Transcript: Nightly Business Report – December 1, 2017

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

Senate leaders are confident they have the support to pass the most
sweeping tax overhaul in decades.

Guilty plea. The president`s former national security adviser heads to
court, admits to lying to the FBI, and says he`s cooperating with the
special counsel.

Dizzying day. Wall Street whipsawed by Washington. What might happen
next, and what investors need to be aware of.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for the first day
of December.

Good evening, everyone. Welcome. I`m Tyler Mathisen. Sue Herera is off

But we begin with history in the making. Republican Senate leaders say
they have the votes now to pass their massive tax cut bill. The day was
spent deal-making to convince uncommitted lawmakers to support the measure.
And it appears enough have fallen into line to pass historic legislation
that will affect virtually every household and business in America.

That prospect, and the likelihood of sharply lower tax rates especially on
businesses, pleased investors, and they watched as stocks mostly recovered
from sharp intraday losses.

Ylan Mui covers the story for us tonight from Capitol Hill.

Ylan, what`s the latest?

Republicans have the votes to pass their tax bill through the Senate 51-49.
The only Republican holdout appears to be Senator Bob Corker of Tennessee.
He said that he`s disappointed, this was a very tough vote for him. But at
the end of the day, he could not cast aside his fiscal concerns over how
this bill might impact the national debt.

Now, GOP leadership has had to make several concessions to win over the
other members of their caucus. Those include increasing the deduction for
pass-through businesses from 17.4 percent to 23 percent. They also
restored the property tax deduction up to $10,000.

Those concessions, however, do come with tradeoffs as well. And one of
those is that they`re going to be keeping the alternative minimum tax for
both individuals and corporations. I spoke to Republican Senator James
Lankford, and he said this is all part of compromise in Washington.


SEN. JAMES LANKFORD (R), OKLAHOMA: There was really a tradeoff for you to
be able to get to lower rates, to be able to make sure that we still have
the revenue. No one wants to be revenue negative in the sense that we
increase deficits. We want to be revenue neutral, able to compensate for
bringing down the rates.


MUI: A final vote on this tax bill is still expected to come tonight.
Assuming it passes, Republicans will be on track to get this bill to the
president`s desk by Christmas — Tyler.

MATHISEN: Ylan Mui, thanks. Ylan on Capitol Hill tonight.

Well, the great tax debate wasn`t the only thing investors watched and
reacted to out of Washington today. Former national security adviser
Michael Flynn pleaded guilty to charges he lied to federal investigators.
And as first reported by ABC News, was expected to testify that President
Trump and transition officials directed him to make contact with the
Russians on a variety of matters.

Eamon Javers is at the White House tonight.


the federal courthouse in Washington, D.C. today as Michael Flynn, former
national security adviser to President Trump, appeared to plead guilty to a
single count of lying to the FBI. A bit of a media scrum on the scene

Here`s what we know about where Michael Flynn`s case stands today, in a
development that moved the stock market dramatically throughout the day.
Flynn pled guilty to that single charge of lying with the FBI about his
talks with the Russian ambassador before President Trump took office.
Remember, there was during the transition period after the election, but
before the inauguration.

Prosecutors say that Flynn discussed Russia with senior members of Trump`s
transition team, among them was Jared Kushner, the president`s son-in-law,
according to NBC News. The White House lawyer is saying that nothing about
this guilty plea implicates anyone other than Mr. Flynn himself. The White
House attorney Ty Cobb also going on to say the false statements mirrored
the false statements to the White House officials which resulted in Flynn`s
resignation in February of this year.

You remember that Michael Flynn was fired for apparently lying to the vice
president of the United States. Now, though, the significant development
here is that Mike Flynn is cooperating with the special counsel`s office.
That could be ominous news for the White House. It`s not clear what
information Flynn has that would be of value to Robert Mueller, the special
counsel. But he is cooperating, and that Cooperation could go on for some

For NIGHTLY BUSINESS REPORT, I`m Eamon Javers at the White House.


MATHISEN: And late today, there were additional reports that former deputy
national security adviser K.T. McFarland spoke to Michael Flynn about his
contacts with Russian officials.

Well, those two events out of Washington created a tug-of-war on Wall
Street today big time, resulting in a turbulent day for investors.

When all was said and done, the Dow Jones Industrial Average dropped 40
points to 24,231 after being down more than 300 points midday. The Nasdaq
ended off 26. The S&P 500 fell five.

Bob Pisani was in the middle of the wild action at the New York Stock


day for the markets. We haven`t seen this in quite a while. The markets
have been fixated on global growth, record earnings, and the prospects for
tax cuts. But traders have spent almost no time thinking about the risk in
the market for President Trump`s potential legal troubles.

We dropped 350 points today when ABC reported that Mike Flynn was prepared
to testify against President Trump and that Trump directed him to contact
the Russians. Originally, reports said it had been about the fight with

We`ve seen this before. Remember back in mid-May, the Dow plummeted more
than 300 points when reports of a memo from former FBI Director James Comey
surfaced, saying Trump asked him to stop the investigation into former
national security adviser Michael Flynn. Stocks sold off about 11:30, but
rose again around noon today when Senator Jeff Flake announced that he was
supporting the tax bill and Mitch McConnell said he had enough votes to
pass the bill.

Here`s the bottom line: the markets are in a tug-of-war between tax cuts
and President Trump`s potential legal troubles. But tax cuts have proven
today that they still have a lot of juice in them.

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


MATHISEN: So how might today`s developments in Washington continue to
impact markets?

Here to discuss that with us is Ed Mills, Washington policy analyst at
Raymond James, and Mike Jones, chairman of Riverfront Investment Group.

Ed, let me start with you, did Bob have it right that for today at least
and probably going forward, taxes trump Trump?

what a lot of folks are looking at is that the fight over tax reform is
very much influenced by a political crisis that congressional Republicans
are facing, that they don`t have any accomplishments yet to truly run on in
the election next year. So, what a lot of Republicans are looking at on
the Hill is that anything that adds to that political trouble adds to the
pressure to get tax reform done.

So, today`s news on Michael Flynn in a way actually adds to the likelihood
we get a tax bill.

MATHISEN: Mike, let me turn to the assumption now that this tax bill, I
call it a tax cut, not tax reform, I don`t see much in here that simplifies
anything, but that`s just me, maybe. If it passes the Senate, there is
still the matter of reconciling their bill with the House. This Senate
bill is very different in certain key particulars from the House bill. How
tough is that reconciliation likely to be?

one of the biggest obstacles to the reconciliation was actually solved
today, because I think that $10,000 in deductibility of state property
taxes, if that was not in the Senate bill, that would be a very difficult
pill for Republicans from blue states with high taxes, that would be a very
difficult pill for them to swallow, because essentially they`d be saying to
their middle class voters that your taxes are going to be going up, not
down, in our tax reform.

So, I think by putting in that $10,000 deductibility for property taxes,
the Senate has really smoothed the path for getting a reconciliation done.

MATHISEN: All right. So back to you, if I might, Ed, on the question of
where this tax cut is most important. It seems to me that it is much less
material for individuals than it will be for corporations and businesses.

JONES: Absolutely. I think what you`re looking at here is that there is a
lot of controversy about individual provisions on the individual side of
the code. I view that as a lot of lobby bait, attracting all of the
attention, all of the fight over there. And we`ve almost seen no fight
whatsoever on the corporate side of this code.

And moving the statutory rate from 35 percent to 20 percent without a lot
of reforms, that`s a significant change that almost gets no debate. And so
kind of to the extent that congressional leaders can keep that debate quiet
and have all of the fight on the personal side of the code, they keep the
eye on the prize, getting this tax bill done, especially the corporate side
of the bill.

MATHISEN: Mike Jones, let`s turn back to the matter of Michael Flynn and
his guilty plea today — the indication that he is he cooperating now with
special counsel Mueller.

How big or potentially catalyzing or maybe even paralyzing a problem do you
see this as being, and what do you see as the market impact, if any?

JONES: Well, I think the market got it pretty well right. After the
initial panic and the selloff, essentially, the market decided to sort of
just toss it out. And I think the reason for that is threefold.

First of all, we do not know that Flynn is going to testify against the
president. That is a rumor that has not yet been confirmed.

Second of all, Trump`s core supporters are never going to believe Flynn
when he says I was lying then, but I`m telling the truth now against the
president. They will stick by the president. We`ve seen that over and
over again.

And the key to surviving scandal historically has always been a core set of
supporters that never abandon you. That`s how Clinton survived his
scandals. That`s how Trump survived the “Hollywood Access” tape. That`s
what would allow him to ride through this as well.

MATHISEN: Final thought, Ed. We`ve got another big event this week, that
is a vote on a budget matter that could not lead to a government shutdown,
debt ceiling, and more. Where are you on that?

MILLS: We don`t shut down. I think we have a short term extension that
gives us to right before Christmas. The House and Senate try to get this
bill conferenced and ready and the whole package is a Christmas present for
the Republican Party getting a big policy win.

MATHISEN: All right. Gentlemen, thank you very much. Ed Mills with
Raymond James, Michael Jones, Riverfront Investment Group.

And still ahead, shifting gears, Americans went shopping over the
Thanksgiving holiday for cars.


MATHISEN: Manufacturing activity expanded last month on an increase in
production and rising orders. Steady consumer spending, improving overseas
markets, helped lift the industry. A report also showed that factory
inventories shrank at the fastest pace in a year.

Well, America`s appetite for new cars and trucks remains strong. In fact,
November sales came in at a robust clip, thanks to strong sales over

But as Phil LeBeau reports, early estimates for 2018 suggest that auto
sales may slow down.


with green for automakers, as buyers took advantage of greater incentives.
As a result, November sales were relatively strong, despite results that
were mixed.

Ford did better than expected with sales up more than 6 percent, while
business for GM and Fiat Chrysler was down slightly compared to a year ago.
As has been the case all year, trucks and SUVs are in demand. Ford had its
best November sales of the F-series pickup since 2001. While the average
price consumers paid for a new GM model hit an all-time high of $37,000.

Overall, 2017 is on track to be one of the five best years ever for the
auto industry, on pace for a third straight year with sales topping 17
million vehicles. But the head of the national auto dealers association
says sales will cool off next year.

MARK SCARPELLLI, NADA CHAIRMAN: We`re expecting over 17.1 million car
sales this year in `17. And for `18, we`re expecting about 16.7 million.
So, it`s still a great robust market for automobile dealers as well as for
the consumer.

LEBEAU: For buyers, the best news is that year-end deals will be fairly

And with consumer confidence at its highest level in years, even those who
don`t buy a new car or truck this month are likely to continue looking as
we head into the New Year.



MATHISEN: Well, profits disappointed at clothing retailer Genesco
(NYSE:GCO), and that is where we begin tonight`s “Market Focus”.

The company said weaker demand for NFL-themed merchandise pressured sales
at its sports apparel store Lids. And despite revenue and same-store sales
that edged past estimates, Genesco (NYSE:GCO) is cutting its earnings
guidance for the full year. Shares falling nearly 18 percent to $25.55.

The discount retailer Big Lots (NYSE:BIG) said stronger demand for
furniture helped the company report better than expected profits. The
company also raised its earnings guidance for the current quarter and the
full year, but same-store sales — well, they came up short, and that
caused Big Lots (NYSE:BIG) shares to slip a percent to $58.21.

Disney (NYSE:DIS) suing the DVD rental company Redbox for copyright
infringement, alleging the company is selling codes that let users download
digital copies of Disney (NYSE:DIS) movies. Privately run Redbox began
offering the feature last month. Redbox doesn`t have a distribution
agreement with Disney (NYSE:DIS). Disney (NYSE:DIS) shares up fractionally
at $105.25.

Meantime, holiday shopping at Macy`s off to a robust start. The retailer
said it would hire an additional 7,000 workers to keep up with foot
traffic. Macy`s (NYSE:M) initially said it would hire 80,000 employees for
the period, down from last year`s 83,000. Macy`s (NYSE:M) shares up more
than 1.5 percent at $24.19.

Well, this week`s market monitor has three picks he says are durable in the
face of changing tax policies. Last time he was on, look at these guys,
Cisco (NASDAQ:CSCO) up 21 percent, you like that. Johnson & Johnson
(NYSE:JNJ), 17 percent. Northrop Grumman (NYSE:NOC), 22 percent higher.

Andy Kapyrin is director of research at RegentAtlantic.

Andy, welcome back. Nice performance there.

Let`s talk about broadly about what we expect tonight is going to be a tax
reform bill passed by — a tax cut bill passed by the Senate. Let`s say it
happens. How much are lower corporate tax rates going to boost American
corporate profits?

But I think the more important question is, who is it going to benefit

I think what we`ve seen this week is the Dow Jones Industrials have done
much better than the more tech-heavy Nasdaq and it has everything to do
with who benefits. Industrials tend to have capital expensing costs, they
tend to have more traditional business models, higher tax rates. Tech
companies tend to be able to park their profits abroad, pay much lower
taxes. So, tax reform doesn`t really give them a boost. In fact, it might
actually hurt.

MATHISEN: And some of the smaller companies that don`t have those big
capital expenses, it might help them as well.

KAPYRIN: That`s right.

MATHISEN: Let`s get to your picks there. They`re interesting. We`ve got
a beer, a package delivery company and a gas company or an oil company.

Let`s start with the beer company first.

KAPYRIN: Sure. So, the company I`m recommending is Molson Coors. Molson
Coors is an interesting one because it`s been struggling so far this year.
It`s one of the underperformers within beverages. And beverages itself is
a hard industry.

Why Molson Coors then? Molson Coors is at a turning point. One, they
recently merged. Molson Coors were separate companies last year. It helps
to bring the cost structure down.

The other thing that they`re doing is they`re pivoting towards more niche
beer brands and a way from the — well, Blue Moon, for example, is one of
their brands that`s growing as opposed to stagnating.

MATHISEN: I like that one. It`s actually a good one.

KAPYRIN: It is a very good one.

MATHISEN: If you want beer, you have to have it delivered. FedEx

KAPYRIN: That`s right. So, FedEx (NYSE:FDX) — FedEx (NYSE:FDX) describes
itself as an e-commerce company on steroids. That`s really what they are.
They benefit from a lot of the trends in consumer shopping, which is we
want to have it delivered to our door. We don`t want to go to the store

But they can actually do it profitably. Amazon (NASDAQ:AMZN) doesn`t make
money off of delivering packages to your door. FedEx (NYSE:FDX) does.
That`s an important difference and makes people bullish on them.

MATHISEN: So, if you have lots of trucks and planes, you need fuel to run
them. Total is your choice in that area.

KAPYRIN: Total. I like European oil giants much more than American ones.


KAPYRIN: Well, one is you don`t have to worry about what tax reform does.
Tax reform could be good, it could be bad.

The other reason is they`re cheaper. After a number of difficult years in
Europe and abroad generally, they`ve gotten materially cheaper than the
Exxons and the Chevrons of the world. It makes Total a bargain.

MATHISEN: Andy, continued good luck to you.

KAPYRIN: Thank you, Tyler.

MATHISEN: So, we got Total, FedEx (NYSE:FDX) and Molson Coors.

KAPYRIN: That`s right.

MATHISEN: Andy Kapyrin, thank you.

All right. Coming up, are business school students choosing bitcoin
careers over Wall Street?


MATHISEN: Here`s a look at what to watch next week. On Tuesday, we find
out if the trade deficit continued to widen last month. Any bets on that?

On Friday, investors will focus on the November jobs reports. And also
Friday, we get new data on how consumers feel about their financial health
and the economy.

That is what to watch next week.

Well, regulators will allow the world`s largest futures exchange to list
bitcoin futures contracts. The CME and the CBOE (NASDAQ:CBOE) will become
the first traditional regulated exchanges where bitcoin related financial
contracts can trade. That could open the door to added regulation. But
some say it could also lead to more mainstream adoption of the
controversial cryptocurrency.

Well, graduate students at some of the country`s most well-known business
schools also have a growing interest in bitcoin. And it`s impacting their
career decisions, steering them away in some cases from traditional Wall

Seema Mody is at the Wharton School of Business in Philadelphia.


students are saying no to traditional finance roles and are increasingly
looking to Blockchain and cryptocurrencies for opportunity.

ROBBIE MITCHNICK, STANFORD MBA STUDENT: Quite a large number of students
in the class who I`ve seen come from private equity, hedge fund,
consulting, you know, those traditional backgrounds, and have foregone the
chance to go back to that traditional path and instead are looking at how
best to immerse themselves in the Blockchain and cryptocurrency world.

MODY: Earlier this year, Stanford MBA student Robbie Mitchnick along with
other classmates wrote a letter to Stanford faculty requesting a class to
be taught on Blockchain. Stanford was quick to respond. The first
comprehensive class on Blockchain and cryptocurrencies will be taught in
the spring of 2018. A similar story is playing out across the country at
Harvard Business School.

College and finance, and entrepreneurship, and strategy, and technology
operations, all thinking about, you know, how do we think about the
Blockchain and the set of questions it raises in our disciplines and the
demand from the students I think surpasses that.

MODY: As students prepare to enter the corporate world, data shows that
employers` interest in Blockchain experience is rising. Global freelancing
firm Upworks says Blockchain was the second fastest growing skill in the
third quarter out of more than 5,000 skills on the platform. In fact,
Upworks saw a 26 percent jump in freelancer billings for Blockchain
compared to this time last year.

As demand grows, business school students across the nation are launching
Blockchain clubs to learn, collaborate, and connect with like-minded

Students are now approaching the critical recruiting season which kicks off
in early January. It will serve as a real world indicator as to whether
students can land a job that utilizes Blockchain technologies. Some say
this field offers more promise long term than a traditional role in

UNIDENTIFIED FEMALE: My immediate goal is to follow a Blockchain incubator
or like venture fund, investing in Blockchain companies.

UNIDENTIFIED MALE: I`m looking to the technology space, and Blockchain is
something I`m looking at keenly, mostly because I see it as a disruption.

UNIDENTIFIED MALE: In the next 20 years, there`s going to be a whole host
of applications that we can`t even dream off today.

MOODY: Still, some business school students prefer playing it safe, saying
they`re skeptical of bitcoin`s rise and the hype surrounding Blockchain.
They also say the lack of regulation and central bank oversight is a major

UNIDENTIFIED MALE: Everyone is looking for the popular trends. I`ve
definitely heard of people that were in investment management that want to
sort of go to more Blockchain/bitcoin type because it`s a sort of, you
know, it`s a different risk/return profile, a higher upside. I`m still a
stocks guy, but I think I look more at the fundamentals.

MOODY: Wharton Business School professor Kevin Werbach says over time,
this technology will prove to be indispensable.

Blockchain very much like the Internet 20 years ago. We`ll look back 20
years from now, and it`s going to be hard to talk about any company of any
size, and maybe really any company at all, that doesn`t have some
application of Blockchain technology.

MOODY: For NIGHTLY BUSINESS REPORT, Seema Mody in Philadelphia.


MATHISEN: Fascinating stuff. And you can read more about bitcoin and
Blockchain at business schools on our Website,

Before we go, let`s take another look at the Dow`s crazy day. Word late
morning that national security adviser, formerly, Michael Flynn, pleaded
guilty to charges that he lied to federal investigators, and an ABC News
report that he was expected to testify that President Trump directed him to
make contact with the Russians, that sent stocks into a tailspin, as you
see on that chart.

The Dow falling at one point more than 300 points. But stocks then
regained most of their losses when Senate Republicans said they have the
votes to pass their tax bill, closing slightly lower at the end of the day.

Well, that`s NIGHTLY BUSINESS REPORT for a very busy Friday. I`m Tyler
Mathisen. Thanks for joining us.

We want to remind you, this is the time of year that your public TV station
seeks your support. We thank you for watching. Thank you for your
support. And have a great weekend. We`ll see you Monday.


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.


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