Transcript: Nightly Business Report – December 27, 2018

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

enjoyed a record thousand point day yesterday, they erased to the Wall
Street`s rescue today, wiping out a 600-point loss in the final hour.

Active or passive? In times of extreme volatility, which is the best path
for investors?

And tech forecast. The group that led the market higher has taken a
beating over the past few months. What might be in store for the sector in

All that and more tonight on NIGHTLY BUSINESS REPORT for this Thursday,
December the 27th.

And we do bid you good evening, everybody, and welcome. Sue has the night

Boy, it was a comeback for the ages on Wall Street today. Following
yesterday`s record, thousand-plus point gain for the Dow, stocks fell first
thing this morning in part on reports that President Trump was thinking
about an executive order banning U.S. companies from using equipment built
by Chinese firms Huawei and ZTE. You sprinkle in a drop in consumer
confidence and you had a recipe for selloff, which we did have for much of
the day. The Dow hit its low of the session a little after 2:00 p.m.
Eastern Time when it was down for more than 600 points.

But then the epic late day reversal began and the buyers piled on in the
last hour. Boy, did they? At the end of the session, all three indexes
were higher. The Dow and the Nasdaq staged their biggest comebacks in a
decade for the S&P, it was its biggest in eight years.

And it all led to the best two-day rally for the indexes on a percentage
basis in more than three years. Some stats again.

Here are the final numbers, though. The Dow up 260 points back above
23,000. The Nasdaq climbed by 25. The S&P added 21.

And as Bob Pisani tells us now, investors should be keeping an eye now on


on Wall Street, as goes January, so goes the year. That`s the January
seasonal gauge. According to the stock trader almanac, it`s registered
only nine errors since 1950, and been accurate roughly 75 percent of the
time. But in a year when old saws are not working, this may or may not be
the case in 2018. January saw a gain of almost 6 percent and the S&P is
down in December so far.

Regardless interest for this coming January remains high because every down
January on the S&P since 1950 without exception has preceded a new or
extended bear market or flat market for the year or at the very least a 10
percent correction. Now the recent history of the January barometer has
been a little bit mixed. 2008 was the worst January on record and preceded
the worst bear market since the great depression, very accurate. The S&P
was down 38 percent that year.

But down in January in 2009, 2010 and 2014 did not produce negative years,
though they did foretell a correction. So, that part was right. With the
storm track record and so much market confusion around all these economic
risks like China slowing and tariffs and the rate hike risk from the
Federal Reserve and political risk in Washington, it`s a little wonder
trade remembers eager to get out of December into January.

But even if January proves to be down month, there`s always a bright side.
According to the stock traders almanac, down Januarys were followed by
substantial declines averaging roughly 13 percent, providing excellent
buying opportunities in later years. Well, that`s a good way to look at

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


PISANI: Now, one investment strategy that usually occur this time of year
is tax loss selling. And some of that may have contributed to the markets
end of year swoon.

Leslie Picker explains.


holiday season is what`s called the harvesting season, when investors look
for losing positions in their portfolio and sell or harvest them to reduce
taxes on capital gains from other investments. It`s called tax selling or
tax loss selling, and it`s a common phenomenon at the end of every year but
particularly this year because there are substantial losses to harvest.
Even with yesterday`s rally, December`s performance in the S&P has been

It`s difficult to know what portion of the selloff can be attributed to the
tax loss selling but it feeds on itself. The more people selling in the
market for tax purposes, the more exacerbated the market declines become,
experts say. In a down year, this is even more popular tactic. It gives
little excuse to get stuck with big tax bills for capital gains, which is
about 23.8 percent. One adviser says investors should be paying as much
attention to tax planning at the end of the year as they are to day-to-day
market swings.

ED SLOTT, ED SLOTT & COMPANY PRESIDENT: Remember, the key to all tax
planning is always pay taxes at the lowest rates, which is right now. It`s
kind of like buying, say, buy low and sell high. That`s good one, too.

PICKER: The deadline for to harvest losses is December 31st. The question
is whether that puts additional pressure on the market in the last two
trading days.



GRIFFETH: Certainly the big swings in the market have made for a bumpy
ride for individual investors. Raising the question again that we raise
tonight. Should you be an active investor or passive investor in this
volatile market?

Joining us once again, Todd Rosenbluth, who`s director of ETF exchange
traded fund and mutual fund research for CFRA Research which offers
investment strategies to institutional investors.

Todd, good to see you. Welcome back.


GRIFFETH: So, exchange traded funds, very popular now. They came of age
during the great bull market we have been in the past ten years or so. But
it was easy to get into those because the market was usually going up. Now
that we are stumbling here to a good degree, why not think about the active
live managed funds of some kind?

ROSENBLUTH: Well, you certainly may want to do active management but the
track record for active managers in 2018 has not been strong. Thus far, we
have seen active large cap funds under perform the broader S&P 500 index.
And thus far in the fourth quarter, they essentially lost as much as the
S&P 500.

So, there are certainly other ways you could not only just own the S&P
through various index-based products, but you could also reduce the risk
profile of your portfolio if you are concerned about the latest volatility.

GRIFFETH: Generally speaking, the active managers have underperformed as
the market was going higher though. But as you go lower the index funds,
the exchange traded funds have no place to go. You`re either in them and
the market goes lower or you have to get out of them to preserve your
capital. With an active manager their job is to try and preserve your
capital, isn`t it?

ROSENBLUTH: It is their job. Unfortunately, sometimes they are successful
and outperforming and pulling chips off the table. And sometimes they`re
not. And this year, they`ve really done an average job versus the index.
And part of the reason that is, is because that high fee that you pay for
active management.

So, most passive and ETF-based products can cause considerably less. And
so, if you lose considerably less on the way down by paying more to the
manager, that`s a good thing for investors.

GRIFFETH: Now, I know that there are exchange traded funds and in fact
index funds that make money when the market goes down. These are inverse
relationship kinds of funds. Aren`t those a little riskier for the average

ROSENBLUTH: They are. So, again, you are betting the market is going to
go lower. What may make more sense for the average investor is to focus on
lower risk funds.

So, lower volatility strategies tied to the S&P 500, Invesco offers one
SPLV is the ticker on that. Ishares offers a product, USMV. You`re
getting long equity exposure but focusing on the least risky stocks within
the index. And you`re actually down less than you would be not only in the
fourth quarter but also this year using those strategies.

GRIFFETH: All right. Once again, Todd Rosenbluth with CFRA Research, good
to see you again, Todd. Thanks.

ROSENBLUTH: Thank you.

GRIFFETH: In the meantime, the U.S. oil market has had wild swings this
year. Prices have fallen 40 percent since it hit a 4-year high in October.
Has oil to some degree become a proxy for the global economy? And is it
the key to all of the market volatility that we`ve been seeing lately?

Joining us once again tonight, John Kilduff, the founding partner of Again

We have a slowdown in some parts of the world economy in parts of the
Europe, parts of Asia. And oil prices have come down. I know you are
seeing a lot of pumping in Saudi Arabia and elsewhere. But how much of it
is a slowdown in demand as well?

Bill. It`s been a part of it. Crude oil has been most affected I think of
all the asset classes by the trade war between the U.S. and China. To the
extent China slows down in the least, it`s the key demand center for the
oil market, for the oil industry. To the extent consumption there takes
any kind of a hit, it`s a bad sign for oil.

And oil is the first asset to evidence the global slowing out there,
because it has been so necessary for oil demand growth to maintain even the
prices that we have been at.

GRIFFETH: In fact, Jim Cramer has said if you want to know where the
equity market volatility is going watch the oil markets first. What do you

KILDUFF: Well, people like to blame oil for all the world`s ills as we
have seen over the years.

But there is no doubt about it. Again, part of it is a supply situation.
There is a big reaction by Russia and Saudi Arabia earlier to the inner
sanctions earlier this year.

But we watch a lot of macroeconomic indicators in my shop and we have seen
them steadily turn down much more quickly on an international basis. And
again, the international field is where the oil consumption equation rests.
India has turned down. The rising dollar has squeezed all the economies.
They`re not getting the price break that we`re getting because when the
dollar goes down, they have to translate their currency into dollars to buy
the oil, they end up paying as high if not higher prices than we have seen
all year.

GRIFFETH: Now, the last time you were with us, you were saying that $42
could be a pretty strong support level. We have come close to that here.
Is that still a support level for you for the price of West Texas
Intermediate crude here in the U.S.?

KILDUFF: It is. I like to joke in times like this that it`s close enough
for government work.


KILDUFF: I think the double bottom is in. This is a 16-month low process
if you pull out the chart and look, this is something chartists in
particular key off of. It held up yesterday, the day after Christmas.


KILDUFF: And we have taken another run at it somewhat today back over 45.
I think that should be it. Setting us up now for I think stability in oil
prices as we look forward for the 2019

GRIFFETH: All right. Keep an eye on that as well. Thank you as always.
John Kilduff of Again Capital joining us tonight.

Coming up, for a long time technology led the stock market higher but the
year did not end well for that group. What can we expect in 2019? One
expert weighs in.


GRIFFETH: It was day six of the partial government shutdown today and the
Senate briefly came back into session. But it still appears that
negotiations are at a standstill.

Once again, Ylan Mui joins us tonight from Washington with not much news, I

I mean, it`s — how much longer do you think the shutdown last? What`s the
census there in Washington?

shutdown will almost certainly last into 2019. As you mentioned, the
Senate opened for business just briefly about four minutes and then it
adjourned until January 3rd, before it will be in regular session again.
The same is true for the House.

And what that means is no votes are expected until the new Congress takes
over. And so this is essentially this current session of Congress throwing
up its hands at the hope of achieving any type of bill to reopen the
government and ensuring that the next group of lawmakers will have to take
this up once the new session begins.

GRIFFETH: And when that happens, assuming that the president holds fast on
his request for $5 billion for the border wall, what is there that the
Democrats could offer him to get this negotiation off the dime?

MUI: Well, Democrats say they are not going to offer him any single dollar
for that border wall. And that is why we are at this impasse right now. I
think the Democrats believe what they can offer is reopening the
government. That`s something that Nancy Pelosi said she will take up if
she becomes House Speaker on January 3rd. She will bring up a so-called
clean short-term spending bill to get the government open again.

But right now, the president doesn`t seem to be backing away at all from
his demands for border wall money. We saw him tweeting just later this
afternoon saying that Democrats are playing politics here, saying that
Democrats just want to ensure that the Republicans cannot carry forth the
agenda don`t want to give Republicans a win. He said 2020, I`m assuming
that was a reference to the presidential election and not to how long the
government shutdown might last.

GRIFFETH: Let`s hope not.

Ylan Mui in Washington, once again, thanks, Ylan. See you later.

Plenty of high profile Democrats are talking about running for president in
2020. Excuse me. Joe Biden, Elizabeth Warren, Bernie Sanders among them
of course. But so far only one, that would be outgoing Congressman John
Delaney of Maryland, has actually gotten a head start and launched a 2020

Now, he may have spent the last six years in the House of Representatives
but he does come from the world of American business after cofounding pair
of companies which went public.

John Harwood sat down with Delaney to talk about his long shot candidacy
and its origin during his years as an entrepreneur.


REP. JOHN DELANEY (D), MARYLAND: Our companies were growing too fast for
the local community bank but weren`t big enough to be served by the big
banks. So I built a business to target just that part of the market. It
became a good sized company. We ended up financing 5,000 companies.

I took it public. I ran it until I tried to run for Congress. I spent
most of my career helping small businesses get the capital they need to
grow. Hire people and, you know, pursue their dreams.

in the six years that you`ve been in the Congress that makes you think that
individually as a person you`re ready to be president?

DELANEY: Growing up in a blue collar family. I lived the American Dream,
which is so central to who we are as a nation. I was an entrepreneur,
started the businesses from scratch. You know, my dad didn`t give me money
to start them they didn`t have any. And I think it`s incredibly important
that we have a president that understands how the private economy really
works and knows how to position the country to be successful.

But I`ve also —

HARWOOD: You think we have a president hat we have a president that
understands how the economy works?

DELANEY: Listen, I don`t think the president — President Trump — I don`t
think he`s a business leader. I think he was a business promoter.

I know what I did as a business leader. I created jobs. I paid all my

I innovated. I hired the best and the brightest. I made sure that every
relationship I had was as good as possible and that people wanted to do
business with me again.

I don`t think he`s really bringing a business person headset.

HARWOOD: Do you want to be known as a pro business Democrat?

DELANEY: I`m a pro jobs Democrat. If you want to be pro jobs, you to some
president extent have to be pro business because business creates all the
jobs in this country, right? So I think about kind of this notion of
capitalism and trying to make it more just and inclusive over times.

HARWOOD: Do you think that the current level of regulation of Wall Street
and the American business is adequate?

DELANEY: I think in some ways it is and in some ways it isn`t. Have we
done enough to deal with what`s happening with carbon that`s going to lead
to climate change? Absolutely not.

HARWOOD: What do you make ever the big gyrations we`ve seen in financial
markets over the last couple weeks, couple of months actually?

DELANEY: I don`t read too much into it. The markets go up and down
because of how people think about the future, but also how they think about
how things are priced. So, I look more at what`s happening to people.

Last year, the Federal Reserve said half our country if presented with a
$500 surprise expense meaning they wake up, something happens to the car,
their house, or their health, their health care and they need $500, they
don`t have the savings or they don`t have the capacity on the credit card.
That`s half the country. That to me is more worrisome statistic than
what`s happening with the stock market.

HARWOOD: After 2020 when you hope to be president, what are the two or
three most urgent things for Democrats to do?

DELANEY: So, instead of cutting the corporate tax raise from 35 to 21, if
you cut it from 35 to 25, which is what the business community asked for —


DELANEY: — you could have a trillion dollar infrastructure bill.

HARWOOD: So, you`d like to take that corporate tax rate up.

DELANEY: As part of launching that trillion dollar infrastructure program,


GRIFFETH: Now, one reason Delaney started his campaign so early is he
realizes he will not have the field to himself much longer. Announcements
for many Democrats are expected very early in the New Year.

By the way, for the entire interview with John Delaney, you can go to our
website at

Apple (NASDAQ:AAPL) may be going high-end in India. And that`s where we
begin tonight`s “Market Focus”.

“Reuters” is reporting that Apple (NASDAQ:AAPL) supplier Foxconn may start
making higher end iPhones like the flagship iPhone X family in India
starting in 2019. It would be the first time that Foxconn has made iPhones
in that country. Apple (NASDAQ:AAPL) was down a dollar today to $156.15.

Elsewhere, is reportedly launching an extensive revamp of its
operations. “The Wall Street Journal” says the Chinese Internet company is
planning to split its primary unit, the JD Mall into three business
departments citing internal documents. Shares were up nearly 3 percent in
that company to $21.70 in today`s trade.

JPMorgan (NYSE:JPM) has agreed to pay $135 million to settle claims that it
improperly handled transactions involving foreign company shares. The SEC
says the alleged transactions occurred between 2011 and early 2015. For
its part, JPMorgan (NYSE:JPM) said it is pleased to have resolved this
matter, which is related to industry practice the company voluntary ended a
few years ago. JPMorgan (NYSE:JPM) shares rose 1 percent today to $97.04.

In the meantime, communications products maker Plantronics (NYSE:PLT) is
going to paying to $36 million to settle foreign bribery allegations
involving its Polycom (NASDAQ:PLCM) unit. The alleged violations occurred
prior to acquisition of Polycom (NASDAQ:PLCM) earlier this year and before
a transaction that took Polycom (NASDAQ:PLCM) private two years ago.
Plantronics (NYSE:PLT) fell more than to 4 percent today to $32.33.

Visa (NYSE:V) is buying is Earthport for $250 million. Earthport
specializes in international transactions for banks and businesses. Visa
(NYSE:V) was up more than a percent today to close at $132.01.

And Boston Scientific (NYSE:BSX) has exercised its option to purchase the
remaining shares of heart device — surgery device maker Millipede. Boston
Scientific (NYSE:BSX) had originally taken a $$90 million stake in
Millipede in January with an option to buy the remaining shares for $325
million. Shares gained better than 2 percent to $34.48.

Well, it was a rough year for some of the biggest names in technology.
That goes without saying. The sector led the market you higher for several
years but it has taken a brutal beating over the past few months. Can we
expect more of the same in 2019?

Joining us tonight, Paul Meeks. He`s the lead portfolio manager for the
Wireless Fund.

Paul, it`s good to see you. Thanks for joining us tonight.


GRIFFETH: First of all, why do you think we have seen such weakness for
technology lately? And do you see it happening more in the New Year again?

MEEKS: So I`ll do the second part first.


MEEKS: I actually think technology stocks may trough. I don`t know
exactly when, Bill, but somewhere in the beginning of 2019. I would expect
once we get to a year from now, December 27th of 2019, the S&P will be
having a pretty solid year.

And tech, if it`s not the top sector among the 11 performers, it will be
pretty close to it. So I am expecting maybe it gets a little bit worse
before it gets better. But I`m expecting some better tidings for tech as
we look out into next year, particularly the second half of next year.

GRIFFETH: But are we looking at a slowdown in demand. That seems to be
the problem for Apple (NASDAQ:AAPL), a problem for a lot of the chip makers
out there, that there is a slowdown overall in demand for those products.
Is that what you`re seeing here?

MEEKS: There clearly is an over inventory situation of a variety of
semiconductors. And, of course, semiconductors and semiconductor capital
equipment, Bill, are big areas within tech. And, of course, tech drives
the whole economy.

What happens, I believe, is not necessarily prolonged poor demand, but once
we winnow down this inventory and I`m thinking about the summertime frame,
we should be in a better position where demand is equivalent to supply and
we will be past the worst of the problems in semiconductors and thus the
tech sector.

GRIFFETH: Now, I know you`re not quite ready to start buying at this
point. But when you do, you are going to look at some of those chip
companies, aren`t you?

MEEKS: Yes, sir. One of the things that is very interesting is the
semiconductor and semiconductor capital equipment companies are very
cyclical. So, they have led this move down. And any will lead the move
back up. And so, some of them are coiled springs for a rebound as I said
within a couple of quarter.

I particularly like Micron, ticker symbol MU, over the long term, Nvidia,
NVDA. NXP Semiconductors (NASDAQ:NXPI), NXPI, Advanced Micro Devices
(NYSE:AMD), AMD, I think they will do very well in 2019.

GRIFFETH: I`ve joked and very quickly here, the last few guests we`ve had
love Apple (NASDAQ:AAPL). Do you love Apple (NASDAQ:AAPL) yet?

MEEKS: You know, I think Apple (NASDAQ:AAPL) becomes more interesting at
about 140 or so. So, a little bit further down.


MEEKS: And, frankly, at that point, I put it in the high dividend
portfolio. I don`t think it deserves to be in a growthy tech portfolio.


MEEKS: Not now and probably not in the future.

GRIFFETH: Paul Meeks with the Wireless Fund, happy New Year. Thanks for
joining us.

MEEKS: Thanks, Bill.

GRIFFETH: Speaking of tech, up next, a new technology hoping to
breakthrough in the world of home fitness.


GRIFFETH: Could it be the end of the line for Sears (NASDAQ:SHLD)?

CNBC is reporting tonight that the 125-year-old department store chain
might be forced to liquidate if no bids come in to buy the company by
tomorrow. CNBC says Sears (NASDAQ:SHLD) best chance of survival is a $4.5
billion proposal from it`s chairman Eddie Lampert to buy the company out of
bankruptcy through his hedge fund ESL Investments. Although the network
says it`s the only party offering to buy all of Sears (NASDAQ:SHLD). But
as of today, Lampert hadn`t submitted the bid or come up with financing.

Finally, tonight, as we approach the end of the year, thoughts are
generally turned to resolves of one of the most popular is getting in
shape. Well, now, you can train at home like an athlete thanks to a new
technology attracting some big money.

Eric Chemi takes a look.


mirror but this mirror could change the way you look — a mirror with a
built in video screen that has instructors leading exercise classes.

UNIDENTIFIED FEMALE: We are going to start off with lunges. I want you to
step that right foot back touch the ground.

CHEMI: Brynn Putnam is the founder of Mirror and a former professional
ballerina. She says Mirror is catching on among professional athletes.

BRYNN PUTNAM, MIRROR FOUNDER & CEO: Many of them are using it for off-
season training and they`re exploring types of fitness that they might not
otherwise do in a public setting. So, you have baseball players taking a
yoga class.

CHEMI: The product costs $1,500 up front, plus a $40 a monthly
subscription for unlimited live and on demand classes. It`s a similar
model to those Peloton spinning bikes in people`s homes. But here, the
workouts can be anything, including yoga, pilates, boxing, cardio,
strength, and stretch. Another option in the $83 billion-per-year global
fitness industry.

Athletes like Katarina Janosikova, an elite marathon runner who is
balancing motherhood and pregnancy, who needs a flexibility to prepare at
home for the upcoming Olympic trials.

outside. But you still need to maintain your core, your strength, so that
you can do at the convenience of your home and you don`t need any gym

CHEMI: The company`s founder sees pro athletes just as one dimension of
the products.

PUTNAM: We`ve already been in contact with a handful of sports team about
the ability of integrating the Mirror into their training facilities. But
I think everyone is excited about the prospect of connecting athletes to
trainers outside of their immediate geography.

CHEMI: For amateur athletes like me, whether it`s doing the weights
routine, or even some kickboxing, I found the Mirror a fun way to squeeze
in my morning workout and get my heart beat up.

PUTNAM: We didn`t build the Mirror as a call for people to cancel the gym
membership. But we are finding increasingly the users are better able to
get a more convenient lower cost option via the mirror at home than they
are through the studios.



GRIFFETH: We need to get him a workout outfit of some kind.

One more look at Wall Street today. A big comeback day. The Dow was down
600 points at one time, finished up 260. Nasdaq up 25. The S&P up 21
points. Big day for the day and we`ll see what happens tomorrow.

That is NIGHTLY BUSINESS REPORT for tonight. I`m Bill Griffeth. Thanks
for watching, everybody. Have a great evening. 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
of Nightly Business Report, or CNBC, Inc. Information presented on Nightly
Business Report is not and should not be considered as investment advice.
(c) 2018 CNBC, Inc.


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