tv Nightly Business Report PBS April 12, 2012 7:00pm-7:30pm PDT
>> tom: more online advertising ads adds up to big profits for google. earnings jump as the internet search giant plans its first stock split ever. overall, the market saw buying for the second day in a row with the dow logging back to back triple digit gains. and an online retailer goes from clicks to bricks. >> people want to touch and feel clothes sometimes before they buy them. and we realized that we are actually failing in the promise of a great customer experience. >> tom: it's "nightly business report" for thursday, april 12. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
captioning sponsored by wpbt >> tom: good evening and thanks for joining us. susie is off tonight. the stock market swings continued with the dow jones industrial average seeing its best day in almost a month. we will have more on the rally in a moment. but we begin with google, the internet advertising giant. the first quarter was strong for google earning more than $10 per share, well above what analysts were expecting. even though google was paid less for each time someone clicked on one of their ads, people clicked on a lot more ads increasing profits. revenues were actually a little less than forecast. but that minor disappointment was over-looked as the company announced a stock split. if approved, shareholders will get two shares for every one
they own, but the new share will not have any voting power. brian bolan has been following the google story. he's growth stock strategist at zacks.com and he comes to us from the c.m.e. group in chicago. great to you have back, what do you make first of all of this stock split, increasing the number of shares, lowering the per-share price but not giving up any control of the company. >> i say good move by them, they look at what they have to give up and what they are going to get in return. they're going to get a lot more retail investors buying into a name that they wish they would have bought at around $300. and now they're going to get that chance. >> they do that all in a very googlesque way when they don'tive up any more control, any more ownership to the company because no none of these new shareholders will come as voters, right? >> right, no vote so there is really nothing to lose here in the situation. >> let's talk about the numbers we saw here after the close. a good report, more than $10 of earnings.
pay clicks were voninger, costs per click were down s that a worrying trend? >> that is the thing that happened last quarter as well. what we saw last quarter was more clicks, less money for each click. this quarter we saw the exact same thing but we even bigger degree. and i think the question that you have to ask is why are we seeing this? why is google allowing these prices to go down. you know, i think it's in a move to go against faceboo facebook's-- so over the last six months google can say to advertisers we're getting you more clicks for less dollars. and it's a trend, it's a pattern. it's going to continue. you are not going to get the same result when you advertise with facebook. so where are you going to put your budget at? are you going to do it at the display end at facebook or on search with us. >> tom: so the idea here from google and for share holders to understand is that lower price but make up with that lower price in bigger volume s that it? >> exactly. >> tom: but how long did:that last? >> well, that can last for a
very long time. because what google is trying to do then is going after its whereas larg large-- spending average am i going to do it on-line via facebook, who will get the more clicks. get more people right to the site t also has the display advertising through u tube. facebook is mainly display right now. and you know there is the comparisons are that google is getting me more for less whereas i am to the exactly certain what has been going on with facebook. >> tom: advertising is pretty much everything when it comes to google but there is still the android smart phone platform, google plus, there is a lot of other components in there. are they adding up to anything at this point? >> you know, it's still pretty much putting all of the igs in the investment basket so right now you see google plus as being one of the big places they are investing in. and android is another spot.
android isn't just the cell phones any more. it is the tablets as well. these are all things that can, over time, work to help goodingel's favor by adding functionality to their product there are all sorts of googem products out there they are not really integrated that well right now because when you think about it there are dozen of them. but how many of them dow really use. and if you get to a spot where you can integrate them all you can use them very well through a single device, either a phone, tablet or pc, then you can really have something. >> tom: do you own any shares of google yourself. >> i do not. >> tom: brian bolan with us tonight from zacks.com. low rates are here to stay for the foreseeable future, at least that's how investors are interpreting comments from new york federal reserve bank president bill dudley. bill dudley told a business group today that it's too soon to say the u.s. economy was out of the woods. meanwhile, new claims for jobless benefits had their biggest weekly jump in months rising by 13,000 to 380,000, signaling the jobs recovery is
still fragile. both reinforced the fed's current policy stance, sending stocks sharply higher. the dow rose 181 points, the nasdaq added 39 and the s&p up 18. >> tom: not since the early days of the housing collapse have there been so few foreclosures. but that doesn't mean the crisis is over. foreclosures in the first quarter fell 16% from a year ago. almost 580,000 homes and condominiums faced foreclosure filings. that's the lowest since late 2007. the top states for foreclosures: california, florida and illinois. together, those three made up more than 40% off all
foreclosures in the first quarter. there is more evidence today that federal programs aimed at helping homeowners avoid foreclosure are not living up to their promises. government auditors say a program funded with money left over from the tarp bailout has failed to reach many homeowners. darren gersh joins me know with more. >> reporter: tom, the program is called the hardest hit fund and it was really hit hard today by government watchdogs. the treasury developed the hardest hit fund as a way to fund innovative ideas to help families in states that suffered most in the great recession. originally, the treasury hoped to help half a million people. it offers some help with mortgage payments for the unemployed, some principal reduction or help with second mortgages and money to catch up on missed payments. but according to a detailed report by the special inspector general for the tarp program, of the $7.6 billion set aside for the hardest hit fund, only $217 million has been spent to help
families. only 30,640 people have been helped, far short of the programs goal to reach around half a million struggling homeowners. housing activists say the report by the inspector general makes it clear the treasury failed to lead. >> for whatever reasons-- lack of management skills, lack of priority, the treasury didn't put the resources on getting the money to the at-risk homeowners. >> reporter: the treasury says that is absolutely not true, that it has talked to mortgage servicers and the mortgage giants fannie mae and freddie mac, trying to get them on board. tom? this report though shows at least the treasury came up short on almost every measure. so what's the program doing now? >> that's a good question. so the treasury says the report really focused on the start-up problems, you know what it took to get it going. but since then, now that the program is more up and running, that the money that is going out the door to
homeowners has doubled over the last few months. they also say that states have got their own servicing shop, the treasury called them. so in other words, the states now have the ability to prevent foreclosures going forward. and the treasure -- treasury says that say really critical part of this ram. >> so at this point then, where is this money going, if the treasury says more of it is going out the door? >> that's a really good question. so you heard in the report before, about 830 million dollars so far has gone out the door to states. about 217 million or so has gone to homeowners. so that leaves 600 and what, 11 million dollars? the question is how much of that has gone to administrative cost. how much of that is cash that is ready to be spent to help homeowners. the auditors are going to be looking at that. trying to get an answer. i tried get an answer today from the treasury and couldn't get it. >> the inspector report obviously is looking backyard and what has happened. it sounds like treasury would say well let's look forward and talk about what we want to be doing. at this point can we say
that this program has failed homeowners, the hardest hit homers it was supposed to protect? >> well, look, we reported for many, many months and years about how tough a problem this is to deal with. these are the worst hit homeowners. people who are unemployed, people who are really in danger of losing their homes in states that have been really hard hit. so it's a tough problem. we have to grant them that. but even so, they have not met their goals. they are a long way from meeting their goals. they've only helped $30,000 even if they ramp up a lot. it doesn't seem that they are going to get to the half a million people that they are trying to reach. so i think right now the read on this program has to be, it's tough to say they've met their goal. >> tom: pretty critical report from the inspector general, washington bureau chief tonight in dc, it's darren gersh, thank you. >> i'm sylvia hall. still ahead, next year's college freshmen are busy choosing the perfect school and figuring out how to pay for it. but experts say most don't fully understand student loans. >> tom: bonobos may not be a
household name. it makes men's clothing and is the biggest clothing brand ever launched on the internet. now it could be coming to a mall near you. bonobos signed a deal with nordstrom today putting its clothes in some nordstrom locations. as erika miller reports, this strategy of going from clicks to bricks could catch on. >> reporter: in this non- descript building in manhattan on the fifth floor lies the only bonobos retail store. and it's by appointment only. many men come for the pants, which are known for solving the problem bonobos calls "diaper butt." >> it falls between, the fit in terms of too fitted-- european style-- and then just baggy and falling off you. >> reporter: customers also like the price point-- less than $100 a pair. >> it's good value for the money. it's something different. i mean, it's not like all the usual stuff you see. >> reporter: but soon you won't
have to go to new york or on the web to buy this men's clothing line. granted, only two styles of pants will be sold at only 20 nordstrom stores nationwide. but bonobos c.e.o. andy dunn says the partnership is an important strategic move to broaden its customer base. >> people want to touch and feel clothes sometime before they buy them. and we realized that we are actually failing in the promise of a great customer experience by not giving them an opportunity to touch and feel the clothes. >> reporter: so what does nordstrom get out of the deal? analysts say it's more than just pants. >> it gives them it gives them expertise. it gives them access to a tremendous brand-- probably the hottest men's brand out there. >> reporter: what makes this partnership interesting is that bonobos established itself online and is now expanding into traditional stores. analysts say it's a model that could be followed by other internet companies. a few deals have already been inked: a year ago drugstore.com was acquired by walgreens. and wal-mart owns a controlling
stake in a leading chinese internet retailer yihaodian. many see similar deals ahead. >> everybody in the retail business who has bricks stores is pouring capital into their online business. that's where all the growth is. >> reporter: for it's part, bonobos hopes it will eventually be in all nordstrom stores and offer more of its products. it is also considering expanding into women's apparel. but that brings up the matter of the name. bonobos are great apes with unique character traits. >> they are most known for being promiscuous. but if you look at the way they've designed their society, they have actually got the first great ape society with no war and no violent conflict. >> reporter: it may not be world peace. but there's no denying that a flattering fit can help people look and feel better and they don't mind paying for it. erika miller, "nightly business report," new york.
>> tom: another gulf oil scare, reports of an oil sheen in the waters surrounding shell oil but the u.s. coast guard is continuing to look for the mexico are not from the nearby peter richiutti is a business professor at tulane university and founder of burkenroad reports, focusing on small companies headquartered in the deep south. i began by asking him if he thinks the gulf coast has recovered. >> tourism numbers are really, really up. and the actual energy industry which was so devastated by the spill has come back pretty with. you look at the deep water, we're back pretty much where we were before the big bp explosion. >> tom: when you look just at regulations, for instance,
and how the regulators have dealt with deepwater, since bp, you go back a year prior to this bill and look at the number of deep water permits granted. it was 67 the year before. after the moratorium, 61 permits, down slightly but essentially the deepwater drilling is back, isn't it? >> right, after a big dip. you can see it in a few of the stocks. one of the companies we follow hos they service just the deep water, and that stock has trimmed over the last couple of years. so the comeback is apparent. >> tom: what has this kind of activity meant for employment opportunities and incomes in the gulf coast? >> actually we had a very strange situation. the deep water has come back in a big way but a big part of our energy industry is natural gas. and prices have fall ento below $2.25 in mp if so than of the picture has really fallen off so it is kind of an offset. >> tom: the historic drop we've seen in natural-gas price, is the boom of production over? in other words, lower prices, prices that folks have just turned off those wells? >> i think the problem is usually that has been the case, tom, usually when
prices drop, they start to lay down rigs and sometimes we jokingly refer to it as the redneck opec. it kind of works but there time it is a little bit different. because when you drill for natural gas you get natural gas liquides in a lot of these wells which are very valuable and that is lowing-- slowing down this program of getting things back to normal. >> tom: the other difference about natural gas is it moved well beyond just the gulf coast production. we've got mean shale natural gas in the dakotas, in pennsylvania t has become a much more competitive environment? >> absolutely. and they think the shale finds are all over here. it has a great long-term future. domestically proud. it's clean burning. but you look at it right now, price around 2.25, a lot of the breaking on these projects is around $had. >> tom: big difference. let's talk about the other petroleum product, crude oil here, in the lower 48 state whence we take a look at this chart of lower 48 oil production, since before the bp oil spill, production has been trending higher. it's 59 a multiyear high now
but so are gas price, explain supply and demand here, professor? >> i think what you have here is that oil unlike natural gas is a global commodity. and so we have that situation. we are really a drop in the bucket compared to the worldwide production. the other thing is that we have very much a shortage of refineries. we haven't built a new refinery in this country since 1976. that is the bottleneck, that stopping prices it from dropping. >> tom: how about petroleum specifically in the gulf coast? we've talked about drilling permits, obviously, which have held steady or back to steady, essentially, the prespill area. production has been trending higher for the lower 48. what about the jobs in that local economy impact that you are seeing in your state, louisiana. >> we're seeing better job numbers than the country as a whole. no question. a lot of things are coming back. not only the oil industry but now we have become a big hub for entrepreneurship. we've been named as the number one city in the country for young entrepreneurs. >> tom: new orleans. >> yes, people coming in, starting businesses because it is a fun town but also it is pretty inexpensive so it
is a good place to start something out. >> paul: at the time-- . >> tom: peter ri chute should know. even though we saw more people than expected file for unemployment insurance in the last week, u.s. stocks saw another day of buying as they continue rebounding from the early april selling. here's how strong the buying was. all ten major stock sectors saw gains led by a trio of economically sensitive industries. the materials, energy and industrials each gained more than 2%. the session started with some mild buying, but it kept building through the afternoon with the s&p 500 finishing up almost 1.5%. putting the past few sessions in perspective. here's the index this year. with yesterday's and today's gains, it has regained about half of what was lost earlier this month. the biggest pop we saw among dow jones industrial stocks was computer maker hewlett-packard. shareholders have suffered with c.e.o. shake-ups and changing turn-around strategies, but shares have perked up over the past two sessions.
volume was heavy on today's 7% rally. some analysts think the stock has been beaten up so much, there aren't many sellers left. after all, even with today's rally, the stock is 15% lower compared to february and down 40% over the past year. there was new data out today on global computer shipments. h.p. remained the world's biggest computer seller. there was speculation today china will release its first quarter gross domestic product report late tonight. with hopes of a stronger chinese economy, dow stocks like caterpillar and alcoa saw some buying. caterpillar was up 4.5%. alcoa gained almost 3% the high hopes for a stronger than expected economy in china in the energy sector, coal stocks were heating up on the hopes of more global demand thanks to an australian coal mine closing. alpha natural resources topped the performance, up just shy of 10%. peabody energy and arch coal each gained more than 7%. the speculation is less australian coal going to chinese steel makers could help u.s. coal miners. while google was one of those in focus after the closing bell, so was coinstar, the company behind
the red-box d.v.d. rental kiosks. after closing weaker by 3% in the regular session, the stock shot up 13.5% after the closing bell. that would take the stock to a new all-time. the company preliminary first quarter results were stronger than expected. the company also raised its full year profit forecast. it was another busy session for new stocks. one seeing lots of trading. forum energy technologies makes products for oil and natural gas exploration. almost 12 million shares traded, making it one of the most actively traded stocks on the new york stock exchange. it's initial price was $20 per share. by the closing bell, it was up almost 9%, finishing its first day just below $23 a share. the reception for fellow energy parts supplier mrc global was more tame. shares up just a fraction from their initial price. and investment oak-tree capital lost more than 1% on its debut. and that's tonight's market focus.
>> tom: this is the time of year college financial aid letters are landing in the mailboxes of prospective students, but as student loan debt tops $1 trillion, experts are warning students to do their homework, when making the financial decisions that go along with college. sylvia hall reports. >> reporter: lecture halls and campus quads are the common college sights. but the debt it takes to get there is less visible. many students don't see the financial burden until college is over and payments come due. >> they sort of tell you, you know, this is debt. you-- you're expected to repay it and then in the same breath they say, well this is how everyone goes to school. >> reporter: between her bacheclor's and masters degrees, sophie vic has $80,000 in student debt. when she started school, she had no idea how big her debt would
be or how much of a burden it would become. >> i think it's hard to impress on anyone what you're getting into when you take on that kind of debt. >> reporter: a recent survey looked at recent grads with big student debt loads. when they took out their loans, two-thirds said they didn't understand the terms or even how much they'd end up paying. >> we found frankly that there's not a great understanding of student loans. we don't teach financial or student loan literacy early, we don't have great systems in place to ensure that when people are making decisions that they know what they're getting. >> reporter: the consumer financial protection bureau is trying to make it easier with a campaign called "know before you owe." it just launched an online tool to help students make sense of the total cost, calculating all the money required to attend school. but even with tools like these, financial aid can be hard to navigate. many financial aid letters are unclear on whether offers are made up of loans, grants or scholarships. >> often the financial aid award letter will characterize a loan as reducing your cost.
while it may make it more affordable from a cash flow perspective, loans don't reduce cost, they increase cost, because of interest. >> reporter: financial aid expert mark kantrowitz says loans with variable interest rates are also misleading. >> you should be careful about interest rates that are variable rates, right now we're in an unusually low interest rate environment. the only place those interest rates can go is up. >> reporter: kantrowitz offers a good rule of thumb. don't take on more debt than your expected starting salary, that way you won't be paying off your college loans, while trying to save for your kids education. sylvia hall, "nightly business report," washington. we asked our facebook friends if enough was being done to keep college affordable. jeff wrote: "college is like health care, both have gotten unaffordable by most and both have bloated budgets." julia said, "technology might provide the answer. basic courses done online saving tons on tuitn and room and board. you can join the conversation. check us out on facebook under bizrpt.
that's also our handle on twitter. tomorrow, we look at whether student loans should be allowed to be thrown out if you declare bankruptcy. and our market monitor guest says the biggest risk right now is not owning stocks. chuck carlson with horizon investment services will join us. it used to be when kids went off to college, the next step was a career and their own place to live. the recession changed that. now, there's no guarantee a new college grad will find a job. for many empty nesters that means the kids are coming home to roost. in tonight's kids and cash, coping with your new housemate. here's neale godfrey, c.e.o. of the children's financial network. >> news flash: the solution for the trauma of the empty nest syndrome-- the recession. the economic realities of life, like high unemployment among recent college graduates, have changed all the rules. what does this mean? how about 85% of our adult children will be coming home to
live! when your older kids come back home, you no longer have to be hotel mom and dad with room service and gas in the car. rules have to change. it's time for a frank conversation, but, it's still your house and your rules. start with: who pays for what? this is going to depend on how much your adult kids are earning. i think after three months of a full-time job search with you paying for all expenses, your adult child needs to find some work. that may be pumping gas or pumping coffee. but, their dream jobs? no, perhaps not. but having them back home will put additional economic stress on you. come clean with your kids by showing them all your bills-pre and post their arrival. that includes: all utilities, food and extras. they should be paying for the increase. if they can, they should also be paying some sort of rent. after the discussion, memorialize it in writing: seems very legal? its not. it may help to avoid any future confusion. i'm neale godfrey.