tv Squawk Box CNBC June 25, 2012 6:00am-9:00am EDT
cnbc. i'm becky quinn along with andrew ross-sorkin and michelle caruso cabrera. joe is enjoying well-deserve d time off. the government at this point has not specified an amount. lead e leaders are expecting to ger for the summit. the finance ministers will not be attending. the government's international lenders was scheduled for today. greece's foreign minister will attend in brussels and they will be asking for the terms of greece's $130 billion euro bailout to be loosened. germany, as you probably know, has been resistant to giving athens any leeway. we'll have more from london in just a moment. the other big story this week is health care. the supreme court's going to be meeting today to issue opinions. president barack obama's health
care overhaul and arizona's immigration law are at the top of the list of undecided cases. today is the court's last scheduled meeting until the fall but it is unlikely to be the final session. additional dates can be announce ed for later this week. we're going to be talking about what a decision might mean for politics and for business throughout the morning. coming up at 6:30 eastern we have a congressman from each side of the aisle. them at 7:40 eastern time we have dr. ezekiel emanuel. >> ja p morgan chase reports the now infamous $2 billion plus loss won't have its strategy changed very much. the paper reportsries can can i investments will still be allowed though trades with derivatives and private equity will be avoided. blackberry maker research in motion is said to be considering splitting its business in two. "the sunday times" reports it could separate its struggling division from its messaging network.
another possibility would be to keep the company together, but sell a stake to a larger technology firm such as microsoft. last month r.i.m. hired jp morgan to look at options. yahoo!'s interim ceo wants the company to concentrate on online advertising. levinson is returning to the idea he laid out last year, moving online ads to the forefront of the strategy while bumping e-commerce to the side. a judge has ruled that apple cannot pursue an injunction against google's motorola mobility unit. it is a blow for the eye phoiph maker. the judge dismissing the litigation between apple and motorola mobility with prejudice meaning it cannot be refiled. andrew? great. and in other headlines had morning, a little bit of deal news. i was working the phones. anheuser-busch is now in talks to buy the 50% stake of corona beer maker that it does not
already own. it could top $10 million and a deal could come as soon as this week. hopefully we will have an announcement midweek to talk about. also this morning samsung expecting sales of its new gallaxy s-3 to top $10 million. becky needs to buy one now that her blackberry blew up. >> no way. >> last night. i didn't realize it until last night. good thing because it's my alarm. >> this new galaxy is the can company's fastest selling smartphone and i should say if you read the reviews, the reviews are better than the iphone. >> the new blackberry doesn't have a cord. >> the new blackberry ten. >> you can get a model with the keyboard. >> a two-month machinist strike at lockheed martin looking to near the end. the two sides reaching a tentative agreement. the union is expected to vote this week. most of the striking workers are at the ft. worth plant where
f-35 stealth fighter jets are made a check on the markets. already we see some red arrows. we did see downward drafts in asia and in the early trading. in europe you can see the dow futures are down by 84 points. the s&p futures down by almost 1%. a lot of concerns about what's happening in europe. pointing back to both greece and to spain and we're going to get more coverage on that in a moment. we've been watching oil prices and for the consumer this is the one area we have seen a silver lining in all of had. oil price s as are down 63 cent. still at $79.13. if you've been watching prices at the pump they've been down significantly. the is yosurvey shows they're d9 cents from the peak and they've been dropping rapidly. the ten-year note and you can see the yield is at 1.621%. the dollar this morning is re t
reacting mixed this morning up against the euro. gold prices i haven't gotten a look at, up $ .80. >> did you see, there's a negative yield? people are paying money. >> it happened during the crisis in 2009. >> it's costing them money. >> unbelievable. >> buffett put up that chart that he had bought which showed he thought was completely ridiculous. >> i think it was 2009. and can greece have any worse luck? the prime minister has been hospitalized. the finance minister.
it's an inauspicious start for something so critical. >> do you think they will be able to change the terms? i was surprised by the language from germany last week. >> i think they will get leniency. it's astronomical. they want to reverse nearly every single reform because they're trying to bow to the left. everything is starting out in negotiating positions. when you go to buy the house, you low ball them, right, and the other person stands firm. you will get leniency. and they will give more than they wanted to and greece will not get as much as they wanted to. >> it is the beginning of the dance, i suppose. >> i think the minute you saw the outcome of the election, that's when the negotiations started. the people said this is not going to work. >> they both have constituencies to answer to. >> exactly. time for the global markets report. kelly evans is standing by.
k kelly? hello, michelle. i'm sorry to kick things off not necessarily the best note. there's a lot of red going on. we have decliners outpacing advancers by a 9-1 ratio. down 1.4% on the index this morning. it's not necessarily that we opened so poorly but sentiments have taken off. as you can see first the nikkei down three-quarters of a percent. over here, though, the xetra dax in germany down 1.6% in trading so far and the ftse 17 in the uk not much better down 0.9%. it's been more about some of the news we've gotten with regards to spain requesting a bailout for its banks not giving a dollar amount but that's not doing a lot to support bonds certainly for the sovereign. here we have an increase of
6.531%. we're off the highest levels we saw a couple of weeks ago. spreads are higher this morning. in the range of 570 basis points. france and germany among the beneficiaries of that as investors look for safer havens. people are paying negative yields. real yields are already negative. the story for the last couple of weeks has really been oil and that continues to be the case after clarity in the elections. brent and nymex are down. brent down. analysts see the premium has come out of that. the question whether it starts to go back in. the dollar down as you would expect on a day like this.
the rupee down a quarter of a percent. moves didn't go far enough to please investors. the stock market has done well. we will be paying attention to commodities. a big story in the wul street journal taking a look at extreme drought situations where a year ago there were major floods here. the global market is relying on a bumper crop. u.s. corn stockpile is projected to fall to a low. it's caused not only problems with the crops but major fires in the western part of the united states, too. which i'm watching because i'm going to the western part of the united states. >> oh, i see. >> you are all looking at me like, what.
i'm flying to utah. >> oh, my gosh, the fires. >> mortgage interest rates and the treasury -- >> me, too. >> i want to know if i can refi. >> the fires have been serious bad news. this is in like 20 states that they are looking at the drought. . >> is your trip in jeopardy? >> no, it's threatening a lot of places where they have homes that are right outside in colorado and other places. it's bad news. >> let's talk consumer news. half of americans don't have enough emergency savings to cover three months of expenses from bankrate.com finding the trend appears to be worsening. it's always the statistics people say, three months. some say six months. some say more. >> a lot people are living paycheck to paycheck. >> the recent recession went on for so long you might have thought, shoot, i should have had a year's worth. >> gasoline prices dropping 15 cents during the past two weeks. the lundberg survey saying the
average price for a gallon of regular unleaded is $3.48. diesel dropping 13 cents during the same period to an average of $ $3.78 a gallon. jackson, mississippi, we have to take a trip there, the lowest average price $3.03. the cost of getting there might ruin it for us, though. san francisco drivers apparently pay the most on average, $3.95 for regular. >> i didn't know it did helicopter fuel. i thought it was only cars. >> very funny. very, very funny. >> my inner joe. >> you're sitting in the seat. it's worthy. >> all right, all right. >> what kind of fuel does my copter run off? >> jet fuel. that's a good question. i don't know. i bet we'll get the answer. >> some viewers who also have a couldn copter.
trying to turn palm oil into biofuel committee ecompleted by. the amazon rain forest bigger than all of london. biodiesel will be used to run the machinery ships, trains and bus. it is huge. that's a company that's had so much government intervention. you wonder how much of this is politically driven to say, oh, we're going to be so green. they removed one ceo at one point because they were too focused on shareholder value. i get a little nervous about that. >> all right. coming up, the banker to the banks. why the group representing the world's central banks say risky behavior again poses a hazard to the global economy. first, though, this morning's sports buzz. the yankees beating the mets 6-5 last night in the final game of the subway series. the bronx bombers taking two out
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deal last december on diesel engines. nissan announcing plans for an $800 million factory in northeast china. to the weather channel mao. ryan what can you tell us about debby? >> reporter: meandering around the gulf of mexico. we'll be dealing with that the next couple of days, even as late as thursday and friday. el elsewhere across the southeast, 93 degrees. warm conditions in atlanta. there's your moisture with debby. back up to new york city we'll see 75 degrees. the heat, though, will be the big story. we're talking about high temperatures in dallas. 105. well above average temperatures. not only here across the heartland but also as you head up into the rocky mountain states. denver usually cooler in the
summ summer. highs today between 103 and 105 around the denver area. this is a very warm conditions here. also salt lake city 100, 108 in phoenix. if you're wanting cooler weather to the northwest. highs here very nice in the upper 60s around seattle. >> do you have any idea how long that super hot weather is expected to last? >> reporter: it looks like it could be with us the next three to four days across the midwest and back across parts of the front range of the rockies and final finally making its way to the southeast. >> thank you very much. great to see you. great. our next guest is the bank er t the world's banks. he joins us exclusively with the findings from the bank of the annual report, the head of monetary and economic department -- at the baj of international settlements and we are thrilled to have you this morning with this report out. i want to highlight one piece of the report and have you comment on it because it struck me last night as i was reading it.
big banks drive up leverage without enough regard to the consequence of failure. because of their systemic weight they expect the public sector to cover their down side. so we are still living in a too big, if not too big to fail squared world, is that what you are saying, steve? >> well, i don't think it's too big to fail squared. we haven't solved the prices with the large institutions. i think we've made a lot of progress, though, with the new basel three banking regulations. the banks realize they have to have much more capital and much higher quality capital and with the banks that you are talking about, the move to the surcharges so that the big banks have to hold even more capital and be safer because of the damage that they would do to others. that's a lot of progress and i think over the next few years we'll be able to write something quite different from what you
read. >> the report is suggesting they are continuing to take risks recognizing or in expectation. do you believe that's the mode right now? >> i think they've done that and they haven't changed. our biggest concern with the banks as we try to imply there that they're overleveraged and that a lot of banks in the world still have loan losses on their books, that they have not recognized appropriately and that they are not valued at market prices. evidence of this is the price to book ratio for the financial system, that the markets are -- the price the markets are valuing he's things is well below. so what that means is that investors in the marketplace look at the banks and say, you know, we don't think you're worth as much as you guys are putting into your accounting
statements. so i think that's a problem and we have to try and move past that as quickly as possible. >> steve, can you break it down for us in terms of u.s. banks versus european banks versus asian banks, versus south american banks, for example, how everybody stacks up? >> well, at this point we're in a position where the emerging market country banks that weathered the crisis quite well are well capitalized, although i think there the concern is at least in some pockets that there's a lot of credit growth and they may be leveraging themselves up a little bit in ways that are not that healthy for their domestic economies. i think as i look at the transatlantic economies that what i see is quite a lot of variation across those economies where the banking systems and some of them have done quite a bit to repair themselves while other ones, i think, have been quite a bit slower. so there's a lot of variation
there. but i think the other thing we try to highlight in the report it's not just the balance sheets of the banks that are the issue. it's also the fiscal authority where virtually the entire advanced economy of the industrialized world, those economies have governments that have their fiscal trajectories on unsustainable paths, something that's been made worse by the financial crisis because of the supports that are needed for the banking system. >> steve, today spain has officially asked for a bailout of its banks. they are full of sovereign debt that is not going to be made whole. referencing the point you were just making. how do you see this working or do you see it working? >> well, i mean, i think what our position on europe, i think, is pretty clear at this point. i mean, the balance sheet problems that i describe in the banking system and also in the government exists with as well
in households and firms. in europe you have this confluence of all of these things going on at the same time. and there's a bunch of different sort of adverse feedback loops. the term i like the best, there are a bunch of vicious cycles in this where all of this is feeding on each other. you pointed to the banks and the sovereigns but it's much worse than that because it also involves the private nonfinancial secotor. and they need to try and break this. >> steve, it's michelle -- >> the quickest way to break this -- yes, sorry? >> spain is emblematic of all the things you've just talked about, denial for years by the government, piece meal when it comes to recapitalization. the day they did something for the third time and they said we're going to need $9 million, by noon $15 billion, by the end of business 19 billion euros. am i overstating it when i say
this is about the absolute worst way to deal with the banking crisis? >> well, i think things have been done as you point out in small steps in europe. i think that we could all hope if we went back, as is the case with a lot of things that we might be able to do it differently and i'm sure the people involved feel that, too. i think that looking forward, though, the question we need to ask is how we build the right in europe. build the right framework. and what we would argue is you start with a comprehensive look at the banks. and i think the simplest way to put it is that we really have to have banks that are in the euro area be euro area banks. and what that means is the customers of those banks both on the asset and the liability side have to look at banks in one euro area, in one part
geographically similarly to the way they would look at a bank in another part of the euro area. and that's not true today and that, i think, what you are describing is symptomatic of that. and they need to move quickly to make it so that this is quite different and so that you don't see the deposit flows across national borders that we've been seeing because the depositors especially will feel that they're just as safe in one euro area bank as they are in another euro area bank. >> becky asked about the issue with sovereign debt. regulations up until now had said sovereign debt was risk free and mortgage debt was considered higher quality debt than other kinds of debt. do you think to any degree that we are in this crisis today because of regulations like that which cause banks to over indulge in certain kinds of products like sovereign debt. >> right. i think -- i mean, we're in this for a lot of different reasons.
and i would list that along with private sector incentives along with it. i don't think i would just point to regulation as being the sole cause. what you describe certainly didn't help and it's the case that risk management processes inside of banks designed to meet regulatory requirements which in a lot of cases allowed banks or encouraged them, as you point out, to do things that have turned out not to be terribly well advised. our hope,hope i think at this p, is that we can learn from this and go forward and we have to be very clear, though, that the risk management processes, that the risk weights, what you are referring to, the riskiness of the assets, be properly recognized on the balance sheets of banks and be properly priced. >> steve, we're going to leave it there. thank you for joining us first with this report. we appreciate your perspective
very much this morning. >> great to be with you. thank you for having me. when we come back, the highest court in the land is set to make the most awaited decision of its session. health care and the supreme court. what it means for everything from health care stocks to the presidential election. we have congressman peter welch and congressman michael burgess who are squaring off right after this. [ male announcer ] every day, the world gets more complex. and this is what inspires us to create new technology.
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along with becky quinn and michelle caruso cabrera is in. >> we get to listen to john mel and camp. >> he doesn't like john m mellancamp? in talks to buy the 50% of corona beer maker is inbev. it could top 0ed $10 million and the deal could come as soon as this week so you could drink your stella with your corona all owned by anheuser-busch. >> the family that controls corona never wanted to do this. >> there was a whole deal three or four years ago when they bought the first 50% and now they're buying -- >> i'm talking personality wise. something has happened here behind the scenes. >> maybe in the 7:00 we can talk about it. i was making some phone calls this weekend. part of it was how it was originally structured so this day you always knew was going to come. also research in motion said to be considering splitting up
its business in two. that's what the "sunday times" is reporting. that is probably the valuable component. are you going to get a new blackber blackberry? >> i want this one to work. >> completely bust smd. >> you can't turn it on. >> lisa will be getting an e-mail from me very soon. >> another possibility is to keep the company together but to sell a stake to a larger technology firm. of course those options seem to be dwindling. the final week of the quarter is what we were just looking at. take a look the future equities, red arrows across-the-board as we walk into the week. dow looks like it would open up about 85 points lower. the s&p 500 off about 12 points. >> the supreme court could rule as early as today on president obama's health care plan. the judges looking into the
constitutionality of the overhaul. talking about the possible fallout of a decision. mi michael burgess of texas, a medical doctor, and peter welch of vermont. good to see you. i will ask you a similar question but kind of the opposite and you'll understand when i do it. representative burgess, if we get this, and you're here in studio so i will start with you, if they do not overturn health care reform, what's the first move for representians? and representative welch, if it they do overturn the mandate. >> this thing has never enjoyed popularity with the american people and i think you will see the speaker said if it doesn't happen then we will, once again, renew the efforts towards repeal of this legislation. look, this was a bad product start to finish. the rough draft got signed into law. the senate put something out on new year's eve -- i'm sorry, christmas eve to get out of town before a snowstorm. it wasn't the finished product but then they lost massachusetts. they didn't have a 60th vote and
peter and i were together in early january of 2010 and i think the consensus was then, yeah, we are going to come to a conference and get this thing worked out, but it never happened. and as a consequence very bad. it was essentially let's make a deal and it got signed into law. >> representative welch, if the supreme court -- and let's focus right on the individual mandate because that's the thing that holds this linchpin here. if they overturn that, what's the first move by the democratic party? >> well, really there is no plan "b" because if it's overturned then we're back to the insurance driven system which has really been a very, very significant factor in having the kospi be very, very high. one of the biggest challenges we have in health care is not only that access is denied to 45 million-50 million people but is faster than the rate of inflation. the big goal of health care is to arrest that rate of growth and make it more affordable.
>> go ahead. i hear you. there was a grown that caan tha of you. >> painful to hear talking points and soundbites. that's not true. look, one thing we were asked to do as members of congress by our constituents, was don't do it, first off. if you're going to do it, don't mess up the system as it works today but if you're going to do anything at all, help us with cost and what has happened. we have messed the entire system up from top to bottom regardless of what happens today on thursday. there is going to be a lot of digging out that has to be done. but what's happened to cost, peter? it's gone through the roof. if just the individual mandate is struck down, all of your other stuff stays in there, your medical loss ratio, all of the market inhibiting activities that the senate put in there is still going to stay. >> the goal -- the goal of michael and the others is very clear. they wanted to repeal the whole thing and that means some of the very good insurance reforms like our kids staying on our policy until age 26, not being thrown
off insurance because you get sick, are not being denied insurance because of a pre-existing conditions, all of those are gone as well. also this individual mandate, it's much like social security in a way. social security everybody is mandated to pay in to the social security fund for mandatory retirement. >> if they work. >> everybody is covered, everybody pays. that's right. health insurance, if everyone will have access to health care, my view is all of us have to help pay for it. >> if you don't work you don't pay into social security. if you don't work, you are going to be required to have health insurance, right? so there is a fundamental difference there. >> but you get subsidies. >> but the mankadate is a very different thing. >> the mandate is different technically but it's not different operationally. in social security whether you want to have a retirement system or not, you have to pay into it. >> does it bother you, senator -- >> does what bother me? >> when the white house proposed this, their mission was to reduce the amount of money spent
by the government on health care for americans. and when you read the cbo report, they were very clear about bending the cost curve and controlling costs. and when you read the original cbo report, they make it very clear that government spending on health care, under health care reform, goes up. >> you had 45 million more people that are going to be cover covered. >> just admit it does not lower the cost, though, of government spending on health care reform, right? on health care. it goes up. you admit that. >> it's the net cost of the country. the problem we have now among other things if you have an insurance policy that you pay for about $1,100 premium is to pay for folks who show up at the emergency ram and have no health care coverage but debt coverage. in vermont if you get sick, you show up and they're going to take you in whether you have insurance or you don't. there is going to be a cost and that cost gets shifted on to
folks like michael or me or you, anyone who has a health insurance policy. >> congressman, the overall cost is going to go up. it's not going to go down as a result, correct? >> the overall cost -- >> the overall cost if you're going to add $45 million. you have to get the cost per person down. health care is inkred play expensive. i don't care if you pay for it with an individual mandate, the employer pays for it or insurance pays for it. if the cost is going up two or three times the rate of inflation as it has in some years, that is going to be very, very tough on the economy. we're pushing towards 18% of the gdp to cover health care and that's not sustainable for our employers. >> will were plenty of other things that could have been done other than this. and let me just say about that issue, yeah, they do, but it's a little bit. what really drives the cost up is the medicare and medicaid which never pay their full freight so hospitals and doctors are left -- >> how does that work? if i go to the hospital i pay -- my insurance pays $1.25 of my $1
of cost because medicare is paying 85 cents of their $1 of cost. but directionally i'm right on those numbers? >> correct. and that is the real problem. what bothered me at the supreme court when i went to the oral arguments on the individual mandate, the uninsured are driving the cost you up. they are but it's at the margin. what really is driving the cost up is government interference in health care and the fact they don't pay for what they have promised. >> the actual cost. they're not paying for the cost. their costs are too high to begin with, right? >> when you talk about high costs, look at 2014. when the subsidies can kick in and the exchange and people who earn $85,000 are going to have their insurance subsidized by the government if their employer drops them, and i promise you they will, this cost goes through the roof. no one has any idea -- they talk about $1 trillion orred 2 trillion this could cost $3 trillion to $5 trillion.
>> representative welch, one last word. >> if you have a fee system where it encourages volume, that is going to promote volume and then that's the major factor why we have such high health care costs. the system is to do more services even though that doesn't result in better health care outcomes. so whatever system you want, moving towards care organizations, moving to pay for performance rather than fee for service, these are the things that have to be at the heart of bringing the cost down and equality up. >> why not shift a small part to the individual? wouldn't that shift incentives a lot if people had to think just a little bit harder about whether or not they were going to do something or where they were going to get the service provided? >> absolute ly it would. >> representative welch? >> that would be part of it. i do. >> all right. we can agree on something. gentlemen, great to have you here. representative, thank you for coming in.
we appreciate it. thank you so much. all right. if you have any comments or questions about anything we've been talking about here this morning on "squawk" e-mail us. when we come back, the lessons of leaders. we will be joined by the author of the book "the transformative ceo" and one of his subjects, aflac ceo dan amos. monday morning sports news for you. arizona beating two-time defending national champion south carolina, 5-1, last night in the opener of the college world series finals. here we go. next up as we head to a break, a look at last week's winners and losers.
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welcome back. were you watching the welcome back. were you watching the movies this weekend? "brave" won the weekend box office $80 million in ticket sales. >> wow. >> the 3-d film is set in scottish highlands centers around a horseback riding teen princess who defies her mother and her kingdom's traditions. the movies brings the 13th consecutive number one opening to disney's pixar. did you see this? >> i didn't but i want to. go girl. >> over the week the bbc was running all kinds of stories about how this would help scottish tourism. >> really? >> i believe it. >> supposedly. >> did it help -- "harry potter"
helped universal. >> for sure. all right. a new book that's out takes a look at what we can all learn from the world's greatest ceos. the book is called "the transformative ceo." the author of the book is be robert reiss. also dan amos of aflac. great to see both of you. why don't you lay out what the transformative ceo is. >> well, a ceo's skrjob can be boiled down in two words, how to get from here to there. the greatest ceos are transformative and i define transformative as a ceo who creates new value that reinvigorates the company, reinvents a company, or reboots society. so what we really wanted to do, i believe, ceos have the answers. we wanted to disseminate ceo which wisdom in hope of elevating the economy. >> dan is a frequent guest of "squawk" and so we know him well. why did you choose him as a
subject is matter for your book? >> because dan is transfo transformative. dan, his stock has outperformed the s&p by 1,251%. he's gone from $2.7 billion to $ $22 billion in revenue, but really what he's done, one of the key tenets of the book, is to take obstacles and turn them into opportunities and that's exactly what you've done. >> what's one of the obstacles? we know about a lot of things where the duck and the voice and how everything that came -- how he's moved into japan and what happened, i guess, last year. was it last year with the tsunami? >> yes, it was. as you know, 75% of our business. so all of a sudden that's going on, i'm trying to figure out how to get over gentlemjapan. people wondered how it would affect our stock and i've always said bad news does not improve with age. get it out as fast as you can. but you didn't want to get out something until you knew as much details as possible. and then in the middle of that
gilbert gottfried tweeted and we had to let him go. that was something that could have turned out really bad for us and in creating a new aflac voice and what we did with it ended up giving us a lot of advertising and a lot of good press. people realized that we didn't put up with that. >> and you didn't sweep it under the rug. it was public about how you did it. you went out on a big search to find the new voice and almost turned it into a positive from a negative almost. >> well, we felt like we did and it all worked out and the japanese were happy we took a stan stance. >> robert, you look back and say, yes, it was absolutely the right move when you're looking at these transformative ceos, how long does it take to say, okay, that was the difference, you do this real time or something you have to look back at the record? >> i think it's different from
every opportunity. but i think what you have to do is look and when you say there's an obstacle it can be a significant opportunity. and one of the things dan also brought to the book, and there were 44 ceos and jeff fox, my co-author, a great storyteller, which is why i got him involved with this, is that he brought in new thinking on risk management. and if we can get the three questions that he outlines in risk management, more ceos can become successful and ultimately that's how we turned around the economy, the ceos are the ones creating jobs, creating strategic direction. talk about the risk is great. >> i really learned it in college. risk management course. don't risk a lot for a little. don't risk more than you can afford to lose and consider the odds. and you can take that in context to anything you are going to buy, anything you do, even your personal life, you know, should i be over there, is that good, is it not? >> it's so basic and yet so few
people do it. >> and i do it in everything that i do in life. i think it's a good -- don't risk a lot for a little. don't risk more than you can afford to lose and consider the odds on it. and you can use the aflac duck as an example. when i first did it, don't risk a lot for a little. it was going to cost a million dollars to make the ad the first time. don't risk more than you can afford to lose. well, we could lose it. we wouldn't like it but we could lose it. and consider the odds. the odds are it's going to work. >> is there a misstatement you ever made? did you ever not not heed your own wisdom? >> no, i pretty much stick to that. if you look back and say what have you done, there have been minor things but, no, i don't risk a lot, more than i can afford to lose. never do that. >> in retrospect you look at the duck, oh, of course it was brilliant, so smart. but at the time i can't imagine selling it like we're going to have a squawking duck advertise this new insurance a lot of people don't have. it must have been a risky moment. >> a squawking duck. it really was because i tried to
explain it to people before you ever saw it and there was this blank stare. >> explain it. >> aflac! >> aflac! >> good luck explaining that. >> the new guy has a different voice. it doesn't have the same quality. >> believe it or not it's very close because i've listened to them a million times, it is very close. >> have you talked to gilbert? >> no. >> has he called in to say' proves of this new voice? >> no, i haven't done that. >> dan, we thank you very much for joining us and robert thank you for joining us and talking about the book called "the transformative ceo." we appreciate you on today. coming up at the top of the hour, "squawk box" is in session, our guest host is the chairman of the house financial services committee spencer bachus. plus jim o'neill, goldman sachs' rock star telling us how he's
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set of "jeopardy!" this summer for their next season, so it's always good news. i don't know if we have a shot but david faber winning earlier, a month ago. >> he did really well when he was on "jeopardy!." >> my favorite "saturday night live" skit involves alex trebek with sean connery. it's a nice suit. why, thank you, sean. do they make it for men? >> that's probably the only line you can repeat from that skit. >> exactly. i love the front page of all the newspapers, the egyptians celebrating the outcome of the election, there was a lot of doubts what was going to happen, people in the state department and some in washington unhappy that an islamist won but i think you have to celebrate the election happened, they've got a leader and seizing their own destiny after years of dictatorship, and the egyptian stock market is rallying. they had to shut it down because
it soared so dramatically. >> you get a vote, they wanted to see democracy. >> you want to talk about apple? >> you can talk about apple if you want to do that first and then come back to this. >> reading this story i don't know if you saw it in the "new york times" by david siegel, talked about how little apple workers at the stores are making. they make about $11.25, $11.50 an hour and compare it to people who get paid a commission and more and lamenting these were lower wages for what are astronomical sales. >> and a skilled group of people. >> some of the people are selling $750,000 worth of merchandise in a year, and part of me thought you know what? it's not exactly like selling a watch or a piece of jewelry at tiffany's, different story. when we come back spencer bachus will join us. stick around. one that continually monitors and corrects for wheel slip.
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europe watch, how doubts about the upcoming euro summit will affect investors here, jim o'nearly of goldman gives us a preview of what's ahead. waiting on the supreme court, the fate of the health care law waiting in the balance. what the decision could mean for america's debt and taxes. we'll talk to one of the original authors of president obama's health care law. the second hour of "squawk box" starts right now. ♪ you better call me a doctor, feeling no pain ♪ ♪ overloaded, down the drain ♪ somebody give me a doctor good morning, everybody, welcome back to "squawk box" on cnbc i'm becky quick along with andrew ross sorkin and michelle
caruso-cabrera. while the cats away the mice will play, we're playing all the music he has banned, starting with bruce springsteen, playing john mellencamp. you got requests, send them in, we're taking all and everything this week. in the futures you will see there's dow down by 76 points, s&p off by 11, coming as we worry about what's been happening in europe. we did see stocks in the red in europe and stocks lower across the board in asia. investors have been watching for the latest of developments of what's to come. spain officially requested banks up to 100 million euros the final amount set later, all of this is happening as european leaders get set for a widely watched summit later on thisique. the plan for a fiscal union is among the topics of discussion although details of the plan are reportedly being worked out. there are hopes for the overall success of that summit being somewhat diminished at this point. however because neither greece's
prime minister nor the finance minister will be attending due to medical issues. andrew i send it over to you. >> for more on europe and the global economy, everything that happened over the weekend and everything that may happen next weekend we have the rock star, what else can we call him, i don't know, we can vamp, jim o'neill, chairman of goldman sachs asset management joins us on the "squawk" news line. good morning to you. >> hi, how are you? >> where are you, sound like you're calling in from i don't know where. >> i'm actually in london on my mobile in a cab rushing to a meeting, so i apologize. >> we'll take what we can get. walk us through what you think we're going to hear this weekend. is there any good news that could possibly come out of this? >> well, starting the week off i guess the best news is people seem to have very low expectations and continued by past performance, it's a
justifiable stance so it's a lot better than going into it believing they're going to come up with solutions for all the short, medium and long-term challenges. i think the most realistic thing is quite a lot could be said about a banking union which actually in the medium to long-term is a very important positive but i worry they're not aware of the fragilities of the interplay between market psychology and the lack of urgency. >> it seems the market doesn't have the same sense of fragility or lack of urgency. for more than a year we said one of the big eurozone countries decides they need a bailout all hell will break loose. we know spain will do it. today spain officially asked and okay the dow is lower but we're not seeing near the volatility and the craziness we saw a year ago and still the averages are at levels i don't think anybody would have expected at this
point? >> it goes to one of my favorite hobby horses that europe doesn't run the world. i don't want to repeat my usually things about it but lots of other issues are going on in the world and it doesn't begin and end with europe so the markets are right to have a lot of concerns about the issues but just as importantly to the s&p especially in my opinion if what's going on with weekly job claims and the growing evidence some momentum in the u.s. is being lost, that concerns me more than this european stuff. all of these various outcomes and options have been so discussed by virtually every human being on the planet, i'm not sure that the european thing is that important for non-european markets going forward. if what's going on with the u.s. and china are two huge important things. >> walk us through where we are in the u.s. in the markets if we've done this before, if my mother called you and said what
am i supposed to do with my money, the thaens morning would be wh money, the answer this morning would be what? >> i think we're continuing shopping through this summer. the u.s. lost with the trend of the pick-up in job claims and jobs are usually the leading indicator of the market. against that because of the collapse in oil prices had a big effect in the u.s. and else where. something that's capturing my eye, the four bric countries have become popular in india, where some oil is made. indian markets are resilient as of late, might be due to the big drop in oil prices. second half of the year, unless europe completely implodes i'm still in the camp that the markets recover, particularly the u.s. and some of the big markets and we could conceivably
see new highs so we shouldn't get solely focused on the european stuff. >> but jim, is there a connection between the two, the sense that there is this loss of momentum in the united states, is it related back in some sense to what's happening in europe? because we have a lot of ceos who come on and say they have seen orders slow there, that it could have an impact. foreign exchange rates are listed as a reason for some of the companies we've heard here in the united states warning. >> and later on the fiscal cliff, right, for the next of this year? >> who knows. i mean what is also slightly troubling me about the u.s., is that there is this seemingly new, modern pattern where something happens else where in the world and the u.s. seems to share quite quick vulnerability. last year it was the japanese earthquake that had a much bigger impact than certainly i thought it would do and now maybe this is creeping in, but i think it's got something to do a bit more with the lack of self-confidence amongst some corporates about things in the
u.s., because there are parts of europe very close to and doing fine. poland for example right next door to it, switzerland is doing okay. it's tough to believe the euro is causing companies to be worried but somt something they easily cite if they want to find a reason to be more cautious. >> some argue health care reform raised the cost of hiring an employee, one of the reasons why we haven't seen job creation in the united states. if we see the individual mandate overturned or some big move by the supreme court today, does the market rally and if so for how long? >> that could be an important thing. in my role i chair as cio, we have all of our portfolio managers constantly asking the bonds equity guys, what are the conditions why corporates would
or wouldn't employ more people in the u.s., the uncertainties around regulation and health care policies are things that come up frequently. but that could be important, as of course it will be in this context, issues that relate to the election, and the election jaut come. >> jim i want to drill down on something you said before, this idea that multinationals might be using europe as an exchange. i'm thinking of procter & gamble and other companies that cut forecasts. you're saying they're pointing to this because they have nothing else to point to? how do you explain it? >> well, you know, if europe was hurting, you know, these other countries so much, why aren't those countries, you know, all of them who are closest to the eurozone suffering? second thing that, because of the uk, this is a huge thing, the weather in the uk is a convenient excuse for everything. second thing is for the u.s. and for the uk, the places that
really matter in the eurozone are places like germany or greece, so i can't imagine for some of these companies you just mentioned and others that problems in greece are a big cause of inclement business to be honest. >> before we let you go, we had, you probably couldn't see it because you were in the back of a cab but we had it up on the screen the speculation you might be in line to be the next mervin king. your comments, your thoughts? >> the head of the central bank of england, i apologize. >> nobody's asked me about it yet. >> that's not the point. the point is if you were asked and the speculation is, would you take it? >> oh, gee, why does this keep coming up? i don't know. i'd certainly have to give it some thut. >> do you have to apply for this job or get the phone call? >> it's that time, guys, i gotta go. >> oh, see, the mobile connection. >> thank you.
>> it's the connection foron the phone. >> thank vodaphone. >> jim, thanks very much. >> that was funny. >> that was funny. >> he probably is named jeeves over there, they really are jeeves. >> he's in a black cab, there you go. coming up next we welcome spencer bachus for the remainder of the hour, he's already on set you can see him, we're going to cover it all. plus obama care in focus as we get set for a ruling by the supreme court, expected maybe today, 90% chance today we'll speak to ezekiel -- i'm sorry, i got distracted by the thunder, holy smokes! ezekiel eman wauelemanuel, brot former white house chief of staff rahm emanuel. [ male announcer ] trophies and awards lift you up.
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and it looks like it's 8:00 at night because the sky is so dark. you may be able to hear the thunder through our microphones, it's incredible. >> you're right, it's all about us. >> galoshes, umbrellas, your burrberry coats. >> and more of the boss since joe is not around. defense contractor lockheed martin reached a tentative agreement with the union representing thousands of striking machinists. vote is expected this week, approval would end a two-month-old strike. rim may split off its handset business. inbev is setting to buy mondelo, who voted corona. the deal could be worth $10 million or more.
>> and briefly to answer your question you said the family, you didn't think they'd want to sell, they had sold 50% to anheuser busch but not to inbev and tried to block that deal and there was a time when anheuser busch was going to the mondelo family to stave off the deal. >> it's always been this drama what's happening in the u.s. versus what's happening in mexico. >> the big question is anti-trust issues. think about inbev. they'll have everything, anheuser-busch, bud light, stella, corona. >> you call them a belgian or brazilian company? >> now they try to say they're a little bit american even. so i don't know. >> brazilians. we'll talk more about this. we're also going to turn our attention, joining us for the rest of the hour is congressman spencer bachus, chairman of the financial services committee and
mr. chairman great to have you with us on set this morning. >> thank you. >> i know over the weekend the republican presidential candidate mitt romney held a huge meeting in park city, utah, for some of his donors and his backers. you were there. >> that's right. >> can you tell us what the message was, what the mood was while you were there? >> i think mitt will be a transformative president. you had "the transformative ceo," i really think he can bring jobs back. this is a jobless recovery and he knows how to create jobs. he's done that successfully. he believes in competition. he believes in the private sector, and private sector deploying capital, not the government, and i'm thrilled to be a part of the campaign. >> obviously the economy is going to be a huge issue for the campaign. we've been watching the jobs number every week for the jobless claims, every month for
the government jobs number. what's the sense you get from talking not only to your constituents but to other congressmen to hear what they're coming back across just in terms of how things are going right now? >> when one out of two college graduates in the last two years doesn't have a job, there's a lot of frustration, and we've always been able to get a job in america, and you know, a job and education. part of it i think and governor romney talked about our education system, k through 12, and what he said, which i've been concerned about for a long time, was you can't have a second rate k through 12 system and have -- you can't be a leader as a country. >> agree, but that is a long-term structural problem. what are things that can happen -- >> it is but it's amazing, becky, how you can make changes and within two or three years students perform at a much higher rate and you see that in inner city schools. >> what type of changes are you talking about? >> well, charter schools or
teacher qualifications, you know, not necessarily money because some of the poorest performing schools have tremendous administrative costs, but you know, in birmingham we just had the state take over the birmingham city school system because of the poor performance and the first thing they did was say you need to eliminate half the jobs in the central office. that's where the money was going. >> you're going to do new orleans, is it a lot more charter schools and school competition, et cetera? >> yes, people like bill gates, there is a model out there, and i've often said if president obama had picked education instead of health care, not that we don't have tremendous problems in health care, and we will even after this decision. i mean this decision is not an end. it's a beginning of a new debate on how to address health care. but had he addressed k through 12 and made moves there, but i
don't think he could, because of his base. >> the unions would have fought him tremendously, charter schools and school competition is an athema. >> in fact, one of the things i think we make a mistake on, people are, this is even in the great depression, people are staying out of work for the longest period of time ever in the history of our country, yet they can do that because of unemployment extends so far out, so many people are sort of playing the system. >> is there anything to be said about the fact that we just lived through a banking crisis and therefore, we need to work on bending the cost curve, potentially bank regulation, which i know you're against dodd-frank. education is a great thing, everybody agrees but it's a long-term solution, even if you can eke out something, it's a 20
or 30-year project, the question is could you get the results quickly we might need from an economic standpoint today? >> with banking let me say this. we're not through the banking crisis. i think the banking crisis is going to continue to grow, just because the government's micromanaging of the, of financial institution, it's not just banks. it's spreading the insurance companies. >> but the financial institutions got themselves there to begin with. >> what is that? >> the financial institutions got themselves in trouble to begin with. >> some of them. i think you had a housing bubble, you had a lot of encourageme encouragement, putting people in houses that never should have been there, underwriting standards, but what precipitated 2008 was just it wasn't pure vanilla mortgage lending but it was this exotic mortgage lending. it was a lack of listen to brokers. it was subprime lending and it shouldn't have been a shock to anyone. i proposed a subprime lending
bill in 2005, but many of the banks which were hurt by it actually opposed the effort by saying we don't do subprime lending. well, their unregulateed afilliates did. >> that's a great point. >> are the banks still too big to fail right now? is the taxpayer still on the, holding the bag if there's a problem? >> i think they are. i think they are. i do. >> how does that influence your thoughts about dodd-frank or your thoughts about regulating the banks, if that is the case? >> well, in fact, it influences me to be more against dodd-frank because the cost of dodd-frank, it will cost the banks a tremendous amount to comply with it, and it will be -- it won't be productive. it won't make them safer. it will just make them less efficient. what dodd-frank does, it forces every bank, every financial institution to a model that is
the sameness, almost like a utility and it does take some risk out, but it also takes the ability to innovate and reward. >> right. >> well, congressman, we want to continue this conversation, you're going to be with us for the rest of the hour and we'll get back to this in a few moments. coming up next, several tornadoes touching down in the tampa, florida, area, traps to tropical storm debby. see it here, what you need to know, look at the impact on oil prices as a result of debby's move to the gulf. "squawk box" is coming right back. i don't spend money on gasoline.
i don't have to use gas. i am probably going to the gas station about once a month. drive around town all the time doing errands and never ever have to fill up gas in the city. i very rarely put gas in my chevy volt. last time i was at a gas station was about...i would say... two months ago. the last time i went to the gas station must have been about three months ago. i go to the gas station such a small amount that i forget how to put gas in my car. ♪ that i forget how to put gas this is new york state. we built the first railway, the first trade route to the west, the greatest empires. then, some said, we lost our edge. well today, there's a new new york state. one that's working to attract businesses and create jobs. a place where innovation meets determination... and businesses lead the world. the new new york works for business. find out how it can work for yours at thenewny.com.
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welcome back to "squawk" on this monday morning. tropical storm debby continues to gather strength in the warm waters of the gulf, the fourth named storm of this young season still well offshore. waves, strong winds and driving rain being felt along the gulf coast. i don't think debby has anything to do with what's going on here but we have some of our own problems in new jersey and new york city, the surf pouring over roads and under beach houses. that's going on in dauphin island, alabama. forecast models still aren't clear about where or when debby could make landfall but the storm has the potential to be a
category 1 hurricane when it does strike. fema's urging all residents along the gulf coast to make preparations. the system spawned several tornadoes and being blamed for one death in southwest florida. we're also watching crude and natural gas a cording to the bureau of safety and environmental enforcement, 23% of the gulf oil production and natural gas production has been shut off due in part to this tropical storm, there are a total of 61 production platforms, 10% of the total in the gulf of mexico. if you have any comments or questions about anything you see here, e-mail us firstname.lastname@example.org and follow us on twitte twitter @squawkcnbc is our hand handle. futures are suggesting lower open, we'll find out what traders are watching next, when we head to the cme. and dr. ezekiel emanuel with his thoughts on obama care, what the supreme court's ruling will mean for the future of the industry, he helped write part of the law.
everyone. among the stories that we are following this morning we're going to be getting fresh housing market data later this morning. economists are looking for new home sales for may to come in at an annual rate of 348,000 units, comparing with 343,000 back in april, that number is out at 10:00 a.m. eastern time. also gasoline prices down nearly 15 cents over just the last two weeks alone, according to the latest lundberg survey. the average price of gasoline is just under $3.48 a gallon across the country. gas prices have come down 49 cents since the peak of $3.97 back in early april. also this weekend at the box office, "brave" came out on top. the animated favor from pixar of disney chalked up $67 million in north american ticket sales, the 13th consecutive movie to debut at number one. the supreme court said to hand down its decision on the fate of the affordable care act.
joining us now is one of the original authors of obama care, ezekiel emanuel, professor at the university of pennsylvania, of course mr. emanuel was a couple of famous brothers, we won't talk about that right now. zeek, thank you for joining us this morning. >> good to be back. >> walk us through, if you could, to the extent that we hear that either all or part of the bill is struck down today and i'm not suggesting it will be but to the extent it is, what happens next? >> well, i think there's no chance all of it is going to be struck down because there's many parts of the bill that have nothing to do with the bill to paying doctors and expanding the health care force. the idea the whole bill is going down as constitutional is simply wrong. the real issue is the mandate and if the mandate becomes unconstitutional, you can still
go forward with most of the bill and indeed most of the expansion of access to health care services, because you can still set up the exchanges that allow people to shop for insurance easily. you still have subsidies, so that people will get some money to offset the high cost of premiums and the estimate by the congressional budget office is that about 16 million people, new people who are currently uninsured will come into the market, that's about half of what would happen with the mandate. so i think from most of our perspectives, this is actually, we still go forward, we implement and the key issue there is to implement effectively. >> how do you pay for it when you don't have collectively everybody putting premiums to offset everybody else? >> good question. if you don't have the mandate you'll have slightly higher premiums than if everyone were in because a lot of the young healthy people would be staying out and that will slightly raise the premiums. >> doctor, some are suggesting
if that part gets struck part and the other part doesn't we could be talking about much higher premiums, no? >> yeah, i don't think they'll be much higher. they'll be slightly higher and a lot depends on how many people come into the system. remember if you think the main barrier is money, is how much people have to pay and the cost of premiums, there are two things to remember. one, there are subsidies in the system that preferentially give money to people who can't afford it and the second thing is that a lot depends on social norming. if the norm is for everyone to have insurance so when they do get sick they're not shoving the bill on someone else, this is a matter of individual responsibility and what i find ironic about this debate is everyone in the country wants people to be individually responsible. if you go around without health insurance you are essentially saying oh, i think it's fine to shove my bill onto someone else. that's unacceptable in america. >> doctor, walk me through the permutations of what the thought process is inside the white
house if this bill or parts of it get struck down meaning this fall or to the extent that the obama administration wins a second term, they approach health care how? >> so i haven't talked to people inside the administration about this, so i'm not going to say i'm speaking for them but i think the game plan is pretty clear, again, a large focus on implementing the exchanges well, making sure it's easy to use and people like it. the second thing is to get out there and campaign with people that it's better for them to have health insurance and there are many ways they can get it and afford it with the subsidies. i think a lot of people don't understand how the subsidies work and the fact that it's going to become much more affordable so you try to set a norm out there. the third thing i think that's important you go around to different states and you encourage them to pass mandates, which is clearly legal -- clearly constitutional, given what massachusetts experienced, and that again encourages more and more people to get into the system. we will then have an interesting
natural experiment with obviously some states, places like minnesota, connecticut, rhode island, implementing a mandate, and other places like texas and maybe oklahoma not implementing a mandate, we'll see which have better health care systems. >> doctor, we have the congressman here, congressman bachus. >> dr. emanuel, when you started talking about the states allocating some of these decisions to the states for state plans, that's what he mitt romney has actually proposed. so i'd be curious to see, would the administration actually go in that direction for subsidies for tax breaks, things of that nature? i'm also curious about -- >> i'm not sure i understand the question. you do have to have a level playing field to the extent that all states have to have exchanges, all states have to have very similar levels and play by the same rules, so i
think all of us think it would be preferable. every health economist in the country, health policymakers that have talked about this think it would be better to of a mandate because everyone would be in the system and there would be no cost shifting, people not in the system shifting costs to other ideas. the individual mandate was developed by the heritage foundation, not by a liberal think tank. this is a conservative idea because it emphasizes individual responsibility. you have to have insurance because you're going to get sick and you need to be able to pay for it. >> doctor, it does increase the cost of health care overall. how do you address this issue of trying to bend the cost curve in. >> wait a second, i worked hard when i was in the administration to put a lot of provisions in there about bending the cost curve and a group of us have come together to think about additional things we can do that we'll release in august through the center for american progress. bending the cost curve is
absolutely critical. it's critical for all sorts of reasons. >> but you acknowledge it didn't happen with this bill? page six from the original cbo when they analyzed it, under the legislation, federal costs would increase by $210 billion. >> federal outlays will, wait a second, that's not a question of bending the cost curve. that's total national spending, that's the key question. >> that's not the way it was defined by the white house, they kept coming out and saying this lowers the deficit, all about federal spending. >> you're confusing issues here. let's be very clear and let me finish. it does lower federal spending. the cbo projected, the federal deficit will be $100 billion lower at the end of the decade, because we make a more efficient system and reduce costs in medicare and medicaid, we raise taxes to pay for this, unlike part d, where the republicans never raised taxes, and we had a big deficit, $400 billion as a
result, so this does decrease the deficit. the second thing is, cost control. health care for the last 40 years has been running above gdp growth by about 2% per year and with this bill, and i think projected into the future, that's going to moderate and come down. that is bending the cost curve. i think there are additional things we can do and we need to look at but there are many provisions in the bill that will bend the cost curve. let me give you three -- one, reducing hospital acquired infections and other mistakes in hospitals like medication errors and falls, that will constrain costs. two, reducing readmissions within the 30-day window, right now medicare patients there's a 20% chance after a hospital discharge they'll be right back in the hospital within 30 days. the bill has incentives to reduce that for hospitals. third these things called accountable care organizations that do a better job of coordinating care especially for patients with chronic illness,
they'll bring down costs so there are lots of provisions in the bill to reduce costs and we're already seeing it. finally with the exchanges, with individuals going in there and deciding which insurance package they want, we know that what they are primarily looking at is reducing their premium and so that will bring some cost pressure down. so i think there are lots of things in this bill that are going to reduce cost pressure and i haven't mentioned electronic health records which will probably bring costs down, comparative effectiveness research. we could go on and on about cost control. we tried almost everything. >> we have to have a commercial at some point so becky has to get something in. >> one thing a lot of people raised concerns about is the incentive plan or the way that employers will be dealing with health care in the future. over the last 50 years or so we've developed a nation where most people get their insurance through their workplace. >> right. >> that's something that came out of the labor union movements. >> no, it came out of the wage and price controls of world war ii. >> over the last say post world
war ii, we have definitely developed a system where most people get their insurance through their workplace. >> um-hum. >> the problem that some people worry about, this will incentivize employers to dump their health care costs and dump their insurance plans and let people get picked up by some sort of national coverage because it's cheaper and a fixed cost. i know i'm going to pay an 8% penalty, cheaper than trying to keep up with health care costs that have been rising 9%, 10%, 11%, 12%, for my business. what's the argument that no, if you like your health care plan, you can keep it? >> well, that's certainly true. he will me make three points to be honest no one knows what the future is going to bring and there's a lot of uncertainty how employers are going to react and i think a lot of it depends on how good the exchanges are. second i was recently in may at a meeting of ceos, about 100 ceos and put the question to them, in five years do you think you'll still be providing insurance to your workers or do you think you will stop
providing insurance and let them get insurance through the exchange? 80% said they're going to still continue to provide insurance and the last point i would make is every health economist, everybody who looks at this thinks that providing, tying health insurance to your workplace is not economically efficient, that the economically efficient thing to do is let workers move around with their own insurance because tieing it to the job encourages job block, lower wages, does not allow individuals to shop for the deal that suits them best >> sounds like you're implicitly acknowledging people would lose health insurance from their employer. >> no. >> which i think ought to be portable that way you're not stuck with the job. >> i'm hoping by saying no one knows the future and we don't know because businesses haven't made a final decision and a lot depends on how good the exchanges are and what workers demand in the end. >> could i ask one question. >> doctor, we have to leave it there, thank you for, on what could be an auspicious day,
we'll see what happens but we appreciate your per spec testify on all of this and of course would love to have you back to talk more about it. >> no problem, take care. bye. when we come back financial services chairman spencer bachus is here and we'll talk about the future of financials. choose control.
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welcome back, everybody, we have a few stocks to watch on this monday morning. overall the markets are indicated lower, looking at red arrows across the board. if you look in the united states, watson, farmer and sheyer, approving adderol xr, the hyperactivity drug. britain had sought to block the generic drug come to market, the stock is off 12.5%. boeing upgraded as investors are ignoring the momentum of the 787 dreamliner aircraft and keep an eye on net flix today the stock upgraded to neutral from cell at janney capital arguing the risk/reward ratio is more balanced after a recent sell-off and downward revisions in earnings estimates by a number of analysts, the stock is up 3%.
>> it's a hold instead of a sell, a real vote of confidence. >> let's get thoughts from congressman spencer bachus of the financial services committee. it's an elephant in the room and i didn't know when i was going to get there but i'll get there now, i got a number of e-mails on it. last fall there was a famous "60 minutes" piece about potential insider trading during the financial crisis, you were trading at that time in 2008 and i wanted to get some of your thoughts and i know you denied the allegations and all of that, but i'm curious more broadly, do you believe that people in congress or the senate should be allowed to trade for their own account at all? >> i do. one thing that i was a focus because i said i actually manage my own account, and but now the charges were false. i traded etfs that excluded all financial stocks. they said i shorted ge. i own ge.
they said i bought a certain option the day after an important meeting when i had bought that option every month as a hedge, 1% of my account every month as a hedge against a down market. >> i think the larger question is -- >> but should we trade okay. >> do you believe you are in possession of either material incentive information or larger macro information frankly that the rest of the country and other smaller investors may not have the privilege of knowing about? >> it's possible and i will say this, in today's political atmosphere, i have quit trading all together, not, you know -- >> but you think that should be a policy for everybody in wa washingt washington? >> probably, or a blind trust. i supported the stock act and had the first hearing on it. just because we need to restore the public's trust in congress, and that's a much bigger issue than our individual right to trade stocks, so i don't trade
any more. my wife has a managed account, in fact, they criticized some of the trades that were made in 7,000 accounts at the same time. but i really believe now one problem, if a member has a small account, a blind trust costs $12,000 to set up, and for some members of congress, they're actually living month to month. >> the utopia in my brain somewhere in libertarianville says if you guys regulated a lot less you'd be in possession of a lot less information and it would be a lot less important. you get involved in health care and banking, you get so deep in the weeds on everything, and then of course you have inside information. you shouldn't even be there in the first place. the much better answer would be to step back and get out of there. >> michelle's absolutely right. >> thank you. >> let's take jpmorgan, let's take jpmorgan. there are now calls that we go in and the government actually
sets the risk modeling or that we need this information. >> that's great the government will set the risk modeling, fantastic. >> will you not have inside information there? >> more inside information. congressman we'll continue the conversation, there's a lot more to talk about banks, mf global and other things but i'm glad we could address this issue. coming up, why you need to watch commodities today. also at the top of the hour the markets looking to open lower this morning. we'll get ready for a big week in europe by talking investments and expectations with two market pros. we have mark grant of southwest securities and barclays head of u.s. equity barry knapp. stick around. we'll be right back. the greatest empires. then, some said, we lost our edge. well today, there's a new new york state. one that's working to attract businesses and create jobs. a place where innovation meets determination...
and businesses lead the world. the new new york works for business. find out how it can work for yours at thenewny.com. i don't have to use gas. i am probably going to the gas station about once a month. drive around town all the time doing errands and never ever have to fill up gas in the city. i very rarely put gas in my chevy volt. last time i was at a gas station was about...i would say... two months ago. the last time i went to the gas station
pay attention to commoditied today, corn jumping to four-month highs as a drought in the mideast -- did i say mideast? the midwest, threatening the supply the global market is relying on a bumper crop to replenish stocks. it's expected to fall to a 16-year low. what is that going to go to soda cost, the high fructose sear imcoming from corn? >> it will please mayor bloomberg, it will be more expensive. congressman spencer bachus is our special guest. we were talking about the "60 minutes" piece and one of the reasons your account had done
well because you owned apple for a very long time. >> that's right. the author of the book had graduate students that were reviewing this, and he actually, one of the most explosive charges he said that i loaded up on an etf that if financial stocks crashed i would make a lot of money. it turned out they were energy stocks. >> it was an energy etf, not a financial etf. there's a big difference. >> i gave them all my records for three years, all my memos, e-mails and they ruled 6-0 that not only did i not insider trading but i violated no ethical rules nor any standards of conduct. >> how long have you owned apple, what price did you buy it at? >> '97. >> you bought it in 1997? holy smokes! you don't need to work. >> i've since sold it. >> you've since sold it. >> when did you sell it? >> '99.
>> oh, okay. >> but it had gone up considerably. >> you should have held that, huh? does that kill you? >> no. >> why don't we get back -- >> i made a lot of it within about a month on some options, so. >> why don't we get back to financial services. >> yes. >> and some of the issues in front of it at this point. you'd mentioned about jpmorgan and some of the issues that have come up. where do you think we head? jamie dimon has now testified. now what? >> jpmorgan, the system worked. depositors didn't lose their money, customers didn't lose their money. it was the shareholders that lost their money. the shareholders lost right now maybe $20 billion, although the loss was $3 billion, so the markets probably overcompensated. but obviously there were risk management problems and on april 13th he said this is a tempest
in a teapot. he obviously, there had to be a lack of communication within the organization, and he's admitted that. he said it was sloppy but there's no threat. that was 1 out of 1,000 of their assets. when it became a big issue, i was the first one that said wait a minute, this is not an aig. this is not going to threaten -- it may threaten their dividend. >> does it have larger implications, though? putting jpmorgan aside and thinking more broadly about the system. you said we are still living in a too big to fail world, the taxpayer is still holding the bag. do you worry about not having risk controls? >> where we have federally insured deposits and discount whether they can borrow at half a percent and then go out and gamble, that bothers me but i think the answer to that is that you require a sufficient amount of capital, don't let them overleverage and you really are
distinguishing between hedging, market making, proprietary trading is difficult to do but i can tell you, andrew, if we limit that, those jobs will move to london and jpmorgan has still made money on proprietary trading. they made money in 2008. they did lose some money but to have rewards you have to have risk. >> we're going to continue this conversation, lots more to talk about. >> no, thank you for joining us for this hour. >> this is it? my goodness i thought we had more time with you, sir. i hope to see you again. >> i don't trade anymore, and today to restore the public trust and let me say this, our biggest threat in this country is the political gridlock in congress. >> congressman thank you very much for your time. >> thank you. >> we appreciate it. we have a lot more "squawk" to come including mark grant and our guest host for the next hour, barry knapp of barclays.
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our guest our guest host for the hour barry knapp from barclays and mark grant of southwest securities and senior european economist the jeffries international. tropical storm debby threatening to disrupt offshore oil production in the gulf. we've got two analysts who will break down the potential impact on the energy companies. the supreme court could rule on health care reform as soon as this morning. dr. scott gottlieb thinks the court will overturn several key provisions. the third hour of "squawk box" begins right now. ♪ here comes johnny again >> welcome back to "squawk box" here on cnbc, first in business worldwide, i'm becky quick along with andrew ross sorkin and michelle caruso-cabrera. joe is off this week. the futures are under pressure,
dow off by 87 points, s&p futures down by almost 1%, a lot of this stemming out of concerns once again about what's happening in europe. you did have spain actually coming and officially asking for aid and that's got a lot of questions about what happens next. >> let's walk you through some of the other headlines this morning, the big one coming out of washington the supreme court are going to meet today and could be issuing those big opinions, president barack obama's health care overall and arizona's immigration law top the list of undecided cases. today is the court's last scheduled meeting until the fall but it's unlikely to be the final session as additional dates could be announced. we'll talk about potential outcomes and their impact later on health care with dr. scott gottlieb of the american enterprise institute at 8:30 a.m. eastern. anheuser-busch/inbev in talks to buy corona, modelo, a
deal could come as soon as this week. leaders preparing to party in brussels for an anxiously awaited sumit to save the euro number six. greece's prime minister and finance minuter is neither one will be there, illness keeping both at home, this will delay a visit to athens by the country's international lenders which was to start today but they have to delay that. greece's foreign minister and outgoing finance minister will ask for the terms of greece's 130 million euro bailout to be loosened. germany is resistant to giving athens leeway. spain requested european aid for the banks but the government didn't specify an amount. you can see that lower by 2% in france, lower by nearly 2% in germany, greece is getting hammered by 5%, so much uncertainty with the illness related to the two leaders, italy lower by 3% so it is a rough day in the european markets. we'll talk about the eu recov y
recovery's european economist. joining success mark grant from ft. lauderdale, managing director at southwest securities and guest host for the next hour is barry knapp, head of the u.s. equity portfolio stroategy with barclays. >> thank you. >> mark, what do you see right now, obviously you've been watching every turn in europe, i get a lot of e-mails from you every day with the latest. what is your sense at this point in terms of where we are in this whole crisis? >> well i think where we are in the crisis is that greece is going to come and ask everybody for more aid. germany made it very clear their finance minister over the weekend that there was no more aid, it was going to be forthcoming. i think they're going to get down to a game of chicken, trying to get more assistance, they want to roll back a number of the policies, roll back the austerity measures.
i think germany is going to say no, and then i think you're going to see a crisis, and i think that's going to probably be this week, if not this week, next week. spain also is in officially asking for more money today. i think ollie wren said we welcome the request, which i found rather strange, but the spanish banks probably need around $200 billion and the regions of spain about $150 billion so i'm looking at over a period of time a request for around $350 billion from spain. >> which is much smaller than what they've officially said they're going to need? i mean much larger? >> much larger. they're asking for it in tran e tranches but if you add up spain's debt-to-gdp ratio it's about 165% if you include the bank bonds they've guaranteed, the regional debt and so forth. so it's a mess.
>> barry, it's bad news but we spoke earlier with jim o'neill from goldman sachs who said europe isn't the only thing driving the globe at this point. he's much more focused and concerned about what's happening in the united states. where do you stand? >> yeah, it's funny, i was in london three weeks ago and went into every meeting and they said things look pretty good in the u.s. from an economic perspective or markets perspective. i said not from where i'm sitting. we're tracking another sub 2% gdp number. the week before last our economist tracking estimate fell from 2.4 to 1.8 for this quarter. i think it's headed further south. i mean inventories boosting gdp in the fourth quarter and first quarter flattened out. auto sales boosted in those quarters have softened and consumption is going to be quite soft this quarter, so we're looking at another really weak gdp report and if you think about the last three years, each year has been the same in the sense we started the year, we were achieving escape velocity, markets have a huge rally, by
the second quarter maybe it's a reinhardt rogafi new normal, it's okay. it left us to de-leveraging risk but in the summer a full fledged recession scare, i don't see how the markets won't flirt with that following the q2 gdp report. >> you're making the point it's about the u.s. spain is asking for all of the money and a year ago that would have been a drop of 500 points in the dow but now it's u.s. data driving stocks? >> no question. that's my thesis throughout the last couple of years the u.s. markets and global capital markets become much more vulnerable to all these de-leveraging concerns when the u.s. growth trajectory softens, when you get worried about the u.s., then correlation goes up and capital markets come under big pressure. for me 1,200 is a likely outcome for the s&p over the next month and a half or so. >> and then what? >> and then at that point we
could be set for a rally through the elections. in 1980 or 2010 type mode, because at that point i would think the probability of a whole new government goes up substantially and if you look at how the markets behaved in 1980, they rallied through some horrific macro economic circumstances. >> what about a fiscal cliff? >> correct, that's the process we're going through pricing that right now. if we go down to 1 00, when i talk about the market pricing and recession risk that will be the number one thing that's cited is the fiscal life cliff is going to fish us off the cliff, the market goes down enough you take earnings estimates down enough, then you get the self-correcting mechanism which is not monetary policy n this case it's an improved public policy outlook with the idea we'll get a new government that can solve our problems. >> most people should take their money out of the market, wait for this correction if you will to happen and jump back in but market timing seize to be a fool'ser rand. >> i understand that.
we've been saying this since march, we've been saying buy the defensive stocks and high yielders and get yourself positioned as defensively if you can. if you get the market as a cheap enough level and the polls look to be progressing that way, buy the industrials, buy tech that, sort of thing. >> this is based on election polls? >> a big part of the uncertainty dynamic and you also need the growth data to bottom out. there are self-correcting examples, for example energy prices are falling considerably. we had better back to school sales that kicked off the fall rallies each of the last two years, but there's a lot, the chinese situation, the european situation, the u.s. situation, you need the data to bottom in the u.s. and stabilize. >> mark, what do you think of the theory we've heard from barry and jim o'neill that it's not necessarily europe that is driving things because we kind of know about the problem there is. europe is still the place that
could be some big implosion for the markets but maybe not necessarily what's driving day-to-day trading as much anymore. do you agree with that? >> no, i this i that it is driving day-to-day trading and you're right, you're 100% right, there are three parts in the scenario, there's china, in a slowdown, there's europe, which is on the edge of the cliff and certainly could implode, and there's the effects of that on the united states. i happen to think that we're in a much more serious situation than some. i think that the united states and the third or fourth quarter is going to head into a recession driven by the problems out of china and europe and i don't think europe is able to solve its problems and as people realize that more and more we're going to see a number of systemic shocks to the system that are going to hit us out of europe. >> i think the fact that the market has not reacted so negatively to europe is that they believe in the central
bank, they believe that when push comes to shove, we see it over and over again they're not going to allow a lehman moment in the final annalysis so we ge years of horndus, awful growth or lack of it in europe because they can't get their act moment but that bring to us your knees moment doesn't necessarily happen. do you buy that or no? >> no, i stru differently. we've had a number of moments, the greek moment, the pour geese moment, the irish moment. >> that's my point, we're still here. >> of course. i'm not projecting armageddon. i'm projecting a recession is driven out of all the problems in europe that cannot be resolved by the ecb and even the fed in our own country when they're at kelvin's absolute zero interest rates there's only so much the fed can do anymore either and i think we're at that portion. i don't think the central bank's help is going to be nearly what it was in the past. >> i love that metaphor or is it
a simile? that's great. >> mark, thank you for joining us. you'll keep us up to date as things change. >> i am. >> barry will be with us for the rest of the hour and we have a lot more to get to him, too. >> i didn't get to say hi to mark but hi to mark. coming up oil companies bracing as debby churns in the gulf of mexico. exxon mobil and bp among those evacuating nonessential personnel from offshore to fa s facilities and we'll ask stephen shork and philip weiss about that. and coming up, dr. scott gottlieb will weigh in on the possible outcomes and what it all means. [ male announcer ] now you can swipe...
win approval from the fda but it didn't require the companies to complete any new studies, instead asking for more info on data verification so analysts say this could only mean a short delay for the drug to still win approval. the oil industry watching a tropical storm threat in the gulf of mexico following the developments, steve schork, editor of "the schork report" and phil weiss, good to see you. >> what was that? >> that was funny, who of that laughing? >> steve we'll start with you, debby in the gulf at this point, what will that do for oil prices? >> oh wow i knew somebody was going to go there. i love it. >> steve? >> right now it looks like the industry has dodged a bullet right now. yesterday morning debby was on path to slice through key assets along the louisiana and texas gulf coast. the storm right now is
scheduled -- forecast to go into the florida panhandle, so a lot of the assets have been spared. be that as it may we are seeing precautionary actions taken by the oil companies up to a quarter right now of natural gas and crude oil production has been shut in, but if debby remains on the path right now we're looking at a minor delay to production and shipping in the gulf of mexico which then creates the scenario, oil going into the houston market area will be delayed but also product being exported out of the market area because of the vessels also being delayed so you have a template for a temporary glut of supply building in the houston area. >> phil, you agree with that assessment at this point? what would that mean for pricing? >> based upon the reports i've seen, too, seems like the impact isn't going to be that material other than what stephen mentioned with the product. in general, to me, the impact of storms like this is a little bit
less than it was a few years ago because we have so much more onshore production, that's something else to consider as well. >> okay, why have we seen such a big decline in prices, steve, what do you think? >> right now i think it's a combination. the market's taken its eye off of supply concerns which are driving prices to unrealistic levels in the first quarter and we're now focused on demand or the demand destruction thereby. so for instance we have here in the united states the cleveland federal reserve has upped the odds from approximately 19:1 to 11:1 that the u.s. will be in recession one year hence. the new york fed upped its odds from 26:1 to 16:1, we'll be in a recession one year hence, that's 16:1, 11:1, those odds are still long but they are much shorter than they were a year ago, a few years ago so it's a poor economy. consumer it's a bittersweet pill. will you see lower gasoline prices but that's being driven by poor economic fundamentals. in europe that situation, and
more importantly china industrial output contracting so we're seeing a contraction in demand throughout the world at a time, remember, we were ramping up supply in the fourth and first quarters to offset the pending embargo from iranian oil. at this point is not the concern of supply but of demand. excuse me. >> it's okay. if you look at the results of the arab spring a little more than one year later, any thoughts as to what that means for oil supplies or oil in general or is that would to big a big think question and not relevant to pricing? >> i think it's a little bit too big when i think of pricing with the middle east. the big thing i think about right now that stephen didn't talk about as much on the pricing front is that concerns about iran and the embargo, they've lessened with the news in europe and the slower demand in china, kind of taking the forefront so that's the other thing that helped push prices
lower. >> if we keep saying the subsequent effect on gasoline prices, how does that play into the way you think about investing? >> i think it's critical. what tended to happen with gasoline prices through the so-called recovery is crude price also run up as they did from the lows from 2000 the, one quarter later you get a negative hit to consumption. the same thing happened last year and again this year, the second quarter weak consumption is a function of the run-up that occurred in the first quarter. prices correct and it will soften and so you'll get some of that back, but this is a reinhardt rogoff view as well, it is a trend but you won't make up for the lost sales so i do think consumption could firm a bit in the third quarter, if we print a 4% number in the third quarter make up for it. i think it's important that we
get to trend. >> what is your assessment of what the price will average out for the year in oil? >> our current forecast is to an average the rest of the way around the mid 80s. >> it's going to have to go up from here is what you're thinking? >> a little bit, yes. >> barry, how does that play into your economic assessment, looking for 85 bucks or something? >> that would be consistent with stabilization and consistent with 4% earnings growth rate we have projected for this year but just fairly tepid by not a recession. >> steve what is your average price for 2012? >> comes into where we started, my forecast at the beginning of the year i'll stick with between 85 and 95. as a trader my game plan was to come in, be a buyer of oil in the low 80s, high 70s, be a seller in the mid-90s. of course in february, when we
shot to 110, 115, i got beat up on the forecast but going forward i think we settled down in the 85, $90 range, a range from a fundamental standpoint where the producer can make money and the consumer can continue to grow and afford those prices so i think that is fair value at this point. >> gentlemen, good to see you this morning, steve and phil always a pleasure. >> thank you. >> thank you. when we come back he is a professor at the nyu school of medicine. we have dr. scott gottlieb going to talk to us about how he thinks the supreme court will rule on obama care and how it will change america's health system. then the eu leaders prepare for a summit at the end of this week. will they soften the terms of the greek bailout? we'll ask jeffries senior european economist. stick around. "squawk" will be right back.
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backelcome welcome back to "squawk box." disney's new animated movie "brave" winning the box office with $80 million in ticket sales. it's set in the ancient scottish islands and centers around a horseback riding team princess who defies her mother's and traditions. you go, girl. "brave" beat "madagascar 3" for
the top spot. coming up a good chance we'll learn the fate of president obama's health care reform in just over 90 minutes. ahead of that dr. gottlieb thinks several provision also be struck down. he'll be joining us next. ole throughout our entire lives. ♪ one a day men's 50+ is a complete multi-vitamin designed for men's health concerns as we age. ♪ it has more of seven antioxidants to support cell health. that's one a day men's 50+ healthy advantage.
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welcome back welcome back to "squawk box." check out shares of teva fa pharmaceutic pharmaceutical. court ruled the generic versions by myelin and momenta pharmaceuticals infringed on the patents. momenta is lower by 20%, taking a big hit. the supreme court's bending decision on president obama's affordable care act is said to be one of the court's most significant decisions in decades. joining success dr. scott gottlieb, clinical assistant professor at new york university's school of medicine and resident fellow at the american enterprise institute and doctor, great to see you. >> thanks for having me. >> it's been a while since we've talked to you on set but it seems no matter how this rules
you'll have an awful lot of questions. >> i think the election will decide what happens longer term because we need to re-legislate. the conventional wisdom the individual mandate will get struck. if they strike it today or on thursday they'll likely strike all of title i, the core of the obama health care plan. despite the fact there was no severability clause in the legislation the supreme court is likely to apply a test of whether or not the legislation itself is feasible without the individual mandate and whether or not it would pass congress without the individual mandate. i think it's you an likely it would have passed without the individual mandate. >> the obama administration said you can't keep parts of it. >> the solicitor general said you have to get rid of guaranteed issue and community rating. that's too clever. i don't think the court will parse pieces of it without parsing the whole thing and it's much cleaner to strike owl of title i. they could strike the whole bill but i think they're unlikely to do that. >> why do you think they'll strike down the mandate? people are jockeying back and
forth. >> i'm not convinced of it. i'm going by conventional wisdom in washington, you talk to court watchers and the right and left, most seem resigned it's going to get struck, even democrats right now. >> what happens if the law stands as is? what does that do for doctors at this point? >> well it conditions to get implemented if the court upholds the individual mandate and the law goes forward. there's been adverse impacts in terms of the practice environment, a lot of consolidation in health care, a lot of physicians become salaried employees. >> that was happening before the health care law came through. >> zeek talked about trying to bend the cost curve. i think the only way you determine that is by determine how you delivering the health care. hmos, pbms, ltacs, skilled nursing facilities, they're small entrepreneurial ventures that tried to move patients from high cost to low cost health
care. nobody is investing in true venture backed companies and health care services. there are no new setups. they go in and cap profitability and go in and say if margins are above 10% we're going to whack payment rates. >> when you think about the cost of health care today do you think the cost being the doctors you say are getting paid less, do you think of it as the actual technology, meaning drugs themselves or different devices or what have you? how do you break down the cost curve? >> i think you need to think about the cost in terms of what we're getting for what we're spending, we're getting a whole lot more health care for what we spend. the idea is to get more health care for every $1 we spend and we're not necessarily becoming more efficient. lot of the costs are taken up by the services, by the hospitals, by the personnel and not necessarily the technology. >> that goes to, so i'm going to argue with you a little bit. the one way to bend the cost curve to shift an ever slight
amount to the individual and have people make tougher choices and people did berserk and -- >> rationing. >> -- rationing and poor people aren't going to have access but a lot has to do with the third party payer. i am never purchasing the service. the health insurance company is or medicare is or the government is or somebody else. >> right. >> if we were more involved the cost curve would bend quickly. >> that's right. someone needs to be cost conscious in the system and it's not going to be the individual, but the government agency paying for it. >> or the health insurance company who will tell you no to a service. >> which isn't transparent to a patient. the most transparent to the patient is the decision a patient makes. if a doctor is capitated which is what this legislation does or the insurance company or the government is making a decision not to provide something to a patient because they deem it costly sometimes a patient will never know the choice they could have had. >> it's interesting when we had zeek emanuel on earlier he laid it out we'll bring the cost curve down because when the
government is paying for everything it will set the rates. your point is that the changes should only be coming from innovation and that will be what brings costs down, is that basically the difference between this? >> shifting more cost to the consumers. >> why has innovation not brought the cost curve down on its own? >> should it raise the cost the fact you can keep somebody alive for much longer raises costs. >> there's additional issues involved. >> i would argue innovation and health care, drugs and devices and health care delivery i'm talking about innovation of services. technology has brought costs down by helping people live healthier lives. it's extended those lives but they're also living better lives. >> they may be more productive and add to the economy. >> right. you have to look at what you're getting in terms of the benefits but if you look at changes in health care, it's undergone rapid change over the last few decades it hasn't come out of hospitals but venture backed companies.
my shtick this administration relied on hospitals to be the "engines of innovation" consolidating doctors around hospitals and making them employees to hospitals where most of the changes that bent the cost curve in the past come out the same way, startup companies and seeker profits, often venture backed that those ideas then became mainstreamed. >> what about turning the entire health care system on its head saying we're no longer going to pay fee for services. you pay fees for outcomes instead as some smaller organizations have tried. is that a better approach for the entire nation to be going to? is it possible to move everyone there? >> it's possible to do it around isolated sort of treatment ensocieties in certain conditions. it will be part for people in health care insure the government and track outcomes and pay for them outside of hospital acquired infections which they talk about. i think we need to change that way health insurance is
structured. there are ways to incentivize people to get into the market with carrots rather than sticks. the administration chose sticks on the individual mandate. you could have given people true portability of health insurance, allowing them to move from workplace to workplace without losing coverage, saying if the state continuously insured they couldn't get rerated and dropped, and those were all incentives to get into the insurance market. you would have had a transition problem and subcy size people getting into the market if they had a shardship and paid for their insurance but that subsidy would have been cheaper than obama care. >> what about low cost catastrophic option? the option was extremely expensive. you tell everybody you can only afford the rolls-royce. >> the option i was given it wasn't cadillac insurance because it mandates coverage people don't want and doesn't mandate a lot of things people do want. you need to give people true
choice, catastrophic insurance or hsa as this plan outlines. it's an insurance pact market that gives people choice of insurance much like you buy life insurance. you want to stick with it. >> what are your thoughts on medicare and the defined contribution versus defined benefit model that paul ryan has been arguing we need to morph towards more of a defining contribution and what role does medicare pay? >> we have to more to a more premium support contribution model. it will probably take another election cycle to get that built into medicare and it's not going to affect current retirees or about to retire but it will restructure the program in the future. >> the microsofts of the world never started defined benefit plans. it didn't make sense. you had to assume you were growing at a linear rate for perpetuity, right, so that to me seems sort of inevitable. >> you said some democrats are
on board with that? i haven't heard one yet, instead they run ads pushing granny off the cliff. >> ryan wyden. >> okay, one democrat says we have to shift to defined contributions in medicare. it's a start. >> there's certainly not an overwhelming consensus. i think you'll get enough people and a closely divided republican senate which has more than 50 votes i think you'll peel off enough democrats for that, you might get 60. >> anything we do on entitlements has to be done on a bipartisan basis, one of the great lessons of affordable care. if one party does it you make it the other party's mission to destroy you. i think the market will play a big role in medicare, medicaid and social security reform next year no matter who wins the white house. >> you have to change the structure of medicare and move toward the premium support model and change the structure of medicaid and nothing in the
obama health care plan restructured the programs. >> medicare is the whole debt sustainability problem. >> we have a lot more ahead to deal with this. dr. gottlieb we hope you'll talk more about this. when we come back we'll tell you about the latest scandal of the day for chesapeake and what it's doing for the stock. also greece will try to negotiate more favorite terms for its bailout without its finance minister. jeffries senior economist will join us after this. people with a machine.
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from where we closed friday. s&p futures down by about 14 points. this is all coming out of concerns about what happens in europe, but if you look at some individual stocks you get some stories that are moving there independently. one of that is shares of chesapeake which have come under quite a bit of pressure down 3.1%. the company reportedly tried to suppress land prices in michigan. >> craziest story. >> at one of america's most promising oil and gas plays and if you read into the details, it gets a little whacky. 'ro reuters is citing notes from aubaub rey mcclendon. in at least nine prospective deals with private landowners there it's the details that are so shocking because apparently mcclendon in one of his e-mails said it was "time to smoke a
peace pipe if we are bidding each other up." reuters went on to talk to a former an lie trust lawyer for the department of justice, says the famous phrase as a smoking gun, that's a smoking h-bomb. this is getting attention. >> reuters has been killing it on the story. i don't know if they have a secret source who handed over hard drives but there is e-mails and its extraordinary. >> it does seem to be moving the stock today. >> yep. the greek delegation to this week's key eu summit will not include the new prime minister nor the new finance minister, both are hospitalized. prime minister samaras underwent eye surgery saturday and the finance minister was hospitalized for nausea before he could be sworn in as finance minister and they will not attend thursday. the foreign and outgng finance minister will bear the burden of negotiating looser terms of the bailout. joining us from london is
marchel alexandrovich i practiced it eight times. marchel great to have you here. >> thank you. >> is this the fifth to save the unit or the sixth? >> i think this is number 14, every few months we meet and get nothing. >> i was joking but you are serious, this is the 14th time. >> i think it is, yeah. >> maybe it's working. >> it's not working. i mean if you look at spanish yields it's telling you everything you need to see. it's not working. they've been dragging their heels so really same old same old out of europe. >> ultimately we care about the impact on the markets here in the united states. we're very ethnocentric what, will that mean for our economy, et cetera. there's been a narrative out there which is, look, spain, one of the four biggest economies in europe is asking for a bailout today, and a year ago that would have been a very frightening prospect and now markets are lower, but it's a little bit more of a yawn than it would
have been. why do you think that is? is that a correct reaction by the markets? >> i'm not sure that it is a correct correction. at the moment they're waiting for thursday and friday to see what emerges from the summit. if we get nothing my fear is we come into work next monday and it's meltdown. at that point there's a realization it's not really about a mini bailout for spain, they get a bit of money upon their banks. nobody wanted to touch spanish and italian debt and both countries get a proper bailout in the mold of greece, portugal and ireland. that changes the story completely because then you're talking about haircutting of spanish and italian bond holders which changes the game completely. >> but ultimately doesn't the ecb step in and prevent the cataclysmic meltdown that everybody fears? >> well, i think you have to be realistic of how much the ecb can do. if you wind the clock back to
last august, sub buying spanish and italian bonds through the s&p program didn't work and it got to december, that didn't work. now we're sitting here in june thinking right, what's next and the point is ecb can't save us. they don't want to get drug into all of the political decisions. the future of europe is in the hands of the politicians. draghi has been saying he wants the pop tigss to deliver on the future of europe, he needs to get the vision of europe before can he do monetary operations. we have no idea whether it will be around for one or two years from now. it's not conducive for markets to function properly. >> i've had a series -- sorry, this is barry knapp. i've had a series of frustrating conversations with people recently, they tell me the esm or esfs are going to buy spanish debt and take up the s&p but
there's $100 billion spanish debt in foreign hands, $500 billion of italian debt in foreigner hands. are they really going to buy that whole 600 billions to drive it down to rates that works and does that resolve the core of the issue, labor cost, uncompetitiveness. i'm curious for your thoughts on that narrative, which is like i said i'm sort of frustrated by all this. >> in the near term the issue is how much fire power esm has. they do not have a lot of capital paid in, something around the region of 80 billion. if you turn around the next press conference we have on the 5th of july, draghi floats the idea of possibly getting a banking license and changes the story completely because we have esm that buys up government debt, brings it back to the ecb and ends up buying more government debt. it's not necessarily about the amount of fire power. there has to be a commitment this idea that esm will take on
the risk of holding spanish and italian paper and obviously it's germany that stands behind the esm, they have 30% of paid in capital. they have to pay for it all. that is the first part of the issue, you're right. >> part of the bailout money for greece is so greece can put money into the bailout fund which is ridiculous. does greece get more leniency, marchel? >> i think does. the greek people voted, we have stability for hopefully the next three to six months and maybe that's good enough for thousand. we need to resolve the situation in spain and italy and undoubtedly it returns to greece, whether greece stays in or out of the euro but hopefully we'll get through most of this and return to it in 2013. it is about spain and italy taken has been for a long time and now we're getting at the crunch point. >> i apologize for laughing. we get another three months out of this. marchel, thank you so much. i was joking. there really have been 14
summits of the year. >> doesn't even matter at this point. coming up stocks on the move this morning ahead of the open, we probably talk chesapeake but we'll head down to the nyse exchange next to talk to our good friends at "squawk on the street." sometimes investing opportunities are hard to spot. you have to dig a little. fidelity's etf market tracker shows you the big picture on how different asset classes are performing, and it lets you go in for a closer look at areas within a class or sector that may be bucking a larger trend. i'm stephen hett of fidelity investments. the etf market tracker is one more innovative reason serious investors are choosing fidelity. get 200 free trades today and explore your next investing idea. recently, students from 31 countries took part in a science test.
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welcome back to "squawk box." welcome back to "squawk box." the bidding war over quest software continues. quest has now received a bid of $27.50 a share in cash from an unnamed bidder. an agreement was struck for $23 a share. then came a $25.50 bid from a computer company. insight came back with $12.75. now the latest bid of $27.50. let's get down to the new york stock exchange. carl, melissa, jim and david -- >> the whole crew at one time? >> i know! guys are you watching the
individual stocks, have you seen the chesapeake news? >> i love jim's comment friday that maybe it's europe that provides the positive this morning. and it's the scotus that provides the negative. >> look. the talk about armageddon. a guest said a moment ago, monday, tuesday will be armageddon. whenever someone thinks there's armageddon. you dent get armageddon. you get something that happens that makes it so these people realize it's about to roll over. the more talk about armageddon, the more bullish i get about what europe is going to do. >> what are you going to do is if they don't put out the health care thing today? you built the whole show around this, right? >> well, whether or not, there will be a show. our awareness will be heightened at 10:00 into 10:20 when they start reading the decisions. they don't usually say when the last day will be. they'll start with the
dissenting decisions first and work up to the majority. >> and roberts puts out a list of lies and -- make ate little easier for us. >> and you see alex trebek, your pal, have you sent him well wishes? >> yeah, i was sorry to see that. come on, he chased down a robber just a few months back and hurt his achilles. >> apparently the second time he had a heart attack. >> that's right. but he's going to be back in time for taping in july, which i understand. >> yeah, which is a good thing. at some point he may want to give up the reins of that show. i'm sure that's years away. but i'm out there -- >> you're available? >> yes, i'm available. >> you'd be good at that, dude. >> any thoughts on corona, anheuser-bus anheuser-busch, anything? >> i don't think the assumption that they would pay $12 billion for the other half is necessarily correct.
and i'm curious as to what you think, but given the synergies that are potentially available here to anheuser-busch, one would participate that it will be more than $12 billion. i don't think that's too far a stretch to assume that it would be a higher multiple than what it's currently trading at. >> we'll look for that and a lot more if just a few minutes. coming up, parting shots from our guest host, barry knapp. don't move. tourism season in years. in florida we had more suntans... in alabama we had more beautiful blooms... in mississippi we had more good times... in louisiana we had more fun on the water. last season we broke all kinds of records on the gulf. this year we are out to do even better... and now is a great time to start. our beatches are even more relaxing... the fishing's great. so pick your favorite spot on the gulf... and come on down. brought to you by bp and all of us who call the gulf home.
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the the stock of the day, momenta, shares getting hit after patented were ruled purported generic versions infringe patents. no surprise that shares of teva are trading higher. >> our guest host is barry knapp. a quick last thought of things to be thinking about ahead of this crazy week? >> sure. to jim's point a little bit earlier that the market's talking about armageddon or positioned for armageddon, i don't see any evidence of that. i was in the equity volatility
business for a long time, we look at measures about -- just like, where is the vix relative to its history? where is the term structure, difference between short dated and long dated? the level of correlation in the market -- none of those things are anywhere near the level wes got to that were associated with bottoms each of the last two years. so there's been this sort of narrative that things are okay. >> health care reform, if they strike out the individual mandate, do we see stocks move higher? >> yes, initially. >> why? >> because of deleterious affect it had on small business hiring -- >> it creates a whole new sense of uncertainty out there -- >> absolutely. that's why i don't think it will be a sustainable move higher. >> but it sounds like you think it improves hiring. >> it could do. that will be the market's perception initially. but we'll have to go through the elections to get to this. >> barry, great having you here. we hope to see youin