Transcripts For KICU First Business 20130717

His testimony to congress on the economy. They are seeking clues as to when the fed will taper its bondbuying program thats been stimulating the economy. Stocks sink ahead of the fed testimony. The dow lost 32 points, the nasdaq 8, and the s p dropped 7. Gold edged up 8 and oil slid 35 cents. Yahoo is sending out a mixed message. The tech Company Earned a nickel more than anticipated, but the revenue and the outlook came in shy. Csx chugs along profits were up 4 as freight volumes rise. Larry shover of sfg alternatives gets the ball rolling for us this morning. Larry, what is the market telling us about that testimony on capitol hill by fed chair ben bernanke . Its funny you mention that. I think the next two days were just going to be on hold. People are so worried about the disconnect between gdp thats being revised downward and the jobs report, so people just dont know what to do with this. Perhaps some people thinking that tapering will happen in september, some thinking in december, but people are largely on the sidelines right now. Specifically what clues will traders listen for as theyre waiting to hear whether there will be a taper now or later . I think traders want some type of concrete rules spelled out that maybe hes not as worried about gdp, he wants to taper in accordance with whats going on with the job number. So, therefore the downward revisions on gdp wont matter as much. But right now, people want clarity. Do you have any observations on earnings so far in the early going here . Yeah, i mean, the sample has been very small, but the one surprise is that so far weve had about a 5 upside beat by the companies. 26 out of 36 as of yesterday have beaten by almost 5 , so its a really good thing. At what point will we see profittaking in the commodities, such as gold and oil . Well, right now gold and oil are acting very differently from one another, and i think a lot of it has to do with the u. S. Dollar. Gold, on the other hand, i think is acting a lot more just in a technical way. Its been so oversold that people are starting to see the value. Were also starting to see some physical buyingout of india and china, something we havent seen for a very, very long time. Larry, thank you for helping us out today. Youre welcome. In our cover story, three years after Goldman Sachs paid a half billion dollars to settle its role in the subprime mortgage collapse of the housing bubble, a 34yearold trader who called himself fabulous fab is at the heart of the feds case against wall street. In u. S. District court, the securities and Exchange Commission alleges that 34 yearold fabrice tourre, a trader working at Goldman Sachs, made misleading statements and omissions to investors about a portfolio of subprime Mortgage Backed securities called abacus. A very large investor convinced goldman to market a product that they knew would fail and bet against it while they tried to get people to buy it. In the civil trial, the sec alleges that Hedge Fund Billionaire john a. Paulson filled the abacus portfolio with assets backed by mortgages likely to fail and took out insurance that theyd fail, but disclosed neither to investors who, when the collapse happened, lost more than a billion dollars while paulson made roughly a billion. Tourre denies wrongdoing. For its part, Goldman Sachs settled three years ago, paying more than a halfbillion dollars 300 million in fines, 250 million in restitution. But some think tourres trial, which began this week in manhatttan, may be the extent of government prosecution into the subprime mortgage collapse. This is the Highwater Mark of this administration to prosecute what happened to the housing market, and its a pathetic and weak attempt. Dennis kelleher, who heads better markets, lobbyists for wall street reform, calls tourres prosecution a joke trial. Why cant they do that against the biggest executives who crashed the system and stuffed their pockets with billions in bonuses . Hugh totten says paulson, for example, faces no charges of wrongdoing. Hes too big and powerful and costly for the government to take him on. Its easy to blame this little guy with a show trial and blame everything on him. Already speed has become an item of note in the trial. The 9person jury was selected in less than 90 minutes, and the selection stayed away from jury candidates with ties to wall street or finance. The presiding judge says she will try to beat the expected 3week timetable for the trial. On capitol hill today, lawmakers will consider whether there is a need to make changes to the dervatives trading market. Senators will listen to testimony from Market Participants as well as the commodity futures trading commission. On the upcoming agenda, congress will focus on what is next for the farm bill. The house has approved a bill that strips nutritional programs, including food stamps, out. Congress will also consider how the house immigraiton bill could affect farm workers. The Senate Version calls for a path to legal status for undocumented farm workers and beefs up border patrols. President obama is taking to Spanish Language tv to tout that Senate Version of Immigration Reform. The president granted interviews to four different anchors, and the interviews aired nationally last night on both telemundo and univision. Despite passing the senate with bipartisan support, Immigration Reform faces a much murkier picture in the republicancontrolled house. A long Senate Standoff over the nomination of Richard Cordray as director of the Consumer Financial Protection Bureau has ended. The full Senate Confirmed cordray late yesterday. Senate republicans were holding out on the confirmation over concerns about how the consumer watchdog bureau is set up. They wanted it run by a bipartisan board rather than a single director. The agency oversees mortgage lending, credit cards and other financial products. Reports are surfacing that dell may delay a vote expected tomorrow on the the fate of the computer company. Bloomberg news reports that the postponement may give dell more time to snag a better offer or convince shareholders to take ceo michael dells offer. Michael dell wants to buy out the tech company for 13. 65 per share and take the company private. Billionaire investor carl ichan is putting up a strong fight to counter the deal. The investigation into last weeks fire onboard an Ethiopian Airlines boeing 787 is reportedly focusing on a transmitter made by the u. S. Firm honeywell. Honeywell has joined the investigation in london. The probe is looking at several possible components that may have caused the fire. Overheating lithium ion batteries had caused the grounding of the entire dreamliner fleet earlier this year. Drug companies are likely on pins and needles this week. Industry watchers are expecting more fallout following accusations against drug company glaxosmith kline. Its been accused of operating a corruption scheme that ultimately manipulated drug prices in china. Analysts say there are signs that chinas government will crack down on bribery investigations, which could potentially put many Big Pharma Companies in the spotlight. Now on to an update on earings news. Cocacola fizzled on earnings. The ceo went as far as to blame the wet spring weather. Whats becoming aparent is americans are more Health Conscious and their soda drinking habits are at a 26 year low. Profits at johnson and johnson rose 8. 5 , mostly due to a bumpup in sales of drugs and medical devices. And Goldman Sachs tops them all. The wall street firm earned 1. 93 billion, which amounts to 3. 70 per share, easily beating out estimates of 2. 87 per share. Goldmans nearly tripled its revenue from investing in bonds. Labor Rights Groups are engaging in a new kind of budget battle. Visa and mcdonalds are catching criticism for an employee budget plan. The Financial Literacy guide was released in 2008 but is gaining renewed attention as fast food workers throughout the nation fight for better wages. The site is meant as a tool to help employees manage a budget on low wages; however, critics of the guide say it is unrealistic. Bob bruno, a labor professor at university of illinois at chicago, says the budget recommendations should not be focusing on Financial Literacy. Thats not the problem. And yet that is what is implied here with this solution. Frankly, lowwage workers will rely on social Service Groups and advocacy groups to make it from one paycheck to the next. Its really not Financial Literacy that they need. Its increased financial power. In a statement, mcdonalds tells First Business the samples that are on this site are generic examples and are intended to help provide a general outline of what an individual budget may look like. Mcdonalds will open its first location in vietnam. The burger giant says it has awarded a franchise to Ho Chi Minh City that should open in early 2014. U. S. Brands have slowly been moving into communist vietnam. 37 other Asian Countries already have a mcdonalds. Panera bread is pulling the plug on allowing customers to pick their price. The Program Began in march and let customers pay more or less than the suggested price of certain menu items. The hope is that customers who can afford a meal would make up for customers who cannot. A panera spokesperson said the program did well in its first phase, due to publicity, but quickly faded. Panera hopes to bring back the program in 2014. A group of hearingimpaired customers is suing starbucks. The group is known as deaf chat coffee. They were in a starbucks in new york when they claim they were mocked by starbucks employees, who even called police to kick them out. Workers say the group holds monthly meeting at the cafe without a permit. A starbucks Spokesman Says any kind of discrimination is unacceptable, and the company is investigating. Aging wine is not such a good thing for one winery. Australian winemaker penfolds plans to dump a million bottles of wine worth about 32 million to get rid of excess inventory thats going bad. Penfolds says its not the good stuff, just the lowerend wines that had been sitting unsold in warehouses for months and possibly years. Telemarketers are attempting to reconnect with consumers. The federal trade Commission Reports an uptick in consumer complaints for telemarketing calls despite being on the do notcall list. In 2011, 2. 6 Million People complained about donotcall violations. In 2012, that number increased to 4 million. Still to come, big changes are in store for your cell phone contract. Plus, will yahoo set a trend for tech earnings . And lying labels how to tell if a product really is made in america. Thats coming up after the break. Chrysler is recalling ram 1500 trucks. 46,000 of the 2013 trucks are being checked for a problem with their stability control software. This comes as Consumer Reports named the ram 1500 its top pick for fullsize pickups. The list ranks Chevy Silverado 1500 and gmc sierra in a tie, followed by toyota tundra, ford f150 and nissan titan. Ford, chevrolet and tesla are all appearing in this years madeinusa hall of fame. Joining us by skype this morning, joel joseph, founder of made in the usa foundation. Good morning, and do you have any concrete evidence that americans are making more of an effort to buy products made right here . Yes, we actually conducted a poll with the harris survey earlier this year, and it demonstrates 75 of the American People want to buy american products, and will pay more for them. You also found out that there are phony products. There are products out there that have the made in usa label, and are actually made overseas. How does a person spot those . Sometimes there will just be an American Flag on a product. It wont say where its made. Thats one sign. It might say that its engineered in the usa or designed in the usa, but not made in the usa. Also, there are ones that say made in the usa that are not made in the usa, and we have brought suits against several companies for this, including one against the kwikset lock company, that actually went to the Supreme Court of california, and we were successful. They had moved production from anaheim, california, to mexicali, mexico, but did not change their packaging, so it said made in the usa, and it was not. And whats happening with reshoring . Are more companies coming back here from overseas . Yes, they are definitely coming back. One example i like to give is the Element Television company. They were manufacturing sets overseas, and they reopened an old factory in detroit and are now making flatscreen televisions in detroit, michigan. Good to hear. Happy to have you on the show today. Take care. Thanks very much. If you were one of the many people who bought sketchers shapeup shoes, it could be payback time. The check is in the mail for nearly a half million consumers. Its part of a 40 million settlement sketchers agreed to pay after the ftc charged the company with deceptive advertising. The Company Claims it did nothing wrong. Up next, is the Tech Industry pushing you to buy a new phone every year, or is it the other way around . And later, a traders view on trading off earnings from yahoo, abbott labs and bank of america. First business continues after this. At t unveils a new subscription plan that will allow customers to upgrade their mobile devices every year. This means the wireless giant will compete more aggresively with smaller tmobile, which currently allows customers to upgrade annually. The new service is not free. Subscribers will have to pay a monthly fee in addition to their service plan. Could this be a gamechanger for the industry . We asked tech analyst jeff kagan. I can imagine whats going to happen next is tmobile going to come back and upgrade their offering to match at t . Is verizon going to jump in and have a matching plan . Whatever happens, this is a good first step into the new world of wireless. The new plan will be available to at t customers starting july 26th. Verizon is reportedly working on a similar plan. The price plan strategy that offers a new phone every year is just one of the Ways Technology is moving at hyperspeed. Sasha segan of pc magazine joins us via skype this morning. Hello, and should consumers buy into the need for a new phone every year . Well, a lot of people already feel that they need a new phone every year, because apple, samsung, htc, all the big phone manufacturers, are constantly pushing these new devices with new features and new designs. So in that case, the carriers are really just reacting to what they see as consumer pressure to let people upgrade more often. And who benefits from that . The consumer . Or the industry . Well, in terms of these specific price plans, its the carrier as often as not. If you look at at ts new next plan, for instance, consumers only benefit if you have all of your old phones in a drawer. As soon as you start reselling your old phones on ebay or recellular or wherever, youre making more money through reselling those old phones than you would have saved with at ts new service plan. But is there any waste involved in this . I have a pile of phones at home somewhere. Well, at t and tmobile actually might reduce the phone waste with these new plans, because what theyre trying to do is theyre trying to capture all of the used phones, and then theyre going to refurbish them, and then theyre going to sell them for 60 or 75 cents on the dollar as refurbs. Theyre going to sell them through Companies Like metropcs and cricket, that typically do prepaid. So youll have these 250 refurb prepaid iphones popping up on metropcs, and the phones will get reused as opposed to just sitting around. Quickly before you take off, what other trends do you see emerging here . Well, i think the other carriers are going to be forced to respond to these new service plans. We have been hearing a lot of rumors that verizons going to do something very similar soon, and sprint, of course, zigged a different way with their guarantee of lifetime unlimited. But i wouldnt be surprised if that happened as well. With four carriers, weve got some pretty good competition in this country, and its great to see it work. Sasha, come back any time. Thank you. Thanks for having me. Yahoo is the First Tech Company to report earnings. Find out if that stock is headed for a breakout or breakdown. A check of the charts is next. James rameli of keeneonmarket. Com joins us now for a closer look at the charts. Good morning, james. Good morning. What is your anticipation for yahoo stock after topping earnings but falling short on revenue . You know, revenue came in a little light here, but im glad to see that they did top on earnings. I think that the stock will continue to head higher through the next quarter here, and i think that it sets a good pace for the rest of the tech stocks. We saw a lot of activity in the xlk, the tech etf, today to the upside out ofthemoney call buyers and i think thats what the market expects to happen, for yahoo and the rest of the tech stocks to continue higher. This morning, abbott labs reports in. Whats your forecast . Abbott labs is a stock that has rallied 5 out of the past 8 quarters on earnings, with an average move of around 1. 5 . This time around, the market is implying a much bigger move of around 2. 6 . It doesnt sound like a big difference, but it actually is. I think that that move looks a little expensive here, so i will be looking to get short volatility in abbott labs, fading that implied move. Im looking at a trade called an iron butterfly. The 34. 50 35. 50 36. 50 iron butterfly. This has me short premium. I can sell that spread for 65¢, risking 35 at a profit of 65 if that movement is less than expected. For someone who does not trade options, break that down in the charts. Is this stock going up or is it going down . I think that the stock is in a neutral pattern here. Its been in a range of around 9 for the past year or so, and the stock doesnt really move that much on earnings. Its average move is 1. 5 . So this has a trader playing a stock flat. What about bank of america earnings . Bank of america reports, and they dont really do that well on earnings. The stock has sold off 7 out of the past 8 quarters here. Not a strong performer on earnings. It also has one of the weaker charts of the banks. Its off its 52week highs, and i think that trying to read order flow ahead of that report is really difficult to do. Theres a lot of varying opinions, hedgers and speculators coming into the market. So i think that the way i want to play bank of america into earnings is flat or to the short side. Thank you for that runup on earnings, james. Thank you. Thats a wrap for now. Coming up tomorrow, an update from greece as protests heat up this summer as the government cuts jobs and spending. Plus, the small budget film that is catching attention of audiences in the wake of the verdict in the George Zimmerman trial. And, more on the fed chairs testimony on capitol hill are all happenng here wednesday. From all of us at First Business, thank you for watching, and we wish you a wonderful wednesday. Announcer the following is a paid presentation for hip hop abs brought to you by beachbody. Pay close attention dont miss your chance to save 75 off hip hop abs. If youre looking to shed the fat. In the first week, i lost 12 pounds. Announcer a way to flatten and sculpt your core. Youre hitting every part of your abs. Announcer and finally get those tight, sexy, toned abs of your dreams. Then stop doing situps. Woman say what . announcer and start dancing with hip hop abs, the fun, new, absculpting system that takes the worlds hottest dance moves and turns them into absculpting, fatburning