tv First Business KICU June 21, 2013 4:00am-4:31am PDT
had enough? how traders handle the "fed freakout" that sent stocks spiraling back to earth. in today's cover story, why some employers are dropping coverage for spouses as healthcare reform takes hold. plus, how to avoid common missteps when opening up your own business. and, the gambling mecca that has investors re-thinking their bets. first business starts now! you're watching first business: financial news, analysis, and today's investment ideas. good morning! it's friday, june 21st - the first day of summer. in today's first look: fear is here. the cboe volatility index spiked 27% yesterday, moving above 21 fore the first time in months as the
market fears the worst will happen when the fed dials back on stimulating the economy with low interest rates. as the vix bounced in yesterday's trading session, stocks dropped in big volume. there was red across the screen in the super sell- off, with the dow sinking 354 points, the nasdaq down 78 and the s&p off by 41. the dow is now below 15,000 and the s&p broke 1,600. gold tumbled to a 2-year low, dropping $94, and oil lost $3.30. we could be in for a wild ride ahead. it's options expiration day, and add to that, oracle turned in earnings that missed on sales. oracle also plans to leave the nasdaq for the nyse. we begin today with prospective coming from todd horwitz of average joe options to talk about that taper tailspin. good morning to you. - good morning to you. what's going on?
- stocks sold off heavily, bonds sold off heavily. is this move overdone? - you know, it might be overdone here in the short-term. i mean, i would look for probably 1580 in the s&p for a little bit of a bounce. but overall, i think this is where we're going to go. i think the market's looking for a reason to correct. i think we finally got some good substance to go ahead and get a correction. but certainly a bounce off of 1580 wouldn't be a surprise. gold i think probably will get a bounce here soon off of this tremendous sell-off. but gold is in a downtrend, and you have to remember that markets tend to go in directions, and gold has been in a downtrend since it hit $1,900. - gold is tarnished. does this mean that all those people out there who were so worried about inflation and the ruining of america were wrong? - yes. gold, first of all, is not a hedge against anything, it's just another commodity that trades, in my opinion. so, gold reached its peak, it had its level of $1,900 a couple of years ago, and it's been in a downtrend ever since. and we've had many markets up and down, and gold has done what it's going to do. i see it as no
hedge against anything once we came off the gold standard. we trade fiat currency, so gold is no real benchmark. everybody should own a little bit as part of your portfolio, but as far as a hedge or as far as an inflation scare, i think it doesn't mean much at all. - it's all about diversifying, right? - that's exactly right. - what will the trade be like today? will we see a bounceback in the market, perhaps? - i think you have a pretty fair chance you can get a bounce. it is triple witching options expiration. there will be some rebalancing in some of the baskets of things that they're trading, plus the s&p is down 80 points - 80 handles, as they call it on the floor here - over the last 12 hours of trading. so, certainly a bounce wouldn't surprise me off of 1580, but certainly from my perspective, i would like to see a bounce, i would like to be a seller at $1,620. - i hope you have a great trading day. - thank you, have a great weekend. a courtroom drama in houston, texas, will captivate attention from wall street to main street today as the man blamed for the collapse of enron pleads for an early release from prison. jeffrey skilling will be seen in public for the first time in
more than 6 years today as he asks a judge to reduce his 24- year sentence. he also wants credit for time already served and for good behavior. he could be out by 2017 after serving around 10 years. under a deal, skilling would drop his appeals, including alleged misconduct by the justice department prosecuting the case. it would also mean victims of the enron business model scheme he invented would recieve restitution. shareholders filed a $40 billion lawsuit after enron shares fell from $90 to $1 in 2001. apple's price-fixing trial is coming to an end. apple's attorney claimed the company acted legally when pursuing deals with publishers. the publishers have settled with the government and agreed to $122 million in damages to 33 states that had joined the federal suit. last year the justice department accused apple of joining with five major publishers to drive up the price of electronic books as it entered the e-book market. apple's attorney warned earlier a court ruling against apple would have a "chilling effect" on commerce. apple closed last
at $416. men's wearhouse is facing a pr nightmare after firing its founder, george zimmer. his abrupt removal angered customers, who say they feel betrayed and will no longer shop at the store. the board hasn't given any details on the firing. analysts say the company is aiming to recruit a younger clientele, and it could salvage its current customer base with a good explanation for getting rid of zimmer. but most think it was a bad move. "when you go to men's wearhouse, you're not exactly looking for quality. you're looking for quantity. but you're going to like the way you look." "if the board has the right to vote to let him go, then they've got that right. i don't know what they know." "if they do 100% get rid of him, then i probably won't go. i don't believe in that." "oh, it's a horrible call. the entire men's wearhouse brand and identity was george zimmer. when you do away with him, you do away with the image of men's wearhouse, because the moment you mention men's wearhouse,
george zimmer, his catchphrase, comes to mind." that was david johnson, ceo of strategic vision. men's wearhouse owns 500 hours of zimmer's voice and tv footage. the retailer reportedly will pay him $1 million in the next 4 years. now on to more fallout from yesterday's policy announcement from the federal reserve. to stimulate the economy, the fed has been keeping borrowing costs low for corporate america and mortgage rates at historic levels for home buyers and re- fi-ers. last month, fed chair ben bernanke made a comment that the fed is considering tapering off its bond-buying program and mortgage rates started to rise. bernanke also mentioned he suspects the uemployment rate will fall to 6.5% by 2014. once that happens, the fed may start to raise rates, which will bring higher interest for americans' savings accounts. in our cover story, healthcare reform extended coverage to your offspring until age 26, but spouses are not considered "dependents" anymore. as a result, a lot of companies are "carving out" spouses from company health plans. it's one of the trade-offs,
negotiated to win passage of the affordable care act: to cover kids longer, members of congress made coverage for spouses optional, and while not naming them specifically, may have been thinking of women. "they tend to use healthcare more, expecially if they're not working. they're free to go to the doctor more and often have more reason to go see the doctor." the changes take effect next year, the same time a network of health exchanges for people to buy coverage opens for business. "employers are doing everything they can to transfer the cost of healthcare to employees. the cost shift is going to be significant this time around." some companies offer surcharges for spousal coverage, but make them so high or reimbursement rates so low they in effect discourage coverage. between now and the end of the year, a lot of couples will likely have
"the talk" about how much health coverage they're willing to pay for their non-covered spouse. "i would buy my wife a better plan than mine. i don't want to sleep on the couch." will coverage for spouses be as affordable through exchanges as it was under your working spouse's company? not clear yet. "wealthy people will be o.k., and poor people will have subsidies, but if you're a middle-earner, you might get hit with higher cost." there's another reason why companies are opting out of coverage for spouses. the law mandates companies pay a fee for each individual covered. right now, it's one to two dollars per person. next year, that fee to companies goes up to $65 per person. a compromise bill on immigration is emerging in the senate. the bi-partisan agreement could gain more republican support because it includes tougher border security. the measure calls for $3.2 billion in will also allow immigrants living illegally in the u.s. to get temporary legal
status. the bill was created by members from both sides of the aisles known as the gang of eight. ford's ceo is airing his currency concerns. alan mulally accused japan of manipulating the yen. he says the weakened currency provides a boost to japanese exports, while hurting u.s. manufacturers there. the yen has dropped 18% since november. the auto indusry has been pushing for reforms in japan, calling the auto market "closed to u.s.-made vehicles." airbus soared past boeing with new jet orders from this year's paris air show. boeing reports winning commitments to build 442 commerical aircraft with a total value of $66 billion. airbus signed deals for 466 jets, worth nearly $70 billion. both showed off new wide-body jets, but it was orders for narrow-body models that dominated. meanwhile, delta airlines has cleared another hurdle to acquire nearly half of virgin atlantic. the justice department and an eu commission gave the deal the ok. the
commission says it does not violate antitrust laws, as the airlines would still face competition against other major airlines. delta would gain access to major airport hubs, including london's heathrow. the plan still needs approval from the transportation department. united airlines is hiking fees for passengers using awards points. united is adding a $75 fee for non-elite flight changes. cancellations will cost $200. united and other carriers are charging passengers with airline tickets $200 verus $150 to change flight plans. one in nine u.s. bridges is structurally deficient, according to a report. some of the oldest and most weather- battered bridges are in the northeast. pennsylvania has the worst, followed by oklahoma, iowa, rhode island and south dakota. repairing bridges across the nation would cost $76 billion. last year, congress eliminated a fund for repairs. natural gas is turning into a power player at the gas pump. a new report from the
international energy agency predicts nat gas produced from shale in the u.s. will become a significant transportation fuel by 2018. the supply of crude oil has been rising as motorists drive less because of higher gas prices. the national average for a gallon of unleaded is $3.59, down from $3.63 a week ago those gas prices are steering drivers away from the roads this independence day. aaa says rising gas prices and the weekday holiday will keep 4th of july travel down this year. however, you can still expect a spending boom on the 4th. a survey finds people plan to shell out an average of $300 on fourth of july fireworks and other gear. thats up 60% from last year. still to come, leaving las vegas: are china's casinos a new investment indicator? that's later on in traders unplugged. but first, delving into risky business: how to avoid common pitfalls of entrepreneurship. that's next, with bill moller.
whether it's to leave the corporate world and be their own boss or to pursue a particular passion, countless americans are dreaming of running their own business. and through this past recession, many have dipped into their savings to pursue that dream. let's talk with gene marks. he's a columnist with the new york times, the huffington post, and inc. magazine. he's written a number of books about the world
of small businesses. so gene, the dream can be wonderful, but the harsh realities are many in starting a small business. - yeah, there really are a lot of harsh realities, and i just want to make that clear. i mean, the ups store asked me to partner with them to get out the results of their survey, because it's national small business week. and when they did their survey, they found that 70% of small-business owners who currently run a business, they would continue to run their businesses if they had to do it all over again, which really surprised me, because i'm a small business owner - i have about 600 clients - and every small-business owner client i go to does nothing but complain about all the hardships of running their business: collecting money from customers and dealing with their employees and all those kinds of issues. and yet, when surveyed, like this past survey just did, 70% of them would come back and say, "yeah, if i had to do it all over again, this is what i'd be doing." - even though they know how tough it can be. so gene, what about this dream of financing is so difficult? is a recovering economy a good time to start a business? - you know, it's funny, is
there ever a good time to start a small business? haven't our greatest corporations been started in depressions and recessions? my feeling, bill, is that there really has never been a better time to start a small business. there are so many resources available out there for the small business owner to use. one example is, the ups store has started a partnership with score. score is an organization of individuals - used to be a bunch of retired people - still is - very experienced and seasoned - but now they have a lot of executives who are running their own businesses, and managers, and they mentor small businesses. so that is a resource that's out there for small business owners to use - a free resources - that they can rely on to help them with their business plans, bounce ideas off of, give them ideas for running a business. these are the kinds of things that really didn't exist just years ago. - and the small business administration, that's another great resource, isn't it? - it really is. the small business administration provides all sorts of loans,
backing of loans, free advice, workshops, seminars. you talk about the environment for financing, you are absolutely right - getting financing is not easy for a lot of people. but for those people who do have the ability to get financing - they've got a little bit of collateral on the side and can get a little help - i mean, my goodness, interest rates have never been lower. so if you can get that kind of a loan, it's a very favorable environment to finance your business if you're able to swing a loan. - all right, i'm fired up myself. gene marks, thanks so much. - thanks, bill, take care. thank you, bill. just ahead, trying times in the stock market: ideas on how to invest in the best coming up in traders unplugged.
keep their cool when the market crumbles. alan knuckman and andrew keene are back for traders unplugged. hi guys, and is it time to cry or buy? that is topic #1: should you buy when others want to cry? - we've seen the 5% sell-off that everybody was looking for. all we did was we took out the double-bottom support the market had here recently. so i think from a risk/reward standpoint, you want to keep an eye on it, see if we can stabilize here, and understand how far we've come this year. - this 1580 level is very key in the s&p 500 futures. if you look at it, we opened at 1444 this year. so have we corrected? yes. 5-7%, which people predicted. is it time to buy? i want to see some consolidation here. this is a key, key level. another level to the downside that's important is 1563. that's a 50% retracement from high to
low this year. so we got our pullback. i think earnings might take us through- - earnings season starts in the beginning of july, so that could the a catalyst to give us some good fundamental information to go on. - topic #2 - mcpay: mcdonald's is said to be paying some employees with prepaid cards coming from jp morgan. is this a reason to give up on a big dividend player here? - i mean, i think mcdonald's is all right. i'm trying to play actually to the short side, and that didn't work out very well. it did pull back yesterday with the market pulling back- - that's shady, though. - i like domino's pizza, dpz. they have better international growth. their chart looks much better than mcdonald's. - all right, jp morgan, they are going to continue to make money. againm, their earnings come out at the beginning of july, july 12th. they know how to make money. $50 is a pivot level there. that was the high in 2008, 2009, 2010, and then we recently blasted above that. so lean on $50. j.p. morgan, they know how to make money. - topic #3, are bets on or off for gambling stocks? macao in china is now surpassing vegas. - this is another one i have tried to play to the short side and it hasn't worked out. mgm, las vegas sands, and wyndham. with the market pulling back, these will pull back with it, but they are doing very well in macao, also in las vegas they
are doing very, very well. i think these stocks are all headed higher if the market can continue higher. - the house always wins, so they have an advantage over the long- term. obviously the macao thing has been long talked about, and obviously is built into price, in my opinion. i'm thinking here, they are talking now about making online gambling legal in america- - it is legal in two states. new jersey and vegas. - so technically, if you look at some of the technical stocks that are involved in this, i think zynga, a $3 stock- - zynga is my stock play of the year. - now we agree! - time for your bonus round question now, and i'm naming this "know your fed chair." which statment is true about fed chairman ben bernanke? - he was appointed fed chair by president george bush. - he was an economic advisor to president george bush. - his mother was an elementary school teacher. -he was born in augusta, georgia. which is true? - all of them. i dunno. - yes! - i was going to say all of them too... - bingo! - i didn't believe d, but i believed the rest of them. - i'm proud of you. you know your fed. first business news continues right after this.
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james rameli of keeneonthemarket.com joins us now for chart talk, and he's watching what's going on with the emerging markets. good morning to you. - good morning. - we had some news out this week coming in from china, for instance, on interest rates, and that moved the market. but where do we go from here with some of the emerging market etss? what do you think the trade is? - we've seen a lot of upside in these this year, and they've started to pull back. that's what you tend to see happen after you have a huge bull run like that. japanese equities futures made it to a 40% high at their peak, and have since sold off. very crowded trade, the yen-carried trade, that's what brought those equities up that high, and we're seeing a bit of an unwind there. order flows have gotten bearish. people have kind of flipped the script, are looking for some downside protection now in these funds. i think if you can stick through the volatility, which is at 52-week highs, that there is some upside in these funds. i am currently long the dxj, and
i think if you can get through all of the wild moves here, that you can make some money to the upside. - so they're bearish now. what are some other reasons why people are looking for that put protection? - one of the reasons is, we are seeing a credit crisis, or the makings of a credit crisis, in china. overnight lending rates reached a 25% high, and that's the type of action that we saw here in the u.s. ahead of our recession, before we saw things like lehman and bear stearns go under. so definitely a lot of concern there. people are buying protection after they have experienced some upside, and that's the type of thing you see before maybe we do get another leg higher. they come in and buy protection. - so it sounds like a "buy on the dip if you see the opportunity" play. - yes. - all right, good to have you on. thanks james. - thank you. it's time for us to jump out of here for today. coming up next week, how to get into "financial shape" to own a fitness franchse. from all of us at first business, thank you for watching this week. we invite you back for more on monday. until then, enjoy your weekend.
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