tv Wall Street Journal Rpt. CNBC September 30, 2012 7:30pm-8:00pm EDT
hi, everybody, welcome to "the wall street journal report." i'm maria bartiromo. worries about europe return. what about the fiscal cliff? but the market chugs on. what it all means for your money. the woman who kept the banks in business during the financial crisis, my conversation with former fdic chair sheila bair and the story she couldn't tell while she was on the job. >> so many lives are lost every single day because of lack of access to drinking water. >> the remarkable new partnership between a renowned inventor and corporate america that could save untold lives. it's the real thing. "the wall street journal report" begins right now. >> this is america's number one financial news program. "the wall street journal report." now, maria bartiromo. here's a look at what's
making news as we head into a new week on wall street. disappointing news on the broadest measure of the size and strength of the economy in america. the financial reading of the gross domestic product shows that the economy grew at an annualized rate of 1 1/3 percent for the first quarter, down from 1.7%. much of the change due from poor farm production in the midwest because of a severe drought. dow industrials broke a four day losing streak on thursday meanwhile with the best day in two weeks. after fresh concerns about europe eased. the markets, however, were down on friday. consumer confidence jumped to the highest level in seven months in september. the conference board says its index rose more than 10% from august. indicator was closely watched because consumer spending makes up nearly 70% of the u.s. economy. two important pieces of date to for the housing market for out. sales of new homes in august for down slightly from july. the median price of a home rose by a record amount p 11%. pending home sales slightly down in month of august, at least in
part due to an inventory mortgage. not enough homes available at the low end of a price range. apology from apple writing . the company replaced google maps on the iphone 5 and in its new operating system. cook said apple is doing everything it can to make the maps better. fresh unrest in europe this week kept the markets on edge. is it a long-term worry or short-term blip? joining me, david kelly, chief global strategist with jp morgan funds. great to have you on the program. thanks for joining us. >> glad to be here. >> for a while we had sort of the quiet coming out of europe. things seem to be stabilizing. and now once again the markets are focused on it and worried. we're seeing anti-austerity demonstrations. the pictures in spain were really horrible with so many protesters pushing against those austerity programs. how concerned should we be about this? >> well, i think the europeans should be very concerned about this because they are not fixing
their economic problem. you can't fix a problem of deep recession and deficits by more austerity when the economy is this weak. so i think europe's got a big problem, but for u.s. investors, i think we should take it with a grain of salt. i mean, europe is slow but we don't expert that much to europe. our financial system looks very strong. and i think u.s. consumer confidence at this stage is somewhat resilient to all these stories coming out of europe. i think it's a bigger story for europe than it is for the united states. >> in the united states we have a different set of worries. warnings from big american companies about their future earnings. we ended the third quarter and already heard from fedex, we heard from caterpillar, big global companies that are citing europe. caterpillar is citing china as well. what are you expecting out of the earnings period that we will begin to see in the next couple weeks? >> there is a slowdown going on in the global economy because you have this recession in europe then you have a slowdown in china, which is more
significant than i think the chinese gdp numbers suggest. and that's rippling through to countries like korea and taiwan and japan. a so big global companies are being hurt by that but more domestically-focused companies in the united states ought to do better. >> want that fiscal cliff, david? it doesn't look like anything is going to happen until after the election. the tax cuts expiring, the spending programs expiring. a lot of people think this is going to lead to a recession in 20 13. how do you think this gets resol resolved and what is the impact? >> i weish we had better elections in this country. the reason we have bad government in this country is because we have bad elections. we don't talk about the important issue. one thing both sides could agree on actually today is the face of deficit reduction. they may go about it different ways but we need to bring the deficit down gradually. right now we're facing the fiscal cliff. nothing will get resolved before november, but i believe political forces after the november election will push both sides to a compromise. i do think we'll see a
compromise. you know, the one tax that's got to come down next year is the uncertainty tax, the uncertainty about washington policy will be reduced over the next six months and be a positive for the u.s. economy. >> it's true, because companies have been in lockdown mode. they don't want to make decision with this uncertainty out there. >> it's so infuriating watching -- >> it is. >> -- washington not understand the incredible drag they put on the u.s. economy by simply not making a decision on these basic -- you know, american business is very good at making money if you tell them the rules of the game but it's like playing -- you're playing the first half of the game but don't know what the rules are going to be the second half. what does everybody do? wait and see. that's deadly for the economy. getting past that, a plan to bring the deficit down gradually, knowing what taxes are going to be over the next decade would be tremendously positive for the u.s. economy. i wish we'd get there sooner rather than later. >> i cannot agree more. it is infuriating. let's talk about residual damage. government defense contractors will have to lay off workers soon if there's no agreement. you know, because they are losing those federal dollars of
those federal programs that are going away, we're going to see more unemployment. the defense company will have to notify workers in the next couple of weeks. how important is this? >> well, it is a temporary drag on the economy. i honestly think of all the things that will not happen, starting january 1st, that the chances that we're going to get both rounds of spending cuts agree to last august, including massive defense cuts, i think is pretty slight. i think it will be rectified the next few months. it's terrible we have to put these businesses through this. until we get out to the other side. >> what about housing? it seems to be recovering but it's still murky. how strong is it? is this important for the overall economy? >> nothing could be more important than the improvement in home prices we're seeing. we're getting very good signals on home prices. join get higher home prices, that pushes up output because builders build more, it pushes up confidence. i think that's important. it also causes a wealth e thekt. we're going to have $1.5 trillion added in household wealth in the third quarter because of home price increases.
we think it's genuine, we think it's going to last for a number of years as we get back to normal in the housing market. >> in the face of all this, how do you want to invest right now? >> invest based on valuations. invest based on relative valuations. stocks are a little bit cheap, but what's really dramatic here is just how cheap they look relative to cash and relative to fixed income. my biggest concern, people ask me what keeps me awake at night, is too many individual investors are putting money into long termed fixed income who are going to lose money in 2013 and 2014 as rates begin to move back up. be over equities versus fixed income. also be a little bit more focused on the united states. >> all right. we'll leave it there. david, great to have you on the program. thanks so much. >> any time. >> david kelly from jp morgan funds. up next on "the wall street journal report" the woman who backed up the $13 trillion u.s. banking system during the financial crisis, she is speaking out. my conversation with former fdic chair, sheila bair. later, the world's largest
but recent research shows... ...nothing transforms schools like investing in advanced teacher education. let's build a strong foundation. let's invest in our teachers so they can inspire our students. let's solve this. welcome back. sheila bair was the chairman of the federal deposit insurance corporation from 2006 to 2011. charged with guaranteeing the stability and public confidence of the nation's financial system. a tough job in the midst of the 2008 financial crisis. today she's the author of "bull by the horns: fighting to save main street from wall street and wall street from itself." sheila, great to have you on the program. welcome. >> thank you for having me. >> when it comes to the $700 billion bank bailout four years ago, you write in your book "to
this day i wonder if we overreacted." was it too much. >> i think it was too much. it was misdirected. shared a lot of money with large financial institutions and made sure they maybe profitable but not enough on restructuring mortgages and foreclosure prevention. >> do you think it was this panic that was going on that you just felt everybody needed money toward the banks? >> it was. i think in late 2008 we were clearly dealing with a situation potentially spinning out of control. we didn't have good information, weren't sure what we were dealing with. the incentive was to throw money at it and it was faster to write checks to big institutions as opposed to do troubled asset relief which was the original purpose of the t.a.r.p. bill. >> you know, you write about ringing the bell at the new york stock exchange the week of the lehman brothers bankruptcy. >> right. >> the same day you were scheduled to appear in an interview with me on this program, also you were fielding calls about the fallout to money market funds. >> it was challenging because we wanted to put a strong public
face of confidence, and the fdic was always up to the task. nobody ever lost a penny of their insured deposits and had seamless access to that money that was very important. that was a very eventful day. i remember well, in my book, early in the morning i was at a hotel in new york. i was going to be ringing the opening bell as you noted. i went out in my jammies and the front page of the "usa today" saying they were going to get guarantees. i said, listen, we have insurance deposit limits for banks, what do you think depositors are going to do? take their money out of the bank. hank and i had a positive relationship, but frequently we were not consulted. we had to fight to get our voice and perspective heard. we had an important window on this. trillions of dollars of insured deposits in the banks. it was important that money stayed where it was. >> a lot of attention has been paid to the philosophical differences that you describe in the book between yourself and treasury secretary timothy
geithner who, of course, was then the president of the new york fed. the system was stabilized at the time, but who got the better deal? was it the banks and wall street bankers or the mortgage holders and depositors? >> the mortgagees who got terrible, unaffordable mortgages. they weren't dealt with effectively. there's a tendency to lump all the banks together as terrible enti entities. there was a differentiation. there were a lot of good faith borrowers that got stuck in mortgages, they were pushed on them, they didn't understand them. they got themselves into a situation that never should have occurred. we needed to help those people and never were willing to spend money and political capital to help those folks. >> how do you feel about the system today? who's better off? >> just because the bailouts made money, it doesn't make me feel better about them. i'm glad out of a cash flow basis they so far have been
profitable but that doesn't justify what we did. to have a financial system based on the idea if institutions make dumb mistakes and get themselves in trouble again the taxpayers will bail them out so they're profitable again, that's what investors call crony capitalism. that should not be the framework for a financial system. i think there is some sentiment in the financial sector as well as washington notwithstanding dodd/frank's explicit prohibitions on bailouts that this is going to happen again. right, if they get in trouble, the government will blink and come to their aid. i would like to hear the presidential candidates talk a little bit more about this and say, call out too big to fail, the pernicious doctrine that it is, tvs not going to happen again. the traditional banks are hurt by near zero interest rate policies. traditional banks have to lend to make money. big mega banks have huge trading books. they have to invest overseas. there are a lot of places to make money in a near zero
interest rate environment. >> the low interest rates which the federal reserve told us are going to be that way until 2015 are also hurting savers. >> they absolutely are. it creates inflation risk. yes, people are being penalized. the return they get, if they're investing their savings someplace safe, the return they're getting is not keeping pace with inflation. every year they're losing money. and so, of course, that creates incentives to go and invest in riskier assets. that's what we had with the crisis. we had very low interest rates then. not nearly as low as they are now. people were looking for return with subprime mortgages. it creates incentives which create significant risk for the system. i think the fed is proceeding with the best of intentions. i think the risks of what we're doing are tremendous and the benefits are incremental at best. >> it's been about the fed providing all the stimulus. what kind of fiscal policy would you like to see? >> the solutions are not hard. it's having the political will to do that. need to get entitlement spending under control. there's that and the defense budget. we are undertaxed. need to raise more revenues.
do that by broadening the base and lowering rates and getting more revenue in. democrats need to compromise on entitlement reform and republicans need to compromise on taxes. again, it's not hard to figure out. it's just getting the political well encouraged to get the job done. >> they just can't come together. good to have you on the program. >> nice to see you. >> thank you so much. sheila bair joining us. up next, do things go better with coca cola? the company's ceo thinks so. i'll talk to the head of the soft drink giant about bringing clean water to those around the globe.
well, this week in new york saw the eighth meeting of the clinton global initiative, the annual gathering of leaders and bold-faced names to address some of the globe's most challenging dilemmas. many in the developing world lack access to clean drinking water. ceo of the world's largest beverage company, coca cola, and the inventor of the segue let me in on their plans to quench that thirst. >> so many lives are lost every single day because of lack of access to clean drinking water. when you think of the numbers in the world today, maria, there are roughly one out of six people in the world today do not have access to clean drinking water. >> so this is enabling you to get that clean water to the people who don't have access to it? dean, how does it work? >> it works exactly like nature does. you know, you get the oceans are
full of saltwater, but when it rains it rains clean water. because the energy of the son evaporates only the clean, pure water. puts it in the clouds, condenses, comes down as rain. distilled water. we built a small box that is so efficient at reclaiming all the energy after it centurily boils and distills the water inside the box, it recycles all the energy so the only energy consumed by our box is to run its computers, its sensors, its little compressor. the box will sit there consuming less power than a handheld hair dryer and produce 1,000 liters of pure water a day, enough for 100 people per machine. >> so you created this sling shot nearly ten years ago and basically separating, or making dirty water clean? >> it makes dirty water absolutely pure. and we've worked on it for more than a decade. but like all the things we do we
need partners to bring it to the world. most partners i make i bring to the medical products and farm suit c farm suit can companies in the world. but they don't go to where coca cola goes. once wu showed muhtar kent what we had and say, you have the only plausible distribution channel that's so global, it can actually make impact and turn our technology into a reality that can help a billion people. >> you're in more than 200 countries, right? >> 206. and as normal as the cause of providing clean drinking water is, think of what we're doing as much broader and bigger. think of the units that we will place in these rural villages, towns, as kiosks, small kiosks that actually will house this machine and also will have even small refrigerators that can keep vaccines, essential medicines in that town. a tv screen that will be operated by solar sustainable
power that, where people can converge and watch news. and charge their phones. where they didn't have a place to charge their fans. and these units will be connected on broadband. it's actually, i think, one of the most exciting golden triangles in action of business, government, civil society, working together. >> how did you come up with this idea, dean? what led you to this? >> actually, i didn't start out to make portable or drinking water for the developing world. i've been working for decades now producing dialysis equipment. one of the items to make that technology, that therapy more available was access to water that's not just portable but water for injection, water that we could make on site in a home where people need to do dialysis. i started working on a small machine that could be added to our dialysis technologies to make it even better. but once we figured out that we could make a machine that could make 1,000 liters a day, we said, wait a minute, besides
helping the population of people with end stage renal failure, how about help the other billions of people get clean water? ironically, the medical community isn't the logical place that can, with great efficiency, reach all these places in the remote parts of the world. >> think of this as a great american innovation working for the world and creating value and shared value in the world. >> what's your take on this whole buzz around the sugar ban, michael bloomberg telling us, you knows, how big a soda you should be drinking? what's your take on all this? >> all i say to you is the golden triangle. governments, business, and civil society coming together, collaborating to find solutions for societal issues. >> so you're happy then? i mean, bloomberg saying that, you know, too large a soda is banned. you don't mind this? >> i'm just saying that you will not solve any issue through a ban or through a tax.
you will solve issues like obesity, which is a real issue, through collaboration. government, business, and civil society needs to collaborate, not work against each other. up next on "the wall street journal report" we'll take a look at the news this upcoming week that will have an impact on your money. then it's open arms for driverless cars. will you soon be outsourcing your daily commute? a break is wn i was on maternity leave. i have retired from doing this one thing that i loved. now, i'm going to be able to have the time to explore something different. it's like another chapter.
up. a short word that's a tall order. up your game. up the ante. and if you stumble, you get back up. up isn't easy, and we ought to know. we're in the business of up. everyday delta flies a quarter of million people while investing billions improving everything from booking to baggage claim. we're raising the bar on flying and tomorrow we will up it yet again. for more on our show and our guests check out the website
wsjr.cnbc.com. i hope you'll follow me on twitter and google-plus. look for @mariabartiromo. now a look at the stories coming up in the week ahead that may move the markets and impact your money this week. tuesday, auto sales for the month of september will be out. on wednesday, president obama and republican candidate mitt romney meet in the first presidential debate. this one focusing on domestic policy. on thursday, we'll get the minutes of the last meeting of the federal reserve open market committee. this one's the meeting when the fed governors approved another round of quantitative easing. and on friday, the always anticipated monthly jobs report will be released. we will find out if there's any change to the 8.1% unemployment rate for america. finally, are you ready to hand over the wheel at google headquarters this week, california governor jerry brown signed a law legalizing driverless cars. the search giant has been developing self-driving cars for several years. they use cameras and radar to detect other vehicles. and have reportedly logged more than 300,000 road miles without an incident.
implementing this idea is right on schedule. you know, it was just at the 1939 worlds fair when general motors predicted a highway system full of electric cars controlled by remote radio as part of the company's futurerama exhibit and predicted those cars would be on the road in 1960. that will do it for us. next week, a special interview, oracle co-founder, ceo and third richest american, larry ellison will be our special guest. each week keep it here where wall street meets main street. have a great week, everybody. i'll see you again next week. ♪ [ male announcer ] how do you engineer a true automotive breakthrough? ♪ you give it bold new styling, unsurpassed luxury and nearly 1,000 improvements. introducing the redesigned 2013 glk.