Transcript: Nightly Business Report – September 11, 2018

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Lingering effects. Ten years
after the financial crisis, investors haven`t completely gotten past the
dark days. And it`s evident in the market psychology today.

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Gaining strength.
Hurricane Florence is making a bee line toward the East Coast, and in its
path the concentration of power plants.

HERERA: Wall Street remembers. A firm that lost so much 17 years ago
spent in day and every 9/11 giving back.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Tuesday,
September 11th.

Good evening, everyone, and welcome.

And welcome back.

GRIFFETH: Thank you.

HERERA: It`s so great to have you back.

GRIFFETH: Took an extra long vacation. We had friends who got married in
Germany. So, we had a lovely time over there the last week or so.

HERERA: Well, you were very much missed.

GRIFFETH: Thank you. It`s great to be back.

Let`s get to our news tonight here. We begin with the stock market with
registered gains as technology stocks rebounded and the energy sector
rallied today ahead of Hurricane Florence. Trade concerns report on the
back burner for now and for investors bought up stocks today. The Dow
gained 113 points to 25,971 with Apple (NASDAQ:AAPL) leading the way. The
Nasdaq was up by 48, the S&P 500 added 10.

And while today`s trading was nothing extraordinary, what investors
witnessed ten years ago this week was. And it change the way Americans
think about their money.

Bob Pisani has more for us tonight.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: A decade since the
financial crisis has taught investors on Wall Street some key lessons, but
it`s also changed how investors think. Here`s five personal takeaways from
the crisis and how it change the conventional trading wisdom.

First, investors do not act rationally in a crisis. They don`t buy low and
sell high. They do the opposite, they buy high and they sell low.

In the week of March 6th, 2009, I`ll give you an example, the S&P hit 666
at the drop off more than 50 percent off the historic high. It made no
sense to sell with the market down 50 percent but that`s exactly what
happened. Outflows from mutual funds accelerated at the end of 2008 into
2009. It didn`t turn positive until later in 2009. Ouch.

Second, there isn`t always a right replies price. When the mortgage-backed
securities market fell apart, no one could agree on how to price the
derivatives that were at the heart of the crisis. The markets seized up
and that affective other credit markets. Increasing complexity does not
decrease risk. It increase risk.

Everyone thought you could slice and dice these mortgage products into
manageable tranches. That`s what we call them. That would spread the risk
out. And that proved to be terribly wrong.

Fourth, the markets are not as efficiently as everyone assumes. Now, I
know this is a key tenet of modern portfolio theory and all that. But Wall
Street had poor visibility on this. Corporations were seeing business
mature rate on daily basis and poor communication and data sharing from
companies themselves really exacerbated the problem.

Many companies provided very little if any guidance and shared as little
information as possible. We were going in the dark.

Finally, bold swift action works better than slow indecisive action or no
action at all. The Fed stepped in to make sure banks would not fail
ultimately. And that finally stopped the free fall.

You know in a sense, John Maynard Keynes, the famous economist, he won.
Governments around the world stepped in, they propped up critical
institutions and they spent an awful lot of money. Keynes` interventionist
ideas won out in the intervening years as well. Global central banks in
Europe and Japan began buying up assets and governments ran big deficits.

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

(END VIDEOTAPE)

HERERA: The aftermath of the financial crisis has been the longest bull
run for stocks in U.S. history. But today, the founder of the world
largest hedge fund said that he`s telling investors to be less aggressive
and more defensive.

(BEGIN VIDEO CLIP)

RAY DALIO, BRIDGEWATER ASSOCIATES: Right now, we have just gotten to the
point in my judgment that it`s more than — the risk return is more
negative. I would then be in a more defense of posture. Whatever your
strategic assets allocation issue, you know what your strategic mix is. I
would be less aggressive rather than more aggressive.

(END VIDEO CLIP)

HERERA: When it comes to the economy, Dalio says that he thinks the
current economic cycle in the seventh inning, that`s where he thinks it is.
And he`s urging the Federal Reserve not to get ahead of the market as it
continues to hike interest rates.

GRIFFETH: Meanwhile, the budget deficit is widening, according to a new
report from the Congressional Budget Office, it hit $900 billion over the
first 11 months of this fiscal year. That is an increase of more than 30
percent over the same period last year. The non-partisan CBO said that the
tax law and agreement to increase government spending contributed to the
widening deficit. Revenue rose 1 percent while spending was up by 7
percent.

HERERA: Those tax cuts are contributing to record optimism among small
business owners, according to the National Federation of Independent
Business, companies are planning to spend more on capital investments and
hiring expectations are at an all-time high. A separate report from the
Labor Department shows 6.9 million job openings in July. That`s the most
ever. The number of workers confident enough to quit jobs also hit a
record.

GRIFFETH: Canada`s foreign minister returned to Washington today to
continue those difficult renegotiations of the North American Free Trade
Agreement. And Chrystia Freeland said today the discussions are productive
but there`s still more work to be done.

(BEGIN VIDEO CLIP)

CHRYSTIA FREELAND, CANADIAN MINISTER OF FOREIGN AFFAIRS: It`s a truism of
trade negotiations that nothing is done until everything is done. We have
been working extremely intensively over the past two weeks. And as I said
to you on Friday, we really feel both sides that we`re in a continuous
negotiation phase.

(END VIDEO CLIP)

GRIFFETH: U.S. officials would like a new agreement to be in place by
October 1st.

HERERA: China now plans to ask the World Trade Organization for permission
to sanction the U.S. The world`s second largest economy is citing what it
calls Washington`s non-compliance with the ruling in a dispute over U.S.
dumping duties. Experts say the fight could drag on for years and it comes
as tensions continue to escalate. Last week, President Trump said he was,
quote, ready to go on tariffs on another $200 billion on Chinese goods.

GRIFFETH: Meanwhile, China and Russia appear to be strengthening their own
economic ties. The leaders of those two countries have been meeting at the
Eastern Economic Forum and that`s where we find Geoff Cutmore for us
tonight.

(BEGIN VIDEOTAPE)

GEOFF CUTMORE, NIGHTLY BUSINESS REPORT CORRESPONDENT: A relationship built
on trust is now Russian President Putin welcomed his counterpart Xi Jinping
to the Eastern Economic Forum here in the far eastern city of Vladivostok.

The two leaders clearly using this photo call opportunity to express their
desire for deeper diplomatic, political and economic ties. In a number of
comments made by President Xi, there were digs at U.S. President Trump over
current trade policy and his unilateral approach to international
organizations. On both of these issues, Xi Jinping said it was important
to have the support of Russia.

Trade and economics never far away at these major events. And some $100
billion worth of deals have been inked related to the technology sector.
One specifically stands out. And that is Alibaba signing a deal with
Russian partners here to provide and enhance social commerce platform.

KIRILL DMITRIEV, RUSSIAN DIRECT INVESTMENT FUND CEO: Six hundred million
customers that Russian businesses can supply products to. Melrose, which
is our partner, deal with 100 million Russian who will get more Alibaba
products.

CUTMORE: A number of Russian business leaders that we`ve spoken to here at
this event say that the increased pressure from sanctions is making
operational decision making harder, and they are concerned that there may
be further sanctions coming down the pike from Washington. As a
consequence of those, they point out that they are increasingly having to
look to the east to do business. And that probably means more deals as far
as China is concerned.

This is Geoff Cutmore for NIGHTLY BUSINESS REPORT from Vladivostok.

(END VIDEOTAPE)

GRIFFETH: And now, time to take a look at some of today`s upgrades and
downgrades.

We begin with Tesla tonight. It was downgraded from neutral to buy at
Nomura Instinet. That analyst who had been one of Wall Street`s biggest
bulls on the stock now calls Tesla uninvestable, in part because of CEO
Elon Musk`s erratic behavior.

(BEGIN VIDEO CLIP)

ROMIT SHAN, NOMURA INSTINET: The risk is that if this behavior continues
he continues to be under scrutiny, the brand, the Tesla brand starts to
erode. And if the brand starts to erode then I think that could spell
trouble because for people not necessarily in the weeds, they may have
second thoughts about buying a Tesla vehicle if they feel the company is
not around longterm.

(END VIDEO CLIP)

GRIFFETH: Shah`s price target was dropped from $400 to $300 a share. The
stock fell 2 percent to $279.44.

CBS (NYSE:CBS) also saw its rating cut to neutral from buy at UBS. The
analyst there says that uncertainty around management changes will limit
any move higher in that stock. Yesterday, of course, we told you about the
departure of longtime CEO Les Moonves amid sexual harassment allegations.
Price target of CBS (NYSE:CBS) now $60. The stock rose a fraction to
$55.40 today.

HERERA: Nike (NYSE:NKE) was upgraded to buy from hold at Canaccord
Annuity. The analyst says Nike (NYSE:NKE) has regained its footing and
expects longtime gross margin gains. The price target, $95. The stock
rose a fraction to $82.63.

Snap was upgraded to outperform from neutral over at Wedbush. The analyst
cites recent management changes and improved execution. The price target
is $12.25. The stock rose 1.5 percent to $9.81.

GRIFFETH: Still ahead, will Hurricane Florence be the most costly ever to
hit the U.S.?

(MUSIC)

HERERA: The Trump administration is reportedly ready to east some
environmental rules. According to numerous reports, the EPA will ease
requirements for oil and gas companies when it comes to releasing methane
into the air. The proposed changes would give drillers a year to do leak
inspections instead of six months and 60 days to make repairs instead of
30.

GRIFFETH: Well, Hurricane Florence is still days away from making
landfall. But, already, there are early estimates as to what it might
cost. Core Logic says it could be one of the most expensive storms to hit
the U.S., could cost more than $170 billion in damage, about 750,000 homes
and businesses.

Jackie DeAngelis is in the storm`s path for us tonight. She`s in
Wilmington, North Carolina.

(BEGIN VIDEOTAPE)

JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Hurricane
Florence is turning into a threat unlike any other.

GOV. ROY COOPER (D), NORTH CAROLINA: The waves and the wind this storm may
bring is nothing like you have ever seen. Even if ridden out storms
before, this one is different. Don`t bet your life on riding out a
monster. If you wait until conditions get bad, it may be too late.

DEANGELIS: The bull`s-eye point, Wilmington, North Carolina. And in the
storm`s path, a concentration of power plants, including more than a half
dozen nuclear ones which supply about a third of thee power to North
Carolina and more than half to South Carolina.

Duke Energy (NYSE:DUK) is warning the storm could exceed the damage from
Hurricane Matthew which submerged North Carolina towns in 2016. The
company also said it could take weeks to restore power from the hardest hit
areas.

Dominion Energy urging its customers to prepare as well.

Gasoline demand certainly outstripping supply right now but more is on the
way. And those who need it to evacuate will likely be able to get it. In
the meantime, no major refineries here, but the bad weather could certainly
impair shipments of gasoline up the East Coast. The residents who are
getting ready to leave are making those preparations.

TABITHA GRISWOLD, CAROLINA BEACH, NC: And we`re probably going to have to
start over probably, along with a lot of other families. And the ones that
are going to be trapped here that can`t get off, I know like seven families
don`t even have a car to get off.

DEANGELIS: Tell me about that.

GRISWOLD: And they are just going to board up their windows and pray for
the best.

DEANGELIS: State and local authorities repeating, safety first. Lives are
more important than things.

JEFF BYARD, FEMA: Those citizens that need to evacuate we implore you to
evacuate now. You heed your local and state warnings. And do your part
and our team to help us save lives. We can rebuild infrastructure. We can
rebuild homes, but we cannot replace lives.

DEANGELIS: With days to go, the mood is tense on the ground and the fear
is this may be the worst storm this state has seen in more than 60 years.

For NIGHTLY BUSINESS REPORT, I`m Jackie DeAngelis, Wilmington, North
Carolina.

(END VIDEOTAPE)

HERERA: Yum China may have lost a potential buyer and that`s where we
begin tonight`s “Market Focus”. Bloomberg says a group of Chinese
investors will walk away from their attempt to buy Yum China after their
initial bid was turned down. The investor group which includes Hillhouse
Capital and KKR (NYSE:KKR) were also said to be concerned with softness in
Yum`s financial performance. Yum China shares plunged 13 percent to
$31.94.

Boeing (NYSE:BA) ramped up deliveries of its top selling 737 airliner last
month after hitting a low in July. The aircraft maker delivered 48 jets in
August. And that is up from 29 the prior month. Production bottle necks
are causing a growing number of Boeing (NYSE:BA) planes to sit unfinished.
And that`s resulting in delivery delays. Boeing (NYSE:BA) shares were up 1
percent to $345.25.

And the FCC says it needs more time to review the proposed merger between
telecom company Sprint and T-Mobile. The agency said it is squashing the
180-day informal transaction timeline so that a third party can review that
deal. Shares of Sprint rose half a percent to $6.08. And T-Mobile shares
finish up a fraction to $65.91.

GRIFFETH: Payment technology company USA Technology says it would miss its
filing that is required the 10K form with the SEC by Thursday`s deadline.
The company says it is launching an internal investigation to its counting
practices and its financial reporting systems. Shares cratered as a
result. They fell nearly 40 percent today to $9.20.

Then after the bell tonight, Gilead Sciences (NASDAQ:GILD) said its
experimental rheumatoid arthritis treatment developed with drug maker
Galapagos performed well during a study. Shares of Gilead initially rose
in after hours but finished the regular session today a fracture to $72.23.
Meanwhile, shared of Galapagos were flat in the extended session, finished
the regular session up 5 percent to $102.74.

HERERA: A decade ago in the throws of the worst housing crash in history,
large scale institutional investors went on a buying spree. Snatching up
foreclosed property and turning them to rentals, most expected this to be
short-term play, and that once home values recovered, they would sell at a
nice profit and call it a day. But that is not what happened.

Diana Olick explains.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: In the suburbs of
Dallas, the single family rental business is thriving and so is a new class
of companies. Blackstone`s invitation homes began buying properties barely
six years ago and now boasts a portfolio of more than 80,000 homes and
close to 1,300 employees.

DALLAS TANNER, CIO INVITATION HOMES: I think it`s a natural evolution in
the space, much like the apartment industry in the early `80s. If you look
at the where we`re at today in single family rentals, it`s still very early
innings in terms of what this space could be.

OLICK: The space was more crowded at the start. Big names like Colony,
Starwood, American Homes 4 Rent and Invitation Homes bought tens of
thousands of properties. But they found it hard to manage so many on a
large scale. They consolidated. And today, just American Homes and
Invitation remain.

TANNER: One of the barriers to entry is having the people, processes and
systems in place that allow to you create an efficient business model.
That took some time to develop and get right.

OLICK: Initially, that`s why most didn`t think the business would last.

JOHN PAWLOWSKI, GREEN STREET ADVISORS: Most people did believe that this –
– this assets class was more of a trade versus a viable business. And I
would — yes, I would put us in this surprised camp as well.

OLICK: It`s much easier after all to manage a multiunit apartment building
in one tall space than thousands of properties across multiple markets.
But technology and consolidation helped and now, both Invitation and
American Homes 4 Rent have about 96 percent occupancy and are turning big
profits.

PAWLOWSKI: 2016 was a huge turn around year for these companies, where
operating performance both occupancy, rental rate and operating margins all
began clicking and proved to investors that these companies would o could
operate this asset class like — more like an apartment company.

OLICK: With home construction still anemic and a critical shortage of
affordable homes for sale, demand for rental housing is unlikely to wane.

And some argue having management on a correspondent scale with all the new
technologies makes renting even more attractive, especially to millennials.
Meaning this new class of rentals could change the housing landscape of
supply and demand for the foreseeable future.

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

(END VIDEOTAPE)

GRIFFETH: Let`s turn to Fred Glick now to talk more about the state of the
housing market. He is the CEO of the real estate and mortgage brokerage
company, Arrivva.com, out in California.

Fred, good to see you. Welcome back tonight.

FRED GLICK, ARRIVVA.COM CEO: Hi, Bill. Hey. Thanks for something me.

GRIFFETH: So, we have far more renter than a decade ago. Is that good or
bad for the real estate market? And how long do you expect that to
continue?

GLICK: Well, it`s actually, I`ll say, good. And why I say that is because
hopefully people will be saving up and eventually buying or finally
considering buying in a few years from now because right now, people`s
mentality is not what it used to be, where everyone said I have to own a
house. That`s the American dream.

GRIFFETH: Right.

GLICK: It`s just not that way anymore.

HERERA: What about the housing market in general? We have gone through
this very difficult time. The banks have tightened up their lending
requirements. That would seem to be a good thing.

Do you feel good about the market as it stands now?

GLICK: Yes, Sue. The story is that, yes, it is difficult, quote/unquote,
to get to mortgage compared to it was in 2008 when as long as you can
breathe and sign your name, you got a loan. Now, there is restrictions on
how much income you need to qualify for a mortgage, which is a good thing.
And they don`t allow any mortgages where you can`t tell them what your
income is for an owner occupied property. So, that`s much better.

HERERA: The dearth of houses being built, do you expect that to change? I
mean, why aren`t builders building more if the demand is so high these
days?

GLICK: Number one I`ll put is local regulations. I have a great story, my
friends who live in Malibu, it took them 16 years to get into the house
after they bought a piece of land and wanted to build. So, that has to
change. There has to be more programs for people to buy their own new
construction property — their land and do new construction on them.

And it`s just supply and demand. They just can`t get it out quick enough.
But what they do get out is too expensive for the average person.

GRIFFETH: Right.

GLICK: And that`s the biggest problem here in the Bay Area.

HERERA: I`m sure in your neck of the woods it is.

What about interest rates? I mean, that`s kind of one of the side stories
to housing. One, there isn`t enough housing out there. But two, with we
see interest rates go up. Does that also take people out of the market for
a home?

GLICK: Not at all. I don`t think so.

HERERA: Really?

GLICK: There is maybe a couple of people who just said oh my god, rates
went up.

If you remember the low in the last cycle was 3.3/8 on a 30 year fixed.
Now, I think I quoted one a couple of days ago at around four and an eight.
So, it`s not that much worse. And plus, you can take a five, ten-year arm.
So, you have a fixed rate for along period of time.

Plus, you take stuff in Silicon Valley when there is 12 people trying to
buy a house. They don`t care what the rate is. They just want to get the
house.

So, I`m not that concerned about interest rates, even long-term, because
you remember 20 years ago, the Chinese government figured out that they are
buying mortgage-backed securities to keep the rates low so people will buy
the stuff to put in their houses. So, we`re always going to have that.

GRIFFETH: We will.

Fred, always good to see you. Thank you for joining us tonight.

GLICK: Same here, Bill. Thanks.

GRIFFETH: Fred Glick with arrivva.com.

HERERA: Coming up, a day of terror and heart break has turned into a day
of remembrance and giving back.

(MUSIC)

GRIFFETH: Yes on this day every year, Cantor Fitzgerald holds its annual
charity day. It is a day to remember the firm`s employees who lost their
lives during the 9/11 terror attacks. It`s also a way to turn tragedy into
something positive by giving back and as always, celebrities were on hand
to help out.

Leslie Picker is in New York for us tonight.

(BEGIN VIDEOTAPE)

ALEC BALDWIN, ACTOR: Brian, this is going to be the luckiest day of your
life.

LESLIE PICKER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Imagine placing a
trade with Alec Baldwin.

GOLDIE HAWN, ACTRESS: We can buy $150,000.

PICKER: Or Goldie Hawn.

GENE SIMMONS, MUSICIAN: Buy low, sell high. I listen to Warren Buffett.

PICKER: Or Gene Simmons. That`s what happens on the trading floor of
Cantor Fitzgerald on each anniversary of 9/11. All revenue from the day
goes to charity. The glitz of charity day, though, was born out of
darkness.

In 2001, Cantor Fitzgerald was based in the World Trade Center and when the
plane struck, the firm lost 658 employees, about 70 percent of its
workforce at the time.

CEO Howard Lutnick vowed to rebuild the firm. Seventeen years later, he
says it`s quadrupled the size.

HOWARD LUTNICK, CANTOR FITZGERALD CHAIRMAN & CEO: Listen to the way each
of them gives of themselves. They are part of Cantor Fitzgerald. They
remember those 658 people.

Each of these people behind us, they are waiving their day`s pay today.
They`re asking all their client to do as much business as possible. And we
give away not our profit, every penny of revenue we give to about 150
different charities to try to turn the toughest day into something really
beautiful.

PICKER: Lutnick who lost his brother in the attack was taking his son to
school when the towers fell, which is how he survived.

Tony Blair was prime minister of the United Kingdom during 9/11 and gave
the now famous shoulder to shoulder speech where he pledged to closely ally
with the U.S. in its time of crisis.

TONY BLAIR, FORMER U.K. PRIME MINISTER: The relationship, you know, it
sort of ebbs and flows somewhat. But at the roots, it remains very strong.
And it always should remain strong, because the world is changing fast, the
values that define the United States and the values that define Britain,
and a basic belief in freedom and in democracy. I mean, these are
important things in the 21st century to stand up for.

So, I hope, you know, we never suffer from a traumatic event again like
9/11.

PICKER: Blair`s trading revenue from today will go to his namesake charity
which works on projects in poorest areas of Africa.

Steve Buscemi volunteered as a firefighter following 9/11, working 12-hour
shifts to rescue victims from the rubble.

STEVE BUSCEMI, ACTOR: Well, I used to be a firefighter at engine 55 in the
early `80s. And September 12th, I went down to my old firehouse, Engine
55, and then I went to the site with them, and was down there for about a
week.

PICKER: Proceeds of Buscemi`s trades will go to Friends of Firefighters
which provides counseling and other services for firefighters and their
families.

Over the last 16 years, Cantor Fitzgerald has raised almost $150 million
for charity. At the very least, it makes this very tragic anniversary just
a little bit easier knowing they are doing something for good.

For NIGHTLY BUSINESS REPORT, I`m Leslie Picker, New York.

(END VIDEOTAPE)

HERERA: Here is another look at the numbers on Wall Street today. The Dow
advanced 113 points. The Nasdaq up 48 and the S&P 500 added 10.

It`s great to have you back.

GRIFFETH: Great to be back.

HERERA: That`s does it for us tonight. I`m Sue Herera. Thanks for
joining us.

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

END

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