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Transcripts For KQED Nightly Business Report 20171005

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Tyler mathisen, coming to you once again from the new york stock exchange, hi, sue. Good to see you, bill. Im sue herera. A record close for stocks. But we begin tonight with the job market. And the potentially unprecedented impact that hurricanes irma and harvey could have on the labor market, at least in the short term. Today we learned that american employers created fewer jobs in september than they had in any single month in nearly a year, primarily because of hurricanes harvey and irma. As Hampton Pearson reports, the disruptions are expected to show up in the monthly government jobs r reporter todays private sector hiring survey is the first indicator of just how much of an impact hurricanes harvey and irma had on the job market last month. Only 135,000 new hires in august, the lowest in nearly a year. Small businesses were hurt the most, losing from 50 to 60,000 jobs, according to Payroll Processor adp. Leading economists say fed chair janet yellen has already indicated monetary policymakers are anticipating the hurricanes impact. The fed signaled they already know the data is going to be noisy and expect some weakness. We in consensus are saying, look, roughly the average hurricane takes 60,000 off the employment growth. This one feels a little stronger than average. Reporter those same economists say construction hiring, on the rebound after two months of decline, will accelerate with posthurricane rebuilding. And they say other key sectors of the economy are in recovery as well. Auto sales were up more than 6 last month, topping 1. 5 million, as americans began replacing destroyed vehicles. New manufacturing data out today shows the Service Sector of the economy expanding at its fastest pace in more than a decade. These surveys from the ism, both the Service Sector and the manufacturing sector, are also looking forward to after the hurricanes and were both quite strong. Reporter marketwatchers and economists say any setback in job growth from the hurricanes will be temporary and reversible. For nightly business report, im hampto and as hampton alluded to there, while job growth may be slowing temporarily, as he said,tiv in the Service Sector rose to a high, driven by increases in both new orders and business activity. The Services Sector makes up the bulk of our economy and includes everything from health care to Financial Services to construction. American optimism on the economy is at an alltime high. The Third Quarter cnbc all America Survey found that a Record Number of americans, more than 40 , believe that the economy is excellent or good. The fourquarter average for every Major Economic metric in the poll, including housing and wages, and the stock market, are also at records. And that optimism is part of the reason why stocks just keep climbing. Today, as we mentioned, the three major indexes closed at yet another record. Each has now set at least 40 alltime highs this year alone. The dow itself has set 45, that was today, up another 20 points to 20,661. The nasdaq, the s p, both added about three points today. Meantime, bill, on capitol hill it was the senates term to question the former ceo of equifax about that data breach which impacted 145 million americans. Yesterday Richard Smith faced questions from a house panel on the companys response to that breach. Today, senators grilled him on another issue, a report that equifax was awarded a 7 million nobid contract from the irs. Its being reported in the media this morning that youve just received a nobid contract from the irs for fraud prevention. Can you explain to the american people, not just as consumers who have been exposed and breached here, but as taxpayers, why in the world should you get a nobid contract right now . Im not sure it was a nobid. My understanding, i dont profess to have the details, senators, its with the irs. Its a contract weve had in the past, i think its being renewed. You realize to Many Americans right now that looks like were giving Lindsay Lohan the keys to the mini bar. I understand your point. Under the irs contract, equifax will verify taxpayer identities and help prevent fraud for the tax agency. Last night we reported that the fcc was considering making millions of dollars available to repair Communication Networks in puerto rico. And today, 77 million was in fact approved. The fund provides subsidies to companies that will make Communications Services more accessible and affordable in places where costs on that island are just so high right now. And puerto rico was bankrupt even before Hurricane Maria hit. After touring the devastat the the countrys mountain of debt would have to be wiped out. That statement sent shock waves through the nations 3. 8 trillion Municipal Bond market. Michelle carusocabrera has more. Reporter President Trump visi puerto rico yesterday, surveying the damage from Hurricane Maria. During his visit, he said this about the islands l debt load. We have to look at their whole debt structure. You know, they owe a lot of money to your friends on wall street. Were going to have to wipe that out. Thats going to have to be you can say goodbye to that. I dont know if its goldman sachs, or whoever it is, you can wave goodbye to that. Reporter as a result, puerto ricos bonds fell sharplies, this is the benchmark bond for puerto rico, falling to as low as 32 cents on the dollar in todays session. When investors think a bond is going to be paid in full, it trades near 100 cents on the dollar. And take a look at Companies Like anbach, nbia, insured guarantee. If the issuer of the bond doesnt pay, they do. They all took a huge hit because they have large exposures to puerto rico. Puerto rico is struggling with massive debt with the inability to get the power back on in the wake of Hurricane Maria. And whats become clear since the hurricanes, despite borrowing lots and lots of money, the island did not invest in its energy infrastructure. The median plant age in puerto rico is 44 years old compared to only 18 years old on the mainland united states. These plants are so old, they have to run on imported oil, many of them. In fact 47 of puerto ricos energy grid is powered by petroleum which all has to be shipped into the island. That number in the is only 0. 6 . As a result, Puerto Ricans spend a lot more per kilowatt hour for their energy, 21 cents versus 11 cents on the mainland in the united states. For nightly business report, im michelle carusocabrera. And its not just hedge funds invested in puerto rican debt. Individual investors also own a lot of muni funds through bonds or directly. How concerned should you be . Alexandra leventhal, her family has been in the business since started the business. Dmot the bankruptcy, and now the hurricane. Theyve been negotiating with creditors to figure out how quickly they can get back. How quickly can the debt be wiped out . I consider this the equivalent of fords drop dead to new york city comment, which was the headline in the daily news in the 1970s. Except in that case he had the ability to do something for new york city. In this case, it doesnt make sense, its not really possible for the federal government to eliminate the debt of a municipality. And you mentioned hedge funds. Lets talk about them for a second. Thats from individual investors. Those hedge funds are very savvy investors who have been in the process of suing or negotiating and trying to figure out what theyre going to get back on their investments. And by the way, trump knows extremely well what its like to deal with bondholders who are savvy boldholders who dont just say, fine, well wipe the debt away and call it a day. His debts didnt exactly work out that way. Alexandra, if youre an individual investor and you have exposure through mutual funds or etfs or the like, given the fluidity of the situation down there, how concerned should you be . Thats a really interesting question. You were showing that graph of puerto rico, they were already trading 44 cents on the dollar, went down to 30. Youre coming into a bad situation already. The good thing is there are not individual puerto rico Municipal Bond funds. Puerto rico bonds are a component of other funds. There are some funds like oppenheimer which also is the old Rochester Fund which has a large percentage relative to other funds. People have seen the value of those funds go down. Theyre already worried about getting the money back anyway because of the bankruptcy. Right. It was bad enough, the hurricane made it worse, and what trumps comments did didnt necessarily make the situation worse in terms of getting repaid. It just added on, piled on. One other sidebar to this, alexandra, are the other municipalities that are in dire straits that are watching carefully to see how this has handled, i this of the sta of tf illinois that has had financial difficulties, theyre watching this carefully as well, as are their mun ychlmuni bondholders. Every situation thats occurred in Municipal Bond, detroit, california, illinois, chicago, puerto rico, was an issue unto itself. Youre absolutely right, there is an effect of, gee, whats happening over there. There are all these different components, like in illinois you dont have the situation of the aging infrastructure, and those numbers obviously are staggering. You do have the pension situation and financial instability. But yeah, i mean, it does give you an idea. And that did not used to be the case. You had new york city in the 70s, that was its own experience, until orange county, california, in 94, i think. And that was its own and then in the last few years youve had this tumbling one situation after another. The situation with puerto rico and the hurricane, the important thing there is the hurricane is stopping the ability of all those bonds to pay interest, because theres no sales tax, people arent buying things. Theres no electric power revenues, theres no electricity. Its heartbreaking. Its a such a great island and it breaks my heart, having been so intimately involved in it over the years. It is a very difficult situation. Alexandra, thanks for the thoughts tonight. Sue . Bill, the president today made his way to las vegas to visit shooting victims and praise the First Responders and the medical teams who responded to the worst mass shooting in this countrys history. Jane wells is covering the. Reporter for the second day in a row, the president came to a place of heartbreak to praise those who had rushed in to help. Americans dashed into a hail of bullets to rescue total strangers. Reporter he also met privately with victims of sunday nights massacre, even as investigators continue to process the wellarmed lair Stephen Paddock created inside his Las Vegas Hotel room, complete with cameras to surveil the hallway. Newly released Police Body Cam video shows what the chaos was like as officers responded sunday night. The gunfire lasted nine to 11 minutes. When a s. W. A. T. Team finally broke into Paddocks Hotel room an hour later, they found him dead, a suicide. Meantime his girlfriend returned to the u. S. From the philippines and was questioned by the fbi in los angeles in hopes of finding out a motive, something the bureau says is eluding them. This individual and this attack didnt leave the sort of immediately accessible thumb prints that you find on mass casualty attacks. Reporter las vegas has more cameras per square foot than any nongovernmental place for surveillance, technology, security. Is it enough . That was top of mind this week at the Global Gaming expo, a massive tech conference here. We dont have a thriving industry, we dont have a thriving las vegas if people dont feel safe. Reporter some compare the situation in vegas to the mgm grand hotel fire in 1980 which killed 85 people and led to an overhaul in building and safety codes. Could this shooting lead to a similar sea change . Whatever happened, it will be too late for the 58 murdered victims including an offduty Police Officer who was at the concert sunday night with his wife. And when the gunfire started, he tried to protect others. He lives behind a wife and two children. Were very grateful for his sacrifice. Reporter a reminder that while many heroes lived, some did not. For nightly business report, still ahead, a new roadmap and fords decision to move away from tradiar European Union regulators are going after two u. S. Tech companies. The eu has ordered amazon to pay nearly 300 million in back taxes. The commissioner also took ireland to court for failing to collect about 15 billion in taxes from apple. Authorities are arguing that apple, like amazon, profited from a system allowing it to avoid taxes that the eu feels should have been paid. The fda wants to speed you want amount of time it takes to get generic versions of complex drugs to market. The theory is that increased competition means lower prices. And the agency is wasting no time. Late last night it approved mylans generic version of tevas blockbuster multiple sclerosis drug. And look what happened to the stocks. Mylan stored. Teva tumbled. Meg terrell explains why this would be the first of more drug ap to come. Reporter the food and drug administra doesnt control the price of drugs. It does control whether drugs are approved. Thats a key part of the agencys strategy to lower the cost of medicine. What i think the fda is trying to do is use Market Forces in the form of more competition, to put pressure on drug prices. Obviously when things go generic, the prices of the drugs drop. Reporter late tuesday, the fda approved a generic version of a multibillion dollar of a medicine for multiple sclerosis made by israeli pharmaceutical teva. Its considered a complex generic, one thats harder to copy under traditional approaches, making last nights approval a surprise. One of the bottlenecks at the fda was socalled complex generics which are hard to make, or have some unusual tweak to them that are different than your typical white solid pill. Reporter analysts estimate mylan could price the generic at a 40 discount to the branded drug. Priced at 80 to 90,000 a year. They say it could capture as much as 45 of the market. The news drove mylans stock higher. For teva, it was the opposite story. The drug accounted for almost 20 of its 22 billion in 2016 revenue. With the new competition, teva said today it expects Fourth Quarter earnings per share will be reduced by 25 cents. The stock sank. Mylans approval came just two days after the fda issued new guidance for approvals of complex generic drugs. Analysts say more approvals could be on the horizon, including for generic copies of advair and mylans epipen, itself the subject of scrutiny over its price. All of the big troublemakers weve read about in the news have probably been in this area. Reporter in a blog post this week, dr. Scott gottlieb, the fdas director, said they plan to bring more competition and lower prices to the drug market, promising, quote, were just getting started. For nightly business report, im meg terrell. Fritolay helps lift the bottom line at pepsi. And thats where we begin tonights market focus. The food giant reported a better than expected profit thanks in part to selling more snacks. But weakness in its north american bevere business caused overall sales to disappoint. The cfo of the company says it focused too much of its Marketing Efforts on newer products, and it will fix that mistake. We really had a strong pipeline of innovation this year. And we probably just moved too many resources from our core businesses of pepsi and dew into these new products. And frankly that cost us competitively for the quarter. Well need to balance that out a little bit better over the next couple of quarters. Pepsi shares finished up 21 cents today to 109. 34. Office depot is buying i. T. Provider compucon, part of a plan for office depot to transition to a broader business c said it was cutting its guidan for 2017 due to hurricane disruptions. Office depot shares were off almost 18 to 3. 78. Shares of gopro got crushed today after google unveiled its new clipon camera which could rival gopros products. And they did it at a cheaper price. Googles new device will retail for about 250 compared to 500 for gopros newest model. Gopros shares were off 6 to 10. 39. And after the bell, bloomberg reported that seaworld is reportedly being approached by englandbased theme park operator merlin about a potential merger. Seaworld is said to be discussing a sale with advisers. Merlin is not the only potential buyer. Shares rose in afterhours trading and ended the regular session up 4 to 14. 11. As we reported last night, ford is shifting gears, mask out a new strategy for staying competitive in a rapidly changing automotive business. The ougautomaker says it will n focus more on trucks, suvs, and electric vehicles. Phil lebeau has the story. Reporter new Ceo Jim Hackett is repositioning ford to compete in a world where electric, connected, and autonomous drive vehicles will change how we get around. The mandate here is that ford must compete. Companies never choose to die. And yet many, by not evolving, are enabling that kind of fate. Reporter while ford invests in future vehicles, its slashing costs by 14 billion. At the same time it will push more trucks and suvs, the most popular vehicles it sells, while cutting back on cars, which are far less profitable. But the biggest change is ford investing heavily in selfdriving and electric vehicles. Thats because ford needs to compete in china, the Worlds Largest auto market, where the government is aggressively pushing its residents to plug in their cars. Theyve got to focus on the now, with cutting costs and producing more suvs, because those are popular all over the world. But theyve also got to be investing in the future technologies like electronic vehicles, like connectivity in cars. Thats not going to pay off for a while. Reporter fords chairman bill ford hired hackett to shake up the automaker. But he knows shifting gears at a company thats built cars and trucks for a century will take time. Still, hackett knows hes on the clock. I want to declare to you that i get up every day feeling like time could be wasted here if we dont get moving. I feel a real sense of urgency. Reporter ford investors also feel a sense of urgency. Their shares have lagged other automakers and the market as a whole over the last couple of years. Phil lebeau, nightly busi. Coming up, will malls have to look a lot less like malls to keep shoppers coming in this . Consumers are expected to spend more this Holiday Season, according to a recent forecast from the National Retail federation, sales may increase as much as 4 compared to last year. Thats important because the Holiday Season of course can account for 20 to 40 of annual sales for many retailers. But with Stores Closing and foot traffic in decline, how are the nations malls holding up as we head into this important Holiday Season . Courtney reagan is in los angeles. Reporter so far this year, at least 20 retailer have filed for bankruptcy and more than 6100 stores are closing. But that doesnt mean the mall is dead. In fact, most malls are holding up okay. Theyre just changing, investing a lot of money to keep up with the shifting consumer. This is a century city hamall i los angeles. It got a Million Dollar expansion and makeover. Its one of the highest rated malls in the country. There are more restaurant and Specialty Food options here than they are clothing stores. There are fitness clubs, lots of stores that cater to health and beauty, a tesla showroom, apple store, amazon books, and much more. A lot of the malls in the country and a lot of the physical asss are aging. You do need to upgrade the mall. You need to have the best retailers. And every 20 years or so, you need to spend that kind of capital to remake the mall. Here at century city i believe we mall of the 21st century in what used to be the city of the 20th century. The idea is to keep the customer coming back, give them something to do, not just to shop but come to a place to be, to meet their fends, create their own physical networks. Reporter mall owners and operators spoke about the state of the mall today and how its changing. The business is detoxing. Were replacing the weak with the stronger. And as a result, well be stronger when were done. Were expanding. Were doing cosmetics and wellness and fitness and service and value and food and beverage and entertainment. All these other types of categories are coming into our property. Reporter revamped malls will be put to the test with black friday less than two months away, as Online Shopping is expected to break new records this Holiday Season. Shopping Center Manager jll ceos sales of america retail says Consumer Confidence is at an all when people feel good about themselves, that affects retail sales. Reporter as mall owners ship away from clothing and toward experience and services, many malls are starting to look less like malls, hoping thats what keeps shoppers coming. For nightly business report, im Courtney Reagan in los angeles, that does it for us tonight. Im sue herera. Thanks for joining us. And im bill griffeth. Have a great eve this is bbc world news america. Funding of this presentation is made possible by the freeman foundation, and kovler foundation, pursuing solutions for americas neglected needs. Planning a vacation escape that is relaxing, inviting, and exciting is a lot easier than you think. You can find it here in aruba. Families, couples, and friends can all find their escape on the island with warm, sunny days, cooling trade winds, and the

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