $13.23.

German automaker Daimler is issuing a profit warning and it`s blaming the
U.S./China trade fight. The company cited the potential for higher costs
resulting in increased import tariffs for U.S. vehicles into the Chinese
market. It also said Mercedes-Benz SUV sales have been softer than
expected. Separately, “The Wall Street Journal” is reporting that
Germany`s largest automaker back the idea of abolishing all import tariffs
for cars between the European Union and the United States.

Volvo is the latest member to add an assembly plant in the southern United
States. And the facility outside Charleston will build cars and SUVs that
will be sold here in the U.S. and exported overseas.

Phil LeBeau is in Ridgeville, South Carolina.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: I would officially declare the Ridgeville plant open
for business. Thank you for coming.

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: The pre-production
work is just getting started, but it won`t be long until 4,000 Volvo
workers are cranking out finished cars from the company`s new plant outside
of Charleston.

HAKAN SAMUELSSON, VOLVO CARS CEO: We need to come closer to customers to
be able to continue growing. We need to know how they think and need to
know their preferences and so it`s very crucial to be here finally.

LEBEAU: Volvo`s expansion comes as sales in the U.S. have jumped 40
percent this year, thanks largely to its popular SUVs. But compared to
Europe and China, the U.S. still makes up a small part of Volvo`s global
business.

China is increasingly crucial to the brand`s future. Not only is it the
world`s biggest auto market, but Volvo`s parent company, Geely, is a large
and prominent Chinese automaker. And then there is the growing trade
tensions between the Trump administration and foreign countries who charge
far higher tariffs on imported vehicles than the U.S., a situation the
president is pushing hard to change.

Volvo`s CEO says more uniform auto tariffs would ease the trade tensions.

SAMUELSSON: I think it was very good. China lowered their tariffs a week
ago, now they`re back up. European Union also, I think, should follow
America on the lower level. So, if we will do that, I think the whole
business would be more strong and the consumers would have better products.

LEBEAU: Right now, the majority of vehicles Volvo sells in the United
States are imported from Europe with a remainder coming from China. But
once this plant is up and running, many of the vehicles it builds will not
only be sold in the United States but will also be exported.

And in the process, the brand intent on making a bigger impression with
Americans will become the latest foreign automaker to put down roots in the
Deep South.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Ridgeville, South Carolina.

(END VIDEOTAPE)

BREWER: Coming up, planning a trip for this summer? Watch out for travel
fraud. It`s on the rise and it`s costly.

(MUSIC)

BREWER: Sales of existing homes fell for the second straight month, thanks
to a shortage of properties on the market. The lack of supply pushed the
median price of a home to an all-time high, and while sales fell nationally
last month, they are red hot on the tiny island of Nantucket. This
vacation spot off the coast of Massachusetts is seeing record prices amid
increasing demand.

Diana Olick has more.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: This 60-year-old home
on the edge of Nantucket Harbor is considered a tear down, a tear down with
a list price of $24 million. That`s just how much money is pulling into
port on this historic island. The property has been in real estate agent
Edward Sanford`s family for decades.

EDWARD SANFORD, GREAT POINT PROPERTIES: In the very high end of the market
where this house is, buyers don`t care about the house. They`re looking
for the location. We see perfectly good brand-new houses gutted and the
buyer — because the buyer wants his vision. He has the money.

OLICK: With ultra high end restaurants and retail crowding into the
cobblestone streets, Nantucket real estate is reaping the rewards of a
robust economy. The dollar volume of Island Homes sold in the first
quarter of this year was up 50 percent from a year ago. The $4 million to
$6 million range is a sweet spot with sales up 300 percent compared to a
year ago, all according to Great Point Properties.

SANFORD: When the markets are good, I mean the equity markets, people are
obviously getting richer, making more money. And so, they`re more inclined
to, you know, want to spend some of that in Nantucket.

OLICK: And there is little less for sale on the lower end of the market
here. There are currently more listings of homes priced over $10 million
than there are homes priced under $1 million.

And while builders here are busy, there isn`t much land to build on, so
they`re focused on the high end where they profit most. Not only is the
value of the limited land here growing exponentially, but docks like this
one are adding to that value as well, because Nantucket no longer allows
anymore docks to be built here anywhere ever.

This dock just across the harbor recently sold for nearly $5 million.
Demand is largely domestic, buyers from Boston, New York, and Texas. So,
it helps that the island`s property taxes are incredibly low. Just one
more reason real estate here is sitting pretty.

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

(END VIDEOTAPE)

BREWER: Well, if you`re hoping to book a get away to Nantucket or anywhere
else at a discount price on short notice, the combination could make you
the perfect target to get scammed.

Senior personal finance correspondent Sharon Epperson is here with tips on
how to protect yourself and your valuable vacation time from travel fraud.

I mean, how big of an issue is travel fraud?

SHARON EPPERSON, SENIOR PERSONAL FINANCE CORRESPONDENT: Travel fraud is on
the rise and it`s become a very big issue. A recent study showed that 55
million bookings per year are done on a fraudulent online website, travel
website, or through a fake hotel website.

So, it is something that has risen 16 percent in 2017 and it`s had a
significant impact on consumers and on the travel industry. We`re talking
about the average consumer, the fraud loss is between $300 and over $500,
and we`re also looking at airlines losing between $2 billion to nearly $5
billion a year to credit card fraud.

If you`re booking your hotel on the same day thinking you`re going to get a
great deal, you`re four times more likely to be a victim of fraud.

BREWER: So, I mentioned that if you`re looking for that deal that makes
you more vulnerable to it? What are the red flags you`re looking for to
know whether you`re about to get hooked?

EPPERSON: Well, you get that suspicious e-mail that says, you know, you
can get a great discount on this airline, or this resort, but there are not
a lot of details attached to it. The biggest one, it`s going to be free,
but it doesn`t give you a date, it doesn`t really give you a name of the
location of where this property is going to be. That`s another warning
sign to look out for.

The other thing to look for is if you`re pressured to do it right now, pay
up front, and you`re going to get this great offer, that is something that
you really want to be weary of, because that`s in order to get your credit
card number and get you to sign up right away, another form of fraud.

And, finally, you want to be sure that you`re looking at currency ranges
when you`re traveling abroad. People saying, I got to just exchange this
money quickly. I`m going to use a store front to do it.

That is not where you want to go, likely to get scammed. You want to go
bank.

BREWER: All right. And what do you do if you spot a scam?

EPPERSON: If you spot a scam, make sure you get all the things in writing,
that`s how you can avoid it. That`s one of the first steps always to take,
and don`t make one payment until you`ve seen it in writing. Make sure that
you`re reading the fine print and make sure that you review it immediately
because you only have 60 days according to the federal trade commission to
dispute a credit card charge from the first time it appears on your bill.

So, if you`ve made this booking months in advance and then discover later
that there`s something wrong there, you may be ripped off and unable to get
your money back.

BREWER: Plus, how do you explain it to your family?

EPPERSON: Exactly.

BREWER: Sharon, thank you. Sharon Epperson.

And before we go, we want another look at the day on Wall Street. The Dow
fell 42 points, the Nasdaq rose 55 and the S&P 500 was up 4 points.

And that`s NIGHTLY BUSINESS REPORT for tonight. I`m Contessa Brewer.
Thank you for watching. Have a great evening. We`ll see you back here
tomorrow.

END

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