tv First Business KICU August 26, 2013 4:00am-4:31am PDT
keeping the faith...should investors trust the stock market in the wake of technical problems that are too large to ignore? in today's cover story... you can't always get what you want....but tips on how to try when negotating your next salary plus....how mood swings are hurting teenage retailers... and...bond market blues-- how to turn losses into gains. first business starts now! you're watching first business: financial news, analysis, and today's investment ideas good morning!it's monday, august 26th.i'm angela miles. in today's first look: the trading day starts with the dow back above 15,000... the blue chips rallied 47 points friday.although the dow logged
its 3rd week of losses.the nasdaq added 19 and the s&p 7 points. gold gained $25 dollar and oil $1.24. a stock exchange merger may be in the works.bloomberg news reports-- bats global market and direct edge holdings are in talks. together it would create the second largest exchange behind the new york stock exchange. facebook tops $40.the can do stock closed friday at $40.55.good news for ipo investors who are holding on to that stock. and a dutch company reports 165-thousand people are interested in a trip to mars-- there's a week left to sign up. we begin this week with charles moon of trading advantage. happy monday morning to you charles. > >good morning. how are you doing? > >i'm doing wonderfully well. there's a lot of chatter in this market about the possibility of the fed tapering
come september. do you buy into that and what will it mean for the market this week? > >honestly i think its very overblown. it's been a lot of media hype. a lot of analysts kind of overextending themselves. really gauging it toward the 7.3 number in the unemployment rate. frankly from the fomc minutes it was already shown that a majority of the fed members are in line with ben bernanke's timeline. they're looking at mid 2014. > >so later on. what about the dow crossing 15 thousand. what sectors would you watch or maybe even dow components that could move this week? > >frankly, a lot of it could be stocks that have somewhat bottomed out. we could see ibm and mcdonalds really pressed to the upside now. there's the technical levels, the 200 day moving average that's supressing mcdonalds but if it happens to clear it could make a really nice rebound here and it's the same with ibm. > >what about the holiday weekend coming up? what does this mean for the trade? i know
a lot of people are probably going to just take this week off. > >that is the actual thought process but we're seeing a little bit more volume coming in. they might be trying to get a little kickstart here. usually it's after the labor day weekend when volatility and volume really picks up. we're starting to see a little bit of jump so they might jump ahead. i would actually expect the beginning of the week to be a lot more active and the trading to die off at the end of the week. > >that's interesting. what do you think is behind that volume? are people wanting to trade on this week? > >quite honestly it was a lot of anticipation of what was leading to the fomc minutes. this wasn't just a week or two. this has been essentially ever since that 1700 level in the spx. there's been a lot of anticipation and a lot of speculation that the fed was going to initiate tapering in september. we're seeing that that most likely won't happen. so we'll see either people clearing out of positions or taking on new positions trying to get in at value. > >charles, thanks for your thoughts today. have a good one. > >you too. thank you very much. the nasdaq is under pressure. the stock exchange operated without incident friday-- but it's under the watchful eye of investors and investigators after shutting down 3 hours thursday due to a technical glitch. senator mark warner who serves on the senate banking committee is calling for a "thorough investigation" by the sec. friday, even the ceo of nasdaq conceded the need for a back up system. although he also tells cnbc the exchange operates normally 99% of the time. julie neimann, of smith moore and company says the problem is getting too large to ignore. "the sec has been somewhat lax
in pressing wall street to fix the problem. but when you're costing the trading public millions of dollars in this is the third major incident that's occurred, we can't ignore it anymore. because it does indicate that the problems are only going to get bigger before they get resolved." the trading debacle also is gaining the attention of investors troubled by the break down trend forming in electronic trading.. "it has a major effect on the economy. fewer people will trade if they think want they want isn't being transacted correctly." "in my past ten years in the market, it shakes my confidence in the market's sustainability." the sec addressed the market concerns friday. sec chairman mary jo white vowed to push for automated trading regulations, originally proposed back in march. traders and investor are considering their next move in microsoft. shares of the company soared more than $2 friday on word ceo steve ballmer plans to leave within a year. it
comes at a pivotal time for microsoft, which has gone from industry innovator -- to trailing market trends. tech analyst rob enderle says the news took industry watchers by surprise. " i think most thought steve was on board for at least another three years, because he had just done a major reorganization and typically when that's done will at least ride the reorganization through. that's at least a three year process so, yeah i think this came as a surprise to pretty much everybody." enderle says insiders are eyeing qi lu microsoft's current executive vp of applications, as a possible replacement for ballmer. but adds-- there are likely other candidates in the mix, including outsiders from h-p and software company vm-ware. we'll talk more about microsoft later on in chart talk. in light of a recent study that found nearly half of all job applicants surveyed would accept the first dollar amount of compensation offered,our cover
story wanted to find out how to best walk that tightrope between grateful and greedy. in what some call a lingering after-effect of the great recession, negotiating has gone out of the negotiation. nearly half of all job seekers say they'll accept an employer's first offer without negotiation, according to online employment site, career builder. "i don't think they should. it's unfortunate that 49% don't negotiate for themselves." "they're going in thinking 'i need to accept whatever, when what they need to do is some homework on what the market is for their skill and go in with confidence they'll pay me that." the tendency not to negotiate is strongest among women and younger job candidates. hedy ratner spends a lot of time coaching women out of that. "women need to evaluate their skills and have a clear idea of what they'll ask for." it may not always work. taz wilson is looking to hire 60-
phone reps, who'll be offered 11-dollars an hour. not a lot of room for negotiating, there. but for higher skilled positions, wilson says there is room. post recession, we found plenty willing to engage in the give-and-take. "it's better to negotiate than take the first dollar amount. how'd it make you feel? awesome--because sometimes they go for it." if you are still on the fence about pushing the envelope back across the table,45% of employers say they're willing to negotiate initial offers. and not everything is measured in dollars. a flexible schedule and more vacation time, even a cellphone can be factored into compensation. whats been helpful for the u-s housing market is hurting bank employees. due to record low interest rates millions of mortgage holders have already cut their monthly payments and
are on more solid financial ground. that has meant however considerably less stable conditions for the mortgage lenders working with troubled borrowers or homeowners who want to refinance. both j-p morgan chase and wells fargo have recently announced lay-offs affecting a total of 53-hundred mortgage lending jobs. a sudden dip in new home sales could be a sign higher mortgage rates are causing homebuyers to think twice before taking out a loan. sales of "new" single family homes plunged 13.4% in july. however-- those sales are up 6.8% compared to last year. the dollar amount banks have already spent defending bad behavior is reaching into the billions. the tab - so far - is reported to be $66 billion dollars -- as the nation's big banks to defend themselves in the wake of the 2008 meltdown. the money was spent on litigation in just the past three and a half years. the analysis was done by snl financial.the banks' legal bills are expected to keep going up because the sec and prosecutors are not finished
investigating possible wrongdoings. the statute of limitations on such crimes is 5 years. a goldman sachs trader has been arrested and charged with rape. jason lee, a managing director at the firm, was charged with sexually assaulting a 20-year old woman at a home in the east hamptons.goldman sachs says lee is on leave from the firm in light of the charges. the banker's lawyer tells cnbc "he adamantly denies this happened." chrysler jeeps are again the target of a safety investigation. this time it is the 20-12 jeep grand cherokee. three drivers have reported sun visors catching fire while the car was in motion. all three incidents happened within the past four months.the cherokee is one of chrysler's best- selling models. a recall would affect about 146,000 jeeps. efforts by the justice department to fight health care fraud are paying off. six florida hospitals are coughing up 26 million dollars as part of a lawsuit. the hospitals --
part of a network owned by shands healthcare are accused of overbilling consumers. patients claim the hospitals wrongly admitted them for overnight stays, instead of treating them as outpatients.since 2009, the justice department has vowed to crackdown on fraud in the medical community. tesla sales may be ready to accelerate. the electric car company claims pre-orders in hong kong top orders from the u-k, japan or australia.the company plans to open a showroom in beijing this year. also, tesla's s-model was recently given a 5 -star safety rating, the highest available, from the government's rating agency --but the company was given a wrist slap shortly after ceo elon musk erroneously tweeted that the car had been given a 5. 4 rating -- the government made it clear such a rating was not possible. koch industries says it is no longer interested in buying any tribune newspapers. the multi-
billion dollar company is run by conservative republican brothers charles and david koch. the pair is reportedly still interested in acquiring media outlets but after a review of eight different tribune properties, the koch brothers have decided to take a pass on those. the government's plan to stop the merger between american airlines and us airways-- is getting push back. reuters reports-- political and business leaders in florida, texas and north carolina want the deal to go through, they say its better for their local economies. also american and u.s. air are said to be pushing for a fast trial.they are asking the judge to hear the antitrust case november 12th.the government is suing to halt the airline merger because it creates the world's largest airline and could hurt consumers. would you pay extra for an airline ticket that guaranteed you wouldn't have to sit next to a small child? an increasing number of airlines think you would. for fees ranging from $4 to $25 several asian carriers including singapore airlines and air asia x are offering child- free zones. analysts caution a backlash could hit any u-s- carrier that attempts to implement something similar.
still to come: if moves by the fed have you worried about your bond investments --- a guest on our show will help ease your fears... plus...some teen retailers are losing popularity...so which ones are part of the in crowd.. and,are we approaching the death of the department store? bill moller steps in next after this in the know message.
what's going on with sears? once again last week, more bad news. losses were up, revenue down, the stock price has now tumbled. what's the problem here? and here's the question--- do the woes at sears say anything about the larger models of department stores in america? is there something wrong there? let's talk with joe cahill, a columnist at crains chicago business. now, this is interesting---you call this,"the longest running corporate train wreck you can remember." > >that's right. sears has decline traces all the way back to the late 80s and early 90s when walmart started attacking their customer base. that was followed of course by target and costco. then in this decade, you've had the rise of amazon as the dominant online retailer and all these trends
have hurt sears badly and set off this long, slow decline we're seeing. > >and the ceo, the man who owns all the stock--ed lambert he's been dancing. he's been trying all kinds of new things and they point out that their loyalty program has gotten good positive growth numbers. > >well, they're signing up a lot of people for their loyalty program, but the key to a loyalty program is to get the people who join the program to buy more from you than they were already buying. so you can make everybody who shops there a loyalty club member but if it doesn't make them increase their purchases from what they were buying already, it's not--- > >well of course because you're giving them discounts. > >you're right. and that's what we saw in this quarter. sears sales continued to decline, despite the success of the loyalty program, and the giveaways under the loyalty
program squeezed profits. > >alright joe, the larger question here. is there something inherently broken with the department store model? has that era passed? > >it certainly appears to have. you see similar problems with jc penney. montgomery wards of course disappeared years ago. the business model that target and walmart pioneered was more attractive to people and remains so to some degree. and then of course online shopping has become the preferred model for a lot of people. > >so the long slow decline is likely to continue unless they can come up with some magic to figure it out. > >yeah. > >joe cahill from crains, thanks so much. investors are left with a "mixed bag" when it comes to retail stocks. best buy was the top-performing stock last week after the company reported better-than-expected earings from cost-cutting. game stock was also a winner with a nearly $10 dollar jump thursday when it raised its forecast. lazy boy strecthed higher after reporting that first quarter profits doubled. but staples was one of the biggest losers last week slipping 16% on lower sales of office supplies as trends change in the business world. thank you chuck.still to come: why investors in retailers that cater to teenagers are losing their cool. also coming up---from stocks to bonds. a savvy trader shares his secrets on how he makes money in the bond market.
investing in bonds can be just as risky as investing in stocks. here to help us sort out the action plan that you might need for your portfolio is glen shultz of performance trust. good morning glen, and let's just start with the bond basics. what's the difference between a bond, a bill, and a note? > >that's really the maturity of the instrument. so, bills have a maturity that are less in one year and they're priced at a discount. notes have maturity greater than one year, less than or equal to ten years--- they carry a coupon. and bonds have maturities greater than 10 years and they also carry coupons. so the big difference between bills and notes and
bonds is largely where they sit on a maturity spectrum. > >i'm sensing some investors may be feeling nervous right now because interest rates are rising so those bonds are not worth as much as they used to be. they're opening portfolio statements--not looking good. what would you do here? > >what i would do here is begin to shorten the maturity of my bond portfolio and at the same time begin looking for higher yielding instruments. that higher yield or higher coupon off of that will acyually work with the maturity to reduce the risk of the portfolio. so bond prices move in the opposite direction of interest rates. the longer the maturity, the greater the price risk of the bond. so as you come in on the maturity spectrum you have less price risk and as you have more coupon income from that you also reduce the price risk of the bond. so, what i'm doing and a lot of investors are doing is they're beginning to look to the loan market for alternatives to say the treasury bond market.
> >here's another issue that's coming up---people are told, put your money into bonds because it's safe. and usually we see stocks and bonds moving in different directions. but now they're moving in the same direction. what does that tell you as a trader? should they be concerned? > >they shouldn't be too concerned but what we are seeing here is a dislocation between the normal behavior between the equity markets and the fixed income or bond markets. and this has really been brought on by the federal reserve's asset purchase program. so not only are they looking to lower interest rates by purchasing bonds, but they're also looking to raise the price of risk assets or equities through that program. so what's happened is people begin to factor in the tapering of the federal reserve purchase program. stock prices and bond prices are falling together as investors anticipate an exit of the federal reserve's asset purchase program. and that's cause positive correlation. so, normally in a portfolio you have stocks and you have bonds because stocks rise and bonds normally would fall. they're
inversely correlated. and right now we're just seeing positive correlation. but at some point, we'll return to a more normal market. > >thank you glen shultz of performance trust. > >thank you. just ahead --is it time to stock up on microsoft as the ceo steps down? and the teen retail stocks that are no longer hip on wall street. chart talk is next i'm going to pass chemistry, and i'll take it from there. i'm going to do what makes me happy. i'm going to work hard. be independent. live large. make the most of every opportunity. i knew i wanted to go to college. but figuring out how to pay for it? i didn't have a clue. the u.s. department of education has over $100 billion. and that's a lot of money. to help students pay for college.
and the free application? you mean the fafsa. i did it online. it was easy. i'm never giving up on my goals. i will make a difference. i'm going to find out how to pay for college. i'm going to college.gov. hit a landmine when i came here, i couldn't move. [male announce david was broadsided on the highway. they weren't very hopeful that he would survive at all. [male announce their traumatic brain injuries have yet to heal. the way i describe it is you're just afraid. am i going to start forgetting things? [male announce tbi is as serious as any battlefield injury. thankfully va has made important advancements in tbi so if you think you or a veteran you know has sustained a brain injury, get screened.
keeneonthemarket.com is here to talk about microsoft and more. hello to you james. > >hello to you. > >microsoft had a major move on friday. will that continue into today's trading session? > >i think that this move could continue. there is one major consideration. one very key level that i need to keep my eye on in microsoft. now, on august 8th, a trader came in and bought 150,000 of the sep35 puts. meaning that this trader has 15 million shares of stock that they could sell to take profits above 35. meaning anywhere above 35 there could be some pressure on the stock so i really need to keep my eye on it and see how it reacts at that level. > >and what about some of these teen retailers? last week some terrible action in abercrombie and fitch for instance. > >right. terrible action in these retailers. i think these are gonna be the new stocks that everyone is going to love to hate. abercrombie and fitch, aeropostale, and american eagle
all get crushed on earnings. the abercrombie earnings call was dismal---just disheartening. their ceo pointed to massive changes in consumer preferences and tastes. and i think it's going to be really hard for these brands to find any kind of growth whatsoever from here on out. now if i want to be long, retailers need to look and rotate into names that have done relatively well this year like michael kors and urban outfitters or lululemon. even fossil---that's another name that's held up relatively well this year in the retail space. > >thanks for coming on the show james. have a good trading day. > >thank you. that's all the time we have for today. coming up on tomorrow's show...are consumers all shopped out? reasons why americans are starting to keep a tighter grip on their wallets. from all of us at first business..thank you for watching today.have a great start to your week.
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