tv Nightly Business Report PBS May 15, 2012 6:30pm-7:00pm PDT
>> this is n.b.r. >> tom: i'm tom hudson at the money show in las vegas. money managers here are focused on dividends and low energy prices. we'll talk with one of them. >> susie: i'm susie gharib. the f.b.i. puts j.p. morgan's $2 billion trading loss under the microscope. >> tom: and this man's job is protecting consumers from bad loans. we talk with richard cordray head of the "consumer financial protection bureau." >> susie: that and more tonight on "nightly business report". >> susie: more fallout today for j.p. morgan. now the justice department is investigating the bank. the f.b.i.'s new york office is leading the inquiry into j.p. morgan's $2 billion trading loss. investigators are expected to look at the bank's accounting practices and disclosures about the trades that led to the loss.
that massive loss was also an important topic today at the bank's annual shareholder meeting in tampa. >> reporter: the meeting took place a thousand miles away from wall street, but the $2 billion trading loss at j.p. morgan was still top of mind at the bank's annual shareholder meeting. c.e.o. jamie dimon, and other executives, arrived even before the sun came up this morning. dimon kicked off the meeting and told the several hundred shareholders, who had assembled, that the bank will "do the right thing" as it deals with the wrong-way trading bet. the other big item on the agenda: splitting the chairman and ceo jobs. in the end, the votes stacked up in dimon's favor of keeping the two roles combined. shareholders also approved dimon's $23 million pay-package. still there's a lot of pressure to enforce, so-called "claw back policies", recouping salaries and bonuses it paid executives responsible for that trading loss.
this morning on the abc television program "the view" president obama spoke about the j.p. morgan crisis. >> "jp morgan is one of the best banks there is. jamie dimon, the head of it, is one of the smartest bankers we got, and they still lost $2 billion." >> susie: we'll talk with a major j.p. morgan shareholder in just a few minutes. >> reporter: i'm erika miller in new york. still ahead, we look at mother nature's impact on april's retail sales. >> susie: a cautious day on wall street as investors continue to worry about political stalemate in greece. once again, political leaders
there failed to agree on a coalition government. tom, that means greek voters will head back to the polls next month. >> tom: susie, the continuing greek drama has u.s. investors on edge. the dow fell 63 points. the nasdaq lost, nearly nine. the s&p lost seven. >> tom: as we told you earlier, some j.p. morgan shareholders are asking the bank to "claw back" salary and bonuses paid to top executives following the $2 billion trading loss. one such shareholder is new york city comptroller, john liu. he spoke with suzanne pratt earlier today, and she asked him how jamie dimon was doing as j.p. morgan's ceo and chairman. >> >> the industry, and even in his own words, this was an egregious mistake, to lose $2 billion. on behalf of our new york city pension fund where we have close to $400 million, our
stake in j.p. morgan chase, we're very concerned, and we believe the board of directors needs to act. they have implemented a fallback policy, and this is a case where we believe the board should follow some policies. >> do you think that mr. dimon and some of the top executives should give back some of their salary then? >> the claw back provision is clear that if there's a substantial loss to the company that the pay of those executives who were responsible for making the decisions leading up to such losses should be given back to the company. we leave it to the board to decide who to hold account accountable. >> are you surprised he accepted the pay package voteed on today. $23 million? >> no, we're not surprised when people accept their own pay packages, which is why it's important for the board, spectacularally the competition committee comprised of outside independent board members, who
look into this matter and to follow and adhere to their own claw back policy. >> susie: now we learn thad the fbi and the d.o.j. are investigating j.p. morgan. what do you expect they're going to find? >> that, i leave up to the regulators and the investigators. from my perspective on behalf of the 700,000 pensioners ultimately the taxpayers, we have to exercise fiduciary responsibilities. when we see a loss of this magnitude which will affect our shares and perhaps more importantly, if the practices don't change because the claw back provisions are not followed through upon or are hollow, then we might see another loss in the future. >> susie: does that mean there's a chance you might sell your stake in the near future? >> as long term investmentors our city pension funds don't have a real option of selling our shares. what we do is work with major
fund managers. we don't pick and choose individual stocks which is more reason why we need to exercise fiduciary responsibility to ensure that decision making within big company that is we own and the corporate governance structure is for the long term benefit of all shareholders. >> susie: besides j.p. morgan retail sales. budged in april. they rose at their slowest pace of the year. sales increased just a tenth of a percent last month, right in line with expectations. it follows a strong seven tenths of a percent gain in march. the question now is whether this is a normal pause after a strong march, or are consumers growing more cautious? erika miller gets some answers. >> reporter: remember the wonderful, warm weather in march? well now it's payback time. shoppers did not need to spend as much in april, after loading up on seasonal items the month before.
categories like building supplies and clothing and department stores posted the biggest declines. but there was one encouraging sign buried in the report: strong furniture sales. >> "furniture sales are a very big ticket item. and if people are buying furniture, for the most part, what they're really saying is: this is something i've put off for a while. and now i think it's a good time to do it." >> there's another reason some shoppers may be inclined to splurge: low inflation, which means more bang for your buck. the consumer price index was flat in april after rising for three months straight. although if you take out volatile food and energy costs, "core" prices rose 0.2% in april. the same as the prior month. >> early reports suggest may will likely be much better for retailers than april. mothers day sales appear to have been strong, and weather has been generally favorable. erika miller, "nightly business report", new york. >> tom: look out for new rules
as early as this summer, that could protect consumers from another sub-prime mortgage meltdown. the regulation is aimed at protecting borrowers, and protecting lenders when a borrower defaults. washington bureau chief, darren gersh, sat down with the consumer financial protection bureau director richard cordray and asked him how the new rules will work. >> the idea is that consumers shouldn't be set up to fail. this is a complicated decision for the average person. they may make the decision once or just a few times in a lifetime what home to buy, and what to take out for a mortgage and how much debt to take on. if they don't understand what they're getting into, and the products are so complicated that they're left behind in terms of comprehension, and if nobody is paying attention to whether they have the ability to repay the loan, that's a market that's not going to work, and we saw that -- we've seen that move before. >> tom: how do you balance the idea thaw want to protect people and people get loans? >> well, one of the parts of
the overall mandate is to pay attention to credit. it doesn't help consumers if they can't get credit, and we want it to be responsible, not just this week, month, year, but for the year. and a lot of mortgage products were not design thad way. they were designed to get a deal done, and interest rates spike, and a lot of back end pricing which is the f.b.i.'s new york office is not good for consumers or the market. there's a small percentage where students end up with a $100,000 in debt, and then owe a thousand dollars a month and can't pay it back when they get out of school. what should we do about it. we have a lot of people coming to the bureau now and telling us story where is they regret decisions they made two years or five years or 10 years ago,
and didn't appreciate the impact of this, and didn't understand the ramifications. we're trying to be much more transparent up front about people being understanding about the debt burden they're taking on, and the choices they're making and how to compare different schools in terms of the total debt burden, and what it means to pay that back month after month for years to come. >> j.p. morgan, a $2 billion loss. is that a consumer issue or is that remove friday consumers? should consumers be concerned when a bank like that might lose $2 billion? >> i would say that we've had numerous examples in the last few years, including the broken mortgage market and the thing that is led up to the financial crisis that justify strong rules of the road going forward to protect consumers, protect taxpayers, and frankly to safeguard our economy, and that's one of the missions that we've been given at the consumer bureau, and we understand that's important, and all of these examples point in the direction of the
strong oversight of the market to make sure that consumers have protection. >> richard cordray, the directedor of the consumer financial protection bureau, thank you for your time. >> you're welcomed. >> susie: facebook's highly anticipated sale of stock to the public just got a little more expensive. the social networking giant today boosted its price on its initial public offering after shopping the deal to investors. shares could go for as high as $38 a share. the previous range was $29 to $34 dollars. if it prices at the top end, facebook's valuation would be more than $100 billion.
we'll find out thursday night when the official share price will be announced. meanwhile, facebook is losing a big advertising customer: general motors. the automaker is pulling its facebook ads, saying they've had little impact on consumers. g.m. spends about $10 million a year for ads on facebook. >> greece, dividends, economic growth and energy all the talk at the money show in las vegas where we're broadcasting from. jim jubak is with us, and he's the chief investment officer at jubak. >> and a lot of concern about the overhang in the united states. how does that cloud an investor's decision how they make money decisions? >> it's clear that the whole greek thing is going to fall apart, and no one knows exactly how, when or what falling apart really means for spain. no one is worried about greece per se. they're worried about what greece means for spain.
>> tom: we know it means a stronger u.s. dollar. the dollar continuing to increase, and commodity prices drop. >> remember, you don't need to be the best currency in the world, just the least worse. and that's where the u.s. dollar is right now. look further. why would anybody put money in dollars as a safe haven? but right now, liquid, easy to get in and out. >> commodity sold off, gold, oil. natural gas rebounds from $2 to 2.50. is this an energy area you're looking for bargains. >> i'm looking for a bottom in natural gas. i think we'll bounce to $3, and ?r somewhere in there for a long time. >> and you're looking at alter petroleum. they have natural gas exploration production, and share price is half of what it was last summer. is this a bottom?
>> what i'm doing is dollar cost averaging down, so buying a little bit of position every time i get to 20 or below. and whey mriek from ultra is that nobody is making money at 2.50, but how much are they losing. >> and if it trends lower. the point is avoiding a permanent loss. >> it's okay with me. >> in the meantime, liquefied natural gas. and u.s. is trying to export gas. lng. this share price doubled since last fall. >> the thing it has going for it is the only license to build an export facility. you look at u.s. natural gas prices at 2.50 per million btus. australia is exporting gas in europe. and it's going for 9.50.
japan 11, $15. so if you get it out of the united states you make a lot of money. >> you have positions? >> both of them, yes. i own what i speak. >> jim jubak from the money show with jubak money management. >> susie: a high profile arrest today in the on-going phone hacking scandal for news corp. rebekah brooks, the former head of the company's british newspaper unit was charged with conspiring to obstruct justice. prosecutors say brooks, her husband and four others concealed documents, computers
and other electronic devices from investigators at scotland yard. brooks was the former editor of the now closed "news of the world". that's the paper at the center of the scandal. brooks called the charges quote, "a sideshow and a waste of taxpayer money." >> susie: the fight for avon is over, for now. coty has dropped its $10.7 billion bid for the door-to-door cosmetics seller. that offer had the backing of warren buffett's berkshire hathaway, which was helping the fragrance company finance the deal. avon has been under pressure to turn itself around after weak earnings, federal bribery investigations and a management shake-up. long-time c.e.o. andrea jung stepped aside, but remains as chairman. after making its first offer earlier this year, and increasing the bid last week, coty's chairman wrote to avon saying, "two months is enough. it is time for coty to move on". coty's last offer valued avon at $24.76 a share, and with coty pulling out, avon shares fell
hard, down 10%. >> tom: little talk of that avon deal on the part of berkshire hathaway as everybody focused on dividends and protection with all the concern about greece. take a look at tonight's market focus. essentially we saw another choppy session. session on the heels of the weak april retail sales data. selling was concentrated in energy and materials. both sectors dropping one and a half percent in the session, and they are the worst performing sect ords this month in the pullback we've seen. analysts are cautious on u.s. steel makers over foreign
pricing pressures. that put the pressures on the material sectors. in energy, coal producers. grilled after patriot coal cut the 2012 production for steel making coal. and competitors were down more than 6% each in a stiff sell-off. after the close, the focus fell on j.c. penney. working to rebrand itself under ceo ron johnson who came from apple. among the projects doing away with the sales and mark downs. they delivered a loss. and the retailer eliminated the dividend. the stock was weaker heading into the night, and the shares trending lower since late last year. shares were quoted to $4 down from the closing rice in after hours action. one to watch tomorrow. speaking of retail, the unusually warm winter playing against home depot. earnings came in as expected at the retail giant, revenues were less than anticipated as home improvement sales slowed down in april. sales were up more in the u.s.
khmered to growth internationally. investors focused on the revenue number pushing the dock down two percent. and didn't get help from the company raising forecasts for the rest of the year indicating confidence that the business will pick up. others moving on earnings. t.j. max raised outlook for the rest of the year. dick's sporting goods did the same. better quarterly results and increased for theest are of the year. shares of groupon shot up 4% as investors reacted to the stronger than anticipated revenues. it helped fuel the rally we saw today. european situation continues to build up, and the u.s. dollar which we mentioned with jim jubak gets a basket of foreign money. on the upswing since april, and trading at the highest level since early january.
>> susie: all this week on "nightly business report" we're looking at the agriculture economy. organic foods make up a growing part of the american dinner plate. we buy an estimated $28 billion worth of organics every year. and one of the best known organic brands, newman's own organics, grew out of a love of charity. becca king reed reports from santa cruz, california: >> we promised a worm with
every year. that's how you know it's organic. >> nell newman knows her produce. she learned from her dad. >> my earliest memories of getting groceries with my dad was at the farm stand. he would peel back the ears to make sure the corn was fresh. and you know, what did a ripe water melon sound like, and a good cantaloupe smell like. so i really got a hands on, all senses involved experience in picking your produce, and picking good produce. >> as president of newman's own organics forged a path all her own. >> my part of newman's own organics was to support organic agriculture and donate money to charity. >> newman had a vision to spin off what pop had done with his famous salad dressing. >> i thought what dad was doing was fantastic. it was for the philanthropy,
and i just love that concept. i really wanted to follow in his footsteps, but i noted to do it a little differently and by supporting organic agriculture. but convincing dad requires a taste test. so nel whipped up an organic meal >> when he finished wiping his plate clean, i said how did you like the organic dinner. >> reporter: dad's support game with a stipulation. >> he agreed to let me business and i research for a year, and 15,000 each for a year's worth of research, and then you have to pay me back the start up costs. >> they paid him back, and in 1993 launched newman's own organics, the second generation. what started as nostalgia food has grown into 150 products. a royalty from the sale of every item goes to the newman's own foundation.
>> the foundation supports a lot of things. the camps for kids with life threatening diseases that pop started all over the world. the organic farming research near santa cruz. >> and even mcdonald's jumped on board. 650 new england restaurants serve the newman's own organics coffee. >> you're reaching a market that might not even think about it normally. >> the newman's quiet philanthropy has been heard and felt around the world. they've reached 300 million in donations, a mark that pop would have been proud. >> susie: tomorrow on "nightly business report", we continue our look at the agriculture economy. from wheat to soybeans and corn, we talk grain trading with the u.s. head of i.c.e., the inter- continental futures exchange, ben jackson joins us.
>> tom: thanks to j.p. morgan's big trading loss, banks are back in the headlines. as the summer olympics approach, other financial names will be front and center, but for a different reason. the financial services sector is among the biggest spenders for the summer games. here's rick horrow. >> reporter: four financial firms have signed on as sponsors of the u.s. olympic committee: citi for retail banking, visa as the worldwide credit card sponsor, td ameritrade as the online-broker, and deloitte as its professional services sponsor. the reason financial service companies are so quick to align with the olympics is simple. viewers with household incomes over $100,000 are 400% more likely to watch five or more hours of olympics coverage daily than lower income viewers. it's these same affluent consumers the financial firms are spending millions of dollars to reach. a u.s.o.c. sponsorship alone costs $10 to $15 million for a four-year cycle, and that's before companies spend another $10 to $15 million on marketing and advertising.
the key for these complimentary, but competing firms will be finding a way to stand out in the olympic marketing clutter. the ones that do, will see their investments pay off for shareholders. the one that don't will have made a multimillion-dollar mistake. i'm rick horrow. >> we've had a great day at the money show in las vegas, susie. a mix of optimism and pessimism. pessimism about europe and the rest of the world, but really a lot of optimism about the united states economy, and opportunities to invest. stock investors, as you know are optimists by nature, and we've had a good crew at the money show. have a good night. see you in miami-dade >> susie: thanks, tom. good night everyone, and thanks for watching. see you online at nbr.com, and right back here tomorrow night. "nightly business report" is brought to you by: