Transcript: Nightly Business Report – November 22, 2019

ANNOUNCER:  This is NIGHTLY BUSINESS REPORT with Sue Herera and Bill Griffeth.

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR:  Win streak snapped.  Stocks  log their first down week in more than a month as trade concerns linger on  Wall Street.  

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR:  Critical shortage.  The supply  of homes for sale is falling across the country.  And it may only get worse  come the spring season.  

GRIFFETH:  Grab and go.  An investigation into a brazen crime that`s  hurting retailers` profits.  

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

HERERA:  Good evening, everyone and welcome.  
Well, it was fun while it lasted.  The major indices fell this week for the  first time in more than a month.  Conflicting signals on the progress of  trade negotiations between the U.S. and China dampened investor sentiment.  

Today, the markets rose after Chinese President Xi called for better  communication between Beijing and Washington.  The Dow Jones Industrial  Average was up 109 points to 27,875.  The Nasdaq added 13 and the S&P 500  rose 6.  But it wasn`t enough to lift the indices for the week.  

GRIFFETH:  First thing this morning, there was a headline from “The Wall  Street Journal” that got just about everybody`s attention.  It read —  Bridgewater bets big on market drop.  

Now, Bridgewater Associates is the world`s largest hedge fund with about  $150 billion under management.  The report said the fund had purchased  roughly $1 billion worth of put options, a bet that would — a bet that the  market would go down.  But around midday, Bridgewater founder Ray Dalio  denied it all, saying on Twitter it`s wrong.  I want to make it clear that  we don`t have any such bet that the stock market will fall.  

Now, “The Wall Street Journal” said the article made it clear that the  trade wasn`t necessarily a bearish bet on the market but rather a hedge  against the firm`s significant long exposure to the equity markets.  

And it`s that word “hedge” that we want to focus on.  The stock market is,  after all, close to all-time highs.  Should you hedge your portfolio?   Maybe you already are.  And don`t realize it.  

Joining us tonight is five-star fund manager Thomas Plumb.  He`s president  and CEO of the Plumb Balanced Fund.  

Tom, welcome.  
What about this idea?  You know, hedge funds tend to make very concentrated  bets.  So they need to hedge often.  But what about the average investor  out there, should they consciously hedge their portfolio?  

THOMAS PLUMB, PLUMB BALANCED FUND PRESIDENT & CEO:  I think you should  always be hedged, Bill.  When you think about it, there`s always the  possibility that the market could go down.  So, you have to be prepared for  that.

But the way that most of us prepare is by having a balance in our  portfolio.  Balance makes sense for your life, for your diet, for your  exercise.  It makes sense for your investment portfolio.  Balance the risk  and the return potential.  

HERERA:  And what is the best way to do that for the individual investor?   Do you it through mutual funds?  Do you do you do it through ETFs?  What  would you recommend?  

PLUMB:  Well, you know, Sue and Bill, when you two were babes in arms when  the show started, NIGHTLY BUSINESS REPORT 40 years ago, the S&P 500 was  under $100.  Now it`s 31 times higher, in 40 years.  

So you think about that.  The market generally goes up.  But the way that  you can moderate that volatility, because it does go down, sometimes for a  lot longer than we`d like to tolerate, what you need to do is just have a  good balance.  And if you do that, I don`t think that you have to worry  about having some type of exotic hedges.  Hedges are insurance and they  cost a lot of money to protect you from something that probably  overprotects you.  

GRIFFETH:  There`s a word we use often when we talk about investing  portfolios.  And that is, diversification.  When you think about it, that  is the way you hedge your portfolio many times, right?  

PLUMB:  Right.  Right.  And diversification includes money market, includes  fixed income, it includes stocks and it includes the types of stocks that  you own.  But that diversification is by far the best hedge you can have.  

And what we`ve seen over time, because some people occasionally are pretty  good at predicting when a market will go down, they don`t get back in.  And  what you`re better off doing is having an actual balance in your portfolio,  where you can feel comfortable that you`ve got the right amount of risk  given your risk tolerances, your own individual needs, your cash flow, your  problems that you might have paying bills or not paying bills, et cetera,  et cetera.  

GRIFFETH:  Our thanks to Thomas Plumb with the five-star Plumb Balanced  Fund tonight.  

HERERA:  To the economy now, and the consumer sentiment.  Which came in  higher than expected in November.  The University of Michigan`s index  climbed to levels not seen since July.  Economists attributed it to higher  household wealth, lower interest rates and an easing of concerns over trade  tensions.  

A separate report showed that manufacturing activity in the mid-Atlantic  region picked up in November.  Firms said they were generally optimistic  about the future.  

GRIFFETH:  In Washington, President Trump met with vaping industry  executives today, and with public health officials, they all clashed on  what should be done about the rising use of e-cigarettes among teens.  
Eamon Javers reports tonight for us from the White House.  

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT:  It is billed as a  listening session here in the cabinet room of the White House today.  It  ended up being an argument session as pro and anti-vaping sides clashed in  front of the president of the United States, giving him an opportunity to  hear all sides of the debate as he makes up his mind on where he wants to  land on banning flavored e-cigarettes.  If he wants to do that or not.  

The surprise guest in the room today, Mitt Romney, the Republican senator  from Utah.  Romney taking the anti-vaping argument, saying to him, it  didn`t matter if employees and companies lost jobs.  More important are  that the safety of the children.  Here`s what he said.

SEN. MITT ROMNEY (R), UTAH:  I salute the fact that Juul said we`re taking  these products off the market because we care about our kids.  The kids —  the adults — the adults have access — the adults have access to menthol  products through Juul.  They have tobacco flavored products.  But putting  out cotton candy flavor and what is it, unicorn fruit flavor?  This is kid  products.  We have to put the kids first.  

JAVERS:  This was originally billed as a private session at the White  House.  It was going to be behind closed doors.  Instead, the president  brought cameras in.  

You could see in real-time, both sides appeal to the president personally,  trying to persuade him on an issue that`s brand new in the American  political discourse.  It matters so deeply to so many across the country.   The pro-vaping side arguing that Michael Bloomberg, the former New York  City mayor, is financing anti-vaping advocacy efforts and therefore, the  president should be skeptical of that, because Bloomberg might be running  against him as a Democrat in 2020 for the presidency.  

On the other hand, you had health care advocates, arguing ultimately that  this is something the president got right back in September when he put out  his initial proposal.  He should stick to that because he was right the  first time around.  

Both sides making an argument.  The president not committing to anything in  specific here at the White House today.  

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

HERERA:  Also in Washington, new proposals were put forth on affordable  housing.  Senator Kamala Harris (NYSE:HRS) and Representative Maxine Waters  (NYSE:WAT) introduced a bill that calls for investing more than $100  billion in things like affordable housing rental units and aging public  housing.  

Both Senator Harris (NYSE:HRS) and Congresswoman Waters (NYSE:WAT) are from  California.  

GRIFFETH:  Certainly the need for housing is an issue all across the  country.  Demand is strong, but supply is critically low and getting lower.  
And as Diana Olick reports, the declines are worse in some surprising  places.  

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT:  The supply of homes  for sale is falling across the nation.  As demand soars as attractive  mortgage rates pull buyers off the sidelines.  At the end of October,  inventory nationwide fell to a 3.9-month supply according to the realtors.   That`s how long it would take to sell all of the nearly 2 million homes for  sale at the current sales pace.  A healthy market balanced between buyers  and sellers, is considered to be a six-month supply.  

GREGORY DACO, OXFORD ECONOMICS:  What we did see over the past 18 months  was some inventory rise, because there was reduced activity on the demand  side.  But more recently with lower interest rates, we have people coming  back into the housing market and that pulled down inventory even lower.  

OLICK:  But all real estate is local and some markets are seeing supply  falling more dramatically and it`s not just the California market —  Seattle, Phoenix, Cincinnati, Pittsburgh, St. Louis, Kansas City and D.C.  all down double-digit percentages in supply compared to a year ago.  

Part of that is affordability, especially in the Midwest.  And in other  places, it`s jobs, like here in D.C. where tech is booming and Amazon  (NASDAQ:AMZN) is moving in.  

The supply is worse on the low end, down over 6 percent from a year ago for  homes priced between $100,000 and $250,000.  That`s according to the  realtors.  Supply is down 15 percent for homes priced below $100,000.  In  the move-up market, supply is rising, but barely, at around 1 percent  annually.  

DACO:  In the current environment where costs are higher for labor, for  lumber and for lots, you`re not going to see builders edge in that much  into the lower end of the market.  

OLICK:  All of this in the fall when supplies usually rise, an indication  that things may only get worse come spring.  
For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.  

HERERA:  It is time to look at some of today`s “Upgrades and Downgrades”.  

Uber was upgraded to buy from hold at Stifel Nicolaus.  The analyst cites  improvement in its core business.  The price target is $34.  The stock rose  a fraction to $29.56.

Lbrands was upgraded to inline from underperform at Evercore ISI.  The  analyst cites the company`s recent earnings report.  The price target is  $18.  The shares were up more than 4.5 percent to $18.01.  

GRIFFETH:  It was supposed to be a big moment for Tesla.  CEO Elon Musk  unveiled his company`s highly anticipated all-electric pickup truck.  But  the Cybertruck`s debut was not exactly a smashing success.  And the stock  fell more than 6 percent in today`s session.  
Phil LeBeau has more.  

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Talk about a wild  ride.  Tesla`s Cybertruck looked like something out of a sci-fi movie.  In  reality, it`s CEO Elon Musk`s vision of what pickup trucks should become.  

ELON MUSK, TESLA CEO:  Trucks have been the same for a very long time.   Like 100 years, trucks have been basically the same.  We wanted to try  something different.  

LEBEAU:  Oh, it`s different, including a body made of stainless steel.  And  windows Tesla says are shatterproof, even though a demonstration on stage  showed just the opposite.  

MUSK:  Oh, well maybe that was a little too hard.  

LEBEAU:  Overall, the Cybertruck`s debut left many underwhelmed.  
DANIEL IVES, WEDBUSH SECURITIES:  I kind of view it as a disaster in terms  of other launch events, in terms of what we saw with the cracked glass,  just from an optical perspective.  

LEBEAU:  The U.S. pickup market is the most profitable and important  segment in the world for the big three, which is why they`ve poured  billions into building truck brands that have the most loyal customers.  In  fact, repeat buyers are a primary reason Ford, GM and Fiat Chrysler  dominate the pickup market.  

But they`re also working to develop their own electric pickups.  The big  three know start-ups like Lordstown Motors and Rivian will soon come out  with E.V. trucks of their own.  

Which is why many believe Tesla, with so much success building electric  cars, could break the big three`s stranglehold on pickups, but after seeing  the Cybertruck, some analysts think it will be no more than a niche model. 

CRAIG IRWIN, ROTH CAPITAL:  This is more of a brand-building event than  anything else.  You know, Elon has played way too much Minecraft over the  last several years.  That`s what allows him to connect with the kids out  there.  

LEBEAU:  Tesla plans to start selling the Cybertruck in late 2021, with  models priced between $40,000 and $70,000.  As Elon Musk rolls out a new  image for the American pickup truck.  


GRIFFETH:  Still ahead, an investigation into a brazen crime that`s hurting  retailers` profits.  

HERERA:  The FCC voted to block American telecom companies from using  federal funds to buy Huawei equipment.  The commission designated Huawei as  a national security risk.  Huawei, which is a Chinese telecom giant, called  the order, quote, unlawful and it asked the FCC to rethink its profoundly  mistaken order.  

GRIFFETH:  Stealing is not a new crime, of course.  But it is becoming more  and more expensive for retailers.  In fact, retail crime losses are at an  all-time high right now, according to the National Retail Federation.  
Earlier this week, Home Depot (NYSE:HD) said that its profits were hurt by  shrink, that is the industry code word for theft among other things.  So,  the company gave us exclusive access to see how it fights a never-ending  battle against stealing.  
Courtney Reagan has our investigation.  Grab and go.  

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  You`re watching  brazen retail theft.  The suspects are so sure they won`t get caught, that  some even get aggressive when stopped, as this surveillance video from Home  Depot (NYSE:HD) shows.  Most likely these people are shop lifters or people  who steal items for their own use.  Instead, it`s a bigger problem known as  organized retail crime, with criminals working together to steal for  profit.  

Home Depot`s Jamie Bourne investigates the theft.  It all starts with  boosters.  

JAMIE BOURNE, HOME DEPOT ORC MANAGER:  A booster is somebody that is  basically professional shop lifter, they`re doing it for profit.  Not just  for personal use.  

REAGAN:  Are they just guessing what items are in demand?  Do they know it  from history?  I know that I can sell a lot of drills.  

BOURNE:  There are many locations out there that are giving lists to the  boosters.  

REAGAN:  They`re giving lists, they`re part of the crime, too, are they  not?  

BOURNE:  Absolutely.  

REAGAN:  One of those locations was this pawnshop.  The manager was charged  with selling stolen property.  The case is ongoing.  
Our next stop is raid.  

POLICE OFFICER:  Police, search warrant!

REAGAN:  Borne and his team helped when law enforcement served a search  warrant on this Utah home.  

BOURNE:  When we serve warrants with law enforcement, we can provide them  the value of the merchandise.  

REAGAN:  The suspect allegedly sold stolen power drills and other tools on  Facebook (NASDAQ:FB).  He was arrested.  

Law enforcement seized a pallet full of items from the home.  They were  brought to this warehouse.  It may look like Home Depot (NYSE:HD), but this  is actually an evidence room.  Inside, is over $1 million worth of stolen  products seized from a raid of seven pawn shops.  

CHRISTOPER WALDEN, UTAH AG`S OFFICE SPECIAL AGENT:  We`ll actually see on  the inside of a pawn shop.  They`ll say Lowe`s and Home Depot`s price, you  know, $129.99.  Our price, $79.99.  

REAGAN:  Chris Walden is a special agent with Utah Attorney General`s  Office.  

WALDEN:  How is it that second-hand merchants are selling it for less than  what a big box retailer like Home Depot (NYSE:HD) and Lowe`s can even buy  the product for?  

REAGAN:  They found the answer in these sting operations.  
UNIDENTIFIED MALE:  Sell them, pawn them?
UNIDENTIFIED FEMALE:  Yes, sell them.  

REAGAN:  This is undercover video of law enforcement selling items that  seem stolen to those pawn shops.  The case led to a new Utah law that makes  it harder for pawn shops to buy unopened products.  

WALDEN:  Since we passed the new law, it seems like it`s getting better we  seen a shift over to e-commerce.  

REAGAN:  Just like the power tools we saw confiscated during the raid.   Here they were for sale on Facebook (NASDAQ:FB).  

Organized retail crime is growing, and costs the industry nearly $800,000  for every $1 billion in sales.  Home Depot (NYSE:HD) said its profit took a  hit in the last three quarters because of higher shrink or loss of goods,  which includes organized retail crime.  

SCOTT GLENN, HOME DEPOT VP ASSEST PROTECTION:  While we don`t comment on  our particular numbers, we are seeing shrinkage rates rise across the  country.  

REAGAN:  Scott Glenn is in charge of asset protection for Home Depot  (NYSE:HD).  

GLENN:  Organized retail crime drives other crimes.  It drives drugs.  It  drives guns.  It drives human trafficking.  I think the opioid and drug  epidemic is a piece of it.  

REAGAN:  Why should consumers care that this is happening?  Isn`t Home  Depot (NYSE:HD) big enough to absorb this issue?

GLENN:  We have been very good about not raising prices as a result of our  shrink equation.  But if it gets to a point where we cannot continue to do  business this way, ultimately, we`ll have to pass it along.  

REAGAN:  For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan in Salt Lake  City, Utah.  

HERERA:  Foot Locker gets tripped up heading into the holidays, and that`s  where we begin tonight`s “Market Focus”.  

The sporting goods retailer topped Wall Street expectations, thanks to a  rise in comparable sales.  But Foot Locker gave a weak outlook for the  holiday season due to struggles and expanding its apparel unit.  The shares  dropped about 3 percent to $40.25.  

J.M. Smucker`s sales missed expectations in part due to a decline in its  pet food business.  The company did beat earnings estimates but lowered its  full-year forecast.  Shares still rose about 4 percent to $108.40.  

Quarterly results at the apparel retailer Buckle (NYSE:BKE) topped  expectations, thanks to a rise in same-store sales.  The company also saw  growth in online sales, the shares rose nearly 20 percent to $26.71.  

GRIFFETH:  An increase in sneaker demand and its strongest rise in comp  sales since 2013 helped Hibbett Sports (NASDAQ:HIBB) beat expectations on  Wall Street.  The sporting goods company also raised guidance.  Shares  climbed more than 14.5 percent as a result to $28.69 today.  

And income tax software company Intuit (NASDAQ:INTU) reported better-than- expected results, driven by growth in small business traffic online.  But  the maker of TurboTax and QuickBooks maintained its full-year revenue  forecast.  That is below analysts` expectations.  Intuit (NASDAQ:INTU) fell  more than 4 percent today to $259.81.  

HERERA:  It is time for our weekly market monitor, who has names of  companies he says will depend more on the ebb and flow of their particular  industries over the next year, and less on the ups and downs of trade news.

Joining us is Chris Cordaro.  He`s the chief investment officer at Regent  Atlantic.  
Welcome back, Chris.  

GRIFFETH:  Welcome back.

HERERA:  Good to see you again.  


HERERA:  This is a narrative that is somewhat refreshing because it seems  as though we`re — we`re basically chained to the trade war and the  narratives that we`ve heard from it.  But you decided to smooth out the ups  and downs a little bit.  

CORDARO:  Yes, I wanted to look for some stocks, put stocks in the  portfolio that aren`t so dependant on the trade war and also will do well  in sort of a low growth economy.  And that`s what I think we`re like going  to get over the next year or so, where the economy is skimming along.  I  don`t think — it`s less likely that we hear a recession, but we`re not  going to have a really strong growth.  

HERERA:  All right.  Your first choice is Royal Dutch Shell.  

CORDARO:  Royal Dutch because it pays a handsome dividend.  So, it`s paying  better than a 6 percent dividend.  It`s one of the lowest-cost oil  producers, so it`s a great bargain and a good income vehicle to add to  portfolios.  

GRIFFETH:  Then you chose a utility, another classic company that seemed to  be insulated from the trade wars, Exelon (NYSE:EXC).  A pretty good  dividend.  Why did you pick this one necessarily?  

CORDARO:  So, Exelon (NYSE:EXC) has a really low-cost of production but  more importantly is one of the cleanest energy producers out there.  And  so, that I think is translates into a lot of appeal for its stock.  And  also I think it has the best position for the future.  

HERERA:  You picked a retailer next, and it`s key at this time of year,  holiday season.  And they had a very good earnings report the other day as  well.  Why else do you like Target (NYSE:TGT)?  

CORDARO:  So, I like target because, one, I think that retailers will do  better this holiday season.  I think we`ve finally gotten to the point  where we`ve all experienced that, that hey, your gift just didn`t make it  in time and I`m sorry about it, but, you know, it didn`t get delivered.  

And so there`s some tangible ability there and I think target is in a good  place to benefit from that in this holiday season.  

GRIFFETH:  But so many individual investors these days are in index funds,  they`re in exchange-traded funds.  So their exposure to the market is more  broad than what you`re suggesting here, and they are subject to the  vagaries of the trade wars going on right now.  
So, what`s your outlook for the market here?  

CORDARO:  Well, so, I think — I think we had a strong year, I think the  economy is definitely slowing.  So, we`re not going to see anything like we  saw this year.  

And what we see going forward is that I think a pivot more into stocks that  are more of a value focus, more smaller cap.  Indexing and market  capitalization has led for a long time.  And I think we`re possibly at an  inflection point where we see that change going forward.  

HERERA:  And interest rates very quickly?  You expect them to stay steady  now?  

CORDARO:  I think they`re going to stay steady.  The Fed is going to wait  to see what happens.  But I don`t see any big movements up or down.  
HERERA:  Chris, thanks so much.  
GRIFFETH:  Thanks, Chris.
CORDARO:  Thank you.
HERERA:  Chris Cordaro joining us today with Regent Atlantic.  
Coming up, can Disney`s “Frozen” heat up a chilly box office?  

HERERA:  A congressional committee has launched an investigation into the  live event ticket industry.  StubHub, Live Nation and others were asked to  provide documents explaining how tickets are allocated, how fees are  determined, and whether tickets might be placed exclusively on the  secondary market.  The committee says it`s looking into what it calls  potentially unfair and deceptive practices.  

GRIFFETH:  Finally tonight, this is expected to be a big weekend for Disney  (NYSE:DIS) and a big weekend for the Hollywood box office.  “Frozen 2”  makes its debut and expectations are for a warm reception.  
Julia Boorstin has the details.  

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  The sequel to the  second biggest animated movie of all time is expected to bring in as much  as $120 million to domestic box office this weekend, bolstered by positive  reviews.  If it breaks $100 million, it would be the first animated movie  to do so outside the summer season.  

And “Frozen 2” is expected to become Disney`s sixth movie to top $1 billion  this year.  

PAUL DERGARABEDIAN, COMSCORE SR. BOX OFFICE ANALYST:  Disney`s legacy is  animation and their brand coupled with something like “Frozen”, a story  like that, they created a new classic back in 2013 with “Frozen”.  It seems  like only Disney (NYSE:DIS) is able to really do that, because the legacy  of the brand, coupled with great content that really appeals to families.   And that`s been their bread and butter since the inception of the company.  

“Frozen” fans paying $25 a ticket for a special pajama party showing at  Disney`s El Capitan Theater at 10:00 a.m. this morning in Hollywood.  Many  wearing all variety of “Frozen” gear to eat breakfast and meet Anna and  Elsa.  

It`s been six years since the original “Frozen”, but as you can tell by  this packed movie theater for an early screening, fans are turning out in  droves, which is a testament to Disney`s ability to take an original idea  and turn it into a franchise, driving not only consumer product sales and  content for the theme parks, but also success at the box office, which  Disney (NYSE:DIS) is dominating this year.  

And movie theaters could use a blockbuster hit.  Total domestic ticket  sales are down more than 6 percent from the same period in 2018.  And the  November box office so far is down 27 percent from last year.  
The big question is whether the growth of streaming services, Apple  (NASDAQ:AAPL) TV Plus and Disney (NYSE:DIS) Plus both launched earlier this  month, have been keeping people at home and putting pressure on the box  office.  

CHARACTER:  Unicorn.  Ice cream.  Castle.  
BOORSTIN:  If “Frozen 2” is a hit, it could not only revive the box office,  but also drive subscribers to Disney (NYSE:DIS) Plus, which has the first  “Frozen” film and will get the second one next year.  
For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.  

HERERA:  And before we go, let`s take a final look at the day on Wall  Street.  The Dow was up 109 points to 27,875, the Nasdaq added 13 and the  S&P 500 rose 6.  The major averages were all lower for the week, and that  snapped a string of gains.  But it was also a week that saw the stock  market hit new highs.  

And that is NIGHTLY BUSINESS REPORT for tonight.  I`m Sue Herera.  Thanks  for joining us.  

GRIFFETH:  I`m Bill Griffeth.  Have a great weekend.  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) 2019 CNBC, Inc.

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