Transcript: Nightly Business Report – June 14, 2016

NBR-ThumANNOUNCER:  This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue

dump stocks and flock to bonds as uncertainty looms over the outcome of the
U.K. referendum.  But just how worried should investors be?

Buckle (NYSE:BKE) up.  Why you may want to keep the money you`re saving at
the gas pump to pay for rising insurance rates.

And America the charitable.  Who`s giving, who`s getting, as a new record
is set for charitable giving.

All that and more tonight on NIGHTLY BUSINESS REPORT for Tuesday, June

Good evening, everyone, and welcome.  I`m Sue Herera.  Tyler Mathisen is on
assignment tonight.

Leave or stay?  Investors around the world are starting to pay close
attention to those few words.

As we`ve been reporting, Britons will head to the polls next week to decide
whether the United Kingdom should exit the European Union.  The markets
have largely shrugged off that threat but that is starting to change.  Over
the past few days, volatility has risen and stocks have come under pressure
as poll after poll show growing support for the leave campaign.  And that
is why stocks were lower again today.

The Dow Jones Industrial Average fell 57 points to 17,674.  The NASDAQ was
down almost 5.  And the S&P 500 was off 3.

As investors flee stocks, money is pouring into relatively safe
investments, so much so that the yield on Germany`s 10-year government debt
fell into negative territory.  The yield on the 10-year U.S. treasury hit
levels not seen since 2012.

So, let`s turn now to our two guests who have opposing views on just how
the U.S. economy will be impacted should the United Kingdom exit the
European Union.

Paul Christopher is head of global market strategists at Wells Fargo
(NYSE:WFC) investment institute and he says it will be negative for the
economy and equities.

While Nariman Behravesh, chief economist at IHS (NYSE:IHS) Global Insight,
thinks that the impact will not be all that big.

Gentlemen, welcome, thanks for joining us tonight.


HERERA:  Let me start with you, if I could, Paul.  Why do you think it will
have a negative impact either on the markets or the economy or both?

STRATEGIST:  I think it`s going to be a complicated divorce, and one in
which it will first of all push the U.K. into recession as investment there
falls.  It will also create uncertainties and falling confidence on the
continent itself.  And that could undercut some of the progress we`ve seen
in the economy there.  I think it will at least slow Europe and that will
slow exports from the U.S. as well as revenues back to the U.S. from
companies already operating there.

HERERA:  Now, Nariman, you are not all that convinced that this will be a
negative event, why?

let`s be clear.  I think it will be negative for the U.K.  I don`t know
that it will push them into recession but it will reduce growth quite
substantially, maybe to only 1 percent growth next year from 2.5 percent.

Same thing with Europe, it will cut their growth.  The good news for the
U.S. is we don`t export that much to Europe.  They`re a fairly small export
market for us.

But there will be a big offset in the sense that global interest rates
including our interest rate will there will be lower, and there`ll be a
flight to safety in the sense of U.S. bonds, even possibly U.S. stocks,
after the initial shock.  So, I think there are negatives that will offset
this export shock, if you want to call it that, which will be tiny I think
in the end.

HERERA:  Now, polls can always be wrong.  We saw that in the Scottish
independence vote as well.  So, that`s one caveat to this discussion.

But, Paul, if indeed we do see an exit vote, a leave vote, carry, there`s
growing concern that other members of the E.U. who have been under pressure
— Greece comes to mind — might decide to follow suit.  Is that a real

CHRISTOPHER:  It`s always been a threat, Sue.  But I think if Greece is not
going to go and Greece hasn`t been pushed out yet, that`s maybe the more
important way to think about it, then it`s unlikely anyone else is going to
leave any time soon.  Especially, you know, if you try to leave the
European Monetary Union, that`s a little bit different story, that`s a more
tightly knit group, right?  If you have to change your currency in order to
leave the group, that makes it more complicated to leave.

HERERA:  Nariman, does this complicate the already complicated election
cycle?  At this point, there are those who say that it would be a damaging
situation for Ms. Clinton if indeed she prevailed in the election?

BEHRAVESH:  Well, I think, you know, you have to kind of separate it out a
little bit.  Again, I don`t think that the Brexit as it`s been called,
Britain leaving the European Union, has that big effect on the economy or
even the U.S. electorate.  I mean, frankly, I think the U.S. electorate
isn`t paying that much attention to this situation.

I think it does have ramifications for the Federal Reserve.  I think if
they decide to leave, I think this will put the Fed on hold a lot longer
than it otherwise might have been.  So, it will mean interest rates will
stay lower longer for the U.S., which is not necessarily a bad thing for
the economy.

HERERA:  Right.  Paul, would you agree with that aspect of it?

CHRISTOPHER:  Yes, we would agree.  We`re only looking for one rate hike
this year as it is even in the best of circumstances.  We think if the
Britons vote to leave, it could complicate matters further for the Fed and
we could see that pushed out a bit.

HERERA: Nariman, do you think that the market is overreacting to this?

BEHRAVESH:  Well, you know, markets hate uncertainty and this is a huge
uncertain event.  So, overreaction is perhaps too value-laden a word.  I
mean, they clearly are unhappy about this and don`t fully understand all
the ramifications.  So, I`m not surprised there`s a fair amount of market
volatility around this.

Once it`s decided one way or another, I think the markets will settle down.

HERERA:  Finally, I`d like both of you to cast your vote, Paul, would you –
– what`s your handicap, are they going to stay or le

CHRISTOPHER:  I think they`ll stay.

HERERA:  OK.  Nariman?

BEHRAVESH:  I`ll agree with that.

HERERA:  OK.  On that note, gentlemen, great to have you with us.

CHRISTOPHER:  Thank you.

HERERA:  Paul Christopher with Wells Fargo (NYSE:WFC) Investment Institute,
and Nariman Behravesh with IHS (NYSE:IHS) Global Insight.

Well, that U.K. referendum, along with concerns global central bank policy
is becoming ineffective is causing investors to hoard more cash.  The
latest Bank of America (NYSE:BAC)/Merrill Lynch global fund managers survey
shows cash levels are at 15-year highs.  But despite all of the concerns in
the market, consumers are still spending.

Retail sales, a key gauge of consumer spending, posted a solid gain last
month.  Commerce Department reported a 0.5 percent rise which was above
expectations.  Households have benefited from steady job growth, reduced
debt, and rising home prices.

And prices for imported goods rose at their fastest pace in more than four
years last month.  That`s the third monthly rise in a row.  Most of the
gains came from oil-related products whose prices have been climbing over
the past few months.

Federal Reserve policymakers today began their two-day meeting on interest
rates.  Just a few weeks ago, many thought a rate hike might be likely but
a weak jobs report and increasing concerns overseas seem to have changed
all that.

Steve Liesman tells us what the nation`s top economists, market strategists
and money managers are now looking for.


shows Wall Street expects a more dovish Fed, pushing later the expectation
for that next rate hike from August to September.

Let`s also look at the outlook for interest rates from our 41 panelists
from the street, 0.7 percent is the expectation for the funds rate in 2016,
1.5 percent for 2017, 2.2 percent in 2018.  The long run they think the Fed
will settle at 2.6 percent for the long run.  Notice each one of these
points is below where the average member of the fed is, we`ll get new
numbers from them at the announcement at 2:00 tomorrow.

How about the S&P?  Expectation is that we will recover — we have
recovered the optimism we had before the market swoon in January and
February.  Looking for 3.4 percent up by the end of 2016 to 2,149 on the
S&P, and up about 8 percent to 2,244 by the end of 2017 from the current
rate of 2,079.

Let`s look at the biggest threats to the U.S. discovery — 28 percent say
it`s global economic weakness, and 28 percent also say tax and regulatory
policies here in the U.S.  Rising interest rates 25 percent, and
protectionist trade policies 13 percent.  First time we`ve had that on the

Terror attacks in the U.S., this was done before the events — the horrific
events in Orlando.  Registered zero, and they have never registered high
even after the terrible attacks in San Bernardino.

So, look for the Fed to hold interest rates steady at the meeting when the
announcement comes at 2:00.



HERERA:  Concerns over the impact of a so-called Brexit on the U.S. economy
continue to push U.S. bond yields lower.  Yields which mortgage rates
loosely follow.  And with rates near lows that lenders are now more focused
on credit availability, which has been tight since the financial crisis.
The nation`s largest lender convened a panel of experts to voice concerns
and potential solutions in Washington today and Diana Olick was there.


UNIDENTIFIED FEMALE:  And the kitchen is really good size.

Americans say they are considering buying a home.  In fact, 40 percent of
millennials say they probably or definitely will in the next two years.
That`s according to a new survey by Wells Fargo (NYSE:WFC).  The trouble,
says the nation`s largest mortgage lender, is that these potential buyers
are misinformed about mortgages.

UNIDENTIFIED MALE:  We see three myths.  One is that you have to have a 20
percent down payment, which we know is not true.  There are programs which
are less down payments.  Number two that you have to have perfect or near-
perfect credit.  And number three that you have to have high income.

OLICK:  Wells Fargo (NYSE:WFC) recently launched a 3 percent down payment
loan backed by Fannie Mae targeting first-time buyers.  It`s designed to be
cheaper and simpler than the government-backed FHA loan.  Codel says in
just a few weeks, Wells has seen strong demand and expects more.

UNIDENTIFIED MALE:  We think the next few years are going to be a period of
high growth for new homeowners coming into the marketplace.

OLICK:  Because according to housing experts Codel gathered in Washington
Tuesday, since the recession, lending has been far too tight.  If lending
were back to the pre-boom standards of 2001 —

LAURIE GOODMAN, URBAN INSTITUTE:  There would have been $1.2 million
additional loans in 2014.  Cumulatively, $5.2 million additional loans from
2009 to 2014, with a more reasonable set of credit standards.  And this is
something that we can do something about.

OLICK:  But former FDIC Chairman Sheila Bair argued the 3 percent down
Wells Fargo (NYSE:WFC) product is deja vu all over again.

SHEILA BAIR, FORMER FDIC CHAIRMAN:  You have that really, really low down
payment, even from a borrower`s perspective, you`re exposing yourself to
risk if home prices take a dip.

Wells` home product may help some but the trend toward easing credit
standards appears to be tapering off, at least according to a new report
from Fannie Mae.  Ninety percent of lenders it surveyed said they were
keeping credit standards about the same.

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


HERERA:  Still ahead, hitting the road.  As Americans drive more, they may
be in for some unexpected sticker shock.


HERERA:  The Obama administration was handed a major victory in its effort
to increase oversight of broadband services.  A federal appeals court ruled
that the Federal Communications Commission`s net neutrality rules will
remain in effect.  That means phone and cable companies must treat all of
the traffic on their networks equally.  No blocking or slowing their
competitors and no fast lanes for companies that can pay more.  Opponents
of the rules plan to take their challenge to the Supreme Court.

Congress approved a $28 million shift in funding for the Transportation
Security Administration.  The approval allows the TSA to allocate more
money to where it`s needed most, like day-to-day operations at airports,
which includes converting more than 2,700 officers from part-time to full-
time.  The additional workers will theoretically open up more airport
security lanes and in theory ease wait times as well.

The computer systems at the Democratic National Committee were breached.
According to reports a group of hackers linked to the Russian government
are believed to be behind that attack.  They are the same groups that
successfully penetrated the unclassified networks at the White House and
the State Department.  The hackers gained access to the entire database of
the opposition research on Donald Trump.  It is one of the largest known
breaches of an American political organization.

Defense stocks moved higher after the U.S. Senate overwhelmingly voted to
pass a $602 billion defense authorization bill.  This despite the
president`s threat to veto that measure.  That sent shares of defense
companies higher, including Lockheed Martin (NYSE:LMT), Raytheon
(NYSE:RTN), Northrop Grumman (NYSE:NOC), and Boeing (NYSE:BA).

John Harwood is following the story from Washington.

So, John, what`s in the defense bill that the Senate passed today?

importantly, Sue, is that $602 billion that you mentioned.  But there are
also policy provisions that are controversial in some quarters.  One would
require women to register for the draft if we return to a draft, limiting
the long prohibition or limitation on the draft to only men.  It would
prohibit President Obama from closing Guantanamo.  It would reorganize some
aspects bureaucratically at Pentagon.  It would limit the size of the
National Security Council staff.

HERERA:  And those are some of the reasons the president has threatened to
veto the bill.  What happens now?

HARWOOD:  What happens now is the House has passed a different version of
the bill and the real negotiating is going to start on just what the final
shape of this is going to be.  We`ll have to see how hard the White House
hangs out with that veto threat and what is their bottom line?  Is it about
Guantanamo?  Is it other provisions like the limits on the National
Security Council staff?

All of that over the next few weeks is going to unfold between House and
Senate negotiators.

HERERA:  Yes, speaking of national security, the president met today with
his national security team and spoke about security threats following the
horrific Orlando terrorist attacks.  What, generally speaking, was his

HARWOOD:  Well, this was extraordinary, Sue.  In addition to giving updates
on the fight against ISIS and the investigation into the Orlando terrorist
attack over the weekend, President Obama fiercely went after Donald Trump`s
suggestions that Muslims be barred temporarily from the United States and
suggestions that as a group, Muslims need to be watched more closely.

The president called those ideas un-American, dangerous, counterproductive.
They would enhance the recruiting of extremists around the world who would
threaten the United States.  You rarely see as much passion as you saw
today from President Obama in going after the ideas being spread by Donald
Trump, whose name he did not mention.

HERERA:  Yes, indeed.  Very true.

John, thank you very much.  John Harwood for us in Washington tonight.

Synchrony Financial warns of steeper than expected loan losses sending a
shiver through the credit card industry.  And that`s where we begin
tonight`s “Market Focus.”

The largest retail store credit card issuer said it sees higher than
expected loan defaults by consumers this year.  The company sees charge-
offs or the amount of debt that it`s not likely to collect higher than
originally thought.  The news sent shares of Synchrony to its biggest one-
day loss since going public two years ago.  Shares fell 13 percent to
$26.45.  Other credit card issuers like Capital One, Discover, and American
Express (NYSE:EXPR) (NYSE:AXP) all suffered big losses today as well.

Citigroup (NYSE:C) is bullish on Vonage.  The bank raised its rating on the
digital phone service provider to buy from neutral and it raised its price
target on the stock to $8 up from $4.75.  Citi analysts cited a favorable
risk/reward scenario with a revenue growth opportunity for the upgrade.
That sent shares up more than 12 percent to $5.34.

Alibaba sees a big jump in sales this year.  The Chinese e-commerce company
expects revenue to rise 48 percent as it anticipates benefiting from recent
acquisitions and stock buy-backs.  Analysts were expecting a 40 percent
increase.  Shares rose 3 percent to $77.77.

And Xerox (NYSE:XRX) has named a new CEO of its business process
outsourcing division who will take over after that unit is spun off later
this year.  Ashok Vemuri has been the CEO of IT services provider IGATE
until October.  Shares of Xerox (NYSE:XRX) fell more than 1 percent to

Low gasoline prices and an improving economy are expected to fuel a record
number of drivers on the road this summer.  But they may want to keep the
money that they save at the pump to start paying for riding insurance

Mary Thompson reports.


hitting the roads in record numbers this year.  And that means they`ll be
hitting their brakes and each other too.

driving more miles and they`re getting into more accidents.

THOMPSON:  More accidents mean more claims and that means insurers need to
pass on the costs through higher rates.  Data from the Insurance
Information Institute shows spending on auto insurance is up 18.5 percent
from 2009 to 2015.  And if you`re expecting a break this year, don`t.
April`s consumer price index shows spending on auto insurance rose an
unadjusted and hefty 6 percent.  A downside, says the Insurance Institute`s
James Lynch, to an improving economy.

LYNCH:  When people lost their jobs in the Great Recession, obviously they
stopped driving, their cars sat in the garage where they weren`t exposed to
accidents.  And so, there weren`t as many accidents.

THOMPSON:  Other contributors to these higher rates are bad roads which
damage cars, a higher number of which are new and more expensive to repair.
The cost of treating anyone hurt in an accident on the rise as well.

As for insurers, some are raising rates more than others, the increase
reflecting the number and dollar amount of claims filed by clients.
Allstate (NYSE:ALL) pushing through a bigger rate hike following an unusual
uptick in loss trends last year.

JAMES NAKLICKI, CITI ANALYST:  Historically, their loss trend has been 2
percent to 3 percent.  Last year, it was over 9 percent.

THOMPSON:  Citi analyst James Naklicki says higher rates should benefit
Allstate (NYSE:ALL) in the long run.  The rival Progressive (NYSE:PGR) is
being seen being hurt in the short term for foregoing larger than average
rate hikes in hopes of attracting more clients.

NAKLICKI:  Their business is skewing toward low profitability new business.
So the reason for the sell there is I think margins will be pressured in
the near term.

THOMPSON:  Rate hikes driving profitability for some while keeping the
brakes on higher prices, helping other insurers bring more clients along
for the ride.



HERERA:  And coming up, the fast-growing gaming industry is undergoing a
massive shift and there`s more competition than ever.


HERERA:  Here`s a look at what to watch for tomorrow.  As we reported, Fed
Chair Janet Yellen holds a news conference after releasing the central
bank`s statement on interest rates.  We`ll get a fresh read on inflation
when the government releases its producer price index for May and weekly
mortgage applications are due out.  That`s what to watch for on Wednesday.

The video game industry is at a turning point.  Mobile gaming is more
popular than ever and virtual reality is starting to go mainstream.
Nowhere is that more evident than at the annual video game trade show in
Los Angeles.

And that`s right where we find Julia Boorstin.


industry is in the midst of massive change.  Virtual reality and
competitive gaming or e-sports is on the rise, as this year mobile gaming
revenue is poised to overtake PC gaming for the first time.

And new consoles are in the spotlight.  Microsoft (NASDAQ:MSFT) announcing
a slimmed-down console, the Xbox One S, and a next-generation 4K console,
Project Scorpio, which will support VR and launch in 2017.

feel great about this console generation.  It`s actually moving faster than
the previous generation.  So, we feel great about console gaming.  I think
hats off to Sony (NYSE:SNE) and their progress.  We`re thrilled with our
progress.  Xbox is selling more units than we ever done before.

BOORSTIN:  But Xbox is also facing more competition than ever from Sony
(NYSE:SNE) whose PlayStation consistently takes the lead in console sales.
Sony (NYSE:SNE) unveiling long-awaited details for PlayStation VR.  It will
cost $399 and will launch in October with 50 virtual reality games
available by the end of the year.

While console-makers compete for customers by showcasing exclusive video
game content, this year, the videogame-makers have pulled out of E3 with no
presence on the convention center floor.  Instead, Activision and
Electronic Arts (NASDAQ:ERTS) are investing in their direct digital
relationship with consumers, with the likes of videogame competitions,
otherwise known as eSports.

Electronic Arts (NASDAQ:ERTS) announcing it`s putting $1 million in prize
money toward an eSports for everyone initiative — three different
tournament levels from professionals down to communities organizing their
own face-offs.

ANDREW WILSON, EA CEO:  We`re not focusing just on the elite levels of
eSports but competitive gaming overall for the entire community.  I think
that we`re going to see engagement and increased profitability overall,
almost immediately.

BOORSTIN:  The more eSports events like these connect players to game-
makers, the more they can sell digital add-ons and content.  The more the
likes of EA and Activision can make sure they`re in demand, no matter which
consoles gamers buy.

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


HERERA:  The nation`s largest banks collected more overdraft fees from
their customers in the first quarter than they did a year ago.  “The
Washington Post (NYSE:WPO)” citing new government data, reports that Wells
Fargo (NYSE:WFC) saw the biggest jump up of 16 percent.  Bank of America
(NYSE:BAC) and JPMorgan (NYSE:JPM), the country`s largest bank, saw a 6
percent increase.  The total amount collected by more than 600 banks during
the first three months of the year rose to more than $2.5 billion.

Microsoft`s $26 billion purchase of LinkedIn (NYSE:LNKD) which we told you
about yesterday has created a multibillion dollar payday for LinkedIn`s
chairman Reid Hoffman.  Now, given Hoffman`s stock ownership, his take from
the all-cash deal could be nearly $3 billion.  But with that windfall comes
a big tax bill.  Hoffman would presumably be subject to both California and
federal taxes.

California taxes capital gains at a rate of 13.3 percent.  Combine that
with a federal capital gains tax rate of 23.8 percent and its tax bill
could be more than $1 billion.  It`s unclear which if any measures Hoffman
will take to reduce the amount he may owe.

In the wake of the terror attack in Orlando, Disney (NYSE:DIS) is donating
$1 million to assist those affected by the shooting.  Eligible donations
from Disney (NYSE:DIS) employees will also be matched dollar for dollar.

And speaking of donations, Americans were more charitable last year than
ever before.  And it wasn`t just the wealthy that donated.  Robert Frank
takes a look at America the charitable.


their wallets for charity last year, setting an all-time record for giving.
Charitable giving hit $373 billion in 2015, according to the Giving USA
report, that`s up 4 percent from the year ago.

So, where did all that money comes from?  Individuals gave the most, $265
billion, but the rest coming from foundations, estates and companies.  And
believe it or not, much of the giving in America is still in the form of
$10 or $20 gifts from everyday Americans.

generous.  They care deeply about those causes that they want to support,
and they want to make a difference with their giving, whether it`s locally,
nationally, or internationally with their giving.

FRANK:  So, where`s all that money going?  Religious groups dominate
accounting for about one-third of the total.  Education ranks second,
followed by human services which includes donations of food, clothing and
shelter for the poor.

Giving to the environment and the arts also saw strong growth.  But the
fastest growth in giving is still in international affairs, which includes
overseas disaster relief, human rights, and medicine.  The flow of dollars
shows that today`s donors see their charitable giving more as investments
in solving social problems rather than just handouts.

CURTIS:  There`s an opportunity for them as they think about their giving,
they`re really to some degree investing in impact.  They want to make sure
that their gifts are making a difference.

FRANK:  Americans aren`t just donating cash.  With prices for fine art and
other collectibles soaring in recent years, gifts of artwork and other so-
called appreciated assets also saw strong growth.



HERERA:  And that is NIGHTLY BUSINESS REPORT for tonight.  I`m Sue Herera.
Thanks for watching.  Have a great evening, everybody.  We`ll see you right
back here tomorrow.


Nightly Business Report transcripts and video are available on-line post
broadcast at The program is transcribed by CQRC
Transcriptions, 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) 2016 CNBC, Inc.

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