tv Nightly Business Report PBS August 8, 2013 6:30pm-7:01pm PDT
this is "nightly business report" with tyler mathisen and susie gharib brought to you by. >> sailing through the heart of historic cities and landscapes on a river, you get close to iconic landmarks, to local life, to cultural treasures. viking river cruises, exploring the world in comfort. the head is on. the government ramping up investigations into some of the world's biggest banks at issue, securities that led to the financial melt down. what happens next and what might it mean for bank shareholder sns. >> crash test a dummy. a highway safety group puts small cars to the test and it's prompting concerns for auto
makers. why bringing in goods from overseas may be the only way for some small businesses to survive and thrive. we'll meet one owner whose putting the made in america slogan to the test as our special series continues tonight on "nightly business report" for thursday, august 8th. good evening everyone. our top story tonight, banks under fire. remember those controversial financial products that were at the center of the financial crisis? they are back in the spotlight, and so is jp morgan chase. the bank revealed it's facing two investigations by the department of justice, both criminal and civil involving the sale of mortgage backed securities. as jackie reports, jp morgan isn't the only one under scrutiny as they ramp up investigations of the largest banks. >> reporter: the government is turning up the heat on banks about their dealings with mortgage backed securities. in a filing yesterday it's the
target of parallel, civil and criminal invelst gages. the probe relates to low quality mortgages packaged and sold in securities between 2005 and 2007. the california prosecutor came to a preliminary conclusion jp morgan violated certain securities laws in connection with the products but it's too soon to say if they will result in either criminal or civil charges. jp morgan shares today fell on the news. investors like charlie of aerial investments saying lawsuits are a fact of life for the bank. >> there is no doubt about it the share price for jp morgan is lower than it would otherwise be if all of a sudden magically these lawsuits went away but they won't. investors know they won't. >> reporter: jamie diamond warned legal charges would rise on the first and second quarter earnings calls. one possible audition to the legal costs, an investigation of
jp morgan securities by the u.s. attorneys office in mile phil. jp morgan or prosecutors would comment. that would make four different u.s. attorneys offices investigating the banks business. in audition, new york's attorney general is suing the bank alleging investors lost $22 billion on jp morgan mortgage securities. they aren't the only bank on the federal hot seat. pennsylvania's pnc repormted investigations of it's pricing and foreclosure expenses. on tuesday bank of america reported a probe of $850 million in mortgage backed securities. rockdale securities analysts says it's unfair. >> when you're suing these banks, you're suing the individual americans who own their stocks and they don't deserve to be sued. >> reporter: it seems unlikely the department of justice is done. for "nightly business report" i'm jackie dean gles.
the dow and s&p 500 brushed off and snapped the three-day losing streaks. microsoft and caterpillar contributed up 2% making them the best performing stocks. optimism crept into the market tonight when china reported strong trade data and the positive news continues here at home. jobless claims rose but the four-week average of claims hit the lowest level since 2007. at the close the dow up 27, the s&p 500 gained six and nasdaq higher by 15. in the bond market, an important message today from bill groves founder of pinco the world's largest bond fund company. he says bond investors are in a quote bloody war right now n. a message laced with references to the world war i battle, gross defended bonds as a class for investors, something he emphasized in an interview
today. >> going forward we're talking about a substantial universal of investors that need fixed income. the boomers require fixed income. pension funds, insurance comp y companies with lieblabilitiesli. it won't disagree. >> smart bond fund managers, including him is can protect capital and grow it in a world of rising interest rates. it's been a rough couple months for bond investors and pinco. the flag ship total return fund is down about 4% since may 1st and since then, inveps tors pulled out more than $18 billion from the fund. the fight over the fate of j.c. penney takes a twist. they are starting a new ceo search. activist and shareholder bill ackman wants a chief executive
named within 30 to 45 days and alan who ran it from 2000 to 2004 and considering coming back not as ceo but chairman. the bored said the company made progress under current interim ceo. the stock jumped 6% on the news and yesterday it was trading at the lowest level in 12 years. shares at mcdonalds down even though people were eating more big macs last month. a key figure powered by the monopoly game, strong sales from the chicken menu options and mcwraps. it offset international sales in europe. toyota recalling tacoma pickup trucks for faulty seat belts. it's the latest issue involving that truck.
last year, the truck was part of a recall of 7.4 million for faulty window switches that could cause a fire. from big trucks to small cars, and a new concern for drivers, a report from the influential safety group the insurance institute for highway safety shows half of the cars tested performed poorly in new crash tests. hampton pearson looks at which cars scored well and which didn't. >> reporter: the cars were designed to simulate crashing into a utility car or tree at 40 miles per hour on the side of the vehicle. when the insurance institute for highway safety evaluated the results, only six of the 12 cars performed well. two honda civic models got the insurance institute top rating of good. dodge dart, ford focus, hyundai elantra got acceptable.
sonic, beetle and cruise were margin and nissan versa, soul were poor. >> we saw where people sit in a car, those cars that are performing better, the occupant compartment held up. >> reporter: the results are important because the small car market is growing. 1.8 bought this year, a 12% boost from a year ago. the insurance industry research says new cars have gotten safer but these tests are designed to raise the bar and lower the 9,000 fa stalities per year. fannie mae has become a cash cow. the company synonymous with bailouts made a profit of $10
billion and will write a check to the government for the same amount. yesterday freddie mac reported the second best quarter ever. diana olick has been reporting. what is driving the profits at fanny and fredy? >> it's two things, really, tyler. number one the current book of business is pristine and performing incredibly well because mortgage under writing is so good in the past couple years. they are paying up unlike during the crash. secondly, fanny and fredy raised the guarantee fees. that is, the fees they charge the banks to guarantee the loans and the banks will pass it on to bowers. the loaners are better, performing better. >> things are going so well and making so much money and returning to much to the government, why is it president obama the other day wants to phase out fanny and fredy.
>> the profitability means nothing to the administration because administration believes government should get out of the mortgage market, that there should be some limited back stuff but private capital back into the mortgage market and fanny, freddy and the fha back more than 90% of the loans made and that's just not the way the market should be or according to the administration. they want to phase it out. it will take time but they don't want to be in the situation in 2009 when the government did have to bailout the mortgage market. >> dianna, this congress has not gotten much down on important issues. will it get this done and reform mortgage finance? >> i can't answer that. there is one very strong bill on the hill right now, the corker warner bill the president seems to have not exactly endorsed that bill but the things he's putting forth are similar to what is in that bill and that's why you saw him this week in phoenix making the push again because this fall would be the
time, the make it or break it time to get the legislation through. again, it's not like it's going to happen overnight. we won't see them close the doors. this is a long-term phaseout but we need the plan in place. will it happen? you've been to washington before, guys, right? >> you bet. still ahead, wall street is warming up to ipos again, names like hilton, possibly twitter are getting ready to sale shares to the public. we'll give you a list of other names that should be on your radar. first, let's get a quick check on how the international markets closed today. we begin the market focus tonight with price line and some strong earnings that came out after the market close. the online travel agency said
that earnings surged 24% and that's thanks to improved hotel and car rental reservations. international booking growth was also especially strong up 44%. the stock closed at $933 and change in the regular session and then rose as much as 3.5% in after hours. groupon the daily deals website was strong second quarter sales and a 300 million dollar stock buy back. the focus now is on mobile and pushing more into e commerce. shares soared more than 21% to 10. 60. the biggest one-day gain ever. dean foods the country's largest dairy producer coming out of pressure after saying increased competition is causing it to close 15% of the factor s factories. the current quarter would be the most challenged this year siting falling milk sales. the stock ended at $10.20, that's down 7% and not a good
day for shareholders of a data storage company that reported a fourth quarter loss and was hit with multiple downgrades. the firm siting an increase in competition. the stock plunged closing down 23% to $11.39 and it was a big debut for the biotech company intrexon and a big bed on synthetic biology which could revoluti revolutionize the way drugs and chemicals are made. it closed at $24.73. hilton may start trading soon. black stone the private equity firm that built the chain six years ago is prepping for an initial public offering. reports say the stock could price as early as the first quart e of next year, though too early to say what the evaluation will be. they bought hilton for $28 billion back in 2007. and hilton isn't the only
well-known name that's getting ready to ipo, probably. according to reports, twitter the online social networking service is preparing to go public but looking to attract investor interest, it will have to explain how it makes money given that millions of people use twitter every day for free. julia borston has more. >> reporter: it's built on adds subtle and integrated with tweets. first up promoted tweets like this one from staples for back to school shopping. as vertizers say how much they are willing to pay to reach people. moms of tweens in the midwest. they give a thumbs up favorite and they pay loss the more the engaging the ad is to make messages compel sglg when you get a quarter of the population doing something, marketers will
have a look and try to leverage that site and behavior. >> reporter: a second is promoted profiles. chase and fedex can pay to promote their accounts to draw followers a. third add business promoted trends for this phone. the flat fee grabs this real estate above the list of trending top picks. though anyone can sift through tweets they have data sift that mine insight for customers and information on brand perception and bing and yahoo pay twitter to include the fire hose of tweets and search results. no comment on how much money changes hands. now twitter which is valued at around $10 billion is expected to file the preliminary documents to go public this year for an ipo in 2014. twitter will generate a billion next year but those numbers could be larger depending on
partnerships like the one it has with espn. >> twitter is only a little bit of the way into realizing the social advertising opportunities that exist today online. >> reporter: the company won't say how much it will make from the partnerships with espn, vicom and others but driving people to twitter is certainly valuable. meanwhile, investors and twitter over the market in general which is very active in recent months. according to deal logic 123 companies have gone public so far this year, the highest number since 2007. here with his take on upcoming offerings and what investors should look for, francis president of and editor of ipo desktop.com. francis, let me start with twitter because there is so much talk about it. we don't know when it will go public. we don't have the numbers yet, although julia gave us an idea of what to expect in revenues
and we don't know what the evaluation will be. is this the ipo investors should look into? >> it would come public at the 10 billion-dollar evaluation at ten times revenue, which is definitely smaller than some of these companies that have gone public. they have probably position in the market and it would be impossible to displace them, and i think what they've done is waited -- they are waiting until their business model shows revenue and probably profit so it would be fascinating to look at the income statement. so it's kind of -- facebook went public too soon and they were screwed up in the mobile area and i think twitter is probably timing it about right. i do understand that they have been talking to the new york stock exchange for two years about an ipo so it will definitely happenen. >> facebook came out greater in terms of revenue than what you described for twitter but my rule of thumb, francis, is the
sexier the ipo sounds, the father i want to get away from it. >> it will probably gap at the opening when the social media companies were going public a couple years ago, what would happen, groupon is one of them, came public 2008 and ten other ones including facebook, what they did is they achieved their peak price in the first 15 to 30 minutes and never saw it again. it will be an interesting company, definitely not buy it in the first 15 minutes. >> any other companies coming in the pipeline coming up that don't have such a sexy product line or name that you are looking at and you think would be really good investments for first-time investors? >> franks international is a boring 75--year-old company that has tubular and services to the oil industry and that's coming -- if you annize the june quarter, the price range
tomorrow is at 14 and that's an example of a boring company that could be interesting. however, it will probably come above the range and a lot of the institutions will go for it. >> francis, we talked a minute ago about the possibility of hilton being i poed by the private equity owner block stone groups next year. what should i make if that comes public to the extent you can analyze it at this point and more broadly when a private equity company brings a company public, they are quote smart money. so i'm figuring they make the money and i don't. >> well, certainly that's what we look at. black stone has a reasonable reputation, pretty good reputation with the ipo. they don't bring all the stock public, a little bit. they might in this case come public with 10 or 15%. what they want to do is have the stock go up so their remaining shares go up. hilton is a good example to look for. you want to look for a brand and
look at top line revenue. you want visibility, which you certainly have and you want to look at the price earnings multiple. there is enough companies in the category we'll be able to see when they file financials, whether over priced or reasonably priced. >> okay. a lot of good tips there. francis of ipo desktop. coming up, what is a small business owner to do when purchasing made in america materials isn't an option? he goes overseas. we'll meet him in the made in america continues. how treasure res, commodities and currencies faired today. made in the usa for some small businesses that's a tough rule to follow.
supplies are seasonable or unavailable in the u.s. so to keep the companies growing, they have to look elsewhere and import. as courtney regan reports in the special series made in america that could be good for the economy and jobs. >> reporter: this seafood business in boston relies on imports. they ship 36 million pounds of seafood every year and most of that is sourced overseas. >> when i started in the business full-time in 1985, 80% of what we did was domestic and 20% imported. now it's flipped. we've seen importing seafood helped us. >> reporter: 84-year-old stavis seafoods has grown eight fold to 126 employees in the last three decades. consumers want their fish year round and that supply isn't available 36 five days a year domestically. >> producers, american consumers, part of a global
supply chain. >> reporter: laura what does he search for dozens of companies is fighting what she calls an outdated perception that exports are good and imports are good. >> more imports, equals more jobs, more growth, more connection with the global economy in the 21st century because we're a 21st century enter connected around the world. >> reporter: 16 million american jobs exist solely because of imports and half the firms involved in importing are small american businesses, like stavis seafood. >> you have it coming from indonesia and asia and to lop ya from china and domestic shrimp from here. >> reporter: this freezer holds over a million pounds of fish, 200 different species from 35 separate countries. without imports, this business would look a lot different. >> we would have a smaller business. the whole industry would be smaller. it would be a negative impact.
>> reporter: for "nightly business report" i'm courtney regan in boston. six numbers, three big winners, those people woke up richer after last night's powerball drawing. they will splint the 484 million dollar jackpot. he used to joke with his family about winning the lottery one day. >> we were playing this game, i don't remember the gist of it exactly but you had to pick who in the crowd would match this description and the description is their financial plan consists of playing the lottery. well everybody picked my name, and they thought it was funny then. [ laughter ] >> who is right now? >> he gets the last layoff there. the other two winning tickets sold in new jersey though their owners haven't been identified. maybe one of us in new jersey? >> obviously not. >> they will take home $86
million before taxes. not a bad return. >> $86 million. >> pretty good. >> that's "nightly business report" for tonight. thanks for watching and remember, support your public television station if you're not a lottery winner. >> thank you for your support. good night everybody and hope to see you back here tomorrow night. "nightly business report" has been brought to you by. >> sailing through the heart of historic cities and landscapes on a river, you get close to iconic landmarks, to local life, to cultural treasures. viking river cruises, exploring the world in comfort.
>> announcer: explore new worlds and new ideas through programs like this, made available for everyone through contributions to your pbs station from viewers like you. thank you. >> dr. tanzi: simply put, you need to realize that you are not your brain. that's right. you are not your brain. you are the user of your brain. your brain serves you. you shouldn't be serving it. >> announcer: dr. rudy tanzi is a professor of neurology at harvard university and director of the genetics and aging research unit at massachusetts general hospital.