tv Nightly Business Report PBS July 24, 2013 4:30pm-5:01pm PDT
this is "nightly business report" with tyler mathisen and susie gharib brought to you by. >> sailing through the heart of historic cities and landscapes on a river, you get close to iconic landmarks, to local life, to cultural treasures. viking river cruises, exploring the world in comfort. >> facebook surprises wall street with a strong quarter and investors are hitting the like button. but with the stocks still well below the ipo price, is there any reason to buy? >> tour, aka fabulous fab takes the stand, the former goldman sachs trader who has become the
symbol during the financial crisis breaks his silence in court. and a new retirement playbook. with interest rates near historic lows, safe investments are delivering lousy returns. tonight, find out if alternative strategies are right for you as we continue our series how to not out live your money. we have that and more on "nightly business report" for wednesday, july 24th. good evening everyone. welcome. earnings jumped, revenues spike and facebook investors are friending the stock late in the day sending it up almost 20%. the social networking company report add profit of 19 cents a share, excludeing accounting charges. that easily beat expectations of 14 cents. revenues up 53% over last year and the closely watched mobile slice of it's business boomed. kayla with a bigger look. >> tyler, what is driving
facebook's popularity this quarter is once the biggest worry. a year ago when facebook went public it warned it didn't know how much money it could make in advertising. this quarter is affirmation whatever they are doing is working w. revenue of 0 this time last year now it's 41% of the $8.1 million in revenue. for and mo more and more people are using phones to facebook and 119 million people were on the site. zuckerberg said soon we'll have more revenues on mobile than desktop. whatever the platform, advertisers like it and more than one 1 million companies have advertisements. >> 1 million companiecompanies? >> 1 million companies are advertising on the network. you would never think. >> stunning.
our next guest says this is a break out quarter for facebook so david, how do you feel about facebook tonight? is this a stock you would buy, sell, or hold? >> if the stock says up 20% as it is as we go into mart ket tomorrow, target price at 12 months is about 35 dlarpz$35 d$. certainly continue to be attractive but there are other names that might be more so. >> how surprised were you, david, at the numbers today? >> very surprised. biggest surprise the revenue coming from mobile. expectations it would be 33% and to have it come in at 41% shows a significant adoption. of usually, we have to be concerned what extent we see the number moving higher than 50% and what does that mean less per add than off the desktop product. >> looks like things were working in this quarter.
what does mark zuckerberg and the company have to do now? >> they spent a lot of money in terms of buying instagram, they paid a billion dollars for and didn't have revenue. clearly, they have to show shareholders they can monotize this billion-dollar investment. how they plan to do that is an open question and something investors will want to hear more about from management just not in terms of today's conference kale b call but going forward. >> if i were to surmise what you said, you like facebook, you don't love it. there are other companies you like more, maybe love. why is that? what is holding you back on facebook, and what makes you like some others more? >> first and foremost looking at the evaluation. we had a nice success in terms of heavy knew and seeing that pass through. aps isn't growing the same.
the evaluation on the stock is still fairly stretched. if we look at other large technology oriented names, whether in apple or google, growth rates aren't too much less than they are facebook but the multiples are much less demanding. >> david, i know you're bullish on apple, if you had to chose apple or facebook, which would it be? >> i would take apple over the next six months. >> but apple's profits were down year over year. >> the second half of the year, going into a period of time apple introducing new products and margins expand and margins will be easier so return in terms of profit growth and the other advantage is a much less demanding evaluation. you're also getting not insignificant dividend where you don't get with facebook. >> thank you so much. on wall street today the dow and s&p pulling back from record highs dragged down by weak
earnings results from caterpillar and at&t after the bill yesterday. but a strong performance from apple as they exceeded expectations. the black just barely. the dow is shedding 25.5 to close at 15,542, the nasdaq added a fraction of a point 3,579 and the s&p fell. speaking in gamesville, illinois he defended his administration's policies, criticized wall street's irresponsibility, washington policies and emphasized the need to grow the middle class. >> this growing inequality, not just a result, inequality of opportunity. this growing inequality, not just morally wrong but bad economics because when middle class families have less to spend, guess what? businesses have fewer consumers.
when wealth concentrates at the very top it can inflate stable bubbles that threaten the economy. >> this is a first in speeches the president will be making about his vision for the economy, and leading up to what some expect will be a major political showdown over the debt ceiling debate this fall. republican ps as are paying attention. >> americans aren't asking where are the speeches, they are asking where are the jobs. a new report suggestions the pace of the housing market is strong. it rose 8.3%, the fastest rate in five years and for the first time in two and a half months, the rate of a 30 year fixed rate mortgage fell averaging 4.58% according to the mortgage bankers association. but last week's rate decline however modest did not boost
demand for mortgages as applications fell. >> for all those troubled homeowners that received help through the government's foreclosure prevention program, many are defaulting again a. report from the watchdog says 46% of homeowners who received loan modifications are unable to make the current payment. the program was launched in 2009 in response to the housing crisis. a mortgage investment at the center of a closely watched fraud trial of a goldman sachs trader. you may not know the name but to many fabris tour is accused of misleading investors and secretly helping hedge fund manageer john paulson construct the mortgage sec coursety he could then bet against. it's the highest profile trial to come out of the financial crisis. investigations by the civil commission. the civil case is getting a lot of attention because the government is basing the case on
many e-mails sent by tourr. in 2007 he referred to the financial markets as the whole building is about to collapse any time now. today in a manhattan courthouse he took the stand to testify in trial. marry joins us now. mary, what stood out, what did tu tuorr say? >> reporter: he was energetic and he was so full of energy, he knocked off water off the table. paulson's hedge fund actually had a large position in the security in question, the cdo called abikis. tourr said i wasn't trying to
confuse anyone but again the fcc counts because as you suggested, the fcc is trying to convince that tourr dell remembmiss led n purpose post and allowed him to profit considerably basically to the tune of a billion dollars. >> mary, let's fast forward a bit. what is at stake for him if he loses this case? >> again, this is a civil trial, so he won't be going to jail but likely face fines and penalties if found guilty. he could face possible bans for the securities industry. mr. tourr left goldman sachs and is in a phd program at the university of chicago. >> mary thompson, thank you very much. a judge cleared the way for the bankruptcy case to go forward without legal challenges
in other courts. this was the first hearing related to the city's bankruptcy and scott cohn was there. >> reporter: suzy, the city of detroit was founded 312 years ago today and for those who believe that what this city needs is a quick and thorough restructuring, this may have been quite a birthday present. at least, that's what u.s. bankruptcy judge steven rods said. he believed that clearing the way for a court case in his court, doing away with other challenges in state court is in the public interest. a spokesperson for the state, the bankruptcy expert to oversee this restructuring says the ruling by the judge is an important first step. >> this allows us to move forward. what we really can't have are weeks and weeks and weeks of delays because it runs up the cost. everyone in that room is being paid. it runs up the lost the longer we're in court and this sun resolved. >> but the unions who have been
pressing those challenges in the state court say their fight will go on, even if it is in federal court. they say the bankruptcy filing is an attempt by republican governor rick scott to do a runaround the citizens of detroit and a provision in the state constitution that protects employee pensions. >> we got a governor, we got a lieutenant governor, and we've got a party that just says we don't care about folks. we care about our own agenda, agendas is in the hospital whno. we're about people's rights. that's what we're fighting for. >> reporter: that fight will be squarely here in federal court. another hearing in the case is sth scheduled for next week. tyler? >> scott cohn, thank you very much. criminal charges against sac capital run by steven cohen.
charges against him. according to the wall street journal no major financial firm survived an indictment. cohen is accused of failing to supervise his firm properly. they are a target of a multi-year insider trading investigation. ahead, with interest rates near historic lows, many safe retirement strategies aren't delivering. should you look at unconventional ways to protect your retirement? our series on how to the not out live your money continues. first, how the international market faired today.
another twist in the dell saga. founder michael dell increased his buyout butt for tout by 10 share. they call it the final and best proposal. it comes as dell's bored pushed back the shareholder vote for august 2nd. it was scheduled for tonight. defense stocks in market focus tonight. despite the sequester and military wind down in afghanistan, defense firms are setting new highs. estimates thanks to better margins the and company raced the four-year forecast. shares touched a new all-time high before closing at 90.30, up 2%. boeing also hit a new high as the commercial plane revenue jumped 15%. profits up 15%, more than the expected and boeing raised it full year guidance. shares dropped after that high,
down less than 1% to $106.95. another new high more than two years for ford motor reporting a 15% jump on revenues on ford f-150 pickups. ford put polish on the full year outlook, as well. investors bought the news on volume as ford gained 2.5%. it closed at $17.37. ford, by the way, up more than 90% in a year. the other way, caterpillar dragged down the dow as profits dropped 43%. jim chanos the noted short seller told a conference last week this cat may not have nine lives. >> we are short caterpillar ink. iconic american company, leader in the class but tied to the wrong products at the wrong time in the cycle. >> cat ceo douglas acknowledged the head winds as investors
dropped the stock 2.5%. cat closed at $83.44. payments and card transactions increase and the bored green lighted a 1.5 billion-dollar share buy back and the guidance for the rest of the year and 2014 shares of visa had been down during the reason session but they popped on the profit news after the bell. baby boomers and retirees are laser focused on their investments these days. one big worry, they will out live their savings. with interest rates at historic lows, so-called safe investments had dismal returns. how to not out live your money, some investors are considering less conventional retirement strategies. >> many of my patients have been with me from the beginning. >> reporter: he built a successful dental practice. >> the beginning of the scar
rear was trying to get the practice going and truthfully, feed money into the practice at the beginning. at that point my wife and i had some roth iras and different iras and most of them were cashed in early on to pay the bills. >> reporter: now he has a 401 k plan for his self-and staff but worried hey has isn't saved enough. >> at my age, my understanding traditionally is people would be a little more conservative. but i feel it's necessary to be somewhat aggressive to be able to accumulate a significant amount of money with the next 10 or 15 years. >> reporter: the old way loading up on fixed income, bonds, money market funds, cds isn't as effective. with interest rates at historic lows and people living longer, the money may not last as long as you need. >> you look at equity markets where potentially you have much
higher returns over the long term, but with i cequities you e more risk. >> reporter: berry gill man says longevity insurance is one way to reduce the risk. it acts like an annuity that pays out a guaranteed income but not until you reach 80 or 85. >> if you put money up at the time you retire at 5 5, 60, 65 and you don't take the income out until you're older, 80 or 85 you get a much higher annuity or pension doing it that way than if you bought an annuity at the time you retired. >> reporter: if the stocks in your portfolio sink, this will help. if you don't reach age 80 or 85 you won't get the money. that's another risk. but dr. singer believes this strategy may be worth a shot. just to make sure he doesn't out live his savings.
for "nightly business report," i'm sharon epperson. let's turn to a financi fin strategist. what do you think about the insurance, good idea or bad idea? >> it depends. >> i was afraid you would say that. >> that's the answer. there are risks to it. you're betting -- you're putting down a big lump sum of money -- >> would you tell your mother to do it? >> no, i probably wouldn't. i probably advice a more diversified strategy and not take the risk of, you know, what if something happens? >> what if you don't reach that 80 or 85 you collect nothing for the money you put in. >> that's right. >> that's the risk. >> that's the risk. >> so what would you tell your mother to do? what are alternatives to sleep at night and last through retirement? >> that's first. we have to make sure my mother has peace of mind.
we would diversify across many asset classes. so stocks are risky. bonds are not paying a great return right now. how do you balance that to get a better return? there are alternative investments and two we like a lot are real estate, which are real estate investment trusts through a mutual fund and another is natural resources, which are commodities like oil and gas and timber. what they do is they don't act the way the market does. so let's say the market is on a tear, these might not be but if the market correct -- >> it seems like volatile investments. they are not sleep well at night alternatives, right? >> you're correct about that. keep them with bonds and stocks, never on their own. at our firm maybe 25% of client's money is in alternatives, but they do work. >> so if i'm let's say in my mid
60s or older than that and we want balance, here we go, a sample portfolio, 25% in alternative investments, 25% in bonds, 25% in stocks, 25% in international stocks and bonds. you would argue that's a good benchmark? >> that's a good mix for a client. >> when you say timber, timber, you're not telling me to go out a buy a forest, are you? >> no, a small sliver of your portfolio would be in timber. >> how do i buy it? i don't go through a timber yard? >> no, they are a pool of different commodities. they are very volatile. >> and real else state, too, the same thing? >> not direct but mutual funds, exactly this is geographically diversified and not single family homes where you think of real estate. these are storage facilities and assisted living and not just
concentrated on one part of the country but across the country. we put 5% of our clients in real estate and over the last three years it's the best performing asset class. >> when you say enter dmaadditi stocks and bonds i assume you're thinking of mutual funds or etfs that do this? a broad fund, index fund or one that concentrates in a particular region? >> a combination. we like index and actively managed. but for international we're concerned about exchange rate risk. so mutual funds are the perfect vehicle for those. very diversified, low cost and exchange treated funds, using more of those. it's been working and helping portfolios grow, which is the goal. >> yeah. >> just like the client there, protect their money and have it grow and make sure it's there for life. >> james, i like how you looked at the camera when you said my mother's peace of mind is
critical. you were talking right to her. >> all right. well for more on the story you can log on to our website nbr.com and tomorrow, we'll continue the special series on how to not out live your money. the look will be on the benefit of downsizing as a way to stretch your retirement budget. still ahead, team starbucks or team duncan. americans are loyal to their coffee but which is winning customers over. but first how treasuries, commodities and currencies did today. a natural gas rig continues to burn in the gulf of mexico. a blowout occurred last night, all 44 workers were evacuated
before the fire started. the owner of the well, hurk lease said they may have to grill a relief well. the blowout is not expected to be as bad as the b.p. oil spill. from one commodity to another, this one, coffee, starbucks and dunkin donuts report earnings tomorrow. the competition is fierce and it comes when it's a wash. jane wells goes inside the java warps. >> reporter: americans take their cup of joe seriously. >> i prefer dunkin donuts because the price is reasonable and the taste is great. >> i don't like dunkin donuts at all, i like starbucks. >> reporter: when it comes to coffee, there is no middle ground. >> star bucks taste better. >> starbucks is too expensive and i can't pronounce anything on the menu. >> reporter: big picture, the
world is swimming in java when you get to the picture it's not a big deal in a small state. in hawaii there is a pest called the coffee berry bore that is costing farms. so the usda is spending a million dollars to try to fight the pest. still, consumers should not see much impact in pricing and a lot of attention paid to what is happening with coffee in the grocery store. k-cup sales are up 20% from a yore ago as prices fall and bagged coffee sales are seeing lower priced competition. >> a rich, never bitter taste cup after cup. >> reporter: givola seen sales more than double, perhaps helped by a sexy new ad campaign but as major retailers support earnings this week, analysts say all will show double digit growth. maybe when it comes to coffee
wars, everybody wins. >> all coffee is good coffee. >> reporter: for "nightly business report," i'm jane wells. >> all good coffee. good coffee. do you have a preference? >> i like the gavalla guy. >> i'm susie gharib thanks for joining us. >> i'm tyler mathisen, have a good evening everybody. we'll see you back here tomorrow night. "nightly business report" has been brought to you by. >> sailing through the heart of historic cities and landscapes on a river, you get close to iconic landmarks, to local life, to cultural treasures. viking river cruises, exploring the world in comfort.