tv First Business KICU June 20, 2013 4:00am-4:31am PDT
moving forward from the fed....where money is headed, now that q-e uncertainty is temporarily over. in today's cover story....how the fed decision will effect the economy short and long term. plus.... why one analyst says its a buyers market for muncipal bonds. and....bill buster.... why you may be wasting hundreds of dollars on your cell phone bills. first business starts now! you're watching first business: financial news, analysis, and today's investment ideas good morning!it's thursday, june 20th. im angela miles. in today's first look: the market's taper caper. stocks fell dramatically yesterday on word from the chairman -- the federal reserve may taper its bond buying program by the end of the year.
the dow fell more than 200 points, the nasdaq deopped 39 and the s&p 23... as traders yanked money out of the stock market. gold and oil also sold off. in irs updates, fbi agentsare said to be to working on a criminal probe into scrutiny of conservative groups. while an irs employee contends the targeting did not originate from the white house. and dunkin' donuts reportedly goes gluten free with some its doughnuts and muffins.dunkin makes the move ahead of rivals mcdonald's and starbucks.. mark sebastian of options pit mentoring joins us now. good morning to you. the fed has spoken and so have traders. a big selloff for the market yesterday but what happens today mark? > >i think there's gonna be some follow through. rates got slaughtered toward the end of the day---bonds did. rates closed right near their highest yield in over 14 months. s &p closed on the lows of the day. if futures are down a bit this morning, i would be really careful for some follow through. i think we're gonna test that 50 day moving average in the s &p 500 right around
1605. > >what does that mean for the sectors that moved higher ahead of the fed such as tech or housing? > >i think the ones you really have to watch are the yield...the ones that got slaughtered the most yesterday were the high div stocks. they had all kinds of problems and it was really problematic for any type of stock that you're going for for div yield is gonna have the biggest problems. > >now that we're post fed, will traders have to adjust the way they play the rest of the week? > >i think so. when bands and stocks are moving together the market it means some sort of turmoil. and until that corrects, until the 10 year note finds a level that traders are comfortable you're gonna see the s &p really move around. that vix is still over 16 despite the news being out. it points toward a lot of volatility in the near term. > >thanks for your thoughts today mark. > >thank you.
in today's cover story---it was couched in cautious language but the government may begin scaling back the stimulus called quantitative easing later this year. that's the word from federal reserve chairman ben bernanke-- if the economy continues picking up at its current pace. two reasons for the optimism--the rebounding housing market...and the end of widespread government layoffs. fed chairman ben bernanke pointed to an historic indicator of good times coming---the housing market is bouncing back. "it's not only creating construction jobs, it boosts value and improves consumer sentiment." and public sector layoffs seemed to have run their course. the fed chairman says if employment grows at its current pace-- roughly 200-thousand jobs a month and inflation goes up but no higher than 2%, the government's bond-buying program known as quantitative easing may be scaled back later this year and into 2014. "we will continue to reduce the pace of purchases in measured steps through the first half next year, ending purchases around mid-year." "quantitative easing did its job but it's not needed
anymore." joel freimuth (free- muth), who helps companies manage their operational budgets says the fed has to now gracefully back out of its activist role but not too quickly. "bernanke realizes that this isn't sustainable at 85-billion dollars a month. but he also wants to wind it down with as minimal volatility as possible."the dow fell more than 200-points in reaction to bernanke's news conference. quantitative easing has pushed down interest rates. bernanke cautioned that the benchmarks on employment and inflation are thresholds to open discussion but not automatic trigger points for action. another measure closely watched--economic output called gross domestic product---g-d-p. the first quarter of this year it was up 2.4%. the next benchmark--second quarter g-d-p will be announced next week. president obama is back at the white house, following this week's g8 summit. while in germany -- the president made note of the devestating unemployment numbers in europe.
he stressed a need to adjust policies in order to tackle the high youth unemployment, which tops 50% in some regions. the trucking industry is embarking on a rocky road. new regulations go into effect july 1st: requiring more rest periods for truckers, and limits drivers to 70 hours per week versus the current 82 hours. safety groups say the rules do not go far enough. trucking companies say it means $1.4 billion in lost productivity . the oil boom in the u.s. is creating a bust situation for opec. bp recently reported.. the u.s. pumped out a record 14% increase in oil production last year. a report by cnn money suggests: while opec still controls the majority of world oil reserves... the u.s. output could but a crimp on opec pricing.
currently oil prices are closing in on $100 dollars per barrel. the world bank is committing billions of dollars to cities said to be at a high-risk of climate change-- including rising sea levels, and violent tropical storms. bangkok, ho chi minh city and jakarta are among so-called hot spots expected to receive aid money. world bank president jim yong kim says climate change threatens to derail global poverty fighting efforts. "south asia is a cornerstone in our effort at ending poverty, if we don't take action now, we'll never reach our goal and the impact could be devestating." climate change is still heavily debated. despite that, funding efforts spiked in 2012, and are expected to go even higher. as the immigraiton bill winds its way through congress... the congressional budget office estimates-- the bill would reduce the deficit by $197 billion during the next 10 years. the study shows by moving immigrants to legal status-- they add to the economy and
become taxpayers. critics have said passing the immigration bill would be costly to the country. on the hill this week, a house panel passed a measure making a federal crime for illegal immigrants to live in the u.s. so much for liking the way george zimmer looks. zimmer, the founder,. chairman -- and pitchman -- for the discount suit chain, men's wearhouse, has been abruptly dumped by the retailer's board. zimmer had reportedly been in transition with the company and according to annalysts, may have been struggling with a diminshed role. in a statement, zimmer says he had expressed concerns about the direction of the company to the board and its reponse was his termination. starting july first-- shares of rupert murdoch's news corporation will trade as two different empires. the profitable entertainment units of his company -- the 20th century fox movie studio and the fox television network -- will become 21st century fox. the company's publishing arm-- harper collins and the struggling newspaper business will remain under the news corp name.this is a split that investors have been clamoring for.it becomes official on june 28. dish backs off its bid for
sprint nextel corp.the satellite t-v provider said it was "impractical" to try and meet a tuesday deadline to submit a new offer. this means that sprint will most likely be acquired by japan's soft bank corp for $21.6 billion.sprint is the nation's third largest carrier. a new study finds many americans are overpaying for their smartphone plan, by about 52 billion dollars a year. analysts say cell phone plans have become more complex, throwing off consumers. "what happens is that people could understand minutes and messages...you know, we understand whats a minute...how long calls are....we understand what a message is, but gigabytes is this whole other realm. you don't really understand how much gigabytes youre using on pandora, or data youre using on email. so what we are seeing is people are overbuying their gigabytes." that was todd dunphy of save love give dot com, a company that analyzes cell phone bills. he notes many americans tend to think they need 6 gigabytes of data, when they really only need one or two.
another day, another problem with a boeing dreamliner. this time, one of the new jets was diverted to seattle after taking off from denver on its way to tokyo. united arilines says the 787 suffered an oil filter issue. boeing's fleet of dreamliners had to be grounded in january because of concerns about lithium ion batteries overheating. the issue on this latest flight apparently had nothing to do with batteries. a new documentary-- claims to have "solid proof" there was more to the 1996 crash of twa flight 800 than what was first reported. the jet carrying 230 passengers crashed in the waters off new york. the ntsb ruled the explosion was caused by an electrical short circuit likely connected to a fuel gage line. the filmmakers say there was an outside detonation.. and are petitioning the ntsb for a new review. the film "twa flight 800" premiers july 17th -- the 17th anniversary of the crash.
electric car company tesla is recalling some model "s" vehicles. it effects 260 cars made between may 10th and june 8th of this year. and involves a defect in the mounting bracket of the rear seat. meanwhile... later today an online demonstration will show how tesla drivers may quickly replace batteries, mid trip....the stock rose 1% yesterday, ending at: $104 dollars. fedex earnings hit a bump in the road. the delivery company topped profit expectations -- sales dipped as international customers put the brakes on spending. the company intends to cut its annual budget by $1.7 billion in the next couple years by reducing the work force. the ceo says the bright spot of the business continues to be its ground services. four mortgage lenders still need to improve foreclosure standards.about a year ago the nation's five biggest lenders signed a $26 billion settlement because of blatantly improper foreclosure procedures. bank of america, chase, citi-bank
and wells fargo are the list and could face fines of up to $5 million. and in news that is shaking the fashion industry...the legendary designers behind the dolce and gabbana label reportedly have been sentenced to one year and 8 months in jail... for failing to pay italian taxes. the pair's list of clients include, madonna and angelina jolie. domenico dolce and stefano gabbana deny charges they hid millions of euros by moving their firm to luxembourg. still to come brad pitt returns to the box office...will the numbers be a- poc-olyptic? thats later on. but first.... are muni bond yields about to rise? what it may have to do with detroit.....thats after the break.
if you hold municipal bonds you know yields right now are pretty puny. well, with so many cities in america under financial stress - consider detroit, is the risk rising or, might there be an opportunity here? let's talk with jim cahn he's chief investment officer for accession out of minneapolis. let me first ask you about ben bernanke's comments yesterday. that'll have impact on the bond market.
> >sure it will. so, municipal bonds tend to trade with treasuries. so as treasury yields rise we're going to see a rise or decline in the value of municipal bonds. and so, i think bernanke is looking for an orderly rise in treasury yields or an orderly decline in the value. and so over time i do think we'll see a natural rise in municipal yield as we see a rise in treasury yield but he's pretty slow and stable. he's pretty cautious at this point. > >one factor that may bump up yields is this fact that so many cities are under stress-- like detroit--there's a 50/50 chance it could go bankrupt. > >detroit's a pretty interesting situation. so, you have a city--detroit--which has lost two-thirds of its population since 1950. only 53% of the people that live in detroit are actually paying property taxes. so the bond market knows that detroit is in a little bit of trouble. with that said, there are some interesting precedents being set in detroit that if you're a municipal bond owner you might not like. for instance, general
obligation bonds, or bonds that are backed by the taxing power of the municipality. so in this case detroit---it was thought that those would be off the table. so if you owned a general obligation bond you were thought to be safe. > >is that a general revenue bond? > >that's a general revenue bond. it's now believed that under the city administrators' plan those bonds are on the table and those bond holders are likely to have to take a haircut. that's a dangerous precedent. > >but for bond yields is there any upside to what's happening in detroit when fear has entered into the marketplace? > >we saw this with meredith whitney. so when meredith whitney came out and talked about the thousands of defaults that we were going to see across the landscape of the municipal space bond yields spiked and that was a great buying time for people who were interested in getting into municipal bonds. now with the detroit situation, we haven't seen a big move yet in yields but if we see a default in detroit and we see a restructuring where the state says its okay to pay bond
holders back 10 cents on the dollar even if it's a general obligation bond or general revenue bond, we could see a spike similar to what we saw with meredith whitney and that's going to be pretty painful for people holding municipal bonds but it might be a really great time to get into the market. > >buy the bonds. jim cahn from accession, thanks so much. > >thank you. coming up.... the box office is full of zombies & monsters this weekend...which summer flick will walk away the winner? thats next in movies and money.
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the show over the weekend with record breaking numbers... but wait there's more.. brad pitt is waiting in the wings for the opening of his new film. eric childress, our movie man, joins me on set this morning to talk about this. brad pitt showing up at screenings of his new film. is this film in trouble? > >well, he's got us talking about it right? > >that's true. it's on everybody's lips right now. > >bard pitt for the last two weeks showing up and surprising people in big cities at these screenings, getting people talking about the movie. that's all positive publicity for a film that is a very expensive production. we're talking $200 million, probably more. reshoots and rewrites and all kinds of stuff. paramount is looking for a little bit of help here. > >does world war z have what it takes to command the box office over superman this weekend? > >i don't think so. it is a pg-13 zombie film and a very expensive one at that. it's gonna be interesting to see how much superman drops this week. i think world war z is probably headed for a 3rd place finish and that's not gonna make paramount very happy.
> >here's what happened at the box office over the weekend...will they make budget do you think? > >we talked last week, it was a $225 million budget film, they made $225 million worldwide and counting so far but the math on that is different because they have to figure in prints and publicity. they have to figure out theater splits and stuff like that. so if this follows the path that ironman 3 and fast and the furious did, which are the other two big openers this year, its probably gonna come in just south of $300 million domestically and i would think that even if it gets a similar bump internationally that superman returns did compared to man of steel, i think we're probably looking at a break even situation for warner bros. and probably have to make money on dvd. > >also last weekend at the box office, take a look at this. the numbers just drop off. > >75% drop. huge drop. > >what happened there? that was a momentary blip. coming up this weekend at the box office as i mentioned...you had the opportunity to screen a couple of these. let's start with monsters university, coming from disney.
> >yeah, monsters university, remember the days when we all looked forward to a new pixar film? i think those days are done. the argument could be made that this is actually the laziest production in their history. it's a really disappointing prequel. it seems like they took a cue from monsters inc. where at the end of that film, they discovered the monsters they discovered that they can make children laugh and that's the best way to success. the last few movies, including this one, it seems like they're aiming for under age 12 so there's no much there for the adults. > >and the bling ring? > >the bling ring, sofia coppola's new film. i think it's her best work since lost in translation. an interesting film, a true story about spoiled teens who invade celebrities' homes and steal from them. it's only opening on 500 screens but definitely one that people should check out. > >thank you eric. > >thank you. coming up-- find if the fed's stance will slow the roll of stocks. chart talk is next
time now for chart talk before we take off for today and alan knuckman of trading advantage joins us on the show. and alan, after listening to the fed yesterday, is there any reason to believe that this rally overall is going to peter out? > >i don't think so. i think the chairman has played his hand perfectly and played the market perfectly to get the results he wanted. i don't look for that to change anytime soon. he tells us what we want to hear. the market had a little bit of a pullback but i think it's important that we hold at these levels...the mid-point bounce of this 90 point drop that we've seen in the s &p over the last couple of weeks. > >what sectors would you buy? or what targets do you now see in the market? > >what i'm keeping an eye on are the treasuries. i'm continuing to see more unwinding in the treasury market. that could fuel the stock market on the upside cause that money has to go to work somewhere. i know people are concerned about higher interest rates, but in the historical
context we're still at very low levels and we're nowhere near the halfway point of the last five years as far as rates go. so, that's a worry for some, but i think there's some value right now in some mining/metal stocks that have been beaten up---coal, some other sectors like steel that haven't participated in this rally over the last four months or so. i think could see some values down here once the dollar turns over once again. > >good to have you on the show this morning. thank you alan. > >thank you. coming tomorrow on trader's unplugged the guys consider powerhouse stocks and hot commodities to buy...this summer plus, in honor of small business week.... how to shatter the obstacles when starting your own company. from all of us at first business.. thanks for watching and have a great thursday!
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