tv First Business FOX May 21, 2010 4:30am-5:00am EDT
in the gulf of mexico. plus, netflix draws rave reviews for it's stock performance. can it keep up the momentum as technology continues to change the entertainment industry? one money manager says this is a long term buying opportunity in stocks. all that, plus viewer mail coming up on today's first business. you're watching first business. financial news, analysis and today's investment ideas. good morning everyone, thanks for joining us. it's friday, may 21st, 2010. and it looks like the bottom really has fallen out of the stock market. after almost a 400 point loss in the dow yesterday. bringing down stocks 10% from april highs. and it seems like the euro zone debt problems really are just continuing to shake investor confidence. a lot of fears across the board out there, beejal. meantime, president obama prodding senate along hoping to get a final vote on the financial reform bill. he
says he wants to protect consumers and hold on wall street accountable. in the meantime, investors in those banking stocks are on edge. as we all try to figure out what exactly is in that bill. and let's get right to the trading floor with brian tehaco of tnt group. he's there over at the c m e group. and brian, the index is now below the may 7th lows. we're talking about the s&p 500 and the dow and the nasdaq. what does that mean, and could it cause further selling pressure? well, and we were calling a correction of 10% for a long time now. we finally got it yesterday. the market is very scared of everything that's going on right now across the whole world. today, we would like to see the s&p's hold above the 1150 area, would be our smallest support. but, have to hold 1136 in the quarter. if we don't hold 1136 in the quarter, tnt group thinks it's very, very bad. and we do not want to stand in the way of the longs. and we would actually like to get short, underneath
that area. and in the long term, we could look for another 10 percent correction down. really? so, you were expecting already a 10 percent correction? we've already seen it from april's highs. and there is a chance though, that we could see further downside pressure, right? right. i mean if you really look across the board, we trade macro. we really look at currencies. we look at risk currencies, we look at the dollar. everything's pointing for a bigger, bigger correction and this. so, if those things are correct, and people are that scared, we could see another 10% from here. and possibly we're looking at below 8000 in the dow. below 800 in the s&p's. boy, that's really extreme though. i mean, what could possibly cause a further 10% correction? i just think the market. in general. we've seen such a huge correction to the upside. that regulatory systems that they're putting in place right now, if we can't back it up with more money. we're not seeing it right now in
the economy. it's all kind of fake, it's a bubble. and the correction is gonna get really, really ugly here if we don't find some kind of way to support it. ok, investors are fleeing stocks and even gold to some extent in recent days. where else are they going to? well that's the question. everybody right now is short the euro and they are long the gold. and yesterday you saw the s&p and the stock market go down. you saw gold go down, and you saw the euro go up. so, right now we have a feeling that everybody is just positioned completely wrong in this market. and we're not sure where they're going. i think everybody is just fleeing into cash. ok, thank you very much. brian tehaco of tnt group. bp says it's now collecting 5,000 barrels of oil a day from the broken well in the gulf of mexico. that oil is being diverted through a tube from the well... onto a ship. but, much of the oil leak is still flowing into the ocean. this video is from an underwater camera. the footage was taped yesterday. bp says it has no idea how much of the oil is still leaking. this new information provides more proof that government
estimates were way off base. those estimates pointed to a leak of 5,000 barrels of oil a day. which is exactly what bp says it is now diverting from the broken well. some scientists say the leak could actually range between 25,000 and 100,000 barrels a day. by early next week, bp says it hopes to plug the well and stop the leak, by injecting a mud and cement mix. the coast guard says damage to wildlife is still limited. 30 birds have died. 13 birds were cleaned and 4 were released. meanwhile, shares of bp continue falling. they're down 25% since the rented drilling rig exploded on april 20th. yesterday's market nose dive. investors gravitated toward selling stocks that have made major gains. netflix is one of those star stocks. shares have shot up from $37 to $119 over the past 52 weeks. mostly because the company has proven to be highly successful in the movie rental business. but whether netflix can hang on
to film fans is far from a foregone conclusion. tvs, the internet, x-box, wii, and ipad are some of the many ways people are watching films and tv shows delivered by netflix. a business that started in 1997. "netflix changed the way americans watch movies" steve swasey vp of communications at netflix says the company with its 5 billion market cap intends to stay on top by downloading films to more devices and outlets. it's lastest coup-- google tv the companys biggest competition might surprise you. "competition for netflix really is people's time." thus the importance of getting onto mobile devices such as the i phone, which is expected to happen soon. earlier this year. industry watchers became concerned when netflix signed deals with major movie studios including warner brothers that it would wait 28 days before sending new releases to its customer. turns out, even that has not
slowed the roll of netflix the company contends the numbers have not slipped from its 14 million subscriber base. "most of what netflix members watch tends not to be new releases." "less than 30% of what people watch netflix for is new releases. we have a big breadth of catalog we have these movies and personaliztion. netflix recommends movies based on your taste and rental history." facets multi media in chicago has found success with the its niche business of new releases to hard to find foreign films. the company has been mailing out flicks to customers since the mid 80's. but the direcor of facets fears the curtain may be closing on the dvd industry... with downloading and streaming taking center stage. "the dvd industry is in a premature meltdown. already its in a meltdown because all the independent stores were basically wiped out by the larger stores and the chains
netflix was obviously a very big influence taking a big share of the market." "nobody likes to see anyone get hurt, movie gallery and hollywood video announced closing, that's very sad when people lose their jobs but the consumers are the ones that have spoken." blockbuster plans to close up to 960 store this year. but taking a cue from redbox will put up 7,000 new kiosks by the end of this.yet another sign of fierce competition in the film industry. 12 years ago the video stores were the only thing and net flix was out there and nobody was really paying attention. we are pretty vigilant at netflix who is cooming after us. there is going to be somebody at some point that's got a better mouse trap that's just capitalism at it's finest." best buy is the latest company to get into the film fray with its just announced cinema now video rental service. but the biggest obstacle netflix may face comes from the u.s. postal service. the company is projected to spen600 million this year mailing out dvd's.
a postage increase or the elimination of saturday deliveries could change the picture for netflix. thanks angie.fast paced computerized trading made the flash crash on may 6th even worse. according to testimony from federal regulators yesterday. sec chairman mary schapiro said there was a severe mis-match in liquidity, which was made worse by different trading rules among exchanges. "...possibly exacerbated by the withdrawal of liquidity by electronic market makers and the use of market orders, including automated stop loss market orders..." she said the situation was possibly exacerbated by the withdrawl of liquidity by electronic market makers and the use of market orders, including automated stop loss market orders. at the end of this month, the sec is expected yo approve a new circuit breaker for single stocks. under the new rule, if a single stock in the s&p 500 index drops 10% or more within 5 minutes - trading will be halted for 5 minutes.
that's across all exchanges. after a trial period, the s-e-c may decide to expand that rule to all market indexes. from the drop in the euro to banks' toxic assets. we're answering viewer's questions in today's viewer mail segment. but first, one money manager tells where he's finding opportunity in today's market. that's coming up next.
[radio transmissions] woman on p.a.: stephanie mccapra... man: excuse me. have a seat. have a seat. i'm fine. woman: take off your jacket, all right? sir! sir, relax. breathe easy. man: stay down. everybody, stand clear. ma'am, i need you to back up, ok? thank you. announcer: two out of three people with diabetes die of heart attack or stroke. we're gonna have to shock him. everybody stand clear. [music plays on soundtrack] [silence] [music plays on soundtrack] announcer: that was his wake up call. this is yours. the good news is you can lower the risk of heart attack or stroke. ask your healthcare provider how. to learn more, go to diabetesactnow.org.
for long term investors this nearly 10% sell off in the stock market could be a good time to buy stocks on your watchlist. and it's time to get some new ideas from our stock picker. michael morcos of old second national bank. welcome back michael. good to see you. let's go through your previous picks here. since january 14th, google, j.p. morgan, verizon all down between 10 and 19%. but you still like all those names? i like every name. yes, so far not so good, right? but i think google, certainly peoples concerned about the china situation has impacted the stock, but i think it's a great opportunity. google's trading at 16 times, 17 times earnings. and the business is really executing well. every name. i actually added to j.p. morgan some more stock today. i like all the names. ok, and let's go over the new picks now. qualcomm is the first one up here. it makes technology for wireless networks. and the stock is at one year lows, why do you like
it? well, i think it's been sold improperly or incorrectly. and we really like it. it's cheap. if you take the cash out of the balance sheet, is trading at around 15 times earnings. and with the growth rate of about 25. so, great management, really 3 g or 4 g continuing to grow. and i think it's a great opportunity to buy qualcomm. and you currently own it? we do. we just recently bought it. and hartford financial-services is up next. they just repaid $3 million in tarp money on march 31st. but its way off the 2008 levels. this is really not recovered nearly as much as other banking stocks. no. it's a lot of the financials. certainly hartford being one of them, had some balance sheet problems. but we see growth on their property and casualty
business. growth in their wealth management business, which is a nice fee based business. and we think again, it's a very cheap trade in to 8 times earnings with smart management. now is a good time to buy the stock. so you think that most investors out there are undervaluing this, considering it has not rebounded as much as others? for sure, every name i mentioned. i hartford's definitely a riskier asset, to me. more risk reward than qualcomm. qualcomm is a low risk entry point to me. johnson and johnson at six month lows. obviously it's a defensive stock. but it's definitely been in the headlines with negative news. it had to recall 43 over-the-counter medicines. do you think it's
going to impact earnings? i don't think in any significant way that the recall will be a big impact. no, and the stock hasn't reflected it. it's held up very well in this downturn, as you've seen. and when did you buy this? we've been buying and all along, all year. so we've been adding to the stock all year. you will consider buying more, even? for sure. let's turn to the overall picture here. we've had a nearly 10% sell-off in the stock market since april. how are you approaching it? is it a good time for long-term investors to buy? or do you hold off, perhaps we might see a 15%, maybe dare i say 20 percent correction since the april highs? well definitely for long- term investors, this is a great opportunity. in the very near term, europe is really affecting the market. the market, all technical regions are very oversold. so even in the short term, it may be a great buying opportunity. well that's going to depend on whether europe comes in with a stimulus package, much like the u.s. in 2008. if they don't, yes, the market will continue to roll over. but for long-term investors, i think it's a great entry point. the big question is, how are these debt crisis in europe. greece, spain, portugal, italy, how are they going to affect u.s. companies? and to what extent our investors already pricing that word in today? well, they've definitely, they've been in the process of pricing it in in the
last month. it's a deflationary even. just like 2008 was with u.s. banks. so that really all can impact all assets, all risk assets very negatively. that's what's happening. i think, if europe doesn't provide a stimulus package, the in the prices are not reflecting having gone low enough. i think they will come in. politicians don't like to be voted out of office. they don't like people running around the streets. i think they will come out with a stimulus package. and if they do, you will see the market turnaround and rally very hard. very sharply. so on a scale of one to 10, just how bullish are you right now? what stocks are already seeing such a sell-off? i would say i am an 8. ok, michael morcos of old second national bank. thank you very much. and straight ahead on the show.... paul eggers and i tackle viewer mail. that's coming uthe break.
hi everybody, and welcome back. time now for our viewer mail segment. and paul eggers is back with us. let's get to our e-mail's now. the first one coming from billy bob in southwest florida. he's talking about a foreclosed home in his neighborhood. great question. certainly a great question. and the problem that he writes about is not one limited to south florida. certainly there are foreclosed homes across the country. and
that's happened a real impact on the real-estate market. i spoke with a real-estate broker right here in chicago who at the time of the clothes ending of the first-time home buyers tax credit, was saying. he was putting in bids in one these foreclosed properties. it would take six to nine months to hear anything back from the banks. whether that's because they don't wanna ride down the value of those homes. i mean, that's a good question to ask. that's probably a likely scenario. these banks are still very reluctant to not only write down the value of bad loans on their books. they still don't want to do loan modifications and do principal forgiveness for borrowers who needed. great question by billy bob. now, moving on to bill runners' e- mail.
taking a look at some of the rules that he's talking about. yeah, the securities and exchange commission in 2007 did revoke the rule. it kind of makes you wonder. that was right before the market tanked. dropping what, half of its value between 2007 and 2009. so, it kind of makes you wonder if that uptick rule was actually in place during that huge market fall. whether, perhaps some of it may have been cushioned, we will never know. let's go over some of the naked short-selling rules that he brought up here.
but that was lifted. yeah, banned recently in germany for some government debts, and things like that. so, those two issues that our viewer points out, very important as well. moving on to our final e-mail. this from keith. well i think there are real fears going on in this market. with regard to the euro debt crisis and how it's going to affect u.s. financial markets. and our economy. and even the federal reserve in its recent minutes said that it is in fact concern that the europe debt crisis will in fact affect both of our financial markets and actually slow down our economic recovery. yeah, keith sounds a little bullish. and we have spoken with plenty of bears on the show. well, you know what, michael morcos was just on the show here. he's actually bullish. he thinks that long
term, this is a great opportunity to buy stocks. although, he does admit that there is still a lot of fear from europe. so keep that in mind. thank you so much for sending us your e-mail's. keep them coming. and as always we want to hear from you, so you can call us as well (312) 660- 8397. or you can send your e- mail's to email@example.com. still to come, trader dan deming gives us a close up look of the s&p 500. we'll be right back.
in our chart talk this morning, trader dan deming of stutland equities joins us now to talk about the breakdown of the s&p 500 yesterday. where do you think we're going from here? well, it's certainly feels like momentum now has shifted to the downside. we saw a break below that 200 day moving average of 1102. closing on our lows. it certainly looks now that we're headed to probably that 1045- 1050 area. which we actually touch briefly a couple weeks ago. but that goes back to last february, actually is where we kind of set that level at 1050. and i have to ask you about that volatility index. the vix, well above 40. what is that telling investors? well, again we're kind of breaking down across the board. we're in uncharted territory to some degree, now that we've broke through 1100. and you're just seeing uncertainty across the board elevated as the market is searching for a bottom. there's so many news items out there that are causing this uncertainty. thank you very much, dan deming, stutland