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tv   Nightly Business Report  PBS  May 18, 2012 1:00am-1:30am PDT

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>> this is n.b.r. >> tom: good evening, i'm tom hudson. facebook starts trading on the nasdaq tomorrow, should you "friend" facebook at any price? >> susie: i'm susie gharib. j.p. morgan's trading loss may be growing bigger, as the banking boss gets called to congress for answers. >> tom: and "made in america." the agriculture economy and how one california farm is milking the cheese business. >> susie: that and more tonight on "n.b.r." >> susie: $38 a share is the magic number for facebook's stock sale to the public. this offering price values the social networking giant at over $100 billion. tomorrow morning, facebook debuts on the nasdaq under the ticker symbol "fb." suzanne pratt reports.
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>> reporter: you may spend a chunk of your time on facebook. but, it's unlikely you'll get even a morsel of the i.p.o., at least not at the offering price. that's because underwriters give priority to their best clients, usually institutions. most retail investors will have to wait to buy the stock until it begins trading on the nasdaq. that means they'll probably pay more than $40 a share, perhaps a lot more. analyst nick einhorn thinks facebook will open at $50, a price he says is still worth paying. >> i think you could certainly justify that price if you have good assumptions about the company's ability to keep growing quickly and not hit mature growth rates too soon. >> s&p says, if history is any guide, similar i.p.o.s have debuted strongly in the last decade. >> the average first day gain among the largest top 10 technology i.p.o.s is about 31% gain on the first day. >> but, is facebook a "buy" at any price? that may depend on revenue
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growth from online ads, and the potential for mobile ads. >> i think investors need to think about the long-term, and you know, be afraid to wait if they don't feel the time is on the first day, or the first week. >> don't be worried about facebook stumbling in the current sloppy stock market. experts say it's a once in a generation deal. suzanne pratt, "n.b.r.," new york. >> still ahead, the u.s. hits chinese solar panels with anti- dumping duties, a decision that could set off a major trade battle.
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>> tom: stocks continued to weaken today over european worries, and slower economic data here in the states. >> susie: tom, the spanish government sold bonds, but investors demanded much higher interest rates. and late today moody's cut the credit ratings of 16 spanish banks. the dow shed 156 points. the nasdaq dropped 60. the s&p 500 fell 20. >> tom: business in the mid- atlantic states shrank this month. the philadelphia federal reserve's manufacturing index fell into negative territory for the first time in eight months. >> tom: wal-mart's return to it's low price roots helped it ring up big earnings gains in the first quarter. the world's largest retailer earned $3.7 billion. that's a $1.09 a share, which was much better than expected. as erika miller reports, it's a sign the company's turnaround is
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working. >> reporter: when you think of wal-mart, you probably think of every day low prices. the company made the smart decision to re-emphasize that promise, boosting sales and traffic. the retailer also added more items to its shelves. >> "typically, they've run about 75,000 s.k.u.'s in a store. at some point they had scaled back on that. but now they've brought that number back up, and that's sort of another reason their sales have come back a bit." >> reporter: sales rose nearly 6% at wal-mart's u.s. stores. the gains were more than twice that outside the u.s. and there was a 7% increase in sales at sam's clubs. for today, at least, the strong earnings helped shift investor attention away from bribery allegations in mexico. according to one estimate, that scandal could cost wal-mart up to 2% of sales, or as much as $9 billion. plus an extra $3 billion in legal costs. so what does that overhang mean for the stock? >> "in terms of how i value the stock, they're not returning those stores to anyone in
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mexico, they're still operating. so it hasn't impacted my valuation on the stock" >> reporter: investors also focused on the positives: sending the shares up more than 4%. erika miller, "n.b.r.," new york. >> tom: the fallout from j.p. morgan's big trading loss continues, as the loss may be worse than first thought. two senators have sent a letter to the nation's top financial regulators, and the bank's c.e.o. has been called to testify. sylvia hall has the latest from washingt. >> reporter: j.p. morgan's trading loss could total $3 billion.
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$1 billion more than announced last week. the losses are mounting as corporate credit weakens and competitors take advantage of j.p. morgan's position in the trade. the impact of the bank's bad bet continues spreading in washington. c.e.o. jamie dimon has accepted an invitation to testify to the senate banking committee. the white house is pushing regulators to beef up the "volcker rule," a controversial piece of the 2010 dodd-frank financial reform. it's aimed at preventing banks from making risky bets for their own profits. but the banking industry maintains the rule could limit the trades they can make for their clients. today, the trade group american bankers association said j.p. morgan's mistake doesn't change their stance against the ban. still, regulators are under stepped up pressure. democratic senators jeff merkley and carl levin sent a letter to the nation's top baking regulators pushing for a strong rule, free of loopholes. the rule is due to go into effect in june, and banks have two years to comply. sylvia hall, "n.b.r.," washington.
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>> susie: president obama will host a meeting with g-8 leaders this weekend at camp david. on the agenda: how to help europe resolve its economic crisis. will the summit restore investor confidence? that's what i asked curtis arledge? c.e.o. of investment management at the bank of new york mellon. >> think that my expectation is not much will come out of it. they won't necessarily release a lot. >> susie: curtis, certainly grease is going to be a topic at this meeting. how worried should investors be about greece exiting the eurozone, how big a deal is that. >> i think it's a very big deal. you do have the challenge where the greek willingness to go along with the agreements seems to be at risk. and so having an election in june, mid-june, the markets are going to be really in a state of flux trying to so whether or not the ecb and germany specifically are willing to do what it takes to get to the june 17 date
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if markets are really unstable. >> susie: and we've seen how investors have been so concerned about the uncertainty about greece. so what are you telling your investors about europe. should they avoid investing in europe all together? >> you know, honestly, i don't think so a lot of the companies that trade on european equity exchanges are actually very large multinational companies. there are about 50 companies, do something like 55% of their business in europe. they just happen to be headquartered in the european markets. and so to look for-- to look for companies that have the ability to continue to generate easternings around the globe, not every company in europe is solely a european company. and there are real values there. >> susie: turning to the u.s., what is your deal on the u.s. stock market, bullish or bearish. >> the u.s. stock market is a preddee got place to keep money t is a large liquid market, and there is less uncertainties about how the
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entire infrastructure and system is going to pan out. so being a very large economy that doesn't have a potential of complete fracturing of its political backdrop makes it a safer, liquid place to put money. >> susie: but curtis, we have been in a market that really hasn't made much money over the last decade. so how do you position investors so that they can make money? >> one of the things that's very important is for investors not to shoot for 12% returns in an environment where the markets and the economic growth really only support a 3 to 4 to 5% return. because you end up reaching for yield and usually when people reach for yield they are doing it, they are taking some risk that exposes their principles in a significant wayment we do like having a mix, as i said, of diversification of safer assets but not completely eliminating the exposures that you have where there actually are higher returns in the event that the world stabilizes. >> susie: and you're a big believer still in investing in treasury. >> i think they should be shorter maturity treasuries. i think are you seeing if
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rate does go up f there is, if the bond bubble theorists are right, i still think you will get par back on a 2 or 3 year treasury. i am not saying you won't have suffered principal losses at the end but i think they will pay par. there is aren't a lot of asset classes in the world right now where you can say that with as much certainty. >> susie: everybody is talking about-facebook today. >> absolutely. >> susie: so what about-fac about-facebook. do you own it at any praise. >> i think facebook will have a place in investors' portfolios. institutional and retail investors will own facebook as a core holding. in 2203 years we'll know a lot more about how they actually will deliver profits and what the competitive framework will look like. and i think facebook is going to be a real company that investors are going to own in two to five years from now.
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>> helen: mixed commodity trade today but the chinese economy has been slowing down and with it could be slowing down its app tied-- appetite for raw materials, commodity one of its largest suppliers of energy, minerals an food australia, especially western australia well. had the opportunity to speak with the chief economist of that region a chamber of commerce. >> he is the chief economist for the chamber of commerce of western australia w us tonight in new york. john, what are you experiencing for demand for australian agriculture products. >> western australia is going through what we could say a boom with demand for our key commodities for
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agriculture but also mineral resources rising considerably. our commodity price index is at near 140 highs because of the demand throughout developing asia or our resource. >> tom: when we talk about developing asia are we talking all about china and the demand from china for not only australian mineral its and energy but also australian grains and cattle? >> certainly. china is our ally trading partner. it has become more and more important each and every year. to give a perspective on that it's gone from representing around 7% of our total exports at the start of last decade to over 41% by the end of 2010. so a considerable rise in demand from china for our key commodities which includes agriculture commodities. >> tom: john, does that put the western australian economy really at risk to the ripple effect if china is successful in slowing its economy down? >> certainly if china is our
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greatest opportunity, but also our greatest risk because it has become so important to our economic prospects. and wa is not alone in that regard. i think if china was to slow down sharply then ultimately the global economy would suffer. but our members, our business community suggests that overall the prospects are still sound, even if there is a mild slowdown. >> tom: so this is the demand side. what about the supply side? what are you experiencing in terms of western australia and the grain producers and expectations of the crop? >> overall it has been a good season. the last season just coming, we have had good rains, after a number of difficult years from a grains perspective due to drought conditions in our part of the country. so there is prospects for a bumper year overall and that undoubtedly is good for the economy. >> tom: the view from the
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western australian growers perspective, looking at the global ag economy, thank you, john. >> thank you. >> susie: tom, it's now, i guess, 11 times out of the last 12 sessions that the do you, the blue chips have been down at the new york stock exchange. but tomorrow is a new day, all this buzz about-facebook could add some positive energy in all the stock indexes, let's see what happens tomorrow. >> tom: certainly there has been positive energy. we'll see if it sucks money out of the market otherwise, because clearly a lot of folks have been tacking some profits driving this market down lower. let's get everybody updated, susie w tonight's market focus. what we have got >> tom: stocks continued sinking under the weight of europe. while a care-taker government was formed in greece, spanish government borrowing costs rose as the crisis threatens to grow. with that, the s&p 500 saw red again today, falling throughout the session, especially into the closing bell. it was a sharper sell-off than we have seen this month, down
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1.5%. and the may swoon continues to erase gains this year. the index is now up just over 3.5% this year, down from the 11% gains through early april. volume picked up, 943 million shares on the big board, and more than two billion shares on the nasdaq. broad-based losses across the stock sectors, with consumer discretionary seeing the worst of the selling, down almost 2%. caterpillar didn't help the tone of the market after announcing construction and mining machinery sales slowed down over the past months. shares fell almost 4.5% percent, making them the biggest percentage loser among dow industrial stocks. this is cat's lowest stock price since december. while sales continued to increase, the pace of the grow slowed. fellow dow stock, hewlett
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packard, saw a small gain after the wall street journal reported the company will cut 25 to 30- thousand jobs. it would reduce h.p.'s payroll by about 8%. the cuts have been expected after the firm announced plans to combine its printer and personal computer divisions. earlier, erika reported on the stronger than expected quarter at wal-mart. another big retailer, sears turned in a better than anticipated quarter. and better for sears means it didn't lose as much money as feared. sears lost less than half what analysts were expecting. even though sales continued falling, the drop was not as steep as predicted. but it's the sale of sears assets, like real estate, that helped sears' financial performance. that strategy of selling off things helped shares battle the weak market and end with a 3% gain. for instance, sears announced plans to spin off most of its canadian business. auto part retailers were ringing up some stiff stock losses. advance auto parts down 17% after a weak first quarter, and warning about a struggling second quarter.
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competitors o-reilly and auto- zone fell more than 5.5% percent each. after the close tonight, the market focus was on cloud computing business software maker salesforce.com. shares went into tonight's results down 2%, but jumped more than 7% after reporting stronger the expected earnings, and slightly raised its financial outlook for the year. gold found some green today, even as the u.s. dollar continued climbing. a stronger dollar has been pressuring gold. but today, gold rallied more than $38 an ounce after touching its lowest settlement yestery since december. and that's tonight's "market focus."
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>> tom: big changes coming in the years ahead for the face of the american economy. some time between the summer of 2010 and last summer, the number of minority newborns became a majority of babies. all ethnic and racial minorities made up 50.4% of births according to the most recent census bureau data. so most kids under the age of one are of an ethnic or racial minority. but overall, the number of births declined, and the growth rate of hispanics and asians in america also dropped to about half what it was a decade ago. for u.s. based manufacturers of
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solar cells and panels. the commerce department said it will slap anti-dumping duties worth roughly $800 million on solar technology imports from china. american manufacturers asked for the help under u.s. trade laws saying the import competition was driving them out of business. darren gersh reports. >> over the last year-and-a- half, more than 2,000 u.s. workers have lost their jobs as chinese imports swept the market for solar cells and panels. today the commerce department moved to level the playing field. declaring that chinese solar cells and panels are sold in the u.s. at an unfairly low price, the commerce department decided to slap a 31% anti-dumping to slap a 31% anti-dumping duty on chinese manufacturers. those duties will be retroactive for three months from today, because the commerce department found chinese manufacturers tried to flood the u.s. market to beat the penalty. solarworld industries americas, a german-owned company based in oregon, brought the trade complaint. >> it really does underscore the
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importance of domestic manufacturing in the u.s. economy and does help determine that the country will be a global competitor in clean technologies. >> in addition to the anti- dumping duties, the commerce department has imposed anti- subsidy tariffs worth almost 5% on chinese solar imports. u.s. companies that produce and install solar components say higher prices for solar cell and panel imports will put jobs at risk. >> 52% of the people in the industry actually wake up every morning with a tool belt and go on roofs and actually build solar systems. so some of those folks are going to lose their jobs because projects they were planning on building won't get built. >> today's decision is almost sure to set off a fierce trade battle with china. for months, chinese officials and industry leaders have warned they are prepared to retaliate against u.s. companies if the commerce department ruled against them. washington
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>> tom: tonight's "made in america" continues our week-long look at american agriculture. farming is a tough business. while technology and large corporate farms have made american agriculture some of the most productive in the world, it's difficult for small, family farms to survive. mike hegedus introduces us to one american farmer who is part of a growing trend. >> reporter: how much passion, persistence and profitability can you squeeze into a 15-pound block of cheese? at the petaluma creamery in petaluma california, plenty of the first two, but not quite enough of the last. why did you buy it? >> i wanted to save agriculture in sonoma county. >> reporter: that's a tall order. did anyone ever tell you, you were nuts? >> oh yes, many times. >> reporter: larry peter bought the 99-year-old petaluma creamery in 2004. it was idle, about to be torn down. a dairyman, peter owns a little over 300 head of jersey milking cows. they roam free on his ranch in two rock, organic to the nth degree. a first generation farmer, peter cobbled together a living from the land-milk, a pumpkin patch in the fall, farmer's markets.
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but after nearly two decades, he needed to do something to increase revenue. >> i figured if i could cut out the middle man, grow the feed, milk the cow, make the cheese, and sell the product to the customer, i'd be able to pay my mortgage better. >> reporter: so he bought the creamery, bringing in milk from more than 30 dairies in northern california, saving them the transportation costs to creameries three and four hours away, and giving him the milk necessary to make 300,000 pounds of high quality ,specialty, cheese a week. 22 varieties under his spring hill jersey cheese brand name. but larry peter is a very small curd in a $27 billion-plus market, until... he was discovered by the chipolte mexican grill restaurant chain. its marketing slogan is "food with integrity." larry peter has both, and his cheese is in all the restaurants.
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they're looking for people with passion. they want to go back and they want to buy a product the way it was 40 or 50 years ago, when cows were just on grass, they weren't pushed. >> reporter: it is that slow food, sustainable farming, buy local, organic, quality food movement that has pushed artesian cheese production into a double-digit percent of all cheese sold, and larry peter has found the sweet spot. >> and now, the artists of the world, the chefs, you know, are taking these cheeses and developing them in their recipes and that's a real plus. people look for acid in the cheese, the drier the cheese the drier the wine. >> reporter: the petaluma creamery-- its cows roam free and its owner has a vision. >> if you love what you do, and you believe in yourself and you put passion into everything you do, you can make anything happen. >> reporter: i'm mike hegedus for the "nigly business report" in petaluma, california.
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>> housing food costs impact giant food distributor sysco, we'll go in-depth with the c.e.o.. our friday market monitor will be jim paulson from wealth capital management. he has four reasons the stock market could rally. and the facebook stock dump we've been telling you about, we'll have a report on its first day of trading. and the u.s. has personed experiencing a record number of business start-ups. if you happen to be among these new entrepreneurs, alfred edmond junior has three things you need to know. he's editor-at-large, at black enterprise. >> here are some tips to help you ensure that you're paid what you're worth. first understand that profits don't happen by accident, or just by being a good person who is passionate about their business. to turn a consistent profit requires research and planning, so you can establish what your goods and services are worth, and then have the entrepreneurial conviction to price to earn a profit on
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purpose and without apology. to do this, there are three things you must know at all times: your cost per unit of goods or service; the maximum price you can charge for that unit and still be competitive in the market place; and the difference between those figures; that is, your profit- or-loss per unit. you need to break down the costs per unit to the penny, taking into account raw materials, labor, time and expertise, etc. you also need to know what customers are currently paying to others for the goods or services you provide. price too much lower, and you won't turn a profit. too much higher, and you risk losing out to lower priced competition. either you're turning a profit or you're not. business is a competition and profit is how you keep score. set, and monitor, and adjust as necessary; your prices accordingly. i'm alfred edmond jr. >> it is a $100 billion company, we'll have complete coverage on that tomorrow, good night, everyone. good night to you, tom. >> tom: good night, we'll
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see everybody on-line on nbr.com tomorrow night. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org
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