Transcript: Nightly Business Report – October 30, 2017

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

braces for a slate of big announcements out of Washington, as well as
earnings from the world`s most valuable publicly traded companies.

strategy of splitting shares is fading, and more and more companies are
happy to have their stocks sit at super-lofty levels.

HERERA: And engine troubles. How sophisticated attacks on boats are
creating a new and costly problems for insurance companies.

All that and more on NIGHTLY BUSINESS REPORT for Monday, October 30th.

MATHISEN: Good evening, everyone, and welcome.

Stocks edged lower today as investors digested analyst ratings cuts on
JCPenney, and Macy`s (NYSE:M) and Merck (NYSE:MRK). Overall, the market
had a cautious tone ahead of major policy, economic and corporate news
later this week. A Fed meeting on interest rates begins tomorrow. It was
widely expected to be a stand-pat kind of session.

The GOP will release details of its tax bill Wednesday. Thursday, we
should learn who the next Fed chief will be. Friday brings the latest jobs
report. And, oh, yes, in the middle of it all, Apple (NASDAQ:AAPL) and
Facebook (NASDAQ:FB) will release earnings.

Stocks seemed mostly nonplussed on today`s news that former Trump campaign
chief Paul Manafort and a business partner were charged with money
laundering among other crimes as part of the investigation into Russian
interference into the 2016 election. Both men pleaded not guilty.

Here`s how stocks fared today. The Dow lost 85 points to 23,348, Merck
(NYSE:MRK), the biggest loser in the Dow, down 6 percent, as we mentioned
on several downgrades after pulling a key cancer drug. The Nasdaq slipped
two, and the S&P 500 gave back eight.

HERERA: Stocks took a bit of a dip midday after one media report hinted
that a cut in the corporate tax rate might not happen at all, or at least
not all at once. And that`s just the big warm-up for the big reveal that
as we mentioned, is expected Wednesday. Ylan Mui has more from Washington.


out the final details of their tax plan this week and a new report suggests
it could include a gradual reduction in the corporate tax rate. According
to one report, lawmakers are considering saving in the 20 percent corporate
tax rate over the next four years.

Now, for Republicans, this could be a way to offset the cost of their
broader tax overhaul. But nothing is final yet.

And today, White House Press Secretary Sarah Huckabee Sanders appeared to
throw cold water on this idea.

out his principles and it doesn`t include the phasing in. So, we`re still
committed to that moving forward, but — and I don`t have any reasonable
changes on that —

MUI: Republicans have already had to walk back plans to completely get rid
of one of the most popular deductions, the one for state and local taxes.
House Ways and Means Chairman Kevin Brady (NYSE:BRC) said individuals will
be able to keep the deduction for property taxes after he got push-back
from members of his own property who live in high tax states.

Now, unclear if that will be enough to win them over, Americans Against
Double Taxation, a lobbying group that`s fighting to keep this deduction,
said it is still opposing this plan.

Brady (NYSE:BRC) proposal, it`s an unprecedented Washington intrusion into
state and local financing decisions. It pits winners and losers among
states and it penalizes states that rely heavily on income taxes.

MUI: And members of the Ways and Means Committee are holed up today and
tomorrow to debate all of these issues, and there is no time to waste if
Republicans want to get this passed, the score wins before Thanksgiving.

For NIGHTLY BUSINESS REPORT, I`m Ylan Mui in Washington.


MATHISEN: Now on to the Federal Reserve where President Trump is expected
to reveal on Thursday his pick to head the Central Bank after current Chair
Janet Yellen`s term expires early next year. The finish line for this
horse race is inside a race that`s seen an extensive amount of lobbying for
all of the various candidates.

Steve Liesman handicaps the outcome.


announce one of the most important decision to date this Thursday, when he
names his choice to head the Federal Reserve. The White House confirmed
today the Fed chair announcement will come Thursday, a choice that`s been
rumored and whispered around Washington for days, weeks and months with
economists, company executives and Congress all lobbying in favor of one
candidate or another.

Many believe the president has decided on Fed Governor Jerome Powell,
something of a compromise candidate. Powell is a Republican, appointed by
President Obama, who supports recent Fed policy, but also favors some of
the financial deregulation proposed by President Trump.

The market seems to welcome a Powell appointment, because it means
continuity at the Fed and continuation of the Fed`s gradual policy of
raising interest rates.

Economics professor John Taylor is also said to be a candidate and up until
recently, there was talk of reappointing current Fed chair, Janet Yellen.
The only question is, does the president follow through on market
expectations for Powell, or does he decide to do something more unexpected
and dramatic.



HERERA: On Wednesday, the major automakers will release their sales
figures for October. Right now, sales are expected to be relatively strong
thanks to greater demand for new cars than many expected just a few months
ago. For that, you can thank a rebounding business in the southern U.S.
following the Hurricanes Harvey and Irma.

MATHISEN: Well, this week, some of the world`s biggest Internet companies
will head to Capitol Hill, as lawmakers look into the role their companies
potentially played in Russia`s meddling in the presidential election last
year. Top lawyers from Facebook (NASDAQ:FB), Twitter, Google
(NASDAQ:GOOG), will appear in three hearing. Separately, Facebook
(NASDAQ:FB) will report earnings on Wednesday, and Apple (NASDAQ:AAPL) will
report its quarterly results, as we mentioned, on Thursday.

HERERA: And the employment report for October is due out on Friday. Last
month, the economy lost jobs for the first time in seven years. But
economists are not expecting a repeat performance. Expectations are, for
the creation of about 315,000 jobs in October, which could represent the
strongest growth in more than two years. The unemployment rate is expected
to remain steady at 4.2 percent.

MATHISEN: Also, as we just told you, there is a lot of new information out
this week on many fronts, all with the potential to rattle stocks, or maybe
fuel them.

Here with us to discuss what the market is looking for and how it might
react to this week`s news is Brian Levitt. He`s a senior investment
strategist at Oppenheimer Funds.

Brian, good as always to have you with us.


MATHISEN: Let`s go sort of one at a time here. Take your pick, but I`ll
take the possibility of a Jerome Powell-led Fed. Is that going to be
markedly different from a Yellen Fed? Good for investors? Neutral? What?

LEVITT: Yes, I don`t think that that`s going to be markedly different for
investors. That`s probably good news for the markets. The big concerns
over the last weeks and months was perhaps that the Trump administration or
President Trump might select someone more hawkish than Janet Yellen,
somebody, the likes of John Taylor. And, you know, if you look at the
shape of the yield curve right now, it`s not significantly steep.

So, aggressive moves on the short end of the curve could have foretold a
looming recession. I think if Jerome Powell is the choice, that risk goes
down considerably.

HERERA: Let`s move on to tax reform, which hasn`t happened yet, but they
seem to be making some progress. Does that have the potential to unnerve
the market? Because there`s in back-and-forth about what deductions will
be allowed in, how retirement savings might be treated, et cetera?

LEVITT: Well, the good news is a lot of the moves in the market this year
were in the growthier segments of the markets, large caps outperforming
small caps. So, if this market rally was all about expectations of tax
cuts, then you probably would have seen small caps outperforming large caps
and value outperforming growth. So, it does not seem as if the market is
set up for significant disappointment.

On the other hand, there is upside potential in the more value-oriented
parts of the market. If you get tax cuts, the problem is, it`s going to be
very difficult, because the initial plans that we have seen, something
along the lines of $5 trillion in cuts, in order to get $3.5 trillion in
offsets so that the deficit doesn`t go up by more than a trillion and a
half over the next ten years, that`s going to be very difficult.

So, I don`t think the market will be significantly disappointed. There
could be upside, but it`s going to be hard to get there. And by that, I
mean, in the more value-oriented parts of the market.

MATHISEN: On to the economic, some good numbers out today on consumers
spending, but end of the week, the jobs number, what are you looking for

LEVITT: So you got it right when you talked about the forecast over
300,000 jobs. We shouldn`t read into that to say that the economy is
picking up significant steam. We lost jobs last month and that was the
result of the hurricanes and the disruptions that happened. So, we should
average out those two months, which takes you pretty much in line with
where we`ve been, call it, you know, roughly 150,000 jobs.

The interesting thing to note on a year-over-year basis, we`re a bit slower
than we were, so don`t overemphasize that 300,000 number, if it happens.

MATHISEN: Brian, thank you so much for your guidance. Brian Levitt with
Oppenheimer Funds.

LEVITT: Thank you.

HERERA: Coming up, why investors should get used to seeing the price of
shares sitting in the hundreds, and even thousands of dollars each.


MATHISEN: Consumers have taken out their wallet. Spending recorded its
biggest increase in more than eight years, in part because of a rise in
vehicle sales in Texas and Florida, following those hurricanes. According
to the Commerce Department, personal spending, which measures household
spending on everything from cars to clothing to haircuts rose 1 percent
last month. Personal income, a measure that includes wages and government
assistance rose 0.4 percent. That was in line with estimates.

HERERA: A number of deals to tell you about. Lennar (NYSE:LEN) and its
smaller rival CalAtlantic are merging to form the largest U.S. homebuilder
by revenue. The price tag tops $5.5 billion excluding debt. The company`s
hope the combination will allow them to better handle some of the
challenges facing the housing market, such as a shortage of labor. The
merger announcement sent shares soars of CalAtlantic soaring and Lennar
(NYSE:LEN) falling.

MATHISEN: For-profit colleges, Strayer and Capella plan to merge in a
nearly $2 billion deal. The tie-up will create one of the country`s
largest for-profit college companies. And together, they will reach 80
those students across all 50 states. They will continue to operate as
independent and separately accredited institution. Shares of both
companies higher in trading today.

HERERA: Constellation Brands (NYSE:STZ) has become the first major beer
and spirits company to invest in legal marijuana. The deal is considered
by some to be a precedent-setting move for an industry that has largely
remained on the sidelines of growth in legal cannabis.

Landon Dowdy has the details.


(NYSE:STZ) is chasing a new kind of buzz. The maker of Corona is taking a
nearly 10 percent stake in Canada-based Canopy Growth. Canopy is the
world`s largest publicly traded cannabis company with a market valuation of
about $1.7 billion. Constellation is planning to work with the grower to
develop and market cannabis-infused beverages, as the company looks to grow
beyond important beers like Modelo or Corona.

The move by CEO Rob Sands is seen as a big bet on the nationwide
legalization of marijuana in the U.S. Sands is saying, quote: Our
company`s success is the result of our focus on identifying early stage
consumer trends and this is another step in that direction.

The brewer`s big best highlights the long-debated question of whether booze
and pot go hand in hand, or if weed kills beers buds. Analysts say rising
cannabis use in the U.S. has a historically negative effect on alcohol
consumption, meaning the more pot sales go up, beer sales suffer.

VIVIEN AZER, COWEN & COMPANY: What we have found in the U.S. data is that
since 2008, we have seen a steady increase in reported cannabis consumption
amongst 18- to 25-year-olds, and simultaneously we`ve seen very steady
reduction in alcohol. I wouldn`t be surprised to see others follow
Constellation`s footsteps.

DOWDY: But Sand says he doesn`t see pot as a threat to booze. As the
consumers going to choose, he wants to be able to offer it all. The deal
is expected to close by early November and gives Constellation the option
to increase its stake to just under 20 percent.



MATHISEN: Well, as we mentioned to you on Friday, two high-profile stocks
are now trading above $1,000 a share. Amazon (NASDAQ:AMZN) and Google
(NASDAQ:GOOG) parent Alphabet pushed higher last week after they reported
strong earnings. And those are just two of many stocks trading at high

And when you see prices like that, you might wonder why the companies don`t
split their shares, to make them more affordable,

Dominic Chu wondered the same thing.


that the stock market is hovering near record high levels. But it isn`t
just valuation or how much you pay in stock price for every dollar of
corporate profits. It`s also just plain old how much you pay in stock
price, period.

As of last week, the average price of a share of stock in the S&P 500 stood
at $103. According to analyst Howard Silverblatt of S&P Dow Jones indices,
that`s the highest on record. And there`s a number of reasons why a
company would want to see a higher share price.

JACK ABLIN, BMO PRIVATE BANK CIO: I think, now, there`s sort of a badge of
honor to have a high stock price, you know, where, you know, companies like
Amazon (NASDAQ:AMZN), you know, breaching $1,000, while Apple (NASDAQ:AAPL)
is over $200, you know, and certainly, Berkshire Hathaway (NYSE:BRK.A).
But all in all, it`s really sort of a cachet, if you will, of having an
exclusive on a high-priced commodity.

CHU: Those higher per share prices are a result of a trend away from stock
splits. Fewer companies are opting to split their shares. Silverblatt
notes that this year, there`s only been five S&P 500 stock splits. There
were only eight in all of 2016 compared to 102 in 1997.

split their stock prices so if a stock got to be $200 a share, the company
would just issue 4-for-1 stock split, the price would go down to $50, and
the owner of one share would then own four shares. It wouldn`t change the
value of your position in that stock, but it would be easier for more
investors to buy in.

CHU: A higher per share price says nothing about an overall company or
market valuation, which does remain your multi-year highs. But as markets
have evolved to be much more index-funded ETF driven, some argue there`s
been less demand from retail investors for buying and selling individual



HERERA: Sales take off at the snack maker, Mondelez, and that`s where we
begin tonight`s “Market Focus”.

After the bell, the maker of Oreo said cost cuts and stronger demand helped
results top expectations. The company also said its international markets
were a particular sweet spot. Shares initially took off in the extended-
hour session, but they finish the regular day down more than 3 percent to

Also after the bell, Texas Roadhouse (NASDAQ:TXRH) said a rise in same
store sales helped overall revenue beat street estimates, earnings were in
line with expectations, and the company said it`s well-positioned for
continued growth. Shares were initially lower in after hours. They also
closed down 1.5 percent during the regular session to $50.41.

Allison Transmission, a provider of fully automatic transmissions to the
commercial industry, saw sales grow at a faster clip than the company and
analysts were expecting. Allison said that a rise in demand in North
America helped topped its own guidance. Profits were also better than
expected. But still, shares fell about 1.5 percent to $42.30.

MATHISEN: The potential merger between Sprint and T-Mobile has reportedly
hit a snag. CNBC says the telecom companies are having difficulty working
through regulatory and pricing issues. Earlier reports said the two
companies disagreed over who would have control over the combined entity
and that Sprint owner Softbank would withdraw from the deal talks. But
CNBC says Softbank won`t take that step, at least not yet. Shares of
Sprint down 9 percent to $6.34. T-Mobile shares off 5 percent at $59.58.

The power producer Vistra Energy will buy Dynegy (NYSE:DYN) in an all-stock
deal worth just under $2 billion. The combined company will have a market
value of more than $10 billion and have power-generating assets and retail
businesses in some of the country`s largest electricity market. Shares of
Vistra Energy fell more than 8 percent to $18.57. But Dynegy (NYSE:DYN)
got a nice bump of 5 percent to $11.85.

Chevron (NYSE:CVX) has reversed its decision to leave Bangladesh without
giving a reason. The oil giant said it has decided not to sell its local
subsidiaries to a China-based energy company. Instead, it said it will
hold on to the assets and work to provide reliability and affordable energy
for that country. Chevron (NYSE:CVX) shares rose a fraction to $114.39.

HERERA: It was five years ago today that the Disney (NYSE:DIS) paid a
hefty sum for Lucasfilm. Today, the purchase price seems like a relative

And as Julia Boorstin reports, the payoff is centered around the galaxy
far, far away.


Disney`s $4 billion purchase of Lucasfilm back in 2012 has paid off. Since
then, the two films it`s released, “The Force Awakens” and “Rogue One” have
together brought in over $3 billion at the global box office. “The Force
Awakens” is still the third highest grossing movie of all time.

BARTON CROCKETT, FBR CAPITAL MARKETS: Disney`s acquisition of Lucas has
been an absolute home run. It`s hard to think of something they could have
done with $4 billion that would have been better and more impactful for
Disney (NYSE:DIS) than buying Lucas.

BOORSTIN: And there are three more movies in the work, including “The Last
Jedi” coming up in December. It`s projected to bring in at least $1
billion globally. ComScore saying it could even hit a $2 billion global

(on camera): And it`s more than just the box office. Disney (NYSE:DIS)
aims to bring “Star Wars” characters to every part of its business, to
exploit the popularity of the films in every way possible, from consumer
products to parks.

(voice-over): Toy sales alone between September 2015 and September 2017
brought in over $1.5 billion according to NPD Group. And Macquarie
Research predicts that this year, total consumer products and interactive
media sales for “Star Wars” will top $5 billion.

Lucasfilm also produces an animated “Star Wars” TV series for Disney
(NYSE:DIS) XE, and another for its YouTube channel. Disney (NYSE:DIS)
could create more of this kind of short-form content for its direct to
consumer app launching in 2019.

Disney (NYSE:DIS) has an even bigger commitment to “Star Wars” at its
parks, investing a billion in each of the new “Star Wars” lands set to open
in 2019.

The success of all of these investments hinges on ongoing interest in its
“Star Wars” films.

CROCKETT: I think the biggest concern is they`ve ascended to such heights,
a movie performance, I`m not convinced that they can get much bigger.
They`ve kind of I think gotten to the peak. But that`s a great place to
be, and I think the view from there is really nice.

BOORSTIN: And Lucasfilm`s value is not just “Star Wars.” It also owns
“Indiana Jones” which Disney (NYSE:DIS) aims to reboot with the film
scheduled for 2020.

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


HERERA: Coming up, thieves know exactly what they`re looking for, and it`s
not what you might think.


MATHISEN: Recreational boating is a $36 billion industry in the U.S. and
sales are on the rise, growing 6 percent last year on the pace for the same
this year, according to industry numbers. But thefts of boats are on the
rise, too.

And Contessa Brewer has learned that thieves target not the boats, but the
high-priced engine that they can easily steal.


criminals just broke into a boatyard, but they`re not after the boats.
They`re after the valuable and more portable engines, specifically high-end
Yamaha engines.

Watch the surveillance video. And it`s clear they know exactly what they
are looking for.

embarrassing and it just makes you feel like a total helpless victim.

BREWER: Alex May owns six boat dealerships in Texas, where thieves have
struck four separate times. They got away with 41 engines worth more than

MAY: These thieves were so sophisticated that they walked past engines
that were sitting in the boxes that they could have just loaded up. They
had our forklift running. And they took specific types of engines that are
more valuable.

BREWER (on camera): And the fact that they know how to do all of this,
it`s not like there`s some casual kid down the street who decides he needs
an engine for his boat.

MAY: No, these are — these are guys targeting this particular item.
There`s no — there`s just no doubt about it.

BREWER (voice-over): There`s no national database compiling engine thefts,
but industry experts say they are seeing a huge spike.

Dan Rutherford oversees marine claims for a large insurance group.

DAN RUTHERFORD, MARINE CLAIMS DIRECTOR: In my 35-year career, I`ve never
seen as many outboards and as many units being stolen from as many marinas.

BREWER (on camera): How are they getting the engines out of wherever
they`re stealing them from?

RUTHERFORD: They`re stealing trucks. They`re breaking through the fences
with the trucks. And there are three guys, usually, and they`re just
lifting the engines and putting them on the truck bed.

BREWER (voice-over): Here in the wealthy South Florida enclave of Gables
by the Sea, we see expensive boat after boats docked on the Intracoastal
Waterway, and so many of those highly sought-after Yamaha engines.

OFFICER MIGUEL ESPINOSA, MIAMI-DADE POLICE: Unfortunately, with the amount
of waterways that we have here in the Miami-Dade County, it is a target-
rich environment, and sad to say, it is very easy for someone to try to
steal a vessel like this, or engines, especially engines. We`ve been
having a big influx of stolen engines and lower units. They could just
pull up to the back of a vessel, and out of the water like this and takes
off six boats, take a lower unit and take off.

BREWER: Florida sees more boat thefts than any other state. Surveillance
cameras routinely captured those burglaries in progress, yet the recovery
rate is just 36 percent, according to the National Insurance Crime Bureau.
And that`s for the boats. Engines are easier to transport and to hide.

UNIDENTIFIED MALE: I believe we were just watching the subjects trying to
take a boat motor engine (ph).

BREWER: Miami-Dade Police Sergeant James Barrett says it`s very difficult
to trace the stolen engines, in part because serial numbers gets erased or

SGT. JAMES BARRETT, MIAMI-DADE POLICE: We have to start from the
manufacturing, work our way back to see where that motor is supposed to be
right now through the records.

BREWER: All these Yamaha engines just sitting in plain sight, even
experienced investigators can`t tell if they`ve been stolen.

We`re there when a team of Miami-Dade police officers shows up unannounced
to a boat repair shop. It didn`t take long for them to find what they
suspect is a stolen boat and two stolen engines. One of them a Yamaha.

DET. SCOTT BROWN, MIAMI-DADE POLICE: This engine here doesn`t have any
numbers, it has a sticker where it used to be, but the numbers seems to be
obliterated or — for some reason, it`s not there. So, without a doubt,
like this particular engine, I can identify who the owner of this engine

BREWER: Police removed the boat, and two engines for further
investigation, as they`re loaded onto a flatbed, the owner of that Yamaha
engine shows up. He tells CNBC he paid $3,500 for the used engine from a
local repair shop.

NORIEL SANTANDER, BOAT ENGINE OWNER: What I worry about losing my money,
because, obviously, I paid for it. I`m not worried because I do nothing
wrong. I just pay a person. If you go to eBay (NASDAQ:EBAY), you know who
the person is, you buy something, you don`t know.


BREWER: Shortly after we did those interviews in Houston and Miami,
Hurricanes Harvey and Irma hit. And here`s some of the photos I took. I
saw damaged and displaced boats all over, which of course makes them
vulnerable to opportunistic thieves. The insurance industry is already
trying to get ahead of climbing claims, and it may now see a triple whammy.
The storm, insurance fraud, with people claiming damage from the storm and
thieves who used these disasters to their advantage.

MATHISEN: Why Yamaha?

BREWER: So, Yamaha says high resale value and reliability. We know that
there`s a network in place in Central and South America of mechanics who
know how to do repairs on Yamaha. So they are highly sought off around the

MATHISEN: And — go ahead.

HERERA: No, go ahead. Where are they going?

MATHISEN: Where are these hot boats and engines going? Who is buying

BREWER: So, the Coast Guard has said they think that it`s just for local
thieves who want to resell the boats or the engines. Veteran insurance
investigators tell me, oh, no, wait, they`re all going south of the border.
There`s cartels in place or organize crime rings that know how to turn
around and resell them, but the Coast Guard tells me they have seen no
evidence of that, not currently.

HERERA: Contessa, thank you, as always.

MATHISEN: Fascinating stuff.

And to read more about our investigation into powerboat engine thefts, head
to our Website,

HERERA: And that will do it for us tonight on NBR. I`m Sue Herera.
Thanks for joining us.

MATHISEN: And thanks for me as well. I`m Tyler Mathisen. Have a great
evening, everybody. And we`ll see you back here 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