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tv   MONEY With Melissa Francis  FOX Business  October 21, 2013 5:00pm-6:01pm EDT

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jobs report. economists expect non-farm payrolls to rise by 180,000. liz: we'll talk about the numbers with labor secretary thomas perez. he will join us on county down to the closing bell at 3:00 p.m. eastern. "money" with melissa is next. melissa: i'm melissa francis. here is what is "money" tonight. uncle sam sticking up banks, making off with shareholders dollars. this is what everyone is talking about on wall street. we have former treasury department official who was there with. you haven't heard this with. abercrombie & fitch ceo, how does he still have a job? from bad decision decisions to even worse personal choices. who thinks he still should be in charge? we will debate it and shareholders beware. "who made money today." his day is looking pretty bright as he rakes in more than a million bucks. even when they say it is not it is always about money.
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>> ladies and gentlemen, may have your attention please. we have ex-presidents. as you can see we are in fact robbing your bank. melissa: so it noise the ex-presidents. it is uncle sam himself. he wants jpmorgan and some of the biggest banks on wall street to pay up. it is costing them and shareholders, by the way, billions. we know jpmorgan alone is said to have reach ad tentative deal to pay the government a record 13 about dollars fine. it doesn't end there -- $13 billion fine. many banks are looking at billions of dollars in fine. many say it is highway robbery by government. it is all the talk on wall street. we have susan ochs and from "the wall street journal" and also fox news contributor, steve moore is with us as well. peter, let me start with you, what troubles me the most about this 80% of the mortgage-backed
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securities they are being punished for were acquired when they got bear stearns and wamu, something they did at the behest of the government anyway. now they are being punished for it. does this make sense to you? >> it makes no sense to me. legally they are liable when you acquire a company you acquire its sins with them. however they acquired the two companies at the behest of the treasury department. they wanted them to acquire them to help deal with the financial crisis. it was hurry-up deal. they didn't have the normal time for due diligence. this is absolutely absurd. it smacks of reprisal for jamie dimon not supporting dodd-frank and the president in 200012. -- 2012. will the 13 billion go to make people whole? how much will end up in the hands of non-profits to campaign for democrats in 2014. melissa: those are at love points. susan, you were at treasury. what do you think about this. >> first of all there are internal jpmorgan documents that show they knew washington mutual
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had some shoddy documentation practices. all of this is not a huge surprise. second of all, if you remember bear stearns very sweetheart deal jpmorgan got, they took the first dollars in losses and federal reserve took the next $29 billion in losses for jpmorgan. so, when we talk about jpmorgan, oy, they're getting screwed by the government, let's remember how good after deal they got. remember the due diligence they had done on these companies. as you said, peter, you know, everybody knows, doing deals on wall street you assume the liabilities of a company when you take it over. melissa: steve that is a tough case, you want to take that on? >> look, i like the way you describe this is bank robbery. this is robbery of this bank, there is absolutely no question about it. to this point i would simply ask the question, number one who is going to get this money? who is owed this money, number one. >> right. >> number two, let me make this point, this kind of misbehavior that was supposedly happening by banks like bear stearns, this
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happened before they were purchased, purchased by jpmorgan and it was, done at the behest, they did a favor for federal government here. one other thing, let's not forget. a lot of this was due to these toxic mortgages. guess who was enticing these banks to buy these toxic mortgages and make these loans in the first place? it was fannie mae and freddie mac. they should be on trial here. >> make a couple good points we should drill down on. for example, who is getting money this is question we've been asking. 7 billion is going into treasury. maybe 4 billion is going into housing programs of different types. susan, what do you think, who is getting money? where does it go. >> 4 billion is going to consumer relief, talking about mortgage prince pill reductions. every penny goes into the general treasury fund. the money can not be used by anybody unless appropriated by congress. this is not some conspiracy all the sudden the justice department is getting more money
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to conduct more investigations. takes same route as every other fine that comes in the government. >> i have to challenge you on this point. >> we're making a lot of sweeping statements here in defense of treasury. melissa: you made the point earlier that this is like henry viii when he went and investigated the abbys because he needed to raise money for the government. that was analogy you made earlier. do you stand by that in the face of what susan said? >> absolutely. masses want heads on a pole and mr. obama is happy to give them jamie dimon's head. with regard to the money in the deal, the initial deal, customary, fdic does this all the time when, a bank goes belly-up, they merge it with another bank and give it sweeteners, because the bank will not absorb all the losses. they give them enough sweeteners, to the deal. they did some due diligence and not nearly enough to warrant this kind of acquisition. tough look at the time span, that a former treasury official is overlooking. this was a hurry-up deal, what
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happens when we have another financial crisis? you have to be out of your mind to do treasury a favor. melissa: what about, steve moore, are they going to get involved next time around? >> here is the point i want to make when which i think is so important. 4 billion quote for consumer relief? what the heck is that? melissa, nobody put a gun to these people's head to take out these mortgages. somehow -- >> nobody put a gun to jamie dimon's head you have to buy bear stearns. >> that is nonsense. the nation's top regulator asks you to do this in the middle after crisis you have to be out of your mind not to accommodate him until at least this day. after this you will have a reason not to accommodate him. let's not pretend that hank paulson did not have lot of leverage that afternoon. let's not pretend. are you pretending that there was no leverage. >> i didn't work for hank paulson. i can't respond to that what i'm saying the more important question here, truly, we're talking about a lot of big
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headline-grabbing numbers. more important questions what are the remedies we're putting in place to make sure this doesn't happen again? i'll tell you, one refrain throughout the entire treasury department through the bush administration and obama administration, never again. we're never going to be put in this position where we have any kinds of deals like this again. we shouldn't have to have this situation. melissa: go ahead and respond to that. >> why are we still giving money to fannie and freddie then? let's get rid of fannie and freddie then. that will solve the problem. >> great, that's let's do it. >> if you think you will solve the all ills of humanity by passing dodd-frank, that's nut. we will have another crisis again. that is the basis of human nature. melissa: very spirited this is tough cook which. wow. next on "money" how does this this guy still have a job? mike jeffries seems to run abercrombie & fitch into the ground. the things he says make him sound like such a jerk.
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shareholdersers brace yourselves we'll hash this out. you won't believe it. amazon may not make as much money as apple but making brilliant business decisions by blowing away the competition. they're setting up inside proctor & gamble's warehouse. we'll tell you why this is the company to beat. more "money" coming up.
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melissa: you sometimes sit and wonder how does that person still have a job? it is a something we talk a lot about in our "money" meetings. take abercrombie & fitch ceo mike jeffries, for example. yes, this is the buy who helped revive the company. now he might be completely responsible for its total demise. on top of that, he comes off like a total tool. forget the infamous comments about how he won't make clothes for fat people and draconian rules how store staffers have to dress on the job this, guy dictates what kind of underwear his staff can wear on the corporate jet. i'm not i had canning you about this. so with abercrombie sales plummeting, we want to know how is it possible he still has the job of ceo? brian and james freeman are here
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to try to help us see both side of this. okay, guys. this is the famous quote. a lot of people don't want to in our clothes. are we exclusionary, absolutely. those companies are in trouble trying to target everybody old, fat, skinny. you become totally vanilla. you don't alienate but don't excite anybody. it is hard to hate fat people and get away with it in this country but he doesn't make anything more than a size 10. that the people out there. you have to wonder, stock is down 27% in the past six months, sales down 10%. women's sales down 30%. seem like it is not working. what do you think? >> what is your role as ceo? to inspire, vision,. melissa: not to make fun of fat people? >> not to make fun pat people, this guy is walking billboard for crest white strips. the stock underperformed since 1998. more importantly, every store, they're closing 50 stores. every store closure is something
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he signed off on. big mistake and shareholders play the price. melissa: you're a good sport. tell us what is right with this guy? >> short straw. defending the indefensible. maybe it is not indefensible. i would say in terms of the business case, forget the ads and i wouldn't want my kids appearing in them. melissa: or seeing them or going to the store, right. >> or having anything to do with it. melissa: right. >> but looking at this market this is a tough environment for teen retailers. for retailers selling to young people. obviously very high unemployment rates. you look at last summer, terrible summer jobs numbers. so his customers are hurting. >> right. >> they're not getting a lot of money from mom and dad right now. melissa: meanwhile he is watching things like his crewmembers are wearing on private jet. only male models on the plane. crewmembers provide ad specific uniform. fitch jeans. that makes sense.
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foster briefs and polo shirts and flip-flops. only off degrees outside or colder only allowed to wear a jacket with the button from the bottom up, lowest one has to be unbuttoned. i can't make sense of that. spray themselves with cologne repeatedly through the flight. will this help sales? focusing on this type of detail? what underwear the guy on your private jet is wearing, your corporate jet, does that help sagging sales at abercrombie? >> keeps sales worse. abercrombie sales underperformed american eagle and urban outfitters underperformed since 2011. this botox wearing ceo, robots looks like him, teen customers, it is your job to get teens buying your product and he is trying to create robots. the product is not working. don't sell black or extra large. that is not normal. not selling trendy items to include more people. melissa: no you just have to
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wear bright colors that show your true weight. doesn't want anyone hiding pound where you can't see them, is that what it is? james what do you think? >> people can change. if you look at him lately, the track record is, he likes to exclude people from his customer base. melissa: right. >> if you're not young and thin and good-looking in his view, he hasn't been interested but he does seem to have started to make some changes. you look at their retail storefronts. it is a more welcoming retail experience. used to have all the blind, kind of message was, stay out. now, they're basically opening up to a broader set of consumers. so maybe this is the beginning of, little more respect for customers. melissa: i see shutters. i see half naked guys out front luring people. opposite of victoria secret. >> if he keeps going he will start respecting dignity of his customers, maybe people that work for him. melissa: he is called one of the most overpaid executives.
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made $8.16 million last year. new forecast for the third quarter earnings, 60% lower than consensus. >> he is not going to get a chance to turn this around. his employment contract expires january 2014. to have this board which is a bunch of yes men, need to raise up the sign and peaceout and get somebody in there to drive better results, better store experience. the fact is he has not done any of that. the stock is down significantly. melissa: james, when you look at what his pay is compared to what happens, when you look at the board, sounds like it is stacked in his favor. when you look a lot at share price is getting hammered. when you need, carl icahn to come in and get rid of this guy. >> he may have a pretty tough road ahead. he really separated himself from the others in that industry. he is not as aggressive as they are online. this is bricks and mortar company much more than other ones. also around the world he wants to own and control every store instead of licensing which makes
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it very capital intensive. i'm not sure this is forever, even if he does have a lot of friends on the board. melissa: you're saying six months from now if we did this segment how does this joker still have a job he couldn't dot segment because he wouldn't have it more than likely? >> new gig. will come out with more store closures. time for change. melissa: great jobs, you guys. you're a food sport, james. from the u.s. to every corner of the globe money has been flying around the world today. first to italy. former top executive at swiss bank, ubs was arrested in northern city of ba loan yaw. -- ba balo-fna. he has been on the lam since 2008. he allegedly helped several thousand clients hide assets into swiss bank accounts. he is facing extradition in the u.s. united arab emirates is placing an order that would kick
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off a 60 billion-dollar jet-buying spree. a huge boon for boeing that includes dozens of its jets including revamped mini jumbo. repeat order for the dreamliner. good luck with that one. landing in china, infamous smog shut down a northeastern city of 11 million people. index measuring pollution reached levels of 1,000 in the city of harbin. to put that in perspective, a level above 300 is hazardous. the world health organization is recommending a daily level no more than 20. the levels forced schools to close and roads closed and shut down the airport. boy. melissa: amazon is making a amazing move to cut out the competition. actually moving into warehouses to get products straight from the source. it's genius! how does it help your bottom line? we'll explain. plus, you think wal-mart is old school? it is ramping up efforts to
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melissa: so you probably don't even know what's going on but it is giving amazon a huge competitive edge. the company has made an amazing innovative move. it is setting up shop inside warehouses like at proctor & gamble. boom, they're inside that warehouse. it cuts out the middleman costs making it more responsive and saving you money at checkout. the question is, why isn't anyone else doing this? we have an expert from nuveen ventures. thanks for joining us. this is innovative. there are some smart things about this. amazon saves on shipping because
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they don't have that silly step in storage. they don't have to have whatever products you're ordering come and sit in the amazon warehouse until i buy it and come to ply house. proctor & gamble doesn't have to endure the transportation costs. is there a downside i'm missing? >> there is really no downside. this is just a between just move by amazon. like you pointed out, they are reducing their own fulfillment costs. they're improving the customer experience because the customer gets product faster and cheaper and at the same time they box out their competitors by creating a privileged relationship. melissa: right. >> all in one move. just shows you this is a company that just continues to innovate. it is not surprising to see them doing something like this. melissa: do they have to pay some sort of premium? how do they get the sweetheart deal with proctor & gamble? i have to imagine as this happens, somebody like wal-mart or even barnes & noble if we were talking about books, they see something like this, wait a second this is total unfair advantage. proctor & gamble, says amazon you have to pay for the
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privilege of doing this? what are the financials behind this. >> that's a great question. no doubt i'm sure amazon's competitors are looking at this and probably not too happy about it but at the same time. you know, proctor & gamble is benefiting as well because they get to streamline their supply chain and they will have reduced out of stocks and things of that nature. the other thing for proctor & gamble is, they would like to increase their online sales, consumer staple goods. not very much gets sold online today. only about 2% goes online. so they would like to increase the share of wallet online and if you want to do that, you want to work with the biggest online retailer out there and that is amazon. melissa: you follow this space. is wal-mart for example, screaming about this? or ebay even? >> i can't imagine they're all that happy about it. and while wal-mart is bigger than amazon in total revenue, they do much less e-commerce revenue than amazon does. so that is probably why p&g is doing this teal with amazon and
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not with wal-mart. melissa: it is also interesting, when you look at this is another way for amazon to make money without having any salespeople. when you dot wal-mart comparison, amazon generates $756,000 per employee in sales. versus 215,000 for wal-mart. it's a huge multiple because they continue to not have to have as many locations. even though they don't have, of course they don't have salespeople because they're amazon but now they have, you know, fewer people at their fulfillment center. seems like a genius model. is there a possible flaw in it? >> not that i could tell. i don't see how it will be a potential downside for amazon in any way. the only possible downside is if they wanted to break up that relationship but, p&g isn't going anywhere this is a relationship that will be there for the long term. so there really isn't a downside for amazon. melissa: the knock people always have on amazon, no matter what they do to innovate, no matter
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how cool they are, if you look at how much money they make every quarter, apple made the same amount of money in the last quarter as amazon made in its entire time since it is public. in other words they find ways to cut prices to be competitive but don't necessarily make it up on volume but necessarily don't make a ton ever money but make it up on volume. does this help translate to more profits on the bottom line or is this another case where they're making margins thinner and thinner and thinner? >> well, amazon is definitely in a mode where it is reinvesting every single dollar back to improving the consumer experience. just to give you some perspective, only five 1/2% of retail spending goes online today. so that's a tiny amount and, that has so, a lot of room to grow and amazon, despite doing over 60 billion a year in revenue still continues to grow at north of 20% clip. there are not that many businesses out there that can sustain that kind of growth.
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when you look at that five 1/2% of u.s. retail sales going online, they can continue to grow at 20% plus for probably next 10 or 15 years. so i think wall street has every expectation they reinvest every dollar back into growth. melissa: thank you so much. good stuff. up next on "money," nothing can make a parent prouder than their kid going public about being a rich and spoiled brat, right? wouldn't that make you feel good? one rich 20-something done exactly that. it's a money talker just waiting to happen. trust me. tough stick around for this one. plus, "who made money today?" he is happy to be lighting up wall street and making bank while doing it. stay tuned for the answer. "piles of money" coming up. when we made our commitment to the gulf, bp had two big goals: help the gulf recover and learn from what happened so we could be a better, safer energy company. i can tell you - safety is at the heart of everything we do.
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talking back on twitter especially when it comes to haters. when you're that big you will have a decent number of fiery followers. how does wal-mart weed through it all? the answer could be a big benefit to your business. here to explain josh marsh, evolution chief analyst, bob norton. thanks to both of you for joining us. i wan to start with one of the first exchanges that was brought to our attention sort of how they're engaging people. we're honored to employ veterans and support families every way they can. they were retweeting join us saluting america's heroes. they said, i put my app in, didn't get a call back. they called them names. learn more about opportunities and efforts. they gave a link where they could get -- what is your interpretation of this exchange? was it worthwhile for the wal-mart employee to go on and engage this person? >> well it shows they're
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listening. everyone else is looking and potentially gives an opportunity for that person who was tweeting and upset to actually learn more and read more about it. melissa: yeah. >> i think it is an example of a broader trend for what companies are doing and what wal-mart is doing in this case? which is, consumers are using social platforms like twitter as a way to reach out to companies, whether they have a question, complaint, upset about something and expect companies to respond. companies will be there just to use social to mock you, is wrong. consumers are there and want to be heard. showing they're listening and helping customers through those channels it could have a major brand benefit. melissa: is there a line you don't want to cross, bob? is there a line, when using your valuable time to try to answer people's questions turns into, especially in the case of somebody like wal-mart, they have a fair number of haters.
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when it is not just spinning your wheels. >> you have to trust your fans and make a stand and talk about solution you're having, what you're doing is activating fan community and your fan community comes to your defense. melissa: does you walmart have a fan community? you're talking about katy perry i believe you. are any of them online? when you think about the people that shop at walmart i don't think they're on twitter listening to what walmart is tweeting. for example they said our goal is to hire more than 100,000 veterans next five years, raw, raw. somebody tweeted right away? what starting pay? part time to avoid medical and benefits. to me sound like political operative, somebody trying to organize unions within walmart and following webb sight. they're entertaining people out there campaigning against them. what do you think? >> social media has massive usage across all generations.
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it is not just the youth. melissa: okay. >> and secondly, there will be individual cases trillions, trying to cause trouble but actually what we've seen, around we looked at some of the biggest retailers in the world. one of the biggest retailers in europe, we've seen when they had crises and trillions coming on attacking them, when they have gone out to engage the people -- trolls of. the people that are aggressive once they see the brand is listening they will support them. melissa: on a given day how do you sort through it? is there a computer program? on a given day how do you sort through the tweets? which ones do you answer and which ones you ignore and say they're internet crazy. >> walmart, we looked at them today, they're getting 250 mentions every hour. this is not like email and everyone is a problem. you have general chit cat on twitter and chitchat on
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facebook. you have to filter and find ones you need to do that you need software to do that. that is what we do with our clients. melissa: what do you think is the goal when someone goes online and uses twiter? is it customer service? is it to give off a general impression you're a nice? what is the goal. >> most of the time it is magic trick. we go online, solve a problem. look at us, we solved a problem and everybody gets excited about it. the truth of the matter unless you're solving the problem off-line and getting online and talking about it, you're putting yourself in a bad position. too many times people -- >> think what they did was wrong? >> no, i don't believe what they did was wrong but it is not the only way to do it. you don't have to get online and actually engauge with your fans in order to, or your enemies, your haters, you don't need to engage with anybody online in order to have effective social media strategy. you need to get people talking about you in a positive light. >> i disagree with that. someone is tweeting at you and
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asking for help or have a real question you can't ignore them. melissa: they gave awe link to this is that satisfying to give a link? >> problems with social customer service they're responding to customers but not resolving their issues. too many companies, when someone has a real issue look at website or email us or phone us. a lot of people contacting on twitter emmailed and phone and want to get help what they need. >> a lot of time you get what xbox does. xbox has a situation with at love people with a lot of problem with their consoles. what the whole strategies is get them off-line, get them off-line quickly as possible. get in priority queues. give them special number to call and get them help they need rather than solving the problem online. melissa: we have to go. thanks to both of you. great stuff. coming up on "money," don't hater because she is rich. the daughter of a wealthy doctor and lays out the opulent lifestyle and says, too bad for you! she doesn't have to presend to
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be poor. it is causing a stir in some circles. we have a money talker all fired up and ready to go. at the end of the day it is all about money.
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melissa: don't hater because she's rich a 20-year-old college student making huge headlines all over in papers and internet for her blog that she posted entitled, i'm not going to pretend that i'm poor to be accepted by you. it is causing quite a firestorm of controversy. so obviously it had to be today's money talker. obviously. here now, are money power players. julie roginsky and scott martin. first quote, i'm sorry i was born into great financial circumstances and my father likes to provide for me. i'm sorry i don't have to go to state school to save my parents money. what do you want from me. people shouldn't make others feel bad about their own personal finances. how people spend their money is their own choice. went on the rant following a
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tale where she went and bought a expensive happened bag she bought. sales clerk, god forbid gave her a terrible time, looked down her nose. what do you think? >> doesn't this read, why we're looking at great piece of literature. reads like a freshman comp essay, draft of an essay, and we're jumping all over this. melissa: i'll tell you why. she is making interesting point in society people are being made to feel bad if they have money. we're in the midst after class warfare war where, it feels like we're pitting rich against poor. >> right. melissa: and she feels like she shouldn't have to continue to apologize for being poor. julie can hardly contain her laughter. >> laughing at you, describing her like comparative literature mode. >> honey, listen to me. i used to live in the west village, anybody who is anybody doesn't shop at there. they shop at gourmet garage. melissa: yeah.
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really want to be one of those people, stop shopping at grastides because it's a little dirty. melissa: scott, do you want to get in a word edgewise? >> i don't know about that, but rachel got totally burned by julie. i think there is something decent in here somewhere. i'm sure her college essays are terrible, you know she talks about a few importance are important. people shouldn't judge people. people who are judging her now are doing worse work than she was when she wrote the essay to begin with. plus, money to me, this is kind of like a cry for help. money can be liberating. but it could be destroying and inhibiting. i think that is what is going on here. i think, melissa she is talking about how secretly she doesn't like all this stuff and lashing out like she is. melissa: i don't know if secretly she doesn't like it. she seems to embrace her bag a lot. i'm not one of those people who try to be poor to relate to people. i think that is honestly disgusting behavior. if you're saying you have to make yourself is beneath you to
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get others to like you. >> i love it. this is anti-williamsburg-brooklyn rant. this chick is not a hipster. i for one is grateful. entire bor roy of brooklyn who pretend like they're poor. melissa: trying to be honest. >> she is trying to capitalize on this hysteria that consumer spend something a little bit down. consumer index says consumer spend something down 21%, according to "gallup poll." >> i'm sure she is very familiar with both of those i'm sure. >> genghis people are freaking out on the economy and people are hating on occupy wall streeters. we know andy cohen has the little talk show. she wants to be on it. kudos to her. melissa: i mean, isn't that the bottom line, scott? don't you feel like when i was reading all this and seeing follow-up and she is online and everybody is tweeting, whatever, she is gathering material for a book. to me it's, maybe i'm cynical,
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this is the ultimate commercial move where she is just trying to get chatter going, very smartly at a young age so she can get out there to write a book or whatever else. >> she is playing everybody and probably even her future professors in college. think of all the great essays that will come from this because she is throw back a lost arguments to people. people who attack her she attacks them back. they attack her back. you're giving her material to go out in life to make tons of money. melissa: this is funny quote. people give gwyneth paltrow, whatever, grief, for saying she can't live like someone who is $25,000 a year. the statement is accurate. she was born in hollywood reality. the point, she is not a liar. she may be a lot of things but people who pretend to be poor to relate or hide the wealth in the society where we're being currently taught wealth is wrong and you should be ashamed and we're living in a robin hood
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society, take from the rich to give to the poor, she is saying no. i don't want to do it. i don't want to be part of it. i was lucky and blessed. born into a family. she says when i was young people with more money than me. people with less money than me. that is always the case. why should i feel bad about a set of circumstance i was born into and why should i lie about it so somebody will be nice to me at grestides. >> that is good rant, there are check out people. are they supposed to fall over here. melissa: she shade good afternoon. >> you're the difference between her and gwyneth paltrow. she was born on thursday. melissa: that's a difference? >> slight, slight. >> she was born on third base as was gwyneth paltrow but she actually went out and did something with her talent. this girl was part of the lucky sperm club. i'm not sure i could say that on tv. melissa: sure it is cable. >> she is part of the lucky sperm club and hit the genetic
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reality. do something with it, sweetie. earn a college degree and get a job. >> julie i think that is exactly what she is trying to do. >> a real job. >> i think she is trying to go out and earn her degree and capitalize on the pr machine. i have to say that i am an associate professor at the school she goes to. melissa: are you? are they like this. >> like this at all. they're very smart and very motivated. a lot of people i teach are wonderful and -- melissa: she may be very smart and motivated. this whole thing could be a con. she is on the cover of the post two days in a row. everybody is talking about her and inviting her to come on shows. writing thing after thing. if she doesn't get a book deal out of this i will be shocked. hopefully she has enough material to hire a writetory help her out. she is proven she can generate media and pr which sells books. scott, i think she might be a lot smarter than people give her credit far. i give laws word. >> i totally agree. she is good ad flipping the bird, ie, middle finger and keeping up foreign relations.
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julie is right. take your privilege to use it for something good. not endearing what she is doing but hey, it is creating a lot of buzz. >> you're offering to write the book for her practically. melissa: no, no,. i would need like a much bigger cut than what she is willing to part with. guys, thanks a lot. that was a lot of fun. next on "money," the news is about netflix. media maven, dennis kneale has the latest and greatest, including what you haven't heard yet about the company's big earnings report and why you should care. don't move. you can never have too much money. ♪
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melissa: time for a little netflix fun with spay change today. we're joined by media guru, dennis kneale. netflix just posted third quarter earnings. they are better than expected. analysts predicted 4cents a share. netflix posted 52 cents. netflix's ceo says the company is investing more than $2 billion in alsoing and original content. netflix added 1.2million subscribers in the third quarter. dennis, what do you think? is emotion getting ahead of -- >> seems like motion has gotten out ahead of the stock the stock quadrupled in price. it was off a artificially low number. it messed up its transition into the digital age. melissa: that is loaded. >> 52 cents instead of 49 cents expected. year ago is 13 cents. great growth until you realize the year before that was buck a share in earnings. they're still not earning a whole lot of money despite bringing in over a billion dollars in revenue but look at raising expectations for the current fourth quarter. this is why the stock popped 10%
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after-hours today. it is because they're streaming, they say by the fourth quarter they will get up to 33.5 million subscribers. and that is more than wall street was originally expecting. see wall street was at 32. they will get up to 740 million in revenue. that is 10 million more than wall street was at and more earnings. melissa: this is what worries me. i have netflix. i'm a huge fan. i love it. when they're talking about more and more customers it is not very expensive to have it and content is enormously expensive. one of the things they're saying on call they want to shorten up season or time in between the seasons. you watch "house of cards" and love it. bing viewing is a problem. people like me watch episode after episode so it is done. they need more content rhett revenue per subscriber is not that high. >> they're trapped in a bit of their own scheme. melissa: they are. >> they have to spend a huge bundle or new show to bring in more new members. they get new members and pump into new shows to get more new members and keep going around.
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melissa: their basic business model is not money maker. the other thing the more original shows you make the more you will fail. they will not be successful in every single one. they will double their original program budget in 2014 beyond what, they have spent 100 million. they will spend 200 million. you will have more flops. just in the past quarter, look at this anomaly by the numbers. okay, new u.s. subscribers in just the second or third quarter up 4%. new overseas subscribers up 19%. the stock price? up 46% in the same quarter that it is u.s. subscribers were up 4%. i think that shows maybe emotion getting out ahead of financials. melissa: you said one of the smartest things i heard people say about this. it feels like a ponzi scheme in the sense that they're bringing in more and more money people they subscribe to make incredibly expensive programs. "house of cards", love it, three emmys it was fantastic. $100 million for two seasons? >> the company says we don't see a big ump in new subs with a new
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program and not a new show or "arrested development" resurrection to bring in fans of that show. that is one problem. the other problem, binging on new programs forces them to write off the cost of the new stuff much sooner than the old stuff and that hurts their earnings. which you haven't had to do that but they may have to make that change. melissa: call is going on. i'm watching things go by. one of the things they talked about the fact they have no interest in sports, nfl or live sports right now. >> kind after slapdown to the nfl which clearly leaked idea they're talking to new bidders like youtube and netflix to go with live programing. there is no way netflix could afford the heft it costs to get an nfl contract. the country free cash flow, the cash left over after capital spending, $7 million in a quarter on a billion dollar revenue basis. not a lost latitude. melissa: doesn't go with the business plan. storing all the stuff, life sports doesn't work anyway. dennis, thank you. you are fantastic. nobody knows more about this than you do. >> okay. melissa: up next, "who made money today." he is more than a million
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dollars richer thanks to his company's bright idea. haven't figured it out yet? we'll have the answer after this. you can't have too much money or too much dennis kneale. i love the guy. ♪ (vo) you are a business pro.
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we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances. melissa: whether on wall street or main street, here is who made money today everyone this owned ge. improving industrial performance helping company beat wall street expectations, shares are up to a level not seen for company since september of 2008, stock closed up more than 2%. jeff e immelt owns shares. >> mark zuckerberg, ashton
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kutcher and google ventures gave company 4 million in feed funding it was started by a under grad, claims to only company that provides -- spending tens of millions of holy money? the bishop of bling, the german bishop of lindbergh is accused of falsifying expense reports. can you imagine? he was also indicted for lying about flying firs class to indit year. that is all we have for you. i hope you made money today, tune in tomorrow.
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martha stewart fight with jprogram penny tomorrow, the willis report up next. gerri: hello, and welcome to a very special edition of the willis report, we had such great feedback to our previous call in shows on obamacare, we're doing it again. we know so much more in just about a week about how the law is working and not working, have you been sending us your questions on tweeter, and e-mail, you can call in tonight. 1877-249-


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