Transcript: Nightly Business Report – September 10, 2018


a lot different today than it was during the financial crisis, but risk
still exists and there are ways to spot trouble.

Network drama. One of the most powerful network media executives in the
country is out of a job after more women accused him of sexual misconduct.

Taking a detour. Ford stock is at a multi-year low and the plan to
reinvent the automaker remains a mystery.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Monday,
September 10th.

Good evening, everyone, and welcome. Bill Griffeth is off tonight.

It was a dreary, rainy Monday on Wall Street and today`s trading session
pretty much felt the same. Stocks started higher, then they drifted lower
and meandered between gains and losses. In the end, the S&P 500 and the
Nasdaq snapped their four-day losing streaks. The Dow Jones industrial
average, however, fell 59 points to 25,857. The Nasdaq was up 21 and the
S&P 500 added five.

This week also marks the ten-year anniversary of the financial crisis.
Mike Santoli takes us back a decade to remind us that even if you had the
stomach to buy stocks then, the road back was very bumpy.


Brothers collapsed and before the full financial crisis and bailouts
unfolded, stocks were already in a bear market. By the Friday before
Lehman`s failure ten years ago this week, the S&P 500 had fallen more than
20 percent in just under a year. Bank stocks were cut in half and a
recession was underway. In other words, it was a time when disciplined
long-term investors might consider investing more in stocks on the idea
that they already reflected plenty of bad news.

As it turns out, this idea would have been sound but the timing awful. The
S&P since the eve of Lehman`s bankruptcy is up 130 percent or an average of
11 percent a year including dividends. That performance is right in line
with the market`s historical rate of return over the past century, so in
this sense after a decade an investor was not penalized for buying stocks
on the precipice of a global panic, but this move was painful for a long
while afterwards. The S&P gave way after Lehman fell, ultimately losing
another 40 percent over the next six months into March of 2009.

Even once the market had bottomed, the recovery was fitful and anxious.
Even three years later, the broad stock market had not fully returned to
pre-Lehman levels and the European debt scare threatened to cause a
financial crisis relapse. And, of course, it took an extraordinary effort
by governments and central banks to support markets since 2008.

Among the lessons of this experience, over the span of a decade or more,
the market usually bales out bad timing by investors but that doesn`t mean
it`s easy or comfortable along the way.



HERERA: Now if you compare 2008 to 2018, a lot has changed for investors
when it comes to trading stocks.

Bob Pisani looks at just how different things really are.


Lehman bankruptcy and the height of the financial crisis, the stock market
is a very different creature than it was in 2008. There are a few ways the
crisis profoundly changed stock trading. First, the IPO market shrank.
The drop in the markets and the regulatory rules created under the Dodd-
Frank said laws made it tougher for companies to go public. So,
excessively low rates also made it easier for private equity to raise
capital and keep companies private.

Second, there are far fewer publicly traded companies than there were 10
years ago. Fewer IPOs, more M&A, and more companies going out of business
have led to a big drop in the number of public companies. So, the number
of publicly listed stocks fell dramatically after the dot-com bust. That
was in 2000, from roughly 7,000 in 1998 to 5,000 in 2004 and it dropped
again after the financial crisis.

Today, the Wilshire 5,000, supposedly a basket of the 5,000 largest stocks
of the United States has only about 3,400 stocks in it. That`s less than
half the number there were in 1998.

Third important point, sort of the death of volatility. Central banks
helped create the greatest trade of the post-crisis era. Go long equities
and short volatility. Bet things would be calm, keeping rates excessively
low for long periods of time helped create abnormally low volatility,
punctuated by short bursts of panic.

Fourth and most important was the crisis sped up the transition for
indexing and the rise of ETFs, exchange traded funds. The ETF trend
started before 2008 but it fit the investing post-crisis psychology very
well. Many investors came to believe that by not taking individual stock
risks and using ETFs, they might be able to reduce their risks. Well,
that`s debatable.

Either way, we know the ETF trend started pre-2008 but it accelerated after
the crisis.

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


HERERA: The ongoing concern, of course, is the potential for another
crisis. Former Fed Chair Ben Bernanke, along with former Treasury
Secretaries Timothy Geithner and Henry Paulsen have written an op-ed. All
said that in some respects reforms have helped the market become more
prepared for the next crisis, but the three also say that Congress took
away some critical tools used by regulators in times of crisis, and they
are urging lawmakers to bring them back.

Well, this morning, former Federal Reserve Governor Daniel Tarullo echoed
those sentiments, saying that he thinks the financial system is much safer
today than it was.


institutions, they`re obviously substantially safer than they were 10, 12
years ago. Capital levels are up. Their funding is much more stable than
it was. Their risk management is immeasurably better than it was. Those
games, though, of course, are not locked in for eternity. It requires
vigilance on the part of the regulators and supervisors.


HERERA: Mr. Tarullo oversaw financial regulation that the Federal Reserve
until last year.

So, how have things changed? Have they gotten better for investors since
the financial crisis 10 years ago? What can you do now to protect yourself
against a future crisis?

Chris Zaccarelli joins us to discuss that. He is the chief investment
officer with Independent Advisor Alliance.

Chris, welcome. Nice to have you here.


HERERA: You know, Bob outlined some of the changes to the market and the
structure of the market. But what do you think are the biggest changes
that have made the markets safer for investors?

ZACCARELLI: Well, for me, if you look at what the financial systems has
done since that time, it`s gotten a lot safer. The banks have a lot bigger
capital buffers which means they`ve got more cash on hand to withstand the
next crisis. The Federal Reserve and other central banks have gotten a lot
more interested in what`s happening within financial markets. And in fact,
they run stress tests annually in order to make sure that they can simulate
what happened 10 years ago, if it were to happen again that banks could
make it through that crisis.

So, those three things really helped to improve the stability of the
financial system and should make the system safer for investors.

HERERA: You know, though, every crisis is different. You know, they never
repeat. They`re never exactly the same. It would be easy to protect
yourself against them if they were, but they`re not. “Bloomberg”, for
instance, this morning posed the question whether or not student loan debt
is the next bubble to burst in the next crisis.

So as an individual investor, are there some basic things you can put in
place to safeguard your portfolio against a looming crisis that you may not
be able to recognize immediately?

ZACCARELLI: Yes, absolutely. I mean, one of the best ways to protect
yourself as an investor is to be diversified. So, to make sure that you
don`t have all of your money in the stock market, you want to have a nice
mix of stocks and bonds. You want to make sure that the stocks you are
invested in are balanced across large cap equities, midcap equities, small
cap equities. And you want to look at international stocks as well, for
some diversification.

Diversified portfolio is typically going to hold up a lot better under a
number of different scenarios and that`s really the best way in advance of
a financial crisis to make that sure you`re protected. Again, not being
100 percent equities is the most obvious way. But further, diversification
can really help you.

HERERA: Do you think the onset of the popularity of ETFs to Bob Pisani`s
point earlier, has that made the market safer? Are investors safer using
ETFs than individual stocks? Or are they basically a proxy for individual

ZACCARELLI: I think ETFs are an interesting development and clearly I
think what you`ve done is you`ve transferred one type of risk for another.
So, for any individual investor, the fact that they don`t have a smaller
number of stocks and they`re more diversified in terms of their ETFs
probably will help each individual.

But in the aggregate, you still have just as much money in the stock market
if not more to the extent that you`ve got the small sense of security that
ETFs will protect you and the market goes down 30 to 40 percent. It
probably doesn`t matter whether you have individual equities or whether you
have ETFs. You`re still going to experience some losses and that can drive
people to sell and create the same type of financial panics that we`ve see
in the past.

HERERA: All right. Well, hopefully, we won`t be talking about a crisis
any time soon.

But, Chris, thanks for your advice.

ZACCARELLI: Thank you.

HERERA: Chris Zaccarelli with Independent Advisor Alliance.

Well, the leading man at CBS (NYSE:CBS) is out. Longtime CEO of the
network, Les Moonves, resigned from the company. This after more
allegations of sexual misconduct surfaced. The stocks fell in trading
today as investors wonder about the future of the Tiffany (NYSE:TIF)

Jane Wells is in Los Angeles tonight.


very hands on. I genuinely respect the people I work with it.

Just 10 months ago, Les Moonves was at the top of his game, the highest
paid CEO in media, leading the number one network in America and here
explaining his management style.

MOONVES: I`ve been an employee. And I know what it feels like to be an

WELLS: But it was the stories of former employees going back decades which
brought Moonves down. He was already negotiating an exit package worth
potentially $140 million after a “New Yorker” story six weeks ago told
tales of sexual harassment, assault, retaliation. But after a second story
on Sunday, negotiations turned into an immediate departure. Moonves leaves
without any severance pending the outcomes of two outside investigations
into his conduct, though “Forbes” lists his current net worth at $700

The clear winner is Shari Redstone which runs National Amusements, which
owns most of CBS (NYSE:CBS) and Viacom (NYSE:VIA). She had been battling
with Moonves over whether to merge the companies. She wanted to and he
didn`t. And CBS (NYSE:CBS) and national amusements ended up suing each

As part of the Moonves exit, the lawsuits go away and Redstone will hold
off any plans to merge for at least two years unless the new board at CBS
(NYSE:CBS) decides the sale or merger would benefit the company and, oh,
yes, also new, half the board has been replaced with outsiders, with media
veterans like Dick Parsons and nearly half the members are now women.

This is. It`s really hard for everybody at CBS (NYSE:CBS) News.

WELLS: On CBS (NYSE:CBS) “This Morning”, anchor Norah O`Donnell found
herself in the same position she was in ten months ago when co-host Charlie
Rose was fired.

O`DONNELL: Women cannot achieve equality in the workplace or society until
there is a reckoning and the taking of responsibility.

O`DONNELL: Moonves denies he forced himself on anyone and that the
allegations are, quote, inconsistent with who I am. A search for a new CEO
is on as COO Joe Ianniello steps into the job at least for now. But 11
months after the #MeToo hashtag was created, of all the high profile out of
a job, the first CEO of a Fortune 500 company has fallen in this news era.

For NIGHTLY BUSINESS REPORT, Jane Wells, Los Angeles.


HERERA: The man who ushered in a new era for the Chinese internet industry
is stepping back. Jack Ma who turned Alibaba into one of the world`s
biggest companies will resign as chairman in a year. That sent the stock
lower in trading today.

Eunice Yoon has more tonight from Beijing.


special day to unveil his succession plan. It`s his 54th birthday and it`s
teacher`s day in China, so people on social media have been congratulating
Teacher Ma and saying he chose this day because he wants to return to life
as a teacher.

So, Alibaba will have a new chairman one year from today. Ma will stay on
during the transition and he`ll finish his term as an Alibaba board member
until the AGM in 2020. Ma will hand the reins to CEO Daniel Zhang and
Zhang joined Alibaba in 2007 and had several different hats. He is the CFO
of the hugely popular online shopping site Taobao. He was the president of
Tmall, the site for a branded stores. And he was COO.

He`s also been credited with making Alibaba`s Singles Day shopping festival
the big bonanza that it is today. In his letter to shareholders, customers
and others, Ma praised Zhang for his analytical mind, and said Zhang holds
dear Alibaba`s mission and vision.

But the big question for investors, as it would be for any company with a
dominant founder is what is Alibaba without Jack Ma. Ma is the visionary
of Alibaba. He`s a big think guy. The elder statesman of the company, not
only for the company but the entire Chinese tech scene.

And analysts have been describing Zhang as a solid manager, cautious and a
man who doesn`t crave the limelight. So, he does have very big shoes to
fill. And perhaps to ease investors` concerns, Ma addressed that question
in his letter saying: The one thing I can promise everyone is this, Alibaba
was never about Jack Ma, but Jack Ma will forever belong to Alibaba.

For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.


HERERA: It is time to take a look at some of today`s upgrades and

Dow component UnitedHealth was downgraded to neutral from buy at Citi. The
analyst cites concerns about the commercial risk market and sees limited
upside to estimates. The price target is $288. The stock fell 3 percent
to $259.73.

Darden was downgraded to neutral from outperform at Baird. The analyst
cites the stock`s recent strength and says it may be over extended in the
short term. The price target is $120. The stock fell a fraction to

Foot Locker was upgraded from outperform to market perform at Wells Fargo
(NYSE:WFC). The analyst cites improvement to the assortment of Nike
(NYSE:NKE) products and fewer headwinds in Europe. The price target is
$58. The stock rose 5 percent to $49.09.

Still ahead, looking for a job at a startup? There are a few things that
you need to know.


HERERA: House Republicans released their plans for a second round of tax
cuts. The legislation proposed by the house ways and means committee would
make the lower individual rates permanent, eliminate the maximum age for
some contributions to retirement accounts and allow for new business write-

Airlines are waiving change fees as hurricanes Florence threatens to impact
travel. The storm is now a category four and it is strengthening. It
looks increasingly likely it should make landfall along the mid-Atlantic
coast a bit later this week. The governor of South Carolina has ordered
more than 1 million residents to evacuate. The governor of Maryland has
declared a state of emergency. Southwest and American Airlines were the
first to waive some fees and the other carriers are expected to follow.

Insurance stocks were also lower, especially those with exposure to North
and South Carolina.

Volvo is dropping its IPO plans at least for now. The automaker`s parent
company, Geely, is blaming global trade tensions in a downturn on stocks.
Volvo and its Chinese parent have been discussing an offering to value that
carmaker between $16 billion and $30 billion.

And Ford shares are languishing near a nine-year low. That is partly due
to the growing uncertainty surrounding the automaker`s future.

Phil LeBeau has more on the questions swirling around Ford.


century, Ford has reinvested itself.

Now, CEO Jim Hackett is trying to do it again but his game plan remains a

BRIAN JOHNSON, BARCLAY`S: The real question is, is there more going on
behind the scenes and under the surface than is apparent in the quarterly

LEBEAU: Ford is still profitable thanks largely to the F-series pickup
truck, the best selling vehicle in the U.S., on pace to have a record year,
but Ford is also struggling to grow profits in Europe. Sales in China are
down and it`s investing heavily to develop self-driving vehicles.

For more than a year, Hackett has talked about restructuring Ford and the
company plans to spend $11 billion to become leaner and more financially
fit. Many expect ford to cut thousands of jobs, but exactly how many and
where remains anyone`s guess.

JOHNSON: Costs build up, market positions weaken, and you need an outsider
to come in and shake things up. The questions we have over a year now with
Mr. Hackett, is he the right one to do it?

LEBEAU: A decade ago, Alan Mulally reinvented Ford by selling niche brands
like jaguar, shutting down the Mercury line and focusing on growing the
Ford brand.

That brand still has plenty of cache, especially when it comes to building
trucks. But in other parts of the business, like developing electric cars
or self-driving vehicles, Ford is viewed by many on Wall Street to be
struggling. Changing that perception will depend on Jim Hackett`s
turnaround plan.



HERERA: Weightwatchers is bulking up. And that`s where we begin tonight`s
“Market Focus”.

The company is being added to the S&P midcap 400 index starting next
Tuesday. It will replace KLX, which is being acquired by Boeing (NYSE:BA).
Its inclusion sent it up 4 percent to $69.57.

Shares of Acorda Therapeutics (NASDAQ:ACOR) tanked after that company lost
a patent appeal in federal court. The ruling upholds a previous ruling
invalidating four patents for its multiple sclerosis drug, opening the door
for cheaper generic drug competition. The shares lost nearly a quarter of
their value, closing at $20.80.

Snap`s chief strategy officer is stepping down. It is the latest top level
executive departure following a controversial app redesign which led to a
drop in users. Snap is the parent company of Snapchat. Snap fell 2
percent to $9.74. Shares also hit a 52-week low during the day.

And Sonos came out with the first earnings report as a public company, and
it was not music to investor`s ears. The maker of smart speakers for the
home lost 45 cents a share. That`s about double what Wall Street was
expecting. Revenue was in line with estimates but down 6 percent from a
year ago.

Sonos went public last month at $16 a share. Today, they actually finished
the regular day up 13 percent to $21.24. But that was initially wiped out
almost immediately following the earnings report that came out after the

As we`ve been reporting, the U.S. job market showed solid growth last month
and startups have played an important role in that growth. While they
account for only 2 percent of total U.S. employment according to research
by the St. Louis Fed, startups make up a significant portion of net job
creation. So, how can you land a job at a startup?

Our senior personal finance correspondent Sharon Epperson joins us with
some tips.

It`s great to see you.

CORRESPONDENT: Good to be here.

HERERA: All right. So there are a wide variety of startups. You`ve done
all of this research for us. Are there certain startups that you should
look at rather than others?

EPPERSON: Well, the first thing is how you define a startup really depends
who`s making that definition. Sometimes, it could be a start up that`s
been around less than a year, maybe it`s up to five years, maybe even a
little bit longer.

But I decided to look at LinkedIn (NYSE:LNKD). They just put out a report
on the best startups to work for. According to some criteria that they
had, companies that are seven years or younger, that have 50 or more
employees, that are privately held in the U.S. and ones that have
significant employment engagement. A lot of LinkedIn (NYSE:LNKD) users are
looking at.

And the number five company was the company called Byrd and it`s an
electric scooter company. It`s now in 30 cities. And next one is company. Also on there, you`ve got to have some of the bitcoin
craze, right? So, Coinbase is one that they`re looking at there and that`s
been growing, 21 million accounts and also expecting to double its head
count, so job seekers are very interested in that.

Halo Top Creamery which I see in the grocery store all the time, the ice
cream company that is now the number one selling company in American
grocery stores.


EPPERSON: That`s a great startup to work for.

But no surprise probably to many people that the number one startup to work
for according to this year`s LinkedIn (NYSE:LNKD) report, Lyft. With all
that they`re doing, of course, with scooters, and bicycles, as well as cars
with ride-sharing, but also in terms of employees, offering mental health
benefits to many of their employees and having over 3,000.

HERERA: There you go.

EPPERSON: So, a lot of folks that I`ve been talking to, venture
capitalists say this is what you want to look for — companies that have
100 or more employees means they`re probably off to a pretty good start
already. You won`t be doing everything for everyone. You might have a
little bit more mentoring, a little bit more guidance, and that`s something
to keep in mind.

HERERA: So, what qualities, I know it depends on the company certainly.
But in general, what qualities are they looking for? How do you get that
on your resume to get that first interview?

EPPERSON: Well, you want to be self-motivated, you want to be driven, you
want to be a multi-tasker, but also a team player because you`re going to
have to be working with a lot of different people. And understand that not
all startups are successful. Understand that you may have to take some
risks and make sure you have some tolerance for that.

HERERA: All right. On that note, Sharon, thank you so much as always.


HERERA: Sharon Epperson with us tonight.

EPPERSON: My pleasure.

HERERA: Coming up, “The Art of the Deal” is taking on a whole new meaning
in the art world.


HERERA: As we have been reporting, the White House has been threatening
additional tariffs on Chinese imports into the U.S. And there`s an unusual
industry that could get rattled by the trade dispute between the world`s
two largest economies.

Robert Frank has the details.


China tariff list contains a surprising entry, quote, paintings, drawings
and pastels executed entirely by hand, whether or not framed, as well as
sculptures and any antique exceeding 100 years. In other words, Chinese
art and antiques would be subject to a tariff if the next list takes
effect. It doesn`t matter how old the pieces are or what country you buy
them from.

So, if you are a New York collector and you buy a Chinese vase from a
London dealer, that vase would be subject to a 25 percent tariff because
hundreds of years ago, it was made in China. Now the U.S. imported about
$300 million worth of Chinese art last year, much of that from Europe. But
galleries, dealers, museum collectors and auction houses say the tariffs
would hurt the U.S. and helped China, which wants to dominate the business
of buying and selling Chinese art, and to keep all the treasures in their
own country.

Tariffs would shift both back to China and cause many American galleries
and dealers to shut down.

JAMES LALLY, J.J. LALLY & CO. OWNER: It would have a very severe impact.
I`d have to question how I could go forward under those circumstances. We
cannot make these things. There`s no one is manufacturing it and it`s
going to severely harm my clients and me as to try and continue to do what
we do.

FRANK: Sotheby`s and Christie`s recently sent a letter to the U.S. trade
rep saying, quote, the vast majority of Chinese artwork imported into the
U.S. comes from other countries and that putting tariffs on art from China
would not result in increased demands for American made art. Antiquities
in ancient Chinese art make up the bulk of the market right now, but demand
for work by living Chinese artists had soared in recent years. Galleries
say tariffs would hurt their work.

MARC GLIMCHER, PACE GALLERY PRES. & CEO: Absurd. Now, of course, I`m the
guy that gets affected, so I know I`m a biased person. But it takes very
little analysis to see, you know, how absurd and self-destructive a blunt
instrument like tariffs are.

This is an appreciating asset, so it would be like putting a tariff on

FRANK: This week kicks off Asia Week in New York with millions of dollars
of Chinese work, both old and new, being bought and sold. And for now, the
tariffs have actually helped sales with collectors rushing to buy and
artists rushing to sell before the tariffs take effect. That show at the
Pace Gallery, well, it sold out in just 25 minutes.



HERERA: And before we go, here`s a look at the final numbers from Wall
Street. The Dow fell 59 points to 25,857. The Nasdaq was up 21 and the
S&P 500 added 5.

And that will do it for NIGHTLY BUSINESS REPORT tonight. I`m Sue Herera.
Thanks for joining me. Have a great evening. We`ll see you 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
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Business Report is not and should not be considered as investment advice.
(c) 2018 CNBC, Inc.


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