Transcript: Nightly Business Report – July 15, 2016

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

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Coup in Turkey. Late
reports today that the military has moved against the civilian government in that NATO country.

Resilient economy. People are shopping. Factories are revving up
production. Why the U.S. economy seems to be gaining steam even in the
face of global headwinds.

Making millions. How one entrepreneur spun his potter`s wheel into a pot
of gold.

All that and more tonight on NIGHTLY BUSINESS REPORT for Friday, July 15th.

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

A big week for the stock market, but we begin tonight with a bid developing
story out of Turkey. The Turkish prime minister said a group within the
military has attempted to overthrow the civilian government. According to
reports from the ground, ground fire was heard, jets seen flying over the
capital of Ankara. Bridges to the city were closed.

The head of the country said security forces had been called in to do,
quote, “what is necessary.” He added that the government elected by the
people remains in charge. The military however claims it is in control.

Gold rose as did the dollar versus the Turkish lira. And money moved into
U.S. bonds and out of a major Turkish-based ETF.

John Harwood is following the story for us tonight from Washington.

John, has there been any reaction from the White House or State Department
so far?

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: No, it`s pretty early
in this. They`re watching, trying to determine what has happened because
with we don`t know yet how much of the country the military controls.
Whether it`s been successful, whether it`s been successful only in a couple
of places.

Of course, Turkey is a NATO ally. Very strategically located country right
next to Syria, Iraq, Iran. A country that`s important because we have U.S.
military assets in Turkey and the instability in that country raises
questions about those assets.

But first, the United States government like everyone else has got to
figure out what exactly is going on.

MATHISEN: What is going on there.

Talk to me to the extent you can about the U.S. relationship with President
Erdogan, who has been in power there, or whose party has been in power
there for about 14 years. And our relationship with the military.

HARWOOD: Well, it`s been strained lately because Prime Minister Erdogan
has been moving in an authoritarian direction. He also, in the view of
U.S. and allies, hasn`t done quite enough to take on the Islamic State.
He`s done more lately, but, of course, the Turkish airport was hit a major
terrorist attack just a few weeks ago. The Turkish government is one that
has been unstable in the past. If this coup is successful, it would be the
third in the last half century, but the United States by bringing —
supporting Turkey`s membership in NATO, has been trying to bring it into
the family of nations that are more stable because it`s such an important
potential ally.

Has it delivered on all of the hopes that the United States has had for
their alliance? And we`ve got to wait and see just what the implications
are of this development today.

MATHISEN: And as you began by saying tonight that Turkey shares a long and
porous border with Syria.

John Harwood, thanks very much.

All right. Now, to the U.S. economy, which is surprising some with its
resiliency. American consumers flex their financial muscles in June,
putting to rest some concerns that the weak growth overseas would have a
big impact here. Retail sales rose 0.6 percent last month, much better
than expected.

And it`s not just the retail sector. Manufacturing maybe on the mend after
a report today showed that industrial output, which includes just about
everything made by factories, is picking up. This follows positive data on
the jobs market and an uptick in inflation earlier in the week.

Steve Liesman has more on the economy that`s gaining some steam.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: A slew of economic
reports showing an economy on the rebound in the second quarter, while
comments from fed officials suggest only the possibility of modest rate
hikes this year, if at all. Atlanta Fed President Dennis Lockhart saying
that the Fed may yet manage one or two hikes in 2016. His comments came
after data showed the second quarter economic rebound picking up steam with
stronger sales than expected retail sales data, and improve industrial
production.

MARK COHEN, FORMER SEARS CANADA CEO: The consumer never went away. What
drove sales in the U.S. in June apparently was auto and home furnishings.
Apparel and accessories continues to be very tough.

LIESMAN: The data combined to push up the forecast for second growth to
2.7 percent, up a tenth and a considerable improvement over the 1.1 percent
from the first quarter.
A couple of concerns in the data. Consumer sentiment was lower than Wall
Street expected and inflation a touch hotter.

LARRY MCDONALD, ACG ANALYTICS: Some of the recent inflation data today,
some of the hottest we`ve seen. So, that`s creating a dynamic where the
Fed`s going to run out of excuses. So, the economy is picking up a bit,
and that`s going to force the dollar higher and risk off as we saw last
August. The same scenario is playing out again.

LIESMAN: For the moment, all the signals from the Fed that they`re willing
to abide higher in inflation and let the fledgling economic turnaround
further, especially because it could yet be grounded by concerns over
Brexit or the U.S. election.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.

(END VIDEOTAPE)

MATHISEN: A week that saw sizable stock market gains finished mixed. The
Dow was able to eke out another record close. The S&P 500 just shy of one.
The blue chip Dow index 10 points to 18,516, NASDAQ lost four, and S&P 500
which had had been at records the past four sessions fell fractionally.
So, its streak of record closes is over.

But another streak continues. This was third straight week of gains
overall for stocks with all of the major averages seeing gains of 1.5
percent or more.

Meanwhile in France, French officials spent the day trying to piece
together the details and motives behind last night`s deadly Bastille Day
attack in Nice. It left 84 dead, including ten children and adolescents
and more than 200 injured.

Hadley Gamble is in Nice with the latest.

(BEGIN VIDEOTAPE)

HADLEY GAMBLE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Tonight, France is
once facing an uncertain future. Just 24 hours after an attack that left
84 dead, including dozens of children, over 200 people injured, many of
them critically, world leaders including U.S. President Obama and French
President Francois Hollande are tying yesterday`s incident to terror.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We will not be deterred. We
will not relent. We`re going to keep working together to prevent attacks
and defend our homeland. We`re going to keep taking out ISIL leaders and
pushing ISIL back in Syria and Iraq. We`re going to keep standing with our
partners from Africa to Afghanistan, and we are going to destroy this vile
terrorist organization.

GAMBLE: Now, just 24 hours after yesterday`s attack in, the Promenade des
Anglais here in Nice has been cleared. As you can see behind me, there`s a
strong smell of chemicals in the air. There were workers here all day long
cleaning this street and it seems as if, at least from the response here in
Nice at least, that things are slowly returning to normal.

The question, of course, going forward is how France or any country,
including the United States, can prepare itself for what appears to be a
lone wolf attack on a massive scale.

U.S. and French authorities have confirmed the suspect was not on any known
terror watch list and wasn`t known to local or national intelligence
authorities.

We saw mourners gathering throughout the day here in Nice, making makeshift
memorials for the victims, as well as gathering at the Nice cathedral for
services. But again, not at all the same kind of tone we saw in Paris
during earlier attacks. And that would seem to signal at least for now,
this seems to be the new normal in France.

For NIGHTLY BUSINESS REPORT, I`m Hadley Gamble in Nice.

(END VIDEOTAPE)

MATHISEN: China`s economy expanded 6.7 percent in the three months
ended in June, holding steady at the first quarter pace of growth.
Industrial output and retail sales were healthier, but much of the weakness
was in the property sector. This is a concern because the revival in the
property market has been credited for helping China avoid a hard economic
landing. Private sector investment ground to a halt and that raises
questions about whether growth can continue at current levels without more
government stimulus.

One way China plans to grow its economy is with startups. The government
is offering incentives to entrepreneurs, encouraging them to take their
ideas and start their own businesses.

Eunice Yoon talked to one man who`s doing just that.

(BEGIN VIDEOTAPE)

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: For dog owners, if
you`ve ever wondered what this means, Damien Ju is building an app for you.
The 26-year-old is developing one dream pet for mobile devices to help
owners better communicate with their pet.

DAMIEN JU, APP DEVELOPER: The way your pet bark, it translates the barking
voice and send it to your phone, like, mom, I`m hungry. I need to go out.
Come back home soon. Yes, like that. All based on data. The data we
built.

YOON: Ju is among an emerging group of young Chinese building start ups
encouraged by the government`s push to support entrepreneurs to expand the
economy. Instead of heading to Wall Street or Silicon Valley after
studying in the U.S., Ju chose to return to Shanghai, sensing an
opportunity in the country`s pet industry.

JU: It`s easier or it costs me less, you know, compared to do my startup
in the States. In terms of pet industry, it`s a mature industry back in
the States, any of the Western countries. But in China, it`s a growing
market.

YOON: His team believes the gadget will be popular among Chinese pet
owners, increasingly willing to a lavish luxury on their newest family
members.

The $15 billion pet industry has grown by over 30 percent annually for the
last five years.

For these young entrepreneurs, authorities here are offering tax break,
subsidizing rent and granting seed money. Ju was initially able to r
$150,000 from V.C.s, though fundraising remains a challenge.

JU: So, I actually applied for some money from government. I raised
around small seed, and it`s spreading pretty fast. That`s raising from the
fund and the macro economy is not too good in China right now. People are
very conscious and prudent.

YOON: Still, inspired by the late Apple (NASDAQ:AAPL) founder, Steve Jobs,
Ju has devoted his life to his startup, turning his bedroom into an office.

JU: I don`t come back to China to live an easy life, to, you know, make
more friends. I come back to China to do a business.

YOON: A business he hopes to take global and put China`s start ups on the
world map.

For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Shanghai.

(END VIDEOTAPE)

MATHISEN: Still ahead, the best places to put your money despite the
global uncertainty. Our market monitor has some investment ideas for you.

(MUSIC)

MATHISEN: The White House predicts that the government`s budget deficit
will rise to $600 billion this year. That`s an increase over last year and
it reverses a trend of improving deficits. The White House also cut its
forecast for overall growth.

The government now predicts that gross domestic product will rise 1.9
percent this year and 2.5 percent in 2017.

Fiat Chrysler is creating 1,000 new jobs. The automaker will invest $1
billion to upgrade two plans in the Midwest. The decision is part of the
company`s plan to increase production of Jeep SUVs as demand increases for
larger cars.

Well, Herbalife (NYSE:HLF) has settled with the Federal Trade Commission.
The company agreed to pay $200 million in consumer relief and will overhaul
its business practices. Though the agreement ends the two-year
investigation, the agency said Herbalife (NYSE:HLF), quote, is going to
have to start operating legitimately.

(BEGIN VIDEO CLIP)

EDITH RAMIREZ, FTC CHAIRWOMAN: Today`s $200 million settlement, one of the
largest consumer settlements obtained by the Federal Trade Commission, will
provide compensation for many of the company`s distributors for the losses
they`ve suffered. The order will prohibit deceptive marketing tactics such
as the promises of a lavish lifestyle and untold riches and the false
implication that typical participants are likely to earn career level
incomes.

(END VIDEO CLIP)

MATHISEN: The agreement marks a financial setback however for the hedge
fund manager, Bill Ackman, who plays a big short bet against Herbalife
(NYSE:HLF), essentially wagering the stock would collapse. Ackman has
alleged that the company`s operations were improper. But the FTC stop
short of calling Herbalife (NYSE:HLF) a pyramid scheme and investors sent
the stock higher by about 10 percent.

Well, profit and revenue fall at Citigroup (NYSE:C), and that`s where we
begin tonight`s “Market Focus”.

The banks saw both of those metrics drop double digits as lower interest
rates dragged down results. Despite that, Citigroup (NYSE:C) still managed
to beat analysts` estimates. Shares down a tick at $44.33

Low interest rates also hit results at Wells Fargo (NYSE:WFC). The bank
saw quarterly profit dipped 3 percent, but that was still good enough to
match street estimates. Profits rose also in line with the targets. The
company`s CFO spoke about how Wells Fargo (NYSE:WFC) is navigating through
today`s low rate environment.

(BEGIN VIDEO CLIP)

JOHN SHREWSBERRY, WELLS FARGO CFO & SR. EVP: Well, we are in a low rate
environment, but as you`ll notice, we managed to generate $5.6 billion
worth of net income. And we did it by growing loans 9 percent year over
year. We did it by growing deposits. We did it by growing a variety of
fee streams.

(END VIDEO CLIP)

MATHISEN: Shares fell 2 1/2 percent nonetheless to $47.71.

Shares of Infosys plummeted after the IT services firm cut its yearly
revenue guidance, citing concerns over the Brexit fallout. The company
also reported an earnings and revenue miss, attributing the results to an
anticipated headwind and the firm`s consulting services division. Shares
of Infosys down nearly 9 percent on the day to $16.81.

And Yahoo (NASDAQ:YHOO) may have a buyer for its web assets as soon as next
week. “The New York Times (NYSE:NYT)” said that final bids are due on
Monday and according to a report from “The New York Post”, Verizon
(NYSE:VZ) is expected to emerge as the top bidder. Verizon (NYSE:VZ)
shares unchanged at $55.84.

Ziopharm Oncology said a patient died while taking part in an experimental
drug trial intended to treat a deadly form of brain cancer. This is the
third patient death in the study. But Ziopharm said it will continue to
enroll new patients. Shares of the company fell more than 11 percent on
the news to $5 and a penny.

Well, this week`s market monitor find opportunity in large cap stocks even
though they have underperformed a bit so far this year. This is his first
time joining us as a market monitor. Ron Weiner, managing director and
partner at RDM Financial at Hightower.

Ron, welcome. Good to see you.

Let`s start with why you like some of the big cap names that you do. We`ll
get to them in just a minute. Why are you going big and tech?

RON WEINER, RDM FINANCIAL GROUP AT HIGHTOWER: Well, first off, being the
inaugural visit here, I thought that I should talk about low interest
rates, lower, longer and things like Home Depot (NYSE:HD) without taking
advantage of all this low interest rate, but I thought I`d go big and talk
about the cloud. We exited most of Europe actually after the Brexit,
saying to ourselves, y8ou know what, we don`t really know what`s going to
happen and the U.S. seems to be chugging along.

Steve Liesman`s report was pretty positive and we think so, too, and it`s a
little bit safer to be in the large caps, even if the small and mid caps
outperform. It`s OK with us. We`re kind of a conservative firm, not
counting one of the stocks I`m going to talk about. But we think it`s a
little bit safer and play the U.S. for the most part.

MATHISEN: Let`s talk about a stock that spent a heck of a lot of the last
15 years, kind of going nowhere, but lately has been doing very nicely and
that`s Microsoft (NASDAQ:MSFT). You think it can do even better.

WEINER: Yes, I think we probably owned it on and off for three times in
the past 15 or 20 years. But we bought it a while ago when Satya Nadella
took over. New breath, it`s like a different company. They embrace the
cloud. They`re doing a great job in creating a private cloud, which is
only seconds to Amazon (NASDAQ:AMZN) in size and subscribers. They`re
replacing the loss of their PC, their Windows at PC with other programs. I
think for now, they`re trading about 61 bucks and, 51 bucks. And we think
it`s worth a lot more.

MATHISEN: A lot more. You got a price target of 65 over the next 12
months.

Google (NASDAQ:GOOG) is your second pick. You see a fair value about $780,
but a price target of $1,000 over the next 12 months. Tell me about
Alphabet or Google (NASDAQ:GOOG).

WEINER: So much to say. First off, their senior management still there
from the start. Brin, Smith, I mean, these are guys that are really smart.
They put together and they`re starting to really leverage all of their
different programs. Androids, the dominant player in phones. They`re
still 80 percent of the search and really what we`re doing is we`re taking
advantage of what`s happening around the globe.

Clouds the thing. Search is the thing. Big data is the thing and they`re
doing a great job of leveraging all these together and they got the brand.

MATHISEN: And a final quick thought, please, on Baba, Alibaba. You call
them Amazon (NASDAQ:AMZN) on steroids with a price target of about $110
over the next 12 months. Quick thought.

WEINER: Yes, that`s been frustrating stock. That is our own truly risk
stock. Amazon (NASDAQ:AMZN) — Alibaba has been growing their big data.
They`re not just consumer spending now. Now, they`re big data. They have
been expanding globally. We think with only about 5 or 6 percent of
Chinese buying online, they`ve got a world to go, and even now, their
subscription base, believe it or not, is the same size at the entire United
States.

MATHISEN: Holy mackerel.

WEINER: And they`re getting clearer. Their accounting is getting clear.
So, we`re hopeful and we think it may be a big winner.

MATHISEN: All right. Ron, thanks very much. Ron Weiner with RDM
Financial Group at Hightower.

Coming up, he found his fashion as a kid at summer camp and turn it into a
design empire. It`s tonight`s how I made my millions.

(MUSIC)

MATHISEN: Pokemon Go quickly overtook Candy Crush, with more daily active
users than any mobile game in U.S. history. And its popularity could be a
turning point for the burgeoning augmented reality industry.

Julia Boorstin has our story.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Pokemon Go`s
massive success dominating the streets and ruling the app stores. It could
open the flood gates for augmented reality`s use in everything from
advertising to manufacturing.

JOHN RICCITIELLO, UNITY TECHNOLOGIES: This is the first of those great
experiments. And we`re on the really the earliest of innings around
augmented reality, mixed reality, virtual reality. This is a very simple,
but brilliantly executed first step. Expect many more to come.

BOORSTIN: The market for augmented reality is projected to grow to as much
as $90 billion a year by 20. That`s three times the projected size of the
market for virtual reality, according to Digi-Capital. And it`s not just
fun and games. Ad startup Blippar uses augmented reality for marketing,
layering advertising material over real world products.

Secretive AR company Magic Leaf has raised over $1 billion. Google
(NASDAQ:GOOG) and Alibaba are among its big backers.

Microsoft (NASDAQ:MSFT) augmented reality goggles HoloLens are already
available to developers, though consumer date hasn`t been announced. There
are uses for console game play as well as enterprise application.

Start up Daqri designed augmented reality helmets and software for workers
and industrial and manufacturing settings.

GE CEO Jeff Immelt saying augmented reality`s industrial applications are
going to generate billions of dollars in productivity.

JEFF IMMELT, GE CHAIRMAN AND CEO: Because you could fix everything right
the first time, you had a chance to visualize and manage the human data
interface down by 10 percent. That`s probably worth $50 billion or
something.

BOORSTIN: And many people use augmented reality every day and don`t even
realize it. . For the likes of these Snapchat lenses, bringing another
dimension to our every day lives.

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

(END VIDEOTAPE)

MATHISEN: It was a passion he discovered at summer camp, but it took
Jonathan Adler years and lots of ups and downs to spin his potter`s wheel
into a successful design business. He`s the subject of tonight`s “How I
Made My Millions”.

(BEGIN VIDEOTAPE)

MATHISEN: Fresh, stylish, eccentric, these are words Jonathan Adler uses
to describe his $100 million empire built from behind a pottery wheel.

Growing up in a farm town in New Jersey, Adler found his life`s passion at
a young page.

JONATHAN ADLER, JONATHAN ADLER ENTERPRISES FOUNDER & CEO: My first pot was
at summer camp when I was 12 years old. The second I touched clay, it was
just on.

It`s a fun feeling, isn`t it?

MATHISEN: Yes, it`s great.

ADLER: When my parents came to get at the end of the year, they found a
pasty potter with a passion.

MATHISEN: That pasty potter attended Brown University, majoring in
semiotics, but spending most of his time in the pottery studio at nearby
Rhode Island School of Design. He even considered pursuing a master of
fine arts degree in ceramics.

ADLER: I went to my pottery teacher. She said, I don`t think you have
what it takes. You have no talent. So, you should just move to New York
and become a lawyer.

MATHISEN: Reluctantly, he took that advice and moved to New York City.
His first job, working at a talent agency.

ADLER: I got fired from that first job and then I moved to another agency,
and got fired. So I just started teaching pottery class at night and
making stuff during the day while looking for jobs.

MATHISEN: Finding himself no closer to a real job, Adler`s parents
encouraged him to make pottery his business.

In 1993, he made his move.

ADLER: So, I called up a buyer at Barneys, just out of the blue, and
Barneys buyer came over to my studio apartment and look at my pots. And he
was like, these are great, I want to order them.

MATHISEN: And that was your first sale?

ADLER: That`s my first sale. Six months later, I still hadn`t been paid.
Finally, I called them up, and they said, oh, yeah, you`re the guy who made
the striped pots. Why didn`t you include an invoice? And I said, what`s
an invoice?

I was making all the pots myself. I roller blade to the studio, I`d be
there at 7:00 a.m. I would leave at 11:00 p.m. seven days a week.

MATHISEN: Adler soon realized that he couldn`t keep up with demand by
himself. So he partnered with an organization in Peru, training local
artisans to manufacture his designs.

And then a big order from Pottery Barn gave Adler the confidence and the
cash to expand.

ADLER: I thought, wow, I`m going to take this capital and open a store.

MATHISEN: The first Jonathan Adler store opened in New York`s Soho
neighborhood in 1998. In 2001, a Los Angeles outpost, Miami, Chicago, San
Francisco quickly followed.

Adler creates a brand manifesto.

ADLER: It`s about style and craft and joy. And once I came up with those
three words, I thought, well, those don`t just have to apply to pots.

MATHISEN: Today, there are 30 stores globally, selling Adler`s furniture,
home accessories and yes, pottery. Adler`s sprawling headquarters in Soho
is the nerve center for the brand`s operations.

ADLER: But the heart of it is still my pottery studio. I`m in here a lot.

MATHISEN: You do think we can sell this, right?

ADLER: A hundred percent.

MATHISEN: Where are you in this company in 20 years?

ADLER: I am restless and relentless and obsessed with design. Whatever
happens with my company, however it develops, I see myself in the creative
director rule until I kick the bucket.

(END VIDEOTAPE)

MATHISEN: And when I asked him whether there was an item he wanted to
design that he hadn`t yet, he said, yes, a car.

A recap now of our top story out of Turkey, the prime minister says a group
within the military has attempted to overthrow the government. According
to reports from the ground, gunfire was heard, jets seen flying over the
capital of Ankara. Bridges to the city have been closed. The head of the
country said the government remains in charge. The military claims it is
in control.

Gold rose as did the dollar versus the Turkish lira and money moved into
U.S. bonds and out of Turkish ETFs.

That, folks, is NIGHTLY BUSINESS REPORT for tonight. Thanks for joining
us. I`m Tyler Mathisen. Have a great weekend, everybody. We will see you
Monday.

END

Nightly Business Report transcripts and video are available on-line post
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on Nightly Business Report is not and should not be considered as
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