Transcript: Nightly Business Report – October 3, 2017

ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue

further into record territory with the S&P 500 logging its six straight
sessions of gains.

auto showrooms as Americans buy bigger, more expensive vehicles.

HERERA: Costly care. Cancer, a new treatment, and an historic price tag.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Tuesday,
October 3rd.

Good evening, everyone. I`m Sue Herera.

GRIFFETH: And I`m Bill Griffeth in for Tyler Mathisen who is on assignment
tonight. And I`m coming to you this evening from the New York Stock
Exchange, where once again stocks finished at levels never seen before,
fresh records were set for all the major averages, as upbeat car sales and
expanding growth across the globe helped to lift stocks once again.

The Dow Jones Industrial Average rose by 84 points, closed at 22,641.
NASDAQ added 15. The S&P gained five. And the rally isn`t just here in
the U.S. It`s happening pretty much everywhere, as Bob Pisani explains for
us tonight.


record territory today as the so-called reflation trade continues to power
the market to new highs. Reflation means expansion — expansion of the
global economy, a little bit of inflation, but not much. Central banks
talking more about raising rates. And in the United States, the prospect
for tax cuts boosting corporate profits in 2018.

This isn`t just a U.S. phenomenon. Stocks have been rising in Europe and
Asia as well. Japan hit a two-year high today and stocks in Hong Kong were
also near a two-year high.

The effect of this reflation trade is that many sectors have been rallying,
particularly banks, which do better in a rising rate environment, energy
stocks, which are benefiting from higher oil prices, and industrials and
transports that benefit from an improving global economy. Elsewhere, car
sales today were strong in September, with both GM and Ford reporting
better than expected sales.

GM is up 7 percent. It`s been on a tear for a month, partly on the
prospects of more sales due to all the cars ruined in Hurricanes Harvey and

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


HERERA: With stocks at records, the world`s most well-known investor
Warren Buffett thinks conditions are still right to buy stocks.


WARREN BUFFETT, CEO, BERKSHIRE HATHAWAY: In the end, you measure laying
out money for an asset in relation to what you`re going to get back. And
the number one yardstick is U.S. government. And when you get 230 on the
10-year, I think stocks will do considerably better than that. So, if I
have a choice of the two, I`m going to take stocks at that point. On the
other hand, if interest rates were on the ten-year where five or six, you
would have a whole different valuation standard for stocks.


HERERA: Some investors disagree and think things are getting a bit frothy.
So, what should you do?

Trip Miller is partner at Golan Capital Partners and he joins us now to
talk about that. Trip, welcome. Nice to have you here.


HERERA: What do you make the Warren Buffett`s point, given the fact that
we have very low interest rates, stocks still hold value?

MILLER: Well, we agree with Mr. Buffett. As value investors, we`re big
fans of his. And we agree that in a market where you find you have a 10-
year treasury at 230, it`s not very compelling for us to deploy capital for
the next 10 years. And we think the average investor is probably much
better served with a concentrated basket of value stocks.

GRIFFETH: I see that you like retail as a sector and I`m intrigued by that
given that this has been a horrible year for many retailers, almost a
record numbers of stores have closed, we`ve had bankruptcies, department
stores are struggling right now.

What do you like about retail?

MILLER: Well, we agree with all those things. That`s why we`ve also long
term shareholders in Amazon. But we feel retail has been unfairly
punished. On a case-by-case basis, we`re finding a few things to look at
and do. And one of the things we`ve done this year is purchase shares
recently in Dollar General. And in the case of Dollar General, we`re
getting a great business that`s buying back shares aggressively, that will
open over a thousand stores this year on top of the 300 they`ve acquired.

So, we like businesses that we think play well. In Amazon world, maybe in
areas of the country where Amazon isn`t.

HERERA: You also like insurance but on a global basis, not just domestic

MILLER: Absolutely. Specifically we`re big fans of Fairfax Financial out
of Canada, run by Prem Watsa, who`s referred to as the Warren Buffett of
Canada. Like Dollar General, a stock that had been beaten down 20, 30
percent over the last year. So, while the market was up, we feel like
we`re getting value there. It`s a global insurance company.

It`s realized a lot of value recently in several of its international
businesses. And again, like Dollar General, it`s just recently announced a
share buyback. So, we like partnering with businesses like Fairfax that we
get global exposure to, plus, an interest rate play. If interest rates
rise, they`ll benefit and thus my portfolio.

HERERA: On that note, Trip, thank you very much. Tripp Miller with
Gullane Capital Partners.

MILLER: Thanks.

GRIFFETH: Meanwhile, companies in the S&P 500 are returning record amounts
of money to shareholders in the form of dividends. According to S&P/Dow
Jones indices, net dividend increases rose by more than 150 percent in the
third quarter compared to a year ago. Those net dividend increases include
all increased in dividends minus dividend decreases.

HERERA: As Bob mentioned earlier, auto sales in September rebounded as
victims of hurricanes Irma and Harvey started buying new cars and trucks to
replace those that were destroyed. The strength of the sales last month,
though, exceeded even the most optimistic forecast.

Phil LeBeau has more on the strong September in the showroom.


estimated 800,000 to 1 million vehicles destroyed by hurricanes in Texas
and Florida, automakers knew storm victims would be eager to buy
replacement cars and trucks. That drove much stronger than expected sales
in September for Toyota, GM, and Ford.

When insurance adjusters tallied up the number of total vehicles last month
and started cutting claim checks for storm victims, much of that insurance
money went towards down payments on bigger, more expensive vehicles,
primarily trucks and SUVs. That`s one reason Ford F-Series sales surged
more than 20 percent last month while GM saw record demand for some of its
cross utility vehicles, and Toyota`s SUV sales also popped.

Overall, September was the strongest month this year for auto sales, which
helped automakers bring down their inventories. The question now is
whether there was a brief increase in demand spurred by the hurricanes, or
if it shows more strength for the economy as a whole. With the
unemployment rate near its lowest point in years, many believe car buyers
should continue streaming into dealerships.

(on camera): There is one other factor that could keep auto dealers busy
through the end of the year, it`s strong consumer confidence. If it
remains high, that`s a good indication we could see solid auto sales
through December.



GRIFFETH: And in a related story, late today, Ford outlined plans to
aggressively cut costs and invest more resources on electric and self-
driving cars. The automaker also plans to reallocate about $7 billion to
increased development and production of trucks and SUVs which are very
popular, while deemphasizing less profitable cars and sedans. New CEO Jim
Hackett is meeting with investors in New York today.

HERERA: On Capitol Hill, Senator Elizabeth Warren told the CEO of Wells
Fargo he should be fired. During a congressional hearing focused on the
fake account scandal, CEO Tim Sloan defended his leadership in a heated
appearance, even as Senator Warren said she didn`t think he was the one for
the job.


responsibility. Wells Fargo cheated millions of people for years. The
Federal Reserve should remove all of the current board members who served
during the fake account scam.

And, Mr. Sloan, you say you`ve been making changes at Wells Fargo for 30
years? But you enabled this fake account scam, you got rich off it, and
then you tried to cover it up. At best, you are incompetent. At worst,
you were complicit. And either way, you should be fired.


HERERA: In response, Sloan said the board has taken strong action in terms
of executive accountability and that his vision as CEO is the right one for
the bank.


TIM SLOAN, CEO, WELLS FARGO: I`m not afraid to make hard decisions when
it`s need. And I have the support of 270,000 people. That`s why I think
I`m the right person.


HERERA: Sloan said the company has corrected its missteps and says Wells
Fargo is a better bank today because of it.

GRIFFETH: And in fact, Wells Fargo`s biggest shareholder still believes in
the CEO. During a CNBC interview, Warren Buffett said when a company
uncovers a problem, it has to be dealt with quickly.


BUFFETT: Tim Sloan has my faith. The truth was that 99 percent of the
people were perfectly decent people. They were just like the people
working at Goldman or some other place. And somebody had gone off —
totally gone off the — gone haywire. And other people didn`t report it.
But when you find a problem, you have to jump on it. I mean, that`s just


GRIFFETH: And in fact when asked if he sold any Wells Fargo shares, Mr.
Buffett said only enough to stay under 10 percent, which is something that
the Fed requires. Mr. Buffett`s Berkshire Hathaway holds now 9.4 percent
stake in the bank.

HERERA: Warren Buffett`s Berkshire Hathaway is acquiring nearly 40 percent
of the operator of Pilot and Flying J travel Centers where truckers and
drivers can refuel, eat, and shop. The company says it generates more than
$20 billion in annual revenue. Berkshire did not disclose how much it

GRIFFETH: Remember the 2013 hack at Yahoo that compromised more than a
billion accounts? Well, today, the company said it was a lot more than
that. In fact, Yahoo now believes that all of the approximately 3 billion
Yahoo user accounts existing at that time were affected. Verizon, which
now owns Yahoo!`s core assets, says it is continuing to work closely with
law enforcement.

HERERA: The former CEO of Equifax was also on Capitol Hill today.
Lawmakers described the massive data breach at the company as a travesty.
And that was just the beginning.

Aditi Roy reports from Washington.


UNIDENTIFIED MALE: Good morning. The Subcommittee on Digital Commerce and
Consumer Protection will come to order.

Equifax CEO Richard Smith took the hot seat this morning in front of a
House subcommittee, ready to answer tough questions on the company`s
massive cybersecurity breach. It`s the first of three days of
congressional testimony, before the House and Senate.

Smith started with an apology.

RICHARD SMITH, FORMER EQUIFAX CEO: I`m here today to say to each and every
person affected by this breach, I`m truly and deeply sorry for what

ROY: Then the grilling began. For about two dozen lawmakers, the
questions and rebukes were fast and furious.

REP. BEN RAY LUJAN (D), NEW MEXICO: I hope we can give assurance to the
committee and to the American people that this committee will have a markup
and a hearing with bills that we can take to the floor before the holidays
to give the American people, consumers confidence again, because this is a

ROY: Among the new details Smith revealed, that it took the company 40
days to notify the public about the breach because at first, Equifax only
noticed suspicious activity and that it took weeks to understand the depth
and breadth of the breach. He also said it happened because of human
error, with the person neglecting to implement a software patch for the
vulnerability, and technical mistakes with a scanner not picking up the

That led to more questions by House Energy and Commerce Committee Chair
Greg Walden.

REP. GREG WALDEN (R), OREGON: How does this happen when so much is at
stake? I don`t think we can pass a law that, excuse me for saying this,
but fixes stupid.

ROY: Smith was also questioned about the selling of shares by three
company executives after the breach was discovered. But Smith maintains
there was no foul play.

REP. LEONARD LANCE (R), NEW JERSEY: You believe this stock was sold merely
as a matter of course as would be true in any other quarter?


LANCE: You do not believe it was based upon knowledge known by these
gentlemen related to the breach?

SMITH: Congressman, I`ve known these individuals for — some of them up to
12 years. They`re honorable men. I had no indication they had any
knowledge of the breach at the time they made the sale.

ROY: But some lawmakers weren`t so quick to buy that argument.

REP. JAN SCHAKOWSKY (D), ILLINOIS: I think it`s very fishy that on July
31st, there was a lot of information that there had probably been a breach,
and August 1st and 2nd, that over a million dollars in stock was sold. It
doesn`t smell good.

ROY (on camera): Smith will answer more questions when he hands over to
the Senate tomorrow. That`s where he`ll appear before two other

For NIGHTLY BUSINESS REPORT, I`m Aditi Roy, Washington.


GRIFFETH: Still ahead, the president tours Puerto Rico. And financial aid
was part of the focus.


HERERA: Thousands of miles from Wall Street, investigators in Las Vegas
are still searching for answers following the worst mass shooting in our
country`s history.

Jane Wells reports.


do it?

Investigators combed through the hotel room 64-year-old Stephen Paddock
used as his sniper perch to slaughter 59 people and injure hundreds more in
a concert venue which today was still closed off as a crime scene. How did
he get 10 bags to his suite carrying 23 weapons without getting noticed?
How did he break two windows with a sledgehammer without drawing attention?
How long was he planning the massacre?

NBC News sources say he checked in last Thursday, four days before the
killings. But the biggest unknown is why.

Stephen Paddock`s brother had no answer.

ERIC PADDOCK, LAS VEGAS SHOOTER`S BROTHER: We`ve got nothing to give you.
There`s just nothing. He was just a guy.

WELLS (on camera): Paddock was a known high roller in Las Vegas. And NBC
News reports the day before the massacre, he transferred $100,000 out of
the country to an account in the Philippines where his girlfriend may have
family. She has been out of the country but is expected back soon and
authorities have questions. But then, everyone has questions.

JIM MURREN, MGM RESORTS CHAIRMAN & CEO: I`m also angry, really angry that
so many lives have been cut short, and so many people have been affected.

WELLS (voice-over): As pictures of the dead began putting faces to the
carnage, Jim Murren, CEO of MGM Resorts, the largest casino company in Las
Vegas, says changes will come. But what they are, no one is really sure.

MURREN: I love my town. I know my town. I feel responsible for
everything that happens in this town. And — but I do know that we did
everything that we could. And we will continue to do everything we can.

WELLS: At the Wynn today, home video showed metal detector wands being
used and bags checked.

WAYNE NEWTON, ENTERTAINER: I think that when all the investigations are
done, that possibly something good will come from it in terms of being able
to learn how we can do things better.

WELLS: The news is not stopping people from coming to Las Vegas.

(on camera): Did you have any second thoughts?

UNIDENTIFIED FEMALE: Yes. We did. But we decided to come anyway.

UNIDENTIFIED FEMALE: There isn`t anywhere safe. I live in northern
Virginia, 15 minutes out of D.C. I`m just saying. So, there`s not really
anywhere that you can say is 100 percent safe.

WELLS (voice-over): It could happen anywhere. But why it happened here,
we still don`t know.



HERERA: Wall Street is also analyzing the impact on the gaming sector.
Today, a long time bull on MGM Resorts which, of course, owns the Mandalay
Bay downgraded that stock, citing concerns that the mass shooting could
have a negative effective on bookings and profits in the coming months.

GRIFETH: Lennar`s profit grows and that`s where we begin tonight`s “Market

Despite seeing many of its markets impacted by the recent hurricanes, the
nation`s second largest homebuilder actually still managed to report a rise
in both profit and revenue that topped expectations. The company cited
increased demand and higher average selling prices. Shares of Lennar were
higher by 4 percent to $55.35.

Delta said that flight disruptions from Hurricane Irma are expected to cost
that airline $129 million in the third quarter. For the same period, the
largest U.S. airline said it expects to report passenger unit revenue that
rose about 2 percent. Investors had feared that the financial impact from
the storm would be worse. So, shares actually soared on Delta today by 6
percent to $51.25.

And as you see, the shares of several other airlines also took off today
and sent the Dow Transports into record territory.

Paychecks said strong performance in its HR services division helped
overall profits and sales to rise more than expected. The payroll
processor also lifted its full year guidance, saying that it expects
revenue to grow by about 6 percent. Meanwhile, shares rose by more than 3
percent to $61.99 — Sue.

HERERA: Bill, Walmart is beefing up delivery services with a deal to
acquire logistics company Parcel. The retail giant plans to tap into
Parcel`s technology and employee base to offer same day delivery in New
York City for Walmart and purchases. Walmart shares were up almost
1 percent to $79.22.

Fiat Chrysler is recalling more than 700,000 SUVs on concerns that water
exposure could affect brake function. That recall applies to 2011 through
2014 Dodge Durango and Jeep Grand Cherokees. The potential defect stems
from a previous recall in 2014. Fiat Chrysler shares were up a penny to
$17.96 — Bill.

GRIFFETH: The FCC wants to make millions of dollars available to repair
communication networks in hurricane-battered Puerto Rico and the U.S.
Virgin Islands. The chairman of the agency has proposed making available
more than $75 million in funding to help restore cell service there.
Nearly 90 percent of cell sites remain out in Puerto Rico, 69 percent are
out in the U.S. Virgin Islands.

HERERA: And President Trump was in Puerto Rico today to survey the damage
from Hurricane Maria. And one of the major focuses was financial aid to
that island.

Contessa Brewer is in San Juan.


President Trump landed at midday, two weeks after Hurricane Maria tore
across the island.


BREWER: Though she engaged in a social media fight with the president
before his visit, San Juan`s mayor, Carmen Yulin Cruz, accepted an
invitation to meet with him today, focused on keeping the lines of
communication open.

TRUMP: Right from the beginning, this governor did not play politics.

BREWER: For his part, Puerto Rico`s Governor Ricardo Rossello says it`s
important for the president to get a clear picture of the magnitude of the

GOV. RICARDO ROSSELLO (D), PUERTO RICO: We`ve calculated that the damage
of the storm is extensive. And what we want is for that aid package to
receive, number one, that funding that is consistent with the damage as it
would have been in Florida or Texas, for the citizens of Puerto Rico.

BREWER: Even before Hurricane Maria hit, Puerto Rico was struggling with
an unemployment rate more than twice the national average and half the
people here living in poverty. The island`s finances are under a federal
oversight board following a $73 billion bankruptcy, the largest municipal
bankruptcy in U.S. history.

(on camera): Over the last decade there has been a big problem of Puerto
Ricans leaving the island in favor of more opportunity in the United
States. And now, with Maria crippling the infrastructure here and schools
in the state bracing for more students from Puerto Rico, the governor is
worried about a mass exodus.

ROSSELLO: If we don`t place the correct conditions in an aid package, this
is not only going to occur immediately but it`s going to occur in the mid-
run and in the long run. And the — you know, the effect of that is going
to be that you`re not own going to get hundreds of thousands of Puerto
Ricans moving to the States. You`re going to get millions.

BREWER (voice-over): As President Trump visits Guaynabo, just outside San
Juan, he asked residents about their homes.

TRUMP: Your house is OK, right?

BREWER: Most Puerto Ricans won`t be watching Trump`s visit without
electricity or cell communications. Those who know about it wonder whether
his tour today will make it easier to get food, water, gas, and medicine

For NIGHTLY BUSINESS REPORT, Contessa Brewer, San Juan.


HERERA: Coming up, an historic drug approval comes with an historic price
tag. The business behind a new way of fighting cancer, in tonight`s
“Modern Medicine”.


HERERA: Last night, we brought you the story of Kaitlyn Johnson, a young
girl who beat cancer with the help of a revolutionary treatment. Tonight,
a look at what that medicine costs, and the complicated business of a truly
personalized drug.

Meg Tirrell has the second and final part of our “Modern Medicine” series.


James Johnson say when it came to treating their daughter Kaitlyn`s cancer,
no price would have been too high.

JAMES JOHNSON, KAITLYN`S DAD: Money would have never been a deciding

TIRRELL: After 2 1/2 years of chemotherapy failed her, Kaitlyn found
success with an experimental treatment that used her own immune cells to
cure her leukemia. The FDA approved the first of its kind drug, August
30th. Its price: $475,000.

Even at a time of eye popping drug prices, that number raised eyebrows.
Doctors at Memorial Sloan Kettering said it, quote, shattered oncology drug
pricing norms. The medicine called Kymriah is unique in several ways.
Each patient`s therapy is made from her own immune cells, requiring a more
complex manufacturing process. The price is for a one-time treatment. And
the number of patients for whom the drug is approved is small, about 600
people in the U.S. each year.

new type of medicine like this, and there will be so many out there that
are administered just once and for profound benefit, really require us as a
community to identify, you know, appropriate and fair pricing structures.

TIRRELL: Novartis, which markets Kymriah, said that some outside analyses
suggested a fair price could be as high as $600,000. The company also
employed a new pricing model. For patients covered by a government
program, Novartis only gets paid if their cancer is clear 30 days after

BRADNER: The CAR-T therapy is administered to all patients who need it.
And if the medicine is working at a fixed period of time, then Novartis is
compensated. And if it doesn`t, then we feel good about having provided
this chance for that patient.

TIRRELL: Kymriah`s success rate in clinical trials was more than 80
percent. Novartis isn`t the only company working in this new tech. The
same week Kymriah was approved, biotech giant Gilead spent $13 billion to
acquire Kite Pharma. Approval of its medicine for another kind blood
cancer could come later this year.

Other companies including Celgene, Juno Therapeutics, Blue Bird Bio and
Cellectis are also working to adapt immune cells into better cancer
hunters. It`s a market Cowen Research estimates could reach $5 billion to
$10 billion at its peak. As companies work to expand the technology`s
reach, its cost will continue to come into question.

I think it`s easier to swallow a price tag like this when you`re talking
about a kid who has 70 years more life available to them if they are cured.

TIRRELL: Kaitlyn`s treatment was paid for by Novartis because she was in
its clinical trial. But the rest of her care has been costly.

J. JOHNSON: Our insurance has been billed in excess of $10 million for
Kaitlyn`s treatment from day one to current.

TIRRELL: Doctors say we`re still in the early days of this new way to
treat cancer. But the question will continue to be asked: How do you put a
price on life?



HERERA: And to read more about Kaitlyn`s story and the business behind
this new way of treating cancer, you can always head to our Website, Pretty amazing story, Bill, right?

GRIFFETH: We are in the beginning stages I think of a golden age for
medical technology that uses immunotherapy and our own immune system.

HERERA: I couldn`t agree with you more.

On that note, that`s NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera.
Thanks for joining us.

GRIFFETH: I`m Bill Griffeth. Have a great evening, everybody. We`ll 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) 2017 CNBC, Inc.


This entry was posted in Transcripts. Bookmark the permalink.

Leave a Reply