SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Bitcoin breakout. The rally
in the cryptocurrency speeds up. It`s all the talk on Wall Street. But
should buyers beware?
TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Fear of missing out. Is
that what will push the market even further into record territory?
HERERA: All real estate is local. But if you own a less expensive home,
you might be in the money.
Those stories and more tonight on NIGHTLY BUSINESS REPORT for Wednesday,
MATHISEN: Good evening, everyone.
The Dow closed at yet another record today. More on that in a moment.
But we begin tonight with bitcoin, the controversial cryptocurrency. Now,
you may know what it is. You may not.
But today, everyone was talking about it, from people at bars, to taxi
drivers, to Warren Buffett. Even Katy Perry. And the front page of “The
Wall Street journal” had something to do.
Part of the reason is that bitcoin has had a meteoric rise. Today, it
zoomed past 11,000, surging more than a thousand dollars in just 12 hours.
And it is up about 1,000 percent since the start of the year.
But as quickly as it went up today, it lost some gains. Retail investors
are taking notice. Now there`s a push under way to create an ETF.
But as Bob Pisani reports, it isn`t without risk.
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Bitcoin is up more than
50 percent this month, it passed the $11,000 mark before falling back
today. So, what`s exciting investors is the expanding derivative market
for cryptocurrencies. It`s adding some much-needed legitimacy to this
Last month, for example, LedgerX, it`s an institutional trading and
clearing platform, they began trading bitcoin options. That was a big
Now, the Chicago Mercantile Exchange, the CBOE (NASDAQ:CBOE), and the
Nasdaq all are set to roll out bitcoin futures soon. This is good news.
Bitcoin futures will enable traders to short bitcoin. That`s a welcome
Another piece of good news, with the passage of time, there`s more
platforms, there`s more participants, there`s more maturity for these
cryptocurrencies. But does that make bitcoin, for example, more valid?
The SEC says not necessarily. There have been several attempts to create
bitcoin ETFs this year. And they`ve all been turned down by the SEC. The
SEC regulates ETFs.
So, here is the problem. The SEC says bitcoin is an unregulated market and
because of that, they won`t be able to enter into any surveillance
agreements between other relevant agencies like the CFTC.
You can`t really blame the SEC for being worried. If bitcoin is really
unregulated, in the SEC`s eyes, it would be subject to manipulation and
fraud, and giving exposure to an unregulated market like the ETF business
exposes the SEC to a lot of potential problems.
So, here`s the question. What would it take to be a regulated market?
Now, it`s possible that establishing a futures market might go a long way
towards addressing the issue. Maybe.
But think about this: bitcoin itself was designed to be unregulated. While
the Blockchain has not been hacked, the platforms that support the
cryptocurrencies have been hacked. And no one is necessarily watching over
all those groups in a coherent, regulated manner.
So, you could see why the SEC is concerned.
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.
HERERA: Jack Hough joins us to talk about the frenzy behind bitcoin. He`s
a columnist at “Barron`s”.
Jack, welcome. Nice to have you here.
JACK HOUGH, COLUMNIST, BARRON`S: Thank you. Good to be here.
HERERA: What is your take in, one, about the volatility that we`ve seen in
bitcoin and the meteoric rise recently in the cryptocurrency?
HOUGH: Well, I think you nailed it, frenzy. You know, when a stock shoots
up, we ask ourselves, what has happened to fundamentally change the value
of the business.
But this isn`t something that can be traced to a business. It doesn`t have
any cash flows. It doesn`t sit up nights thinking about ways to make
itself more valuable. This is a purely speculative instrument.
I think what`s really happened here is in the early days of this, buying
and bitcoins was restricted to hobbyists and some people with ill-begotten
gains out there. We`ve all heard stories about drug trafficking and so
forth using bitcoin.
But now, it`s expanding to a more generalized audience. People are saying
— they`re hearing about friends that bought the bitcoins early, has made
great money and they want in, too. And there`s more exchanges that are
And so, we could see this frenzy continue for a while. You know, when the
time comes, when the people sitting to the left and right of you both own a
bit of bitcoin, I suppose it`s — I suppose the party is over. But until
then, there`s no telling how long this will continue.
MATHISEN: I was speaking yesterday to a couple of investment managers, and
they said the question they get asked more than any other is, should I buy
bitcoin? They`re both equity managers.
So, let`s be clear. What is bitcoin? Is it an asset class? Is it a store
of value? Is it a means of exchange? Is it all three?
How legal is it?
HOUGH: It`s such an important question. They call it a cryptocurrency or
a digital currency. But, look, the last thing I want from a currency if
I`m saving money in the bank is to have a tenfold change in value in the
space of a year.
So, it doesn`t have nearly the stability for that. It`s not an investment,
because it doesn`t provide you any type of cash return. I`m not sure —
it`s not a collectible, it`s not scarce enough.
So, I really think bitcoin is the purest speculative instrument on the
planet right now. The supply of it is controlled by a predetermined
program that increases according t a formula over time. There`s no
government or central banks saying to themselves how much supply shall we
create of bitcoin. It happens automatically.
You`ve got a pretty tight constrained supply over time and just more and
more people wanting to buy in because they see others buying in.
HERERA: You know, one of the things I`m curious about, and admittedly
maybe a little bit worried about, is if indeed there becomes a futures
market in bitcoin, or if there is an ETF, as Bob says there might be, in
bitcoin, what is to keep my mutual fund or my money manager from buying
that ETF and exposing me to bitcoin?
I mean, the individual investors may say, oh, I`m going to stay away from
that. But if there`s an ETF out there, or a futures market out there, they
may inadvertently become exposed.
HOUGH: I think you certainly want to ask the question of any fund that
you`re invested in whether they have plans to buy this. I notice — we see
a lot of excitement around names like the CME and Nasdaq being attached to
bitcoin with derivatives. If you notice, what these big institution —
everybody says the institutional money is getting in.
What these institutions are doing is they`re attaching themselves to the
transactions. They`re connecting a fee here and a fee there. They`re not
putting their own capital at risk.
So I don`t see a time right away when we`re going to see institutions want
to put up capital risk on something that has had this rapid run-up in price
and doesn`t attach itself to any fundamental peg of value.
HERERA: That is a very interesting point. Thank you so much, Jack. We
HOUGH: Thank you.
HERERA: Jack Hough with “Barron`s”.
MATHISEN: Well, as we reported, the blue chip index finished at a record
today, helped by a rise in bank shares. Technology and the Nasdaq went the
other way though, falling sharply. The Dow advanced 103 points to 23,940.
Nasdaq off 88, big loss there, more than 1 percent. The S&P fell almost a
Despite today`s mixed market, investors want to know if the climb higher
for stocks will continue over the month and into 2018.
Mike Santoli takes a look.
MIKE SANTOLI, NIGHTLY BUSINESS REPORT CORRESPONDENT: After stocks` latest
surge, a record highs hitting into what`s often one of the strongest months
of the year, Wall Street is asking if a market melt-up is under way.
There`s no set definition of a melt-up, but it usually describes a market
that levitates quickly and steadily as investors feast on good news and
traders chase the rally for fear of missing out on further upside.
The Dow Jones Industrial Average is already up 20 percent this year. And
good news abounds. Third quarter GDP growth was just revised higher,
corporate profits are up more than expected. Consumer confidence hit a 17-
year high. And now, Wall Street has become captivated by the chances for a
corporate tax cut. After going most of a year without directly pricing in
the effects of a lower corporate tax rate, the market in recent days has
placed more bets on companies likely to benefit most — banks, smaller
companies and other domestic businesses.
So, it would not be surprising if a sturdy but sometimes plodding bull
market became more generous for a while. Yet Wednesday`s market action
hinted at an alternative to the melt-up scenario — a rotation of cash into
those tax cut beneficiaries and out of the huge global growth stocks that
have done best through 2017, including the giants of technology.
Whether it melts high or in a big final flourish for 2017 or stalls from
here, the market this year has been one of the most rewarding in history
measured by the size of the gains compared to minimal downside pain along
The question is, as we enter 2018, might not be about a melt-up, but
whether this is about as good as it gets.
For NIGHTLY BUSINESS REPORT, I`m Mike Santoli at the New York Stock
HERERA: You know, it`s usually all about the economy. And today,
investors learned that the economy grew at its fastest pace in three years.
Here`s Steve Liesman.
STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The U.S. economy got
an even better report card for the third quarter than the one that was
first sent out. The government revised up its estimate of third quarter
growth to 3.3 percent from 3 percent originally reported. It`s the best
economic showing since 2014 and marks the second quarter in a row of at
least 3 percent growth.
The CNBC rapid update estimate for the fourth quarter shows forecasters
expect the economy to remain strong in this quarter as well.
Fed Chair Janet Yellen, in what was likely her final testimony before
Congress, said today it looks like the economy is hitting another year.
JANET YELLEN, FEDERAL RESERVE CHAIR: The economic expansion is
increasingly broad based across sectors as well as across much of the
global economy. I expect that with gradual adjustments in the stance of
monetary policy, the economy will continue to expand and the job market
will strengthen somewhat further, supporting faster growth and wages and
LIESMAN: Yellen`s big concern is that the economy is yet to hit the Fed`s
inflation goal. But she says she thinks it will get there and she sees
early signs that wages for average Americans might be on the rise. The Fed
in its Beige Book report on regional economic conditions said labor markets
were tight around the country. It found, quote, many districts reported
that employers were raising wages as well as increasing their use of
signing bonuses and other nonwage benefits to retain or attract employees.
The next key economic report card comes a week from Friday with the
November jobs report. That`s the last jobs report before the Fed meets.
And as of now, will likely raise interest rates in mid-December in response
to better economic growth.
For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.
MATHISEN: Well, the government report on GDP also showed that corporate
profits are near an all-time high. Adjusted earnings rose more than 4
percent in the third quarter to an annual rate of more than $2 trillion.
That`s just slightly below the peak reported back in 2014. Financial
services companies accounted for two-thirds of the increase.
HERERA: Home sales bounced back in October. Pending home sales, which are
contracts signed but not yet closed, rose thanks to pent-up demand from
hurricanes in the South. But sales in the rest of the nation were not as
strong as record low supply pushed home prices higher, especially where
demand is the greatest.
Diana Olick is in Washington.
DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Buyers came back to
the housing market in October, but not everywhere. It was mostly in the
South, where they`ve been sidelined during two major hurricanes. The
Northeast and Midwest saw small gains. But the West did not, and that`s
because supply is tightest in the West and prices are high.
Inventory is at the lowest since 1991 nationwide. That`s when the realtors
started tracking it. And prices are heating up even more, especially on
the low end, where supply is lowest.
In fact, the bottom third of the market is seeing price gains at twice the
pace as the top third. That`s according to Zillow. Nationally, prices are
up just over 6 percent compared to a year ago. But on the bottom third,
they`re up over 8 percent. On the top third, barely 4 percent.
The same is true locally. In Miami, the bottom tier of the market is
seeing prices up nearly 10 percent. But the top, up just over 2 percent.
In Boston, homes at the top of the market are seeing prices up 4.5 percent
and at the bottom, up 8 percent. And in Atlanta, price gains at the bottom
are three times what they are at the top.
So, if you own a cheaper home, you`re seeing your investment gain in value
much faster. Of course, you only realize that gain when you sell, which
very few homeowners seem to be doing today.
For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.
MATHISEN: Oil prices fell for the third straight day as investors try to
figure out whether the world`s major oil producers will reach a deal to
extend production cuts.
Steve Sedgwick is in Vienna tonight.
STEVE SEDGWICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: A big day of
shuttle diplomacy for oil ministers in Vienna on Wednesday. What`s at
stake is all the gains that have been made over the last 12 months to drag
prices from the low $40 a barrel level up to above $60 a barrel. It`s been
a largely successful strategy for OPEC and their non-OPEC oil-producing
allies, including, of course, the key biggest player in the world, Russia,
which currently produces over 10 million barrels a day.
They took 1.8 million barrels off the table every single day over the last
12 months. The question is, how long they need to carry on doing that
strategy to get the market into where they believe there is balance between
supply and demand with lower inventories. We understand various options
were put on the table today at the joint ministerial monitoring committee
here at the OPEC secretariat in Vienna, but no concrete word yet on a
common path going forward.
Paths could include a nine-monthly rollover to the end of 2018 of the
current strategy, or indeed a review of the strategy at the half year stage
as well. What remains to be seen, though, is whether we`re going to see
accord between all these ministers at the whole meeting on Thursday here in
But oil markets are watching. And any dissent, any fudges could see prices
go right back down again.
This is Steve Sedgwick for NIGHTLY BUSINESS REPORT, in Vienna.
HERERA: Still ahead, why the CEO of AT&T (NYSE:T) says he is digging in
his heels and ready for a fight.
MATHISEN: AT&T`s CEO is ready to fight to win approval for its merger with
Time Warner (NYSE:TWX). Randall Stephenson reiterated his case for the $85
billion deal as the Justice Department alleges the get-together would break
He spoke today with Becky Quick at the Economic Club of New York.
(BEGIN VIDEO CLIP)
RANDALL STEPHENSON, CHAIRMAN, CEO AND PRESIDENT, AT&T (NYSE:T): This
particular case, the Department of Justice chose to file the suit, and so,
we see absolutely nothing in this case that is anticompetitive, lawfully
anticompetitive. And so, as a result, looking at the facts of the case, we
feel like we have a darned good case, and we feel like this is one worth
taking and pursuing into the courts.
(END VIDEO CLIP)
MATHISEN: Julia Boorstin is following the story from a media and
technology conference in New York.
So, Julia, what is the sense about what this might do to deal-making in the
JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, Tyler, here
at the Business Insider Ignition Conference, there`s been a lot of talk
about what`s next for media M&A. I spoke to the Discovery CEO, David
Zaslav. He says there will be more vertical deals, vertical being similar
to what we see with AT&T (NYSE:T) and Time Warner (NYSE:TWX), content
distributors interested in buying creators. He says that distributors are
going to be looking for an advantage.
(BEGIN VIDEO CLIP)
DAVID ZASLAV, PRESIDENT AND CEO, DISCOVERY COMMUNICATIONS: More and more,
they need great content to differentiate.
BOORSTIN: But does that mean you would be interesting to selling to one of
ZASLAV: No, but I think it means — it`s possible. I mean, you know,
that`s possible. What`s more likely is, the reason we bought Euro Sport,
the reason that we bought the Olympics, the reason we`re buying Scripps, is
all that content we own on every platform.
(END VIDEO CLIP)
BOORSTIN: Lachlan Murdoch, the chairman of 21st Century Fox also spoke
here today. He dodged questions about whether he`s interested in selling
part of Fox. But he said the subscale businesses, not including Fox, need
to merge to compete — Sue and Tyler.
HERERA: You know, Julia, there was another big media story today, and that
is Matt Lauer of NBC News. He was fired from NBC News for inappropriate
workplace conduct. But the “Today” show, which he was one of the co-hosts
of, is among the most profitable of television franchises.
So, how big a financial blow, if you will, is that to the network?
BOORSTIN: Well, look, it`s still too soon to say exactly what kind of
changes are going to be made at the show. But Matt Lauer was fired and it
is a major shakeup for the “Today” show. NBC`s chairman Andy Lack saying a
complaint against Lauer was filed by a colleague, which prompted a review.
Lack saying, quote: While it is the first complaint about his behavior in
over 20 years, he`s been at NBC News, we were presented with reason to
believe this may not have been an isolated incident.
Now, Lauer was one of the highest paid men in television news. Last
November, NBC signed a new two-year deal with Lauer to continue paying his
salary, which is reportedly more than $20 million a year, into 2018. And
Lauer is really credited with helping NBC maintain its lead among the
morning shows in the valuable 25 to 50-year-old demographic. The show has
more than 4 million Americans tuning in daily.
Now, the “Today” show brings in far more ad dollars than its rivals. The
first two hours of the show, which Lauer co-anchored, generating over $610
million in ad revenue just last year, according to Kantar Media. Now, of
course, Sue and Tyler, this comes just a week after a rival show, “CBS
(NYSE:CBS) This Morning,” fired Charlie Rose, also following the discovery
So, we`ll have to see how this changes everything or anything in terms of
ratings and ad dollars, et cetera.
MATHISEN: Julia, thank you. A busy day in your world.
Julia Boorstin in New York.
Well, Comcast (NASDAQ:CMCSA) (NYSE:CCS), of course, the parent company of
NBCUniversal, which produces this program.
HERERA: Chipotle is searching for a new CEO. And that`s where we begin
tonight`s “Market Focus”.
Founder Steve Ells is stepping down from his role as chief executive
officer of the burrito chain, saying it`s the right thing to do for
shareholders. The company has formed a search committee and says Ells will
become executive chairman once the search for a replacement is found. An
E. coli outbreak back in 2015 devastated the restaurant chain and the
company has struggled to win back customers ever since. Shares rose more
than 5 percent to $301.99.
After six quarters of decline, Tiffany`s reported a rise in same-store
sales in the Americas. The jeweler said there was strong demand for lower
priced items and high end diamond pendants. Sales in foreign markets
slipped with the exception of China. But the company still topped
expectations for profit and revenue. Shares were off, though, more than
1.5 percent to $92.55.
American airlines is scrambling to find pilots for the upcoming holiday
travel season after a computer glitch allowed every pilot to take vacation
at the same time. To remedy the scheduling issue, American Airlines is
offering pilots a 150 percent of their hourly pay as an incentive to work
those dates. Shares were up a tick to $49.25.
MATHISEN: Nokia (NYSE:NOK) reportedly preparing a takeover bid for Juniper
Networks (NYSE:JNPR). After the bell, CNBC reported that Nokia`s potential
deal would value the networking company at about $16 billion. Nokia`s
shares initially rose in the extended session but finished the regular day
down a fraction at $5.02. Meanwhile, shares of Juniper Networks
(NYSE:JNPR) took off on the news and ended the regular session up 5 percent
After the bell, the apparel company PVH said sales rose above its own
guidance even at the company`s North American businesses were impacted by
the hurricanes. PVH says it sees continued strength in its Calvin Klein
and Tommy Hilfiger brands and it`s raising its full year 2017 outlook for
earnings and sales. Shares initially higher in after hours, they closed
down marginally in the regular session at $137.14.
Coming up, driving into the future.
(BEGIN VIDEO CLIP)
PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Self-driving cars,
electric cars. The newest models turning heads here at the Los Angeles
Auto Show. That story coming up on NIGHTLY BUSINESS REPORT.
(END VIDEO CLIP)
MATHISEN: Residents of a wealthy area in San Francisco are getting their
street back, literally. The city`s board of supervisors overturned the
2015 sale of Presidio Terrace, a privately owned street used about a few
dozen homeowners. As we reported, the residents did not realize that their
homeowners association had not paid a $14 a year tax bill for decades. A
couple then purchased the street and its sidewalk for $90,000 two years
ago. Last night, the agency said the city`s tax collector was at fault and
not the residents.
HERERA: This week, the L.A auto show kicks off with the latest cars and
SUVs from automakers around the world, and increasingly the cars come with
the technology some or all of the driving.
Phil LeBeau is in Los Angeles tonight.
LEBEAU: With all the glitz and glamour you would expect in star-filled
Southern (NYSE:SO) California, the L.A. Auto Show shines with luxury models
loaded with new technology, like BMW`s concept car, the iVision dynamics.
BERNHARD KUHNT, BMW N.A. CEO: It is a taste of the future. But a lot of
the technology in the car will be reality. Not like in the future. It`s
worked on as we speak.
LEBEAU: For Audi, the A8 is an established model updated with features
that allow the car to do more of the driving.
SCOTT KEOUGH, AUDI OF AMERICA PRESIDENT: What is the scenario is, I`m
sitting on the 405, gut-wrenching traffic, bumper to bumper to bumper. I`m
incredibly distracted, because I`m on the phone, I`m taking calls. That`s
when accidents happen. And that`s a stuff that can be avoided with this
LEBEAU: Since California is ground zero for the development of self-
driving cars. It`s not surprising almost every automaker is working on
autonomous drive technology. Even though we pay not see self-driving cars
for several years.
HAKAN SAMUELSSON, VOLVO CARS CEO: Very realistic time frame could be 2021.
That`s what we are seeing.
LEBEAU: And you believe the market is ready to embrace this?
SAMUELSSON: Absolutely. I think there is a lot of people who would like
to use their commute time for something more productive than sitting and
watching the steering wheel.
LEBEAU: While electric and autonomous vehicles may dominate headlines,
Americans still want their SUVs, which is why Subaru is rolling out its
first three-row SUV.
And the best news at this year`s L.A. auto show maybe that sales of new
cars and trucks remains robust, with few in the industry expecting a drop
Phil LeBeau, NIGHTLY BUSINESS REPORT, Los Angeles.
HERERA: And that is NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera.
We`d like to remind you that this is the time of year your public
television station seeks your support.
MATHISEN: And I`m Tyler Mathisen. We thank you for your support. Have a
great evening, everybody. We`ll see you back here tomorrow.
Nightly Business Report transcripts and video are available on-line post
broadcast at http://nbr.com. 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.