tv First Business KICU April 2, 2013 4:00am-4:30am PDT
price drop at the pump. more signs the outlook this spring is sunny for motorists. in today's cover story: food fight - why consumers are calling kraft "shady" over its mac and cheese. plus, a look ahead at sectors that could be major market- movers in the second quarter. and, why more companies are swapping services in exchange for a healthcare plan. first business starts now. you're watching first business: financial news, analysis, and today's investment ideas. good morning. it's tuesday, april 2nd. i'm angela miles. in today's first look: stocks pull back after running up to record highs. monday the dow fell 6, the nasdaq 29, and the s&p was off by 7. gold
gained 4 dollars, while oil slipped 26 cents. a judge is giving stockton, california, the go-ahead to file for bankruptcy. the city of 300,000 is the largest in the nation to declare it's bankrupt. the city is reeling from the housing price collapse. and facebook phone in: thursday, the social media company is expected to take the wraps off a new operating system on google's android phone. daniel stecich of tjm institutional services join us now for a closer look at today's market action. good to have you on the show this morning, and a lot of people are talking about this big downer in the market. the sky is falling, chicken little. do you buy into that? > > no. yesterday was kind of instrumental in that we were able to watch the markets without the european affect on it. and we started focusing on what data came out. the ism number came in a little weaker than expected, but remember, it was above 50 - 51.2 - and although that is weaker than they expected, it is still growth. i am not panicking on that number alone. i want to
see a few months' worth of that number on the low end before i start getting worried. > we have seen a healthy rally in the stock market here, but what is likely to happen this week? there is some economic data that is coming out that could follow up that ism number. > > biggest number of the week coming up here. we have employment coming out friday. i believe the estimates right now are 196 on the non-farm, adp number coming out wednesday at 200. that will give us a little bit of a clue. but that is one thing we have to pay attention to, and it is interesting to note that in yesterday's ism release, the employment was the only component that was up. it was up to 54.2, i think from 52.6, so let's see how that plays out going into friday. > is there anything on your sell list? > > one thing i would not do, i am not selling any positions i
have, because i am comfortable with what i have - long-term, i like the market. however, if we see any type of a pullback - ford is one example that i would look for. if that comes down a little bit, auto sales have been good, and that stock hasn't been responding, i would add to that position. any of the home builders - they came off a little bit yesterday as well - i think i would start paying attention to those, because i think those two aspects of the economy are going to do all right, and going forward you can make some decent money on them. > you are all in on those stocks. good to have you on the show. > > happy to be here. thank you very much. kraft foods may use yellow dye number five and number six another day in its macaroni and cheese, but not for much longer if a determined food blogger nicknamed "food babe" has her way. our cover story follows her effort to rid american consumers of colorful additives used to make food look appealing, but which may also contribute to health problems. "they use paprika for coloring in the uk." vani hari, a food blogger who wants kraft to stop using artificial yellow food dyes, gave out samples of kraft mac and cheese - british versions without the dyes - and the
brightly-colored american original. the point: americans don't prefer mac and cheese because its a vivid yellowish- orange. "it tastes exactly the same." "i don't really like mac 'n' cheese, but i like this one." yellow food dye #5 and #6 have been banned in some european countries and are being phased out in others. public health organizations say food dyes pose a rainbow of risks - among them, hyperactivity in children. but the food and drug administration approved these dyes, and kraft still uses them in products for the u.s. "in the uk, they have the clean version. here, we have dyes made from petroleum. they're pumping our kids full of petroleum. " hari, whose website foddbabe.com seeks to expose what's in american processed foods, took 270,000 petitions gathered in a
month-and-a-half to kraft's headquarters in suburban chicago, her trip sponsored by the petition website change.org, which documented her one-hour meeting with kraft executives. in a statement afterward, kraft listed products it makes without artificial dyes, and as far as phasing them out, a spokeswoman said, "i can't speculate on the future. as we consider new products, we'll keep listening to our consumers." the food and drug administration wouldn't say whether it would reconsider its approval of the dyes, nor would it comment on bans on them enforced in other countries. meanwhile, new data from the centers for disease control says 11% of school-age children are now diagnosed with attention deficit hyperactivity disorder - adhd. that's an increase of more than 50% in the last decade. u.s. generic drug company owners are closely watching for the fallout of a landmark drug case in india. a high court handed a patent defeat to drug maker novartis in a battle that lasted several years over the updated cancer drug glivec. health activists say the decision enables poor patients
to continue to get affordable meds. novartis says the decision will inhibit innovation. health insurers' stocks added healthy gains in advance of rulings on medical reimbursement rates. the ruling from the centers for medicare and medicaid services calls for reimbursement rates to climb more than 3%. earlier, it was expected the cost it pays insurers per person would fall more than 2% next year. one analyst reportedly predicts the revised rate will give medicare advantage plans more stability. humana led the way with a nearly 9% gain yesterday, closing at $75.02. small businesses are finding a
new way to beat the rising cost of healthcare. many employers have started to barter medical services for employees. in exchange for medical services with doctors, dentists and pharmacies, businesses can actually trade a service for the cost of a procedure. "we found a way to incorporate using their barter accounts, their trade accounts as spifs or bonuses for their employees so that way they can contribute towards healthcare for them." that was nicole graham of trade international exchange, a firm that coordinates the transactions. she says 2/3 of small businesses in the u.s. already use organized barter, and the switch to obamacare is pushing employers to offset the cost of typical insurance plans. the u.s. supreme court says airlines must show the actual cost of tickets. airlines were challenging federal rules that taxes and fees must be included in advertised ticket prices. it
is a victory for the transportation department, which enacted the rules to reduce consumer confusion. volkswagen & mitsubishi plan to bump up hiring. volkswagen wants to increase its headcount to 600,000 over the next 5 years as it strives to become the world's largest car maker. mitsubishi plans to expand its u.s. operations after selling just 58,000 cars here last year. meanwhile, in japan, sales of mini-mobiles are reaching a record high. a new report says car companies sold 1.57 million mini cars, up 23% from last year. analysts believe it signals a shift in the market with a move away from family-sized vehicles to smaller cars. tesla is turning a profit, and it's driving share prices higher. tesla stock jumped more than 15% yesterday as the high- tech automaker revealed its electric sedan sales exceeded expectations. the profit is a first for the electric car company. we'll have more in chart talk. a protest in west virgiana over patriot coal's bankruptcy re- organization plan ended with
arrests. thousands of demonstrators showed up for a rally yesterday. the union claims patriot coal plans to cut its pension and healthcare programs. the company denies it and says in a statement: "...patriot coal is not proposing to eliminate healthcare for umwa retirees. in fact, the company's proposal could make hundreds of millions of dollars available for these retirees." an oil spill in an arkansas neighborhood is drawing concern from around the nation. clean- up crews are still tending to the spill, which originated from a crack in an exxon mobil pipeline. the oil was on its way from canada to gulf coast refineres when a leak caused the oil to flood the streets of a subdivision. investigations into the pegasus pipeline are ongoing. exxon mobil said a recent inspection of the line showed no red flags. a spring surprise is happening at gas pumps around the nation. for the first time in a decade, gas prices fell in march and
could continue to fall. prices dropped because of an increase in refinery production and lower oil prices during the month. according to aaa, prices at the pump declined 15 cents in march. the average gallon of regular gasoline is going for $3.63, down dramatically from a year ago, when prices were close to $4. onto today's ipo watch. two new companies plan to go public this week, and one drops out of the race. this week, texas- based bank "independent bank group" is expected to launch its ipo. it plans to raise $80 million with 3.2 million shares at between 24 to 26 dollars. cancer diagnostics company "cancer genetics" is expected to price in on friday, after postponing its ipo last month. meanwhile, toys'r'us has scrapped plans to go public. it reported the news after announcing 4th quarter earnings. profits fell 30% due to slow sales. greeting card giant 'american greetings' is going private. the stock bounced 12% yesterday, ending at $18.05. if the deal gets the go ahead,
shareholders will receive $18.20 per share. the company's founding family will take the company private, with cash funding from koch industries. a fizzle in the land o' drizzle - july 4th will be a quiet day in seattle. the city will not host a 4th of july fireworks display this summer. a non- profit has been attempting to raise $500,000 for the display, but missed its deadline. seattle has struggled to raise money for the displays after corporate sponsorship ended in 2010. still to come, what the second quarter has in store for investors according to a money manager. that's later on. first though, america's small business owners see better times for the balance of the year. the reason is next with bill moller, after this "in the know" message.
we know the economy is improving, but what about small business owners. their hiring practices are a major economic driver in this country. what do they think? what are they planning? every month we take measure of their thinking and what they're doing in the surepayroll small business score card - a sampling of tens of thousands of businesses across america. michael alter is ceo and president of surepayroll. michael as you look at the data, it looks kind of like there's a split in the numbers.
> > there is a split in the numbers, and i think we are seeing some positive signs in that half of small business owners are looking to invest in the second half of this year. in the next nine months, they are planning on adding people, technology, spending more on marketing. this is the first time we have seen this kind of result in a long time. > you actually have a number fixed to the optimism index. what is that? > > the optimism index is just under 70% are optimistic about the future, and that is very positive as well. traditionally we like to see that in the high 80s, low 90s, but it is much better than where it has been over the last few months, down below 60. so, you take that, coupled with the fact that 80% of small businesses said in the first quarter it met their expectations or exceeded their expectations. so they have come through a period where everybody was really concerned about how things were going to go, they have made it through, they are comfortable with how it looks, and as they look to the future, they are starting to think about investing. > that is looking ahead, but the numbers are for march actually, and they show that in
general, hiring, payroll, those are down. > > right. and i think there is a lag between - optimism then drives hiring. but we certainly did see another month of declines in march. we saw a 2.2% fall in the number of folks on the payroll, and a .1% decline in the average paycheck. so, we are continuing to see a decline, but i think some of the early indicators in optimism and perspective of what they are thinking about investing in will change these numbers over the next nine months. > there are some anomalies in the those numbers. i know in the south hiring was up, actually, and in the midwest payrolls were higher. how about 1099s, contract workers. they are still- i saw the numbers, they are going up. > > right. and we have seen that trend over the last few years. and i think that is a structural change for how small businesses operate. they are using more and more independent contractors in the same way somebody might employ a lawyer or an accountant on an hourly basis, they now have access to more and more skills that they can employ that way. so you have got marketing folks, you've got online folks, developers, all
sorts of resources that you couldn't have before, partly because the internet and the technology makes it accessible to find these folks anywhere in the world. you can interface with them easily, and you get a lot for your money. > it is interesting. so they are not tied to whether the economy is up or down. that is just a fact of life now in the workforce. > > right. it is certainly a key piece. > michael alter from surepayroll. thanks so much. > > thanks for having me. we're going to take a look ahead at the second quarter: just what are investors tuning into. that's coming up.
for a preview of the second quarter. good morning to you. > > morning angie. > the first quarter was very strong. what follows now? do we follow suit, or do we see the stock market gains peter out? > > there is a lot of pessimism that is out there. if you look at consumer confidence in regards to overall investing, it is really not at an exuberant level. the problem that we have coming up over the next three months is you sort of see a swoon after the first three months historically if you are looking at like the dow jones industrial average over the last 100 years - may, june, and july typically aren't great investment months. > but this year, you think, could be different, because, i am hearing from a number of traders on the show, there is just no great place to park money except for in equities, the stock market. so, could that change the picture?
> > yeah. thank ben bernanke for that, because interest rates are so low there is no other place to really put your money. if you look at what has been happening overseas in terms of some of the foreign markets, they have been suffering as well. so the only place that looks like the best safe haven right now is the u.s., which is one of the reasons why i think we had such a strong quarter. > what are some sectors that you would put some money to work in, such as healthcare or financials, which were strong. last quarter, will those continue to gain, or are you looking for other areas now? > > it is interesting, when you look over the last 30, 40 years, where the heights of the market were, energy stocks were all the rage back in 1980, technology stocks in 2000, and financials in '07. we try to shy away from where people start putting a lot of their money, because typically that is sort of the top end of the range in regards to where we think that industry will be heading. so, we have got a lot of different assets in a lot of different places, because it is really tough to narrow down and pinpoint exactly where the next great bubble is going to be. > you have to give us some of
those places ed. > > we are looking at consumer discretionary is a big part of it. we are watching the consumer come back in a robust fashion. that is an area we are really focusing in on. and as far as different areas, small-cap stocks is a place where we would really like to find some good value. > what about the manufacturing sector? we have china moving faster than anticipated, the u.s. slowing down just a tad. what do you see happening? will it matter to you? > > i think china sort of ebbs and flows in fits and starts. china all of a sudden one month is doing really well, and then the next month is doing really poorly. i think the new government regime there is a little bit more cautious in terms of just the overall wealth, in fact they are trying to dampen that down a bit, which i think is going to affect manufacturing. so i think the resurface of manufacturing here in the states will continue. it is great to see "made in the u.s.a." being stamped on a lot of things. and that should be an area of sustained growth. > thank you ed. > > thanks angie. coming up, car charge: will tesla shares accelerate from here? chart talk is next. i wanted to be in the military since i was a kid.
i served in the united states air force. i served a total of 16 years. i was deployed 13 times. on my second deployment four bombs hit my vehicle. and at 19 years old, that was the first time i ever saw somebody die. coming back, i was raging. i started having pretty horrible nightmares. i would wake up in middle of the night sweats. i started drinking a lot. i felt worthless. i guess i never recognized it in myself. eventually, one day i just walked into the va hospital and said i'd like to see somebody. don't suffer alone. you've got to find that link with somebody that will make you let it go. it all starts with going to the va. there's a whole community of veterans that just want to help you out. it's for the guys who couldn't come back, you owe it to them to live well. because they're not here with their families.
matt shaprio, president of mws capital, joins us now for a quick chat about cars and houses. good morning to you matt. let's start with cars: tesla having a standout day yesterday. can this run continue? > > i think the stock is a little high. it had an amazing surprise profit announcement yesterday, up $6. it is a stock
we have talked about, lower. i've just been afraid to buy it, because of its really high valuation, even though last november i hit one of those tesla stores in the mall, and i thought, "what a high quality car this is." but, you know, i was just too afraid to get into the stock at its valuation, and it shows you there is money to be made. just wait, i think, for a pullback. always twists and turns in this stock. if it comes back down to earth, i think try to get in. > and don't feel bad. everybody has that woulda, shoulda, coulda stock. let's go on to the housing market now. you are watching some mortgage-backed rates here. these can be tricky, but i know that fannie and freddie are actually making money. is this a good sign for that industry, that sector? > > well, it is a super hot leverage sector. we are talking about alnylam capital management, two harbors, and american capital agency. these have been hot stocks for aggressive income investors. they buy lots of mortgages, don't pay much in short-term financing, and pay out about 10 to 15% as rates to their
investors. and of course, the mortgage market has been recovering. but the question is, what happened to companies like these before the financial crisis? > they collapsed. > > they did. now these companies, of course, have only been in business for a few years, and they have been red- hot and doing really well. the caution is, what happens when short-term interest rates rise that is really going to compress their margins, even though, of course, they do manage that exposure as best they can. but of course, the news came out fannie and freddie are making money, and these companies are making money in mortgages. it is just very leveraged. so just watch out and be careful. > thank you matt. > > you're welcome. time for us to roll out of here for today. coming up tomorrow, bp on trial: the latest on the case, plus a look at the damage to the gulf 3 years later. thanks as always for watching. from all of us at first business, have a great tuesday!