tv First Business KICU April 30, 2013 4:00am-4:31am PDT
feeding off profit: why venture capitalists are pouring money into the kitchen mix. in today's cover story, why one vote could be so symbolic for caterpillar's future. and, naughty versus nice: why kind companies may emerge the winners with consumers. plus, the market signal that's so bad it's good. first business starts now. you're watching first business: financial news, analysis, and today's investment ideas. good morning. it's tuesday, april 30th. i'm angela miles. in today's first look: it's the last trading day in april, and stocks are surging. the dow came within 46 points of a record close monday. the s&p finished at an all-time high, and the nasdaq gained strength on the
back of buzz about apple's next iphone 5s. apple shares ralllied nearly 13 dollars. in earnings after hour, herbalife profits were up nearly 10%, and the company lifted its outlook for the year. and, workers at an exxon refinery in baytown, texas, are threatening a strike in june if the oil giant fails to update saftey procedures at the plant. here we go to open up the trading day on our show for this tuesday. doug rothshild of performance trust investment joins us now. good to have you on the show. we are ahead of the fed. what is the bond predicting about this meeting? - you have seen yields get back to the lowest they have been really since december. the 10- year about a 167 yield or so, or just below 170. that is about as low as it has been since december and last fall. what the market is really telling you as we look forward to this fed meeting, the start of this two-
day fed meeting, is that they are expecting the fed to continue their bond-buying program, and to continue to be the ones driving the bus. - what is the skew in high- yielding bonds saying about stocks? - the picture in stocks, we are getting a lot of what i would call false positives in the market. you see the stock market at its all-time highs, the unemployment rate is getting a little bit better, and really, if you looked at what's underlying that, the unemployment rate, you have people leaving the workforce every year. 10,000 people a day are turning 62 and leaving the workforce. so that could be a false positive. and then qe3 is driving the stock market. there is nowhere else to invest. so if you want to get a return, you've got to go to the stock market. so i think it is actually so bad that it's actually good. - what is the trade in the bond market, then, ahead of friday's jobs number? - ahead of friday's number, i
think people are just trying to position themselves. we are looking at the fed, and we are looking for two things: 1, are they going to recognize the fact that the economy is slowing, and 2, what are they going to do about it? are they going to continue their q-e program, or are they going to think of something else that we haven't even seen yet? - thank you, doug. come back again. - thanks. in our cover story, more than 800 union steelworkers in south milwaukee vote on whether to accept a new 6-year contract negotiated with caterpillar, and it has employees weighing a series of offsetting provisions, such as job protection in exchange for lower wages, in a state where labor lost a state recall election just last year. here are some of the reported trade-offs union steel workers at caterpillar in milwaukee are facing: higher costs to workers for healthcare, lower wages for new hires, a freeze on wages and pensions, and retirement turned into a 401k plan. in exchange, up to $25,000 over the six years of the contract, a $2500 bonus for ratifcation, protection against permanent layoffs through the use of temporary layoffs, and elimination of reduced workweeks. "this is caterpillar taking advantage of workers again." the tentative agreement has
divided union officials. one calls it "not great, but one of the better contracts we've seen with caterpillar." a former president of local 1343 called it "totally unfair. no self- respecting union would accept it." observers note it is only the latest labor battle in wisconsin, where public employees lost their effort to recall governor scott walker. "they were demoralized when the recall failed. they may think this is the best they can do." caterpillar says the workers, who make between $18 and $34 an hour, are paid 'significantly above market, putting caterpillar at a competitive disadvantage.' workers have several options: they can approve it, reject it, strike, or agree to extend the current contract until a new agreement is reached. if they reject it but decide not to strike, caterpillar could lock them out. the voting continues all day until 6 pm.
a new pension pact moves kodak closer to emerging from bankruptcy. the printing and imaging company has a deal on the table to sell two of its businesses to its u.k. pension fund to cover a $3-billion pension shortfall there. kodak plans to downsize to focus solely on commercial imaging. the iconic american company filed for bankruptcy last year. today kodak is expected to file a draft plan showing a path out of bankruptcy. venture capitalists are looking to what's cooking. in the past year, investors have planted $350 million into food start- ups. silicon valley companies are tapping into smaller companies, many of which focus on organic, locally-grown food. technomic analyst david henkes says while it is a small part of the market, it is one that could pay off for investors. "it's a growing area. it's a
very small part of the business, and again, it's not something that's ever going to be on the radar of a nestle or unilever or some of those companies, just because they are so big, but it is growing, and there is opportunity, and i think that's what some of these venture capitalists are identifying, is there is an opportunity to jump in on a small but rapidly growing part of the food market." organic and all-natural products tend to attract higher- end consumers. henkes says while that market is small and limited, it is underserved, with plenty of room for growth. your chances of an irs audit just fell dramatically. due to government budget cuts, better known as the sequester, $600 million will be gone from the irs budget this year. it forces nearly 100,000 employees to be furloughed without pay for up to 7 days. less money for uncle sam's workers could mean less assitance to taxpayers, or even fewer audits, according to marketwatch.com.
a high-ranking exive has departed from jp morgan. frank bisignano, the co-chief operating officer, has left the bank. he will now head to first data, while matt zames, who had split the role with bisignano, will become the sole coo. it is the ninth executive to leave the bank following its massive trading debacle last year. rating agency moodys says the italian government may still need to be bailed out. italy's new prime minister, enrico letta, was just sworn in this week, and the country has taken successful steps to avoid an immediate crisis. but, in a statment, moodys says: "we cannot yet rule out italy will end up asking for help." the agency will continue to monitor italy's efforts to overhaul its economy. it's a pretty rare thing for the u.s. army to say "no thanks" to more funding, but that is exactly what the defense department is saying about the abrams tank. the army is on record saying the abrams are not needed, but that has not stopped congress from allocating $436 million for upgrading the weapon. the main defenders of
the abrams funding are ohio senator rob portman and congressman jim jordan of lima, ohio, which is also where the only plant that manufactures the tank is located. meanwhile, the government is paying down the nation's debt for the first time since the financial crisis. because the government is spending less, the treasury will pay off 35 billion dollars' debt in its 3rd quarter - the first debt payment since 2007. however, the government expects to borrow $223 billion in the fourth quarter. it's been six months since superstorm sandy ripped across the east coast. this week, new jersey governor chris christie said the garden state will spend $1.8 billion in federal grants on storm rebuilding and recovery. christie notes the state is doing a "heck of a lot better than it was 6 months ago," but that thousands of people are still without their homes. meanwhile, projects are beginning in may to restore boardwalks and build a dune system on the jersey coastline. christie says the state will be
better prepared for storm conditions in the future. the mayor of charlotte, north carolina, could become the next transportation secretary. monday, president obama named anthony fox as his choice to replace ray lahood. lahood is choosing to step down after serving a term, and will remain on the job until a successor is confirmed by the senate. fox has no specific experience as a transportation executive, but led the expansion of an additional runway at the charlotte douglas international airport, and is interested in investing in infrastructure as a way to create jobs. a staggering drop in earnings at chrysler group - 65% in the first quarter. ceo sergio marchionne labeled it "not so glorious." the car-maker's earnings took a hit in large part because of an agressive schedule of new vehicle launches. kelsey mays of cars.com says those new vehicles will be critical to chrysler's results going forward. "you're comparing it to a quarter that was very very successful a year ago, and
because of that, we're probably not going to see profits hit that again until q3, q4 as chrysler advises, because that's when there's going to be new product. at the end of the day, it's all t getting more cars, new cars, into showrooms - especially in this growing u.s. economy now - and allowing consumers to see them." the company added that it remains on target to achieve its goal of $2.2 billion in full-year earnings. ceo marchionne says that while the task ahead for chrysler is "daunting," the company is committed to those targets. the struggles of for-profit devry university may end up benefitting students - at least in the short-term: after declining earnings, revenue and enrollment, the school will freeze tuition rates for the upcoming year. drug giant novartis is defending itself against allegations of kickback schemes. a federal lawsuit alleges novartis of bribing doctors with money, trips, and outings at hooters restaurants. novartis tells the wall street journal that "discounts and rebates by
pharmaceutical companies are a customary, appropriate and legal practice as recognized by the government itself." the government says kickback schemes raise the cost of healthcare for everyone. google is trying its hand at digital assistance as it attempts to upstage apple's siri. yesterday, google released a new free app called google now. it performs many of the tasks that apple's siri does. google says its app is superior to siri becasue of its ability to anticipate a user's needs. in other tech news, samsung unveiled its galaxy 3 tablet yesterday. this new model uses the latest android operating system and will be available worldwide next month. ahead of its u.s. opening, "iron man 3" already has ironclad box office numbers abroad. the third installment of the superhero series raked in $195 million when it opened overseas this weekend. it opens here in the u.s. on friday. shareholders of disney are happy. the stock jumped nearly 2% on the news, and received an upgrade from ubs.
twinkies are coming back to town. the private equitygroups that now own hostess brands are taking applications at some locations. the plan is to open bakeries in georgia, kansas, illinois and indiana, possibly by late may. the shops will be non-union. the new owners promise to not discriminate against job applicants with union ties. twinkies, ho hos and other snacks will be on store shelves by july. still to come, why companies might want to consider the cost of kindness. that's later on. but first, bill moller gets insights on some of the most tight-lipped individuals in charge of the global economy. that's next.
central bank. "the alchemists" is effectively an insider's account of how they did it. it was written by washington post economics columnist neil irwin. alchemy and the mystical powers of turning things into gold. i assume there is a deliberate intent in choosing that as the title for your book? - there is. hundreds of years ago, the alchemists were these guys who tried to create gold and silver out of routine materials. turns out you didn't need magic or potions or any of the stuff they worked on. if you have a central bank, if you have the authority of the state, and you have somebody to run it, you can print money out of thin air, and that is what the central banker's been doing for the last six years. - but they are not really being hailed as heroes in all quarters. a lot of people feel they have unchecked powers, these un-voted individuals. - it absolutely raises huge questions for anybody who cares about democracy and transparency. what i am trying to do is provide a window into what they did and the true story of what happened. but there is no question that over and over, through these last several years of crisis fighting, there has been a lot
of stuff that raises real questions about how democracy works and whether there is enough accountability for these central banks that act in private and in secret. - and whether or not they are operating based on political motives. - that's right. it's an interesting contradiction. we want them to be accountable to the people in politics. on the other hand, we want them to make sound, good decisions, not influenced by what politicians want day-to-day. so it is a tricky balance, and that is the story i try and tell. - we had a real roller-coaster ride with the economy. are some people now saying we need more regulation, we need to clip their wings a little bit. - yeah. i think the banking system, it is clear the financial system got out of whack in the mid 2000s, and that part of what caused this tremendous conflagration the world has been through, this global recession, was a financial sector that had gotten out of control. how to change that, how to get a system that both supports growth and supports the economy, but doesn't create these risks of a collapse is the great challenge
for everybody ahead. - what is your thought? you are very close to these men and covering them. do you feel they acted wisely, or were they just kind of putting their finger to the wind and saying, "well, i hope this works." - those are both true a little bit. sometimes the thing you have to do is, you don't have complete knowledge, you don't have complete certainty on what the effects of a bold action will be. but over and over again, it has been these global central banks - the federal reserve, the european central bank, the bank of england - deploying trillions of pounds and dollars and euros, and they have made a lot of mistakes along the way, but it has also kept the global economy from a much worse position. - the book is called "the alchemists." neil irwin, thank you so much. - thanks for having me. thank you, bill. still ahead, how to make a killing by filling your portfolio with kind stocks. that's next.
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it can enhance important skills, like concentration and problem solving, which can improve academic performance. this means physical activity can help your kids in the most important game of all -- life. kill 'em with kindess is a mantra corporate america might want to consider. joining us via skype this morning, author and blogger peter shankman. he is founder of the geek factory. good to have you on the show this morning, and you say being a shark can actually be costly
to companies. do you have any proof that that's true? - i do. if you look at a company like zappos, for instance, zappos does not charge any less than any shoe store. they don't do anything specifically special in terms of the shoes. there are no magic shoes that they sell. but what they do do is they offer 24-hour customer service, and they offer you the ability to return the shoes at any point when you don't like them. they offer you the ability to up your shipping to overnight for no extra charge. they care. and they fostered this culture of a caring that has actually turned into massive, massive profits. - how does being mean cost a company? - we live in an age now where everything is share-able. so if i have a bad experience with your company, 30 years ago i had to stand outside with a sign and tell people how bad it was. now i simply take to twitter, and i take to social media and i take to facebook, and i tell people that trust me, and depending on how big your audience is, you are looking at telling upwards of millions of
people through friends and friends of friends within minutes. being nice actually does the flipside. it allows you to share, "hey, look at what this company did for me. look at how awesome they are." - how can investors spot a kind company? - really several ways: does the company have good stewardship? is the ceo, can you talk to him? does he talk to people? if you can't get an answer out of a ceo - a ceo is not supposed to live in a glass tower. he is supposed to coordinate with the people, talk to the employees. how is their customer service? does it come from the top down? are they willing to talk to people, are they kind to the environment, are the kind to their employees? the '80s concept of working 20 hours a day and not taking lunch has been replaced by, "you know what, we understand you have family, and you will be a better person, and thus provide better value to the company, if we treat you well." - thank you, peter. we like your style. - my pleasure. just ahead, will the stock market continue to be kind to investrors?
- good morning, angie. - you made a call on this show that the s&p 500 would go to 1600 this year. it seemed unfathomable at the time, but here we are sitting just below that. you get 20 seconds to do an almost-victory lap. and will we cross over by, say, june? - well, i think we will. now, of course, the question is, will we have that spring-summer swoon correction? i don't know. obviously we can't go up this fast forever. i would obviously like to see the rate of appreciation slow down a little bit. but you know, just some time here and there, even if the market trends at these levels, comes down a little bit or comes back, we are setting the stage, obviously, for a forecast, really, of stronger economic growth over the next couple quarters, which will justify the rise. - i also wanted to get your take on herbalife. on one hand, you have a hedge fund shorting it. on the other, someone going long - a couple guys going long, in fact. what would be your play here, or would you stay away? - they had earnings last night
that were really, really good, and they are forecasting over $4 in earnings. but, investors out there - i, myself, other retail or even institutional investors - we are not carl icahn. we don't have billion- dollar stakes, we don't have seats on the board. it's tough to know exactly what those books really are. of course, ackman called into question everything about the company. then of course there's news that they're leaking material, nonpublic information, the accountants. so you just don't know. and for me, it is a headline stock i am going to avoid. - too many question marks. good to have you on the show this morning. that is matt shapiro, president of mws capital. time for us to roll on out of here for today. coming up tomorrow, the hidden toll work stress is taking on your life, and tips to relax. from all us at first business, namaste.
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