Transcript: Nightly Business Report – December 28, 2017

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

Stocks heat up on the next to last trading day of the year. But could
January bring a chill to investors?

Not too late. There is still time to perfect your portfolio for 2018.
We`ve got some last minute tips.

And, scam school. There are many different schemes out there to take your
money or your information. Some expert advice tonight on spotting what`s
real and what`s not.

All that and more tonight on NIGHTLY BUSINESS REPORT for Thursday, December

Good evening, everyone, and welcome. Sue Herera has the night off.

Well, one day left, that is all that remains this year on Wall Street. And
today was like many others this year, not spectacular, but lovely and
steady. At the end of penultimate trading day of 2017, the Dow had notched
its 71st record close of the year and has 25,000 in its sights.

Also, the blue chip average is tracking to end the year with six straight
weeks of gains. That would be the first time for that since 1954.

Here are today`s closing numbers. The Dow rose 63 points to 24,837.
Nasdaq added 10. And the S&P 500 tacked on just about five.

So, 2017 will be remembered as one of the better years for U.S. stock
investors in a generation. Not as good as, say, `95 or `97. Still, 20
percent or more is nothing to scoff at. But next comes January. And many
market pros wonder whether that will the month that some investors book
profits, sending the major indexes lower.

Landon Dowdy takes a look.


final two trading days of the year, the Dow was higher by 25 percent year
to date. The Nasdaq, 29 percent. And the S&P at nearly 20 percent year to

Will that trend continue into 2018?

Well, if history is any indication, we could expect a winter chill to start
the new trading year.

According to Kensho, here is a look at January market performance the last
20 years. The Nasdaq, the lone bright spot of half a percent on average.
The Dow down 1.3 percent. The S&P down 8/10ths of a percent, with January
typically the third worst month of the year.

Now, within the sectors, tech has the highest return, up 3/4 of a percent
on average. Western Digital (NYSE:WDC) a big winner there, posting 6
percent returns on average. But you may want to think twice about
financials. The sector usually slides more than 2 percent. Fifth Third,
one of the biggest laggards with an average lag of 8 percent.



MATHISEN: Well, as 2017 comes to a close, what should you do to get your
finances in order for next year?

Here to talk about investment strategies and planning is Reed Fraasa. He`s
a financial advisor with Highland Financial Advisors.

Reed, welcome back. Good to have you back.

Tyler. And happy New Year.

MATHISEN: You know — happy New Year to you. One of the articles in
today`s “Wall Street Journal” pointed out that if you were invested in
index funds this year, the percentage of your portfolio now represented by
technology has risen, because tech stocks have risen in those indexes. If
that makes you uncomfortable, what should you do?

FRAASA: Well, if you`re buying large cap indexes like24 percent of that
index is technology.

MATHISEN: A few years ago, it would have been energy.

FRAASA: Exactly, exactly. Last year, it was also technology. It was just
about the same. So, it`s just a reflection of what is going on in the
economy. Technology is a huge part of our economy. I don`t think it`s
going to change.

So, you only have a few options. If — well, one of several things can
happen. The economy that we`ve seen the technology doing so well could
continue on as we have a little bit of a tidal push from the Tax Reform Act
and everything else with the economy. The economy is looking very good. I
mean, we have low interest rates. It`s very solid. The markets will do
well next year with this push behind it.

So, to think that now this technology growth period that we`ve been in or
this part of the sector of the economy is going to stop or something,
there`s really no evidence of that. So, but if you`re concerned about the
overweighting in the portfolio, that`s another matter.

MATHISEN: Maybe pull back a little bit. If I want to rebalance my
portfolio because some stocks have grown too much or stocks overall have
become too big a percentage of my overall asset allocation, should I sell
this year, or wait until next year? And if I sell tomorrow, does that sale
get booked in 2017 even if it may not close until 2018?

FRAASA: Yes, it`s booked based on trading day. If you sell to it`s a 2017
event for tax purposes. Capital gains taxes won`t be different next year
than this year, none of that changed. So, the reason for doing this year
next year, you know, you really want to be prudent. You don`t want to just
because — you know, Kafka said most human error is a result of impatience.
So, to think that something is going to happen and then act upon it is
where most people make a mistake.

MATHISEN: If you want to rebalance your portfolio either now, tomorrow, or
the after the first of the year, is it more advisable to do so first in
your tax advantaged accounts like 401(k)s where there is no tax

FRAASA: So, if someone — most people with 401(k)s have bought index
funds. Your allocation of that sector is really based on the index, the
third party who`s managing that index for you. Hence, you have 24 percent
in technology. So, trading within your 401(k), in an IRA, is a great way
just to say let me sell of this and off. Otherwise, in your taxable
accounts, you`re going to accrue taxes.

MATHISEN: You`re going to have to pay taxes.

FRAASA: And there`s no losses this year to offset any.

MATHISEN: Oh, I could find some losses.

Reed, thank you so much, and again, happy New Year.

FRAASA: Thank you. Happy New York.

MATHISEN: We appreciate it. With Highland Financial Advisors.

Well, one sector that has been on a roll has been retail, believe it or
not. The ETF that tracks the sector is up 3 percent so far this year, a
mini-roll, let`s call it. Most of that has come since November 1st, which
is the beginning of the holiday season, and we`ve been telling you, it was
a strong one for the group.

Kate Rogers (NYSE:ROG) take a look at some of the outperformers and some of
the laggards.


winners and losers this year? Year to date, these five stocks are the best
performers. Conn`s Inc., seller of mattresses and furniture, up 183
percent. Wayfair up 131 percent. Petmed Express (NYSE:EXPR) up more 100
percent. And then two discount retailers, Ollies Bargain Outlet and Five
Below up 85 and 70 percent.

Now, in the bottom five for the index, Rite Aid (NYSE:RAD), GNC, and then
two traditional department stores, JCPenney and Sears (NASDAQ:SHLD) both
down 60 percent year to date. Rounding out the bottom five, Genesco
(NYSE:GCO) Inc., that is the owner of Lids and Journeys. That`s down
nearly 50 percent for the year.

But if you look at the retail season, the naughty and nice list shifts
around from November 1st when the shopping season really kicked off. The
names changed. These are the top five now: Foot Locker, Express
(NYSE:EXPR), Abercrombie and Fitch (NYSE:ANF), Finish Line and Ingles
Market all up between 50 and 60 percent from that point on. Foot Locker
was one of the worst performers for the year but has really turned around
this holiday shopping season.

And to the downside this retail season, GNC, Sears (NASDAQ:SHLD), Signet
Jewelers and Liberty Trip Adviser along with CarMax (NYSE:KMX). Analysts
say, though, in terms of execution, Amazon (NASDAQ:AMZN) and Walmart are
the real winners this season. They`re up nearly 60 percent and 45 percent
year to date.

Back over to you.


MATHISEN: That was Kate Rogers (NYSE:ROG).

Well, 2017 is not going out quietly on the weather front. With subzero
temps gripping the northern part of country. But the cold air has also
taken hold in the South as well. The arctic weather up north has set
record lows in many locations and dumped feet of snow in others, and with
the frigid temperatures expected to linger through the New Year, investors
might want to keep an eye on heating oil and natural gas. Today, both
commodities were up. But as you see, natural gas popped a lot, almost 7

Well, the new tax law that goes into effect next week could fundamentally
shift the competitive landscape among the states for business. And that`s
because new limits on the deductibility for state and local taxes could
send workers who are in short supply across the country fleeing from high
tax states to lower tax locales. And nowhere are they watching this more
closely than in California, where Scott Cohn reports for us tonight.


food at Initiative Foods outside Fresno, the third largest baby food
manufacturer in the country, in the heart of California`s Central Valley.
But it could be anywhere. After fire destroyed the facility last year,
invitations from other states came pouring in.

would say. We were just sort of figuring out how to take care of the fire,
how to take care of our people. And we`re getting phone calls.

COHN: Ultimately, they decided to stay. After California ponied up some
$1.5 million in state and local incentives.

A relief to employees like Sandra Ventura, now back on the job. A single
mom, she wanted to stay in California. But pretty much everyone here,
including Sandra, knows someone who`s left for someplace more affordable.

said there are no jobs and it`s too expensive.

COHN: It`s a case that low tax states have been trying to make for years.
Now with the new tax law potentially making states like California even
more expensive, low tax states like Texas and Arizona are freshening up
their pitches, hoping to attract businesses and workers like Francisco

somewhere else that`s less expensive, and I`m working, I`ll be happy. If I
could find it out of state, I would move.

COHN: Workers like these are the most critical piece of all. With
companies nationwide having trouble filling skilled positions. States that
can attract qualified workers have an automatic edge. The CEO of San
Diego-based Conatus Pharmaceuticals worries about paying more to attract
talent. He`s staying put but worries future startups will look elsewhere.

to hesitate even more in putting their investments in California, when the
cost of doing business in some other states is going to be a lot less.

COHN: Back in Initiative Foods, they like another aspect of the tax law
which allows them to write off more of the cost of equipment just as they
start to rebuild. So, they`re installing automation, allowing them to stay
in California with roughly half the employees they had before.

For NIGHTLY BUSINESS REPORT, I`m Scott Cohn in Sanger, California.


MATHISEN: Last night, we talked about what you needed to do to prepay your
local taxes before the New Year. With stories of confusion and surfacing
in some states, we sent Eric Chemi out into the neighborhood of Greenburgh,
New York, to see how residents there are handling the rush to beat the
deadline and save a deduction.


of states are rushing to visit their local tax collector`s office before to
prepay as much of next year`s property taxes as possible. Many towns
seeing overwhelming long lines with confused residents.

UNIDENTIFIED MALE: If we can pay part of it this year to get the deduction
which we`re not going to allowed to get next year, doesn`t that make sense?
It should save money.

UNIDENTIFIED FEMALE: The thing that frustrates me is the sense of havoc
that we have. Like from one day to the next, we don`t know what to do.

CHEMI: In this town, Greenburgh, New York, the government rushed to
accommodate these last-minute taxpayers. Not every town has been quick to
adjust to the rules.

would handle this. We were careful, the budget was approved by the town
board. We`re not accepting taxes that haven`t been assessed by the

CHEMI: The people who live here could not pay everything because the
county decided not to provide 2018 bills so quickly.

NED MCCORMACK, WESTCHESTER COUNTY: I think what we`re trying to promise is
that the county will act responsibly and in doing so will do the best job
to provide the most accurate tax warrants as possible, so that when people
do get the tax warrants from the county, they can rest assured that this is
a good calculation, an accurate calculation.

CHEMI: That`s why the answer is not completely cut and dry. It all
depends on where you live.

GOVERNOR ANDREW CUOMO (D), NEW YORK: The way they financed it was by
raiding the blue states. Why? Because the Senate doesn`t have any
senators from the blue states. So they came up with a very convenient
rationale, we`ll raise money from the blue states and we`ll give it to the
red states. So New York, a blue state, California, a blue state, Jersey, a
blue state, they are paying a penalty.

CHEMI: The IRS on Wednesday said it would only allow deductions for taxes
assessed and paid in 2017. That`s why residents here are rushing to pay in
person, standing in line. They don`t wan to take any chances and they want
to make sure they`re complying with all the new rules.

For NIGHTLY BUSINESS REPORT, I`m Eric Chemi in Greenburgh, New York.


MATHISEN: And taxes are on our market monitor`s mind. Coming up, she has
three stocks for 2018 she says will grow and benefit on tax reform.


MATHISEN: Well, as California gets ready to legalize recreational
marijuana next week, cannabis companies are preparing for what some
estimate will be a $6 billion market opportunity. Aditi Roy takes us
inside one such company in San Jose.


UNIDENTIFIED MALE: I would like to get some indica.

buying medicinal marijuana here to treat his insomnia.

ROBERT SHORT, BUDDY`S CANNABIS CUSTOMER: And I get the indica and that
pretty mellows me out so I can sleep.

ROY: But starting next week, customers like Short won`t need doctors`
notes to get marijuana. California, which legalized medicinal marijuana in
1996, will now legalize pot for recreational use on January 1st.

SHORT: I think it`s going to be a huge industry, absolutely.

ROY: Buddy`s Cannabis, which has been selling medical marijuana since
2010, became one of the first cannabis companies to be licensed by the
state to sell recreational pot. Matt Lucero is the owner of Buddy`s. He`s
a former Silicon Valley corporate attorney who`s taking companies public.
Now, he`s prepping for what some analysts believe will be a $6 billion
market in 2021.

MATT LUCERO, BUDDY`S CANNABIS OWNER: This is going to be our opportunity
to lose. We are going to be ready for the crowds.

ROY: Their five states are chock-full of inventory which Lucero says is it
its highest level ever. They`re looking to expand their cultivation area
and hire more workers.

But others aren`t as bullish about the prospects for recreational
marijuana. There are the bureaucratic hurdles. The state has only issued
about three dozen licenses to sell recreational marijuana. Businesses also
have to get municipal licenses. The regulations to get those permits are

LUCERO: The packaging of a products, the labeling of the products, testing
of products, the different operational requirements that we here to make
sure that our product doesn`t get into the hands of children, for example.

ROY: And then there`s the issue of banking. With marijuana still being
illegal under federal law, companies can`t store their revenue at banks,
instead relying on armored cars to hold their cash. California`s treasurer
says it`s a big challenge for marijuana businesses.

JOHN CHIANG, CALIFORNIA TREASURER: When you can`t bank, how do you move
that money into the system? Fear of being robbed, fear of burglaries, fear
of physical violence, that`s a major fear concern for all of them.

ROY: Skeptics also say the high tax rates on recreational marijuana, with
some estimate could reach 45 percent and would hike prices and empower the
black market. Lucero disagrees.

LUCERO: There is a concern obviously that if you tax the legal cannabis
too much, then you`re going to give an incentive for folks to go to the
black market. I feel, though, that the challenge is going to be on the
retailers to keep the prices down.

ROY: He says with all of the new taxes and regulations that will go into
effect, he expects his prices to go up about 10 percent, adding that he`ll
still be absorbing some of the cost.

For NIGHTLY BUSINESS REPORT, I`m Aditi Roy, San Jose, California.


MATHISEN: JB Hunt forecasts a disappointing quarter and that is where we
begin tonight`s “Market Focus”.

The trucking and logistics company gave earnings and sales guidance for the
fourth quarter that missed analysts` estimates. The company also said it
expects the new tax changes to create an additional one-time benefit for
2017. Shares were off a fraction to $115.24.

When Apple`s CEO Tim Cook needs to get somewhere, he`s now required to fly
private. A regulatory finding has revealed that the tech giant said Cook
must, must fly private, even for personal travel, due to security concerns.
Strong sales at Apple (NASDAQ:AAPL) this year resulted in a big pay raise
for Cook. He saw a nearly 75 percent increase in his annual bonus. So he
made about $100 million just in 2017.

Separately, Apple (NASDAQ:AAPL) apologized for not being more transparent
about slowing down older iPhones. The company did that, it says, to
preserve battery life and not, as some customers believe, to push users to
newer models. Apple (NASDAQ:AAPL) shares finished the day up a fraction to

Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) reportedly have their sights
set on Saudi Arabia. Reuters says the two tech heavyweights are in
licensing discussions to make a potential investment in the country. Apple
(NASDAQ:AAPL) is looking to open its first retail store there by 2019.
Amazon`s investment timeline has not been established. Amazon
(NASDAQ:AMZN) shares were fractionally higher to $1,186.10.

Now to our market monitor has new picks for the New Year that she says can
continue to grow and benefit from tax reform. Last time she was on in
September, she recommended Texas Instruments (NYSE:TXN), look at gain.
Home Depot (NYSE:HD), nice one. And the SPDR Consumer Staples

Nancy Tengler is chief investment officer at Heartland Financial.

Very nice returns on those stocks and a little less so on the ETF, but 5.25
percent is — I`ll take that any day, Nancy.


MATHISEN: So, give me your outlook for the market for 2018 and then we`ll
move quickly to your stocks.

TENGLER: OK, Tyler. Well, thank you for having me back.


TENGLER: You know, listen, we`re still optimistic, certainly bullish for
the near medium term. But we would like to see a bit of a correction. And
that was actually the reason I recommended the consumer staples ETF because
it`s a hedge against a downturn. And we think we`ll see a 7 to 8 percent
downturn or correction, and then we think stocks will take off again from
there again for now.

MATHISEN: All right. Let`s go to something you like for 2018 and beyond,
beginning with FedEx (NYSE:FDX) which has made no bones about the fact that
it sees a big benefit from this new tax law.

TENGLER: Absolutely, Tyler. And they raised guidance prior to the tax
bill passing. So, this is hands down the sector leader, the industry
leader in on-time delivery and a big beneficiary of e-commerce.

So, with e-commerce at 10 percent of sales, we think the growth runway for
this stock is pretty robust. Their target is to hit 10 percent plus
margins and 10 to 15 percent earnings growth. They raised the dividend 30
percent a year for the last three years. We think management is very
optimistic. They move forward some plane orders of the Boeing (NYSE:BA)
777. So, that plus the 40 percent increase they`ll see in earnings from
tax reform is really quite enticing.

MATHISEN: And Walmart has certainly got its mojo back. But you think it`s
got more room to run? It`s had a very good year.

TENGLER: It has had a good year. It`s outperformed the S&P significantly
since Doug McMillon took over. But listen, they bought for $3
billion. They purchased a number of millennial favorites, Bonobos,
ModCloth,, and they are quick learners. I`ve used
quite frequently and the service has improved dramatically over the last 12
years. They expect to grow their e-commerce business by 40 percent, from a
base of $11.7 billion a year in sales, and the stores look pretty fabulous.
When I`m not at Saks (NYSE:SKS), I`m at Walmart.

MATHISEN: All right. You`re ahead of me, I`m going to have to channel my
inner millennial, Nancy.

Let`s go to Facebook (NASDAQ:FB), which may or may not be a millennial.
That`s one of your favorites as well, up 52 percent in a year. You think
it can go higher?

TENGLER: Yes. This company — so this company does not pay a dividend.
This is for investors who are willing to take a little bit more risk,
stomach some more volatility. But they are growing. First of all, their
market share in ad revenue globally is just 20 percent. So they have
plenty of room for growth.

Total global revenue, ad revenue, not just digital — I`m sorry, that was
the first number I gave you — is 5 percent. So, they don`t have huge
market share. They still can monetize Instagram and Messenger. And we
think that`s the story much more than the Facebook (NASDAQ:FB) platform.

MATHISEN: All right. We`ll leave it there. Happy New Year, Nancy. Nancy
Tengler with Heartland Financial. See you next year.

TENGLER: Thank you. OK.

MATHISEN: Up next, ever wonder how to spot a scam? Some experts give us
the tips they use.


MATHISEN: From fake government calls to business e-mail schemes, con
artists steal millions of dollars every year. So, how can you weed out
what`s real from what`s not?

Andrea Day asked some experts to spill the signs and secrets they tell
their close friends and family. And she takes us to scam school.




DAY: The FBI agent.


DAY: When it comes to cons, these guys are the pros.

WYMAN: We get e-mails through work or calls via our work cellphones, our
bureau-issued cellphones, when people trying to solicit information out of
us. How they get that number, I`ve got no idea. It just goes to show that
the people we`re up against, you know, the bad guys — they`re pretty good
at what they do.

DAY: Dyan Finguerra-Ducharme specializes in intellectual property law.

FINGUERRA-DUCHARME: I get at least once a week in email from our clients
saying, is this legitimate?

DAY: She`s talking about an invoice sent to one of her clients in the mail
that looks like the real deal.

FINGUERRA-DUCHARME: They say in order for your trademark to get processed,
you need to do the following things. They asked for credit card

DAY: But it`s just a scam and the U.S. Patent and Trademark Office is
sending out this warning.

Did any of them ever fall for it?

FINGUERRA-DUCHARME: Many of them have.

DAY: Supervisory special agent Patrick Wyman says some victims fall so
hard that —

WYMAN: They`re not willing to believe that I`m with the FBI, because
someone on the phone said, don`t believe anyone who comes at the door.
They tell you from the FBI, they`re lying to you.

FINGUERRA-DUCHARME: It`s OK to be rude. It`s OK to hang up the phone.
It`s OK not to continue a conversation.

WYMAN: Another growing threat according to Feds, the business e-mail
compromise, where you think an e-mail is from a top exec.

FINGUERRA-DUCHARME: So, we get this all the time, where we`ve had clients
be duped. Someone in accounting believes that it was the CFO that directed
them to send money. And then it gets sent and then we`ve got a problem.

DAY: So, here is what they do to weed out fakes.

WYMAN: If it involves money in any way, shape, or form, do not just trust
some sort of unsolicited comment that you`re getting.

DAY: A list of things that immediately make you go, oh, red flag.

FINGUERRA-DUCHARME: When someone calls you that you`ve won a sweepstakes
that you`ve never even entered. When you see something out of the blue
that just can`t possibly be right.

DAY: The bottom line, you know it. But will you listen?

FINGUERRA-DUCHARME: If it sounds too good to be true —

WYMAN: It probably is.

DAY: And even if you don`t fall for the con, the FBI still wants your
call. You just never know when that one nugget of information will help
them tie the entire case together.



MATHISEN: One cybersecurity expert Andrea spoke with said that the scam
likely costing people the most money is fake technical support, where
someone tells you something is wrong with your computer. I`ve had that

And finally tonight, the richest people on the planet got richer this year,
much richer, thanks to strong stock market gains. Bloomberg`s billionaires
index showed the top 500 wealthiest people added nearly a trillion dollar
to their stash. The big winner, the world`s richest man, Amazon`s Jeff
Bezos, added $34 billion. He`s now worth $100 billion, which qualifies him
for free shipping from Amazon (NASDAQ:AMZN) Prime.

Well, that is NIGHTLY BUSINESS REPORT for tonight. I`m Tyler Mathisen.
Thanks for watching. We`ll see you tomorrow.



Nightly Business Report transcripts and video are available on-line post
broadcast at The program is transcribed by ASC Services II
Media, LLC. Updates may be posted at a later date. The views of our guests
and commentators are their own and do not necessarily represent the views
of Nightly Business Report, or CNBC, Inc. Information presented on Nightly
Business Report is not and should not be considered as investment advice.
(c) 2017 CNBC, Inc.


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