Transcript: Nightly Business Report – November 17, 2017

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

The Dow and the S&P 500 fall for the week as tax reform worries linger.

build some wealth? Why you may be better off not buying a house.

MATHISEN: And a new approach to pain. Doctors want to develop no non-
addictive medicines to ease severe discomfort, and they are looking to
genetics for help.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Friday,
November 17th.

HERERA: Good evening, everyone, and welcome.

A wobbly week for stocks which saw both triple-digit gains as well as
triple-digit losses. The debate over tax reform and corporate news keeping
investors on their toes, as is the bond market, which some say is raising
concerns about economic growth. Today when all was said and done, the Dow
Jones Industrial Average fell 100 points to 23358, the Nasdaq fell 10, and
the S&P 500 dropped six. For the week, the Dow and the S&P 500 reported
their first two-week losing streak since August. The Nasdaq, though, was

MATHISEN: Well, with tax reform on the minds of investors, the Senate
Finance Committee voted along strict party lines late last night to advance
the GOP proposal. But a heated exchange erupted at the end of the hearing
with Ohio Democrat Sherrod Brown and Utah Republican Orrin Hatch, the
chairman, arguing over who really benefits.


SEN. SHERROD BROWN (D), OHIO: This tax cut is really not for the middle
class. It`s for the rich. And that whole thing about higher wages, well,
it`s a good selling point, but we know companies don`t just give away
higher wages. They just don`t give away higher wages, just because they
have more money. Corporations are sitting on a lot of money now, they`re
sitting on a lot of profits now, I don`t see wages going up. So, just
spare us the bank shots, spare us the sarcasm and the satire —

SEN. ORRIN HATCH (R), UTAH: I`m going to just say to you that I come from
the poor people. And I`ve been here working my whole stinkin` career for
people who don`t have a chance. And I really resent anybody saying that
I`m just doing this for the rich. Give me a break. I think you guys
overplay that all the time. And it gets old. And frankly, you ought to
quit it.

BROWN: Mr. Chairman, the public believes in it.

HATCH: I`m not through.


HATCH: I get kind of sick and tired of it. True, it`s a nice political

BROWN: Well, Mr. Chairman, with all due respect, I get sick and tired of
the richest getting richer and richer. We do a tax cut —


UNIDENTIFIED MALE: Regular order, regular order.

BROWN: — over and over and over again. How many times do we do this
before —


HERERA: Senate Republicans are hoping to hold a vote on their tax plan
after Thanksgiving. And in an interview today, the treasury secretary said
he`s pleased with the progress.


STEVEN MNUCHIN, TREASURY SECRETARY: We`re very excited about the timeline.
I mean, yesterday was obviously a huge day in terms of having the House
pass the bill. That`s a great move forward. We`re going to have the
Senate as soon as they get back from Thanksgiving, vote on the bill. And
our expectation, it will go to conference right away and we have every
reason to think we`ll get it to the president`s desk before Christmas for
him to sign.


HERERA: Democrats say Republicans are rushing the bill through Congress.

MATHISEN: The White House is asking Congress for $44 billion in hurricane
aid to help people in Puerto Rico, Florida, Texas, and the U.S. Virgin
Islands. The request was short of what some officials say is needed.
Puerto Rico`s governor is asking for $94 billion, for example. Texas, $61
billion. Florida has requested $27 billion. Now, the White House budget
director said that today`s request is not the final one.

HERERA: One Federal Reserve official says that the U.S. economy is growing
enough to withstand an interest rate hike next month. The president of the
San Francisco Fed, John Williams, is also looking for three interest rate
increases next year, bringing the rate to about 2.5 percent. The Fed
currently targets short term interest rates of between 1 and 1.25 percent.

MATHISEN: New home construction surged to the highest pace of the year in
October, but much of that was rental apartments. With home ownership rates
still at historically low levels, at least in recent history, developers
are betting big on rentals and a new study backs that bet.

Diana Olick has more.


Homebuilders were busier again in October, starting new projects at the
fastest pace they have all year. Much of that was about back in the
hurricane-ravaged south, where a single family construction was strongest.
But the biggest driver was here in rental apartments, surging 37 percent
for the month and signaling demand for rentals is still very strong.

Supply has been building in the multifamily sector as home ownership
remains historically low and the supply of entry level homes for sale is
extremely tight.

While some, especially politicians, tout the benefits of home ownership, a
new study says just the opposite, that it is not the best way to grow your
wealth. Economists at three different universities who collaborated on a
study of home ownership found that households can make more money investing
in stocks and bonds than they can owning a home and waiting for that home
value to appreciate. Of course, all real estate is local, and price
volatility various market to market. So, the researchers matched local
markets with comparably volatile investment portfolios. The portfolios
still won.

The one caveat here is that for this comparison to work, the renter must
invest the savings from renting into stocks and bonds.

(on camera): So, if I`m saving a hundred bucks by renting compared to the
monthly cost of owning, I can`t spend that on shoes. I have to invest it.
And remember, owning a home means insurance, property taxes, and everything
that leaks and breaks. And now that the tax breaks that make home
ownership enticing are at risk in the Republican tax plan, that all makes
renting more attractive.

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


HERERA: Owning a home has been the American dream. But according to that
study that Diana just referred to, it may not help you build the wealth
that you would expect.

So, is renting the solution?

Here to talk more about that and the study`s findings is one of the co-
authors, he is Ken Johnson, a real estate economist with Florida Atlantic
University`s College of Business.

Welcome. Nice to have you here.


HERERA: So, do you think that renting overall gives the person an
advantage in terms of wealth-building over time?

JOHNSON: It depends on an individual`s savings, our ability to save, or
their discipline in terms of saving.

As a general rule, Americans like consumption and home ownership at its
core is a self-imposed savings vehicle. So, it`s not always the same for
each individual. In our model, we assumed that the renters are monastic
savers and will reinvest.

MATHISEN: How monastic are we talking about here? Because I assume you
can tweak the assumptions. One would be, how fast are prices rising in the
market that you happen to be in versus — I mean, it might be a great
market in San Francisco and a lousy market in Youngstown, Ohio.

But to get it to come out, I mean, does this mean I have to take my down
payment and invest it? Does it mean all the difference between my rent
versus my mortgage plus insurance plus property tax plus maintenance
charges and invest that difference every month?

JOHNSON: No. It only means that you would need to reinvest your down
payment savings that you would have. You wouldn`t save them and put them
under your pillow. You would actually reinvest the down payment.


JOHNSON: You would also reinvest any payment savings in terms of a rental
versus a mortgage payment. Historically when you rent a particular
property, the rental payment on it will be lower than, say, your mortgage
payment, assuming you get a fixed rate mortgage. But through time, your
rent will climb up and eventually reach and then go above that of your
fixed rate mortgage payments.

We account for both of those in our model. But we only assume that you
need to reinvest your down payment monies and any monies that you would be
saving each and every month. Once we go past to where rent becomes a
negative in terms of it`s now more costly to rent than to own on a monthly
payment basis, then it hurts the portfolio a little bit. But none of that
changes the results. Renting and reinvesting on average wins.

HERERA: How does it — how does it gel with the fact that as Ty mentioned,
you have — all real estate is local, but if you`re investing in a strong
market, you may do well, but, you know, what if you happen to time it so
that you`re investing in a bear market or a negative market?

JOHNSON: The markets tend to be highly correlated with property
appreciation. It`s not perfectly coordinated, but they tend on average to
be highly coordinated and slightly over-perform. So, therefore, for that
renter that reinvest, they`re simply putting their investment in a better
investment vehicle.

HERERA: On that note, Ken Johnson, I don`t know if I`m going to tell my
husband about this, he loves to work on the house — thanks so much for
joining us.

JOHNSON: I`ve enjoyed it very much.

HERERA: Ken Johnson of Florida Atlantic University`s College of Business.

MATHISEN: And still ahead, modern medicine. New hope for managing pain
with non-addictive medicines.


HERERA: The Keystone Pipeline spills 5,000 barrels or more than 200,000
gallons of oil in South Dakota. And the leak comes just days before the
state of Nebraska is set to decide whether to approve a sister pipeline.
TransCanada, the company behind the pipeline, said the leak has been
contained and that it is investigating the cause. But it did send the
shares of TransCanada lower in today`s trading session.

MATHISEN: Shares of 21st Century Fox rose today on reports we first told
you about last night. Comcast (NASDAQ:CMCSA) (NYSE:CCS) said to be in
talks to buy Fox`s worldwide entertainment and distribution assets in
exchange for Comcast (NASDAQ:CMCSA) (NYSE:CCS) shares. The addition of
Fox`s stake in Hulu will give Comcast (NASDAQ:CMCSA) (NYSE:CCS) control of
that company`s streaming service.

Now, all of the recent talk in the industry, deal talk that is, hasn`t gone
unnoticed by CBS (NYSE:CBS) chairman and CEO Les Moonves who said at a
conference last night that CBS (NYSE:CBS) might eventually have to do a
partnership of its own.


against monstrous companies. Disney (NYSE:DIS) is six times as big as we
are. Comcast (NASDAQ:CMCSA) (NYSE:CCS) is six times as big as we are.
Netflix`s market cap is huge. Now, Amazon (NASDAQ:AMZN), the number one
company in the world, is producing content.

We`re sort of like an old fashioned production company, you know? We`re a
small guy. Eventually will we need to do partnerships with other content
companies and distribution companies? The answer is probably yes.


MATHISEN: Moonves isn`t the only media executive talking about all the
changes in the industry. In a separate interview, Liberty Media chairman
John Malone said the cable industry missed its opportunity to compete with
Netflix (NASDAQ:NFLX), adding that now, it`s way too late.

HERERA: On Wall Street, a number of companies made their debuts today.
But as Bob Pisani reports, investors seem to be losing interest in initial
public offerings.


heating up again. But some fatigue may be setting in. Now, it`s been a
very active fall for IPOs. So far, there`s been 150 of them. That`s way
ahead of the 105 we had last year. Six IPOs began trading days. It`s one
of the busiest trading days of the year.

The most widely known of the new crop is the e-commerce apparel darling
Stitch Fix. They priced below their range but they opened strongly. And
also, enterprise security firm SailPoint Technology, they track users on
company networks to make sure no unauthorized activity occurs. Hot space,
they priced above the range and they also opened strong.

But there`s signs of fatigue, like I mentioned. First, four of the six
IPOs that began trading today were priced at the low end of expectations or
in the case of Stitch Fix, below expectations. Now, this tells us that
investors believe the companies are trying to price their IPOs too high.
This was a big issue earlier in the year when companies cut the prices, the
companies traded better after they went public.

And we may be seeing that again. Three companies postponed their IPOs this
week citing market conditions, in other words they couldn`t get the price
they wanted. We`ve also seen a raft of Chinese IPOs in the past few
months. But despite high levels of interests, many of the recent ones have
traded below their initial prices.

So, here`s the bottom line, the IPO market is definitely back, but
investors aren`t willing to pay what they see are inflated prices.

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


MATHISEN: Tim now for our weekly market monitor. As an energy play he
says should provide a great dividend and ETF pick that stands to benefit
from tax reform, he thinks, and an ETF for investors looking for yield, it
is his first time on the program but he`s going to do just fine.

He`s Phil Blancato, the CEO of Ladenburg Thalmann Investment.

Phil, welcome. Good to have you with us.

How are you doing?

MATHISEN: We`re great.

Let`s get your thoughts about this second week in a row of a little bit of
a swoon for the market. Is it anything that you`re worried about?

BLANCATO: No, not really. When you think about earnings season, it`s been
pretty strong. You look at total earnings up around 7 percent, and total
sales, which I care more about, up over 5. Those are strong numbers.

And you continue to see whether it`s housing starts came up today, you see
inflation moderating, even wages up 2.5 percent. Those are all good what
we call goldilocks numbers, and not too hot, not too cold. The economy is
just kind of warm enough to keep going.

MATHISEN: All right.

BLANCATO: And that will support stocks.

HERERA: All right. So, let`s get to your first pick, the iShares Russell
Mid-Cap Value ETF.

BLANCATO: When you think about that wonderful term we called a Santa Claus
rally, going into the end of year, there`s a lot of euphoria around
consumer spending, and that`s what`s held up the economy. In mid-cap value
stocks are only up 9 percent of the year, sister stocks, mid-cap growth,
are up over 21.

So, you`re getting a cheaper sector of the market that`s going to do well
in the fourth quarter because of companies like Best Buy (NYSE:BBY) and
Royal Caribbean and names you know, consumer names you know are going to do
real well in this fourth quarter. So, fourth quarter earnings, strong
consumer, and then tax cuts.

Tax cuts will have a profound impact on middle company stocks, mid-cap
stocks —

MATHISEN: All right.

BLANCATO: — pay higher tax rates. You can win on two fronts. Taxes and
you win on the fourth quarter.

MATHISEN: The number two is another ETF, the Vaneck Fallen Angel — I`m
thinking of the Frankie Valli song — Fallen Angel High Yield Bond Fund.
Tell me about it.

BLANCATO: Well, we`re chasing yield, you know. You think about your local
bank, you don`t make any money, we`ve been sitting in cash, making no money
for a long time.

But a lot of folks are afraid of high yields. It`s been a great high yield
run. This is a great way to buy higher yielding bonds that aren`t as risky
as traditionally yield. The Fallen Angels are companies like Sprint, they
didn`t get the T-Mobile deal done, so the stock sold off, the bonds sold
off, you`re getting a nearly 7 percent yield before a $25 billion market
cap company.

So, to call it high yield is a misnomer. It`s a Fallen Angel because it
was a high credit quality bond that`s fallen a bit, you get it cheap, you
find value in it and you get a big dividend. That`s what you want, being
in the high yield space with less risk and you win on that front really

HERERA: And we finish up with Western Gas Partners (NYSE:WES). Why do you
like it?

BLANCATO: That`s my fun one. For those of you who are a little
opportunistic, want to take a little risk, stock looks terrible, down over
17 percent on the year. But the reason why is earlier in the year, work
with their parent company Anadarko, they issued a bunch of new shares.
They converted their preferred stocks into common shares, and it diluted
the company, meaning they have more shares out there and it put the
pressure on the stock down 20 percent.

But the fundamentals of the company are very strong. You get 7 percent
dividend, they get lots of cash coming in. If you`re like me and you
believe in the future of natural gas, I think that`s the number one heating
source going forward, and perhaps a cold winter, you get a stock that`s
cheap with a big dividend, it`s the energy future of the United States, I
think you win on a lot of fronts by owning the company.

MATHISEN: All right. Phil, thanks very much. Phil Blancato with
Ladenburg Thalmann Asset Management.

BLANCATO: Thank you.

HERERA: Foot Locker shares have their biggest gain since Jimmy Carter was
president. That`s where we begin tonight`s “Market Focus”.

Shares of the athletic shoe retailer soared after that company reported
stronger than expected earnings and said it`s made strides in its e-
commerce platform and mobile app development. The company said there was a
rise in demand for Nike (NYSE:NKE) shoes and said it`s optimistic it could
beat its previous guidance for the holiday period. And the shares ran up
more than 28 percent, their best one-day gain in 40 years, closing at

Meantime, Abercrombie`s Hollister Brand helped to revive sales in the
latest quarter. The teen clothing chain reported sales growth for the
first time in a year. Those results, along with earnings topped estimates
and Abercrombie is also forecasting strong sales for the holidays. The
shares took off, rising nearly 24 percent to $15.55.

A regulatory filing showed the General Electric`s new CEO John Flannery
recently bought 60,000 shares in the embattled company. The transaction
worth more than $1 million could be viewed as Flannery`s vote of confidence
in the conglomerate. GE`s shares which initially rose after the
announcement finished down fractionally to $18.21.

MATHISEN: Apple (NASDAQ:AAPL) says it`s delaying the release of its home
pod speaker until 2018. The technology giant said it needs a little more
time to tweak the $350 device and expects to launch it early next year.
The product marks Apple`s first entry into the smart speaker world. And
Apple (NASDAQ:AAPL) shares were off about a half percent at $170.15.

Despite facing challenging retail situations and two major hurricanes, Ross
Stores (NASDAQ:ROST) said late yesterday it beat its own expectations for
quarterly results. The off price clothing and home goods retailer also
blew past street expectations, hiked its guidance for the quarter and the
full year. Shares finished higher, nearly 10 percent, at $72.25.

HERERA: The opioid epidemic now claims the lives of 100 people a day in
this country. That`s according to the Centers for Disease Control and
Prevention. That has drug companies searching for new non-addictive ways
to treat pain. They`re getting some important clues from genetics.

Meg Tirrell has our story of modern medicine.


might think Steve Pete has a hidden superpower.

JESSICA PETE, STEVE`S WIFE: He broke his foot and it was kind of swelling
up and he was having, you know — it was uncomfortable and he was not
walking like a normal person should. And he just kind of duct taped it and
went to work.

TIRRELL: Pete is 36 years old, and because of a rare genetic mutation,
he`s never felt pain. But what may seem like a genetic gift is actually
incredibly dangerous. Pete has lost count of how many bones he`s broken.

STEVE PETE, CAN`T FEEL PAIN: Probably somewhere around the high 70s, low

TIRRELL: And often doesn`t realize he`s severely injured himself until
months later. Pete`s condition is called congenital insensitivity to pain
or CIP. It`s only been identified in a few dozen people. But it helps
spur a hunt for a whole new class of non-addictive medicine to relieve

Across the country, Red Millius and her siblings grew up with the opposite
problem, an intense pain nobody seem to understand.

REID MILLIUS, HAS “MAN ON FIRE” SYNDROME: One time, I was having like an
attack for several days and finally, I went to the hospital and they were
like, oh, it`s psychosomatic, there`s nothing wrong with you.

TIRRELL: It wasn`t until her young niece started going through the same
thing that Millius did some detective work.

MILLIUS: She was exhibiting the same symptoms, and I was like, there`s no
way I`m letting her go through it, thinking she`s crazy.

TIRRELL: Poring through scientific journals, she identified a rare
inherited condition called erythromelalgia also known as “Man on Fire

MILLIUS: I was like, oh, my God, this is the first thing I ever read that
actually sounds like what we have.

TIRRELL: Genetic testing confirmed her suspicions. Her two daughters have
now developed it as well.

As Pete and Millius separately dealt with their medical mysteries, what
they didn`t know was that scientists have been searching for them for
years, scientists like Dr. Steven Waxman.

rare experiments of nature.

TIRRELL: Waxman and his team are researching potential new approaches to
treating pain, driven by the discoveries of people with rare genetics like
Pete and Millius. It turns out their conditions are caused by mutations in
the same gene for a sodium channel called NAV 1.7.

WAXMAN: It`s like a volume knob on pain signaling. You turn it up,
they`re going to be shouting when they should be whispering. Turn it down,
they don`t make any noise, they don`t send pain signals.

TIRRELL: Now, half a dozen drug companies are working on medicine
targeting NAV 1.7, trying to mimic Pete`s genes in the drug.

personally and I think also at Amgen (NASDAQ:AMGN), we all feel a sense of
urgency. You know, this opioid crisis is really, we`re living it right
now. This is not something that we`re anticipating.

TIRRELL (on camera): The medicines are potentially years away from hitting
the market. And they must go through rigorous safety and efficacy testing
and clinical trials. But researchers say they hold the promise of
delivering pain relief to millions of people, without the side effects,
including addiction, of opioids.



HERERA: Coming up, Tesla unveils a new electric semi truck and a roadster.
But the company is facing a major challenge under the hood.


MATHISEN: We want to remind you about a special program we`re putting
together on retirement on Thanksgiving. We will explore the retirement
crisis in America and different ways you can fund your future.

We want to know how you`re saving and some of the challenges you`re facing.
Tell us by logging on to, clicking on “contact us.” You can also
post a comment on our Facebook (NASDAQ:FB) page or on Twitter.

If you have a question for our personal finance expert Jane Shatsky (ph),
you can e-mail a short video to

HERERA: Amazon (NASDAQ:AMZN) has been quietly going after truck drivers.
The company has designed an app to help delivery drivers get in and out of
the warehouses faster. The app is called Relay. It`s Amazon`s first
attempt to automate the truck delivery process which relies on paperwork
and is prone to errors. It`s a big market to tap into, valued at about $80
billion, because roughly 80 percent of cargo in the U.S. is transported by

MATHISEN: Tesla, the automaker behind some of those stylish electric cars,
says it will revolutionize the trucking industry with an electric semi
tractor trailer. Fans of Tesla`s chief Elon Musk love it. But skeptics
point out Tesla is still struggling to build its latest model and make

Phil LeBeau is in Hawthorne, California.


says this is the future of trucking. All electric semis that go up to 500
miles fully charged and cost 20 percent less to operate than comparable
diesel rigs.

ELON MUSK, TESLA CEO: From day one, having a Tesla semi will be a diesel
truck on economics, day one. And this is a worst case scenario.

LEBEAU: Trucking giant J.B. Hunt says it will reserve multiple Tesla
semis. Other trucking companies may do the same, intrigued by Tesla`s new
take on the semi, including a steering wheel in the center of the cab, and
touch screens replacing standard instrument panels.

(on camera): While the Tesla semi was the headline before tonight`s
unveiling, the real star is this beauty, the new Tesla roadster.

(voice-over): With a ridiculously fast zero to 60 time of 1.9 seconds, the
all-electric roadster is expected to have a range of 620 miles.

MUSK: You`ll be able to travel from L.A. to San Francisco and back at
highway speed without recharging.


But the point of doing this is to just give the hard core smack down to
gasoline cars.

LEBEAU: Tesla fans love the idea of a super fast sports car. But many are
waiting and wondering when Tesla will straighten out production problems
that have slowed deliveries of the company`s newest car, the Model 3.

KARL BRAUER, KELLEY BLUE BOOK: At some point, he`s got to deliver those
before he can, you know, convince everyone he`s going to be able to deliver
things like trucks that have to be used by businesses and be very
dependable and on time.

LEBEAU: The present may be challenging, but Elon Musk knows Tesla fans and
customers will remain loyal as the company plans for a future with electric
cars and trucks.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Hawthorne, California.


MATHISEN: Walmart says it plans to be among the first companies to pilot
Tesla`s all electric semi heavy duty truck. It ordered 15 of them with the
hopes it will help the retailer meet its long term sustainability goals.
Walmart added that it has a long history of testing out new technology.

J.B. Hunt, as Phil mentioned, also reserved multiple vehicles for use on
the West Coast.

Now, that sent shares of truck makers lower today as you see. Cummins
(NYSE:CMI), Paccar and Navistar among them.

HERERA: It will be fascinating to watch.


HERERA: That does it for us tonight on NIGHTLY BUSINESS REPORT. I`m Sue
Herera. Thanks for joining us.

MATHISEN: And thanks from me as well. I`m Tyler Mathisen. Have a great
weekend, everybody. We`ll see you Monday.


Nightly Business Report transcripts and video are available on-line post
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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
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Business Report is not and should not be considered as investment advice.
(c) 2017 CNBC, Inc.


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