tv First Business KICU January 17, 2014 4:00am-4:31am PST
bruised banks. the latest earnings from the financials confirm money trouble.in today's cover story... political power plays in the diary industry. plus, a tech stock that sold off last night is considered a buy today by one trader. and-- are the ladies better at running hedge funds than men? first business starts now. you're watching first business: financial news, analysis, and today's investment ideas. good morning! it's friday-- januray 17th. i'm angela miles.in today's first look: stocks stumble on earnings.a warning from best buy, along with profit trouble at citigroup and goldman sachs kept buyers at bay.the dow lost 65 points, the nasdaq rallied 4, and the s&p fell by 2.gold made a 4 dollar run. and the oil
market was quiet.intel tops revenue estimates and reports a slight profit increase.the chip maker notes a shift from people using pcs to tablets and smartphones. president obama releases nsa reforms today. it could have a huge effect on phone companies that store caller records.the senate passes a $1 trillion dollar spending bill that will keep the goverment funded through september.washington - the president is expected to sign before saturday.and, millionaires on the move. a new study shows the states of florida and nevada lost the most millionaires in 2013 while north dakota was the biggest gainer. in trader talk this morning, we are tapping into the trader mind of todd colvin of rj o'brien. good morning and what are you doing with your money? >>good morning. i think a couple thingsi think equities are still a safe place to be. if you didn't get in in 2013 waiting for a pullback, you're
kicking yourself so i think a modest percentage of anyone's portfolio should be in equities in the united states. as well as some minor fixed income, i think while we're seeing 10 year notes hover between 290 and 3 percent. certainly not the most attractive levels to get in but not a bad place to be in case there is some kind of a global crisis. i think you also want to have some emerging market exposure. looking out at where we're seeing a lot of money being pushed in 2014 is going to be in japan and europe as those 2 central banks will maintain their push to keep money flowing and their equities should outperform if that is gonna be successful. >>china now holds a record amount of us debt. is that a good or bad sign? >>i think with the federal reserve backing off slightly. we call 10 billion out of 85 billion a slight move. i think we should be a little cautious here. the chinese do own a lot of our debt but lets not forget who owns the most debt and that is the us federal reserve. i think right now where china stands as long as they maitain
their steady purchases it's a good thing. but if they start to decline greatly or they start to increase greatly then i would raise an eyebrow. but for now i think it's probably status quo where it should be. >>ben bernanke's getting ready to say goodbye to the federal reserve. what did you think about his comments yesterday? >>i thought they were interesting. i think he looked very relaxed when he was speaking, very comfortable. we didn't see that a lot in 2008 and 2009. so that's reassuring to see. but when asked if it was the right thing to do for the fed to be so aggressive with their easing of monetary policy he said it was the right thing to do---i hope.and that signals to me that the fed along with everyone else really doesn't know how this is going to play out. hopefully we start to see some positives in the economy and jobs and the equity market which has really exploded, is not a good reflection of where we stand as an economy. i think right now we need more time but it's going to be a zero interest rate environment for quite some time in the future. >>thank you for your comments. >>thank you very much. as todd mentioned...traders were listening very closely to mr. bernanke.the outgoing fed chairman opened up in an interview at the brookings institution.he defended his choice to give the green light on quantitative easing, adding that the financial market will continue to be sensitive to the risk of instability,
and...discussed his legacy. retailers around the nation are learning exactly "how" cyber criminals broke into target's system according to reuters - the government has issued a confidential report to merchants.it details the methods used in the target hack attack.more than 110 million customers were victimized.the attackers stole credit card and debit card data reportedly through.malicious software that infected checkout registers. the wall street journal reports part of the software was written in russia. a bump in the road for some major earnings on wall street.citigroup earnings missed the mark, falling short of expectations.the stock dropped 4% in trading yesterday as the bank told investors that income was up, while its trading revenues were down.goldman sachs also took a hit.profits slipped 21% due to falling revenue within its bond trading division. goldman slumped 2%. a name that bucked the "down" trend yesterday...american express. profits nearly doubled at the credit card company due to brisk holiday shopping. revenues also rose, 5%. now onto that best buy
shocker.the stock will be in focus today aftetumbling $10 yesterday when the retailer disclosed a sharp drop in holiday sales despite offering consumers deep discounts.the electronics seller notes intense competition from rivals. gilead sciences stock is heading to new highs on hopes for its treatment for hepatitis c ---shares closed near its record high at $77.optimisim was sparked by comments from analysts and from a medical director from johns hopkins...who says"standard treatments for the disease are going to improve dramatically within the next year"gilead won fda approval in december for its hcv drug that treats hepatits c. a major insurer has a "healthy outlook" for 20-14. united health group confirms the affordable care act and upcoming changes to medicare will effect the companie's short term profits.however, it expects profits will grow as more americans sign up for coverage under the health care law.in its fourth quarter earnings report, united health's
profits beat wall street expectations. shares sold off yesterday closing above 72 dollars. in our cover story, the farm bill is being held up in a dispute over a program to limit milk production, if prices for milk products drop below certain levels, in short--a guarantee that dairy farmers would make money by manipulating the supply of milk.could it sink the farm bill or is it more or less a drop in the bucket? there's an internal battle in the dairy industry. and the battle lines are not altogether clearly drawn. some producers-- farmers want price supports to protect them if the price of feed or transportation costs go up or if the price of milk itself drops. the current model authorizes the u-s-d-a to order milk production cut. house speaker john boehner calls it "soviet style" supply management. "really, the big problem is the dairy price supports. we need to get that done." processors, the plants that turn milk products into one- hundred-ten-billion dollar a year industry in the u-s, and some farmers don't want to cut production. "many producers are not as intent on price supports as
they were 20-yrs ago. " considering that milk consumption in the u-s has dropped 30% since 1975, some argue that the u-s should think less locally and more globally about demand, which is growing at 2% a year--twice as fast as current production growth. "we need to be looking outward and forward, not backward. the world has changed." other aspects of the farm bill, including what was considered the biggest hurdle--cuts to the food stamp program, seem to have been worked out.the huge gap between the house and senate on whether to cut food stamps by 39 billion or four-and-a-half billion has been reconciled to eight-billion over ten years. "with the loss of some of the money in food stamps, it will cut into demand for beef and pork, which we would've subsidized as a society."
but there have also been a number of house supported proposals taken off the table. "there was universal drug testing of applicants, and a lifetime ban for certain felony convictions even if you paid your debt to society." republican senator john hoeven of north dakota says if a deal is reached soon, congress should be able to pass the bill before the end of january. but if congress fails, agriculture secretary tom vilsack warns that older subsidies may be implimented that could double the price of milk at your local store. the number of homes falling into foreclosure... dropped to the lowest level in 6 years.. the housing market continues to emerge from the depths of the financial collapse.realty trac reports while foreclosures are steadily declining around the u.s...florida, new york and california's housing market recoveries continue to struggle.. detroit...denied. a bankruptcy judge has shot down a request by the city to sever a financial contract with two big banks. detroit entered into the interest rate swaps with ubs and bank of america in 2005 to help keep interest rates steady on pension funds. the contract costs the city around 50 million dollars per year.to exit would have cost 165 million, which the judge deemed "too expensive." now that amazon workers have voted against joining a union...the company is responding. in an email to time.com a spokewoman for the company says our employees have
made it clear that they prefer a direct connection with amazon.we apologize for accidentally broadcasting the union was a go in yesterday's show. trucking company y-r-c worldwide is back in talks with teamsters to refinance debt and avoid bankruptcy. earlier in the week y-r-c workers rejected a proposal that included a 15- percent wage cut, delayed salary increases and reduced vacation time.the company plans to revise its proposal shares of y-r-c raced up 21-percent on the news. american airlines is dropping flights from the east coast as a result of its merger with us airways.american will halt year-round, daily nonstop service to 17 cities from washington's reagan national airport and from new york's la guardia airport.the merger required that american give up 52 pairs of takeoff and landing rights as part of an antitrust lawsuit by the u.s. justice department. meanwhile united airlines is laying off hundreds of flight attendants in a plan to cut costs.about 685 flight attendants will be put on involuntary furlough as part of
the airline's $2 billion dollar annual plan to reduce expenses after merging with continental in 20-10. united says it failed to attract enough takers for voluntary layoffs and job sharing, which led to the involuntary furloughs. the threat of natural disasters plays out at the top of the list of what worries corporate managers-- the most. accoding to a study-- insured loses from hurricanes, floods and other natural disasters totalled $38 billion last year -- and an allianz survey shows that-- has companies concerned about this year. "there is more heightened awareness of events that happen because they come to you right at the news time, and you see it right away, whereas that wasn't always the case. but i think it's really where the globalization of products are - the fact that events in other areas of the world can impact businesses in any area of the world." that was thomas varney--a regional manager for allianz risk consulting.cyber security
breachs and loss of reputation also ranked high on the list of potential risks. 3-d printing is getting sweeter.hershey and 3-d systems are cooking up a concept that would use 3-d printing technology to produce snacks. a hershey exec says the experiment will create an entirely new way of producing candy.3-d systems says the plan would help the technology go "mainstream." sony, paramount and warner brothers are just some of the film studios that could get a box office bump because of oscar nominations.. films that have a shot at winning the golden guy include: 'american hustle','captain phillips','dallas buyers club','gravity','her','nebrask'' ,'philomena','12 years a slave','the wolf of wall stree'' netflix could also come up a winner with the its 'original" documentary "the square", which is about the 2011 uprising in egypt. the sacramento kings are the first sports team to bet on bitcoin.fans will be able to use bitcoin to buy team products ranging from tickets to beer.the kings' owner vivek ranadive says he is not concerned about price volatility.bitcoins ranged from
13-dollars to more than a thousand dollars in 20-13 on the "bitcoin index." the current price is 857-dollars and 82-cents. still to come: one trader who is all in on the intel action. plus...who wears the pants on wall street better... men or women? and next... a former merrill lynch chairman reflects back on the glory days. that's coming up after the break with bill moller!
mortgage-back securities on its books & a collapsing stock price merrill lynch was bought by bank of america in the midst of the financial crisis. but it is still the world's largest brokerage. with its long history there's quite a story to tell and it is told in the book "catching lightning in a bottle: how merrill lynch revolutionized the financial world. winthrop smith junior is the teller of that tale. you are a former merrill chairman and son of one of the founders. beyond the recent turmoil, what are the important components of that larger story of the company? >>well, thank you bill. merrill lynch is known as the firm that brought wall street to main street, the inventor of cma, a major investment banking firm. what my book tells is how merrill lynch became successful. it was by following a set of values and principles throughout its history that really guided it through the good times and the bad times and unfortunately the next to the last ceo didn't understand the history and threw those values away. in my opinion that's what led to the problems of 2007 and
2008. >>if you're in charge still in the 2000's, what would you have done? >>what i would not have done after 2001 is i would not have cut as much of the core businesses as were cut. i would not have cut back international business, the investment banking business, the private client business, and therefore i wouldn't have had to jump into those highly toxic assets of subprime mortgages and ceo's. i would not have leveraged the balance sheet to 35 to 1. >>what about this history? give me some interesting tales such as the relationship between your dad and charlie merrill. >>my dad actually spent 10 years in chicago with ea pierce which is a firm that charlie merrill had essentially sold to in the 1930s. in 1939 he convinced charlie merrill to come into the business, get out of the grocery business and back into the securities business and come up with a new motto of bringing wall street to main street, of taking the conflict of interest out of brokerage, about separating research, about training brokers, educating the public. it was really a revolutionary concept
in 1939 and 1940. >>people forget that it was merrill lynch who basically did that. thank you very much mr. smith. >>thank you bill. coming up...the in crowd. a trader takes on some of the most "popular" stocks of the moment.and...our friday favorite! in traders unplugged...the guys reflect on wall street's girl power. that's just around the corner.
time now to take it to the streets-- or at least the floor of cme group. joining us for traders unplugged alan knuckman and scott shellady. at the bell gentlemen topic number one: gender bender last year hedge funds run by women out performed those run by men-- is it better to go with the ladies? alan: the answer is yes, but i would say both performances are terrible. 10% for women and 6% for menhedge funds did
terrible. you would have been much better off to buy the spiderreturn 25% but look at marissa mayer and look at meg whitman. they are doing it. scott: i'm not gonna touch this with a 10 ft. pole. all i can say is these 3 things: 1i'm sorry. 2it's my fault. and 3it'll never happen again. that's how i steer clear of that question. angie: moving on to topic number two: ford in chinahenry ford back in the day said it was better to pay higher wages because that leads to more profits. so what do you think is better here? to maybe buy an etf in china or to actually buy ford stock? scott: i'm gonna stick with ford stock. i'm not really trusting of china and their numbers at this moment in time. i'm also leery of their banking system. ultimately ford was judged during a different time and i think that today's ceo alan: he paid double the wages so people could buy more fords.
they can't do that in china. they can't afford to pay those people so they can buy goods. we are the consumer of their goods. scott: you're right so, the government should just ultimately decide what we pay our ceo's alan: my answer is thisford as well. ford is up 600% in the last 5 years. look for another 25% move. it's been trading between 18 and 15. if it gets back up to 18, it's going to 225% higher. xli has gone nothing but straight up but i like ford's momentum. scott: as an ending point, their cars have looked better as of late versus the other 2 big ones in the states. i think that's why they got the market share that they've got. angie: topic number 3: nike's jump shot - nike sold a $1,500 shoe prototypewill the stock rebound? alan: i think nike still has a lot more upside but this shoe that they found, they dug it out of the groundit was a waffle design jogging shoe. now it's worth 1500 dollarsso look at the return on investment on that. this stock split just last december and we're back up to 75 dollars. loof for it to get to 90 and then when it gets to that level they look to split it again so it's got some very strong momentum as well. scott: i love having alan next to me because it's like cannon fodder. if you look at a chart and it's broken out of its trend lines to the downside,
first stop 70. next stop 62. alan: lean on 68. that was the breakout a couple of month ago. angie: on to your bonus round question for today...name the most valuable team in the nfl according to forbes. is itthe dallas cowboys, the new england patriots, or the washington redskins? alan: it's dallas. scott: it's great to take football advice from a guy that looks like this so we'll go with dallas. alan: i played jv football. i have experience. angie: it's dallas. good job guys. first business continues after this.
intel came out with earnings after the close last night and beat revenue estimates. good morning now to tim biggam of trading block. what will be likely to happen with the stock today. >>i think probably a bunch of nothing angie. i think intel is the classic if you want to play tech from a value perspective, you got that 3.5% yield. you
got tepid to slow growth to say the least. but if you want a lower beta exposure to the mobile world that we're getting into, intel is a lower risk way to play it. i kind oflike this stock if we have some weakness post earnings. >>i would also like to get your thoughts on some of the more high beta names such as twitter, tesla, amazon. what would be your plays there? are those stocks starting to peter out? >>they looked so on the chart. all these stocks have raised up and had a pretty sharp comeuppancea pullback after making all time highs. i would be very cautious to be a buyer anywhere near these levels. in fact i would be looking to be a short seller, selling some call spreads at these levels. looking for a pullback probably about 10-15% across the boards
certainly on those names, maybe even more so on twitter. >>what would would you like to buy outright? what do you like in this market? >>a lot of the stocks in my opinion have gotten ahead of themselves with the s&p generally about 17.5 times. it's getting a little bit pricy here but the names like intel that i alluded to where you combine those decent dividend yields3.5% still more than the 10 year. hang your hat on that slow steady growth. i think thatit will be a stock pickers market going forward this year. i don't think that pe expansion will lift all the ships. >>thank you and have a good friday. >>you bet. thank you angie. that wraps it up for this week.join us next week to find out how traders are using twitter to potentially make money in the stock market.from all of us at first business, have a great wekened.
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