tv First Business KICU April 24, 2013 4:00am-4:30am PDT
frustration is in the air as sequester cuts take hold of the airline industry. in today's cover story, following the biotech boom - why the sector is gaining support from players on capitol hill. plus, the director of an acclaimed documentary joins us for an up-close look at the collapse of an american empire. and, apple finally plans to turn over a bundle of its cash to shareholders. first business starts now! you're watching first business: financial news, analysis, and today's investment ideas. good morning. it's wednesday, april 24th. i'm angela miles. in today's first look: apple's relief rally. shares of apple raced above $400 after the close. the tech company topped earnings and revenue numbers. its sales forecast was weak, but apple will return $100
billion to shareholders. it's said to be the largest dividend play in the world. federal investigators look into a hack attack of the associated press' twitter account. a fake tweet of an explosion at the white house that injured the president set off a mini flash- crash in the market. the dow dropped 145 points in a matter of seconds. the dow bounced back to rally 152 points on the all-clear. gold is down 7 dollars, oil up 18 cents. and an outtage on the charles schwab website had day traders and others complaining on twitter. the company immediately acknowleged the trouble. today could get a little crazy for traders out there. joining us now is larry shover of sfg alternatives. great to have you on the show today. i want to start by talking about that big market plunge yesterday, with the dow falling 154 points. is that completely over, or is the market still on edge? - i think we are always on
edge. that 3.5- to 5-minute time period really had everyone on edge, and traders were saying, "uh-oh, here we go again," pointing to the fact that electronic trading and social media aren't perfect. - on to apple's earnings after the close last night. this was a surprise. the numbers were solid larry. - yeah, they were solid, and it did catch a lot of people by surprise, and after the close yesterday, post-close, $18, $20 on the upside, very interesting, because that is really going to help give a shot in the arm to the market. let's keep in mind, people have been so subdued, have dialed down expectations for apple, and this is great what happened. - what about gold here? goldman sachs has been talking a lot about gold. they are talking about shorting gold, not shorting gold. what do you think is best at this point? - i think slow and steady wins the race, and part of your portfolio should include gold. the reason being is not because
of inflation - i don't think that might be a good hedge for inflation - i think it is really because we are in uncharted waters. we have the fed printing money, we have the rest of the world printing money, and now japan is in the act. so, we don't know how this is going to end up. i would buy gold, especially right here, as part of your portfolio, and perhaps hope you're wrong, because if you're wrong, that would mean the rest of your portfolio is doing very, very well. - you like these levels. - i do like these levels, but, again, it is just a sliver of your portfolio. - good to have you on the show. thanks larry. - thank you. travel is already turning into a headache at some airports because of budget cuts, while on capitol hill blame is taking flight. the faa reports more than 1200 flights were delayed around the nation. sequestration requires the faa to cut $637 million from its budget. yesterday, hundreds of airport workers were forced to stay home because of the cuts. congressional republicans took to twitter to blame the president. house speaker john boehner tweeted under the hashtag obamaflightdelays. congressman eric cantor tweeted
"why is president obama unnecessarily delaying your flight?" white house spokesman jay carney told reporters "the faa has no choice under the automatic budget cuts brought about by the congressional republican budget priorities. the gop can eliminate sequestration by approving a debt reduction plan that includes taxes from the wealthy through the closing of loopholes." "these cutbacks, with all the harm that's being caused to the traveling public, there's just no reason that i can see that justifies what's being done here." flight delay information is available at faa.gov. a bill will be introduced in the senate today aimed at banks that are considered too-big-to- fail. the legislation is meant to reduce risk at banks carrying more than $500 billion in assets. under the bill, the nation's largest lenders would have to raise the amount of money on hand, known as capital standards. the bi- partisan legislation is backed by a senate democrat and republican. they say the intent is to guard against the need for a taxpayer bailout in a financial crisis. the ceo and board of directors
at citigroup will face key questions from an analyst at today's shareholder meeting. mike mayo, a respected analyst at clsa, is said to have purchased shares of citigroup so he could attend today's sharholder meeting and question the leadership, including potential break-up plans at the bank. marketwatch.com reports citi ceo mike corbat reached out to mayo for a pre-shareholder meeting, but mayo was unavailable. jon corzine, former ceo of mf global, is being sued by bankruptcy trustee louis freeh. in the suit, freeh, a former fbi director, alleges that corzine, along with two lieutenants, was "grossly negligent" and took mf global on a risky course that ultimately caused its bankruptcy. a corzine spokesperson maintains the suit is filled with seriously flawed allegations. biotech has a lot of friends right now: investors, increasingly the fda, and, as our cover story shows you, the governor of texas, rick perry, who made a trip to chicago to lure biotech to his state.
texas governor rick perry wants to lure biotech companies to relocate to texas with a personal pitch made at the bio international convention in chicago. "god bless you, and we'll see you in texas." "i would suggest that it's as competative as anywhere. these are companies that can move around. we have to show that our environment is conducive to business and that we have the obvious workforce." perry's appearance follows a week-long series of radio and print ads in chicago costing $80,000 and paid for by a texas marketing group promoting texas as a better place for business than illinois. "the private sector gets to keep more of its money, and that's what makes the quality of life a draw for biotech companies." perry is hardly the only suitor trying to catch biotech's eye. in fact, nearly every state and a lot of countries have set up booths at the convention. as an industry, biotech is bouncing back. twelve biotechs went public last year. the head of
one of them, san diego-based regulus therapeutics, predicts as many as 20 may go public this year on the calculated risk for a payoff with fda approval. "it is a very big reward if you bring your drug to market." more reason for investors to take a look at bio-tech: many analysts report a shift that's happening at the fda toward fast-tracking some drug development. one of them announced this week by another recent biotech ipo, kalo-bios, for treatment of hospital- acquired infections. "the fda is trying to stimulate investment in antibiotic and anti-infectious space." another reason for investors to take a look at biotech: there's a lot of work being done on the treatment of alzheimer's, a disease affecting more than five million americans. the first alzheimer's prevention trial is underway. it's the
first to evaluate an alzheimer's treatment before the disease ravages patients' brains. huge profits expected from ford motors: the car-maker is poised to post its highest north american first quarter profit ever. analysts estimate that ford earned $2.7 billion in the first three months this year. it's largely due to sales of the ford fusion. ford earnings are due today. hearings continue today regarding boeing's dreamliner mishap. national transportation safety board members will question officials about the aircraft's lithium ion batteries that erupted in fire just months ago. "we are looking for lessons learned: not just for design and certification of the failed battery, but for knowledge that can be applied to emerging technologies going forward. "
that was deborah hersman of the ntsb. hersman also said "it is imperative to undersand how to best oversee the batteries' development and certification." officials from boeing, the faa and the 787's battery manufacturers are all being called to testify. mcdonald's is being punished by a consumer agency in brazil. according to reuters, the burger chain must pay a $1.6- million fine because it targeted children with its happy meal advertising and toys. a spokesperson for mcdonald's declined to comment on the fine. in the latest round of earnings, coach and dupont emerged as winners. luxury buyers gave coach stock a bounce. the company posted better-than- expected sales. shares traded 10% higher on the news. meanwhile, last summer's drought helped to double profits for crop chemical-maker dupont. airline stocks for delta and u.s. airways both popped. the airlines reported higher first quarter profits. however, delta says it's already anticipating lower profits due to sequester cuts. defense company lockheed martin also reported strong earnings but warned of lower profits in the future as a result of
sequestration. no more guessing when a fedex package will arrive. for $10, fedex customers can schedule a 2-hour delivery window. for $5 they can reschedule a delivery day or change a location. fedex is making the move because of the boom in online shopping. a price break is starring at the box office. the average ticket is now $7.94, down from more than 8 dollars. prices can rise or fall depending on the range of movies available. with the packed summer movie season just ahead, prices will likely tick up again. ben affleck is the latest high- profile person to pledge to live on $1.50 a day. the oscar- winning actor is joining hugh jackman and others in the effort to raise awareness of the 'live below the line' poverty awareness campaign. by taking the pledge, he promises to spend no more than $1.50 per day for food and drink for five days. his challenge begins next week. still to come, a follow-up to a
just released, somewhat troubling data about the new and aggressive ways that the bad guys are breaking into our electronic records and stealing our personal data. bryan sartin is the director of verizon's risk team. they are the ones who conducted this study. they looked at 47,000 different incidents. bryan, tell us what we need to know. what were the main findings? - the main findings are, if you have a connection to the outside world, if you have an ip address, you might be a victim. but the big story this year is cyber-espionage. more than 20% of the cases that were tracked involved state- affiliated cyber-espionage campaigns. - so, is this coming from out of the country, do we know, or typically domestic? - it comes from a variety of places, but clearly one theme is common across all the contributors to this year's study: the very, very vast majority of cyber attacks we're
tracking are coming from china. - and what are they typically going for? - generally speaking, they are going for company intellectual property, information that gives them a competitive edge, information of intelligence value or other economic interest. - and the kinds of protective steps that companies and individuals can take, what are the recommendations? - well, for companies, i would tell you there is no one-size- fits-all approach. it doesn't work that way anymore. you have to understand what types of threats uniquely face your organization, and understand what it takes to mitigate those risks. and then for consumers, there is a different set of steps, and those revolve around security basics. - and what i also found a little troubling is that about 2/3 of the breaches went unnoticed for what - two, three, or more months? - that is absolutely true. the very, very vast majority of these, they don't play out in minutes or seconds as much as they do months, weeks, or years. and still today, after all this time tracking this facet, the very vast majority of victims, they don't find out on
their own, via their own devices and technologies, they find out from someone else. a lot of improvement is needed in incident detection. - it seems like the faster we put up the protections, the more creative the bad guys get in getting around those protections. - there is some truth to that, there is no question. we still see a lot of the same financially motivated criminals and the attack types. hactivism is of course a new theme this year. but cyber-espionage, as i mentioned, has really taken off, and right now you see more variability in the types of attacks. different attackers, different criminal motivations behind them, and each one of those has different types of techniques and different methods to defend against them. - all right. bryan sartin from verizon's risk team. thanks so much. - thank you. still ahead, the rise and fall of queen of versailles. angie talks with one of the principals behind the documentary, coming up.
an epic real estate adventure will soon air on tv. the documentary "queen of versailles" details the outrageous fortune spent on re- creating the palace of versailles in france - in a town in florida. the mansion boasts 90,000 square feet, a roller rink and least 20 bathrooms. filmmaker laruen greenfield joins us now via skype. good morning to you, and congratulations on your documentary. - thank you. - what inspired you, and what did you learn by making this film? - it was an amazing journey. i am a photographer, and i had been working on a project about
wealth for a number of years, and i met jackie when i was photographing donatella versace, and she told me about them building the biggest house in america. it begins with this couple, jackie and david siegel, building a 90,000-square-foot palace inspired by the palace of versailles in orlando, florida. and david is also building the tallest timeshare ever built. he is the king of timeshare, owns the largest privately-owned timeshare company in the world, and builds a building that is over $600 million, the most expensive timeshare ever built. this building, after the financial crisis, turns out to be the overreach that threatens their whole empire, and his whole personal fortune, and when he goes into default on both his dream home of versailles and the vegas building, and faces the prospect of foreclosure, their story turns into an allegory about the overreaching of america. - did you find it odd though with these people claiming to be billionaires, that when the recession hit, they went down with it as well? because a lot of billionaires were barely touched by the recession. - no. the interesting thing with david, and what he told me when he put his house on the market, his dream home on the market in may 2010, he said, "i made two mistakes: i never took anything off the table, and i personally signed for everything." he believed so much
in his business and its ability to expand that he mortgaged his homes and put everything he had into the business, and that is why when the business got over- leveraged and the lenders refused to continue to lend to him, he was in trouble. he was in a very interesting position, because he was both banker and lender in his business, and that's why it turned out to be an incredible symbol for the housing crisis. - everyone i have spoken to so far is absolutely riveted by your documentary. why do you think that is? - i think it spoke to the american dream and how we were getting bigger and bigger, and how everybody had taken advantage of cheap money and used their homes as piggybanks and borrowed too much on their credit cards. so, in some ways, david and jackie siegel's story is a kind of morality tale that speaks to the mistakes we all made that led to the crisis. - you were actually sued by the siegels. where does that stand? are you on better terms with them today? - jackie siegel has supported the film throughout, from the opening at sundance, we have traveled around the world together, to yesterday she was with me promoting the film for bravo. david siegel sued because he didn't like the
ending, and a judge in federal court in florida threw out the case a few months ago. - good to have you here, and congratulations again. it will air on bravo tv on the 29th. thank you. - thank you. coming up, investors were lining up to buy a slice of apple after the close last night. will it continue? what the options market is predicting next in chart talk.
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initially investors were buying shares of apple on the earnings news. joining us now is apple trader andrew keene, president of keeneonthemarket.com. what else could be lurking in those numbers, andrew, that could cause that stock to stumble today? - it kind of got mixed reviews last night. we saw an initial spike up to $428. if you look at it, the top and bottom line were pretty much in line. the guidance was really, really soft, so we thought maybe it was going to sell off on, it got halted. but then they came out with the stock buyback: $100 billion to 2015. think about it, this company generates around $60 to $75 billion cash per year, so they are not going to be spending any of their money that they have, that they
are hoarding, they are going to be spending the money that they are generating right now. so it's not really that great of a stock buyback. the stock got up to $428. i wanted to actually get short it last night. it didn't get to my level. i wanted to get short it at $440, so it didn't spike enough. then it sold off. $419 is a nice little pivot here. this was recent lows, we're at triple bottom, and then it broke to the downside, so we have the recent low of $385, and then we have $419, nice pivot. i can play to the short side under $419, i can play it to the long side above $419. major, major resistance at $440, though. - what is the options market predicting about apple this week? - it is interesting, a lot of times when i go through my trading plan, i look at the at- the-money straddle: at-the-money calls, at-the-money puts, i add those together, and i add it to the strike price. i get a measure-move target to the upside and then to the downside. so it was a $30 straddle in apple. the stock was trading $405. they were implying the stock would move to $375 or $435. it doesn't look like apple is going to make that move, so the straddle sellers or
the premium sellers will make money on that; the people that were long the straddle will lose money. so they were expecting a $30 move in apple. sometimes when we see netflix moving $45, google moving exactly the straddle price, the price gets a little bit high. also, apple sold off $57 on earnings last time, so this was a good opportunity for premium sellers. - thank you andrew. do think it will sell off today a bit? - should be interesting. $419 is a nice little pivot here. $428 was the highest from yesterday. i think that a lot of profit-taking, 2/3 of the time apple closes lower from where it opened the day after earnings. - thanks a lot. - thank you. that wraps it up for today. coming up tomorrow in movies and money, a preview of potential blockbuster hits and the film studio stocks that could sizzle this summer. from all of us at first business, thank you for watching, and have a good day!