Transcript: Nightly Business Report – January 11, 2018

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

indexes close at records as oil prices rise and investors grow increasingly
optimistic about earnings.

nation`s private employer, is the latest company to hike pay and issue
bonuses. What the cash will mean to the economy.

HERERA: Powering bitcoin. Why a small town in Washington has suddenly
become the epicenter of the cryptocurrency craze.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Thursday,
January 11th.

MATHISEN: Good evening, everyone, and welcome.

It is a familiar refrain. But it doesn`t seem to get old. It was a record
day on Wall Street again today. The major indexes rebounded from
yesterday`s brief stumble, extending the New Year`s rally. And today,
energy shares led the way on a rise in oil prices and a strong start to the
earnings season, thanks to Delta`s better than expected results and
guidance. The Dow Jones Industrial Average advanced 205 points to 25,574.
Nasdaq added 58. And the S&P 500 was up 19, rising on seven of the first
eight trading sessions of the year.

HERERA: The world`s largest retailer is handing out pay raises. Walmart,
which is also the nation`s largest private employer, will pay workers a
starting salary of $11 an hour. Employees are also getting a one-time
bonus of up to $1,000 depending on how long a worker has been with the
company. The CEO says the new tax law is giving the company the
opportunity to be more competitive globally. In a statement the company
said, quote, today we are building on investments we`ve been making in
associates in their wages and skills development, end quote.

And in a separate announcement, Walmart is shuttering 63 of its Sam`s Clubs
locations across the country. Several stores closed abruptly but others
will be closed over the next few weeks. The membership warehouse store
says the decision was made to better align its locations with its strategy.

MATHISEN: Walmart is not the only company to increase pay and offer
bonuses to workers lately. Eric Chemi is here to discuss that part of the

Eric, how common has this trend been among the top ten, say, private
employers in the country, bonuses, hike in pay?

top ten, it`s interesting, employers in the country, Walmart is the only
one that has announced something like this. So, that`s actually unique,
what they`re doing. The top ten, those are companies like Amazon
(NASDAQ:AMZN), Home Depot (NYSE:HD), IBM, these real big, giant household

But Walmart is the only one that has a specific plan. The other companies
have put out statements talking about the new tax law in general, but they
haven`t actually —

MATHISEN: And they attributed this move to the new tax law.

CHEMI: Right, right.

HERERA: You mentioned the fact that they`ve put out statements, talking
about how it might impact their businesses. If you go further than the top
ten, what other companies have made a move, if at all, to raise wages?

CHEMI: So, that`s where it gets really interesting, because you do see
companies just outside this top ten like an AT&T (NYSE:T) or a Wells Fargo
(NYSE:WFC) or a Boeing (NYSE:BA), and then you start to see a lot of
companies that have done wage hikes, one-time bonuses, or corporate
investment, for example more employee giving, infrastructure improvements,
education spending, those kinds of things. So, a lot of different
approaches depending on the companies. But not in the top 10, it`s all
kind of 11 and onward.

MATHISEN: There are a couple of things the interesting to me. It was not
only pay they boosted. They boosted some benefits, maternal and paternal
leave and other things. I have to think that if Walmart does this, we`ll
start to see more of it not just in the second tier companies but in those
top 10.

CHEMI: You could think so, because a few weeks ago, Walmart even said,
we`re running the numbers, we`re working on this, and then here we are
today with this announcement. So, there are probably other companies that
are still working on their numbers and maybe in a few weeks, they`ll have
an announcement. We have earnings season coming up, so maybe companies
want to get through that first, then get the PR bump a couple of weeks
after earnings with some new announcement like this.

MATHISEN: Eric, thanks very much. Eric Chemi, appreciate it.


HERERA: So, can rising wages and even those bonuses have a positive impact
on the economy?

Here to discuss that is Craig Dismuke. He`s the chief economist at Vining

Craig, welcome. Nice to have you here. Thanks for joining us.


HERERA: Tell me what you think the impact will be, as Eric just detailed,
Walmart is the first in the top 10 to do it. But as he also pointed out,
there are other companies lower down on the totem pole, if you will, that
have been doing that.

DISMUKE: Sure. Well, I think it`s notable that it`s Walmart. They`re the
world`s largest private employer in the U.S. They employ 1.5 million
people. They`ve commented that over half of the retail workers will
benefit from this increase.

And so, I think they`ll have a big impact on the retail space specifically.
It`s — being as large as they are and how many people they`ll affect,
number one, it`s going to drive up wages for a lot of folks. And secondly,
I think it`s going to spread to other companies.

And I think it really reflects the fact that there is a tight labor market,
that they`re competing to retain their employees. And so, I think it does
reflect the tightness of the labor market and the fact that we will see a
little better wage growth this year, finally.

MATHISEN: I can see a twofold effect here. If more and more companies do
what Walmart and several others have done, and that is to increase pay to
workers, and at the same you have workers getting more in their paychecks
because of reduced withholding, that you`ve got a cash inflow into the
economy that could make growth go up. Do you see it that way? If so, by
how much?

DISMUKE: I do, Tyler. We expect to see the consumer really drive growth
this year. They drove growth in 2017, but you — taxpayers are going to
save $140 billion we estimate in 2018 from the tax law. And so, then, with
all of these increases that we`ve seen hundreds of companies that have
announced pay raises, there`s really going to be a double whammy.

And I think that`s great news for the consumer. It`s good news for the
economy. It`s good news for the stock market. I think that`s one of the
reasons we`ve seen all of these record high closes that you talked about
earlier, is because people have been anticipating this coming for a while.
The wage growth part is really just the icing on the cake at this point.

HERERA: But are there negatives to this?

DISMUKE: You know, there are negatives. I think the most acute negative –
– and really, I don`t want to dwell too much on this, because it largely is
a very positive development. We haven`t seen wage gains of any material
amount during this expansion. And so, it`s nice to see some potential wage

The most acute concern would be that it becomes inflationary. If you have
so much demand for products and services, that you start to see prices
rising and inflation starts to rise faster than the Fed wants. Now, with
inflation below their target already, I don`t think it`s a real huge
concern for us. But that is the most acute one.

HERERA: Right.

DISMUKE: The longer term concern is that the more you raise wages, the
more you raise labor costs, the more economic incentive businesses have to
replace that labor with automated mechanisms.

HERERA: Right.

DISMUKE: So, that will be a longer term challenge. But in the short term,
net/net, it`s very positive development.

HERERA: All right. On that note, Craig, thank you very much.

DISMUKE: Thank you.

HERERA: Craig Dismuke with Vining Sparks.

MATHISEN: And speaking of inflation, a key gauge of inflation fell for the
first in a year and a half. The producer price index slipped 0.1 percent
in December, which was below expectations. Some economists say the weak
report could temper expectations that inflation will accelerate this year.

HERERA: Still others believe inflation will pick up. And that could pose
a threat to government bond investors because it could erode the purchasing
power of their fixed interest payments. So, what`s really happening in the
bond market and what do investors need to pay attention to?

Here to talk about that is Victoria Fernandez, Crossmark Global Investments
managing director.

Victoria, nice to see you. Thanks so much for joining us today.

pleasure, Sue.

HERERA: Let`s start with what you are watching for in the bond market, as
either a caution or a positive.

FERNANDEZ: Sure. I know there`s been a lot of headline news that has come
out recently and investors sometimes try to chase the market or make
changes in the market based on what they`re seeing. But really, most fixed
is are longer term investors. This is the time when they need to take a
step back, look at the actually holdings in their portfolio, and see if
they`re properly f or what they think is going to happen.

If we do think there`s going to be higher rates, if you feel like we`re on
that trajectory and that that`s going to continue, then you need to make
sure you`ve got higher income securities, lower duration securities in your
portfolio, and that you`re not taking on risks that you didn`t know you
were taking. So, we`re really watching obviously what the central banks
are doing, not just here but the ECB as well. We`re watching the inflation
numbers, the wage numbers that come out, and obviously earnings that
started today. That`s going to be something to watch in the coming weeks.

MATHISEN: You just said if you think rates are going higher you would want
to go to lower duration, maybe some higher yielding products in your funds,
in your individual portfolio.

But what do you think? Do you think rates are going to be markedly higher?
And if that is true, what would you do, what would you roll out and roll

FERNANDEZ: Sure. So, we have had some, you know, individuals come out
lately and say that they think we`re going into a bear market for bonds. I
don`t think he would go that far and say we`re doing a bear market. But I
do think we`re going to see rates move higher. There`s a lot of support
for that.

We have really strong equity markets. We have some of the uncertainty
that`s been priced into the market, that`s been removed a little bit. And
we have some reduced exposure, you know, the ECB talking about bringing
back their bond-buying program.

So, there`s support for those levels to an extent. But we have to
remember, we still haven`t even hit the high of last year, that 263 level.
So, this is a time to just kind of temper your investments, make sure
you`ve got some low volatility securities in there, get out of some of
those really longer, lower coupon and put yourself a little shorter where
you`re going to reduce the interest rate risk.

HERERA: Victoria, we`ll leave it there. Thank you so much for joining us

FERNANDEZ: My pleasure.

HERERA: Victoria Fernandez with Crossmark Global Investments.

MATHISEN: In a low rate environment like we`ve had for much of the past
15, 20 years, investors are drawn to utility stocks because of their low
risk, high yields, and stable revenue streams. But this sector is
sensitive to rate changes and any increase could make bonds more attractive
to risk averse investors. So, if you do have utilities in your portfolio,
what should you do?

Joining us to talk about that is Brad McMillan, chief investment officer at
Commonwealth Financial Network.

Brad, I can think of this as a double edged kind of thing. On the one
hand, rising interest rates tend to be anathema to utility stocks. On the
other hand, a better economy ought to increase their earnings.

And I think that`s exactly right, Tyler. The first thing to do here is not
panic, because at the end of day, rates may go up a bit, but it — the
effect is going to be modest. And the effect on you as an income investor
in particular isn`t going to matter. If you bought these securities for
income, rising rates are not going to hurt your income. In fact if you
reinvest it, you`ll actually get more income over time. So, the first
thing here is not to panic.

HERERA: All right. So at this point, then, do you take a look at the
utilities that you have and see which ones perhaps are more vulnerable to
rate increases, as modest as they might be? Or — and maybe sell some of
those and add other aspects or other types of utilities to the portfolio or

MCMILLAN: Well, utilities as a whole are indeed vulnerable to rate
increases. So, if you`re really concerned about your capital value, you
probably want to start backing off a little bit. But again, there`s no
need to do that wholesale. Cherry pick, look at the companies that you
think are going to benefit least from a faster growing economy, because
Tyler`s point is dead right.

Second of all, if you`re looking at how we`re going to reinvest this over
time, you probably do want to reinvest the money in those utilities that
have higher growth rates in the revenue and in their dividends. It`s an
all a matter of making sure that you`re riding the opportunities. But for
utilities, even though there may be some short term concerns, I don`t see a
massive problem.

MATHISEN: And the one thing I try to remind myself, during rising rates,
it`s been a long doggone time since we`ve had them, is if the dividend is
not cut, you`re still getting that same income per share. And if you don`t
sell the bond, you`re still getting the payout on that bond, right?

MCMILLAN: That`s exactly right. And that`s why I make the distinction, if
you`re buying them for income, your income is solid. In fact your income
might even go up. If you`re worried about the capital value, then you
might want to look at it. But from an income perspective, you`re in good

MATHISEN: Brad, thanks so much, appreciate it. Brad McMillan with
Commonwealth Financial Network.

MCMILLAN: Thank you.

HERERA: Up next, the cryptocurrency craze is going full bore in the
Pacific Northwest.


one of the largest bitcoin mining operations in all of the United States.
It`s in Wenatchee, Washington state, three hours east of Seattle. Dozens
of crypto miners are coming to Wenatchee. Why? They need a lot of power
for these servers. I`ll explain more coming up on NIGHTLY BUSINESS REPORT.



MATHISEN: A day of many moving parts in Washington, where a bipartisan
group of senators said they had reached an agreement on immigration. The
deal would protect undocumented immigrants. But some lawmakers along with
the White House say they are not ready to endorse this deal.

Now, the six senators say their agreement address the so-called Dreamers,
and border security as well, and family-based so-called chain immigration.
Immigration of course is an issue closely watched by big business.

HERERA: A small town in central Washington has become the epicenter of
bitcoin mining in the U.S. How did that happen? Well, it all starts with
extremely cheap power.

Michelle Caruso-Cabrera is in Wenatchee, Washington.


CARUSO-CABRERA: Wenatchee, Washington, three hours east of Seattle and
surrounded by beautiful mountains, famous for its scrumptious apples and
now famous for something else — bitcoin mining. More than a dozen
cryptocurrency companies have started mining operations like this one.
Mining is a process using extremely fast computer servers to solve complex
mathematical equations. The reward for solving those equations? Bitcoin,
a new digital currency.

location. And they are doing two things. One, confirming the network,
two, racing to find the next group of bitcoins.

CARUSO-CABRERA: Malachi Salcido has invested millions in three local
mining facilities, and is producing five to seven bitcoins per day. He
believes the underlying software network of bitcoin, known as Blockchain,
will become the payment system of the future.

SALCIDO: What businesses is it not going to disrupt? Banking, securities
transfer, interbank settlements, credit card services, PayPal.

CARUSO-CABRERA: But to run a mining operation like this one requires a lot
of electricity. Malachi Salcido needs 7 1/2 megawatts of power. That`s
enough to power 11,000 homes.

And that`s why he`s in Wenatchee, Washington, home to the Columbia River
and a series of dams that provide extremely cheap hydroelectric power.
Here, electricity costs between 2 cents and 3 cents per kilowatt hour. The
average in the United States is more than 6 cents and in some states, more
than 10 cents.

Steve Wright runs the Chelan County public utility. He says there are
currently 12 large bitcoin miners in the area. But with the recent
dramatic rise in the price of bitcoin, many more want to come.

STEVE WRIGHT, CHELAN PUD GENERAL MANAGER: Just in the last month, we`ve
had another 75 come through the door. So, we`ve gone from just a few
people out there who have been knocking on our door, all of a sudden,
people who are banging on the door pretty loudly.

CARUSO-CABRERA: But the infrastructure required to service miners is
expensive. Just to lay a mile of cable can cost millions of dollars. He
doesn`t want to put the local taxpayer at risk.

WRIGHT: What we don`t want is people who come here to make a quick buck
off our low cost electricity and then leave town and leave us holding the
bag and leave the people of this community holding the bag.

CARUSO-CABRERA: With all the infrastructure you built for them.

WRIGHT: That`s right.

CARUSO-CABRERA: So they`ve started demanding cash up front for major
infrastructure cost for miners. Even though the power is perhaps the
cheapest in the entire country, it`s still Malachi Salcido`s biggest cost.

SALCIDO: We currently spend over $100,000 a month just on electric costs.

WRIGHT: It`s a lot of money, but he`s convinced it will pay off because he
believes in bitcoin.

For NIGHTLY BUSINESS REPORT, I`m Michelle Caruso-Cabrera, Wenatchee,


MATHISEN: A different kind of mine we`re looking at there.

Bitcoin mining could use more electricity this year than Argentina, that
according to a new report from Morgan Stanley (NYSE:MS). The report also
estimates that mining for cryptocurrencies would suck more power from
global electrical grids this year than electric vehicles would draw in the
next seven years.

HERERA: Well, the boom in cryptocurrencies has newly wealthy investors
looking to spend it. And luxury real estate is fast becoming the ticket.
That has luxury sellers hoping to cash in on the craze as well.

Diana Olick has our report tonight from Malibu, California.


this five-bedroom, seven-bathroom beachfront oasis 10 years ago. The
Malibu home is unlike any other architecturally, and Dr. Chen is unlike
most sellers because he`s willing to accept bitcoin for part of the $45
million price tag.

DR. WEI CHEN, HOMESELLER: I think we`ll attract more international buyers
than our country.

OLICK: Do his neighbors think he`s crazy?

CHEN: Oh, yes.

OLICK: But he thinks he`s very logical.

CHEN: The whole concept of cryptocurrency is, in my opinion, it`s going to
be the future. It just depends which one is going to be what we call
stabilized in the current market.

OLICK: There are not a ton of $45 million buyers. But the boom in
cryptocurrency wealth created new ones, especially international buyers.

They don`t want to be taxed on their gains. So, buying with these so far
unregulated cryptocurrencies helps them fly under the radar. And for
luxury sellers, that opens up the pool of potential buyers.

property, especially luxury real estate, is never assume where the buyer is
going to come from, make sure we get this property out there and say, we
are open to all currencies and crypto being one of them.

OLICK: So $45 million worth of house.

GIORDANO: U.S. dollars. But also 3,125 bitcoins, as of the last 30

OLICK: Luxury real estate agent Tony Giordano has done a few
cryptocurrency deals.

GIORDANO: Somebody else is going to do it if you`re not willing to do it.

OLICK: Now, he travels the country lecturing other agents how to do it.

GIORDANO: The one thing I`m trying to teach real estate agents is you
better start getting familiar with this. Do your research. Download a
crypto wallet. Buy $50 of bitcoin. Understand how to buy it and sell it.
And start to realize, this is a legitimate currency.

OLICK: But still a highly volatile play in a brick and mortar market.

CHEN: I`m not saying it`s safe. I just want to take a risk for
investment, just like everybody else.

OLICK: For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Malibu.


MATHISEN: A lot of bitcoin.

All right. Delta sees clear skies ahead. That`s where we begin tonight`s
“Market Focus”.

The airline lifted its 2018 earnings guidance after it reported better than
expected profit and sales. The company said passenger revenue improved in
every region, and said it expects the new tax law to offset higher fuel
costs incurred during the quarter. Shares took off, rising nearly 5
percent to $58.52.

And Pitney Bowes (NYSE:PBI) is reportedly drawing interest from some buyout
firms, including Blackstone and Carlisle Group. Bloomberg says the mail
management company has held preliminary talks with those interested and
that Pitney`s CEO is open to a breakup or outright sale. Shares of Pitney
Bowes (NYSE:PBI) rose 13 percent to $13.36.

HERERA: Buffalo Wild Wings (NASDAQ:BWLD) sees sales for the year coming in
below street expectations. The restaurant chain it expects sales to fall
just under 2 percent, but analysts were anticipating a 1.5 percent decline.
Shares were off the tick to $156.70.

Shares of Amazon (NASDAQ:AMZN) rose for the eighth straight day after a
pair of Wall Street firms raised their price target on the stock. Stifel
Nicolaus raised its target to $1,425 a share, up from $1,313. While UBS is
now coming in at $1,440 for Amazon (NASDAQ:AMZN), up from $1,250. Today,
Amazon (NASDAQ:AMZN) climbed nearly 2 percent to close at $1,276.68.

MATHISEN: And coming up, this flu season is packing a punch.


be the worst flu season in nearly a decade. Coming up, we tell you what`s
driving it and what you can do to protect yourself.


HERERA: The flu was estimated to cost the U.S. economy roughly $10.5
billion annually. And that figure doesn`t even include lost productivity
from sick days.

And as Meg Tirrell reports, this year`s flu season is expected to be
especially bad.


UNIDENTIFIED MALE: I think I got it on Wednesday.

TIRRELL: Flu season is here. And already, it appears to be more severe
than usual. Flu is now widespread in 46 states and hospitals and clinics
are seeing a spike in patient visits with flu-like symptoms.

A major reason is the strain of the virus that`s circulating. It`s called
H3N2. And the Centers for Disease Control and Prevention says reports of
that strain rapidly increased in the last weeks in December.

Dr. Anthony Fauci at the National Institute of Allergy and Infectious
Disease says it`s a more severe strain and the flu vaccine isn`t providing
as much protection this year.

DR. ANTHONY FAUCI, NIAID DIRECTOR: A really good year of protection would
be about 60 percent efficacy. We can`t tell for sure right now, but we`re
estimating that it`s going to be significantly less than that. It`s going
to probably be around 30 percent for the predominant strains.

TIRRELL: Doctors we`ve spoken with say this is shaping up to be the worst
U.S. flu season since the 2009 swine flu. That puts pressure on emergency
departments like this one.

DR. COLIN BUCKS, STANFORD HEALTHCARE: Last year, a busy day in our
emergency department would have been 200, maybe up to 220. But every day
this week, we`ve been seeing 260, 270, and a major component of that is
people with influenza-like symptoms.

TIRRELL: And it`s not just the patients who are getting sick.

DR. IAN NELLIGAN, STANFORD HEALTHCARE: When half the staff is out with the
flu, it`s really hard to take care of our patients.

TIRRELL: In addition to the surge of flu patients, hospitals are coping
with spot shortages of IV saline bags, important for delivering medicine
and hydrations. Those products have already been in short supply. But
production problems were exacerbated as hurricane Maria hit facilities in
Puerto Rico run by Baxter, a main supplier.

And as ERs getting overwhelmed by flu patients, doctors at Stanford are
encouraging the use of telemedicine for those without major complications,
so patients can get the care they need without going out and risking
spreading the flu further. Meanwhile, work is under way on a better flu
shot, one that can work every year regardless of which strain are

FAUCI: We want to get away from that intelligent guess game and be much
more sure that you can get a vaccine that can protect against virtually any
of the influenzas. That would be what we call the universal influenza
vaccine and that`s what we`re trying very hard to get to.

TIRRELL: Dr. Fauci says that may be several years away.

Meanwhile, doctors recommend staying home from work if you`re sick,
covering cough and washing hands with soap and water.

And though the flu shot doesn`t appear to be as effective this year,
universally, public health experts still recommend getting one.

For NIGHTLY BUSINESS REPORT, I`m Meg Tirrell in Palo Alto, California.


MATHISEN: And before we go, here`s another look at today`s rally. The Dow
advanced 205 points to 25,574. Nasdaq added 58. And the S&P 500 was up
19. That means it has risen seven of the first eight trading sessions of
this New Year.

HERERA: And that will do it for us tonight on NBR. I`m Sue Herera.
Thanks for joining us.

MATHISEN: And thanks from me as well. I`m Tyler Mathisen. Have a great
evening, everybody and we will see you tomorrow.


Nightly Business Report transcripts and video are available on-line post
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Media, LLC. Updates may be posted at a later date. The views of our guests
and commentators are their own and do not necessarily represent the views
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Business Report is not and should not be considered as investment advice.
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