tv First Business KICU August 8, 2013 4:00am-4:31am PDT
secret deals heat up on wall street. what's fueling the merger madness. in today's cover story, parents hit the breaks on back-to- school spending. why it's bad timing for teachers. plus, how robots are changing the way corporations choose the next generation of tech leaders. and, a hollywood star is coming to the defense of sony. first business starts now! you're watching first business: financial news, analysis, and today's investment ideas. good morning! it's thursday, august 8th. i'm angela miles. in today's first look: a double earnings surprise. tesla lowered its losses by delivering more electric cars than expected. shares flew to $148 after the close.
then there's groupon. the company's sales came in stronger than anticipated, and the coupon company's co-founder, eric lefkofsky, will become ceo. grounpon shares topped $10 last night. there was more selling on wall street wednesday. the dow, nasdaq and s&p 500 all fell. gold added 4 dollars and oil lost $1.04. and tracking u.s. tourism: visitors from other countries injected the economy with $87 billion for the first half of the year, a rise of 7%. todd horwitz of averagejoeoptions.com joins us on the show this morning. good morning, todd. - good morning, angie. - i want to know how you plan to make money on all of this taper talk. - you know, angie, i really believe that the taper talk is a bunch of just that - talk. i think the fed has backed
themselves into a corner, and i don't think they're going to be able to taper, but the traders are showing them that they can taper without them, because they're still rising, making interest rates go higher. but i think the fed's got a real problem, and this could actually be the start of a sell-off in the market, because everybody is realizing that the fed has really backed themselves into a corner here. - what about some of the other central banks, such as the bank of england? that central bank also looking for unemployment to dip to around 7% there. - you know, they've all put themselves in the same situation here: they have all tried to over-fund, and they have all let the rich get richer, or the mr. potters of the world continue to grow on the back of the average joe, and eventually it's going to end ugly, and that's what i see here, is it's starting to end a little bit ugly already, as we see now. - is there anything in the commodity world you would want to buy right now, or are you sticking with stocks? - right now i am really sticking with cash. i think you want to be neutral most of the markets. but we do have, right now we have the widest exchange between the s&p and the commodities index right now. it's really wide right now, so
probably looking at some commodities to buy might be a better way to go right now. - which ones? - i think you might want to look at gold somewhere down around $1,180. it's a little bit lower than here, but i think that would be a reasonable commodity to buy. i think you might want to start looking at some of the grains as they get a little bit lower. they're still moving in a downtrend, but i'm looking at corn, and wheat as well. - good to have you on the show. thank you, todd. - thank you so much. retailers expect parents will spend slightly less on their children's back-to-school needs as summer slips into fall, but schools themselves will likely ask for more help with supplies. our cover story looks at the squeeze at school. this summer, more parents are back-to-school shopping earlier than any time in the last decade. not necessarily spending more - instead, spending more wisely. "i'm stockpiling for the year." "my daughter will need a laptop this year. she's going into middle school." the national retail federation reports families will spend $635. the website retail-me-not breaks it down to $285 per
student, down slightly from brisk spending last year. what's up - schools asking for help. "we're seeing unusual things besides clensing wipes and such. we're seeing requests include sporting goods now, and musical instruments." and as school budgets are strained, teachers and parents are finding new sources for supplies. one of them is called donorschoose.org. "i went and put a project online and got a lot of donations. i was able to buy the books we need. they're wonderful." parents are also organizing school supply funds at their
work. "my employer is involved in a school supply fund drive. we're raising money because it's important for our kids and others who are in need." an additonal note - one reason why back-to-school retail sales may be off slightly from a year ago is because they will be compared to a spike in sales in 2012, due to a lift in consumer confidence at the time. in a rare web event, president obama took questions from americans on the housing market. the president partnered with real estate site zillow for the q&a, and for the second day in a row, he called for scaling down fannie mae and freddie mac, which are both backed by the government. the president prefers the private market perform more mortgage activity. "a lot of the questions have had to do with how do we get fannie and freddie reformed so they are not in a situation
where taxpayers are essentially subsidizing huge risks that they are taking. as part of a package, you could see fannie and freddie reform that protects taxpayers, puts them on a more stable footing." the latest earnings from mortgage giant freddie mac came close to hitting a record. the agency, which was bailed out by taxpayers following the housing crisis, had a $5 billion profit. some republicans want to wind down fannie and freddie over 5 years and close the fhfa. bank of america shares fell on a double whammy. shares tumbled more than 2% wednesday after the justice department and the sec both lodged charges against the bank for allegedly cheating investors through the sale of residential mortgage-backed securities. according to the charges, bank of america sold $850 million worth of bad investments. bank executives claim the company did nothing wrong because the securities went south after the housing market collapsed.
two banks are being sued over allegations of price manipulation in the aluminum market. according to bloomberg news, the screenmaster company, which sells products made with aluminum, accuses jp morgan and goldman sachs of hoarding the metal in detroit-area warehouses. the lawsuit claims hoarding drove up prices. a jp morgan spokesman tells bloomberg the suit has no merit. goldman sachs agrees and plans a vigorous fight. goldman sachs was sued on similar charges august 1st. jpm recently revealed plans to exit owning and trading commodities. a-rod's appeal has eroded, according to marketing executives. it happened to tiger woods, lance armstrong and a list of other athletes who fell from the pedestal they were placed upon after a variety of missteps - in alex rodriguez's case, major league baseball's 211-game suspension, which he is appealing, for
involvement in the biogenisis performance-enhancing drugs scandal. "i think there is more of a risk for companies to identify with an individual athlete. if they do something wrong, your brand goes down with them. i think what you're likely to see are more 'group' sponsorships, similar to the 'gillette young guns' or the coca-cola's 'family of drivers' in nascar. that seems safer to me." adler says look for fewer mega- deals for individual athletes, and corporate sponsorship decisions to move even slower than they do now. apple is offering consumers in china a chance to swap out iphone chargers. it follows the death of a woman who was electrocuted by a knock-off charger last month. starting next week, apple will sell usb chargers for $10 to customers who turn in counterfeits. investigations continue into the hard landing of a southwest airlines flight. the incident happened in late july at new york's laguardia airport. the ntsb finds no evidence of a mechanical failure. pilot actions are now being questioned.
an investment scam is making its way across the country. federal regulators warn con artists are posing as brokers of a big-time investment firm. they are calling people on telephones and pitching high-yield certificates of deposit. the cd's don't exist. what the scammers are after is personal information to steal identities. topping earnings news today, time warner got a surprise from superman. the "man of steel" movie gave a huge boost to the company. earnings were up 87%. the company says it's raising its full-year outlook. however, ralph lauren unraveled yesterday the stock is down 7% as weaker profit margins and slowed shipments to europe was the equivalent of kryptonite to its bottom line. the rising cost of cable may have more americans cutting the cord. it's estimated the fees for cable, internet and wireless capability, also known as triple-play, jumped 6.3% every year for the past 3 years. the average bill is $273 per month. last year, 316,000 customers reportedly cut the cord.
could robots influence the next generation of tech innovation? gm seems to think so. the automaker is using robots to get young people interested in a career path in engineering. the program enrolls students to design and build robots...for competition. james bell of gm says it could be a solution down the line, as many companies struggle to fill a shortage of engineers and tech workers. "there's a great gap between the new jobs available in the technical areas and the students coming up ready and trained to jump into it. so, selfishly, we're now using this program to build a new generation of employees and engineers that are technically savvy enough to build our next generation of cars." some other big names involved in the initiative are google, microsoft, and boeing. one of the internet's most recognizable logos is in for a change. yahoo is planning a logo makeover. during the next 30 days, the company will release different variations of the project. its new trademark will
spending in the digital video advertising space will grow 41% to $8 billion this year. media mergers and acqusitions are picking up the pace this year. monique lewis, who heads up the tech and media division of mergermarket, is skyping with us this morning. good morning, monique. why are merger deals so active? - we're seeing a lot of activity because interest rates are really low. you have these large buyers just sitting on a lot of cash, and they can get really attractive assets on very cheap prices, so this is a good time to really go in and strike now while they have the opportunity. - how does this year stack up to last year? - so far, being only about halfway through the year, the m&a activity in north america has nearly doubled all of what we saw last year. last year there was about $29 billion in valuation of deals, and this year so far we have seen already $55.7 billion in valuation of deals, and that's an increase of 92.1%.
- is this a trend you think is likely to continue? - yes. i definitely think this is likely to continue through the remainder of the year, and we'll continue to see these large megadeals. competition is what's going to set apart one from the other in terms of looking at acquisitions going forward. that's why you saw at the deal between omnicom and publicis. they recognized that they need to remain competitive compared to the other traditional ways of advertising. - monique lewis, thank you for your time. she's with merger market group. come back soon. thank you. - thank you. entrepreneurs are getting creative with raising capital. a growing number of start-ups are launching dpo's, or direct public offerings. its similar to an ipo, only instead of partnering with an investment
bank, entrepreneurs raise money from the public on their own. the concept has been around for a while - in fact, ice cream kings ben and jerry launched their start-up by raising their own funds. dpos are gaining traction in the market again as more investors support locally- owned start-ups. thanks as always, chuck. coming up, popular actor george cloney is ready to take on a hedge fund believed to be threatening the film industry. and, later on in chart talk, is it time to short tesla stock? stick around, first business is back after this. this neighborhood sure has changed a lot over the years.
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a hedge fund has infiltrated hollywood. our movie guy, erik childress, is here with the low-down. george clooney not happy about this, but to back up the story, daniel loeb, who runs the hedge fund third point, wants sony to spin off its entertainment division. why is clooney so up-in-arms? - clooney, he's sort of a true
hero of the arts, if there ever was one. he's looking at a guy that's clearly just interested in the bottom line - and that's fine. in all capitalistic ventures, we're fine with people making money, as long as they make it the right way. and daniel loeb, obviously, after seeing a couple failures this summer by sony, which has not really had a very good summer at the box office, is sort of pushing to maybe make some changes, maybe hold some people responsible for it, when he really shouldn't. - do you think clooney will win out? he's a popular guy. - i think he will. you look at the summer, all the studios have had ups and downs - we're going to be talking about one in just a second, here. but you look at sony, they have not had a great summer, but just before the summer, seven of their last eight films were hits, including skyfall, which made $1.1 billion at the box office. so, this summer they've had a couple of misfires, but they were not exactly bad investments, they just didn't perform. - here's what happened at the box office last weekend. coming in at number one, "2 guns" - that's the denzel movie - that was the topper at $27 million. "wolverine" at $21, "the smurfs 2" at $17 million - there's a sony flick. "the conjuring,"
which you loved, by warner brothers. "despicable me 2." - all of those are going to be hits. "smurfs 2" is not going to do as well here in the states, but that's exactly- "smurfs 2" is exactly the kind of film that daniel loeb is looking for sony to make, because the first one did $563 million worldwide, so it just seems like an easy investment. this one is kind of underperforming. - coming out this weekend, a lot to look forward to. "elysium;" " percy jackson: sea of monsters," out on wednesday; "we're the millers," also debuted on wednesday; and "planes," by disney. i want to talk about disney, because everybody's all weirded out that "the lone ranger" lost money. no surprise on our show. you've talked about this extensively. - yeah. i mean, let me ask you this: did "john carter" bring down disney last year? - it did not. - it did not. they had "the avengers," they've had a number of other hits. "lone ranger" is
just this film that's kind of festering right now, because it's the last movie they released, it's just been sitting there for a month, people are talking about its failure and whatnot. but they have "iron man 3." they also have the biggest film of the summer. so we talk about sony and the sort of ups and downs they had - here you have disney, they have the biggest film of the summer, and the biggest disappointment of the summer. so they're going to be just fine. - so it might hurt the bottom- line in the stock momentarily, but there could be a bounceback. - they have "star wars" in a couple years. they're going to be just fine. - "star wars," not so shabby. - not so bad. - so, which film wins at the box office this weekend? what would be your pick, erik? - i think the winner this weekend is going to be "elysium, " and that's probably good news for sony, even though this is a much more expensive film than "district 9," the director's previous film, so it's going to have to make a lot more. so, the people at sony, particularly daniel loeb, will probably be looking at the grosses of this. i think it's probably going to do somewhere in the mid-$30s this weekend. - how's warner brothers hanging in there? - warner brothers has had a pretty good summer. i think "pacific rim," was sort of their only real disappointment so far. "the conjuring" has been a huge success, "great gatsby," "hangover 3." they've had a lot
of success this summer, so warner brothers is doing just fine, and disney, "planes," is going to do okay for them. "we're the millers" is going to be a nice surprise for warner brothers this weekend. i think "percy jackson" is going to be the only one that kind of disappoints at the box office this weekend. - thanks for coming on the show as always, erik. - thank you. just ahead, is the tesla car company headed in the right direction for investors? chart talk is next.
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i'm so thankful paralyzed veterans of america was there for me. surely those who sacrificed so much deserve no less. join me in supporting our paralyzed veterans. visit p-v-a dot org. plenty of stocks to watch today following earnings and with upcoming earnings from priceline. joining us now is james rameli of keeneonthemarket.com. good
morning, james. - good morning. - let's start with priceline. what is your expectation? this stock is getting close to $1,000. - it is getting close to $1,000. it actually made a new 52-week high on tuesday around $940, and then found some sellers. we saw expecia stock get crushed on earnings here, but i think priceline is a much stronger story. the stock has rallied six out of the past eight quarters on earnings. it's a high-flying stock, though. they're implying a $53 move between now and friday's close, so it's going to be a mover here. i'm looking to get long priceline with an upside target around $980 by this friday's close, which is where the options market is implying it's going to close. - what about groupon? what do you think the fallout will look like today for groupon? - right. groupon reported better-than-expected earnings. it'll be really interesting to see if sellers come into the market and try to hit groupon up at these elevated levels. the thing about groupon is, i think they have a terrible business model. 50% of all
merchants that do a groupon never do another one again. they have a terrible retention rate, and i still think that the stock is a sell. they have big competitors like amazon getting more aggressive in the daily deals space, and i think it's going to be very difficult for groupon to compete against those players. - would you short the stock, or just stay away from it completely? - i would be playing the stock flat to short. i would definitely not be taking any longs here. i think maybe this would be a good sell up here. i could look to short the stock. i definitely do not want to be taking any longs. - what about tesla? the shares rose immediately off of earnings after the close last night, but there's some calls out there that it may be time to short tesla off of this earnings news. what do you think? would you short this big stock? - i wouldn't short tesla here for one reason: it's because it's a heavily-shorted name. we saw some reaction in the stock.
it got crushed today. it's not really an earnings story, right? they don't really have the earnings yet. it's about guidance. eli musk is a very smart guy. he's going to be very careful of the way they describe their earnings in this report here. and, with the short squeeze in play, i don't want to be taking a short position. i think it's too dangerous on a risk vs. reward basis. - would you own this stock long by any chance? - if i were to own this stock long, i would do it through options and have a well-defined risk vs. reward set up here, maybe buying out-of-the-money calls - less capital-intensive, less risk, and a really good way to take a long view on tesla. - thanks for all that, james. - thank you. coming up on our show tomorrow, it's traders unplugged, with the guys trying to figure out if the new size scandal at lululemon will "downsize" the stock. that's it for today. from all of us at first business, have great thursday!
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