Transcripts For WBFF First Business 20100518 : vimarsana.com

we re going to get check up on the trading floor coming up. and i m glad that you mention the markets, because what a great turnaround in the markets yesterday. the s&p 500 and the dow staging that big come back in commodities. pulling down, we saw a sell-off happening in gold. and oil moving below $71. and beejal, we re hearing that its going to be a much better driving summer for everybody. with those vacations coming up, oil prices are coming down. that s going to translate down to the pump. let s hope so, angie. and speaking of oil. there s another update from bp this week. it s been able to stop some of the oil and gas flow from that broken well in the gulf of mexico. they re diverting some of it through a tube up on to a big ship where it s being collected. and these pictures show that some of the gas that s coming from that broken well is actually being burned out. big spenders are making a comeback. traditionally, as recessions wind down the ultra wealthy are the first to show their wallets. and sales are up on a number of luxury items. as the economy revives from recession, spending among the ubber rich was rock solid for the first quarter and could shine in 2-q. the affluent shopper is definitely back. david lampert, president of lester lampert tells me sales are strong for expensive pieces, especialy big diamonds, as the upper crust happily makes a return to the store in chicago s gold coast. i just think they are feeling better about the overall economy. and, they want to spend. it s very much human nature to want to spend when you can, it adds to your feeling good. and oh, what a feeling. lampert let me get in on with a pair of diamond crusted hoop earnings and a chain of brown diamonds, which a rap singer recently tried on for size. lampert believes the added bonus for buying baubbles is the lasting value. they are wearing their jewelry again. i know some people who didn t feel right about wearing their big rings, so they didn t last year. now they are not only wearing it they are adding to their collections. other high end retailers are also noting a wealth of shoppers. along with sales of luxury cars. rolls royce sales for first quarter increased of 60% from a year ago. bentley sales world wide were up 16%, but only the really rich can withstand the sticker shock this beautful bentley at bentely gold coast will set you back close to 250-thou.. one of the headlines is that consumers are coming back. at leo j. shapiro and associates owen shapiro, who studies consumer behavior agrees affluent shoppers are back after a brief spending break. one thing that happened wal- mart did very well during the recession and now they are in a little bit of trouble. one thing that happened was that people were shopping down, the affluent consumer was shopping down to wal-mart. he says the rich with new money were not only shopping at wal- mart, but also mcdonalds and target. they may be back to their big spending ways, but it s the middle class that remains in question. the upper middle class shopper is still very wary and is going to take a while to comeback but they are potentially the next group to come back in. as for the working class, which held up the economy when times were better. shapiro says their return to retail. largely depends on job growth. this week, lots of retail earnings are in focus. and that sector has been disappointing for investors in recent days. kimberly picciola, retail analyst at morningstar is here to break it down for us. welcome kim. so, for the major retailers from the home improvement stores to major department stores. they re reporting that profits are certainly up from a year ago. but forecast for the second quarter are missing the mark. and is that a sign that consumers are maybe tapped out completely? or are investors expecting too much? we think it s more a sign that investors are really expecting too much. we think the market has gotten ahead of itself a little bit in terms of expectations for consumer recovery. and while we do in fact expect a modest recovery in consumer spending this year, which most retailers should benefit from. we think the market was expecting a little bit more then what s really going to play out. one retail e t f is up 60% in the past one year. do you think at investors just kind of bid up their shares a little bit too much and now we re just seeing a correction? we think so. in general when we look across the retail sector, we think most stocks are fairly to slightly overvalued. as again, the market has really just gotten a little bit too excited about what s to come. and reality is kind of setting back in as these retailers report earnings. the biggest retailer in the world, wal-mart reporting earnings on tuesday. is that company likely to continue to benefit from a continued economic uncertainty? we think so. we think their value positioning is really going to bode well for them. as we see a modest recovery in consumer spending this year. we do think price deflation in food will weigh on their same-store sales results. but that should moderate as we progress through the year. and what about midlevel department stores. are we likely to continue seeing the discounts that they ve been offering in past months? we re not expecting that to continue. we think midlevel department stores are operating with very lean inventory levels. and they re really focused on selling more goods at planned pricing. there ll always be some promotion at department stores, but not to the amount that we ve seen recently. we think the days of excess of discounting to move unwanted goods, we think those days are over. let s talk about the ultra discounters, like family dollar and dollar tree. those stocks have been on fire. they are at all-time highs right now. how cautious would you be on this specific sector? we would be cautious on this sector. we do see that their at all-time highs. and the results are there. they have really been performing very well in terms of sales growth and profit growth. we just don t see that sustained over a longer term. particularly as the economy improves and consumers choose to trade backup in other channels. really quick, who are the winners if and when consumers do decide to trade back? we think the midlevel department stores are well positioned to gain some of that traffic as consumers get more confidence to increase spending on discretionary goods. like target for example? target particular, given their discretionary mix. we think they re well-positioned to benefit. ok, thank you very much kimberly picciola, retail analyst at morningstar. and let s get a check up on the trading floor with scott shellady of gfi group. scott, we ve seen the banking industry come under a sock from all directions here. do you see the financial stocks taking a bigger hit than maybe what is necessary? yes, i think they have taken a bigger hit than what is necessary. but it s just because their the headline stock right now. you can put goldman sachs and take them off the headlines. and put bp and take them out the headlines. and put goldman sacks. right now the financial industry is equal to the oil company that has the exploding well at the bottom of the ocean. we just don t see any reason to get long on them right now. but i definitely think that this sell-off is overdone for those financial stocks. ok, what about the overall stock market, the s&p 500? we ve seen the bulls try to claw back some of the losses from yesterday? well, its going to be viewed as a relief rally. and i m not quite sure that s the best word you can say. if see the dollar weakened as it did all day today, and the euro rally as it did today. then, the knock on effect is a natural rally in the stock market. is that a relief rally? well, it s just a natural, technical buy having seen what those currencies have done. but i think that we have to be careful about how negative we do to get here. ok, the euro is at four year lows. i mean, levels we haven t seen since 2006. are you ruling out any possibility of a full-fledged crisis in the euro currency? nothing can be ruled out. but as an older trader said to me when i was young and just get started. if you bet on the world exploding and you win that bet, what do you actually win? all of us lose. so, you have to be careful about how negative you get here. we re going to have some things put in place, both policy weis with the government. and with some traders taking advantage of anomaliesthat will probably help shorten this market on the way down. i don t see a full-fledged crisis, no. ok, thanks very much. scott shellady of gfi group. our tech expert brian bolan has the latest news on google coming up next. and later on, details from the new clean energy bill - and what it could mean for off shore oil drilling. google has been in the news lately on several issues, including its nexus one phone. and a possible google tablet computer. brian bolan, technology analyst at olympia capital markets group is here with what he knows. welcome back to brian, good to have you as always. so something on a tablet for google could be announced soon? right, we just heard not too long ago from the ceo of verizon that they were partnering with google to make this new tablet and. and get into the space that ipad is currently raiding. we could hear an announcement as soon as may 19th or 20th when google is hosting the i o developers conference. but there s so many questions surrounding it. what would be called? what kind of operating system it will have? what do you think? well, as there are lots of questions, i don t know the name of is going to be. the operating system is either gonna be the android operating system, same on many of these mobile phones. or possibly the chrome operating system. early indications are that the android is more than likely to be the operating system, as verizon is partnering with them. it looks like this is going to be a possibility here. and i think google needs to come out with something pretty quick because apple has already sold about a million ipads in its first month of sales. right. some pretty large numbers from apple right off the bat. a lot people were very excited about this product. we ve seen other interests in the market. h-p is coming out with a slate. that is another product that is out there. the google, a tablet has been talked about. also, microsoft has been rumored to be putting out something. and do you think google can go head-to-head with apple s ipad? i definitely think the google can go head-to-head with ipad. i mean, we ve seen worse numbers of iphone vs. the nexus one, google phone. but i still think the google pad will compete effectively against the ipad. ok, want to talk about the nexus one. because it s only been sold on google s web site and it s pretty lack luster. and now google taking it off of its web site? yes, sales have been disappointing for the most part so far. it s been a web model only. so you have to go to the web to buy this phone. the consumers really want to go into the store and touch and feel a product before they buy it. they want to see how works and how it feels. so google is going to be stocking t mobile stores in the future with the nexus phone. do you think the lackluster sales from nexus one on google s web site is going to hurt its earnings? yes, i have a decrease my earnings estimate and sales estimates for google because of lackluster sales of the nexus one. it appears as though it is going to be a minor flop for google. other carriers such as verizon have gone with h t c incredible. and sprint/nextel has gone with the e v o 4g from h t c as well. the possibility of the nexus one being rolled out on other carriers is pretty slim. but google is seeing some pretty good success with its android operating system. it s actually gaining market share. what do you attribute that to and what does it have legs? right, those last two phones that i mentioned were also android operating phone systems. so there is legs there. there are a lot of great products that the android is attached to. the h t c incredible is one that sold out in its first week of being available. and its currently unavailable at verizon stores. it s two weeks off. there s a lot of room to grow for the android. and you have a $700 price target on google stock? how do you justify that? well, i take a look at the earnings for the stock going forward. and i believe that $28 and this year, 2010 is an achievable bottom line number for them. and i give it 25 multiples. ok, i m going to throw you a curve ball. either/or, does google trade below $300 a share? or does cleveland actually win a sports title? what comes first? cleveland will win a sports title. all right, brian bolan. a tech analyst with olympia capital markets group. thank you very much. the euro currency is in a downward spiral. could it turn into a full fledged currency crisis? head to our website to hear what our market pros think. plus, even with gold at record highs, one trader says it may not be worth hanging onto gold coins as an investment. find out why at first business news com. in the u-s se..te. yet another clean energy bill is on the table, just introduced in the u-s senate. craig sieben of sieben energy associates is here to talk about the details. welcome back read. and this new bill introduced by senators john kerry and joe lieberman is called the american power act. and does it actually still use the proposed cap and trade system that s been talked about to try and reduce carbon pollution? well, first is a significant improvement. they ve been working on this since june of 09 for developing a stronger legislation. and they ve made a number of modifications of around allowances, emission permanents, trading regimes. they ve separated out what they are going to do for electric utilities, from transportation. so they worked with that basic framework, but they ve made a lot of specific improvements. which improved significantly upon the previous waksman marketing legislation. which was the one introduced in the house and passed in the house? yes. let s go over the emissions targets now in this new bill. it calls for reducing carbon pollution by 17% in 2020 and by 80% by 2050. and now basically how would this work? companies would be getting pollution permits from the government, is that right? yes, and this was the same. the objective of the legislation was to put a price on carbon. it was to establish a mechanism to reduce co2 emissions. nothing has changed about that from the legislation put forward in the house. so, they have proposed to do that through allowances, through emission allowances when it comes to electric utilities. basically allowing permission to pollute, if you will and establishing allowances that companies will have for electric utilities. when you move to transportation, they re putting, in fact kind of a constant set of allowances so that you will have a constant price. so that the transportation sector will not have to play the market on a regular basis. it is much easier to manage it from the market standpoint, on the emissions from the electric utility sector and all other manufacturers. it is 7000 manufacturers that will be affected by this. this legislation pushes back the timing from 2012 for electric utilities to 2013. and goes to 2016 for all the other 7000 manufacturers in the economy. so price is going to be really de minimus from most manufacturers in the u.s. economy. really de minimus over the next five to 10 years. and these pollution permits, they will be traded on an exchange? yes. and, what is the risk and what our legislators trying to do as far as minimizing the risk of manipulation? well, looking at quite a bit of market structures that will seek to mitigate that risk significantly. ok, well what about the penalty for exceeding carbon caps. now, there is no hard numbers in this bill. i would think that there would be. there will need to be in the future. one of the real drivers is that the epa is currently scheduled to start regulating co2 emissions. so, one of the interesting political games here is if they don t do it through market mechanisms, we re going to see epa regulating it through epa rulemaking. and many companies would prefer to see a market mechanism vs. an epa mechanisms. one interesting thing i want to get to really quick, offshore oil drilling is addressed in this bill. and basically states will be able to opt out of drilling within 75 mi. of their shorelines. so this is probably obviously an effort to get a lot of lawmakers on board this, right? yes, to give them the political out so that they don t have to basically have offshore drilling. we don t know what this disaster in the gulf portends. they could go around for order and go up the coast of the united states. we just don t know at this point. well, there are lots of changes that is going to be made to this bill, since its just been introduced. thank you very much. we ll be following it with craig sieben of sieben energy associates. still to come, matt shapiro talks about the turn around for the s&p 500. we ll be right back. it was more surreal than anything. you re under fire. you re getting blown up. there s definitely adrenaline. there was the explosion, and i remember just opening my eyes, and it got both of my legs. i had surgery after surgery, you know, i was on a lot of pain medicine. what s going to happen next? and how long am i going to be here? the wounded warrior project dropped off a backpack for me. and it had everything in there that i could possibly have needed at that time. peer visitors, people who have been where i had been before, said, look, brother, everything s going to be okay. three months from now, or four months from now, a year from now, you ll be fine. that type of thing was an invaluable service. to be honest, i don t know if i would be as well adjusted as i am now if it wasn t for them. to learn more, call. or visit woundedwarriorproject.org. in our chart talk this morning, we re bringing in the president of mws capital. he s matt shapiro. and matt, i think you might want to bring in extra rolaides to the trading floor with you today after that wild ride yesterday. let s pull up a chart of the s&p 500. what a bounce back. well, thank god. i was looking for a bottom somewhere. and i think we got it at 11:15. we came back strong, the vix was as high as 35 yesterday. then came back down to 30. and i ll tell you a secret from the vix trading pit. the weigh the options are trading, the risk is really that the market s gonna rally. and the vix is gonna fall substantially over the next couple of days. so i think with the euro coming back yesterday. we have housing starting this morning and ppi. with a little bit of good news, i think we can get back to 1150 on the s&p 500. it is sounds like what you re telling me, in another translation would be that 1115 is some sort of bottom here for this correction. i really think so. i mean they were just throwing these stocks away. and that s almost near where we bottomed out at the panic. so, is sort of a classic second probe down. we came back and i think we could rally this morning. any idea what sectors to watch for in the return of the market? definitely financials had a heyday yesterday. yeah, definitely financials and also watch the technology. hewlett-packard has earnings. all right, very good. matt shapiro, president of m w s capital, have a great trading day. that t it for first business. thanks so much for watching. we ll see you tomorrow.