Transcript: Nightly Business Report – December 22, 2017

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

last minute push for gifts is giving brick and mortar stores an advantage
over online retailers during one of the busiest shopping days of the year.

California leaving? Why some residents are thinking about moving out of
the largest U.S. state economy.

And bogus Bordeaux. About to crack open a bottle of wine for the holidays?
Be careful, it might be a fake.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Friday,
December 22nd.

Good evening, everyone, and welcome. I`m Sue Herera. Tyler Mathisen is
off tonight.

It is one of the most important times of the year for the retail sector,
and this weekend is likely one of the most critical for brick and mortar
stores. With the last minute push to buy gifts, many will be heading out
to the malls or local shops for fear that packages won`t be delivered on
time. In fact, tomorrow is Super Saturday, one of the busiest shopping
days of the year, and it falls at the tail end of the holiday season in
which most retailers earn a sizable chunk of their annual sales.

Courtney Reagan caught up with last minute shoppers at the Queens Center
Mall in Elmhurst, New York.


checked off your Christmas list yet, you are far from alone.

UNIDENTIFIED FEMALE: I just started, because I work all the time, so today
is my first day of shopping, I`m not even close to being done. I`m

UNIDENTIFIED MALE: None of it`s done. We`re just getting started and I
have two days to finish it.

REAGAN: Half of U.S. consumers are expected to hit the stores in the final
hours before Christmas. That`s actually down from last year, largely
because consumers took advantage of deals starting early in November.

UNIDENTIFIED FEMALE: My holiday shopping has been pretty OK, except for
those few hard last minute people. So, here I am.

UNIDENTIFIED MALE: I come to the mall at the last minute, the prices go up
and you have to spend a lot more money.

REAGAN: Tomorrow is expected to be the second busiest day of the year for
stores. So far today, at the Queens Center Mall, traffic has been picking
up as the hours have worn on. Tomorrow, the mall is opening at 8:00 a.m.
and stores are staying open for 35 straight hours.

The last Saturday before Christmas is always critical, nicknamed Super
Saturday, and it`s even more important for last minute shoppers this year.

With Christmas falling on a Monday, shipping deadlines were earlier, which
means procrastinators need to finish up in stores.

UNIDENTIFIED FEMALE: I started a week ago. Today is my second day
continuing my shopping. I think I`m going to go tomorrow again.

REAGAN: First Data says holiday sales are up more than 6.5 percent since
November 1st. Couple with the already strong season with the last-minute
rush, and analysts are upping their optimistic forecasts, going into the
final shopping weekend.

DANA TELSEY, TELSEY ADVISORY GROUP CEO: Today and tomorrow are key times
for the holiday season. And typically, 40 percent of holiday sales occurs
between December 15th and the 25th. So, today and tomorrow are outliers in
terms of their importance and significance.

UNIDENTIFIED FEMALE: I think I need some adrenaline like last minute, it
gives me some adrenaline. This is what motivates me to do the shopping.

REAGAN: Nothing like the adrenaline of a ticking clock.

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


HERERA: And today, we learned that Americans spent more and saved less in
November. And some economists are interpreting it as a sign that the
holiday spending season is strong.

And as for those who made purchases online, deliveries appear to be running

Morgan Brennan has a report card on the shippers.


FedEx (NYSE:FDX) are expected to deliver more than 1 billion packages
between Thanksgiving and year`s end, and historically, this week is the
busiest. Add the U.S. Postal Service`s 850 million packages, and the
numbers are extraordinary.

So, how is it all going?

Well, based on third party data from ShipMatrix, pretty well. On-time
performance for FedEx (NYSE:FDX) ground last week was 98 percent. For UPS
ground, 97 percent, after some early service hiccups after Thanksgiving.

And ShipMatrix notes preliminary results for this week show both are
performing even better. UPS says demand for its services, quote, remains
very strong. We have returned to our original chief operating plan, normal
delivery time, and transit after the initial cyber week surge that exceeded
our operating plants.

For FedEx (NYSE:FDX), CEO Fred Smith saying earlier this week, quote, FedEx
(NYSE:FDX) is on track for another record holiday shipping season. From a
service stand point, so far, the company calls at it the best peak season

As for the Postal Service, last mile delivery which Amazon (NASDAQ:AMZN)
uses heavily, has been on time 99 percent of the time and volumes have been
higher than expected. For each of the Sundays in December, the government
agency forecasts 6 million package deliveries. This past Sunday, it
delivered 10.5 million.

But while the cost to deliver all those shipments won`t be known until
earnings, overall, operations do seem to be going as planned.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan at the New York Stock


HERERA: Well, with this year`s holiday shopping season almost in the
books, we`re looking ahead to 2018. What might the retail environment look
like and what trends could we expect to see?

Here to share some thoughts with us tonight is Thom Blischok. He`s
chairman and CEO of the Dialogic (NASDAQ:DLGC) Group.

Welcome, Thom. Nice to have you here.

Sue, and merry Christmas.

HERERA: Merry Christmas to you as well, and a great new year.

You know, it seems that 2017 for the retailers was, one, a very tough one,
and, two, one of disruption. Does that continue into 2018?

BLISCHOK: Oh, absolutely, yes. I think some of the changes we`re seeing
with people like Walmart buying, Target (NYSE:TGT) buying Shipt,
we`re moving into a different kind of retailing environment where retailers
are going to buy capabilities. So, you can expect the disruption to
continue well into 2018. By the way, also driven by shoppers who are
moving more and more online.

HERERA: You know, do you expect that this particular shopping season, as
we finish out 2017, will be strong? That`s what we`re hearing, anyway.
What are you hearing?

BLISCHOK: Yes, I`m seeing a very strong shopping season, I believe both
online and in store. And I do believe there will be a fairly interesting
day tomorrow as shoppers rush to the store because of deals. I was in
stores last night and earlier today, you know, 90 percent off, 70 percent


BLISCHOK: So, this is a tremendous time, a tremendous time to buy for the
holiday season.

HERERA: Now, what about shopping in 2018? You mentioned the migration to
online. I assume that will grow exponentially.

BLISCHOK: Yes, I would project that we would see — this year online grow
about 14 percent to 16 percent. I would say, next year, we`re going to see
in the mid-20s. America has found convenience shopping online, whether
it`d be from the couch, or the office, or the home, has actually been
something they like a lot — easy, expert, and fair.

HERERA: Now, in terms of value, and in terms of pricing, you mentioned
what you saw today. Once the consumer gets used to those kinds of deals,
they tend to wait longer. Will 2018 continue the discounting or the
pressure on the stores to continue discounting?

BLISCHOK: Absolutely, yes. I mean, we have total price transparency. I
was in probably 300 different outlet stores this year. And I saw more
smart phones than I`ve ever seen, people checking prices. So, what`s going
to happen next year is that this issue of price transparency becomes even
more real. Retailers are going to have to deal with how they serve those
shoppers, same with manufacturers.

HERERA: What about the tax reform package? The administration is saying
it will give people more money in their pockets. They may see it as soon
as perhaps February. What`s the psychological impact for those who do see
a little more in that paycheck? Do they spend it, do you think?

BLISCHOK: Oh, I think so. And I think we`re already seeing it, you know,
in chatting with a bunch of shoppers this morning after the tax package
passed, they said, we`re going to buy one more gift. I would expect that
we would see some more spending next year, probably more for things like
home appliances, updating the home, updating the car, updating clothes.
It`s been a long time since people had this level of euphoria.

HERERA: On that note, have a wonderful Christmas, and a great new year,
Thom. Appreciate it.

BLISCHOK: You too. All right.

HERERA: Thom Blischok with Dialogic (NASDAQ:DLGC) Group.

On Wall Street, meanwhile, stocks pulled back just a little bit ahead of
the long holiday weekend. The markets are closed for Christmas on Monday.

Today, the Dow Jones Industrial Average fell 28 points to 24,754. The
Nasdaq was off five. And S&P 500 lost one point.

For the week, the Dow and the S&P posted a five-week win streak. Now, this
is also the start of the so-called Santa Claus rally. But will Santa be
coming to Wall Street this year?

Bob Pisani is at the New York Stock Exchange.


of the so-called Santa Claus rally period. That`s been viewed as an old
Wall Street indicator of market performance in the year to come.

The Santa Claus rally refers to the tendency of the markets to rise in the
last five trading days in December plus the first two trading days in
January. It`s been good for an average gain of 1.4 percent in those seven
trading days over many decades. The failure to rise is thought to indicate
the start of a bear market or at least some kind of pause later in the

But some traders are saying, bah, humbug, after the year`s already hefty
gains. Dow, and the S&P, and the Nasdaq have all surged 20 percent or more
in 2017. And 5 percent of those gains came just in the last five weeks.
So, we`ve got a tax bill, a government spending bill done. And in the
absence of other catalysts, investors could be looking for excuses to sell.

UBS`s Art Cashin though believes Santa Claus could be on his way with a
little help from banks and industrials, sectors that would reap the biggest
benefits from corporate tax cuts.

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


HERERA: Purchases of new homes unexpectedly surged to the highest level
since before the Great Recession. The latest report from the Commerce
Department shows that demand for new construction remains strong across the
country. Sales of single family homes soared 17.5 percent in November and
the number of properties sold in which construction had not yet started
increased more than 40 percent, indicating that builders will stay busy in
the months ahead.

There are also signs that demand is improving for long lasting manufactured
goods. Durable goods orders increased 1.3 percent from the prior month,
helped by purchases of airlines, cars, and military equipment.

Meantime at the White House, the president signed into law the most
consequential tax bill in decades. As you know, that legislation sharply
cuts corporate taxes. And today the president said it includes something
for everyone.


bill for the middle class and a bill for jobs, and jobs are produced
through companies and corporations. And you see that happening.
Corporations are literally going wild over this I think even beyond my


HERERA: The president also signed the continuing resolution which will
keep the government opened through mid-January.

And with the tax bill now the law of the land, how will it change
California, the country`s largest state economy?

Jane Wells reports tonight from Long Beach.


dreamin`, more taxpayers are California leavin`.

JOEL KOTKIN, CHAPMAN UNIVERSITY: California`s outward migration has been
increasing over the last few years. And the tax bill could make it worse.

WELLS: A hundred and five thousand more people moved out of California
than moved in last year, according to state realtors. That`s three times
more than five years ago.

MICHAEL HUTTON, MARKETING ASSOCIATE: My next opportunity, my next career
step, I`m looking elsewhere.

WELLS: Twenty-six-year-old Michael Hutton is a marketing associate in L.A.
His 61-year-old mom Sandi is a retired executive in Long Beach. Both will
move in 2018. Taxes are killing her, and he can`t afford to buy a house.
They`re debating whether to move to Texas or Florida.

SANDI FITCH HUTTON, RETIRED EXECUTIVE: They`re growing states with
excellent infrastructure, tax-friendly.

M. HUTTON: I can get a two-bedroom, one-bed house in Tampa for $120,000.
My mortgage would be less than my rent was in Van Nuys.

WELLS: Most Californians will see their tax bills go down because they
don`t itemize. But this state has always had an exaggerated dependence on
higher income earners who do itemize. They deduct their sky high state
income taxes and they have really large mortgages. And one study suggests
2 million of those Californians will see their tax bills go up.

At the same time, though, the state`s tech giants will see their corporate
taxes go down, which means they might invest and expand, though maybe not

KOTKIN: If you take a look at where Apple (NASDAQ:AAPL) and Google
(NASDAQ:GOOG) are growing, outside of the Bay Area, it`s not in the rest of
California, it`s to Boulder, it`s to Austin, it`s to Salt Lake City.

WELLS: California`s economy has grown more quickly than the rest of the
nation since the recession. But an economic forecast from California
Lutheran University says its so-called growth premium will virtually
disappear by 2019.

And the Golden State`s loss will be another state`s gain.

S. HUTTON: There are parts of California that just feed my soul. But I
can always come back.

WELLS: Sandi Fitch Hutton says profits from selling her home means she can
come back whenever she wants — as a visitor.

For NIGHTLY BUSINESS REPORT, Jane Wells, Long Beach, California.


HERERA: And still ahead, looking for some stocks that could benefit from
that tax bill?

Our market monitor has some investment ideas for you.


HERERA: Apple (NASDAQ:AAPL) is facing some lawsuits over its policy of
slowing down older iPhones. As we reported, Apple (NASDAQ:AAPL) admitted
to the practice but says slowing things down helps the battery life on
older models. Now two class action suits have been filed, one describes
the practice as deceptive, immoral and unethical. The other lawsuit
alleges that the practice harms users who did not agree to it.

Eric Schmidt is stepping down as the executive chairman of Google`s parent,
Alphabet. Schmidt joined Goggle in 2001 and he helped take the company
public in 2004, and played a critical role in growing that company into
something more than just a search engine. Schmidt will relinquish his role
at the company`s next board meeting in January, but will continue to be a
member of the board and a technical adviser.

Papa John`s founder is also stepping down as CEO. But John Schnatter will
remain chairman of the company. Papa John`s has been in the headlines, as
you may recall recently. The CEO criticized the NFL publicly last month
for not resolving the anthem issue and blamed declining pro-football
viewership on a drop in its sales. Papa John`s is a sponsor of the
National Footbal League.

There is also a change at the top of CSX (NYSE:CSX). The third largest
railroad named Jim Foote chief executive, succeeding veteran industry
turnaround expert Hunter Harrison. Harrison died suddenly week just months
into the company`s ambitious turnaround plan. CSX`s board said it is
confident in Foote`s ability to lead the railroad.

Home Depot (NYSE:HD) is reportedly eyeing logistic services company XPO as
a takeover target. That`s where we begin tonight`s “Market Focus”.

According to Recode, Home Depot (NYSE:HD) has been in talks with XPO in
recent months regarding a potential merger. The report says if Home Depot
(NYSE:HD) does make an offer, it will be because it wants to keep that
transportation and delivery company out of the hands of Amazon
(NASDAQ:AMZN). Shares of XPO jumped 14 percent to $90.01.

Swiss drug maker Roche is buying the cancer treatment maker Ignyta for $2
billion. The deal will expand Roche`s oncology portfolio, giving it
control over gene therapy treatments that are in early development. Ignyta
shares soared 72 percent to $26.85.

And Amazon (NASDAQ:AMZN) is expanding its lineup of in-home devices with
its latest deal to buy security camera and smart doorbell maker Blink.
Amazon (NASDAQ:AMZN) bought the startup for an undisclosed amount. The
deal appears to be complementary to Amazon`s existing service for its Prime
members, which lets delivery personnel walk right into the home to drop off
packages. Amazon`s shares were off just a fraction to $1,168.36.

And UnitedHealth Group (NYSE:UNH) says it has signed a definitive agreement
to buy Chilean healthcare company Banmedica for about $3 billion, as the
insurer looks to expand its presence in South America. UnitedHealth
Group`s shares were off just a fraction to $220 even.

Time now for our weekly market monitor who has three valued picks he says
will benefit from tax reform. It`s his first time on the program, so we`re
going to welcome Ernesto Ramos with BMO Global Asset Management.

Ernesto, welcome. Nice to have you here.

Sue. And happy holidays to you and our viewers.

HERERA: Yes, absolutely. You basically favor right now value over growth
because of valuation concerns in the market, correct?

RAMOS: Well, that and other reasons. The tax reform will have a huge
impact on U.S. growth. We think conservatively speaking, it`s going to add
close to 1 percent to GDP growth over the next few years. So, that favors
the value sectors because they are more cyclical. Financials, energy,
materials, industrials are more the value stocks, whereas technology,
utilities, real estate, et cetera are more on the growth side, and those
are not as favored by tax reform.

So, that`s one of the reasons we like value stocks right now over growth.

HERERA: Well, let`s get right to your picks. Valero, the symbol is VLO.
It trades at 18 times, and it has a dividend of better than 3 percent.

RAMOS: Exactly. And when you combine the valuation plus the dividend, it
really is a company that is very attractive, especially when you compare it
to treasury yields at 2.4 percent or 2.5 percent. The story with Valero is
very simple. They used to be very focused on growth and growing capacity.

And now, they`ve turned their focus to very much a cash flow story and a
very disciplined approach to spending capital. And the market has loved
that, that`s why the stock has done what it`s done over the recent past.
So, it`s a story of becoming much more disciplined in the way they spend
money and returning more money to shareholders.

HERERA: Let`s go to your next pick, which is Bank of America (NYSE:BAC),
BAC. You said you bought it after the president won in the election, and
you say it scores in the top 20 percent of the universe. Interesting.

RAMOS: Well, so we have a very complex scoring system. We score 10,000
stocks worldwide, 4,000 alone in the U.S. at BMO Global Asset Management.
The key for Bank of America (NYSE:BAC), it benefits from a few trends.
First of all, it benefits, it`s a 30 percent effective tax rate. That`s
going to go down, of course, with tax reform.

It`s also benefitting from deregulation of the financial sector, of course.
And it`s benefiting from the fact that they`ve become much more
conservative in their approach to lending. Their mix is now much better at
50 percent retail and 50 percent commercial. And they`re returning an
additional $5 billion on top of the $13 billion of capital to shareholders
over the next 12 months. So, it`s a great capital return story, like
Valero in that respect.

HERERA: All right. Last pick is Walmart, which is perfect for this time
of year. And you say it actually scores in the top 12 percent of BMO`s

RAMOS: Yes. And Walmart is not as cheap as the other two, it`s about 22
times. But Walmart is the — pretty much the leader in — or the most
effective competitor to online retail amongst the brick and mortars,
because they`ve expanded their online presence. Just the last 12 months,
their online sales grew 50 percent. They`re the only ones that are
competing with Amazon (NASDAQ:AMZN) effectively.

They`ve introduced free shipping, free two-day shipping in orders over $35
to compete with Prime. And with the acquisition of, they acquired
the technical knowledge and management to effectively run their online

HERERA: All right. We have to leave it there, Ernesto. Thank you so much
for joining us.

RAMOS: You`re very welcome, Sue.

HERERA: Ernesto Ramos with BMO Global Asset Management.

Despite the big rally in the market this year, not all stocks participated.

Dominic Chu takes a look at those that were left behind.


when we take stock about the market and figure out which of the stocks in
the market had been cast out, like the land of misfit toys, except now
we`re talking about the land of misfit stocks.

So, as the markets have run towards record highs, some of these sectors
have gone along with them. Check out what`s happened with financials,
multiyear highs for that sector.

But underperformers, stocks that have been left behind, ditched, XL Group,
6 percent to the downside. AIG, 8 percent to the downside. And Navient,
20 percent to the downside. Financials that have not participated, misfit

Also check out what`s happening with technology, the biggest sector out
there. Some of the stock we`re focusing on here, take a look at this. F5
networks down 8 percent so far this year to date. IBM, Big Blue, down 9
percent. Western Union (NYSE:WU) down 11 percent. Tech stocks that have
missed out on that rally, misfit stocks.

And check out what`s happening with discretionary, it`s the retail season,
which means we`re focusing on discretionary stocks also near record high as
a sector. But Signet Jewelers, down 41 percent year to date, Mattel
(NASDAQ:MAT), the toymaker, 43 percent downside, and Under Armour
(NYSE:UA), the athletic apparel giant, 47 percent to the downside.

Very interesting story when it comes to winners and losers here, but some
of these stocks may either be due for a bounce next year, or do investors
think that downside continues?



HERERA: Coming up, before you raise a glass this holiday, make sure the
wine you`re drinking isn`t a fake.


HERERA: As you crack open that bottle of wine to celebrate the holidays,
do you really know what`s inside? Experts say wine is one of the luxury
markets that`s rife with fraud. And it`s not just the vintage collections.

Andrea Day reports on the faux Bordeaux.


something, I would pick wine.

bestselling author and wine expert.

HELLMAN: Upwards of 20 percent of the time, you may be drinking a fake and
probably will never know it.

DAY: It`s a multibillion dollar business. Just one man, Rudy Kurniawan,
raked in millions hawking fake wine, even duping billionaires.

HELLMAN: Now, he was a very good counterfeiter.

DAY: He`s currently serving a ten-year sentence. But his case helped
expose the dirty truth that collectors and auction houses don`t like to
discuss. Years later, experts say counterfeiters are still in the game.

HELLMAN: People have forgotten. New, wealthy people are moving into the

DAY: Just last month, Chinese police seized thousands of bottles in a fake
wine scam. According to Hellman, it`s one of the easiest luxury goods to

HELLMAN: It`s not like a Rolex. You can`t take it apart and say, oh, this
is not a Rolex. You can`t prove that a wine in a bottle came from a
particular vineyard in France. It`s in the taste that you know the

DAY: And he says the phony bottles are often just recycled.

HELLMAN: They will simply very quietly resell it in the auction market.
This happens over and over again.

DAY: And it`s not just rare vintages being sold at auction, or through
high end dealers.

HELLMAN: The mass produced winds which are faked, yes, they show up in
your store.

DAY: How easy is it to catch these cheaters?

HELLMAN: Almost impossible to catch them. Almost impossible.

DAY: Bill and Annie Edgerton are in the business of weeding out frauds.
The father/daughter team typically hired when someone thinks they have a
fake and want an expert opinion.

Do you know of major collectors right now who have counterfeits in their


DAY: But they`re not revealing any secrets.

EDGERTON: Not without a lawsuit.

DAY: Despite the bogus wine, they say, some of the best clues are on the

EDGERTON: If you were able to feel it, it`s very rough, because it was
glued on the bottle.

DAY: And this one looks like it`s been sitting in a cellar for years, but

EDGERTON: It was printed on the label to make it look like it was dirty.
If you take some cleanser to this and try to take it off, it won`t come

DAY: All of these magnums found in an investor`s collection after he tried
to sell them a decade later.

EDGERTON: And the person he bought them from wouldn`t take them back. The
reason they wouldn`t take them back was everybody knew they were
counterfeit except the investor.

DAY: So, what can you do?

HELLMAN: If you`re buying expensive wine, you need to know the provenance
of that wine, where did it come from. If the dealer can`t show you that
sales receipt, that provenance, don`t buy it.

DAY: And the bottom line, all bottles look the same. You can`t know how
it tastes until you open it. That`s why buying from someone you trust and
asking all the right questions is key, even at the local wine store.



HERERA: And that will do it for NIGHTLY BUSINESS REPORT tonight. I`m Sue
Herera. Thanks for joining us.

Have a great weekend, everyone. Merry Christmas. We`ll see you Monday for
a special edition of NIGHTLY BUSINESS REPORT.


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
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Business Report is not and should not be considered as investment advice.
(c) 2017 CNBC, Inc.


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