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tv   Squawk Box  CNBC  June 28, 2012 6:00am-9:00am EDT

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i'm becky quick along with andrew ross sorkin and brian sullivan. joe continues his vacation today. let's get you up to speed on this thursday morning. eu leaders gathering in brussels for a summit today. ahead of that meeting german chancellor angela merkel brush ago side-day mand from delay and spain for rapid action to lower their soaring borrowing cost. she called eurozone countries to assume jointly built for each other's debts. we knew this was coming. silvia wadhwa will join us live from brussels with more. this is what has the markets on edge today. also today is the big day, the supreme court is set to deliver its ruling on president obama's health care overhaul. a key component of the law was challenged on the grounds that congress exceeded its constitutional powers by requiring people to obtain insurance or pay a penalty. the justices could uphold the entire law, they could strike down certain provisions of this, maybe the mandate, or they could overturn the entire thing.
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we'll see what happens and we expect a decision sometime between 10:00 and 10:30 a.m. jpmorgan infamous trading loss may reach $9 billion far exceeding earlier estimates. the "new york times" reports the red unk has been mounting as the bank has been unwinding its position. j.p. morgan's exit from the losing trade is faster than expected. but first brian has the morning's other top headlines. >> newscorp's board reportedly approving a split of the $60 million media conglomerate, it will be two company, one publishing, the other entertainment. official announcement is expected today and do not miss this. newscorp chairman rupert murdoch will join our own david faber right here on cnbc at noon eastern time. nasdaq will file a plan next week with the sec to detail how exchange, the exchange intends to compensate market makers who
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lost money during the trading of facebook's boy. they may point out there were internal issues that contributed to their own losses. some good jobs news courtesy of europe. european playmaker airbus reportedly intends to build its first plant in mobile, alabama. the company is expected to bill 80 a-20s there. >> let's head to brussels and check in with silvia wadhwa. she has a lot more on what's going on at the eu summit. silvia. >> reporter: the big story is, of course, what can we expect for the markets. angela merkel kind of toned down all the expectations. she did concede, however, the obvious, all eyes on germany, all eyes on this crucial summit here in brussels but how many crucial summits have we had.
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this is the 20th. we still have the division of visions. we got two completely visions of europe. we got the french saying we want euro bonds, we want solidarity, we want money on the table first then can you talk about giving up sovereignty. angela merkel, the germans are saying we want you to give up sovereignty first, we want to have some budget control, we want to have some spending control, then we put some money on the table in terms of common euro bonds. unless these two minds meet somewhere maybe they come up with a novel idea saying you know what? we can do both at the same time. delay track for everything. we stall in terms of long term solution. in term of short term fixes we're talking about a 130 billion euro growth back which was essentially decided by a summit of france, germany, spain and italy a week ago so that would be the on table. we're talking about european banking union, a stronger
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european banging supervision and deposit fund for the european basis that would possibly be supervised by the ecb which kind of makes the european banking watchdog. so that could be something on the table. the big grand fix for europe that's not going to happen at this summit either. with that i take it over to kelly in london. >> yes. silvia, thank. you basically summed it up by saying it's not on table. we're seeing in reaction in markets. classic risk off day here decliners outpacing advance engineers by a 9-1 ratio. this basically looks like they are tumbling off a summit. we opened the morning trading to the upside and continued to build on those loss. take a look what's happening across credit. 10 year in spain back above 7%. over in italy the 10 year
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6.24/7%. th it wasn't a great auction. just shy of the total they wanted to raise yields much high they are than the last auction. germany and france a little bit almost to some degree germany 10 year bund back below 1.5%. 1.4. a couple of bank stocks, let's start with barclays down eight and a third, this following the settlement that barclays has agreed that huge fines southeast biggest we've seen in terms of cost as we look at the next development to come. george osborn the uk chancellor, finance minister will be speaking in a couple of hours ear time. we've seen comment from the prime minister david cameron. jpmorgan is down 4.4% now in germany. only 1% earlier. now 4.5%.
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"new york times" reporting its loss from the london trade are now in the range of $9 billion not $2 billion as initially expected. a quick look what's happening with the euro/there are, 0.35%. a weak low. quick look at oil prices lower by .8 on brent, .4 on crude. risk off morning ahead of those meetings that silvia was outlining. we won't get a lot of answers. no surprise. >> let's get a check on the broader markets. health care will be catching a lot of people's attention but it's the situation in europe most likely driving the markets at least in the early hours. you can see right here those dow futures are down about 85 points. s&p futures are off by over nine points because hopes have been dashed for this idea that you're is going to see some grand slug that comes out of this meeting that's happening in the next two days in brussels.
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take a look what's happening with oil prices. they touched up over $80. just below $80 at 79.91. ten year note in the united states, treasuries looking as a safe haven. that yield is back below 1.6%. the dollar this morning is up against the euro once again. we're looking at the euro below 1.24, below 1.25. euro is trading at 1.2425. some reports suggesting it could drop 1.20. if you think things are problematic in europe you have to wonder how far. the dollar is weaker against the yen at 79 30i7. gold prices are down by $10. 15.68.50. >> two stories. newscorp we should be getting
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breaking news on that split probably during this show. >> whether or not -- >> not a whether or not. board has approved. it's happening. rupert murdoch is coming on cnbc with david faber. this is a done deal. >> what are we getting that hour. >> we should get some details on who is running what company. how it's set up. then we'll hear a little bit more about how they are playing to value to companies where they think the multiples will be. >> what will murdoch's role be. they are expected to take over the entertainment part of the business. will murdoch be -- >> he'll be overseeing both companies. that's how you have to do it. the big story this morning that everybody is talk about, dallas 9 billion, jpmorgan, "new york times" we mentioned at the top. show reporting the company could lose as much as $9 billion. that's the big headline. came out at 2:30 a.m. this
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morning. i want to put out a couple of caveats so people understand. the $9 billion figure and there's a sentence in the story that's important. it says the $9 billion estimate came in april. it says one april the bank generated an internal report that showed the loss worse case conditions would reach $8 to $9 billion. we didn't hear about this whole situation until may. we heard from jaime dimon suggesting that they will be profitable and get the real number on july 13th when they report their earnings. they have been trying to put a box around this deal. they have been trying path box around this trade. they have been selling it off faster than they originally expected and have taking greater losses than they necessarily appreciated earliest on but i do want to caution people, later on in the piece and focus interest, some expect the red ink won't
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exceed $6 to $7 billion. that number is closer to where we are today based on my own reporting, but we will, obviously, have to see where this goes and as we were talking before the show, how they are doing these trades, then selling a lot of this stuff to a former trader at jpmorgan or no longer at jpmorgan, he's at blue mountain. >> this is one of those trades. if you don't have quarterly results, if you don't have to tell your investors where the trade is going you're in a much better position to ride it out. in the long term it might be a decent trade. >> blue mountain for me doesn't have to do that the hedge fund you referred to. if i'm hearing you right you're not throwing the reporters under the bus, what you're saying is be careful because there may have been a use of the jpmorgan internal memo from a while ago. what we don't know is if that worse case scenario has been
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reached. >> that's the best way to suggest it. $9 billion is at the very top end of an estimate. i think today where we are is at a lower place. having said that i think it will be a much bigger number than the $2 billion. higher than $4 billion. could we be in a five, six, seven billion, yes. >> they have been selling this off as quickly as they can is a good one because the hey days of that it is over. >> bill weinstein is out. this idea if you're really out already the worst part of the trade may have already come and gone. the worst part for jpmorgan, the best part. anyway that's where we are. we'll have more on this throughout the show and i'll do some more reporting as well. >> all right. speak of the big banks calls this morning from barclays ceo to step down following yesterday's sentiment overly
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bore manipulation. barclays will pay out $453 mill loin total. diamond said he'll forego his bonus for the year. earn males and instant messages disclose as a result of the regulators investigation cast a rather unflattering light on barclays trading floor. the back and forth over fixing rates included comments like quote done four big boy, and dude i owe you big time. come over one day after work and i'm opening a both of bollinger. blue nun? something good. >> how much does bollinger cost? >> oil open up a box of franzia. >> i'm not a champagne guy. >> bro, oil meat you at the rush concert. there were emails and messages showing senders knew what they were doing was dubious. >> my biggest question with this
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and i wish we fold up more on this yesterday, my biggest question if this bank was doing it does it mean other banks were as well? if one is doing it you would think the olympic way they do this where they throw out the four highest and four lowest would take care of it. if everybody is doing it then you have a very dubious set up. for investors and actually for anybody who is buying a car, buying a house, libor sets a lot of these rates in a got to wonder if you're getting duped by these banks. what if they are all doing it. >> if it's not just this, becky, think about the last few years. what have we heard? is there any large bank that has been soil free, right? jpm, barclays we just talked about. >> wouldn't put jpmorgan in that same category. >> just because of the headlines. >> they weren't doing something
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that was illegal, which is the differs. you make stupid trade that's a stupid trade. that's a different category than what these guys were doing. >> just in the headlines in the negative way. >> worth noting the investigation is on going not just at barclays to the point you're making, hsbc is still in the headlights and jpmorgan another firm we keep talking about it. >> libor has been affected. the point is you should feel confident because they were trying to do it. >> the other question i have is not only does the manipulation or the attempted manipulation happening within the firm meaning their own traders talking to their own but if you start thinking about jpmorgan, but it's what's out there, if hsbc and jpmorgan and barclays and others are doing it are they talking to each other. that's when everything breaks down and everything changes. >> i talked to a buddy of mine
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in the rate market yesterday and he doubted that jpm would have the ability to muscle libor around. libor extremely large in terms of its scope as we noted yesterday and i was a little bit sarcastic about it. so to your point was there a bigger action being done because nobody thinks jpm could do this on their own or barclays. >> having said that we had bart chelten on and he talked about this. i was surprised if in fact there's a lot more leggs to this and if there are additional investigations and additional settlements i would have imagined -- he's been much more open than other regulators he would have been more aggressive with us. >> $450 million is a lot of money pop barclays it's what 5% to 10% of their expected income. nice headline.
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will it have a material effect on barclays result? >> seems more representational. >> word of the day is dubious. >> i'll add it. is there a drinking game involved? >> no. definitely not. >> 9:01. crack open a bottle of bollinger whatever it is. >> then you'll stay around for your show at 10:00. >> "street signs" will be much more fun. >> what the street is saying about the newscorp split. stay tuned. "squawk box" will be right back. >> tomorrow on "squawk box," the decision is in. now the short fallout. reaction from all sides of business and politics. cigna ceo, former dnc chairman, texas congressman and top health care analysts here to help steer your investments and make smart money.
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good morning. welcome back to "squawk box". let's get now to today's national weather forecast, alex wallace joining us from the weather channel and i expect it's going to be hot, h-0-t. >> we'll find ourselves more and more ways to describe hot over the next several days because that's main story fours. here's the outlook across the
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nation. right now still have a bit of an area of low pressure across new england. few showers. another system notifying the northwest, like showers associated with that. in the middle of the country that's the heat and that's expanding eastbound as we work our way through the coming days, impacting a number of states. we're talking 27 states here that could be dealing with 100-degree heat by friday. that's over 50 million people that will be sweating to the hundreds. we have the advisories in place. all the states here that are colored in the brown that's where we have heat advisories or excess jeff heat warnings in place. temperatures will be in the 100 to 105 range with heat index values, what it will feel like getting up to 110 degrees. here in the east we have advisories out for our friday afternoon into sunday. get ready for the heat from the carolinas as well as into the mid-atlantic. tough time out there. take it easy, guys. >> thanks for that. we can go wherever you want.
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i still think it's hot. i like the h-o-t. >> dubious. >> it's what all the kids with the pumped up kicks are saying. >> do you hang out with a lot of them. >> only my own kids. >> let's talk just for a moment about the other big story of the morning besides jpmorgan, besides health care, it is newscorp operation and this split up. let's walk through what some of the analysts have been saying in the past 24 hours about where thing are. it's all been positive. goldman sachs saying in our view splitting newscorp into two companies would enable investors to more accurately value the individual business units win the group. deutsche bank saying we expect that a split-off would be a major positive for sharks even beyond the initial reaction wean fit in with the many positive
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steps the company has been taking. nomura says we see this development as another significant positive step to an already strong newscorp story. ironically we believe last year's failed bid to acquire it's we raining bskyb stake has proved to be an unexpected fimg. the point here is that when you looked at viacom stock, great to overlay what happened with viacom when they did the split, there was an initial bounce the news and then there was a real flat line and people were worried, they said this really means nothing, just a lot of financial engineering shuffling the decks but if you look at cbs and viacom independently you would argue there was some value. >> this was a $9 stock two years ago. rich greenfield, very well respected analyst came out with a note saying he's raising his price target on newscorp to 30 bucks a share. because of the split.
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he likes what he sees for the results. 30 bucks. >> there it is. about 7.5 bucks to go. so some money to be made if he's correct. >> of course we're watching what's happening in europe today. leaders gathering for yet another summit today. they pointed out this is the 20th significant summit. traders are reluctant to make any big moves ahead of the summit. david, good morning. the euro is below 1.25 for several days in a row at this point. what i don't understand if we think europe is on the verge of a collapse there are people saying there's a significant risk that the entire thing blows up. why is it still even anywhere near 1.25? >> it's a very important question. in some sense it's like lehman. in 2008, if you thought lehman was going to go bankrupt would
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you forecast that? probably not. everybody says this an important risk but nobody factors it in as a scenario. unfortunately the result of the leaders today fail to basically boost confidence in the market, they got this thing taken care of, the market has to start thinking about break up risk especially given the last couple of months. >> what do you think the odds of a break up are? 10%, 20%, 30% or less? >> i think it depends on how you define break up. the odds that greece will eventually leave the eurozone is very high. >> if you do factor in a break up as the weaker countries getting kicked out it makes sense keeping a higher level for the euro because if the weaker ones get kicked out you have a stronger euro. >> in italy over the last couple of weeks they are now an open public debate about the cost benefit of remaining in the
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euro. the fact that berlusconi is joining the chorus about italy benefiting more from exiting the euro, being able to export its way out of the recession is a very dangerous talk because pandora's box, once open difficult close to. >> if you believe the eurozone will break up completely, a complete dissolution, going back to the drachma, deutsche marc, the franc. how would you play it? >> i think long people just basically buy like bunds because you buy german assets it's going to dominate the strong currency. that's what investors have been shifting money out of spanish government bonds into german government bonds. >> say the treaty is torn to shred, would the euro become confederate money, worthless paper. so if you owned euros you would
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have nothing or would you then get some sort of ratio breakdown of deutsche mark versus franc versus whatever might be? >> i would be very surprised if it crease to exist entirely. will we end up -- first country to exit are they the country like greece or countries like germany? germany exit the euro will remain a currency for the weaker countries. if weaker countries were to leave as you suggested perhaps the euro will be stronger. >> stay away from it for a moment. >> i think that's what is it. important thing that everybody is talking about is major risk but nobody factors in as basically even -- not even a probability with more than 30%, 40% probability. >> david thank you very much. when we come back we'll talk about the broader markets. sidewa "squawk" will be right back. ♪
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>> >> good morning, everybody. welcome back to "squawk box" here on cnbc. i'm becky quick along with andrew ross sorkin and brian sullivan. we've been watching the big banks. ci citigroup is dropping its estimates. the price target dropping to $110 from 145, as for morgan stanley citi forecasting earnings of 26 cents a share.
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bank of america now seeing earnings down. price target of boa, cut to 70 cents a share from 87 cents and price target taken down $43 from $45. take a look at the broader markets we see red arrow there's pap lot of hesitation and concern ahead of what's happening in europe. those dow futures are about 66 points below fair value. s&p futures are off by six points. oil prices have also been a little bit lower after finally closing above $80. they are above $80 at $80.12. comes after four or five days where we see west texas intermediary crude below $80. ten year note is seeing a lower yield today. prices have gone to up as investors have been a little bit concerned about stocks around the globe. the yield on the ten year is at
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1.599%. the dollar is strongerence the euro and swiss franc. gold prices are down by about $10. right now 1,569.80 an ounce. >> joining us now is chief oil analyst. and standing by at the cme, ira harris. how low can crude oil go, west texas intermediate before opec steps in and reinflapts price snoops we're already at very defendable prices right now and there's nothing magical about $80 or $90. we're within a few percentage points. that doesn't mean people will delever and oversell. but we're much closer to the low
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than we were at any point. >> giving the drilling boom happening in america does opec even now have the power to move the needle more than a couple of bucks on a barrel of crude? >> they have the power to move the international price. they have the power move to the brent price, west africa or saudi price or whatever not that much impact in north america. we'll see north american production of about 9 million barrels a day from the u.s., lower 48 and so we're in the neighborhood of 4.5 million barrels a day from canada in the next decade. that will displace a lot of opec crude, all the light sweet crude that we import not just from opec but from other countries. >> i can't imagine opec is listening to tom or doing their own research and thinking oh, okay the price of oil will go down, well that was a nice run. they are going to do something about this. >> i don't think at this point in time they are looking to
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sell. the wild card we're hearing china is slowing more than anticipated and putting downward pressure on the demand curve. but, what are they going to do? we took out the premium because iran was supposed to get bombed, you know, six times over in the first half the year. that didn't happen. we had a lot of that political risk premium come out. i don't know what opec will do. they, $70 to $80 is not a bad price for a barrel offensively from opec's concern and keeps other drilling at bay. i don't think you'll see anything out of opec here. >> the futures are weaker today. i'm guessing that's all because of euro. does the supreme court weigh in in any way in the trader's minds today or is that a foregone conclusion? >> by the time you read through it it will be very complicated
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then you have to clear out what's going to remain of this bill, what's not going remain will be a total whitewash which nobody is looking for. it's europe, becky. this is all politics. and merkel got trashed at the g-20 but it raises an issue. everybody is jumping on merkel and the germans but what if merkel turns around and points the finger back at the united states what do you want from me? ben bernanke has talked about the fiscal cliff and why is merkel more culpable than obama who has walked away from bowles-simpson. people say bowles-simpson was the best starting point. what if the germans start the finger pointing back. >> the weaker the red arrows today are because it doesn't sound like we're is going get any grand solution coming out of
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this. >> europe has a tendency to play with the markets. they deny and when they have to step up, i would be careful being short because they know -- merkel, interestingly talked be about what the markets were going to demand. for a german leader to talk about markets and what we had better come to something, so i would be -- if i was short i would be very cautious. >> tom from a macro economic point of view the average family in america uses about 50 gallons of gasoline a month. >> it is going up. so a buck drop in price of gasoline is, you know, call it 600 bucks a year. that's something to a lot of families. how low are gasoline prices going to go given what's happened with oil? >> i think we're going to get to the prices we saw in 2010 which seems a distant time away. we were below $3. we'll get there by the fourth quarter of this year. we won't stay there. next spring you'll be talking
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about higher gas prices and getting disinagainous analysts saying it will be $5 and $6. we have many days above a billion dollars a day in motorist expenses. we're there now. 2.70 is a lot better number. it's really a good forecast for the united states and north america because north america stands occupant as a continent which is cutting production, excuse me, which is cutting demand and consumption and increasing production. and that's going story really for the next seven or eight years and it's a pretty good story. for manufacturing you have to figure we got natural gas prices that are a third of the prices in europe and some other countries and we'll have cheaper crude oil particularly in the interior of the country. so this is one thing that neither political side can take credit for but it's a good
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story. >> another 50 bucks a month in people's pockets. helping energy cost. payroll tax cut. average american family is going to have a couple hundred bucks more per month in their collective wallet. >> until fiscal cliff hits at the end. year. >> good news thursday. very dubious thing to say. >> you are working this dubious thing into every conversation. >> bad news, americans are burning extra billions gasoline every year because of obesity. that's true. we're pulling the weight, yep cars have gotten more fuel-efficient which we've reduced completely by excess mass being towed down the highway. is that bad enough news for you? it's not a dubious statistic. yra, tom, thank you very much. >> comments, questions, about anything you see here on "squawk" including what's dubious, shoot us an e-mail.
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welcome back. you can see the u.s. equity futures are down. implied open is lower. making headlines china sending a strong signal that it intends to push towards a freely tradeable yrn uan. chinese officials announcing plans for a test zone for currency convertible in she shengzen. >> paychex reported fourth quarter earnings of 34 cents a
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share last night in line with estimates ceo of payroll services and human resource company is joining us from rochester, new york to talk about business and nation's employment picture. thank you for joining us this morning. i think of you guys as a great way, great signal if you will of where employment is going and where we might see hopefully some growth or maybe it's going the opposite way but a good barometer nonetheless. your quick snapshot of where we are? >> we've seen our checks per payroll which is an employment number fours. our checks per payroll is up for nine straight quarters, gradually but still up. we're seeing businesses staying in business now. so we've seen 6% improvement in our loss and about 80% retention rapist which is near our record levels. existing businesses i think doing much better starting to grow and continuing to grow, new business formation still a
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little challenging. >> let's talk about new business formation you guys do deal with small companies and start ups. what your seeing? >> well, it still looks pretty flat year-over-year. consumer confidence is a big issue. whether you want to open that next small business or location. when the consumer confidence is flat you're not sure if somebody will buy your product, then you have an election year this year. that keeps people a little bit hesitant. >> you put out a statement last month releasing the top five small business issues of the upcoming election and you put taxes at the very top, two of the overall regulator burden, three employment regulation, four immigration and five retirement security. nowhere on this list from what i gather is the economy or demand. how do you square that with everything on that list? >> well, i think when we look at that list, the biggest one is still, overall i think it's the economy and it's demand but when
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you look at taxes consumer confidence is impacted by all those things. so especially as you talk about earlier today you got the first the year coming up with a lot of taxes that could be changing. you got an election. all these things make the economy more uncertain, it makes consumer confidence waiver a little bit and if you're not going to have somebody buying your product you won't start. >> when you think about small business formation, start up, at least in my experience, rare to talk to an entrepreneur who says i'm not sure i'm going into this business because i don't cho what the taxes will be next year. am i think about this incorrectly. >> no. when you look at the top five that we talked about that's impacting more existing businesses and already they expand or not. but the new business is definitely confidence, whether somebody will buy their product that's the biggest thing and taxes would be a little bit further down the list. they have to have profits to worry about the taxes. i think the overall regulatory environment is a big concern.
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>> this is brian sullivan, if the supreme court strikes down all or part of obamacare which small companies have told us that is one of the big regulatory hurdles they are facing will we same a wave of job creation? >> i don't know it's a wave but certainly see one more thing tlifts off the list of uncertainty. businesses will know what the future holds for them for health care cost. we sell health insurance through carriers. one of the fastest growing businesses we have. because there's so much regulatory concern that the clients come to an expert like paychex. it would help. >> martin, we'll leave the conversation there. thank you very much for joining us this morning. >> good to be with you. >> when we come back we'll invite brian to join us in the chairs and stories that will have us looking twice. then coming up, he was one of
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and state-of-the-art equipment. kpj -- saving americans in health care costs. kpj malaysia -- care for life. welcome back, everybody. we've been watching a lot of stories here and one that has consistently caught our
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attention is what's been happening in the west, severe drought situations that played out across the midwest and particularly what's happening in the rockies have created havoc. they're saying this is epic dryness and the entire rocky mountain range, the entire whole central rocky mountain range is a tinder box, in the words of one. more evacuations in colorado alone, ten fires burning, they've been evacuating thousands of people including the entire u.s. air force acade academy, a base there as well. something to watch out for. we watch it from the prospective of commodities here but this is obviously wreaking havoc in states and regions throughout the central rockies. >> seems a little dubious. i thought i'd get a bell or something. story on the front page of the "new york times" about google making a device in america, actually says on the back, "made in america" all of the component
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pieces made in america as well. there's always been this big debate why iphones are made abroad typically in asia and google it bringing it back, apparently not trying to make a big deal out of it, of course it's on the front page so somebody is making a big deal about it. >> they should make a big deal. that would be a selling point. >> the article implied they're afraid it won't work. they're more afraid if they cease production, they wouldn't reveal where the factory is, how many people work there but i think it's a great story. >> it was interesting to see google do this and what i don't understand is why you wouldn't want to make a big deal out of this. the costs are always higher. >> maybe you can sell it for a little more and people would pay for a little bit more. >> if they're not going to advertise that and make that a big component of the sale process i'm not sure i understand the experiment.
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>> the absolute costs may be a little bit higher but einstein proved that time is actually money or maybe that was a far side about einstein. if something is wrong and you have to send your head of purchasing on a flight to shenzhen or gangzhou to fix it. >> the flipside it is i think you've seen shenzhen and other places become so popular for manufacturing is because they've compressed the time, meaning they've put the glass manufacturer next to the semiconductor, physically right next to the case manufacturer, and they've compressed the time it takes to make these things. to your point i see the translation issues. >> i was going to talk about this fireworks story, states are easing their bans on fireworks. there's only four states that absolutely ban fireworks, new york, new jersey, new jersey to your point about the fires if something goes up the whole state will go up, delaware and massachusetts, so only four, but states are easing up so
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fireworks manufacturers are excited for the fourth but i'm going to switch gears to go on your thing i love that airbus story about the possibility of a plant opening in mobile, alabama. vw built a massive factory in chattanooga, tennessee. kia, hyundai in mississippi, and now airbus. the hopium it's called, our term we coined last year to say we thought the thesis was the u.s. will get better as capital flows here. all of my friends in business and finance are saying we see the capital flow here. now we're seeing large corporations do that as well. it's a great jobs story. the 35-hour work week in toulouse was maybe too loose. >> a little loose. >> that was a bad french pun, man. >> bollinger, we got it wrong today, it's apparently a very fancy -- >> and pricey. >> 500 bucks a bottle.
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>> we're getting killed for the viewers for not knowing that but would get killed for the viewers for knowing that. we're pouring it out on ourselves. >> maybe like a colt .45, i didn't know. >> what have you got against the .40? >> absolutely not. >> 8 ball, will you join me? >> wow, we're off the rails already. >> i'll save you both. coming up, the nation's high court is set to decide on the fate of president obama's health care overhaul, we welcome one of its chief architects. zeek emanuel. >> what is he holding there in. >> broccoli. >> oh, wow. >> this must be in reference to scalia. we're also joined by romney health care adviser tevy troy. stay tuned. we'll be right back.
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it's a supreme decision day for the nation's high court. one of the main authors of the health care law is here. >> the idea that the whole bill is going down as unconstitutional is simply wrong. and mitt romney's health care policy adviser. >> i think people need to start making decisions based on value if we'll start to get the health care inflation rate under
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control. the urge to merge, how to navigate for business opportunities during the current and global economic climate. plus the latest developments from the eu summit, an upto the minute live report from brussels. the second hour of "squawk box" begins right now. good morning, welcome back to "squawk box" on cnbc. i'm becky quick along with andrew ross sorkin and brian sullivan. joe is on vacation this week, he'll be back on monday. there are red arrows this morning, the dow futures down by 73 points, the s&p off by more than 6 points. also in our headlines what's been moving the markets is the two-day summit of european leaders set to begin later today. expectations for major policy initiatives have been ratcheted down but traders are going to be watching closely for any signs of progress or maybe lack of progress for its long-term solutions for the debt crisis
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that's likely what's going to be the major mover of the markets today. we also have the supreme court set to deliver that long anticipated ruling on president obama's health care reform this morning. the announcement should come just after 10:00 a.m. eastern time and among the key decisions is whether a mandate that individuals have to buy insurance coverage is actually constitutional, and whether that issue can actually be separated from the law as a whole. we're going to have much more on what the ruling might mean for investors in a few minutes. some economic news, weekly jobless claims coming out at 8:30 eastern time, we'll bring you the numbers and instant market reaction. over to brian. financials are in focus, after citi cut price targets and estimates for four major banks. citi points to signs of slower growth, lower volumes and wider credit spreads. here are the new estimates for the second quarter, goldman sachs goes to 2.70 per share to 80 cents, big haircut from citi,
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price target lowered to $110. morgan stanley to 31 cents, bank of america sliced from 19 to 12 cents and january morgan from 87 cents a share estimated to 70. now has a price of 43 bucks. news corp.'s board approving a decision to separate the conglomerate into publishing and entertainment companies. shares finishing 2% higher yesterday on the news and by the way, david faber will speak with rupert murdoch today at noon eastern time. catch that interview here on cnbc. we'll see if google's new tablet maintains its first day buzz. the tablet priced to compete with the kindle fire, while microsoft's recently unveiled tablet the surface is positioning itself as a
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potential laptop replacement. the google nexus tablet features a seven inch screen priced at 199 bucks, the same as the kindle fire. >> thanks, brian. let eight get back to a story we mentioned at the top of the show, jpmorgan in the headline this is morning, the "new york times" reporting jpmorgan's trading loss could reach $9 billion, a higher number than we've heard about before. i want to walk you through some of this just to put a little bit of caution for listeners and watchers this morning. that $9 billion is not where we are today. the suggestion in the piece is that it could reach as high as $9 billion. today i think from my sources we're living in much more of a sort of $5 billion, $6 billion loss world, very different than $9 billion. over the past several weeks we've seen jpmorgan trying to settle down as much of the riskiest pieces of the trade, now off the table but of course there is still a big piece of
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that trade still on their books. we'll have to see how much of it is on their books and learn more about what the ultimate number is on july 13th, trying to box that trade so they can say here is the number, here is how much we've lost this quarter and here is how much we think we can lose going forward. as we know, jpmorgan and jamie dimon the past several weeks said repeatedly they believe this quarter they will be "solidly profitable" if the number was at $9 billion today it would be hard to say they would be solidly profitable. that note of caution. having said that of course we don't know how much that trade is still on their books and how much ultimately that could cost the company, not just over the next quarter but over several quarters as they try to get rid of that trade. lot of people talking about the story this morning and thought it was worth trying to explain some pieces of it here. >> a lot of nuance but very important when you start thinking about the headlines and most likely scenarios. speaking of big banks, calls
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for barclay's ceo bob diamond to step down over potential libor ma. police station. barclay will pay out $453 million in total fines. diamond will forego his bonus for the year. kelly evans will be joining us live from parliament at 7:30 eastern time. but the big story of the morning the country awaiting the supreme court's ruling on the health care mandate. as we await that decision, mitt romney's presidential campaign is already working on its own reform plan. joining us is tevy troy, the health care policy adviser to governor romney's campaign. also with us is dr. zeek emanuel, he's a senior fellow at the center for american progress and a big architect behind the president's health care plans and law at this point. dr. emanuel, thank you for joining us on set today.
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>> no problem. happy to be here. i brought my broccoli, very important. >> is this a suggestion -- can the federal government make us buy broccoli? >> this is my lucky charm for this whole debate carrying around the broccoli. you know, i think one of the constitutional experts said there's no bar on congress to make stupid laws. stupid laws aren't unconstitutional. we need to division unconstitutional laws to stupid laws. if they force people to buy broccoli it would be stupid but not necessarily unconstitution ap.. >> is the mandate a violation? >> no, the mandate is definitely constitutional. health insurance is an interstate market, congress has the necessary proper powers to regulate those interstate markets. we know that without a mandate, you lose a lot in terms of the stability of the market. >> and that's my question, what happens if the supreme court does decide to knock down the mandate, allows the rest of the law to stand?
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in some situations just in terms of practicality it seems like the worst case scenario. >> no, that's not the worst case. >> if you have people who don't have to get health insurance until they're sick how do you pay for it? >> if they overturn the mandate, 95% of the law stays but 5%, a very important 5% goes. second, it does mean that we'll have fewer people getting insured, instead of the 32 million with the mandate, who would get coverage, we'd have 16 million who would get coverage. people have subsidies, people who want it and can't afford it, and people with preexisting coverage will get it through the exchanges. >> also means the premiums are going to go up. >> your viewers are much more sophisticated economically, more likely sick people will buy insurance driving premiums up. the people who aren't buying health insurance are still going to use health care. >> why wouldn't i buy health insurance until i'm sick?
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it's silly to pay for insurance until you're unhealthy. >> that exploits someone else. you might get sick without insurance, there are millions of people who get sick and they shove costs onto us. we estimated when i was working in the administration that the costs to us people who have insurance, people who don't have coverage is about $1,000 per insurance policy per family. that's a lot of money of cost shifting and it's basically abdicating your responsibility. >> tevy, we don't know what the supreme court is going to do but conventional wisdom does say they could strike down the mandate a low some parts of the law to stand. if that's the case what do you think that means? >> we don't know what the supreme court is going to do and it's useless to speculate at this point. if the mandate goes down or if it doesn't go down, the law is still a problematic law. dr. emanuel said that you can have unconstitutional laws and
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bad laws. i think this is a law that is definitely bad and probably unconstitutional so i'd like to see it go down and what doesn't go down should be repealed. >> the last time we talked you suggested that premiums f this happens premiums would go up and you said slightly. there's been a debate around this table and amongst other guests who say significantly, there's a difference between significantly and slightly. why would you argue they only go up slightly, marginally, which i don't think is a big deal and others say it is a big deal. >> it is a big deal because health care costs go up faster than inflation, a system wide increase in health care. you are still going to get 16 million people into the system, that's half of what we would expect and the estimate by the congressional budget office is that we would get them in at roughly a 50% premium costing 50% more so we're still tens of
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billions of dollars that would be transferred to people. we're going to come back down from the $1,000 per cost shift. >> that's assuming, doctor, a baseline scenario of use and when people have insurance, wouldn't they theoretically utilize more because they would perceive it as free? >> it's not a matter of free. you still end up paying co-pays and deductibles. people would now pay for 70% of the care. they'll be getting more preventative car care and won't be going to the emergency room. when we remove the incentive, millions of people have utilized those services. i would also say, i want to disagree with tevi for a second. he says this is a bad law. think about all of the things the law has done for people. i was in your waiting room, your previous guest said i have a
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25-year-old living at home, a 22-year-old living at home, thisser a'on my insurance. >> many insurance companies including some of the ceos we'll have later on today said they'll keep that part no matter what happens with the law. >> that's exactly right. >> but that would not have happened without the law. remember the law did that. >> it's been lucrative for health care and companies which is why. >> they were not going to that in 2008. the law made that. >> the consequences of the law going into effect are worse. some studies show 30% of employer also drop coverage. the consequences are much greater than this, so that is a problem and the other is the overall cost. dr. emanuel is talking about the tens of millions of dollars transferred but the fact is that there is an overall cost to this law that is in the trillions of dollars that long-term unsustainable and if it is implemented we'll see it's more unsustainable quickly than anticipated. >> actually this law has had a
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major effect on hospitals and doctors reducing costs and becoming much more efficient in the way they deliver costs and really delivering much more value, and that's the key actually to bringing health care inflation down. as tevi knows, health care inflation has come down substantially over time and the projections are that it's going to moderate. that's going to be good for the entire economy instead of more and more money and higher percent annual of the gdp going to health care because of the law we are going to bring down the rate of inflation and we are going to begin bending that curve, which is critical for the long-term. >> zeek and tevi i'll let you jump on this. >> we have a lot of skeptics here. >> naturally. this is one of the biggest laws that have gone through, it's confusing and a lot of fear that comes into something like this. the argument comes from both sides of the aisle where you'll say this brings down the cost curve by setting price controls. >> no, i didn't say price controls. >> a lot of this comes from the
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government and that's how price controls come in right now. >> i didn't say price controls. the fact of the matter is that hospitals are now required to reduce their infection rate which is a good thing for health and good thing for saving costs. they're required to reduce their readmission rate so patients don't get discharged and immediately back into the hospital. it's good for quality and quantity. >> the price comes with it. if you don't rate in the top 50% of hospitals that do this, you don't get the full pay. >> that's not price control. that's incentive structure. >> you said 50% of the hospitals, you haven't set a standard and say if you get here it says that. >> because you want to constantly improve. this is constant improvement. >> also means 50% of the hospitals are going to be paid not 100%, no matter how good they are. >> they have a large room to go and i think there's plenty of savings to be had there. >> the other point is that the readministration policy is something we started in the bush administration. >> oh, no. >> that is absolutely true. >> no. >> in addition, in the bush
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administration we talked about having hospitals lower their readmission rates and second of all the -- >> it was all talk. we acted. >> it is a form of price control, and where you're going to have unelected officials telling people what services they can have. so the ipad is a form of price control. there are a number of price controls in the law because the laws cost are so great and enormous, the only way to try to get them under control are through price controls and i don't think it will work. >> health care inflation, half of it is excess pricing and half of it is excess utilization. i was there, most of the law is about trying to get that excess utilization down so we get more value, better health care for less dollars. lots of hospitals including mine in pennsylvania are working hard to figure out how to do that, and i think that's been one of the great benefits of this law is that it's really catalyzed a lot of attention onto how do we actually deliver better value for patients? the other thing the law does is
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to try different ways of paying doctors so they're no longer incentivized to do more and more. >> quickly you mentioned a lot of skeptics, 1972, congress allowed most kidney dialysis to go under medicare and the social security act, seen as a model of a national health care system that could be -- there's a great article from two years ago in pro-publica noticing how that program resulted in the u.s. spending $77,000 more per patient per year with the same results on dialysis. i don't think it's unfair for the public to be skeptical when the federal government gets involved in something as important and personal as health care when history shows the government doesn't do things well. >> there the problem is that we have paid for dialysis companies to do more and more and more. actually now what part of what we've done in the administration actually was to give a bundle for dialysis, put a box around everything that they have to do
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for dialysis patients and that's going to make them much more efficient rather than putting lots of people on and collecting more and more money. debris with you, that has not been a perfectly managed program, through democratic and republican administrations. >> i'm not political about this issue. for me it's a matter of costs and health care. why isn't health insurance priced for risk like every other form of insurance? >> because we're all going to be at high risk and you couldn't afford it if it were priced for risk. that's the whole preexisting condition problem. if you suddenly had -- people who have genetic predisposition to being obese. >> it's a miniscule portion of the population. >> 5% to 10% and many other factors. i think there's some individual responsibility but there are many other factors, what mcdonald's sells you, what soda makers sell you, the availability of broccoli in neighborhoods, there's lots of other issues that are beyond the
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individual's control. i do think we need to have individual responsibility but we also need to be clear about what is societal and what is available to people. >> tevi i'll leave the last word with you. >> please. >> if this law is struck down, what is your plan? what is mitt romney's plan? >> look if it's struck down i think that would be the ideal scenario but whatever happens it needs to be repealed and needs to be replaced with a series of market-based reforms that allows individuals to have more flexibility, allows states to have more flexibility and provides safeguards for individuals who need those kinds of assistance. >> you have two problems, health care costs, the second is the number of people who are uninsured. do you have a plan that would address both of those? >> look at governor romney's website he has a plan and it would address the cost issue by increasing market flexibility, individual flexibility, state flexibility and provides safeguards for individuals. he also wants to change the deductibility of tax treatments and will allow more people to get coverage. all of those are addressed in a
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bipartisan way and more flexible and not the overall big cahuna approach the obama administration took. >> tevi, thank you for joining us today. much more to come from dr. zeek emanuel. follow the show on twitt twitter @squawkcnbc is our handle. the european summit is in the spotlight today as well. we'll take you live to brussels after the break. and ken moelis, the life of a boutique banker, we'll get his take on transactions that could be in the pipeline when "squawk box" comes right back. st 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.
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[singing] hoveround takes me where i wanna go. call or log on to hoveround.com to find out where a hoveround can take you! eu eu leaders are meeting in brussels, belgium, as they look for ways to deal with the european debt crisis. silvia joins with us an update. is it going to be a kumbaya moment, are they going to come together or as you've said on the program a nasty box of worms? >> i think it's going to be more nasty worms coming out of this, but it might not stop them from
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singing kumbaya just the same so it's a little bit like whistling past the graveyard. it's going to be another crucial summit, it's the 20th of its sort and i don't know how many euro group meetings we have in the meantime. i wouldn't hold my breath coming back to the morkarkets monday morning and saying the world has been saved. ain't going to happen. they could come up with mini steps. they agreed on a growth compact so the $130 billion in terms of a growth program could be signed up for. we could have some more details of banking union, banking supervision at a european level but that's not really what the market wants to hear. the market wants to hear is where are we headed with the deep space w the long-term solutions and what are we going to do about yields exploding. spain above 7%, italy spreads widening so the big problem is how to find an immediate solution to appease the markets, but at the same time getting the european ship sort of in the
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right sort of direction. and there we have essentially germany, i wouldn't quite say against the rest of the world but germany against france in terms of sentiment. the french want euro bonds, want solidarity and more money on the table and then we can talk about giving up sovereignty. the germans very much of the other opinion saying no, we need to have budget control, we need an institutional framework and then we can talk about solidarity via something that's called euro bonds. this is coming head to head as we limp from one summit to the other with quasi-solutions, without tackling the real problem, and that's probably what we're going to be lumbered with and the next thing is at the end of the day is going to be the ecb being pulled across the table again by buying bonds and pushing more money into the money market. so it's all going to be fun and games yet again. back to you. >> we look forward to the fun and games and thank you very much for that, for the songs, the worms, for everything. coming up, dealmaker ken
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moelis on the state of m&a and later the supreme court set to rule on health care reform, what that means for the health care system and your investments. "squawk" is back in two minutes. people with a machine. what ? customers didn't like it. so why do banks do it ? hello ? hello ?! if your bank doesn't let you talk to a real person 24/7, you need an ally. hello ? ally bank. no nonsense. just people sense. forty-five states have joined together... ...to ensure consistent academic standards across america.
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welcome back, everybody. the futures this morning have been indicating a weaker open, if you look right now you'll see dow futures are down by 41 points. i've seen it down more than twice that much. the concerns about europe is what really has been driving the market today. there is that european summit that starts today, and expectations are low for any sort of a grand solution. when we come back, we have barclay's, the focus of parliament this morning. we'll go to london for an update. up next big deals announced in the last few weeks, we'll talk to boutique banker ken moelis, after a quick break. with a new continuous spray wand. and a fast acting formula. so you can kill bugs inside, and keep bugs out. guaranteed. ortho home defense max.
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welcome back, everybody. the management of barclays will have to mention serious questions over how it manipulated rates over the last ten years. kelly evans joins us with more. >> reporter: becky, hi, i'm standing in front of parliament as you can see behind me, the finance minister in the uk,
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george osborne is talking right now and here is a sense of what he's saying, barclays and potentially other banks were in flagrant breach of proper market conduct. the investigation into libor shows a systemic failure of the banking system a shocking indictment of the cultures at banks like barclays in the run-up to the financial crisis. you can tell from politicians in the uk what has happened with barclays, the settlements over the fixes of libor, prices everything from derivatives to mortgages to your credit card bill in the u.s. investigations into whether barclays and other financial firms were in fact manipulating that rate turnout to show the biggest settle lmt in termentse. the headlines in the uk show the heat is on bob diamond the ceo of barclays, who has already given up some of his bonus.
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there are more than a dozen other banks all over the world who could potentially be brought into this investigation, why was barclays first? maybe because it was the first to be more forthcoming with investigators. andrew back to you. >> thanks so much, kelly. we've got news crossing the wires right now, the news corporation split is happening, it is official. we'll bring you some details in just a moment. it does say however news corp. says rupert murdoch would serve as chairman of both companies and ceo of the media and entertainment company so he will not be the ceo of the publishing company. we will have more on that in a moment. chase carey will serve as president and coo of the media company. i'm looking through this, the publishing company would be xrids of news corp.'s newspapers in the u.s., uk and australia and also include harper collins, the book publisher. let's walk through this in a moment and we have the pleasure
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of having a dealmaker at the table who might have a comment where all of this is going, a dealmaker to tell us how the global xeconomy and the climate ken moelis, ceo of moelis and company but are in the midst of a lot of deals. you do a lot of media deals. what do you make of this transaction? >> i think we're spending a lot of time talking to people about things like this, splitting companies, rationalizing businesses and really giving people you know, the way money is invested has become so specific. you think back ten years ago, most people put their money into giant mutual fund. today most 401(k)s have 100 different choices and people are thinking about how to set up their businesses to attract the money the way it's being invested. >> but does this deal make sense to you? you know the players involved, all of them i think quite well. is your sense we're just shuffling paper around, that
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this is a financial engineering transaction or a larger strategic issue here? that's what always happens when you see these splits happen. >> people want to invest in certain assets and they'll value them higher. there's a bunch of analysts that invest in cable assets and they will pay a lot of money for a cable asset. if you make them analyze a newspaper asset at the same time they want to buy cable, sometimes they'll throw up their hands and go no. >> does the newspaper section have value? >> sure it has value, we're spending a lot of time and rationalizing companies. if you want to get the highest valuation for your assets sometimes you say how do i divide it up so people can invest in what they whatnot to invest in. >> will it make the media empire perform better and the publishing empire perform better or as i think andrew said it's just paper. >> we call it fit and focus a lot of times. it enables a capital allocation to focus on what's good for this
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section and what's good for that, and you often find better capital allocation, better management. >> quickly to jump in because the headlines are crossing, if you own news corp. you'll get one share of the new corp. so it will be one to one ratio. murdoch chairman of both companies but ceo only of the entertainment company which leads a publishing ceo job open. not sure who would want that. >> there will be people. >> but one to one. >> they'll be cleekeeping the c a and class b common voting shares and they're going to be looking for management teams and board of directors for both businesses over the next several months. separation is expected to be completed in about a year. >> quick question on rupert, personally, are you surprised he would split the company? he has been such a die-hard newspaper guy and that's been such a pivotal piece, even if
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it's a small piece of the empire he's been pushed and pushed for several years, this is something case kerry has been wanting to do. >> it seems with the ab shares retained it doesn't seem like he's lost the newspapers from his empire. >> right. while we have you here i want to talk about the m afternoon amp a environment, a transaction also in the news, modela, the owner of coors doing a deal with inbev, anheuser-busch. you work when they merged two or three years ago maybe now. at the time if i recall anheuser-busch made overtures to modelo to do a deal with them and mow dmodelo tried to block the deal with inbev. >> i represented anheuser-busch, so i'm not involved in this transition but at the time the
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acquisition of the other 50% of modelo made a lot of sense. anheuser-busch couldn't implement it at a time when they were receiving such a high premium from inbev from the whole company. it made sense to consolidate the ownership. >> what kind of price do you think they'll get? >> i have no idea. >> more generally the business is off in a big way, m&a business. i don't need to tell you, you know it, before we came on we were talking this idea we could have layoffs on wall street. >> i think the industry is still way overcapacity. you have i think it might have gotten yesterday something might have happened but from facebook to about two or three days ago there were no ipos in the united states and m&a is off 35% plus. >> are you expecting a blood bath? >> blood bath might be too strong a word.
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>> but layoffs? >> i think there will be reductions in staff and i think it will happen before august. >> we're only at the end of -- we're almost at july. >> it's interesting because most wall street firms always wait to september, post labor day has been the time people focus on their bonus pool. we might see something earlier than that because of the reduction in activity. >> one place they've had a lot of m&a is health care. >> true. >> you think the affordable care act has something to do with that? >> give him some credit before they strike it down. broccoli, they're not striking at that. >> interestingly the number of deals is up. deals are up by number i believe, the large size high-risk deals not getting done and it's just the environment out there, the ability to do a large transaction and take on substantial risks, boards, ceos. there's a lot of smaller end market transactions. >> are you expecting a wave of transactions in europe? i know a couple of corporate
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lawyers have war chests, going to go to europe and buy the up the remnants of companies. >> i think there's a lot of money chasing opportunities that are just not showing up. i think it's interesting over there, there's a lot of money formed to buy the assets when they come out and the assets aren't come out so quickly. >> why not? >> because the way they set it up. the ecb is funding liquidity, ltro, so nobody has to get rid of their assets, no forced sale. >> ken moelis, we appreciate you coming in on a newsy day. >> thank you. >> ken moelis of moelis and company. let's take a look at the futures. we've seen them pare their losses over the course of the morning. still down by 53 points. they had been down by more than 80 points earlier. we saw a little bit of a bump higher when there was a story that came out on the wires that german finance minister wolfgang shavel made some comments suggesting germany may be
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willing to move sooner than expected toward that shared liability debt when it comes to the eurozone. that's what the market is watching for every single signal that comes out of europe, the summit over the next two days. we'll keep you up to date on the latest headlines. keep it locked here on cnbc today. rupert murdoch will be joining david faber at noon to talk about the news that just broke, news corp. splitting the company into two. "squawk box" will be right back. [ male announcer ] this is rudy. his morning starts with arthritis pain.
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welcome back. having a good time here on the "squawk box" set on a busy thursday. we're going to be watching shares of family dollar this morning. why, you might ask? because the retailers earnings fell slightly below estimates, they earned $1.06, a penny shy of consensus. let's get some expert perspective on the supreme court health care ruling, joining is bob kochar, guess sclol lar at the brookings institution and harvard trained medical doctor and i'm feeling really bad about my own insignificant credentials at this point. we have dr. zeek emanuel here as
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well. bottom line do you expect the supreme court to invalidate the individual mandate which would, some suggest, pretty much put the whole law at risk? >> i really hope they don't because i think the laws put in place a great deal of innovation, making the system more affordable, better for patients and higher quality. >> here's what i, let's talk about economics. we're arguing with dr. emanuel a moment ago. here's my view on this thing. lasik, the price has come down dramatically, you can get it for a couple hundred bucks, started out as a few thousand dollars, a private market-based system. dialysis under medicare, if you have diabetes you need it, has only soared in cost. how do we square the two that are purely private market surgery has come down so fast while government sponsored at least one procedure, dialysis, has spiked? why should we believe that the health care law will overall
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bend that cost curve down? >> i think a great deal of policies have been put in place in the law which will drive down prices making care more affordable. the first is the fact there's more transparentally around what the prices are and people will be shopping more for conditions and so as we have more transparency on price and quality and more people with insurance products, cost sharing which is what the health insurance reform actually has, which are plans that have 20%, 30% cost sharing. >> why would they shop for procedures if the procedures are paid for by somebody else? if i'm going to buy a car, if somebody else is paying, i'm not going to shop for the best deal. i'm going to shop for the closest deal. >> so let me talk about, sorry, let me talk about one thing where we do get price competition in the bill and we specifically put it there which is price competition around prosthetic devices, around
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wheelchairs and walkers and things like that. the bill has competitive bidding and requires medicare to put competitive bidding in. in the first year we've seen prices come down about 40%. you want price competition we put it in the bill. one of the things that bob and i have talked about is trying to expand that competition beyond just walkers and prosthesis, but that's a way of getting it. the chaexchanges will have pric competition, individuals want to know if they want the gold plated insurance program or more limited program with limited choice. that will encourage price competition, too. >> bob? >> for each condition, people will have cost sharing, which they will actually manage out-of-pocket which is more than many have today. that leads to the market-based competition we talked about and tools coming on the market that show you the price that you'll pay for different providers and those will vary by 300 to 400% and that allows consumers to move towards the lower priced,
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better quality providers just as they have in lasik. >> one of the things you have insures are going to say that high priced hospital we might not include it in our network until they bring the price down and we'll sell that insurance cheaper on the exchange. that is the price competition you want and that's built into the bill and the bill is encouraging that kind of competition. >> we're seeing a boom in i don't know what you call them, the princeton longevity center, the executive health, basically cash only places where you go and you get -- if you have the money, and you get treated and do your fitness and you're off the insurance grid. those places are booming. we see in canada if you've got a lot of money you can bypass the five-week wait for an mri on your knee. >> that's good for the 1%, not good for the 99%. >> i'm not saying it's good for anybody. what i'm suggesting is that if we start to see that as waiting times get longer because more people are in the system won't the top end leave the system, reducing the overall payment
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structure we've talked about? >> i don't think so. first of all you'll bring more people in, first thing. the second thing is -- >> bring more people who are consuming more. >> look -- >> they're not paying more. >> in massachusetts when they brought in 500,000 more people waiting times did not increase, delays to see a cardiologist did not increase so that's false. >> the budget problems did exist in massachusetts. >> no, no it didn't. it was all claimed they were going to exist. if you look at the studies three or four years none of them materialized. the emergency room waits did not go up, the waiting for doctors and family doctors and obstetricians did no go up. that was a bad rumor. >> the first ten years are paid for with ten years of taxes and -- >> wait, we were just talking about whether people are going to be able to get in to see their doctors. they're going to get in to see their doctors. one of the things the bill incentivizes is what bob and i have been advocating which is task shifting. lot of things doctors are doing that a nurse practitioner can do or a health aide can do and that is going to increase under the
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bill and you'll see a lot more manpower being brought to bare right where it has to be. >> i'm worried about the creation of another tier of health care, bob, is that a real fear, the 1% here? >> we're actually seeing a lot more innovation on the lower cost, more recent, retail style places of getting care. you talk about wellness centers and executive physicals, i look at market and say there's nurse practitioners doing primary care, employers opening up primary care clinics more affordable, people offering retail access to ct scanners. it's more convenient than ever before in response to the cost pressures and the fact we'll have more people in there to shop. you want a market and this bill brings you a market. the idea it's only price setting in washington is wrong. it provides more competition in insurance and competitive bidding for government
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contracts. it is really going to be driving a lot more of these innovations. >> both of you guys will switch to this plan if it's approved? >> absolutely. >> the exchange? >> all of congress is now going to go on the lowest cost option. >> no, they have to go into the ex-changs change. >> they have a choice for the bronze or the gold. venture capital has doubled since the last year, and the last quarter was the budsiest ever for health and i.t. and things that will drive costs down for consumers. >> bob kocher, thank you. >> thank you. >> i'm thanking bob. >> we're still going after you on this thing, zeek, i don't think we're done. >> up next, final thoughts from dr. zeek emanuel and coming up, news corp. is making it official and splitting the conglomerate up. we'll get reaction from one of the top analysts covering the company.
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"squawk" will be right back. +g#a#a#a#a#a'9#a+=#a#a#a#a#a#a
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let eight get back to final thoughts with our guest host, zeek emanuel. we have done such a good job helping people live longer but at the end of the day it costs us more, not less. >> 12% of the health care budget
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goes to people in their last year of life. we do spend a lot of money there, you're absolutely right. we don't have the perfect answer for how to save it. >> but more money will go to that. >> not more. >> the longer we keep everyone alive the more people will end up being 90 years old and have dementia and die from that and that costs a lot. >> research dollars toward solving dementia. >> it's been relatively stable that 10% to 12%, it's unlikely to go up but it's a big chunk and doesn't seem to be that meaningful to keeping people alive in a meaningful state. one of the ways we don't deal with it is by talking about death panels and dr. death, thank you very much but we need to talk about how to solve it. we've tried to make a serious proposal about it. here are things we need to do, we need to train all doctors and nurses about how to deal with end of life. >> there are so many difficulties having that
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conversation. >> why won't they have a straightforward conversation? one, they're not trained to do it, two, it's emotionally training and three they don't get paid for the time it takes to do that. we need to solve the problems. there's no controversy. >> we got to run. >> should an 85-year-old get a knee replacement covered by medicare? >> that's for the 85-year-old and the doctor to decide, and i think your issue, your issue is it really depends on how active that 85-year-old is, how cognitively intact they are. >> the real question is, should the taxpayers pay for the operation and that's part of the law. >> right and also the doctor doing it because they get paid for it, is the patient doing it -- >> most people extract from medicare a lot more than they've paid. >> thank you very much, it's been a pleasure. i hope we enlightened your audience about health care. former fda official
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practicing doctor and resident fellow at the american enterprise institute, dr. scott gottlieb will be joining us for the next hour. [ male announcer ] this is the at&t network.
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>> doctor. >> doctor. >> doctor. >> doctor. glad i'm not sick. >> the countdown continues to the historic health care decision by the supreme court. we've got the smartest minds in the business to break it down. >> what the landmark decision could mean for pharmaceutical and health industries, we'll ask fred hasson and michael mcallister. breaking economic data. >> i have decided who i want to be our new vice president of sales. me. >> what did he say? >> please we're in the middle of a meeting. >> i'll contribute this to your drinking problem. >> the third hour of "squawk box" starts right now. ♪ can't stop, addicted to the shin dig ♪ ♪ drop down it says i'm gonna win big ♪ ♪ choose not for life of imitation ♪ welcome back to "squawk box" here on cnbc, first in business
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worldwide. i'm andrew ross sorkin with becky quick and ryan sullivan. joe kernen will be back next week. dow is off about 78 points, nasdaq off 15 and the s&p 500 off 8. >> the markets are watching every single move, every single headline that comes out of europe. earlier this morning we saw the futures improve, the losses get pared in half when schaeuble suggested germany might be open to picking up some of the debts, liabilities earlier than others anticipated and a new headline from a german finance minister spokesman saying schaeuble did not say that and the futures dropped by 80 points again. every headline makes a difference. >> also worth noting, barclays off in london by over 14%,
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unclear what is moving that stock. we'll try to get you answers in a little bit. let's get you through some of the morning headlines. shares of jpmorgan falling on a report from the "new york times" that losses from a bungled credit derivatives trade could reach $9 billion in a worst case scenario. my reporting and i just want to, note of caution to the viewers out there who are looking at that story and the stock is off, my understanding is that as of now, not the future but as of now, we're looking at the a much tighter range of $4 billion to $5 billion, that number could grow, the piece does say it may get as high as $9 3w8 but my source is suggesting right now we're living in a $4 billion to $5 billion to $maybe 6 billion world. we'll get more on the number on july 13th when jpmorgan announces its second quarter and trying to put a box around that botched trade and that is though a big story that a lot of people are talking about this morning. in other news the british prime
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minister saying that the uk's treasury and financial market regulator have discussed the potential criminal implications of an investigation into the manipulation of libor rates. barclays will pay $453 million to u.s. and british authorities to settle allegations it manipulated interest rates. brian, you want to jump in, maybe why barclays stock is moving the way it is. >> also they'll drag bob diamond and some other bankers in front of parliament so sorry to jump in but david osborne is basically saying they need to find out who in barclays management is responsible for this, and that they're going to basically haul them in front of a question and answer panel. so there's been some calls for barclays, american ceo bob diamond to step down. david osborne wants to take him in front of parliament. things are heating you up for barclays, the stock down 14.5%. >> the other big news, it's a big headline day, official, news corporation is splitting in two.
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we reported earlier this week they are separating their publishing and entertainment businesses, they have now officially announced it, and joining us on the "squawk" newsline is david joyce, media analyst with miller tabek. we're going through it now, looks like pretty much what i think we all thought, to me the most interesting piece is that rupert murdoch will remain the chairman of both companies but only remain the ceo of the media company. >> i think it was to be expected he'd be chairman of both but yeah, the question as to the management of the publishing side is yet to be determined, but it's known he's fond of the newspaper assets and not to have a more direct role say little bit of a surprise. one of the other interesting things it seems like it mentions that all of the australian assets would be in the new publishing business, and which
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includes obviously a lot of newspapers but also pending 50% of a company called foxtail so video asset there is and the final interesting thing is they mentioned it would be a one for one spin-off ratio so that means it's going to be a low price point share and perhaps in the $2 to $3 range, could keep some institutions from holding that kind of a security. >> david, there's been a lot of positive notes out from analysts recently. i want to read you one that's negative, ty younger of sanford and bernstein says i'm perplexed why so much value is created overnight in an entertainment company. lot of investors are thinking they're spinning off this wonderful high growth asset into this entertainment company but it will also include businesses that aren't high growth. what do you make of that? >> i'm not going to comment on someone else's note but what i've been saying is what it does
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is highlight different growth rates of different businesses which require the different allocation of multiples based on that growth. i think what it does is put a more appropriate multiple on the publishing assets, puts more multiple on the media assets. >> would you want to own the newspaper assets? ken doctor, an analyst at outsell saying without deeper cost cutting, given print advertising continuing to spiral the news companies thin 7% profit margin would disagree quickly. do you buy that? >> the financial health of the publishing side will depend how they allocate capital. if they're not putting any debt on it they've gone through large capital expenditure programs to upgrade the printing presses and what have you. it could be a free cash flow generating asset. >> the comparison to viacom splitting with cbs is that apt
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or is this apples and oranges? >> it is apples and oranges because you have a different array of media assets. viacom and cbs did not have significant publishing assets. they did have some simon and shuster but they didn't have the challenged newspaper assets. >> david, your price target on the combined two companies now? >> we have a buy rating on 25 target on news corp. >> 25 and we're about 22, a little over 22 right now. david thank you for joining us this morning. >> thank you. >> a quick programming note, don't miss this, this is big, david faber has a conversation, he's going to sit down with rupert murdoch at noon eastern right here on cnbc. >> ryan? >> i want to get more on the barclays thing. this is old as far as minutes go but it's important and new for our audience. the uk looks like they're going to go after barclays and maybe other banks hard here. george osborne, i called him david earlier, george osborne finance minister of the uk apparently hinting a short while
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ago that criminal actions could come in this libor probe, basically to summarize the comments i've read off the headlines they want to know who is responsible, how exactly this happened and they're going to hold people accountable and there was some hint that criminal, not civil, not money but criminal action could be taken in this probe. to your point, andrew, this news came out in the libor probe yesterday morning and looks like traders and investors have had a whole 24 hours to synthesize it and say wow, maybe this could grow, now maybe the possibility of criminal action, you've got the british bankers' authority calling not for banks to regulate libor but for the government to do it. >> it raises the question if you found this at barclays it's one thing if it's one bank but if you think it's more pervasive, the way the banks may work, then it raises much more significant questions. >> and adding hsbc, rbs and ubs
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to the list. i imagine stocks across the board are going to have a tough time. >> i was being snarky about libor yesterday but it is important and a great piece on cnbc.com says in layman's terms why you care about the london interbank offered rate and everything that it impacts. look at barclays shares. >> the crisis affects 66% of americans right there. so we'll continue to bring these headlines to you. if that wasn't enough news for you today there's a resolution to the medical drama that is likely a few hours away. the supreme court is expected to rule on the constitutionality of president obama's health care hour. dr. scott gottlieb servegd as senior medical individualser at the fda and now assistant clinical professor at the new york school of medicine and jim karpetta, responsible for health care issues at the office of management and budget from 2001 to 2004 and now project director
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of obamacarewatch.org. both are with the american enterprise institute and gentlemen this may be the perfect group of people to talk about t a doctor who spent time in the government before who is watching this and then someone who is watching this from the budget side as well, and jim, i'm hoping you can lay out for us what you think it means if the mandate is struck down. in the last hour we spoke with one of the architects, zeek emanuel. he said the mandates is about 5% of the law. >> well they say that now but the president's briefs to the supreme court said it was instrumental to the operation of the whole law. if they strike the mandate it will be a question about the viability of the operations of the rest of the law. lots of states have had guaranteed issue in a voluntary system and they had to appeal the laws because they collapsed, with a ush wash, kentucky, maine. so i think it will lead to more efforts to repeal the entire
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law, if they just strike the mandate. >> if they just strike the mandate. what happens in those efforts beyond, is it entirely related to what happens in the next election? >> well the health care is going to be a huge issue in the presidential election no matter what, whatever the court does, the policy could change in a very different direction if governor romney is able to win the white house in november. he's pledged to repeal and replace the law so it would be quite clear if he were elected we would be moving in a different direction even if the court upholds the law. we have two big events, the supreme court today and the november election, both of which will determine the future of the health care law. >> dr. gottlieb in the last hour we spoke with dr. emanuel who laid out his reasoning behind why he thinks this is important and the way to bend the cost curve. he said for starters, you have to get all of these people in and we're not counting the cost of the uninsured right now, and what that's doing. people who are uninsured can still get health care when they walk into an emergency room. >> that's right and everything
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he talked about in terms of trying to make the market for competitive relies on the usual fare, top-down control from washington and more price control and really no effort to make distinctions between high and low quality providers because it's politically unfeasible to do that. if you work in a washington agency you can't make distinctions between providers. >> there are some distinctions. >> very little. >> hospitals if you don't meet certain standards, they measure anybody who rates 50% and higher gets full reimbursement, 50% and lower gets lower. it's not against a set standard but take half the class and basically say you're not getting full pay. >> the penalties aren't enough to move capital. you want people to have enough incentive to allocate capital to do things differently and if you're only giving someone a 5% incentive they'll continue to do what they do. that's what happens. you need to create a competitive market for insurance and allow insurance to be bought like other products and services like we buy health insurance and car
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insurance. the obama plan created a one size fits all insurance plan. it's the same basic package of benefits and that's not a competitive market. >> bottom line, doctor, zeek emanuel was very passionate that this will improve care and lower costs. history says perhaps otherwise, given i brought up the example of kidney dialysis, how that cost has spiked and our survival rate is the same in other industrialized nations despite spending $70,000 or more per patient on it. where could the critics of obama care be wrong. how could zeek emanuel be right? >> i frankly don't think it can work. back up and think what we're talking about, 80% of americans get their insurance from work or medicare or medicaid. 10% are uninsured. under the plan half will get
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medicaid. we're talking about 5% of the population adressed by the decision today that would have potentially gotten coverage on the exchanges that won't if this bill gets knocked down. the 5% represents a lot of hardship. i don't want to diminish it. there are better ways to address lower insurance options they could have bought it. the problem is a problem of cost, zeek is right. if you can get the cost growth under control and you will tackle the uninsured. >> can you tell us if the mandate is struck down which community will be most upset about this and which will be most jubilant? politics aside. >> the states are going to have to take a hard look at this law if the mandate is struck and decide whether or not they can build these exchanges that are supposed to cover everybody with insurance. many of them will look at this and say we're going to suffer from adverse selection, that basically sick people will sign up for the insurance and the healthy won't, they'll wait to buy insurance until the last
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minute and that will mean the whole system will be very unworkable and probably collapse. >> is that possible? becky brought this up earlier in the show, somebody no insurance, motorcycle rider, crashes, breaks their leg, literally calls their insurance company from the ambulance and signs up for insurance on the way to the hospital. is that actually possible? >> well, if the court strikes just the mandate and leaves in the rest of the insurance regulations, it would be possible. frankly, other states have already tried to enact just those kinds of requirements, and when they did, washington state tried, kentucky tried, maine tried, when they did, the insurance industry collapsed in those states and insurers withdrew and basically consumers had no options of any insurance plans in the individual market. so it's a reality that if you do that kind of an insurance regulation it doesn't work, it's been proven many times already, and so the question is what happens if the court goes that route? i'm not sure they will, but they might. >> jim thank you very much for joining us. dr. gottlieb will be with us for the rest of the show and we'll get your thoughts on this as
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well, doctor. our health care conversation is just getting started this morning. up next, ceo fred hasson will join us and what is this going to mean for pharmaceuticals, for the pills you buy? is it good? is it bad? we are awaiting the supreme court's decision and awaiting jobless claims in 14 minutes. we're just waiting, and we're back after this. erforsurprised some people. so did the country that came in 17th place. let's raise the bar and elevate our academic standards. let's do what's best for our students-by investing in our teachers. let's solve this. 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
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well come back, everybody. in our headlines today we've been telling you about the comments out of britain on britain. uk treasury chief george osborne says four other banks are being probed in this case. hsbc, rbs, ubs and citigroup, all of those stocks moving lower in the u.s. premarket trading here. pretty significantly, barclays is down by about 12%. royal bank of scotland down by 12%. others are showing marginal losses but these are something that are broader -- bigger than the broader market losses and something to be watching closely. guys if you're talking about five that's significant in whether or not libor was manipulated. we said yesterday they take the four lowest and four highest and throw them out. if there were five banks it starts to have an impact on
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libor. >> the question i have, whether there was collusion or just a whole -- that's probably harder to get there. >> a harder stretch to get there and sounded like from the e-mails you read yesterday it was the trading desk talking to the banking arm on these but who knows. let's get back to health care and we have the banking news we'll talk in a little bit. few hours to go, the form ceutical industry has a lot on the line and joining us on set, former ceo fred hassan, currently managing director at warburg pincus. what do you think is going to happen at 10:00 a.m.? >> i believe andrew it's a tossup. in spite of the 75% on end trade i think it's going to be a tossup. >> you think what should happen? >> i would prefer if it was left alone, only because the process of doing this whole thing the
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last time was very, very messy, and my concern is that if it gets opened up again it's going to get very messy. >> we had steve schwartzman on earlier this week and he said he'd rather be late than wrong. the idea being you don't want to get there first and completely screw it up the first time around. you're not necessarily happy but you'd almost take that to avoid the uncertainty that comes with this being struck down. >> we've tried this stuff so many times before. it hasn't worked in the past. we finally got somewhere. very messy, unfortunately, one-sided but why not improve it as opposed to open it up all over again. i remember the last time this happened, there were some very misguided politicians who wanted to do strange things to the drug industry, for example, they were going to start negotiating on
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part d prices, which you and i know is price controlled and that's terrible for new medicines, new drugs, new devices. also they were going to open up the border to imports, why we are spending so much money on improving quality of drugs in our own country, going to open up the back door to imports so that bad stuff starts to happen when you open up the whole thing. >> although you have to argue that the government already sets some sort of price controls. what medicare sets for the payments that they're going to be dishing out in effect is what becomes the price for drugs, how is it any different than that? >> there's a lot of that already but there is some free market that at least supports an innovation industry that allows us to bring new medicines to the people waiting for new medicines. if you make this a very government managed system, i think you'll choke off innovation. already innovation is in serious trouble.
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>> what about the argument, why should america be footing the bill for drugs that the entire world benefits from? why should we pay different rates than the canadians do or europeans do? >> i think there are some misunderstandings on that. we spend 10% to 12% on drugs as a part of the health care, and if you look at germany, japan, italy, france, they're hard on us. so drugs are not the issue. if you add drugs and devices, we are 18% of the total system. it's really the 82% that needs to be handled, and there are clear, clear economic studies that show if you spend $1 in a new drug you save about $3 or $4 else where in the health care system. >> fred i got to get you on another topic, lead director at avon. we see what happened to the stock. what is going to happen? give us a 20-second snapshot of where we are. >> we got a new ceo, she was a
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vice chairman of johnson & johnson and we are to let her show us how she can reinvigorate this company. the details of all that stuff we keep talking about, it's good to get behind the details, where is the debt financing going to come from, let's ask important questions there. >> fred we have to have you back to talk more about that and whatever happens with the ruling. thank you for being with us on this morning morning. >> my pleasure. still to come the latest on jpmorgan's trading losses, plus breaking economic news, we're getting jobless claims and gdp in over five minutes time. ♪
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welcome back to "squawk box." we have data out momentarily, big day, gdp, no surprise, our last walk around the block remains under 2% at 1.9. if we look at initial jobless claims, 386,000. lastweek, it was 387,000, so we'd walk away from this one except for in between last week and this week a revision happened, moving it up to 392, so we are down, down 6,386 and continuing claims hover a whisker under 3.3 million. let's go through those internals and backfill on gdp up 1.9 and remember one month from today, we are going to get our first look at second quarter gdp, that he's going to be important. consumption, 2.5%, that was down a couple of tenths.
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if you look at the price index, that jumped 0.3 to 2%, that's fascinating. we need to keep an eye on that. if you look at pce corps, that jumped a couple of tenths to 2.3, so hotter on the metrics. interest rates we're under on the ten-year. europe, on my train ride in, the germans are in, the germans are out. i felt like doing a polka! back to you. >> ha, ha, ha, that describes it perfect, or the hokey pokey. ♪ you put your right arm in, you put your right arm out ♪ >> georgia tech graduate don't go to the hokey pokey. it's my second time on the show. >> in and out and in and out. >> it's the nasty bokz of worms silvia described. are you hopeful at all, rick, honestly they'll get their stuff together? we've been waiting three years? how much longer do we have to
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wait? are ten-year yields going to 1% and a variety of other questions. >> i'll tell you what, brian, i would be way more surprised if the range in a ten-year note in the united states included 2.5% more than i would be much less surprised if it was under 1% or if it touched 85 or 90 basis points and did a jgb lookalike. that would surprise me less. as for europe it's been hundreds and hundreds of years, centuries, europe's still there, i don't suspect it's going to go anywhere. will it exist in its current financial form? in my opinion, no way. i was one of the first to talk about the easiest way to solve this is have all the weaker countries stay with the euro, have germany go back to the d mark and i felt happy when i read the other day, actually in "the new york times" that griffin from citadel had a university of chicago professor
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arrived at that same conclusion and they obviously have a whole lot more gravitas than i do but i think that is a possible solution. something's going to give here. you can't build an entitlement state. you can't have a manifesto for europe that says more stimulus, more government spending, because if ever there was a test tube example of -- it isn't that you don't need to stimulate from time to time economies, it's that the means that that stimulus gets there is wrong and we are where it ends sup structurally broken. if all of these things were working right it would be a different story but they're not. >> rick, can i ask you about the other big story of the money or 17 other big stories of the morning, the questions about libor and potential ma. police station. it's not just one bank, you have hsbc, rbs, ubs, citigroup being investigated, being probed, i don't know what the official terminology is for this but if this is a number of banks being
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looked into about what was happening how confident should we be feeling with libor rates overall? >> a libor was really never the rate many people think it is, really never -- it's a reference, it's a corporate finance structure rate. having said all that, you know, these banks are not energy companies in the middle east, so it is illegal for them to be a cartel. >> wait i second, i thought brokerage margin account rates were based off of this, that mortgages had been based off of this, trillions of dollars. >> it is a reference point. it's an important reference point but even if you went to preki pre, kind of corruption or would-be corruption or collusion, if you went back to a period of time before that, if you looked at the banks involved in pegging that rate in that kind of a throw out the top-bottom style i doubt if the banks interacted very much with each other at that rate. >> doesn't make you feel about wall street. >> you know what? listen, the british bankers
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association, this isn't a new issue and i guess this is somewhat upsetting to know. if in our lives, becky, we have an issue, we try to deal with it in a timely fashion. what's been going on with this libor rate under the microscope just like a lot of issues that are embedded in dodd. frank like derivatives and over the counter, these things have been around for several years. we come back just as things may be getting better and then we throw a bunch of water on the coals starting to heat up. we need to clean up after ourselves in a much more timely fashion. this was swept under the rug in many ways. it's not good. we should deal with it and move on. if we do what all governments do and stretch these things out, like the european fix, we're going to just be in trouble longer and longer. they need to fix it. >> rick, it's being stretched out, barclays and rbs shares are down 12%, last time i checked because george osborne, the uk finance minister suggesting that criminal proceedings could be
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taken and by the way, it is also important to note, and i've seen some stories incorrect on this because bart chilton on the show said there's no proof they manipulated, that they tried to manipulate the rates. there are a number of stories suggesting they were success envelope ma. police station. >> we have to put "alleged" in front of that. i don't agree with mr. chilton on many things but i thought he was pretty good yesterday and remember that fine doesn't mean anything as the banks are being put under the criminal microscope. this case gets some gravitas. it's another headwind. we don't need more headwinds. i wish they'd lock the people in the room, come up with something and move on. >> jim, your thoughts on the most important, what do you think is the most important story out of all of these this morning? europe the big headline mover? >> i think so but in a close race, there's so much going on. we have to remember the good part of the last couple days, too. we had two decent housing
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numbers. plenty of people who live and live by the mantra, housing got us into this and housing is the only thing to get us out. it would have been nice to have a confirmation on the jobs number. we didn't really get that so we put that aside and yes the biggest number is europe and the things that we know for sure, either that germany supports or doesn't support a euro bond, so we don't know anything, and when we have these binary outcomes like europe and obama care, it could be 50/50 if it goes a good way for the markets or bad way but net/net, uncertainty is negative so i still think that rates are going lower in the ten-year and equities probably trade up lower as well. i think 1,300 even is a good starting point in the s&p but things still seem net negative because of the uncertainty. >> john silvia, next week we get the big jobs report, the monthly government number. with all of the weekly numbers on a case by case basis, what do you think that number is going to be? >> we're looking for something like 70,000 with the unemployment rate at 8.2%, as
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you folks reported earlier, jobless claims still 380,000 plus, forward moving average moved up a little bit so we don't see a major improvement here on the jobs front. >> don't see a major improvement and where does that get new terms of quarterly numbers you're looking for in gdp and annual numbers? >> in the gdp numbers i like to highlight two different movements, one, structures became positive and they were a big negative in the earlier estimates and corporate profits turned into a negative number in the latest release so those are two new pieces of information. what the job numbers tell me, becky, is that consumer spend something really slowing down now in the second half of the year, so while the first half of the year looks like 2% growth, second half of the year more like 1.5%, possibly 2%, but more towards 1.5, 1.7 area. there is slowdown going into the third quarter in terms of
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consumer spending. >> all right, guys, thank you very much, jim and john, appreciate it. rick, thank you as well. >> thank you. coming up we'll talk more about jpmorgan's trading losses plus the countdown to the supreme court's decision on health care, humana's ceo will be our special guest, after the break. a a
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a. welcome back to "squawk box" on this nurse morning. look at shares of jpmorgan, down off of a "new york times" report
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on dealbook. i want to provide a note of caution on this, currently my sources are telling me that the trading losses are in the range of $4 billion to $6 billion, not to suggest they couldn't get higher or their models out there that suggest they could get higher. currently the kind of losses we're talking about are much lower than the $9 billion number which is the headline, but i would also indicate that the headline says that they may reach $9 billion. i think the number we'll hear july 13th when that second quarter results come out and they've been trying to put a box around these trades is going to probably be a lower number. now, could it get higher? i don't know. but i just want to provide a bit of note of caution this morning on these numbers as we've talked about throughout this whole show, they are trying to sell this stuff down as fast as humanly possible. kate kelly reported they've cut i think, sold about 60% or 70% of it already, and if the
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numbers therefore indicate they're in the four to six range and six being on the high side, unclear whether the trade can move away from them to get to a $9 billion number. things do happen but i think it's worth putting that note of caution out there because i know there's a lot of conversation about this story in particular and this $9 billion number is a very big number and i should also note jamie dimon came out and said several times in the past two months, the past month that they plan to be solidly profitable, if in fact the number was nine and that was the number in july you'd have a big problem. this would not just be hauled in front of congress, you might be hauled with cuffs. that's a complete misrepresentation of where we are and the suggestion i've had thus far is that they still anticipate being solidly profitable and that has not changed. worth talking about. >> one of many big news stories we've been following this morning. the supreme court is set to rule on the president's health care
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overhaul today, sometime in the next hour and a half to two hours. joining us is mike mcallister, chairman and ce oh of humana. mike we've been running through every possible scenario on the show. we don't know what the supreme court is going to do. conventional wisdom says the mandate will be struck down. if that happens, where does humana stand on this in terms of is this good news, is this bad news and what does it mean from just doing business. >> it would make things very difficult, the linkage between universal coverage and the market reforms part of this bill is critically important. the president had this right when he fought to have the market reforms linked to the requirement for coverage and i think it's going to be a fundamental flaw and puts us on a slippery slope to a lot of market disruption in the future. >> why? because the premiums are going to go up because if you have people who can wait until they're sick to get health care coverage it means that everybody has to pay more? >> of course. we don't have to guess what's
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going to happen. this experiment has been run in a number of states across the country in the past. in my own state of kentucky in the mid '90s, market reforms similar to these were put in place without universal coverage, went from 40 companies competing in the state to two relatively quickly and premiums jumped to 100% and other states around the country experienced the same thing with the reforms, where there is not universal coverage. >> this is scott gottlieb, mike, good to be with you. aren't there better ways to get in the insurance market and stay continuously insured? >> there are other ways. this is a strong way to do it and probably the best possible outcome would come from this but there are other ways. could you have limited enrollment periods, set up rules and structures around when people can come and go. you have to prevent people from buying coverage after they're ill. people are smart enough to do if they can do that, they won't buy ahead of time. >> what about people getting rerated or dropped. you have a transition problem and have to subsidize people to
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get into the market and subsidize through true hardship. that would be a big incentive to get in without a mandate? >> absolutely, those tweaks are what probably has to happen if the coverage requirement goes away. there's a number of things that could be effective. at the end of the day we all want people to get coverage and get into the system. the goals on both sides of the aisle are the same and those tweaks could help a lot. >> mike, your stock has gone up more than $30 a share since the health care law was passed in december of 2009, so if it's overturned, will your stock fall 30 bucks a share? >> well i would hope not. we've grown this company dramatically by being one of the big participants in the medicare advantage business and we've triple the size of the company in the last handful of years, that's driven the stock price and performance on the shares has been great. we're going to be a long-term player in medicare regardless of what happens with this bill. medicare advantage will continue to grow, we'll continue to be a big participant in that so the
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private sector i think is part of the long-term solution to the medicare cost problem, we're doing much of the things that people would like to see happen with the aco component of the bill, organizing health care, getting on top of implementing information technology, data analytics, case management disease, chronic illness manageme management, we'll be a participant in medicare over the long-term. >> mike you're running close to your medical loss ratios in segments that's been written. do you stand to gain the most if the bill for the most part gets knocked down? >> i don't look at it like that. the medical loss ratios are i'm not sure good policy but something we'll manage with. those are the components. if it gets overturned completely we'll have to figure out what's next. no one was happy with the health care system before this bill, costs were too high, rising too fast, we all know that. the health care system is not
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going to be in good shape if the bill is overturned, if the bill is sustained completely, there are things that still have to change, for example the taxes that are in the bill, they're being used to fund a big portion of this, fall disproportionately on small business and the seniors that are in medicare advantage programs so the tax implications are going to have to be looked at. there has to be some tweaks. this is a big bill and in these cases there's things that have to be done in the next handful of years to make them better. >> mike we hope you'll come back after we get the ruling to help us figure out what happens next. thank you very much, appreciate your time. >> see you. coming up we'll head down to the new york stock exchange and talk more about all of the story this is morning and believe me, there are a lot of stories, like a shoney's buffet of news. if you know that you're a southerner, congratulations. check out this video, just in from washington, look at this, belly dancers are performing on the steps of the court right now, big banners and
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slogans such as "strike down obama care" how long must we wait for medicare for all, don't tread on me. it's good to see americans getting exercise. >> which side of the debate are they on? >> i think they're on all sides but anything that involves a castanette, i'm in favor of. "squawk box" ap courses. together, they raised ap test scores 138%. just imagine our potential... ...if the other states joined them. let's raise our scores. let's invest in our teachers and inspire our students. let's solve this. 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.
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one that's working to attract businesses and create jobs. a place where innovation meets determination... and businesses lead the world. >> coming out in october. >> "it's your business." >> is this kind of like -- >> we collaborated on it. >> we do a lot. >> yeah. >> okay. thanks. see you on "your business." [ male announcer ] olympic tennis players bob and mike bryan
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really hard to lose your job in america bank. i'm not being facetious.
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i'm just looking at what people at home are saying, it's $9 billion, $5 billion, a billion here, a billion there. >> corporate america in general. look at andrew jones. what do you have to do to get fired? >> obviously -- >> more personal related. >> barclays is down 12% right now. it's going to wipe a few billion in cap off that company. jpm is down 3%. calling for bob diamond's head in some corners. are you worried about barclays? >> barclays is a government bank. >> look at the bright side, we've still got peter madoff. >> right. not all. >> you lose. we haven't even gotten to the court. >> bankers, has a banker gone to jail, brian? >> no. >> for robo signing. >> no. >> nobody is going to jail. >> nobody has walked the perp walk since 2008. >> i don't remember a single
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one. ait, nothing. these are the guys that brought down the western world. >> you're dealing with intense or incomp teps. there's a big difference. >> that's one thing. this is like -- >> it takes confidence. >> if you were a conspiracy theorist, you were right. >> trillions of dollars in all kinds of things like mortgages and beyond that. so, guys -- >> we will see you in just a bit. coming up, final diagnosis of what may happen in a couple of hours from washington from our guest host. and awards lift you up. ] s
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we're back on a very newsy thursday morning. our guest host, dr. scott gotly, but we are going to get hopefully -- is it possible -- it's impossible not for us to find out something. >> the decision is coming down. >> a quick final thought to leave us with? >> i think 7% trade right now. all title i gets taken out, which is the obama title changes. ultimately the election is going to decide the future of health care. i think we need to reform medicare. a lot of problems on systems exist because of the way medicare buys services biological weapon need to pay market for insurance where it's affordable and people own it. >> we'll see what happens in just about an hour. >> thank you very

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