Transcript: Nightly Business Report – August 13, 2018


across the globe run from risky assets on concerns of financial instability
and Turkey could spread to other markets.

report their earnings this week, and the results could prove that the death
of that sector has been greatly exaggerated.

GRIFFETH: Cashing out. Is your 401k leaking? It may sound odd but it`s a
serious problem that could put your retirement at risk.

Those stories and much more tonight on NIGHTLY BUSINESS REPORT for Monday,
August the 13th.

HERERA: Good evening, everyone, and welcome.

Well, stocks start the new week where they left the last one, with
declines. Investors are concerned about the financial crisis in Turkey
that sent its currency tumbling on Friday that worries spilled into markets
around the globe and dampened enthusiasm for stocks worldwide.

Here at home, the Dow Jones Industrial Average dropped 125 points to
25,187, marking a four-day losing streak. The Nasdaq fell 19 and the S&P
500 was down 11.

But Turkey is trying to take action to stem the financial fallout and
reassure investors about the country`s fiscal condition.

Willem Marx reports tonight for us from Istanbul.


doubled down on his blame game today after a weekend spent railing against
foreign powers and the economic war they`ve launched against Turkey, as the
lira continued to hover around new lows against the U.S. dollar.

This morning, the country`s central bank promised to support local banks
with as much liquidity as they needed. But it stopped short of raising
interest rates to combat inflation and support the currency as many
investors had hoped. The country`s interior ministry meanwhile vowed to
investigate more than 300 social media accounts it said were responsible
for talking down the lira.

In a speech to a group of Turkish ambassador`s at the presidential palace
in Ankara, Erdogan accused economic terrorists are plotting to harm Turkey
by spreading false reports that the authorities would seize foreign
currency deposits and impose capital controls to combat the currency slump.
Those were just rumors, he insisted.

The new finance minister, Bharat al Buraq, meanwhile had promised to roll
out a new economic plan this morning, but his father-in-law President
Erdogan who`s philosophically opposed to interest rate increases and as
public criticized them, simply promised to speed up government
infrastructure spending.

But this feud, of course, with Washington, D.C. over the continued
detention of American pastor Andrew Brunson has also exacerbated the
situation here, and that`s prompted President Trump to announce higher
tariffs on steel and aluminum back on Friday.

Brunson`s lawyer told us early this afternoon there had been no change in
his client situation and he still remained under house arrest.

For NIGHTLY BUSINESS REPORT, I`m Willem Marx, in Istanbul.


GRIFFETH: The fear, of course, is that Turkey`s economic turmoil will
spread and that fear has been sending money into safer assets like U.S.
treasuries. But how concerned should investors be?

Steve Liesman takes a look.


the common cold, financial contagion can jump from country to country,
targeting the weak at first but also sometimes hitting the healthy. The
question of contagion is now top of the mind of markets with the decline of
the Turkish lira by almost 40 percent against the dollar in the past
several days. Sparked by U.S. tariffs levied on Istanbul for holding an
American pastor, the Turkish crisis has exposed a country with a punishing
level of foreign debt, double-digit inflation, and the president who
doesn`t believe in an independent at central bank.

It may sound all limited to Turkey, but Federal Reserve rate hikes have
strengthened the dollar and weakened currencies in a host of countries.
U.S. tariffs have raised questions about their economic growth outlooks.

DAVID ROSENBERG, GLUSKIN SHEFF: It`s not just Turkey. You have just a
massive external debt load among a whole array of emerging market
countries. So, you can point to South Africa, you can point to Brazil,
point to Mexico. There`s a — you know, a whole bunch of them out there,
of course, including Russia as well, and I think that`s the underlying
problem is the massive amount of debt.

LIESMAN: The U.S. is even feeling the effects already with stocks down
modestly and interest rates lower as investors clamor for safe us assets.
But the effects have been moderate nothing like what happened in the 2008
financial crisis or even the 1998 currency crisis, at least so far.

One big difference, there`s a very different U.S. president now.

JIM PAULSEN, LEUTHOLD GROUP: One of the strategies of this administration
in some regard is to create enough stress abroad that they have to come and
negotiate a settlement on the trade negotiations. And I think — I got to
believe that`s part of their strategies, is put enough pain on China, put
enough pain on other parts of the world that they bring them to the
negotiation table in a favorable way for the United States.

LIESMAN: The president has said that strong U.S. growth gives him latitude
to pressure other countries for concessions, but that strategy assumes the
U.S. doesn`t catch cold from the rest of the world.



HERERA: OPEC`s oil production rose slightly in July, even as Saudi Arabian
output declined. In its monthly report, the cartel says the increase was
driven by Kuwait, Nigeria, the United Arab Emirates, and Iraq. OPEC also
revised lower its estimate for oil demand growth next year. That sent the
price of domestic crude lower to settle at about $67 a barrel.

GRIFFETH: The retail sector will be in focus this week. Industry leaders
like Home Depot (NYSE:HD), Macy`s (NYSE:M) and Walmart will be reporting
their latest earnings, along with Coach (NYSE:COH) parent Tapestry,
JCPenney and Nordstrom (NYSE:JWN).

Charlie O`Shea joins us now to talk about the outlook for these results.
He`s lead retail analyst at Moody`s (NYSE:MCO).

Charlie, good to see again. Welcome back.


GRIFFETH: Overall, this has been a very strong earnings reporting season.
Do you expect the retailer`s to continue that trend?

O`SHEA: Yes, I think so. I think when you`re looking at Walmart for
instance and that`s one of the highlight names I think this week, and as it
is every quarter, I think Walmart provides a real window to the soul for
the U.S. consumer, and I think in that vein, Walmart`s been investing
heavily trying to get the food business just humming on all cylinders and
it`s pretty close right now.

So, I think that`ll give us a real idea of how the consumer is feeling and
give us a pretty good backdrop going into the — into the second half of
the season, back to school and holiday this year.

HERERA: What about some of the department stores, Macy`s (NYSE:M) and

O`SHEA: Sue, I think they`re all going down the same path. They`re all
trying to lean up their inventories so margins will be better. They`re
trying to get their online businesses humming along and integrate the
online business with the brick-and-mortar business. And throughout that
segment, we`re seeing varying degrees of success, and I think this quarters
earnings results will give us a real litmus test as to how well these guys
are doing.

GRIFFETH: Home Depot`s the first big one to report that`s tomorrow
morning. The housing market has been pretty hot here. Does that — will
that be reflected in their report do you think?

O`SHEA: I think so. Home Depot (NYSE:HD) has been one of the real
highlights. Home Depot`s online business is really good. Its Pearl (ph)
business is running on all cylinders.

I think Home Depot (NYSE:HD) will be one of the real highlights this

HERERA: What about the issue of tariffs? Some of them have been imposed
some of them are still in the works will we see any of that do you think
reflected in any of these reports? Who are the most likely to be affected
by those?

O`SHEA: I think it`s too early. I cover the auto retailers for instance
and I don`t want to get too off-topic here, but one of our premises there
is that with the variety of brands they sell in the used business, they
should weather this pretty well.

On the retail side, I think if you`re a savvy retailer, you`ve been around
for a while, you saw the Hanjin bankruptcy, you`ve seen dock strikes,
you`ve seen all sorts of things happen over the last several years. You`ve
beefed up your supply chain so that any impact was is likely to be muted.
However, if you are 100 percent sourcing in China, you`re going to have
some problems.

GRIFFETH: Charles, always good to see you. Thanks for joining us tonight.
Appreciate it.

O`SHEA: Good seeing you. Thanks very much.

GRIFFETH: Charlie O`Shea with Moody`s (NYSE:MCO).

And a little bit later in the program here, we`ll be taking a closer look
at the health of the consumer what we`re spending on our money — with our
money and how that could impact the economy coming up.


HERERA: Bill, shares of Bayer, the owner of the weed killer Roundup, fell
sharply today. This follows a legal ruling late Friday that the widely
used product presented a, quote, substantial danger to consumers. The
stock tumbled 10 percent in overseas trading.

Aditi Roy has the details of the California court`s decision.


COURT JUDGE: Was the Roundup Pro or Ranger Pro design a substantial factor
in causing harm to Mr. Johnson? Answer, yes.

in a San Francisco courtroom Friday. A jury ordered agrochemical giant
Monsanto (NYSE:MON) to pay $289 million in damages to Dewayne Lee Johnson,
a northern California man who says his terminal cancer was caused by
spraying the weed killer Roundup while working as a school groundskeeper.
It is the first of thousands of cases across the country involving the
Monsanto (NYSE:MON)-made weed killer to go to trial, making some wonder if
it will set a precedent.

Johnson hopes it does.

DEWAYNE JOHNSON, PLAINTIFF: And that`s global, so that`s bigger than me,
way bigger than me. So, I hope that that light will be shined.

ROY: The news sent shares of Bayer, which acquired Monsanto (NYSE:MON) in
June, lower. The case is just the latest development in an ongoing
controversy over glyphosate, the active ingredient in Roundup, which is one
of the most widely used weed killers on store shelves today.

The chemical first came under fire in 2015 when an agency under the World
Health Organization said the chemical was probably carcinogenic. Monsanto
(NYSE:MON) vigorously denies that claim, a company spokesman spoke to
reporters after the verdict.

not change science.

ROY: The company says more than 800 scientific studies and reviews and
conclusions by the U.S. EPA, the U.S. Institutes of Health, and regulatory
authorities around the world support the fact that glyphosate does not
cause cancer.

Still, Johnson hopes this case sends a powerful message.

JOHNSON: We know you`re going to die, you might as well not die in vain.
You might as well say to yourself — well, let`s put this out here what
happened to me.

ROY: Monsanto (NYSE:MON) says it will appeal.

Meantime, the next case involving Roundup is scheduled to go to trial this
fall in St. Louis. There`s also a federal case involving hundreds of
plaintiffs that was given the green light to go to trial. No date has been
scheduled for that case at this time.

For NIGHTLY BUSINESS REPORT, I`m Aditi Roy, San Francisco.


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

And we begin tonight with Papa John`s which was upgraded to buy from
neutral at Longbow Research. The analyst there says it can only get better
from here following the recent controversial departure of Papa John`s
founder. Price target now is $52. That stock rose more than 3 percent
today to $41.81.

Dish was downgraded to sell from neutral at MoffettNathanson. The analyst
there cites the uncertain outlook for that company`s frequency spectrum
holdings which he says has gotten worse. Price target is now $29, and the
stock was down half a percent the $34.99.

HERERA: Akamai was downgraded to neutral from outperform at Credit Suisse.
The analyst says increased competition will make revenue growth more
difficult next year. The price target is $84. The stock is trading below
that level at $72 even after falling three and a half percent today.

Dollar Tree (NASDAQ:DLTR) was upgraded to overweight from neutral at
Atlantic Equities. The analysts there sights and inflection in sentiment
regarding the discount retailer. The price target is $110. The stock rose
fractionally to $92.97.

GRIFFETH: Still ahead, how will Harley-Davidson (NYSE:HOG) handle being a
target of the president? Well, we`ll soon find out.


HERERA: The National Retail Federation expects retail sales to be even
stronger than first thought. Spending is now expected to climb at least
four and a half percent this year. That`s up slightly from the previous
estimate. The trade organization cites tax reform and other upbeat
economic indicators for that new forecast.

GRIFFETH: Younger generations seem to have no problem spending these days.
According to a new survey from Charles Schwab, the so-called Generation Z,
those are the ones that they aged 16 to 20, they`ve racked up an average of
more than $4,000 in debt. But the survey also shows young millennials,
aged 21 to 25, they have an average of more than $11,000 in debt, but that
includes student loans as well as credit card debt.

Now, despite their high debt levels, Schwab says the survey also shows
these two groups are optimistic about their financial futures.

HERERA: So, what does all of that data tell us about the health of
consumer spending?

Ethan Harris (NYSE:HRS) is the co-head of global economics research at Bank
of America (NYSE:BAC) Merrill Lynch. He`s here to share his thoughts on

Good to see you, Ethan, as I`m always.

Good to see you.

HERERA: And you seem to think that the consumer is pretty healthy right

HARRIS: Yes, I think so. We`ve had nine-year recovery now. We`ve seen
the unemployment rate drop to levels we haven`t seen in 20 years. Wages
are starting to grow.

And one of the really important things is that after the big financial
crisis that collapsed in the value of people`s wealth, that is now
completely recovered. We`re now at record levels of net worth as a share
of income.

So, the household sector is actually in quite good health right now.

GRIFFETH: Savings are going up but debt levels also, as we just cited

Is that a generational thing? What are you seeing there?

HARRIS: You know, when I look at that, I look at it more as it shows how
tough it is for that generation. Education costs of skyrocketing.


HARRIS: So, a lot of that student loan debt is not irresponsible spending,
it`s just people need to take out the loans to cover their bills.

GRIFFETH: And that`s — those are young folks who grew up during the
financial crisis. How does that affect them do you think?

HARRIS: Well, I think a lot of economists, including myself, would argue
that this in some ways this generations kind of like the Great Depression

HERERA: Right.

HARRIS: These are people who know what it`s like to be in a really bad
economy, to come out of college and suddenly have all your job
opportunities disappear. And so, I think they`re a pretty conservative

One of the things we do is we have a regular survey of consumers we do, we
find that millennials have a much stronger tendency to save the tax cut
than older people, and that I think is a reflection of this idea that, you
know, it`s — it can get dangerous out there.


HERERA: But a longer term, that could be healthier.

HARRIS: It is healthier. I think one of the things that`s good in the
latest date and including the revisions that they`ve done to the data, the
saving rates much higher than we previously thought. That`s a sign that
people have moved into a stronger position, they`ve recovered their wealth
and so they can spend going forward.

HERERA: All right. Ethan, always great to see you. Thank you so much for
joining us.

HARRIS: Great to see you.

HERERA: Ethan Harris (NYSE:HRS), Bank of America (NYSE:BAC) Merrill Lynch.

GRIFFETH: The CFO of one of this year`s best performing stocks is stepping
down, and that`s where we begin tonight`s “Market Focus”.

David Wells has been Netflix (NASDAQ:NFLX) chief financial officer since
2010. He`s a real veteran with this company. He`s been in there a total
of 14 years, and he says that he will stay on until a successor is found
and then he plans to focus on philanthropy when he leaves the company. The
stock fell one percent today to $341.31.

Meanwhile, activist investor Elliott Management has taken a big stake in
the TV ratings company Nielsen. According to “The Wall Street Journal”,
the hedge fund plans to push Nielsen to sell itself. Nielsen says it
welcomes the views of its shareholders, including Elliott.

The stock dropped by 12 percent today on that news to $24.62.

Dycom has slashed at second quarter profit and sales outlook. The
contracting services company cited slower than expected large-scale
deployments, and this is the second disappointing outlook issued by the
company which already cut its first full year guidance back in May. The
stock down 24 percent today to $68.09.

HERERA: The maker of ATM machines is reportedly looking to sell itself.
According to CNBC, Diebold (NYSE:DBD) Nixdorf has hired Credit Suisse and
Evercore to help find potential buyers. The talks are not in the advanced
stages and no deal is assured. Nonetheless shares of the small cap stocks
soared 16 percent to $4.60.

Regeneron`s request for expanded approval of its eye drug was delayed by
the FDA. The biotech will continue discussions with the regulator and will
wait two months for a final decision. One analyst says that delay could
put Regeneron at a disadvantage versus its competitors. The stock fell a
fraction to $366.45.

And Tesla`s CEO says his claim last week that funding had been secured to
take the company private was based on repeated conversations with the
Saudis. In a blog post today, Elon Musk said the Saudi Arabian sovereign
wealth fund approached him multiple times about that issue. After a July
31st meeting, Musk said he thought a deal could be closed. In a volatile
session, the stock closed higher to $356.41.

GRIFFETH: And from electric cars to an iconic American motorcycle company.
Harley-Davidson (NYSE:HOG) is now being targeted by President Trump again.
He said over the weekend in a tweet that he supported a boycott of the bike
maker. That sent shares of Harley lower today, extending its recent slide.

Morgan Brennan has more on this escalating feud.


the president of the United States supports the boycott of an American
brand? Harley-Davidson (NYSE:HOG) may soon find out.

After hosting a Bikers for Trump event at his New Jersey golf course over
the weekend, President Trump once again took to Twitter to slam the
company, saying, quote: Many Harley-Davidson (NYSE:HOG) owners plan to
boycott the company if manufacturing moves overseas. Great. Most other
companies are coming in our direction including Harley competitors, a
really bad move. The U.S. will soon have a level playing field or better.

It`s the latest salvo in a war of words and tariffs that has found Harley
at the center of a bigger policy debate, a debate CEO Matt Levatich
commented on several weeks ago in response to the president`s anger over
Harley`s decision to move some production overseas.

MATTHEW LEVATICH, HARLEY-DAVIDSON CEO: I think as a business, we just deal
with what we have to deal with. And this — we are not a political
organism. We`ve worked very hard to be apolitical in how we approach our
business and our consumers everywhere in the world. So, we do what we have
to do to maintain that integrity as a company and as a brand, facing
difficult decisions as we do, as we had in this case, and that was just an
unfortunate, you know, attention around a set of decisions that we made
that were rational under the circumstances.

BRENNAN: Harley said it would shift some manufacturing to counter higher
tariffs in Europe, but maintains motorcycles sold in the U.S. will continue
to be made in the U.S.

As for whether presidential comments and now prospective boycott are
affecting sales, a number of Harley dealerships whether in North Jersey,
Kansas City, the Chicago area or Dallas say so far, they haven`t seen it,
at least not yet. Managers say they`re educating customers on
misinformation and as one store manager quipped, Trump`s been there two
years, we`ve been here 115.

Still, investors are worried and that did drive Harley shares lower today.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan at the New York Stock


HERERA: And from motorcycles to planes, tonight, federal investigators are
going over voice and data recorders from a stolen Alaska airlines plane
that crashed after a wild and scary joyride Friday night.

And as Phil LeBeau reports, the incident raises some tough questions about
airline security.


RICHARD RUSSELL: I`m going to try to do a barrel roll, and if that goes
good, I`m just going to go nose down and call it a night.

everyone is asking how did 29-year-old Richard Russell a ramp service
worker who is not a licensed pilot get into an Alaska airlines turboprop
started up and take off for a one-hour joyride, that included steering the
empty passenger plane through a huge loop over the Puget Sound?

RUSSELL: I got a lot of people that care about me and it`s going to
disappoint them to hear that I did this.

KRISTIN DOMAS, EYEWITNESS: We`re just sitting watching the sunset and
there was a plane that was about to hit the water and we`re — my cousins I
were like whoa, that`s crazy.

LEBEAU: The fiery crash in a wooded area killed Russell, but it left a
trail of questions. The biggest: how secure our planes parked on the
tarmac? And how can airlines make sure only pilots are able to get into
the cockpit and start up a plane?

JEFF PRICE, AVIATION SECURITY EXPERT: The biggest red flag is that this is
something that aviation security is not designed to prevent.

LEBEAU: That is likely to change, now that the FBI, NTSB and FAA are all
taking a long hard look at airport and airplane security, with airports
busier than ever adding more flights, federal regulators want to make sure
safety is not being overlooked.



GRIFFETH: By the way, SeaTac and the Seattle Port Authority say they have
added more security in cargo areas and terminals following that stolen
plane incident.

HERERA: Still ahead, raiding your retirement. Why more people are doing
it even though they shouldn`t.


HERERA: Fax machines could be the next target of hackers. Researchers at
Checkpoint Software warned that cyber criminals can exploit vulnerabilities
in all-in-one printers. Hackers are able to take over a device by faxing
lines of malicious code disguised as an image file. Millions of fax
machines remain in use today.


GRIFFETH: Well, millions of Americans are saving for retirement, thanks to
automatic enrollment in their 401k plans. But new research shows that many
auto enrolled workers are treating those accounts like an ATM, withdrawing
their long-term savings prematurely.

Our senior personal correspondent Sharon Epperson has been sitting here
waiting patiently to tell us more about the impact this could have on their
financial future.

Let`s start with this automatic enrollment program. How does that work?

Well, about 70 percent of large employers right now are automatically
enrolling their employees in a 401k. And basically that means that when
you are hired, you automatically become part of that 401k plan unless you
opt out. And the plan will specify a certain percentage of your pay that
will be deducted every pay period. And then you can elect if you choose to
do so to contribute a different amount.

HERERA: Are they saving more as a result of being automatically enrolled?

EPPERSON: Well, that`s the issue. They`re saving more but not as much as
they possibly could.


EPPERSON: A new study came out from TIAA Institute showing that a lot of
workers are increasing their savings, but not by as much because they`re
doing something that is causing what they call 401k leakage. So, the
potential retirement savings that they could get with auto enrolment is 7
percent of their starting pay after about eight years. But what also
increases is the amount of outstanding loans and withdrawals they`re taking
from these 401ks. That increases by about 3 percent, so then the net
effect is that their increase in retirement savings is only about four to
five percent.


GRIFFETH: This has been a persistent problem since 401ks were introduced
more than 30 years ago. It`s so tempting to, you know, withdraw money from

EPPERSON: You think if you`re getting that benefit of automatically being
enrolled, you don`t have to think about it. It`s on autopilot, that you
wouldn`t see this leakage. But yet, we`re still seeing people who have
smaller balances, they`re not rolling it over to an IRA or another company
401k, they`re taking that money for themselves. That`s a taxable event.

HERERA: I was just going to say tax implications?

EPPERSON: Yes. So you don`t ever want to do that. That`s how you can
avoid the 401k leakage. Don`t take that withdraw and not put it in a
qualified account.

GRIFFETH: But there`s nothing that can be done to try and keep them from
doing this?

EPPERSON: Well, the other thing is you need to really look at that loan
amount. Sometimes, there`s a medical emergency. There`s some type of high
interest debt you want to pay off and you really need that money from the

You shouldn`t do it though by any stretch if you can help it, but if you do
it, look at the plan requirements, make sure you understand how much you
can borrow and what the payment terms are going to be and don`t stop
saving. That`s what really all says folks up. They take the money out,
they`re not putting anything back in.

And so, you know a quarter of people —

HERERA: Absolutely.

EPPERSON: — reduce their retirement savings when they take that loan out
and that`s really the biggest problem.

GRIFFETH: As always, Sharon Epperson, thank you.

EPPERSON: Sure, my pleasure.

HERERA: And before we go, here`s a look at the final numbers from Wall
Street. The Dow dropped points, marking a four day losing streak. The
Nasdaq fell 19, the S&P 500 was down 11.

And that`ll do it for a Monday edition of NIGHTLY BUSINESS REPORT. I`m Sue
Herera. Thanks for joining us.

GRIFFETH: I`m Bill Griffeth. Have a great evening. We`ll see you


Nightly Business Report transcripts and video are available on-line post
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