tv First Business KICU December 6, 2013 4:00am-4:31am PST
spurt or game of catch up? a look at the gdp rate post- government shutdown. in today's cover story...fast- food workers across the nation are marching against minimum wage. plus...the obamacare parallel...we talk to former wisconsin governor and medicare spearhead tommy thompson. and...a lot of ground to cover...the boys debate amazon's intentions with drone delivery in traders unplugged. first business starts now! you're watching first business: financial news, analysis, and today's investment ideas. good morning! it's friday, december 6th. i'm angela miles.
in today's first look: the jobs report out this morning could dominate the trading day. it's expected 185,000 jobs were added to payrolls in november. and the unemployment rate ticked down to 7.2% from 7.3% the stock market has been selling off into the report. the dow and s&p dropped for the 5th session, yesterday. the market is having a small anxiety attack that decent job growth could cause the fed to taper its bond buying program. gold lost 22 dollars. and oil edged up 16 cents pension tension in illinois. the governor has signed landmark legislation that includes cutting benefits to cover a $100 billlion deficit. unions are planning a fight. and starbucks is out with a fancy shmancy metal gift card...that costs $450 dollars. it goes on sale at noon est today at gilt.com. only 1,000 are available. tim mulholland of china america capital joins us now from the trading floor he's getting set for the jobs number coming out today. will we see jobs on the rise? > >given the adp report, the gdp report, the initial claims
earlier this week and yesterday i think expectations are for a strong number. so that's what the market's expecting. i think an expected number of 185 will be considered good. if it's a stronger number than expected, above 200, bonds sell off in this anticipation of tapering. but i think we're still along ways off of that. i also think we need to consider if it's a weaker than expected number i think that fears of any early tapering are off the table and maybe we'll be off to the races again in the equity markets will continue quantitative easing and stimulus in the market. > >what else could we see as far as market reaction today? > >i think what you're looking at here is coming into the end of the year people worried because of this fed tapering. but let's face it, even if the fed tapers they're still adding liquidity and keeping rates at zero. so i think what we're looking at here is a market that really is---maybe bends a little bit but i don't think is in any danger of breaking at this point. and i think there's still so much liquidity and under-investment right now that at least for the rest of this year maybe into early next year, it looks as though the marlet is going to continue with the momentum it's had all year long.
> >thank you tim. fast-food workers who say they cannot live on minimum wage paychecks protested in cities coast-to-coast. our cover story looks their demands and what industry sources predict where this is all headed. a coalition of fast-food workers and labor organizers led marches in new york, l-a and cities in-between to raise the federal minimum wage far above the current level--7.25 an hour. in chicago, it was the "fight for 15." jessica davis, a single mother of two, makes $8.88 an hour. "there's a bill in congress that would raise it to $10.10. would that do it? no, 15 is what we need to survive." protestors, backed by the service employees international union for the past year, have targeted large corporations, though one of them, mcdonalds says 80% of its fast-food restaurants are franchised. "mcdonald's made $5 billion last year, they have the money. (but most of those aren't corporate run, they're franchised) we're
saying the corporation is responsible." "we can't survive on $8.25." the national council of restaurants called the protests, "choreographed street theater directed by big labor." but it is not dismissed by others. "this is the early stages of what will be a significant movement." bob goldin of restaurant consulting firm, technomic says chains may be headed toward higher costs and smaller margins. "they're pretty nervous. // my opinion is they should get ahead of the the issue. // you're always better being ahead of wages, benefits, health care, yes." employers have said raising wages would cut hiring. this week, labor secretary thomas perez addressed that by saying it would cut turnover. "if i pay my employees well, they stay longer, they're producutive and there are
studies that demonstrate just that." a recent report by the university of california found more than half of fast food workers qualify for public assistance. and one out of four fast-food workers is raising a child. despite low wages-- the economy is growing... the gdp number out yesterday came in at 3.6%. that is strongest economic growth in 1 and half years. the number was revised up from an earlier estimate of 2.8%. what's troubling to wealth manager juli niemann is that consumer spending grew just 1.4% "the economy is not really rocketing upward, it's slogging upward. so it's just not as wildly good news as it looks like it would be on first blush here." the real driver of the economic growth is coming from the businesses building up inventories. some fear that however, could be a negative factor going into the final quarter of the year. tech and start ups as the area adding strength. "i look at now where the dow
jones is, but where nasdaq is. if nasdaq is at 4,000, we've got a pretty strong economy, at least in the tech sector. if goes to 2500, then we're in real trouble." that was howard anderson-- senior lecturer at the mit sloan school of managmement the gdp report also points to a smaller drop in government spending... that suggests the across the board budget cuts are having less of an effect- and the economy could improve next year with less of a fiscal drag. a tough economy coupled with stagnant family income saddles the class of 20-12 with a heavy debt load. $29,400 is the average amount of debt per student according to an annual study done by the institute for college access and success. parents now average just 27% of college costs for their children, that's down from 37% just three years ago. a mass hacking reported this week has hit nearly 2 million internet accounts worlwide. according to cyberdata firm trustwave, email accounts and social media sites in over 100 countries were affected through keylogging software. it began in october and still may be taking place. in a separate issue, jp morgan chase is warning 465 thousand cash card or "u-card" holders of a possible hacking occurrence.
banks are now much safer and the obama administration's goal of overhauling the financial system is almost complete -- that's what treasury secretary jack lew is expected to say in a speech later today. according to draft copies of that speech circulated yesterday, it's likely the secretary will also call for more rules for u-s banks. he is also expected to say that other countries need to do more to ensure their own financial institutions are properly regulated. china is banning bitcoin trading by major banks. it's a critical first step as government officials begin to regulate the digital currency. the chinese central bank said the virtual money has not posed a threat, but carries risks. regulators say bitcoins are anonymous, untraceable and can be transmitted electronically - which is cause for concern. apple is close to a deal with a chinese mobile company to sell i-phones overseas. the agreement gives apple access to
china mobile's 700 million customers. some say it will give a major boost to apple in one of the world's most important smartphone markets. however, china's inflated prices of i-phones may keep sales figures down. meanwhile...among sales of tablets, a report says apple will lose market share to microsoft. international data corp. says that apple's growth will fall by 2017 as consumers favor large phones over smaller tablets. tech expert rob enderle weighs in on both issues. "long-term, apple's going to have to do something about their price if they really want share in china. of course, that means that they're going to have to collapse margins, which they really don't want to do. they're kind of between a rock and a hard place, which is kind of how they are in emerging markets. it's why they don't do well in emerging markets." enderle points out that sales of microsoft's surface tablet outpaced those of apple's i-pad on black friday. retailers are "dealing" with a dilemma. major retailers
logged in weak sales in november. and stores that had sales gains-- report having to offer better bargins to attract shoppers. among the companies with sagging sales. l brands which owns victoria's secret and costco. walgreens was able to prompt an increase in sales through discount promotions. it's a first for kohl's stores -- staying open around the clock from december 20th through christmas eve. that's more than a hundred-hours- straight. the move is seen by some as a possible desperation move for the retailer that cut its full-year guidance and reported an 18% slide in quarterly earnings. jos a bank is turning a suitable profit. profits increased 2.3% on better than expected sales numbers for the third quarter. the ceo views it as a plus going into the critical holiday shopping season. the men's clothiing store also disclosed spending $1.2 million in its bid to buy men's wearhouse. men's wearhouse later made an offer to buy josabank. shareholders take lululemon to court over the company's sheer yoga pants. in its filing, a florida pension fund accuses the athletic wear company of trying to hide defects in the yoga pants and simply hoping consumers wouldn't notice the problem.
in its response, lululemon says it is implausible to believe that, and that it worked (quote) in real time to recall the pants. ford is celebrating mustang's 50th birthday with a makeover. the automaker's challenge was to keep the look of the iconic car while adding fresh updates. the new car is sleeker and lower, but includes the old logo and grille. the current model is offered at $23 thousand dollars. prices for other models, including a convertible version, are not yet available. slow sales are forcing general motors to shift focus away from its chevy brand in europe. it will instead target opel and vauxhall cars to bring back profits. analysts say the switch is an about-face for g-m, which intended to make chevy its primary european brand. but with sales trickling in at 200-thousand a year, targeting better-selling brands makes sense. northern and eastern china are on high alert as smog clogs several cities. air quality is so poor schools suspended classes. and people are adviced to avoid outdoor activities. the red code smog alert could last through sunday. a picasso worth at least a million dollars could be yours for only $135. man in the opera hat is being raffled off by picasso's grandson. only 50- thousand tickets are being sold. as bloomerg points out -- chances of winning here are exponentially better than most lottos where the odds are closer to 4-million to one. proceeds from the raffle will be used to develop an artisans' community in lebanon. still to come: traders are on edge ahead of
today's jobs report-- a check on how the power players are preparing for the possibilty of a blow out number.. in traders unplugged...the shipping news. how is shell's massive floating vessel could effect entire the energy market. and, 7 years before the troubles with the obamacare roll-out there were the similar glitches with medicare perscription drug benefits. bill moller is up next wtih insights from former h-h-s secretary tommy thompson after the break.
sunday is the 10th anniversary of the vote to pass the medicare prescription drug benefit. you know it as medicare part d. tommy thompson, the former governor of wisconsin also served as secretary of health and human services during the 2nd bush presidency. and you're the one who steered the law through congress. and boy does this sound familiar - 7 years ago when medicare part d it went into effect those who it was to benefit were confused, far fewer than expected at first signed up, there were a host of roll out gliches - then majority leader john boehner called it "horrendous" but today part d is seen as a resounding success. lessons here for obamacare? > >i don't know if you can really go that far bill. what i can tell you is that 10 years ago, it was very controversial in america as to whether or not seniors should be covered. we were able on a bipartisan basis--i was tasked by george w. bush president---to get a bill passed through congress and
we were able to do it. we were very happy with it but we didn't know exactly how it was going to work and i'm here to tell you, ten years later that 90% of the seniors voluntarily, not mandatory, but voluntarily signed up. and over 90% of these individuals say today that it's the best program for seniors out there. so i'm very happy with the turnaround and the support for part d. one thing that you can always point out, how popular it is not one democrat or republican has ever introduced legislation to repeal it. that shows you how popular it is. > >it shows you how things can change. it did have a troubled early stage during the rollout period. it was also the result of bipartisan support. you said there has been nobody to try and repeal it. even during the creation process. there were from both sides of the aisle a hand in making this happen. > >that is correct. that's why every chance in america we have been able to have transformative legislation it's always been done on a bipartisan basis. the afforable care act or obamacare, however you want to call it, is the first time it's been done on a partisan battle. i think that's one of the problems
because it didn't have the proper ventilation, the articulation, or the publuic hearings. now, the part d it was controversial. you said it had some problems. the problem was not the computer system or the rollout. the problem was we had a tremendous amount of insurance companies coming in with more plans. we had more plans than we had anticipated and we had a difficult time explaining how these plans all differed but how they would react with individuals. once we were able to do that it rolled out smoothly. we also have been able to prove those individual naysayers who said it would be way to expensive. the cost of part d is 45% less than what the experts projected back when it passed. and the seniors are paying 50% less on their premiums than what the projections were at the beginning. > >very briefly, tell me about the fact that you want this benefit to be expanded and strengthened and basically to cover what has become a growing cause of death and disease in this country--obesity. > >that is correct bill. what is happening right now in america is the american medical association has come out and said obesity is a disease. and it's costing the system $190 billion a year, both direct and indirect medical costs. we think obesity causes heart disease, attacks, strokes, and the big epidemic of all---diabetes. and we think it should be treated. and that's why we think the reduce the obesity act which is in front of congress right now with 60 co-sponsors, democrats and republicans, is the right way to go. and we 're certain that we can bend that curve downward just like we did in the rest of part d. that's why i'm so supportive of it. > >governor thompson, thanks so much. president obama is turning to young people in his p-r blitz touting the benefits of obamacare. at a white house youth summit encouraged the group to sign up for health coverage. the healthy younger generation is viewed as key to the success of the afforable care act to offset older americans with a higher risk of health issues. a new harvard poll shows that fewer than a third of young people intend to sign up for health insurance through the new exchanges.however, the
president is urging 20 somethings to move past the negative publicity that followed the botched rollout of the "federal" healthcare.gov site. the product is good. it is affordable. people want financial stability of health insurance. we're going to keep working through any glitches, problems that may come up. this is a big deal, to quote joe biden. the president compared the struggle starting up the nation's new healthcare system to the civil rights movement. now turning to sad news about one of the ultimate civil rights pioneers -- nelson mandela, an enduring world icon of peaceful resistance, has died mandela famously led south africa, out of apartheid. he spent 27 years in prison after being convicted by a white minority government. he was released in 19-90 and went on to became south africa's first black president in 1994. while in office, the economy nearly doubled. mandela died late yesterday. he was 95.
friday is funday at first business. here to lighten the mood and enlighten us-- from the floor of cme group alan knuckman and scott shellady. they are ready to go for traders unplugged. good morning and topic number one: bears snared? corporate profits are at all time highs, stocks are sustaining near record levels-- are the bears growling? alan: my friend here is a market atheist.i know he doesn't believe. but if you look at the pe ratio at 19 and a half versus the record in 2000 was 26. we still have a long ways to go and the profits tell the story whether you like it or not. scott: i think that you have to really separate the fact that does the qe justify where the stocks are today or does the fundamentals and the economy justify where the stocks are
today. 5% of the people own 82% of the stocks alan, so this has left main street behind while wall street has gotten ahead. so there aren't any bears to be bearish of the market because they're all on wall street thinking it's going higher. it's just common sense. alan: 83% of people are bullish. when people like you finally turn bullish, that's going to be my concern. scott: i'm only bullish if the fed continues to print--- alan: so you're bullish! scott: the fed has way outpaced the economy. angie: topic two: drone groan. amazon is showing off delivery drones-- will the stock continue to ride higher? and what other tech stocks could get an air lift? scott: i'm gonna stay short of being short tech stocks right now because i feel as through we're going back to a 1999 scenario where we're seeing some of these valuations way outpaced what they're actually worth. bricks and mortar and or/what they produce. twitter hasn't even given us a profit. alan: a lot of these ipo stocks make no money, so i'm with you on that. but let's get back to amazon. amazon is its own entity. it doesn't make money but you cannot fight this stock. i'm not gonna make any pizza cracks here because that's where they're going with the drone delivery. but i think the play here on the internet on the
amazon type sales is ebay. ebay at 50 bucks. scott: alan, you've fallen for bezos' ploy. alan: it's working! scott: he just talks about a drone. it's not gonna ever happen and here we are talking about his stock. he's getting free advertisement because you believe in the drones. stop it and don't give him the power. alan: he needs us. got it. angie: topic three: ship shape - shell has built the largest floating vessel ever. it contains a natural gas factory. will increase production hurt energy prices? alan: holy ship! it's the largest ship ever. bigger than the empire state building. but the answer is no. i like ung. ung has broken above 20. 17-20 the target is 23. more upside in natural gas. ung is the way to play it with options. scott: i can't get excited about natural gas at all until we get back over the highs of katrina, number 1. which is $12. number 2, we're talking about bringing more supply in the market? we're burning more than we're using on a daily basis. so when that stops--- alan:---the world is a big place my friend. the halfway point of this low at 2 to the 12 high is 7. so until we get to 7 i still think we got a lot of upside. scott: i'll let you get long here because until we can't see us burning more from space than we're actually using--
alan:---i'm getting cold. scott:---why are you surprised by the weather in winter? i don't understand that? so until we can stop seeing us burn more than we're actually producing from the moon the i will start to get long natural gas. angie: here's your bonus round question for today. it's a fill in the blank. this week marked the 17th anniversary of what--- alan:---i know it! angie:---i didn't even finish the sentence. alan: chicken dinner! angie: chicken dinner! scott: i'm gonna rename 2013 the era of irrational apathy. no one cares that we're at these highs. we've gone from 96 irrational exuberance to 2013 irrational apathy. alan: that's your political commentary for the day. back to you! angie: time to go. you guys terrific job. chicken dinners all the way around. we'll be right back.
dan deming of stutland equities joins us now. he's on the trading floor at cboe. dan, how are pro traders preparing for today's jobs numbers? > > i can tell you angie from a market standpoint you did see some selling. expectations are that the numbers gonna be a little bit better than expected. we're gonna see continued pressure on the fed to do something sooner rather than
later. as far as the vix is concerned, we did see a fair amount of activity in that front month options yesterday. a fair amount of buying with the anticipation that you might see a bit of a reaction in the vix post jobs number. > >what's the overall tone though dan? are they still bullish overall in this market? > >it feels like once we get through the initial fact that maybe the fed might tighten a little sooner than later. the market is pricing some of that in. it feels like underneath though there are some buyers underneath this market. we got some pretty good support not too far below where we currently are. > >what's your trader instinct? where do you think the number will come in? just take a shot. > >i'd say i think it's going to come in at around 205 thousand. > >that's a pretty decent number and by the way there's a huge football game this weekend. you are a michigan state grad, as am i. so go green! > >absolutely. go green! thanks angie. > >thanks for being on the show. time for us to close up shop for this week... join us for an update on manufacturing and how companies in the south are investing in american workers. find out where the jobs are monday. from all of us at first business, happy friday!
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