Transcript: Nightly Business Report – October 12, 2017

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

In the face of scathing criticism following a data breach that may have
impacted more than 140 million people, the credit reporting agency Equifax
(NYSE:EFX) gets hit with another embarrassing Website issue.

(NYSE:JPM) and Citi post their quarterly report cards as the first of the
big banks to report. Will their numbers set the tone for the rest of the

MATHISEN: And first of its kind, an FDA panel gives its stamp of approval
for a gene therapy treatment here in the U.S.

All that and more on NIGHTLY BUSINESS REPORT for Thursday, October 12th.

HERERA: Good evening, everyone, and welcome.

It`s been quite a few weeks for credit reporting agency Equifax (NYSE:EFX).
Last month, the company revealed it had been hacked, potentially
compromising the data of 145 million people.

Since then, the CEO stepped down and apologized. Several other executives
also left. There are investigations by federal and state agencies
including the Department of Justice.

Now, today, the company said it was looking into a possible second breach
but later in the day reversed course, kind of. Instead of putting the
issue on a third party vendor.

Andrea Day explains.


just one month after the credit giant disclosed a hack that compromised
sensitive information of more than 145 million people. Then, today,
Equifax (NYSE:EFX), taking one of its consumer web pages offline, the same
page people use to dispute issues in their credit report.

This is all after an independent security analyst discovered that Equifax`s
credit report assistant link contained malware. According to the tech news
Website, R`s Technica, visitors were tricked into installing fake Adobe
Flash updates and those updates could infect computers. This evening,
Equifax (NYSE:EFX) saying, quote: Despite early media report, Equifax
(NYSE:EFX) can confirm that its systems were not compromised and the
reported issue did not affect our consumer online dispute portal.

The issue involves a third party vendor that Equifax (NYSE:EFX) uses to
collect Website performance data. And that vendor`s code running on an
Equifax (NYSE:EFX) Website was serving malicious content. Since we learned
of the issue, the vendor`s code was removed from the Webpage and we`ve
taken the Webpage offline to conduct further analysis.

(on camera): So, how is this different from the last attack? Well, this
one apparently didn`t steal any sensitive data from the agency, like
birthday, socials and names. But it could compromise your computer. No
word yet as to when that Webpage will be back online.



HERERA: Along the same lines, Hyatt said it discovered a credit card
breach at 41 of its properties around the world. It is the second breach
in two years at Hyatt.

MATHISEN: We`re angry. That`s what Facebook (NASDAQ:FB) chief operating
officer Sheryl Sandberg said about potential abuse of the company`s
platform. So, with ongoing questions about the role that Facebook
(NASDAQ:FB) ads played in the election last year, Sandberg finally broke
her silence.

Julia Boorstin has the details.


meeting with leaders of the House Intelligence Committee yesterday,
Facebook (NASDAQ:FB) COO Sheryl Sandberg sat down with “Axios`” Mike Allen
to discuss Russia`s purchase of ads on Facebook (NASDAQ:FB) to influence
the election.

Sandberg saying Facebook (NASDAQ:FB) is cooperating fully and wants
Congress to release the ads, and owes the American people an apology.

SHERYL SANDBERG, FACEBOOK COO: Certainly any time there`s an abuse or
interference on our system, we`re upset. And it`s not just that we
apologize. We`re angry, we`re upset.

But what we really owe the American people is determination. We`re
determined. These are threats. These are challenges. But we will do
everything we can to defeat them because our values are worth defending.

BOORSTIN (on camera): Sandberg saying Facebook (NASDAQ:FB) is investing in
artificial intelligence to go after fake accounts and hiring 4,000 people
to oversee ads and content. But as Sandberg stressed that they want to
crack down on abuse, she also said they want to maintain free speech on
Facebook (NASDAQ:FB).

FARHAD MANJOO, NEW YORK TIMES: I think they are going to try to do a good
job to fix some of the actual problems and also the PR problems. But I
think it`s probably much harder than they or anyone else kind of expects it
will be.

BOORSTIN (voice-over): Now, investors are weighing whether this
controversy and how Facebook (NASDAQ:FB) manages the needs of its
advertisers and users will impact the platform`s bottom line.

are the advertisers going to do in this? And if they get attacked
politically, are the advertisers going to pull out? And that will in fact
be the determinant in affecting their market value and in fact their growth

BOORSTIN: And many are asking whether Facebook (NASDAQ:FB) and the other
platforms such as Google (NASDAQ:GOOG) and Twitter will come up with
policies to govern themselves or will draw more regulation around the likes
of political advertising.

Facebook (NASDAQ:FB) representatives are expected to return to D.C. to
testify on November 1st. But we don`t expect Sandberg there as Facebook
(NASDAQ:FB) earnings are the same day.

For NIGHTLY BUSINESS REPORT, Julia Boorstin in Los Angeles.


HERERA: In Washington, President Trump signed an executive order which he
says would promote health care choice and competition by making lower cost
plans more readily available. This is the first step in the president`s
promise to loosen regulations under the affordable care act.

Bertha Coombs takes a look tonight.


Wolf welcomes any efforts to lower costs for his small business, a
restaurant supplier startup in New York City.

NOAM WOLF, MARKETMAN CEO: Reducing prices is just one side of the coin.
The flip side of the coin is actually reducing prices may lead to worse

COOMBS: President Trump says his executive order will help usher in more
affordable insurance prices.

staggering. Insurance companies will be fighting to get every single
person signed up.

COOMBS: The order paves the way for small business groups to buy coverage
through association plans across state lines like large self-insured
employers do.

mandates that are required under the insured plans that a self-insured plan
does not have to comply with, that are built into those insured plans. And
so, that in itself would help to bring down the cost for those programs.

COOMBS: It would also allow more businesses to fund health reimbursement
accounts or HRAS to help employees pay premiums. And for individuals, it
would allow them to buy short term coverage for more than the three-month
limit imposed by the Obama administration.

Supporters say this gives healthy people the choice to buy only the
coverage they need while critics charge it will undermine the exchanges.
Actuaries say it will likely split the market.

(on camera): The proposed changes won`t affect plans starting January 1st.
Administration officials say it will take a few months to draw up the rules
and allow for public comments. Insurers so far have been cool to the
announcement. The major industry lobbies say long term market
stabilization efforts are what`s needed now.

For Noam Wolf, ultimately lower prices aren`t worth it if it means a lot
less coverage.

NOAM: If you just have, you know, slightly lower prices, you might get
garbage plans out there.

COOMBS (voice-over): Bertha Coombs, NIGHTLY BUSINESS REPORT, New York.


MATHISEN: Well, to earnings now, where the ball is rolling, as two of the
nation`s biggest banks reported their results, both of them beat Wall
Street estimates. But investors seemingly wanted more.

JPMorgan`s earnings beat Target`s by 11 cents a share, on $26 billion
revenue for the quarter. But the bank`s fixed income trading did fall 27
percent. Citi meantime beat by a dime, and its $18 billion revenue target
beat estimate as well. The concern there was the company`s credit costs
which rose.

All in all, both stocks fell. Citi was down more than 3 percent.

HERERA: So, let`s turn now to Fred Cannon for more analysis on both banks`
earnings and also what we can expect tomorrow from Wells Fargo (NYSE:WFC)
and Bank of America (NYSE:BAC) when they report their results. And he is
director of research at Keefe Bruyette & Woods.

Welcome. Nice to have you here, Fred.


HERERA: Let`s start first of all with Citi and JPMorgan (NYSE:JPM). I
know that, in general, you were looking for a somewhat — the anemic
economic background to impact earnings this time around. But both of these
banks managed to beat modestly.

CANNON: Right. They have very solid results. I mean, if you look at —
well, you know, maybe a few folks were disappointed, stocks were sold off
today. If you look across the board, given that trading was a little bit
weak, the numbers were solid at both companies.

MATHISEN: What was there to nitpick here and why — did the market get it
wrong? I mean — and you`re pretty favorable on these stocks going forward
too, right?

CANNON: We are. I don`t think the market got it wrong. Remember, these
stocks had a nice run coming into earnings.


CANNON: So it`s a little setback, number one.

Number two, I think, that there was some nitpicking especially around
credit cards and a little tick up in delinquency rates.

HERERA: Now, Jamie Dimon came out and was talking basically about earnings
and how the comparisons were going to be a factor in all bank results
because of the comparisons compared to last quarter. Do you agree with
that? Is that part of what`s factored into their ability to beat the

CANNON: That`s part of it. But, really, I think what people are looking
for, I think they pretty much got at JPMorgan (NYSE:JPM). They got large
expansion and they got loan growth. I think at Citi, we didn`t have as
much growth, that`s why the stock didn`t perform quite as well today.

MATHISEN: How about Wells and B of A, they come out tomorrow. Wells has,
obviously, has been in the spotlight with its various travails. B of A has
a different set of circumstances.

What are you looking for?

CANNON: Well, first of all, loan growth is key. And one of the things is
that JPMorgan (NYSE:JPM) really beat the federal numbers on loan growth.
That means one of the other big banks probably won`t. So, we`ve got to be
a little cautious on Wells Fargo (NYSE:WFC) about that issue.

B of A, we think will be solid. We`re looking for net interest margin.
Can they keep the cost of deposits down and see earnings grow?

HERERA: Well, we will see. Fred, thank you so much.

CANNON: Great to be on. Thanks for having me.

HERERA: Fred Cannon with Keefe Bruyette and Woods.

MATHISEN: Well, those bank earnings did weigh on the market today.
Investigators also took in data that showed weekly unemployment claims
dropped. Inflation numbers showed a run-up in gasoline prices following
those Hurricanes Harvey and Irma. Those together push producer prices
higher in September and stocks pulled back from record levels. The Dow
lost 31 points to 22841, Nasdaq dropped 12, and the S&P 500 slipped four.

HERERA: Amazon (NASDAQ:AMZN) said it will hire 120,000 additional workers
for the upcoming holiday shopping season, pretty much on par with last
year. Amazon (NASDAQ:AMZN) is the latest retailer being cautious about
their hiring plans in part because of the stronger job market. But those
holiday hires serve as a backdrop to an industry that has shed tens of
thousands of jobs this year alone.

What is happening with all of those laid-off retail workers?

Well, Courtney Reagan takes a look.


retailers closed stores, jobs are disappearing with the liquidation sales.
The U.S. will end the year with more than 2700 fewer stores this year than
last. And that`s even accounting for offsetting store openings. The
number of people working in retail peaked in January and has been declining
since, with more than 107,000 retail jobs lost in the first nine months of
this year.

Some retailers do offer employees positions at other still-open stores.
But while online divisions of retailers are growing, with more abundant
jobs in warehouses and distribution centers, few store sales associates
move into those roles. The skill set is a mismatch. Those jobs are closer
to an assembly line or operation skill than sales and working directly with

Plus many retailers` warehouses aren`t located near their closing stores.

Zip Recruiter says more former retail workers are looking to cross over
into completely different industries.

UNIDENTIFIED MALE: There`s almost a shift of these people from retail into
sales, customer service, business services, food and beverage.

REAGAN (on camera): The employees we spoke to at this giggle baby store
aren`t sure what their next move will be when this store closes. Other
former retail workers that I talked to are all doing something different.
One woman worked at a family Christian store for over a decade but decided
not to get another part-time job to supplement her teaching income when
that store closed. Only one of her former colleagues works in retail.
Another works for an insurance company. And another started a nonprofit.

(voice-over): Labor economists caution other industries to pay attention
to what`s happening in retail because of the spillover effect. With more
retail workers vying for nonretail jobs, competition increases for open
roles. And with more available candidates willing to work, it makes it
harder for wages to grow.

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan in New York City.


MATHISEN: Coming up, a Food and Drug Administration panel gives the green
light for gene therapy treatment here in the U.S. We`ll tell you what it


HERERA: Bitcoin, the controversial crypto currency, soared to an all-time
high today, a confluence of speculation helping to drive up the price.
First, reports have surfaced that China may reverse its ban and allow
trading in Bitcoin to resume. Also, there have been recent reports that
Goldman Sachs (NYSE:GS) may explore trading that currency. All of this
helped push bitcoin past its high of 5,000. To put that into perspective,
that`s worth four times as much as an ounce of gold.

So, for those of you saying, what exactly is bitcoin, here is a quick


NARRATOR: What is bitcoin? It`s a payment system that uses completely
virtual money for online transactions. The digital currency is called a
bitcoin. It`s like cash for the Internet, transferred between people via
mobile app or a computer program.

Users request and send bitcoins to pay for goods and services. But the
identities of users and the transactions are kept anonymous through
complicated encryptions.

And unlike real money, bitcoin has no centralized bank or authority that
runs the system. Instead it operates on an open source platform that can
be accessed by anyone. And it`s controlled by the people who use it and
ultimately the power of supply and demand.

Which brings us to the value of a bitcoin. Since its creation in 2009,
it`s fluctuated dramatically from pennies to now over $5,000.


MATHISEN: Campbell Harvey joins us now to talk more about bitcoin and the
risks when it comes to your money. He`s a professor of finance at Duke
University`s Fuqua School of Business.

Welcome, Professor. You`re going to have to walk me through this like a
freshman in an economics class.

If I wanted to buy some bitcoin, how would I do it, how would I pay for it,
where would my money go, and what would I see for it, what would I get?

many ways to buy. But a common way is to go to a firm like Coinbase, and
they have over 10 million customers. And you can do a wire transfer of
regular U.S. dollars and buy from them a bitcoin.

You can use a credit card also. But you have to actually exchange the
dollars into bitcoin, or another crypto currency.

MATHISEN: A lot of people, professor, point to the anonymity of bitcoin.
And as a result of that, it is sometimes used for nefarious purposes. You
know, I guess you could make that argument for other currencies as well.
But what do you make of that?

HARVEY: Well, it`s actually false. So, it`s a myth that bitcoin is
anonymous. And let me explain it this way.

That when you receive a payment, it`s anonymous until you start spending.
And when you start spending, then probabilistically, we can figure out who
the spender is.

There are other crypto currencies like Z cash, that`s anonymous. Bitcoin
is not anonymous. It`s a terrible technology for a criminal to use because
every single transaction is recorded and cannot be altered in this ledger
called the Blockchain.

So, it would be the last choice of a criminal. But the criminals don`t
understand it.


HARVEY: They don`t get it. They don`t understand this is not anonymous.

MATHISEN: So, in typical — obviously, a dollar isn`t worth anything
unless people believe it`s worth something. But who controls the supply of
bitcoin and is that supply fixed or not?

HARVEY: So, bitcoin is a computer program. It`s a program anybody can
download. And it`s got various parameters in the program. And one of the
parameters is that the bitcoin supply goes up by 12.5 bitcoins every ten
minutes. And then after a couple of years, that`s cut in half. It`s cut
in half again. Until you reach 21 million bitcoin and then it stops.
There`s no new bitcoin.


HARVEY: So, it is fundamentally just an algorithm, a rule. It`s
effectively deflationary.

The other thing that`s important is one bitcoin is divisible not by 100
units like a dollar and the cents, but into 100 million units.

HERERA: So, obviously, this — from what I`m gleaning, is not for the
everyday investor. Would you agree with that?

HARVEY: Yes, I totally agree with that. It`s difficult to understand. It
is wildly volatile. So, it is five times the volatility of the S&P 500.

It is a new technology. And I do worry that there`s a lot of bandwagon
speculators, it`s going up so let`s pile into bitcoin.


HARVEY: The capitalization is $88 billion, which is substantial.


HARVEY: That`s more than the capitalization of all the gold ETFs and gold
mining ETFs.


MATHISEN: Campbell —

HARVEY: It`s substantial but it`s still small.

MATHISEN: Campbell, we have to leave it there. I wanted to ask you
whether the Coach (NYSE:COH) Krzyzewski would like to be paid in bitcoin.
That will another conversation.

Campbell Harvey at Duke.

HARVEY: Thank you.

HERERA: Sales growth slows at Domino`s. That`s where we begin tonight`s
“Market Focus”.

The pizza chain reported a rise in same store sales but the results weren`t
as strong compared to a year ago. So, the company said stronger demand in
the U.S. led to total revenue and profit that beat expectations. Domino`s
shares finished the day, though, down nearly 4 percent to $201.03.

Tesla recalling 11,000 Model X SUVs on concerns that the back seats could
fall forward during a crash. This is the second time Tesla has issued a
recall for that model due to seat latch problems. Shares finished slightly
higher, $355.68.

MATHISEN: And investment management firm Eaton (NYSE:ETN) Vance will raise
its quarterly dividend 11 percent to 32 cents a share. The yield now just
under 2.5 percent. Shares of Eaton (NYSE:ETN) Vance were up 23 cents to

And the drug maker Baxter said revenue for the fourth quarter will take a
hit following the impact from Hurricane Maria on its Puerto Rico
facilities. The company said it will provide a clearer outlook for the
quarter later this month. In the meantime, the company said it`s working
with its manufacturing sites in other countries as well as the FDA to
support the supply of product in the U.S. Baxter shares up fractionally,

HERERA: A Food and Drug Administration panel voted unanimously to endorse
a gene therapy treatment for a childhood form of blindness. If the agency
approves that treatment, it would be the first of its kind here in the
United States. Spark pharmaceuticals makes the drug and the stock was
halted all day but spiked when it opened after hours. And it`s up more
than 70 percent so far this year. Some of the other smaller companies in
the field are Bluebird Bio, Voyager Therapeutics and Regenxbio.

Meg Tirrell joins us now with more.

This is the most amazing story.

incredibly story, and a milestone in the field of medicine. Gene therapy
represents a whole new way to treat disease. Rather than taking a pill or
an injection every day or every week, gene therapy is designed to be a one-
time remedy. It uses a virus to deliver a healthy copy of a gene to make
up for the one that causes the disease.

Sparks Therapeutics could be the first to bring gene therapy to the market
if the FDA agrees with its panel of outside advisers and approves the drug.
The panel voted 16-0 today that the medicine has a favorable benefit risk
profile. Now, it`s designed to treat a rare, inherited form of blindness,
in some cases known as Leber congenital amaurosis.

There are no approved treatments for it now. And people with the condition
eventually lose their sight. People who participated in the clinical trial
told the FDA panel today how much of a difference they felt after taking
the treatment, with one person saying that before, it was like she was
wearing sunglasses and looking through a tunnel, whereas afterwards, she
could make out the stars for the first time.

And we visited two siblings last year who participated in the trial. Here
is Caroline Carper sharing her experience.


CAROLINE CARPER, GENE THERAPY PATIENT: Before, I couldn`t see snow, the
little snowflakes when they were falling. I went outside when it was
snowing and I was like, oh, I can see the snowflakes!

TIRRELL: Really? What was it like?

CARPER: It was really cool. Like to actually see something that I`ve
never seen in my life before.


TIRRELL: So, the FDA is set to make its decision on this drug by mid-

HERERA: We look forward to that very much, Meg.

It`s a one-time treatment. Is — how long does it last? Is there a time
frame on it?

TIRRELL: That`s a really important scientific question for gene therapy,
because the first patients were only treated a few years ago, they just
don`t know how long it will last. So far, they hope. And for Caroline and
Cole, it`s been pretty durable for them.

MATHISEN: What else could gene therapy treat and how much does it cost?

TIRRELL: Well, those are two really great question and this is a huge
field now. A lot of companies are getting into it. Diseases like
hemophilia are being targeted by a number of companies big and small.
Pfizer (NYSE:PFE) is in this space, they have a partnership with Spark,
actually. You showed a few other companies there, Voyager Therapeutics is
working on diseases in the brain.

So, the applications are potentially very broad, but it could be costly, up
to $1 million, guys.

HERERA: You have the best news beat there is.

TIRRELL: I really do.

HERERA: Thank you, Meg.

TIRRELL: Thank you.

HERERA: We appreciate it. Meg Tirrell.

MATHISEN: And coming up, we`re going to take you to take you to Swiss Alps
that puts the Ritz in St. Moritz.


MATHISEN: Referring to the California gold rush, one of the most famous
lines came from Mark Twain novel, there`s gold in them thar hills.

Well, in Switzerland, it`s not exactly the hills, but rather the sewers. A
study out this week shows that more than $3 million worth of gold and
silver are found every year in the country`s sewage system. The metals are
byproducts from chemicals and products like paints, alloys, electric
components like watches, which accumulate in the sludge from treatment
plants. But recycling would not be economically viable. By the way, past
researchers have put the amount flushed away every year here in the U.S. at
around $13 million.

HERERA: Well, as you probably know, Switzerland has long been seen as a
tax haven for the super rich. Robert Frank got an exclusive look inside
that country`s most expensive home, a mansion nestled high in the luxury
Alpine resort town of St. Moritz.


Moritz is the winter playground of the world`s rich and famous. And
nestled in this snowy paradise is the most expensive estate for sale in all
of Switzerland. This home actually has seven levels and most of them are
hidden in the rocks below.

The stairway leads to a heavenly grand reception area. On one side, these
35-foot windows frame the Swiss Alps. On the other, an entire wall that`s
about as lavish as we`ve ever seen.

SENEDA ADZEM, DOUGLAS ELLIMAN REAL ESTATE: This is floor to ceiling mink.

FRANK: But if you prefer pampering, the mega home`s wellness level is your
private paradise.

ADZEM: It really rivals some of the finest spas and the best hotels in the

FRANK: You can inhale the healing powers of Himalayan salt in a room lined
in glowing rock. Get an out of this world steam in a modern hamam that
looks like a spaceship. Or chill out big time in a subzero ice chamber.

But the showstopper down here is the subterranean lake. The glimmering
pool is lined with Swarovski crystal lights that flow through every color
of the spectrum.



HERERA: Homey.

MATHISEN: Yes, the mink walls.

HERERA: That will do it for us —

MATHISEN: I`ll buy it for you.

HERERA: Thank you, dear.

I`m Sue Herera. Thanks for joining us.

MATHISEN: I`m Tyler Mathisen. Have a great evening, everybody. We`ll see
you tomorrow.


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