Also in this playlist...
This transcript is automatically generated
-- -- -- you have what it was worse it was where I'm actually but we have to jump right to Elizabeth.
McDonald AKE Mac she had -- big story last April Bank of America she's got other things to do places to go so.
Isn't it yeah.
Lioness found that about what the -- started well.
Yeah but if the paper -- -- -- spending time with a look at I don't understand.
Because -- -- over a couple of little because first of all and I thought it was the other way around I thought that the government was pressuring Bank of America to go forward with the Merrill deal and that's why they -- in ten that was similar I didn't -- -- do it.
It's -- I had to do it are now on the senate Delaware.
It's gonna sound like a non sequitur what you -- because let's give interviewer what is happening right now what's going on and Washington DC as I speak.
Is we have a former Bank of America top General Counsel top lawyer.
At Bank of America and what happened was he's essentially saying.
Twenty billion dollars in taxpayer money.
What -- -- -- governments back door with no strings attached to Bank of America which -- America used to buy Merrill Lynch had a BankAmerica and get that money.
It tried to invoke it did successfully threatened to invoke.
What's called the material adverse change clause that don't get caught up in the legalese essentially call the Mac clause.
Very common -- mergers and acquisitions and lets it acquire walk away from buying a target company if it sees anything rotten.
And the company's balance sheets or for any other reason so Ken Lewis goes to -- down to Washington DC says I'm going to invoke the Mac clause.
IIL or else give me twenty billion dollars would -- amount of money he -- it.
At that time he had -- Merrill Lynch's losses were mounting shareholders who had voted on -- deal on December 5.
They didn't know that Merrill Lynch's losses were mounting -- Merrill at Merrill Lynch apparently those numbers.
Were brought to light in November before the deal was voted on fifteen billion dollars eventually in the fourth quarter and losses at Merrill Lynch so what -- Ken Lewis do.
Noted -- losses doesn't tell shareholders about the losses doesn't tell the shareholders he's talking to a top -- that he may invoke this Mac clause.
And goes and get twenty good gets twenty billion dollars.
And taxpayer -- will we have Fox Business got that -- clause we got a hold of that document insiders at the bank gave it to me to have a look at.
And it shows that Ken Lewis could not have walked away from buying Merrill Lynch and watch this let me give it a breakdown.
If you're losses at Merrill Lynch Ken Lewis can out of walked away from buying Maryland's.
-- there are losses in values.
Merrill Lynch's asset marks another with assets were plummeting in value.
Failure to meet earnings projections that Maryland she could not have walked away changes in the price of Merrill's stock could -- -- walked away.
Acts of terrorism or war could not have looked that way I could -- -- could not a lot anyway but not a lot to not have walked away with an iron as well grant us there was no clothes and just right essentially.
So you -- and -- It's like that his hit his head looks like he's about to explode.
Because at that time guy's -- -- know twenty billion dollars in taxpayer money went out to tyrants back -- no strings attached to BankAmerica to buy Merrill Lynch which eventually did.
For seventeen billion dollars by the way.
Kept Palestinian and music at Mac clause -- which turned out between anti threat to get Maryland -- -- -- writes so look so the government bought this threat even -- want to real threat that even don't they Ben Bernanke that's a great question -- ending in an email the Federal Reserve has confirmed this to me.
Ben Bernanke sent -- Inger Miller and saying look -- -- and doesn't buy this Mac clause in an invocation.
And he's saying essentially it was being used as a bargaining chip with the US -- Henry Paulson says.
If they try to former Treasury Secretary.
It back America tries to invoke that clause that would show a colossal lack of judgment so.
A lot of moving parts here but -- again.
Hark back to the fall of 2008 system and economic system is in crisis companies are collapsing.
Tracy and Chris you could have hung out of -- shingle called himself a bank and credit -- taxpayer money.
You could have gone down -- Washington says you know I wanna buy this company but I'm not gonna do without taxpayer money that's what happened here.
Let me ask you this.
You really hear that the lawyers for both sides -- reading the document you get to -- section that says material adverse changes.
You read it you read through the thing that and even says even an act of terrorism says you can't walk -- why do you advise your client.
To sign a document.
Like exactly Wachtel.
Lipton Rosen and -- accidents can't comment from them -- -- out saying that.
They felt that they had doubts essentially about invoking the -- -- they were advising Bank of America but then they wanted to takes more time to try to get quote comfortable with the idea of invoking the Mac clause so put -- behind us that's right out and Edwards are trying to find some way to invoke at a tortured reading.
Of the document perhaps what's the end game here we're gonna have congressman talking to executives like we've seen what it doesn't time exactly analysts -- game -- with the -- afterward you claw back -- they have to pay back the twenty billion anyway -- and penalize them do you know.
And when at a higher rate when he realizes just went whenever it is it just hasn't been lumped in with all the other -- -- the rest of the TARP money that they have to.
Does not quite sure there's a deadline to pay it back does Wachtel hold any responsibility and I think that you know Ken Lewis the former -- stepped down in such retired in the years pushed down under fierce criticism over his handling the Merrill Lynch deal.
I don't know of Wachtel there isn't responsible that's another question now.
Well I hope so we know UNC -- -- yeah I mean.
This syphilis in crisis that it doesn't mean that the government loses their minds when it comes to taxpayer I I I just hope we we've.
I don't want to believe -- right what to believe anymore.
And I don't know what what we get out of -- sending these executives -- there.
It's reveal something else -- -- now there's another wrinkle in other wrinkle we get -- congressman talking executives and -- get anyway you know.
A potential soon return -- if I you know it would -- -- Enterprise what you started out asking the question as he thought the government with a heavy hand right here.
And you know -- there was you know and report out that Henry Paulson threatened to fire the entire management bank -- -- tried to confirm that I know that -- mildly mentally you know they also out of it with guests like twenty billion dollars in taxpayer.
Yep and then -- Evelyn was just happy we'll give you twenty million you buy Merrill -- -- -- -- of it like gonna go away like that it's -- not gonna surface everything and.
I don't think anything.
I kind of think things like this are going to proliferate and continue to celebrate as awful as it sounds because there's too many Smart people -- that consistently find loopholes.
In any clause contract.
They -- gays and that's right that's what they do.
Or fittingly enough to feel like nobody like you Mac is gonna find out at some points and that's really -- gets and that the Eamon yeah.
Yeah and I and another idea run the next thing I think that it does guys was that we got a society -- out on what's going on with -- Bank of America.
So as the government and it was Bank of America both pressuring -- was -- he had pressure.
From -- everybody I know but that's an -- -- and I guess that's.
That's the way it has been it always will be all the stuff that goes on behind closed source unfortunately transparency say you want to call for.
At the end of the day we're never gonna have 100% we are we had talked to us since is he coming up here a little bit markets right now we are down 24 points on the day.
We opened a little lower that's that's I -- totally to be expected up 137 points yesterday thirteen month highs.
You know the same old story we dollar's strong commodities.
-- know the movement in the riskier assets being stocks across the the globe basically.
Yet Japan -- ST yeah -- are positive yesterday it just seems to be the scene exacts.
Story every single I know I was on about PPI if you -- the wholesale inflation basically up less than expected I mean.
I mean that's terrible up up like -- take break more than expected and he's still not an issue mortgage delinquencies hit another record that.
It seems to be today.
Tons of little tiny bits of economic his -- not which is really all that important but it's hard to really decipher through it.
And since -- -- here with a senior managing director -- capital and -- it is that how you make it today adult all the info kind of come in from.
Always have addressed the most like little -- but you don't really know how to make any heads or tails out of it yet and a and a lot of it is it's this seasonally -- -- Already has made the look slightly better than it otherwise would because of comparable over last year's situation so.
I don't think I don't think much of its really driving the market but market but Asia and Europe are taking a break.
Just we've you know we've had another like five -- sustained kind tick higher.
And you know at least the US is up -- highs across the board were back to seeing.
Russell outperforming us and he were back to seeing in the ten year down where was off the PPI number.
None of its really driving the market today.
And you buy any of this now we get I guess -- earning season was pretty good.
Yeah -- -- -- a lot of we get much better alliant bottom line numbers and we didn't -- line we still have that we've seen some life in the retail numbers you know if it does any -- bode well.
You know it depends what.
Over what timeframe you know I still think the economy.
Is not on a healthy trend yet I think it a lot of it was just.
You know restocking if you will across the board whether it be in materials or retail.
A lot of it was an inventory push out some of the stimulus based none of it was you know that the -- standing on its own so to speak.
Com I'm still little sceptical it doesn't mean.
You know for made and now I would just be short stocks and and lose a bunch of money the market is there.
Can be discounting different things are responding to different things and and -- right now the market and economy are very different animals.
Yesterday Ben Bernanke said he cared about the dollar of that that he really say cared about the dollar being as low as it is.
Do you care do you think -- -- Wall Street cares that the dollar valuations -- solo and in eighty going -- probably yes I think.
I don't know -- the dollar's gonna go a lot lower right now but it's not gonna go a lot higher -- and Bernanke.
And the US economy definitely -- -- it being down here.
On at least in the very short term in the long term it's it's a big negative effect and and it obviously has the Chinese and all of our other creditors.
I'm very worried so I think it's gonna be down here for awhile.
It does make me in the short term like may perhaps like Buffett like a lot of the transportation based companies because.
It's gonna lead to all of our you know the basic things that we have in this country being transported to the city out to the ports -- the can be shipped.
Overseas as the did in the dollar is so weeks dot com.
-- agricultural chemical guys all the training guys in some of the mining like all those stocks win to a weak dollar and it's really carried through.
-- -- they win.
Because they're transporting overseas and I transporting within our country of the that's okay -- I -- that I knew if we can exist just perfectly fine it's a very different state.
You know that our country was in 304050.
Years ago but down it will help us get our feet underneath -- -- short term I don't necessarily agree.
Win the the way to government is going about it getting our currency down -- kind of it's basically a faux stimulus is well.
But it is gonna have that short term impact on -- so feel like how they're doing and is there another way that they should be doing it or is this at some -- and you say OK now it's time to start reeling in.
Stimulus -- are really you know all the stuff but he people didn't yeah I think and that's what it is it's really you know pulling back a lot of liquidity that they're pumping in.
I think at this point it's really almost too late but.
They need to start eventually.
It's going -- it I don't think we see inflation in the near term meaning you know six months nine month time -- But it will come home to roost I don't think we'll be able to lift interest rates fast enough we won't because we'll need to do it.
When the economy's still isn't looking good we're gonna get data points.
-- into the first quarter that still look reasonably good year over year.
So it's going to make it and it should give us some some.
You know some legs to -- to the equity market.
-- of being fully invested here because I think it's.
It's a bit of fools there and attack just be fully long a market -- rallied so much with such poor fundamentals.
Com but what you what you won't see is the Fed indicating they're gonna raise interest rates you know hundred basis points in 2010.
Which -- what they would need to do.
Before we see really strong economy.
-- be living the same story this half a 100% right -- -- percent we didn't pull the punch bowl last time fast enough and here we are not we're not doing it again so are we creating on on the bubble all over again blew me.
Have to change the way the government operates and manages the country before we could change the way to government behaves it just changing parties and do anything.
So I don't know you can ask the government to behave differently could.
It it is what we you know it it's the way large corporations tactically Maryland should be -- they act it's you know it's -- lost big business.
And you can't just expect government to be -- -- for its flawed.
Com you know you can get a lot of of gas that are kind of political philosophers on here pontificating about how we should do different things.
But at the end of the day you know Nancy Pelosi and Harry Reid -- gonna let.
Let the government do something that it otherwise should do.
This is what you'd have to change -- -- where country does a real -- we've got is a few seconds left he liked the transportation stocks up a little feel like you're near -- anything in the -- -- -- second.
You know -- been really strong in general I like I like software here so if if businesses are going to stabilize.
You know you go like CRM -- -- into it.
-- those names are good -- Microsoft's been terrific.
It's really just been a story of people buying growth so Russell and NASDAQ and outperformed the Dow Jones and S&P.
I would start to get out of that trade if you -- in and out -- weighted basis and instead just by its name but then you're still holding -- even with this -- absolutely so.
-- helpful personally have better you know pretty good year as an investor.
But I'm really never more than 50% in this market yet and -- getting safer and getting -- blue chip yeah looking at a little bit dividend play -- absolutely absolutely it and that's the right thing out.
Ten actually senior managing director at capital -- here.
Stay the same course when you come -- you know.
-- headed about yes we need a level head in his -- that is now I think it's easier with the weather.
You know I go with a winning team yet -- that good to see it then good to see that's me coming back we've got a lot more gets you on the show including your five movers and there are some moves despite -- -- market.
Is only down about seven points right now so are flirting with the break even mark.
-- -- -- -- -- Moving in the market we always -- -- now.
-- -- -- What about foxbusiness.com.
Live Chris cutter Tracy Byrnes with the -- -- -- -- talking about.
How the government really needs to change how it operates is opposed to -- one party over another party in charge will Chris Edwards joins us right now director tax policy studies.
At the Cato Institute think this -- from reading your notes before the show today.
-- sounds to me like you you would be in agreement with that statement that that government right now just based on the way it works here in the states.
Is not really very conducive to the proper turn -- that we need you with the economy.
I think that's -- I think we do have a two party problem now I mean we didn't get trillion dollar deficits just -- the actions.
Of one party.
And there's no doubt that if if you have.
-- is they have British parliamentary system where a majority government and an act dramatic reforms.
The US -- -- -- system is just a lot more difficult.
And a lot trickier.
I think the main problem though -- both parties today is a short term focus they focus on bail outs.
And short term stimulus of the economy and there's really been -- few if any efforts under the Obama administration to look at the long term competitiveness issue.
Ultimately we will get out of this recession.
But that doesn't mean in American business is going to be able to compete.
Chris your tax -- -- attacks dropped by the -- parents and young can you I know exactly what these tax numbers continue to companies at the end of the day.
You even with the Tax Foundation which was -- was a big fan of the Tax Foundation back Monday so what's the cancer because I think it's to decrease the corporate tax.
I'm with you exactly I was with price water has through corporate tax for five years I was in the same sort of business the view.
-- did that I -- a report came out by IK PMG.
A few weeks ago.
Dude that 2009 survey corporate tax rates the US has the second highest rate in the world -- about 40%.
The average -- in the European -- now is only 23%.
Ultimately American Paul makers I think they've been far too parochial they've got to understand the US multinationals.
Can invest anywhere in the world.
And even if you know their balance sheets have now recovered in the short run and they're earning profits the big question is -- are there next big investment.
-- Intel gonna builder chip factories are they gonna build them in Arizona and California or the gonna build them and Vietnam and China right and that's the big question that policy makers have to face up.
And actually -- -- to the whole story and it's even more amazing not only do we have the highest corporate tax rate we tax on worldwide income many nations do not and yet we still have.
The majority of the biggest companies in the world based here in the United States he got to wonder how much longer it back in last.
That's right although you know what we have a lot of big corporations I think because we have the biggest economy in the world.
But if you look -- -- a lot smaller economies like the Netherlands for example has been extremely.
Beneficial -- from corporations to locate so the Dutch economy has done extremely well because they have a very good corporate taxes -- -- a lot of multinationals are located there.
So you're right there's two questions -- that the rate the US is very high and also the United States has the most aggressive policy to tax the warning com.
-- US multinationals.
In the world and how -- have -- facts Americans.
Is that if Intel and caterpillar.
You cannot make money on the foreign investments.
They will not hire Americans the more US companies invest abroad the more people they want higher at their headquarters at home.
And that's what both the makers need to understand.
Chris is this a lost cause is there anything on the horizon now with this administration -- this congress.
To Wear people out there can have hope that.
Tax policy particularly will change or might change in the next couple years.
I think ultimately the United States will lower corporate tax rate.
Even during the recession in 2009.
A number of advanced countries such as South Korea cut their corporate tax rate.
You know what Canada has cut the corporate tax rate substantially in recent years.
So you don't -- automobile company and you think about what -- -- -- you're probably more likely to closer Michigan plant and say you're Ontario plant now so.
I think that eventually that message -- have to think in view of pulp to maker.
But here's the problem and -- -- just rode in with the same issue.
We cut taxes we cut tax revenue we can't afford to -- tax cut tax revenue right now -- our deficit.
Is -- -- Galindo so we're caught -- a rock and a hard place right now.
I think with a court.
Attacks is -- that it is a little different.
Bomb like capital gains that the other corporate tax base is extremely dynamic in response to the tax rate cut.
You have a lot of advanced countries with lower tax corporate tax rates enough but they -- much more -- share.
Of corporate tax revenues as a share their economies so.
I think there is this so called Laffer Curve effect here when you have the second highest rate I think we could cut the rate and not lose revenue.
Chris I could talk taxes I'll take them.
A clerk and I guess that makes you went -- so I'm sorry Chris Edwards director of tax filing -- studies at the Cato Institute thanks for coming -- He's laughing and is this.
I didn't want to say that about Chris deciding criticism you know a man -- and sit up and audio pack in there and your total delight you with it'll -- iPad killer all right you what you're gonna tell us though pagan movement taxed -- to market -- -- NTELOS.
What is going on and what is -- in this market -- yeah I don't go on the weekend we'll volume down what six points on the -- pattern we started -- know where we're inching our way better it's that karma that comes from that -- dot com live.
But you're tells the five market -- and I don't want Amare I want you know what I -- -- deep not because it was lying low if they break actually to tell me at the break.
I didn't listen but -- -- and now we at -- we come back her five market movers she's diet and a guy who has better here than I do and a nah that's that X beta but that's not that -- -- actually pretty easy.
As I think there hey everybody -- -- twelve point three on they Tuesday were down two point eight points in his keep inching our way toward breakeven that's what we do we hear.
On a bulls love as the -- status.
With a five market movers today somebody's moving even though volume is still out.
A latter actually moving Home Depot is not including a lot but I thought it was a big deal.
It's down it was down almost 3% before it came in fiscal third quarter profit down eight point 9% this is less than expected.
Of course is -- -- consumers still not really sure am sort of surprised but consumers still not even sure they want to upgrade the stuff -- their homes.
Fiscal year earnings were boosted.
But of course they missed that forward expectation you know what happens when that happens the stock was down so it's down a little not a -- we heard from -- yes you profit down 30%.
There was some thought that Lowe's might and you might be -- because -- on the -- had a much stronger presence in certain areas of the country that are experiencing a little bit quicker housing readout or at least the first part of the housing rebound California.
This southwest Florida but I -- two million also it was better than -- -- -- Home Depot is like alpha male.
Vs lows being seen now that's right and I think and then -- and -- -- tools speaking of the female what's next.
It stacks up.
Swung to a surprise fiscal third quarter profit cost containment even -- sales were down -- cut costs -- their margins here we are.
There seems herself.
Well it though not so great and then Tween Brands now I am there isn't Tween Brands and well it has -- -- -- close so little girly clothes but limited to and justice my -- -- this.
But the best is the reason they did so well it's -- -- -- the entire store on sale for like the last six months you walking.
Is 40% off anything registers take what you want it's 40% -- So that being said they swung to a third quarter profit as well and they beat estimates.
This is a week before the shareholders are gonna vote on whether to sell the company to dress I would just about to ask you why hasn't somebody snatch them up and I I thought it was just because the economy that we're in -- -- again just one event at my management -- like this they withdrew a planned offering of six million shares of common stock.
And it's a mineral development company that word about dilution.
And -- the time just offer shares to raise money this company actually taking a step back and saying it's gonna do our current shareholders until we're not gonna do it.
And then -- tool this is for you.
What is this all about -- -- are you saying something about me in terms of the names sound scary mean some jewels 52 week I applied materials -- gonna -- -- -- -- -- -- -- -- -- If this is and today and campaign cash.
I don't know I guess I'm trying to find little glimmers of hope for you and that's what -- it.
Com and just to remind the discriminating a lot of noise is is it's -- -- somebody says hopefully I'll we'll get a -- panel call us out beside -- because.
-- -- got important things to say meat and isn't it -- -- Is run my mouth -- involved -- that you are of course up and financial group president of -- financial group and you've got some.
Information today that people want to hear about some stocks that you -- you join -- though once we can.
You -- some good information.
Yeah I look at a couple stocks this week one addiction by a Monday order related -- -- -- -- matter earlier this week.
That's a pretty strong in US.
But not nearly as strong as they are overseas and not look at China.
Do you think about here in the US for every 1000.
People out there but -- 150 vehicles -- per 1000 people in the United States.
In China it's about forty vehicles for every 1000 people so there's a huge upside potential.
As the middle class grows.
You know you're not a small little cars a tough time a side view of the automotive cherry on -- these small little.
Chinese names but one way to play that is instead of trying to pick the actual core coming.
When I played the company makes the auto parts Wonder Auto Technology means that the -- a Chinese name.
But it's a huge parts -- -- some big deals overseas.
As sales increased 50% most recent quarter they're actually earning money the bottom I was -- 26%.
I'm so I think is a great upside for Chinese auto maker -- auto parts maker.
It's a little -- company that's I mean you do taking a lot of risk in this type of company out buying shares on Monday.
-- -- -- -- a little bit demeanor and they're expecting the auto industry as a whole has to be flat at best.
-- state in the United States right so you're saying that overseas we're gonna continue to see growth in cars and and we did see it in some of the numbers.
Mercedes on lots of them in China you know he and the -- and just great exactly so that's pretty much what you're going off of the I'm playing on growth in China I could care less about cars here in the United States because.
I've had the same car for eight years and I had no desire to -- it because I don't need to.
And I think that's that's a situation where here in US than the last thing we're gonna purchase you're not going on people why would you buying new car -- -- -- can give you money like they did you know to bump up sales but.
You know we only have forty out of every 1000 people in China will have a car.
Even if that goes eighty you're gonna double the amount of cars on the road and that's a substantial amount of cars being -- probably I'm guessing you have the same line of thinking with your second pick as well that is -- that yes.
Graphical -- Tata Motors is the largest Indian auto manufacturers -- type of situation where.
They're the Liberty City GM of India -- the big name.
This at a 52 week -- it had a big run held her well off the hi we had 2008.
But again we're seeing growth in China India that we're not seeing here United States.
As a middle class grows they go from riding a bicycle riding a scooter what I do and up to.
Our vehicle -- vehicle that covers your -- how.
How much I wonder about Tata Motors -- that take from GM and Ford up from an international perspectives I think a lot of people are concerned if you if you own Ford if you own GM you think can.
I know they have partnerships and -- you know you have a Tata Motors coming on at some point time -- anti business are making their own cars and millions of them.
How -- how should Ford and GM worry about that.
Worry about a time.
They should -- where I mean they had they -- -- you know -- partnership strategic partnerships overseas but this is still small portion of their overall sales but is the only portion of sales that are really growing.
-- -- need to worry that.
If I'm in India you know I'm probably gonna support my company my Indian companies that in -- Ford.
However here in the US to be exact -- buy foreign cars these are cheap little -- a couple thousand dollars yes very very cheap very small area -- efficient.
Not that I at least not yet.
-- lawnmower he had a now something I haven't.
I -- -- gasoline needs yet so if you want to play cards and in a roundabout way -- kind of hedge against gas going higher.
You GA which actually -- tracks the price of unleaded gasoline was trading in futures.
We have four dollars last year I think we -- four hours again if not five dollars in the next couple of years.
As oil moves higher -- the gasoline prices -- so that's a concern for you.
You driving big SUV which Tracy probably driving big SUV I'm smaller did OK so you need to -- you know -- of that big gas tank and across a lot so.
You're paying for five hours when a hedge against that you wanna -- car by UGA gases got -- five -- absolutely.
By -- 111 and next but thirteen months.
And if we're looking out further we look -- five or ten year agency -- seven -- -- Is -- -- 200 I mean it is no doubt in my mind that we're gonna see energy prices skyrocket.
Two -- real quick the FT and you RB end give the FT DuPont Fabros Technology the bases -- a real estate play.
They'll they're gonna own the real state where -- technology companies house their servers in the storage.
Has to be special clean rooms the company's been amazing as far as earnings -- the few real estate related companies growing earnings great looking chart.
-- -- and Urban Outfitters had to throw retailer in the retail sales -- for the most part.
If I'm going to -- any retailer I do own some shares of Urban Outfitters that's woman picked anthropology is a very good -- -- one of their brands.
And I think what hasn't niche area that people are still spending money in that area prison -- the same thing.
SA loves Urban Outfitters for anthropology -- -- reason why she went I -- and see what.
She's not here so I can say I don't get the anthropology really really.
I like that -- yesterday well because she was very excited about it and obviously it's time -- yeah.
And they got a run out of time I would have gotten better with her but men don't want to hear -- on at a time now say this is.
-- -- in this area and call getting it's up to date on stocks he likes moving forward okay when we come back Alexis Glick is gonna join us.
-- gonna talk with -- -- sealed Broadcom very important right now broad band all over the country.
If the lowdown on what's going on there and what's going on the semiconductor industry as well -- going.
Live don't forget to download a great -- for your icons you can watch us in -- on IC -- threw -- for a loop here implements in Illinois not Indiana Illinois.
-- -- Download the -- okay we're gonna take it down to Washington DC now are.
Very on Alexis let me down -- Wall Street Journal CEO conference.
-- is I I can't I can't -- your head is not spinning the CEOs you have nothing just this morning alone.
WellPoint CEL telmex of course Carlos Slim.
8 PM American Express ear just on fire down there act.
-- -- well so jealous fit and it has been such an exciting conference and you're right -- pinching myself constantly.
Because I'm talking to the best and brightest in they're having.
Really deep conversations about how to fix the economy closed door discussions.
We discussed some of those things last night like uncertainty.
And economic instability.
But joining me right now is one of those CEO's and that is Scott -- -- is the CEO of the US chipmaker Broadcom -- -- got a good to be here.
You are it's inextricably linked to the consumer in fact and last quarter you said.
I'm not so sure that Santa Claus is gonna bring us a good -- season what makes -- cautious.
Well we're certainly hopeful and that -- will indeed come.
And what makes us cautious is just conservatism on the part of consumers we hope that sorting this holiday season they're gonna go out and buy things and that helps the whole economy.
You you have said I think this is a great quote he said if you tell are the brains of electronic device is then Broadcom chip.
-- the nervous system.
If you provide the nervous system would do you do it what -- the device.
So no analogy is perfect but our devices are the chips inside many of the boxes you have in your house a set top box or TV -- a cell phone.
And we provide a way that these devices talk to each other and communicate over the Internet communicate between each other.
There was a terrific article just a couple days ago I was talking about this this past weekend in the New York Times out.
Of the connectivity between the television -- And the computer that you'll be able to use the Internet on your computer it's happening already.
But you are wanted the he makers of the -- necessary to do that wouldn't stand -- that evolution.
And it's interesting because in the living room and in your whole home -- devices have never really talked to each other and it's sort of a shame because there's so much they could communicate.
For example your cell -- to take a picture you -- display that on your TV set your cellphone could be the remote control for your TV.
Moving -- -- moving content from your set top box your TV.
This would just be really nicer -- I think than the cheap button boxes we have today really give people -- -- children.
Concept popular cell phone -- the remote control now let me think about that we're just know -- you reduce your remote controls you have on the table there.
Would it be nice to see the guy on your remote controlling your cell -- before you go to the TV station and not annoy your family members pictures scrolling through the -- And that's revolutionary that's a lot of change.
Do we have the capacity.
-- the memory in these chips to do all these things had to upgrade the -- day -- Actually we have a today we just haven't -- it.
You think about it the bill of materials at a cost of a remote control on TV set.
It's a couple of dollars it's a pretty cheap not very bright device on the other hand the Smartphones and cell phones that are coming out -- right now.
Have hundreds of dollars in the electronics and they have all those capabilities we just don't -- today.
Wi-Fi huge Nintendo -- things like that you guys with the -- -- MI you I think you do some things for apple on the down low on the iPhone.
What is the future -- what the future of our capability to move anywhere any time and and have access to information.
I really think we want to make it really simple for consumers they have content be -- music they have pictures and movies they wanna see him wherever they are.
In their car in their cell phones as they take -- places in their living room they want an easy experience and again we have to make this technology.
Really simple to use and really straight for the people.
Let's talk about broader issues big topic of concern here is -- -- uncertainty regarding health care happened to me unemployment.
What are your greatest fears regarding that on certain.
One of the challenges.
That I have is a CEO and I think a lot of the business leaders here have.
Is how much can we invest in the face of uncertainty going forward.
If we believe the economy is on a steady path going forward were more likely to invest if we're concerned about that and we'll hold our investment.
And I think multiply that by the thousands of companies we have.
And that really -- the economy so we really need to make sure that we do have conviction going forward so we can invest and get us back -- the track.
Conviction going forward is one thing.
But navigating through that uncertainties and other thing and a lot of companies have pulled their guidance they're very cautious.
And they say I'm not gonna make investments until I had some more certainty.
How do you navigate and no you know 50% threatening basically you left it to the turnovers -- You know semiconductors is a cyclical industry so we're used to volatility and I think in the face of not being able to predict things you learn to be -- You need to be actually need to be able to modulate your costs when things are good you hire quickly when things are bad you need to find ways where you can repair costs in a way that doesn't -- the employees doesn't -- the company.
You care a lot about education in -- your company has donated fifteen million dollars.
To the foundation of education.
Absolutely why that's so crucial to you.
You know in the downturn we have right now education suffers even more than a lot of other institutions.
And education is absolutely the fundamental cornerstone for the competitiveness of this country.
So we Broadcom have donated fifty million dollars to a foundation that will focus on education and science math engineering technology.
To really help students develop do better become more effective that's good for us because those will be better employees down the road but in the meantime it really helps us.
Impossible country we hear a lot about what the president -- this administration is not doing -- you believe when it comes to education and they are doing a lot in fact perhaps one of the most.
Active administration's an education that we've seen in decades.
Absolutely we believe education is a shared partnership.
Business plays a role the government of course plays a role but also parents play a role and I think parents need to take an even more active participation.
In making sure their children get the best education possible.
-- -- the night.
What keeps me up at night for us we're in a very competitive environment we need XQ we have a great team at Broadcom we need to continue to execute make sure we stay competitive.
Think that it means we're deals.
More deals doing the right thing for our customers.
Creating great process open to acquisitions absolutely we acquire about -- a quarter.
Just looking at that track record of how many you complete it in the past ten years.
Gotten better -- thank you very much greatly needed to be like taken the time -- -- -- Tracy.
On winning outright that he skies we have a very busy day and a lot more exciting and it is good to see them.
Good to see you as well Lexus with the CEO of Broadcom Alexis -- get the the Wall Street Journal CEO council in DC that was great stuff on the you know other than the stocks today.
And you talking about and apology and -- that kind of stuff.
-- copyrighted and just carries this morning.
-- Alexis illustrious list of CEO interviews certainly commie allies but.
Costco and Coca-Cola in -- pricing dispute right now potentially -- saying we're not gonna carry any clinical products.
Now one might just say there goes Coke and Diet Coke potentially Diet Coke with line because -- like that to -- -- -- No I didn't start investigating some of the -- that might disappear now cost -- doesn't necessarily carry all of them but there could be in that potential of then number one.
C'mon Leavitt Leavitt -- cream -- to very underrated big you know in Louisiana they sit there and then wait.
Bacardi mixers yeah what's this summer -- -- according mixers and Danny and Danny and shrinks as yogurt drinks both my kids love those these are my two favorites bands and -- -- At a press got me that's got me.
Okay this is on the specialty and Godiva bells and blends you know the Godiva -- in the bottled and I sort of I don't but I know a lot of eleven.
But here for the kid -- UIC.
Yeah I see -- Okay and out on your your unhealthy -- at Wallace superffoods in a -- fountain right and power aid of course is a big one and my favorite.
And ready I'm ready tab but -- I.
That is you know -- -- -- -- worked at Coca-Cola you yes so allies that all of these beverages.
Basically on tap.
You know it's free of charge there it's great that -- it all day long you're treated tad you know was big then.
When I were there for utopia -- -- -- -- -- so much for utopia.
That's probably why my brain is as going to explode I -- so -- have a special and I was account with -- -- that was my late night drinking McGowan and then they came out with this like it's gonna -- -- -- thing right and you do -- just consumed four.
-- In the past two months -- thinking golly they could this instantly they can't recover it's still one of.
-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- And then you wonder you don't just how much of the of Coca-Cola products are actually sold through -- so that I think there's some negotiations on both sides I think.
Both parties can come to the table.
Feeling they probably could have some leverage he had as a sort of one of those things that's the wal mart's.
Way of doing business sort of leaking out in the fact that -- -- -- turn the screws on every one of supplies that you need us more than we need to do so we're gonna pay X number of sense for that -- period.
I think I think it is partly.
Costco is not Wal-Mart yet they'll do it but I mean that I think what they're doing is.
I think it's a great PR stunt quite frankly and I'm not sure that they they were doing -- -- that but I mean think about how what they're doing is they're saying we're going up against the big.
Coca-Cola and we're gonna squeeze the calls for our -- and you are members investing so let me get to them you know it's I think there's a lot of public relations benefit from -- -- needs it because he can't.
Well because -- not is not a Wal-Mart because.
Your final bill when you look at a Costco is generally much bigger than it is when you look at a Wal-Mart you can look at a Wal-Mart -- five dollars you you spent 500 easily in Moscow on I I think -- -- -- -- -- I mean the Wal-Mart model I mean they basically put the distribution on the lap of any anyone that's gonna sell products through -- -- taught me.
The way they've transcended that and really made that model work and it's it's an unbelievable I don't think anyone else can replicate -- I mean it's.
-- tribal on this Josh asked the question Chris where have you not worked there.
Place right not -- -- but Don Edwards and a lot of different spots and a lot of industries when we're to cocos on the Diet Coke brand.
And it was in there were -- if you worked on Diet Coke.
You were not friends with the guys working on strike down the hall more than guys working on Coke classic you know upstairs it was Diet Coke man all the way that's how we're at -- -- -- -- I'm not we got to talk about -- Producer Price Index we got it's not about -- economy.
And open will come back and -- -- -- I I think.
That the numbers today -- Producer Price Index tell us that what we already know.
That eventually inflation's gonna start showing up it -- only a question of.
How we get a time this thing that I mean I think a lot of people are in denial that this is actually gonna play out this -- You can't throw so much money at the problem that we had here in the United States and -- brought -- to think that we're not gonna see.
Signs of inflation and -- -- the fast thinking and if no one wants to look at putting their portfolio together to benefit from that right now.
And discuss them -- -- home I think these things you're hot water heater.
You know it's gonna break eventually you just ignore it because it's okay and then -- -- you gonna come home to a flat out so but how do you prepare.
Are for this -- -- you don't get flood insurance when your basement full water and a half hour for a fact but I I think would you do if you have to look at asset classes now that -- Florida.
Out of favor.
That you know we're gonna benefit from the rising rate environment basic no one wants to be -- treasury inflation protected tips -- you know it's like.
Well inflation isn't there yet but any.
Now's the time that you start positioning -- that.
Maybe senior loading senior floating rate fund something that will -- when inflation comes when rising rates come you're not I'm not saying put your -- -- portfolio there.
But a 15% maybe 20% allocation.
In a portfolio commodities a real estate that you don't tips.
Floating -- something -- gonna benefit from.
That so are you don't lose essentially you don't believe Ben Bernanke yesterday when he said.
With unemployment at 10% and really we see that continue through 2010.
We are not gonna raise rates in 2010 -- or you know from for the foreseeable future he he is gonna raise rates and I'll tell you why he's gonna raise rates because inflation is gonna come because the in my money that -- being pumped it.
I don't think it's gonna happen -- after the election though so it's going to be a little bit of the cat and mouse game I I think that there are you talking next now that I'm talking at some members celluloid bit but when he does raise rates I think why people have to be protected now it's not -- -- be gentle -- it's -- -- be 75 B 75 B fifty beef and before you know what we're back to the pre -- days and if you think about the Fed right now and why I know we have to do something.
He is the most powerful financial figure in the world he's also the most helpless.
What's he gonna do you've got two trillion on the balance sheet you can't bail anyone out anymore and the Fed Funds rate to zero so -- -- -- -- the next crisis so so I mean I know that he's got to be pitching that to back that -- you've you've got to have.
That's an animal in the -- gonna -- and it's always had the housing market that's how does that play out well -- you know I think what happens is the housing market doesn't recover quite as fast as people thought it was going to we're already seeing some signs of recovery so that's a good thing it.
Especially in the areas or really really depressed and I think what's gonna happen actually I had sort of contrary view on this -- -- -- started deterrent.
But we still have no there's no sense of urgency you'll this insurgency to buy houses when the Fed fund rate -- 200 basis points.
That may be just the catalyst we -- may be were stealing some some activity for -- from 2011 or even 2012 but right now people were saying you know I didn't just wait forever.
-- -- rates are never going up until things are turning up you're saying it's gonna be panic mode that they're gonna be off to the racists I gotta go but it's going to be that short term pop that it's actually gonna make it look may be a little better and actually it's okay -- -- this thing he sounds pretty dire hot much higher taxes.
And the higher interest rates mean how does the economy continued to.
You know get out of this recession with that well yeah I mean Donald -- shot.
I think we are gonna have much higher to inflation a much higher interest rates from from zero but still from zero to 2%.
Historically that that still going to be a pretty good level forced I think the wild card -- is in taxes I I I know taxes are going down but I'm not sure.
It exactly where and how that's gonna play out I'm going to be on the sidelines for that.
He'll next year all of -- sudden the wind up close you know next year -- at congressional election year it's it's going to be a different environment and I think it's going to be much more difficult.
To raise taxes that not that it won't happen but.
10% I do believe -- Ben Bernanke 10% unemployment we're gonna have that for a while.
I think that's a really tough environment.
To raise taxes in that and in in that situation.
So I mean not not to that can't be done but I think you know if it's going to be tough but I feel we have to see.
Employment turn around and I don't think the unemployment rates coming down to -- think we're creating jobs and but I do see a silver lining in this silver lining is he'll lay -- of slow down if you look at layoffs X models -- we downtown thirteen week average of 40000 down to 10 AME I'm not that -- but I know you have to put laying people off before you hire them on -- -- that's sort of but.
A good sign.
The glimmers of hope I keep saying I'm so I think all starting to see them a little bit doctor Bob froehlich senior managing director Barbara Francis -- just the company is my pleasure being on the having -- is -- you write them.
You see now I get excited south I south they're not that it can't figure out you're from Jersey that makes sense that if -- Really if -- -- you're -- Coca-Cola I'm telling you what you know unless it analysts look at.
You will be forced the lightning at daybreak and implement that -- -- would love it I don't like it would be forcefully in the -- importantly.
Welcome back to foxbusiness.com.
Lot of us know what you like Diet Coke -- diet that's because we're still -- Madden.
And has nothing to do with -- cash yes it does since it does not.
My mom I'd like to say that -- one point off.
-- -- into a positive market.
You can -- kind of burns for that well again I give us really realignment woman -- -- surely aware miniature and Chris tell us what.
Good -- all I was so disappointed today I was so disappointed to see that looks like Cincinnati Bengals.
Am -- gonna sign Larry Johnson I was so pleased.
Get rid of that trouble maker in the end and then all the NFL teams they pass suddenly clearly.
That god gave him heavily.
Right -- hands and say I'm sick of it I'm not gonna deal it malcontents.
Not a deal with guys are cancers in the locker in the angles and sign in the bank was to finally winning games -- a good locker room what do you do it.
Bringing this guy in the mess things up.
I can't believe it's so what -- Cedric Benson got hurt did a -- of Brian letter that what this kid get it to him.
-- Jersey kid -- what are you doing bring in this cancer in your locker room I give credit to laden.
Are you credit the late -- in the Tennessee football coach to Tennessee players went on the very highly rated recruit -- -- Richardson.
Decided to hold up a convenience store you don't you're done the home that's it.
In the -- do the same and they consistently.
Don't do it Cincinnati.
So disappointed -- and I've said this before I'll say it again that's cents a crappy example second -- kids everywhere like a fifth chance for this guy heating up even in her how I like it went up.
Well pay at least you know what I -- this -- -- -- looked at least you'll.
You'll you'll look like he's wearing a prison jumpsuit.
In that inning status yet so -- it's one step closer maybe I don't know not a fan of violate Johnson -- -- and now not a fan since savings as defiant unless they've had so many little problems with the players why are you -- in lieu of inviting this again -- inviting you back.
I haven't done.
And I've got my yelling out of the way let's move on in a Coke.
I -- I have got one right here on my table Judith Paris Tennessee from rankings -- thankfully it's help us because he's got to take a breath I'm gonna be fine.
Gift card regulations.
For the stuff we all worked up -- ID theft can't say we're about the -- -- -- again because Chris from.
This caught his -- yesterday.
Gift card regulations now I as a woman who goes out there and -- the entire world to give her gift cards for every single holiday -- -- gift cards and get angry when.
I forget to use it and a year from now I find out that my fifty dollars has become 45 dollars and has been his feet because -- -- use it within certain time frame -- what have you forgot to use it.
How do you -- you forgot.
-- Most people agree with you most people love their gift cards and but you have to keep in mind and one of the big.
Worries about the industry and I represent a lot of gift card issuers.
Is that there are two kinds of gift cards they're the ones that are we call them close -- those are the ones that are -- by store.
You know your Macy's gift card Barnes & Noble.
Those almost never have expiration dates or service fees you can you can put them in your wallet and forget them leave them in the door.
Pull them out in five years and you'll still be able to use them.
The other cards that do tend to have -- We refer to them as open -- and those are the ones that have the grants the visa or MasterCard brand and and everyone asking well why did they have different why -- one -- that is so when pressed them but if you think about the business model.
If you have a hundred dollar card for -- best buy.
You that is a promising you're gonna go into best buy and shop and you know the majority of people who go to best buy it actually spend more than the 100000.
And and then best buy in all of retailers to have a market it's another -- you spend that hundred dollars there at best buy.
They're getting the benefit of you going in doing the shopping the -- -- on the goods.
You have a hundred dollar visa or MasterCard.
You're not going to the bank -- spend that hundred dollars you're spending it somewhere else they're just getting the fee revenue.
And have the same time they have to look.
Provide things like 24 hour customer service they have to protect the -- at the lost and stolen so there are -- set of services that go with that plastic.
And that's why they tend to be two different business models but the consumers they -- both I mean if you wanna pay.
More and have a -- but you want to let Europe recipient go anywhere they want to go then you get them -- is Amex.
Card if you want to just choose where they're gonna shop.
You go and you you know picked -- -- are -- Ehlers better do that better putting keys on putting time limits on their cards as well these days.
Yeah some and -- -- -- was unable to use them you know those are very rare there's there's a retail association called the retail gift card association.
And they have them that -- like creme of the major retailers.
And they're the ones if you belong to that you have to make a commitment not to have -- not to have expiration dates if when you go to be a gift card mall the next time this week while those little displays cases he should really spent some time to take a look really the majority on fact.
And I can't think off the top of my head of -- retail and it's still charges so I know you're reading an American Express is -- American Express -- they feel like it dwindles by the minute but like well.
I can go to my bank my black.
Americans best just announced.
She had baby may be two or three weeks and maybe a month ago that they have stopped doing all of the Hannity and -- -- me Allen and by the way it's.
It's was it ever read it relates back even that the department recommended thank you know it yet so even if you already have a card that card that card hit.
-- no longer be -- that the service is the biggest issue here though.
That the language and how it's communicated the consumer because to me.
If it says you have a -- to use it.
And you don't use it in the year that's your fault -- -- -- is the fact that.
When you go to buy this card from visa or MasterCard that it's not being properly communicated to the consumers at the biggest issue here.
Don't know what the real big issue is that -- I -- tell you we are in the middle this industry some middle of a tidal wave of legislation.
We have new federal regs that just came out yesterday that's limiting fees.
If you talk to consumers the majority consumers are really happy with these cards and one of the things that we worry about -- is whether this is going to mean for example.
We -- we've heard of legislation that's pending that's gonna call.
All loading and purchasing a prepaid cards to be deposit taking.
So you know what that means -- -- can be able to buy these these cards and you're in a grocery store you have to go to the bank to get them that that kind of legislation doesn't make sense or.
I'm really not by the mom's food store you know I -- the -- out of store but I think part of the problem on the company's side is we were talking about this yesterday the way -- book revenue of these things.
You -- you know the story you go to Sachs advised the hundred dollar gift cards sacks hasn't taken that revenue until I come back and spend -- hundred and then sent.
So -- -- on -- decide they want me to get in there in the next thirty days of -- global.
That revenue -- and and I guess and that's certainly.
The downside of insisting that they're not be expiration dates on cards.
You know that consumers if you had a six month expiration date -- year you'd be using that much faster it's.
They've actually found that people who have now that they have no expiration date they're they're less.
You know a push to go women use yeah -- is up.
And I try to tell all my friends have -- -- using right away no matter what kind it's good to get them you know move them and bring the business to the stores that's really what they're there for.
So what -- legislation are we expecting here in the next few months -- we we know we talked at length about the credit card legislation and we certainly is over the last couple of days of heard about this new gift card legislation.
Let's talk with whatever gets passed what we'll get past and when will we see differences.
If you will we already have there -- the card act this summer it was really mostly a credit card law but they slipped -- -- a gift card that provisions.
And that goes into effect in August of 2010.
-- and the regs that came out yesterday were part of that -- the -- implementing regulations.
And those also go into effect in August 2010.
If you think about it most most of the let those laws do.
-- the industry is already doing them is gonna tell you that you can't start charging those service fees those to cancer exhibiting -- until twelve months of -- activity.
And that the expiration date has to be at least five years -- news from from sailor from last load.
And there has been actually a call to try to speed up -- -- the effective date.
But that would be.
A disaster because you can't you know.
You order in August the cards that are in the shelves now there's no way you could actually get on to the shelves in time for the holidays all the new cards and back again.
Those kinds of calls I so loved -- again.
And I still give them and I I think actually people like to go shopping and feel like they can shop and buy whatever they want and it's almost like it's -- Judith and good to see -- thanks for coming and only time Atlantis and appreciated I've got to go we'll see among.
-- -- -- Don't forget by the way hey this is happening tomorrow I will not be -- luck to you oh my god you Tracy any agenda lady oh cool that's.
You don't want to miss -- live from the -- strategic media conference in San Jose at their hometown.
And a lot of fun.
Filter by section