Transcript: Nightly Business Report – September 12, 2018

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

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: New talks? The U.S. is
reportedly reaching out to China to resolve trade tensions while
businesses and farmers sound the alarm against tariffs.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Supersized revenue? Apple
(NASDAQ:AAPL) shows off its biggest and most expensive iPhone ever,
betting consumers are willing to pay up.

GRIFFETH: Shifting gears. Automakers with plants in the South are
rushing to export vehicles just as Hurricane Florence closes in on the
Carolinas.

Those stories and much more tonight on NIGHTLY BUSINESS REPORT for this
Wednesday, September the 12th.

HERERA: Indeed. And good evening, everybody, and welcome.

Investors were reminded once again that trade matters. A report that
the U.S. is reaching out to China for a new round of trade talks caused
an immediate spike in stocks. These trade talks it appears would be
high level led by the treasury secretary. That helped left shares of
Boeing (NYSE:BA) and Caterpillar (NYSE:CAT) often seen as bellwethers
for global trade.

But it wasn`t enough for big gains in the broader markets. So, the Dow
Jones Industrial Average closed the day with just a slight rise of 27
points to 25,998, the Nasdaq down 18 and the S&P 500 rose 1 point.

GRIFFETH: However, the threat of the new U.S. tariffs on Chinese
imports does still exist and that makes the greater business community
very nervous here in the U.S. Today, a number of different industries
joined forces to let the White House know about their concerns.

Ylan Mui has more for us tonight from Washington.

(BEGIN VIDEOTAPE)

YLAN MUI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Retailers, the fishing
industry, tech companies and more, they`re all coming together under the
banner Americans For Free Trade to sound the alarm against President
Trump`s tariffs and they`re spending millions of dollars to make sure
the message is heard across Washington.

MATTHEW SHAY, NATIONAL RETAIL FEDERATION CEO: It`s a campaign directed
certainly at the ultimate decision makers in the administration. But we
know that there are others out there that can be influenced and
persuaded. And really, it`s about informing people of the real negative
consequences of tariffs.

MUI: In a letter to Congress today, the coalition called its concerns
urgent. It`s planning listening sessions with small business owners who
have been hurt by the tariffs starting next week in Illinois,
Pennsylvania and Tennessee. TV and digital ads are in the works.

Also today, farmers fanned out across Capitol Hill to push the issue
with lawmakers.

MARK WATNE, NORTH DAKOTA FARMERS UNION PRESIDENT: We are concern that
the approach taking on the trade war is going to hurt us essentially at
a time when we are seeing farm income down by 50 percent.

MUI: The Trump administration has already imposed tariffs on $50
billion in Chinese goods. Another round on $200 billion of imports is
in the works. And the president has said the rest of what we import
from China is at risk too. But business leaders hope that hearing about
the impact of the trade war is already having on Main Street will make a
difference.

SHAY: It`s one thing to talk about those in a hypothetical sense as has
been done for the last year. It`s another thing to actually have the
people who are being hurt by these tariffs tell their own stories. And
that`s really what this campaign is all about.

MUI: Businesses hope the White House is listening.

For NIGHTLY BUSINESS REPORT, I`m Ylan Mui in Washington.

(END VIDEOTAPE)

HERERA: And businesses are expressing concern over trade tensions.
According to the Fed`s Beige Book, companies are grappling with rising
input costs due to imposed and retaliatory tariffs. And in some cases,
those concerns resulted in postponed business investment.

That said, the survey suggests the economy overall grew at a moderate
pace at the end of the summer, along with hiring and wages.

GRIFFETH: But for the first time in a year and a half a key inflation
gauge actually posted a decline. The producer price index unexpected
fell 0.1 percent last month as lower food prices offset higher energy
prices. And despite the moderation last month, inflation overall,
though, has been steadily rising, thanks to that tight labor market, a
strengthening economy and the rise in tariffs.

HERERA: That strengthening economy is leading to more money in the
pockets of Americans. According to the Census Bureau, median household
income increased nearly 2 percent to $61,400 last year. That is the
highest on record due to the change in the way that those figures are
calculated. And the poverty rate also inched lower.

GRIFFETH: We have been commemorating the tenth anniversary of the
financial crisis which spawned the recession. The economy, of course,
today looks different from what it was ten years ago at the beginning of
that crisis. At the depths of the dark days, three men in particular
took extraordinary steps to save a financial system that some say was
teetering on insolvency.

Andrew Ross Sorkin spoke with them today.

(BEGIN VIDEOTAPE)

ANDREW ROSS SORKIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Ten years
after the financial crisis, today, we sat down with Hank Paulson, Tim
Geithner and Ben Bernanke, three men at the center of the storm. We
talked about policymaking and the policies that may have led to the
crisis and those that rescued us from it. One of the things all three
men talked about was the difficulty they felt they had communicating to
the public what they were trying to do.

Here is what Mr. Paulson had to say.

HANK PAULSON, FORMER TREASURY SECRETARY: It is very, very hard to
explain that — that the system was so complex, so interconnected that
we had to go to the source. And Wall Street was — was like the heart.
And we had to stop — what with he had to go to the heart, we had to go
to the source to stop the bleeding. Otherwise, it was going to kill the
economy.

And what we were doing is putting the tarp, the things we did was like a
tourniquet on it. But it`s very hard to explain that finance is the
life blood of the economy.

SORKIN: One of the other issues debated was the rise of populism after
the crisis. Ben Bernanke took issue with the idea.

BEN BERNANKE, FORMER FEDERAL RESERVE CHAIRMAN: Financial crisis didn`t
help, obviously. We know historically financial crises do tend to
proceed increases in populist politics but people have been saying that
the country has been going in the wrong direction for 40 years. There`s
been a long period of very slow gains in real wages, increasing
inequality, slow upward mobility, social mobility. We have had rising
concerns about trade, China`s entry to the WTO in 2002, immigration,
cultural issues.

So, the whole gamut of things that are feeding into the popular mood. I
think the financial crisis obviously exacerbated that. But it was not I
don`t think the primary source of the politics that we are seeing today.

SORKIN: For NIGHTLY BUSINESS REPORT, I`m Andrew Ross Sorkin in
Washington.

(END VIDEOTAPE)

HERERA: After experiencing that crisis, it is difficult to think
another could happen. But, of course, anything is possible.

And in an interview, the head of the world`s largest hedge fund says the
next crisis could be more severe.

(BEGIN VIDEO CLIP)

RAY DALIO, BRIDGEWATER ASSOCIATES: I think the next downturn is going
to be a different type of downturn. I think pension problems, health
care problems in terms of obligations that are not funded, whether or
not debt —

INTERVIEWER: More severe next time?

DALIO: I think it will be more severe in terms of social political
problems and more difficult to handle.

(END VIDEO CLIP)

HERERA: Dalio said he believes the current economic cycle has about two
more years to run.

GRIFFETH: Well, let`s talk about this turn to Art Hogan to talk more
about the next financial crisis might look like. Art, of course, is
chief market strategist at B. Riley FBR.

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

ART HOGAN, CHIEF MARKET STRATEGIST, B. RILEY FBR: Thank you.

GRIFFETH: Cyber-attacks on banks, high debt levels in the fracking
industry, too many subprime auto loans. I have heard those just this
week as possible seeds for a future financial crisis. We never know
where it`s going to come from, do we?

HOGAN: Yes, we really don`t. I mean, the next crisis is never going to
look like the last crisis. It`s like the military trying to fight the
last war. We really have to look forward and see where the real cracks
are.

And in my mind, you know, all of those things, cybersecurity is
obviously going to be, you know, a large concern forever, because the
folks that practice cyber crime, you know, get better faster than the
people stopping it. But I think the biggest concern in the near term
for me would be the amount of dollar denominated debt, especially in
some emerging markets if we continue to see a strength in the dollar,
because that continues to become a negative feedback loop. We see
emerging market countries taking on debt over the last five, ten years.

And that being denominating denominated in dollars just gets worse as
the dollar strengthens.

HERERA: Yes, do you think we`re ready, though? I mean, what did we
learn from, you know, the 2008 financial crisis? Has it made Main
Street and Wall Street perhaps more hyperaware of the fact that the
crises do happen and they`re different every time?

HOGAN: Yes, for sure. I mean, when you think about our banks, for
example, and look at Lehman before it under, they had 30 to 40 percent
leverage ratio and the highest any bank has. The most extreme is like
ten. So, you know, the balance sheets are stronger for our banks. So,
we`ve learned that extreme level of leverage is bad and we`ve
ameliorated that.

So, what else have learned? I think we`ve certainly learned that giving
mortgages to people that we know won`t be able to pay them back, and
then wrapping up in a derivative investment product is a bad idea as
well. I think all those lessons learned, but that`s the last crisis. I
think, you know, moving forward, the things we`re going to have to learn
to deal with is what happens if the euro zone starts to fall apart as an
experiment, and I think that, you know, when you see things like Italy,
or the Brexit, or Turkey for example.

So, I think that, you know, things that are in front of us instead of
behind are things that we are quickly going to have to grapple with. I
think being prepared for that means certainly paying attention to that
in real time.

GRIFFETH: Art Hogan with B. Riley FBR, always good to talk to you, Art.
Thanks for joining us tonight.

HOGAN: Thank you, Bill.

HERERA: Let`s take a look at some of today`s upgrades and downgrades.

Micron was downgraded to neutral from buy at Goldman Sachs (NYSE:GS).
The analyst cites weakness in certain semi-conductor chips, specifically
DRAM, which accounts for more than three-quarters of gross profit. The
price target $50. The stock fell 4 percent to $41.74.

Fellow chip maker NXP Semiconductor was downgraded to sell from hold at
Stifel. The analyst says certain chip markets may have peaked. The
price target there is $84. The stock fell a fraction to $88.80.

Tiffany (NYSE:TIF) was upgraded to outperform from perform over an
Oppenheimer. The analyst cites the stock`s valuation follow an 8
percent drop in shares over the past month. The price target is $152.
The stock rose 1 percent to $124.74.

GRIFFETH: Still ahead, preparing for Hurricane Florence.

(BEGIN VIDEO CLIP)

CONTESSA BREWER, NIGHTLY BUSINESS REPORT CORRESPONDENT: I`m on a pilot
ship now responsible for getting the car carrier that you see out to sea
away from the danger of storm surge and flooding that could come with
Hurricane Florence. I`m Contessa Brewer. I have more on the
preparations being made in the Lowcountry, South Carolina, ahead on
NIGHTLY BUSINESS REPORT.

(END VIDEO CLIP)

HERERA: 3M (NYSE:MMM) was the worst performing stock in the Dow index
today, this after a company executive tempered expectations about its
growth outlook. The chief financial officer cited rising raw material
costs and said automotive demand particularly in China may not be as
robust as initially thought. The stock fell more than 2 percent in
trading today.

GRIFFETH: As expected, Apple`s flagship product is getting a makeover.
The iPhone is getting bigger in some cases pricier too. But the stock
had a little smaller today, falling 1 percent in today`s session.

Jon Fortt, though, has a recap for us tonight from Cupertino,
California.

(BEGIN VIDEOTAPE)

JON FORTT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Three new iPhone X`s
and watch that`s been approved medical device, that`s what Apple
(NASDAQ:AAPL) announced at its biggest event of the year. For the last
couple years, Apple (NASDAQ:AAPL) hasn`t been selling more iPhones than
in the past, but it has been able to charge more. This new lineup will
test that trend.

The new iPhone X is both more expensive and more affordable. The XS Max
has a larger screen and price tag. But the entry level XR is less
expensive than last year`s model.

WALTER PIECYK, BTIG MANAGING DIRECTOR: They`re taking the size of what
was an A plus and because of the way the screen is going edge to edge,
you`re having what is going to look like the biggest screen that they
have. So, this is a new effective size in terms of the screen. That
could induce also some additional people to consider upgrading their
phones.

FORTT: Apple`s iPhone makes about 60 percent of the company`s revenue
but the world`s largest publicly traded company is also looking for its
next leg of growth in wearables.

TIM COOK, APPLE CEO: Apple (NASDAQ:AAPL) Watch is not only the number
one smart watch in the world, it`s the number one watch, period.

FORTT: The buzz with the new Series 4 watch, a new electric cardiogram
feature. ECGs can detect irregular heartbeats. The chief operating
officer Jeff Williams told the audience that the watch is the first to
have those features receive FDA approval. Health data from the watch
will be encrypted on the device and in the Cloud. The new watch has a
screen 30 percent larger and a new feature that can detect if the wearer
has fallen and call for help.

It`s a growing business for Apple (NASDAQ:AAPL). CEO Tim Cook mentioned
on the last earnings call that wearables generated more $10 billion in
sales for the company.

ISI analyst Ross Muken says the ECG capacity is a big deal, saying this
upgrade really establishes the company`s increasing efforts to push the
watch as a serious medical device. Apple (NASDAQ:AAPL) hoping it also
establishes the watch as a winner.

For NIGHTLY BUSINESS REPORT, I`m Jon Fortt, Cupertino, California.

(END VIDEOTAPE)

HERERA: The TV ratings company Nielsen will reportedly consider selling
itself. That`s where we begin tonight`s “Market Focus”.

“Reuters” says Nielsen was expanding its review of strategic
alternatives following pressure from investors and hedge fund Elliott
Management. Other options for Nielsen are also being considered,
including going private or spinning off parts of its business. Nielsen
shares rose 1 percent to $26.72.

E.L.F. Beauty may also be facing pressure from an investor. “The Wall
Street Journal” says Marathon Partners Equity Management, which owns a
nearly 9 percent in E.L.F. will encourage to sell itself or cut costs.
The report added that Marathon is also seeking new additions to the
company`s board. Shares rose a fraction to $13.44.

United Technologies (NYSE:UTX) was charged with violating the Foreign
Corrupt Practices Act by making the illicit payments in its elevator and
aircraft engine businesses. The SEC says the United Tech paid for trips
and gifts for foreign officials to attract business which is illegal
under U.S. law. The company will pay about $14 million to resolve those
allegations. The shares were up a fraction to $133.89.

GRIFFETH: Elsewhere, Chinese electric carmaker Nio started trading on
the New York Stock Exchange today. They price their shares at $6.26 a
piece. That was near the low end of the expected range and that pricing
values the company at nearly $6.5 billion. Nio, which plans to expand
in the U.S. and in Europe, says it believes it has a better and cheaper
product than rival Tesla. Nio shares finished up 5 percent today to
$6.60.

Then after the bell, Tailored Brands reported a revenue miss, even as
the owner of Men`s Warehouse and Jos. A. Banks saw sales rise across all
of its brands. Earnings were in line with estimates but margins
smaller. Shares were volatile in the after-hours session but finished
the regular day up more than 1 percent to $23.94.

Also out after the bell, tonight, Pivotal Software topped earning
expectations and gave a current quarter outlook in line with
expectations as well, but investors may have been looking for a little
more. Shares initially plunged in the extended session but finished the
regular day up nearly 3 percent to $28.78.

HERERA: Hurricane Florence was downgraded to a category three, but
remains in an immensely powerful storm. Most automakers have critical
operations in the region and they expected to get hit. They are now
preparing for the worst but they are hoping for the best.

Contessa Brewer is at the Port of Charleston for us tonight.

(BEGIN VIDEOTAPE)

BREWER: The preparations are intense here at the port of Charleston as
BMW moves thousands of cars on the giant car carriers. They`ll head out
to sea and away from the risk of any storm surge or flooding that
Hurricane Florence might bring with it. And they won`t move any new
cars in.

The port is typically a very busy place. In fact in August, it set
records for the number of containers moved, up 16 percent over the
previous August. Annually, this port accounts for $53 billion worth of
economic activity or 9 percent of state GDP.

JOHN CAMERON, CHARLESTON HARBOR PILOTS EXEC. DIR.: The port is the
economic engine of the state and one in ten jobs and somewhere or
another connected to the port. So, every day we are down is day that
the produce of South Carolina doesn`t have access to the world markets.

BREWER: The real risk with the hurricane is not the wind. Not even
whether Charleston is the bull`s-eye. It`s the flooding because
Charleston is in Lowcountry. It floods with just a few inches of rain
in a regular rainfall. And the prediction here is for inches or perhaps
even feet of water.

What`s going to happen to those cars?

CAMERON: Those cars are being exported and that`s very important for
South Carolina. That ship is leaving to get around the storm. And have
a safe voyage to its destination. There`s actually another ship coming
in to take another load this afternoon and that will leave tonight. And
that will hopefully clear the docks so that those cars are safe onboard
ships.

BREWER: Other industries have shuttered as well. Volvo idled the new
plant because of the storm. It had just opened in June.

Mercedes-Benz just opened a sprinter factory this month. It`s already
closed because of the storm. Rail cars have been diverted outside of
Atlanta, Georgia. Boeing (NYSE:BA) has sent all of its workers home so
they can evacuate with their families. And it`s sending any finished
787s all way to Everett, Washington.

What`s your biggest concern standing here today about the next few days?

CAMERON: Really, it`s the uncertainty and in the forecast. This storm
is going to be significant for somebody. And we have to be prepared for
that to be us.

BREWER: The preparations continue until the effect of the storm starts
to be felt here. The wind gets too strong, the seas get too rough. And
then, of course, comes the planning. How do you get the port back up
running once the Hurricane Florence has passed?

For NIGHTLY BUSINESS REPORT, Contessa Brewer in the Port of Charleston,
South Carolina.

(END VIDEOTAPE)

GRIFFETH: Meanwhile, home improvement retailer Lowes is working all day
and all night to get residents on the East Coast the supplies they might
need before and after Florence makes landfall.

Courtney Reagan is in Palmetto, Georgia, taking a look and inside Lowe`s
command center.

(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Disaster prep
starts here at Lowe`s emergency command center in Wilkesboro, North
Carolina, where weather is monitored year-round, but it runs around the
clock starting up to a week before a storm hits and up to three weeks
after. Inventory requests from stores are called in and the emergency
command center plots the logistics to get the right merchandise to the
affected areas.

From regional distribution centers to vendors shipping directly to
stores or in many cases, from one of three coasting holding facilities
like this one in Palmetto, Georgia. The 250,000 square feet are
dedicated to emergency response supplies at all times, including 15
prepackaged truck loads.

CESAR GUERRERO, LOWE`S FACILITY MANAGER: We get emergency response from
the command center, telling us exactly where the load needs to go and at
that point, we start moving the freight.

DEMETRIC FAVORS, LOWE`S TEAM MANAGER: They send the list to me. I make
the pallets.

REAGAN: Like the command center, the coastal holding facility is open
around the clock in an emergency.

KIM HARRISON, LOWE`S ADMIN. TEAM MEMBER: It`s tiring. We`re exhausted.
The product keeps moving. It`s hard to say yes you sleep in the car but
I have a home when it`s done.

REAGAN: It took about 30 minutes to load the truck up with things like
tarps, Clorox (NYSE:CLX), buckets, brooms, anything you might need to
prepare for a storm. Now, it`s ready to go to the stores.

So far, Lowe`s has sent more than 1,000 truck loads full of pre and post
storm products to more than 135 stores in Hurricane Florence`s
anticipated path.

JENNIFER THAYER, LOWE`S VP OF STORE OPERATIONS: We are starting to see
post-storm products roll in with generators and water. I will tell you,
I just recently went through Hurricane Irma. Very similar as to what we
did during Hurricane Irma and Hurricane Harvey as well.

REAGAN: While the preparation has been so far similar to past storms,
Florence has yet to make landfall. The retailer will keep its doors
open as long as possible, though it`s already closed the coastal stores
to follow local evacuation orders.

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan in Palmetto, Georgia.

(END VIDEOTAPE)

HERERA: Coming up, the push to protect your privacy on the Internet.

(MUSIC)

HERERA: Another executive is out at CBS (NYSE:CBS). Jeff Fager, the
veteran executive producer of “60 Minutes”, is leaving after the company
said he violated its corporate policy. His departure follows a “New
Yorker” report that included allegations of sexual harassment,
allegations that Fager has denied. As we have reported, CBS (NYSE:CBS)
CEO Les Moonves left earlier this week amid allegations of sexual
misconduct.

GRIFFETH: Last month, a company called Nostrum Laboratories quietly
quadruple the price of an antibiotic that it makes and then this week,
the CEO of the company defended that move in an interview with “The
Financial Times”, calling it a moral requirement. The antibiotic in
question by the way has been listed by the World Health Organization an
essential medicine for basic health care system.

Well, in response, FDA Commissioner Scott Gottlieb tweeted that, quote,
there is no moral imperative to price gouge and take advantage of
patients. The FDA will continue to promote competition so speculators
and those with no regard to public health consequences cannot take
advantage of patients who need medicine, end quote.

HERERA: The FDA commissioner is cracking down on e-cigarette sales to
teenagers. The agency today declared youth vaping an epidemic. It said
it will halt the sales of flavored electronic cigarettes if
manufacturers cannot prove that they are doing enough to keep them out
of the hands of children and teens. But some call the crackdown not as
bad as feared, and that sent the shares of Altria, British American
Tobacco and Philip Morris higher.

GRIFFETH: Tech companies these days are facing growing scrutiny from
all sides. The latest this time from Attorney General Jeff Sessions who
is reportedly exploring the possibility of investigating social media
companies. Well, now, the lobbying group that represents most of those
companies is trying to get ahead of any proposed federal privacy
regulations.

Julia Boorstin has details.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Representing the
largest tech and social media giants, the Internet Association releasing
proposals to guide federal privacy legislation toward the cause and
confusion of a patchwork of state rules and get ahead of California`s
comprehensive privacy laws that going into effect in 2020.

MICHAEL BECKERMAN, INTERNET ASSOCIATION CEO: It is important for
individuals and certainly for start-ups and companies to have a national
framework that avoids this patchwork. I mean, imagine if you`re flying
or driving across the country and as you go from state line to state
line, you are covered by different privacy protections. Your
expectations as a user and certainly for companies trying to innovate,
you can`t have 50 different standards. We want to have one robust
national standard that protects people.

BOORSTIN: This group 45 companies includes Facebook (NASDAQ:FB), Google
(NASDAQ:GOOG), Twitter, Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN)
and Uber, and pushing for legislation that enforces transparency,
controls over how personal information is used, consumer access to data
they provided and the ability to delete or correct personal information
or transfer it to other companies.

The Internet Association is advocating for national data breach
notification laws, preempting the state rules, to create a new standard
for clear breach notifications. Also saying privacy protections should
apply equally to all tech companies as well as offline companies, such
as retailers or credit card companies, recommending that the FTC
enforced these laws at a federal level.

BECKERMAN: I think people expect to have the same privacy and the same
transparency offline as they do online. Online, the tools are great and
they`re constantly improving. But we want the entire economy to be part
of this to protect people.

BOORSTIN: The lobbying group says consumer data is valuable to help
tech companies deliver a better experience and they are working with the
White House and Congress to craft rules that will protect consumers
without stifling innovation.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.

(END VIDEOTAPE)

HERERA: And before we go, here`s a look at the final numbers from Wall
Street. The Dow rose 27 points to 25,998. The Nasdaq was down 18, and
the S&P 500 was up one.

And that will do it for us tonight. I`m Sue Herera, thanks for joining
us.

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

END

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