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tv   First Business  KICU  July 30, 2013 4:00am-4:31am PDT

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fed fears: stocks struggle ahead of this week's federal reserve meeting. in today's cover story, a new way for frequent fliers to stockpile miles. how to invest in the stock market... and sleep at night. plus, why trash is the new economic indicator. you're watching first business: financial news, analysis, and today's investment ideas. good morning! it's tuesday, july 30th. i'm angela miles. in today's first look: fed watch is on. traders and investors played it cool monday, with mild selling in the stock market. gold moved up 7 dollars, and oil lost 26 cents. what a herbal-life! the
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nutriition company shocked wall street, beating the top- and bottom-line numbers. shares jumped to nearly $64 in heavy after-hours trading volume. and two tires blew out during the landing of american airlines jet monday. no one was hurt. doug rothschild of performance trust joins us on this tuesday morning. good morning, doug, and are you sensing that bonds will be on edge ahead of the fed? - morning, angie. thanks for having me. absolutely, all eyes are on the fed this week. will bernanke have another taper tantrum? and how will the market react to that? so as we're looking forward, the fed meets on wednesday, they're going to release their notes. there will be no press conference, but instead, in their notes, investors are going to be looking for clues that the fed is going to begin tapering their bond-buying program. that's going to be dependant on
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what happens in the economy. one thing we do know is that bernanke wants to keep interest rates low for a long period of time. tapering and the movement of interest rates are two different things, and the tapering, we expect to get clues from the notes, but we know interest rates are going to stay low for quite some time. the other thing you're looking at is the stocks, and the earnings we just came out of. the one thing we're seeing from the economy is, there's lots of bottom-line improvement, expenses getting better, earnings are a little bit better, but there's not a lot of top-line growth. so the fed is looking for the economy to grow before they taper. - what about who's buying the bonds? what's the big money doing verses the retail investor? - what you've seen is a tremendous outflow out of fixed-income, out of bonds, in june, when bernanke had his little taper tantrum earlier. you have to keep in mind the amount of money that came out of bond funds and bonds was enormous, bigger than anything we've seen since the 90s. and that cash is largely sitting on
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bank balance sheets in cash. so, they're not buying bonds, but they're not necessarily going into stocks, either. - doug, always a pleasure. thank you. - thanks for having me. the bailout that's biting back: the former chief of aig, maurce greenberg, wants bernanke to testify what he knew going into the $182 billion bailout of aig in 2008. greenberg contends that the rescue came with strings that cost aig shareholders tens of billions of dollars. the judge in greenberg's case agrees, calling bernanke "a key government decision-maker." so do traders such as todd colvin. "he knew things no one else knew going into that bankruptcy that when the fed had to kind of step in and overtake. the same goes for when the banks took the $500 billion back in 2008. the fed chairman knew things. not all those banks needed the money, but he made them take it anyway." looking ahead, the wall street journal reports janet yellen has come closest to predicting growth, jobs and inflation during the last four years. she
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remains the favorite to succeed bernanke. others include larry summers, alan blinder and roger ferguson. jobs are on the agenda for president obama. today, the president delivers a speech in chattanooga, tennessee, at an amazon warehouse. amazon is adding 5,000 full-time positions at distribution centers across the u.s. and 2,000 customer service jobs. the president is touring the nation with a series of speechs on the economy and jobs. the congressional budget office predicts canceling the sequester would add nearly one million jobs to the economy in 2014. senate republican leader mitch mcconnell tells reporters the president needs to cut entitlements to get relief from the sequester. apple is said to be back to investigating labor practice in asia. china labor watch, based in the u.s., says worker abuses are happening at factories operated by taiwanese company pegatron, where iphones are made. violations reportedly include withholding employee pay and excessive working
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hours. apple responds it's committed to safe and fair working conditions and is investigating. pagatron also promised to investigate. fast food workers in seven cities are protesting this week, hoping to call attention to their low wages. the campaign for a minumum hourly wage of $15 has been garnering momentum since last fall. a coalition of clergy, labor and community groups are behind the movement. the average hourly wage at many fast food restaurants is less than $8 an hour. average ceo pay for top low-wage employers is estimated at $9.4 million. iconic department store saks fifth avenue is being bought by the hudson bay company. the $2.9 billion deal means hudson bay will pay $16 per share at a 5% premium. hudson bay is also the parent company of the lord and taylor chain of department stores and the oldest company in north america. it started in canada in 1670 as a fur trading enterprise. saks fifth avenue has 42 stores and 66 outlet stores. a merger between two major players in the advertsing industry is shaking up the sector. the wall street journal reports ominicom and publicis group will together become the
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leader in the ad industry, creating a $35 billion frim. both stocks rallied on the news, but investors are less convinced about a deal with perrigo buying irsih drug-maker elan. perrigo shares tanked more than 8%, while elan bounced 6%. the cash stock deal is reportedly $8.7 billion. analysts are concered about perrigo, a consumer healthcare business, buying into a speculative drug business. no let-up in drama going into friday's vote by dell shareholders. in an open letter to dell's special committee, billionaire investors carl icahn and southwestern asset management are demanding changes to the voting method for "unaffliated stockholder approval." founder michael dell wants an amendment that only counts votes with a firm yes or no. unaffiliateds could count as abstentions against the proposal. michael dell is offering $13.75 per share. ichan's deal is up to $18 per share.
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boeing is calling on airlines worldwide to inspect emergency locator beacons on all of its jets. the locators are built by honeywell and are under scrutiny after a fire broke out on a parked 787 dreamliner july 12th in london. there are up to 1200 jets that need to be checked. the information will be turned over to the faa. airbus is investigating the beacons but is not requesting a fleet-wide inspection. just in time for the rebound in business travel, entrepreneurs have launched a new website called "rocketmiles." our cover story takes a look at how it brings more smiles per frequent flier mile. rocketmiles is a hotel-booking website, but for its customers, the draw is how many and how quickly you can acquire frequent flier miles. for example, three nights at the chicago hilton over labor day weekend would earn you 13,500 miles on united. if you stay at the westin, 11,500 frequent flier miles. "our target is the business traveler who makes their own
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bookings and then expenses it to his/her cfo." jay hoffman, a former united airlines and groupon executive, found a way to merge aspects of both businesses. the company buys frequent flier miles from a growing list of airlines. it uses the miles as rewards for customers who book hotel rooms through rocketmiles' website. in premium hotel that are also purchased by rocketmiles at a discount, often these are rooms that would go unsold. "i could see the business traveler doing this, or the leisure traveler who doesn't travel much or have the venues to accrue miles." in its first round of fundraising, rocketmiles raised $2 million in external funding and started with six airlines and hotels in about 30 cities. it just added two more - air france/klm and abu dhabi-based etihad. hotels are about to grow from 30 to 300. "this has a real nice packaging
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to it. hotels with mileage perks, business travelers love that." rocketmiles has competitors. one of them, called "pointshound," offers rewards from among nine frequent flier programs for bookings at more than 150,000 hotels in the u.s. and overseas. bmw is zooming into the electric car market with its new model 1-3. its compact size and carbon fiber body are designed to be more city- and earth- friendly. it's priced at $42,000, which is under the $60,000 sticker price on the electric tesla model s. it's bmw's attempt to drive in business from the growing electric luxury car market. "the combination of luxury brands and plug-in vehicles is a good one. people buy electric cars in some cases for the same reasons people buy luxury cars, and that is image. they're looking to make a statement." that was joe wiesenfelder of cars.com, who tells us bmw's
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move in the market could accelerate sales at tesla. nissan is expected to announce today a major expansion of its operations in canton, ohio. the plant there already manufactures six vehicles. it had already announced in january that it would add the cross-over murano vehicle to that list. in earnings news, hertz rental cars had a banner second quarter, posting more than $120 million in profits. insurer cna also did well, posting a net income of $194 million, a jump of 17%. equally impressive was franklin resources: net income was $552.3 million in its latest quarter, beating estimates. after several years of declines, customers are more satisfied with their hotel stays. a new report out from jd power and associates says guests are the happiest they've been in seven years. this comes after years of long-term investments to upgrade facilities. surveyed guests were particularly happy about interactions with hotel staff.
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still to come, with record highs in stocks, average americans could have doubled their money. how to make sure you don't miss the market's next move. and, the spillover from the deepwater disaster - why bp is claiming fraud. plus, how come consumers are coming unglued over an elmers product? that's next, after this "in the know" message.
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and advocate for the services he needed. fortunately, paralyzed veterans of america's trained experts were there to help him so he could concentrate on getting well. for over sixty years, paralyzed veterans of america has worked to ensure that our injured veterans get the medical, housing and auto benefits they have earned. i'm so thankful paralyzed veterans of america was there for me. surely those who sacrificed so much deserve no less. join me in supporting our paralyzed veterans. visit p-v-a dot org.
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a retired school teacher and woodworker are sticking with their story that krazy glue doesn't work the way it should. according to usa today, the two have filed a lawsuit claming they were fooled by the ad showing a man in a hardhat stuck to a wood beam. the pair noticed on one side of the krazy glue package, it says the glue works on wood, and on the back it says it doesn't. attorneys for elmer's have yet to comment. three years after the gulf oil spill disaster, officials with bp are questioning settlement payments. the oil giant has pumped out $14 billion to victims of the disaster, but believes claims are getting out of hand. jackie keenan has that story from florida. just a few months ago, attorney kevin mclean filed claims against nursing homes. now it's stricltly b.p. he's one of many lawyers shifting his practice
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to represent alleged victims of the 2010 deepwater horizon oil spill, and business is booming, with payouts averaging $220,000. "absolutely, there's been a flurry." his opportunism is not isolated. there are currently more than 61,000 claims to bp that are from businesses not related to fishing or wetlands damage - nearly double since february. last year, bp agreed to a settlement that included a simple formula for businesses to use in calculating claims. the result is a free-for-all for gulf-coast businesses. businesses such as dentists, restaurants and even printers far inland are making claims and getting paid with the help of lawyers like mclean. "they knew that there would be businesses 40 miles, 100 miles from the coast that would be making claims. they knew that many of those businesses would
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be unrelated to seafood or tourism, and completely unrelated to the spill." here in st. petersburg, the city made a claim to bp for loss of tourism dollars. it's a claim bp sees as legitimate, but the oil giant is fighting back those claims they say are fraudulent. "i'm thinking that bp lawyers didn't really think this thing through." dr tim kaye says the agreed settlement was the only option for bp to avoid a trial, which might have been even more costly. but bp is appealing to the courts to investigate the system, and is even appealing to the public, such as in this ad that appeared in the wall street journal. kaye doesn't see anyhting wrong with what lawyers and businesses are doing. "well, it is ethical in the sense that really this is the trade-off that bp and the other
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corporations allowed themselves to get into, in the interest of getting the settlements done quickly. they don't want the litigation going on for years and years. it's not in their best interest, and it's not good pr, so if you're paying a few people who probably haven't had a just cause, that's probably a price worth paying." so far, bp has spent $14 billion to clean up the gulf, and has paid more than $11 billion to accomodate 300,000 claims. for first business news, i'm jackie keenan. bp is also fighting back with a hotline. the number is 1-855- 662-3728. the oil company is encouraging the public to call with names of businesses making fraudulent claims. coming up, fear is keeping investors out of stocks. how to keep the faith when stocks drop. and, one trader's view on how a big ad company merger will affect consumer stocks. that's next.
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i'm going to pass chemistry, and i'll take it from there. i'm going to do what makes me happy. i'm going to work hard. be independent. live large. make the most of every opportunity. i knew i wanted to go to college. but figuring out how to pay for it? i didn't have a clue. the u.s. department of education has over $100 billion. and that's a lot of money. to help students pay for college. and the free application? you mean the fafsa. i did it online. it was easy. i'm never giving up on my goals. i will make a difference. i'm going to find out how to pay for college. i'm going to college.gov.
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we continue to hear reports of americans shying away from the stock market out of fear of losing their entire nest egg. but one look at this chart shows the dow alone has more than doubled in the past 5 years, meaning americans lost out on an opportunity to double their savings. we are calling in andrew keene, president of keene on the market, and alan knuckman of trading advantage to take the fear out of investing. good morning, and people do have a right to be scared, but is now a good time for someone who doesn't have a dime in stocks to get involved with the stock market? - i don't think it's a good time to get involved in the stock market, but if you're currently in the stock market, there's ways of playing options that i can limit my risk involvement. one of my favorite strategies, if i was long stock - let's say apple's trading $430 - i can buy a zero-cost collar. in this situation, i could maybe buy january 2014. i buy the
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$350 puts, i sell the $500 calls, and i do this for zero premium, so i'm outlaying zero cash for this trade. i'll be stopped on the downside at $350, and i still have all the upside reward up to $500. - alan, why not get in the market? people are calling for 1700 on the s&p 500, for instance. - there's always a good time to get into the market. markets are never good or bad, you just have to be positioned correctly. but it's all about controlling risk, and i don't think people understand really how to do that. andrew's talking about putting in a floor by buying those puts. you can always protect your positions. its like buying insurance on your house or your car. you have something of value, you want to protect it. that means you have to control risk. and in this day and age, you don't just buy stock shares and put them in a drawer and hope that things are better in 20 years. you have to have a trading plan. you have to have an exit strategy if things go for you or if they go against you, you have a certain dollar amount you want to risk. it's not all-in. you're not putting all of your money into one trade. you need to diversify and put your monies into different baskets with different
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time horizons. - as alan said - i'm actually going to agree for him for once - everything is a risk vs. reward set-up. i look at every situation as a different set- up. how much am i willing to risk on this trade? the difference between a good trader or investor and a great trader is, a good trader looks at how much they can make, a great trader or a great investor looks at how much they can lose. "if this trade it goes against me, what's the most i can lose?" - let's talk about exit strategies, because people do retire at different times, and the baby boomers are going to be retiring all together, and they don't want to get out when the market's down, so what should they do? - there are a lot of the exchange-traded funds that you can use to track the market itself or different indexes, so you don't have single-stock risk that you would have. what you want to do is divide your account into, let's say, 20 slices of pie. so if you lose one slice of pie, it goes completely against you, you still have 95% of your account left. again, i can't talk enough about maybe buying puts as insurance on any of your positions or your portfolio, and have that protection for six months out, or eight months or a year out, so you can sleep at night, and that way you know you have your downside protected, and you've got unlimited upside. - thank you for the 411 guys. thanks for coming on the show. we'll see you later this week. - thank you very much. - thank you.
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more on the market is just around the corner as trader jared levy joins us for two stock picks ahead of earnings. chart talk is next.
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jared levy of zacks.com is here for some trash talk. good morning to you, jared. always good to have you on the show. - thanks, angie. - you're watching waste management. what do you see in the chart on this one? - you know, i think waste
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management's an interesting story. we've been talking a lot about how the consumer's doing good, and we're consuming more, we're buying stuff. well, if you're buying stuff, you're also throwing stuff away, right? - it's an economic indicator. - yeah. so you know, with waste management, not only do i like the technicals here - it's building sort of a nice bullish foundation - but i like the fact that the fundamental story is solid, and it's also a stock that a lot of people haven't been talking about. but logically, it makes sense, as long as all of the other stuff is true, which i believe it is - the economy is beginning to do a little bit better, and we should see that reflected in waste management. - but are these levels too high? i'm pulling up a chart here for one year, and it looks like this has rallied pretty hard. - yeah, it has. but remember, everything has to be put into perspective. when you see a stock that's rallied, you have to think about, a), where it's come from, and b), what is it
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really worth? in other words, what is the company earning? if they're trading at 10 times earnings - which is very, very cheap for the s&p - even if the stock has rallied 50%, it might still be a buy, and that's why i think we need to keep our eyes here on waste management. i think it still has more upside here. - any other stocks on your radar? - you know, i'm sort of checking out cracker barrel. it's actually a stock i bought in one of my services last week. it's a stock i've loved since about $70. it's approaching i think $97 here, and cracker barrel doesn't report until september, but what's intriguing about cracker barrel - all the stocks have been having trouble with revenue, and yet cracker barrel has seen a 5.4% increase in revenue due to their big cracker barrel sales. but the bottom line is, this stock also, good, strong fundamental and technical trend; and i think this stock could easily clear $100, perhaps get to $105, $106. - thank you, jared, and have a great trading day. - thanks, angie. that's it for today. coming up tomorrow, the back story on why hair is becoming a hot commodity in the counterfiet market. from all of us on this tuesday, have a great day, and we hope you will join us tomorrow.
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