Transcript: Nightly Business Report – November 22, 2018

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

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Good evening, everybody.
And welcome to this special edition of NIGHTLY BUSINESS REPORT. Sue is off
tonight.

It is no secret that the economy is growing and is considered by many to be
healthy. And tonight, we are taking a look at different industries doing
well yet face challenges.

We begin with the red hot labor market. Unemployment is historically low.
While that`s good for employees, it`s creating a worker shortage for
companies looking to hire.

Steve Liesman has more.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Wanted: One million
workers. That`s the number of extra workers the U.S. economy will likely
need if it`s even going to have a chance to grow at 3 percent. That`s a
percentage point above what economists think right now as U.S. economic
potential.

Here is the math. Right now, U.S. economic potential growth is thought to
be 1.9 percent. Half a point of that comes from workforce growth and 1.4
percent comes from productivity. That is American workers getting more
efficient every year.

But President Trump and others want to see growth return to the post war
average of 3 percent plus. To do that, the U.S. needs more workers and
more productivity.

JOSEPH QUINLAN, MERRILL LYNCH AND U.S. TRUST: Historically, any society or
economy that has an aging population, has a shrinking labor force, it
doesn`t have to be the end of the world in terms of output and growth and
your position in the world. But you have to run faster just to maintain
the level of output that we currently have, which is around $20 trillion.

To maintain that or move it to $25 trillion, like you said, we`re going to
need a combination of more workers, automation and reaching across our
borders for more workers as well.

LIESMAN: Exactly how many more workers? Say half of the extra one
percentage point of growth comes from growing the workforce. Right now,
the U.S. is expected to add one million workers a year. Economists say
another 1 million workers above and beyond what`s forecast will be needed
every year to add a half a point to potential growth. And that`s even if
the U.S. gets people who aren`t working to start participating in the labor
force.

Conrad DeQuadros of RDQ Economics says it`s hard to get it because of
participation rates because of the aging of the population.

The U.S. could put more unemployed back to work. But the low 3.7 percent
unemployment rate suggests the pool of workers is small and getting
smaller. And the question is, how much further the Federal Reserve will
let unemployment fall before it feels it has to slam the brakes on the
economy?

MICHAEL GAPEN, BARCLAYS CHIEF U.S. ECONOMIST: I think their forecast would
tell you they don`t want to go below 3.5. I think they keep going
gradually. I don`t think it means that they have to go faster. It may
ultimately mean they go further.

LIESMAN: Bottom line, it`s going to be very hard for the U.S. to reach a
goal of 3 percent growth. Not because there isn`t work to be done, it`s
because there may not be enough workers.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.

(END VIDEOTAPE)

GRIFFETH: The shale oil industry is facing an unprecedented labor
shortage. And with oil prices volatile, that may be one of the problems
facing the energy rich Permian Basin.

Brian Sullivan is in Midland, Texas, for us tonight.

(BEGIN VIDEOTAPE)

BRIAN SULLIVAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Here in West Texas,
long timers in the oil and gas business will tell you the industry is
really built on three things: rock, people and money.

The Permian basin of Texas, the richest oil area in America, has plenty of
the first but always needs more of the other two. And that`s why some
people are questioning whether the great American shale oil boom has
reached a peak. So-called good rock is plentiful here. It`s estimated
there are tens of billions of barrels of oil just waiting to be sucked out
of the ground.

But to do that, you need the oil and gas workers to do the job. Something
that is increasingly harder to come by in a city 500 miles west of Houston
with one of the hottest real estate markets in the country.

RON GUSEK, LIBERTY OILFIELD SERVICES: Getting people to come here
particularly to move here is a difficult challenge. Obviously, real
estate, particularly — particularly troublesome in that house something
expensive, more expensive here than Houston or Dallas or someplace like
that. And so, for your younger families trying to come here and start up,
that`s a — that`s a lot to ask.

SULLIVAN: Locals have told us that some houses will sell in less than 24
hours. Some workers live in hotels where rates can be eye-popping. A
hotel like this can run nearly $400 per night.

But the biggest concern about the shale boom on Wall Street is not people.
It is debt. Moody`s (NYSE:MCO) estimates that some $240 billion of oil and
gas company debt will mature in the next five years, with nearly 100
billion of that alone coming from the exploration and production companies.
We asked the head of research at Simmons Piper Jaffray about the impact
rising rates could have on the industry.

BILL HERBERT, SIMMONS PIPER JAFFRAY: Of course they matter. Actually, the
collective balance sheet of the upstream sector with regard to E&P and oil
service is in much better shape than it`s been in a long time. Companies
are living in closer, I guess, proximity of cash flow and there`s been true
capital allocation reform. So, effectively, that was a germane argument
two or three years when the E&P companies were living well outside of cash
flow. But today, coupled with pretty responsible balance sheets and living
in much closer proximity of cash flow I don`t think is nearly as alarming
as it could have been.

SULLIVAN: A few years ago, many oil and gas had almost no free cash flow.
Now, they`ve gotten smarter and they`ve cleaned up their balance sheets.
Low interest rates and higher oil prices have been a great combination for
the industry. But if rates keep moving higher and oil prices fall due to a
slowing economy, the booming shale oil industry and the boomtown of
Midland, Texas, could find itself between a good rock and a hard place.

For NIGHTLY BUSINESS REPORT, Brian Sullivan, Midland, Texas.

(END VIDEOTAPE)

GRIFFETH: Obviously, when the economy grows, many businesses benefit. And
that`s one of the reasons why the cruise industry is firing on all
cylinders right now. In fact, Royal Caribbean is making a bet that the
consumer will continue spending with its recently opened new port in Miami.

Seema Mody went to check it out for us.

(BEGIN VIDEOTAPE)

SEEMA MODY, NIGHTLY BUSINESS REPORT CORRESPONDENT: As more baby boomers
retire, the cruise industry is expecting a strong upturn in 2019 with a
record 17 ships set to debut next year. The problem is there is not enough
capacity at the ports to accommodate the new ships.

Royal Caribbean is taking matters into its own hands, launching a state of
the art terminal, making it the first cruise line to build and launch a
terminal in Pport Miami.

RICHARD FAIN, ROYAL CARIBBEAN CRUISES CEO: This was a $250 million
expenditure. But it is — it will pay back fairly nicely in terms of guest
satisfaction, in terms of what it does for the community, and also our
operating costs on a per passenger basis ends up being less. So, the net
to us is a slight improvement to our bottom line.

MODY: Royal broke ground on Terminal A last year. The build employed
2,000 construction workers. Port Miami estimates it will have a $500
million annual economic impact on the state of Florida.

MAYOR CARLOS GIMENEZ (R), MIAMI-DADE COUNTY: We continue to have increases
every single year. So, we had a record year of over 5 million cruise
passengers come to Port Miami. We`re the cruise capital of the world. We
expect that to grow another 2 million by adding additional facilities, by
adding more ships.

We`ve already contracted more ships, more lines, are now going to make Port
Miami their home port. So, we expect that growth to continue and start to
expand a little bit to the year 2021.

MODY: With the new terminal, Royal Caribbean is forecasting cruise
bookings to rise, from 750,000 to 1.8 million over the next year.

But the terminal launch comes at an uncertain time as investors debate the
future of the economy, the impact of higher rates and the state of the
consumer.

Royal Caribbean`s Fain says while he is concerned about geopolitics and
ongoing trade disputes, it`s not having an impact so far.

FAIN: I`m a free trade advocate, and anything creating tensions about free
trade I view as economically a bad thing. But our business in China
continues to do well.

I think part of it is because the Chinese market is so embryonic. It`s so
small that it doesn`t take much to attract new customers.

MODY: Analysts say travel is an economically sensitive sector, and any
downturn in the economy can have profound consequences on whether consumers
continue to spend money on travel and cruises.

For NIGHTLY BUSINESS REPORT, Seema Mody, Miami.

(END VIDEOTAPE)

GRIFFETH: It`s not just cruise ships riding the wave of a strong economy.
The corporate jet business is as well. It`s finally taking off after a
decade of trying to clear out the problems left by the great recession of
10 years ago. Industry leaders recently met in Orlando to set a course for
the future.

And Phil LeBeau was there.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: They are big, high-
priced and very much in demand. Corporate jets from small ones selling for
a few million dollars to the big boys going for tens of millions. They are
once again hot sellers.

ED BOLEN, NBAA PRESIDENT: Clearly, the global economy is very strong right
now, particularly the U.S., and business aviation tends to follow the
economy. So, this is a particularly good time that we`re seeing for the
aviation industry.

LEBEAU: After business jet sales lost altitude a decade ago, the recovery
has been slow, mainly because a lot of used planes held down demand for new
ones. That`s no longer the case.

Embraer`s new Praetor 600 jet is attracting heavy interest.

MICHAEL AMALFITANO, EMBRAER CEO: We already have sales for the Praetor 600
and the Praetor 500. So, we`re starting to see the momentum for our
customers — not only our existing customers but new customers coming to
the brand, especially the corporate flight departments.

LEBEAU: The corporate tax cuts and deregulation under the Trump
administration have also convinced more companies it`s time to get a new
jet. The latest models can fly further with more connectivity and features
attracting a wider array of buyers.

MARK BURNS, GULFSTREAM PRESIDENT: There`s been individual buyers, private
companies, mall companies, large companies. I think everybody is
benefitting from that. I think you`ll see that the next couple years.

LEBEAU: Historically, this is a boom and bust industry, with jetmakers
overbuilding in good years. But this time industry leaders believe it will
be different, confident they can keep the business jet business soaring for
years to come.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Orlando, Florida.

(END VIDEOTAPE)

GRIFFETH: Now, as the economy grows, so does the amount of stuff that we
ship from place to place. That`s especially true now that more people shop
online. And that gave one entrepreneur the bright idea to help businesses
get packages where they need to be at a lower cost.

Sue has the story.

(BEGIN VIDEOTAPE)

SUE HERERA, NIGHTLY BUSINESS REPORT: Rafael Zakinov began selling high-end
surplus watches and jewelry working his way through college in 2009. He
discounted prices and sold online through Amazon (NASDAQ:AMZN), eBay
(NASDAQ:EBAY) and others out of an apartment in Queens.

RAFAEL ZAKINOV, RUBY HAS FULFILLMENT CEO AND FOUNDER: The living room was
a warehouse and the bedroom was a warehouse.

HERERA: As he filled the apartment with 10,000 items, Zakinov e began to
notice price differences between the Amazon (NASDAQ:AMZN) and eBays telling
friends and family running similar business that is they often paid too
much.

ZAKINOV: I saw that they are really missing an opportunity to selling
elsewhere where the margins were better. None of them wanted to handle the
logistics or space was too expensive.

HERERA: A burgeoning ecommerce boom meant thousands of small businesses
needed help with storage, packaging, labeling and shipping.

ZAKINOV: I started calling up friends and it was like, hey, instead of you
sending everything to Amazon (NASDAQ:AMZN), send me it, I`ll send half to
Amazon (NASDAQ:AMZN), we`ll keep half of it by us and we`ll take back and
ship it as the orders come in.

HERERA: Starting in 2011, his company Ruby Has Fulfillment, outgrew the
apartment and office space and a warehouse. By 2014, it was handling a
couple thousand orders a day. And Ruby took its conveyor systems and
shelving to a warehouse on Long Island.

On average, the company says customers save 45 percent on freight and if
you think Ruby`s warehouse looks like an Amazon (NASDAQ:AMZN) fulfillment
center — well, that`s no accident.

ZAKINOV: We had to do everything right. And we had to do it the way
Amazon (NASDAQ:AMZN) would do it, just a much smaller scale. We have
clients today that have distribution centers 10 times our size where that
distribution center can`t handle the direct to consumer needs.

HERERA: In fact, Ruby handles some orders from Amazon (NASDAQ:AMZN). But
one thing Ruby offers that Amazon (NASDAQ:AMZN) doesn`t is the ability to
use a customers branded packaging.

ZAKINOV: There is a lot of companies that can say they can do the branding
but not in scale, right? As soon as, you know, you start doing a thousand
orders a day what we see is they break down on scale.

CHRIS WICHERT, KOIO CO-CEO AND CO-FOUNDER: I don`t want it to be like a
third party brand.

HERERA: Chris Wichert started his high-end sneaker brand Koio in a
Brooklyn apartment three years ago. Now, Koio has stores in New York,
Chicago and Los Angeles. But 60 percent of its business happens online.

When Wichert signed on with Ruby this year, they realized some of his
inventory lacked the bar codes needed for automated processing.

WICHERT: They discovered the problem and without sending them back or
ignoring the problem, they would print bar codes themselves and label them
and get them into the system so that nothing is lost.

HERERA: Now with almost 200 clients and revenue of more than $17 million a
year, Ruby Has has added warehouses in Las Vegas and New Jersey, with plans
to expand further in 2009. Aiming to keep delivery times down to the two
to three days consumers expect and businesses depend on.

ZAKINOV: You can literally deploy those dollars in products, marketing,
staffing, right? Things that actually help them grow the business.
Getting a new forklift isn`t going to add their top line or the bottom
line.

(END VIDEOTAPE)

GRIFFETH: Ruby now has more than 200 employees and is looking to expand
not only here at home but in internationally as well — possibly into
Canada and Europe in the near future.

Well, on this Thanksgiving evening, I`m sure you`re like most Americans,
your stomach is stuff and so is your garbage and recycling. But did you
know that the recycling business has seen better days? In fact, waste
management company Republic Services (NYSE:RSG) says it`s so weak, the
whole recycling model needs to be scrapped.

Jane Wells is in Anaheim, California, for us.

(BEGIN VIDEOTAPE)

JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: The recycling business
is getting trashed.

DON SLAGER, REPUBLIC SERVICES CEO: Well, the recycling model right now in
the U.S. is broken.

WELLS: Don Slager is CEO of Republic Services (NYSE:RSG), a waste
management company that`s doing very well with its regular garbage
business, not so well with recycling.

And they`re not alone. For years, the garbage man has collected our
recyclables curbside often at a loss because he made good money reselling a
lot of the materials overseas especially to China. But now, China has an
air pollution problem. So, it has stopped buying things like our old
cardboard boxes. And the value of those commodities plummeted from $200 a
ton to half that.

At the same time, the values of these commodities are coming count more and
more consumers are putting a wrong stuff in the recycle bin. These people
pull out the bad stuff, the stuff that shouldn`t be in there. For example
plastic bottles are fine. Plastic bags, no, they gum up the machine.

And get this, while clean cardboard is great, if you put in the greasy part
of your pizza box, you could contaminate the entire load.

SLAGER: Contamination levels are as much as 30 percent. So, we are
sending in separate trucks to the home to collect what should be clean
recyclables and we`re having to spend a lot of additional time, effort and
money frankly cost in cleaning that material up.

WELLS: Republic Services (NYSE:RSG) has invested in technology to improve
sorting, but it warns that if the resale value stays low, collection rates
at the curb will rise. Though they might rise more slowly if people learn
what goes in the blue bin and what doesn`t. Think loose paper, clean cans
and bottles, because the company says here`s the ugly truth, for all of our
good intentions, nearly a third of what comes in here these days ends up in
the landfill any how.

For NIGHTLY BUSINESS REPORT, Jane Wells, Anaheim, California.

(END VIDEOTAPE)

GRIFFETH: Then there is the scrap metal business which is a $100 billion a
year industry. Sixty percent of U.S. steel is made from recycled scrap.
That`s why one entrepreneur on New York`s Long Island got the bright idea
to make scrapping a full-time business.

Sue has our story.

(BEGIN VIDEOTAPE)

HERERA: Scrapping metal is not easy, especially if you`d rather be doing
this.

But it`s how Von Strauss pays the bills. Jobs he had in the past,
landscape designer, swimming pool builder, even news photographer read like
a list of cans kicked down the road until in 2006, Strauss began picking
them up, literally.

He helped a friend scrap for just a week before starting his own business
and Metal Man was born.

VON STRAUSS, “METAL MAN”: I saw the potential of the money that could be
made if you did it right.

HERERA: Doing it right meant among other things, financing a truck instead
of renting to improve his cash flow. This is truck number two. The first
one, well, it was scrapped.

STRAUSS: It`s probably a toaster now or a microwave.

HERERA: He also learned hours of separating copper, iron, steel and
aluminum could mean making more money.

STRAUSS: If you don`t cut it off, it`s 85 cents a pound. If you cut it
off, it`s a dollar.

HERERA: Metal Man says he`s picked up about 4 million pounds of scrap,
mostly in the fashionable Hamptons on New York`s Long Island. He summered
there as a child and played music gigs there as a young adult.

STRAUSS: You know, you do whip out on the house and there`s copper all
over the house, so I`ll approach these jobs and talk to the guys knocking
it down. They give me 300, 400 bucks, and usually, I double or triple my
money.

HERERA: Prices can fluctuate, sometimes violently. China`s tariffs on
U.S. steel meant growing supply at home this summer and copper prices
dropped nearly 20 percent.

STRAUSS: Ouch.

HERERA: But when he`s busy, Strauss will drop five or six loads a day at
recycling center like Gershow, a family business opened by another scrapper
in 1964.

Still, he was pleasantly surprised at how much this load paid.

STRAUSS: Five hundred and forty-nine dollars. It was 1,173 pounds.

HERERA: The biggest risk? Injuries. A fall sidelined him for weeks
earlier this year and he is still having issues with his fingers.

A classically trained pianist, Strauss says he`s played in 23 bands and
written more than a thousand songs. Now, he`s finishing a collection of 46
originals. His words? His music. There`s value whether his music sells
or not.

STRAUSS: I`m a perfectionist with the music and it transfers over to the
business.

I want to do everything right with the metal thing. I want everybody to be
happy when they call me and then they have the Metal Man experience.

Metal Man is on his way here.

HERERA: There`s legend, too. A 1,000-pound safe. Call Metal Man —

STRAUSS: There was about 30 workmen watching this whole thing. They were
all cheering, Metal Man! Metal Man!

HERERA: All part of marketing, a superhero persona.

STRAUSS: Iron Man is taken and Man of Steel or Magneto. I`m trying to
recycle metal instead of rip it from the earth and keep mining it and all
of that stuff. So, in a way, I`m trying to do something great for the
planet.

(END VIDEOTAPE)

GRIFFETH: Von Strauss says no, he wouldn`t call his music heavy metal.
But in addition to his musical interests, all of the heavy lifting paid for
his trucks and also helped put his daughter through college. Great story.

Now in order to continue growing, industries do need to look to the future.
And for the banking business, that includes robots.

Leslie Picker recently attended the Money 2020 conference in Las Vegas.

(BEGIN VIDEOTAPE)

LESLIE PICKER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Meet Pepper. She is
a robot created by Softbank, a concierge of sorts for the banking industry
to help customers figure out tasks like depositing checks or opening
accounts.

The London-based bank HSBC thinks Pepper is a key to better customer
service and next generation technology for their branches.

JEREMY BALKIN, HSBC HEAD OF INNOVATION: It`s been incredible the feedback
and we`re continuing to learn. Like this is history. No one has done this
in a U.S. bank branch. We`re learning.

PICKER: HSBC brought pepper to the Money 2020 event in Las Vegas that
gathers together hundreds in the financial technology industry to discuss
the future of money. I decided to take Pepper for a test ride to see what
she could do.

Pepper, tell me about credit cards.

PEPPER: Whether you are looking for cash back promotions, low introductory
APRs, or travel benefits, HSBC offers a variety of credit cards to meet
your needs. Say or tap one of the options on the screen to learn more.

PICKER: Cash rewards.

PEPPER: Would you like to learn more about applying for the cash rewards
MasterCard (NYSE:MA)?

PICKER: Text link. I just got it.

When you hear the word robot, you may think job replacement. But HSBC
insists that Pepper isn`t replacing any jobs. She is augmenting those that
already exist by handling the more mundane tasks. HSBC says Pepper ensures
customer privacy.

BALKIN: There is zero customer data. Zero personal identifiable
information. And Pepper is not asking for it. She`s not storing it.
She`s not recording it.

PICKER: Each Pepper costs about $25,000, an investment that HSBC says they
recoup just three hours after installing her at their flagship location in
New York this summer. The firm says she`s brought in more foot traffic and
those customers have signed up for credit cards, checking accounts and
other revenue-generating products for the company.

But Pepper`s not all business. She loves to show off her moves.

Tell jokes.

PEPPER: What do you call an alligator detective?

PICKER: I don`t know, Pepper. What —

PEPPER: An investigator.

PICKER: An investigator.

And even take a selfie.

Regardless of her gimmicky side, HSBC is banking on Pepper even if she just
helps someone crack a smile.

For NIGHTLY BUSINESS REPORT, I`m Leslie Picker.

(END VIDEOTAPE)

GRIFFETH: The future of the genetics industry relies on people learning
more about their past and that`s helped by the rise of direct to consumer
DNA testing kits. 23andMe, one of the leading companies in that business,
recently held an event in New York City.

And Meg Tirrell was there.

(BEGIN VIDEOTAPE)

MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: New Yorker Deborah
Dadlani wants to learn more about where she came from.

DEBORAH DADLANI, PROSPECTIVE 23ANDME CONSUMER: My background is pretty
splendid and I`m just curious as to what my full background, my ancestry
is.

TIRRELL: So, an Instagram post about an event for 23andMe caught her
attention. The company is just one of many now offering direct to consumer
genetic tests in a market that`s exploded in recent years.

23andMe opened a pop up in New York City to explain the information they
give about everything, from how you sleep, to how your body processes
caffeine, to gluten, to lactose, to even how your muscles work.

It`s an example of the category`s massive increase in advertising, up 63
percent in the first half of this year, driven by the largest companies,
23andMe and Ancestry. The market for consumer genetic tests could top $6
billion according to Evercore ISI.

But some experts are concerned about the growth and promises, implied or
explicit, about what some tests can accomplish.

DR. ERIC TOPOL, SCRIPPS RESEARCH INSTITUTE: The benefit for cancer carrier
testing, these are solid. Unfortunately, we got all these other — you
know, 90 percent of the field is essentially very questionable.

TIRRELL: One independent company promises to improve kids` soccer kills.
Others offer guidance for weight loss and fitness.

TOPOL: It`s difficult for the average consumer who is uninitiated to
ferret out which ones are of value and which ones are really worthless.

TIRRELL: Helix, whose platform includes wellness tests from partners
focused on diet and nutrition, says it vets their offerings thoroughly and
doesn`t make unrealistic claims.

And despite these concerns, there is still a lot of optimism for the future
of genetic testing.

TOPOL: All these sorts of things that we`ve been hoping for for many
years, it`s evenly getting actualized. It`s just been a delay in getting
there.

TIRRELL: For Deborah Dadlani, it`s about curiosity.

DADLANI: Now that I`ve seen that there`s a medical side, I`m very curious
about that too. So, I probably will look into getting a kit.

TIRRELL: She`ll be one of millions who does.

For NIGHTLY BUSINESS REPORT, I`m Meg Tirrell.

(END VIDEOTAPE)

GRIFFETH: Thank you for watching in special edition of NIGHTLY BUSINESS
REPORT. I`m Bill Griffeth. Enjoy your thanksgiving. And we`ll see you
tomorrow.

END

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