tv On the Money With Maria Bartiromo CNBC July 28, 2013 7:30pm-8:01pm EDT
hi, everybody. welcome to "on the money." i'm maria bartiromo. one of the biggest hedge fund investors indicted. what will that mean for the markets and your money? plus the architect of obamacare. my conversation with zeke emanuel. will the plan work, will it save you money, and what impact on american business? and then the cronut craze. why are people waiting hours for this tasty treat? the chef behind the cronut and what's to stop it from getting stale? "on the money" begins right now.
here's a look at what's making news as we head into a new week. one of the america's largest and profitable and best-known hedge funds is facing criminal charms. the federal government says employees of s.a.c. capital are guilty of insider trading. >> s.a.c. became over time a veritable magnet for cheaters. they operated a compliance system that appeared to talk the talk but almost never walked the walk. >> the fund pleaded not guilty in court on friday and is run by billionaire steven a. cohen, not named in the criminal indictment. in a statement, the company said it never encouraged, promoted or tolerated insider trading and takes its compliance and management obligations seriously. the charges did not have much effect on the markets. the s&p 500 hitting a new high during the week, though it was a choppy week overall. a big week for earnings, though. amazon missed expectations, but netflix came in ahead, as did
apple and facebook. facebook stock, by the way, soared after that big beat. 30% in a day. among industrials, ford and gm both beat expectations as did boeing and 3m. caterpillar, though, missed big time. sales of new single-family homes hitting a five-year high in the month of june, up .83% and above analysts' expectations. the third-straight month of gains in new-home sales. there was concern that rising interest rates would slow down home purchases. a massive hedge fund indicted, earnings season in full gear and the markets hitting new highs, a busy week. what does it mean and how does it affect your investments? joining me right now is burton malkiel, the author of "the investing guide, a random walk down wall street," princeton professor. good to have you on the program. >> thank you so much. >> thank you so much for joining us. it's been a busy week, hasn't it? we saw the federal insider trading charges against the huge hedge fund s.a.c. capital. do you think that has any impact
on the retail investor? >> oh, i think it certainly does. i think people get scared, that the insiders have a real advantage over the public, and i think it drives people away from the market. >> i mean, i guess it does shake confidence, and once again people feel like the game is not a playing field -- an even playing field. >> i think that's right. and, therefore, i think the s.e.c. coming down very hard on this, i don't know exactly what's going to happen, but the fact that this is in the sights of the s.e.c. and they're going to try to make this as fair as possible is probably a good thing, not a bad thing. >> they probably certainly have been working on this a long time. >> you bet. >> let me ask you about this upcoming week. the federal reserve is meeting once again. we've got job numbers coming out. the second-quarter gdp. typically a market-mover. what are you expecting from the week ahead? >> there's no question that things have slowed down. and we're definitely in a pause. but actually, i'm rather
optimistic. i think that what is happening is we're getting the results of the sequester, we're basically getting the budget deficit is still big, but it's coming down. and it's the change that matt s matters. the private economy is actually doing rather well. it's the government sector that's providing the drag on the economy. i think that drag is going to be somewhat less in the quarters ahead. and i'm expecting a better second half and a better 2014. >> you are. and how would you characterize earnings so far? i mean, earnings, i think, are coming in better than expected, but revenue is really not growing very much. >> absolutely. revenues are not growing much. but that's a part of gdp, growing very, very slowly. i think as gdp starts growing faster -- now, i don't think it's going to go crazy, but instead of being 1%, 1.5%, i think we're going to see a number that starts with 3 in
2014, and i think that's going to help on the revenue front. >> and in terms of investing today, you've seen a huge outflow of money coming out of bond funds. what would be an appropriate way to look at one's retirement, look at your i.r.a., in terms of allocating bonds versus stocks? >> well, i'm actually rather worried about the bond market. i think people should remember history. the last time u.s. government bond yields were as low as they are today was at the end of world war ii, because we pegged interest rates very low to finance the large government deficit. rates stayed low into the early 1950s, and then started rising steadily till 1980. as those interest rates rose, bond prices fell, bonds became very, very volatile, and those who don't remember history, i think, are doomed to repeat it. we're in the same situation now.
we're financing our large debt with what's called financial repression -- keeping interest rates veriyvery, very low. as interest rates normalize, this will not be a good place for the bond investor. >> tell me what you're trying to do from your new position at the board of rebalance i.r.a. >> well, basically the problem is this. you've got a number of financial advisers who are putting portfolios together for people, and there are two problems with many of them. first of all, they tend to be conflicted. they will want to put things in your portfolio where they get a commission. and secondly, they might charge you 1%, 2%, or 3% a year to look over your portfolio. with rebalance i.r.a. and with wealth front, another company that i'm associated with, that does the same thing, we charge a
very low overall fee, that might be .25% or .30%, and we use my favorite funds -- index funds, which charge rock-bottom expenses -- >> like etfs? >> like etfs that charge almost nothing to get into -- >> right. >> -- a broad-based equity market. >> do you think the average american is saving enough for retirement? >> absolutely not. i think this is one of the crisis -- >> me, too, exactly. >> -- in our country. the average size of an i.r.a. is somewhere just over $50,000. we need much more. we really need to have a campaign to get americans to save more. >> thank you for coming on the program. >> thank you so much, maria. >> burton malkiel joining us. up next, on the money and on your health, key components of bottomcare a
obamacare are coming online. are you ready for it? one of the chief architects will join me next. up next, a treat worth waiting hours for. the cronut has captured new yorkers' hearts and wallets. we'll learn about the magic behind the mania as we take a break, and look at how the stock market finished the week. back in a moment.
welcome back. are we ready for the obamacarrollout? implementation of the affordable care act approaching a critical stage this fall when the health insurance exchanges begin. the mandate for small employers and small companies has been postponed giving the implementation of the affordable care act an uncertain diagnosis.
dr. ezekiel emanuel is the former white house adviser on healthcare policy and is vice provost for global initiatives at the university of pennsylvania. zeke, it's great to have you on the program. >> good to be here. >> thank you so much for joining us. let me ask you about the implementation of the affordable care act. it's when the health insurance exchanges go online. >> right. >> october 1st. >> right. >> some talk that the computer systems being developed for the exchanges may not be ready. these are supposed to be stat state-run and 34 states kicked it back to the federal level to either help or run it totally. >> right. >> what's the status? are we ready? >> we're going to know on october 1st. every state i know and the federal government are working really hard to get this up and running. i'd like to say two things. there's probably going to be glitches. even the president has said there will be some glitches. but those are software things that by year two, 2015, year three, 2016, will be ironed out. and it's going to be like shopping on amazon. if you want to see what it's like, go to the massachusetts connector that's been up for
years and it is like shopping for amazon. the more important thing, in my opinion, is what are the choices people are going to have and what are the prices? and there, i think all we've had is good news. 11 states have now reported what their premiums are going to be and the big ones -- california, new york -- have reported remarkable savings. >> so walks through the consumer experience come october 1st. >> okay. so you go online to your state exchange. you find it. and then you put in your zip code and you're going to find out what the offerings of insurance policies are. there are going to be four levels, increasing richness. that is, more benefits, lower co-pays and deductibles. and then, you will go, and, you know, for 60%, 70% of americans they shop on price, so they'll go to the bottom ones -- the silver and the bronze, they're called. and then they'll look and find one they like. they'll find out what their subsidy level is based upon their income, and then they'll see what the price is. and you have to buy the first month, but you'll see what your
monthly premium is. now, for most americans, the majority of americans, they will have a subsidized premium that is going to bring the price down. and i think this is going to -- first of all, it will be a lot more competition. you'll decide what you want, not your employer. and you're going to decide what the price point is, how much those benefits are worth to you. and i think it's going to be a pleasant surprise to people what they can get and how much they can get. >> is this going to be a hard sell for, you know, to those young, healthy people who typically needless medical care than older citizens? >> well, given what the rates are that have been published already, i think young, healthy people are going to be actually find it quite desirable. if you could buy insurance for $34 a month, are you going to stay out? that would be crazy. >> right. >> even if you have to pay $170 a month, that's a pretty good deal. >> the employer mandate. why was that pushed out? >> two things. it is confusing, because it applies to full-time employees and who's a full-time employee -- over 30 hours. the university -- i work at the
university of pennsylvania. if someone teaches in the first semester but is not teaching in the second semester, are they a full-time employee or not? and so, it became confusing. the second thing is, it's not critical to the success of the bill. and here's why. if you're an employer with less than 50 employees, employer mandate doesn't apply to you anyway. that's more than 95% of all employers in america have less than 50 employees, so most of the employer it is doesn't apply. the big employers, more than 51 and more employees, they already provide insurance at the rates of 96%, 97%. and once you get to 200, they're at, like, 98%, 99%. we're talking 12,000 employers in the whole country afoefectedy this. >> are you worried businesses are saying it's too big of a cost? >> the big insurers -- the big employer, this already provide insurance, and there's no law
mandating. why are they doing it? a confident person like you, you go to an employer, you expect insurance. you don't have insurance, you're not interested. smaller employers, some of them do and some of them don't, it's about 50/50, depending upon size. and, you know, the ones who are smaller they're probably not going to do it and there's no penalty. the ones who already do it do it to attract better workers and are probably going to continue. >> we know the u.s. spends so much money on healthcare, more than $2 trillion. >> 2.8 trillion. and the economy of france. >> and so much more than economies most of -- most other countries. >> right. >> so where is the rollout of reform in terms of bending that cost curve? how do we get costs down? it's predicted that medical inflation will decline in 2014? >> so we have already seen actually over the last five or six years a decline in medical inflation. that's the first thing. so we're already getting some bending. second, there are many things in the affordable care act that are beginning to bend the curve.
the policy on penalizing hospitals that have too many readmissions within 30 days of hospital discharge, getting hospitals to focus better on keeping people healthy, getting rid of hospital-acquired infections. the next big move in my opinion, the thing that is sort of undone and still really needs to be done, is big payment reform. moving off the fee-for-service system. you pay a doctor for a fee for everything they do. you pay a hospital a fee for everything they do. they have the incentive to do more. quantity over quality. we need to change that incent e incentive, and that's, i think, the next big thing. >> now, some people say that the weakened economy is really accounting for a drop in the rate of growth, because people were opting out of costly care. >> that's probably true for some of it, but not all of it. most of the data suggests the drop in healthcare inflation predated 2008 and predated the recession. there was a blip in 2011 in terms of an up tick in inflation and people thought people were getting things -- healthcare services they postponed. but it does look like this
slowdown is actually real, and i think that there are other things being put into place that are going to -- that are keeping hospitals and doctors looking to save money. we still have some unfinished business, and i think that's extremely important to actually attend to, changing how we pay doctors mainly. >> zeke, good to have you on the program. >> great to be here. and thanks for the session. >> dr. ezekiel emanuel joining us. up next, the korean of cronuts, chef dominique ansel is here. he'll tell us the recipe for small-business success, and he's serving up a new dessert to keep you cool this summer. look for us on facebook/mariabartiromo. back in a moment.
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welcome back. there is no sugar coating it. the cronut is the hottest food item in new york. the combination of a croissant and doughnut has people lining up for hours for the privilege of shelling out $5 for each one. and many leaving empty-handed. i'm here with the chef behind the cronut right now, dominique ansel. he is the former executive pastry chef at restaurant daniel under celebrity chef daniel balew before opening his own bakery in soho. so good to have you on the program. >> thank you for having me. >> so what are you doing there? >> it's a summer treat. it's smores.
marshmallow ice cream, developed for the summer, and actually is special recipe that we can freeze. inside, there's vanilla ice cream and chocolate wafer. >> so ice cream inside? >> you can see ice cream coated with chocolate wafer. >> oh, my goodness. you fired it up. >> we torched it to order, and put it with smoke with wood. >> and that looks like heaven, and i want to talk to you about the cronut here. you came up with this idea of the cronut the you've become famous for the dessert you created. it's half croissant and half doughnut, or it's a special dough? >> it's a special dough. we describe it as half-croissant, because the texture and the -- the dough is really similar to croissant dough. it's something we launched the beginning of may and we change the flavor every month. >> oh, okay. and why do you think it's become so popular? i mean, you've got people lining up for hours for this. >> yeah, we think people like it, it's something different, unusual, and everybody -- everyone knows what a doughnut is and everyone know what's a croissant is, and putting them
together makes something special. >> and you're increasing demand? >> well, we've increased the production since the beginning, but it's very important for me that the creation doesn't kill the creativity. i keep myself busy, and we enjoy, like, creating new thi s things, and our chef is not all about cronut. there's a lot of beautiful pastries like this one. >> i'm going to get to these in a moment. i remember years ago the cupcake all of a sudden became hot. how does this happen that one pastry becomes hot? and how do you make sure it doesn't just become a passing trend? >> that was really unexpected for us. it went viral overnight. and it was very surprised after a couple days to see, like, 00s of people lining up for the cronut. >> amazing. you're constantly creating new desserts. tell us about each one that you brought. these are also some lovely things from your bakery. >> exactly. so on top of the specialty from france. it's very tender, like cream butter, the outside is
caramelized. this is actually our signature. our bestseller and probably my favorite is call dominique's creation, specialty from france. and my take on it, it's a lighter version than the original one. there's a lot less butter, a lot less sugar. >> looks phenomenal. >> and on the bottom, the paris cake, a french classic. this is a ring of cream puff. inside caramel, peanut butter, chocolate, just to remind you of the bar. >> amazing. so you studied and worked under chef daniel balew until you opened your own. how did you get the resources to open your own bakery? >> i worked for daniel about six years, and then after those beautiful years, i decided on moving on and opening my own bakery. >> good for you. good for you. was it tough to start your own business? >> it is not easy. it is a lot different from being a pastry chef to being a business owner. >> sure. and was it easy to get the funds needed?
starting your own business? >> i had some savings, and i started my own -- >> good for you. congratulations. you've trademarked the cronut, right? >> that's right. kr we've trademarked the cronut so we can keep doing it and keep the creation at the bakery. >> congratulations. we appreciate you bringing everything. chef dominique ansel. we appreciate it. we'll take a break and we'll look at the upcoming week that will have an impact on your money. and being rich isn't the same. what's your magic number? when we made our commitment to the gulf, bp had two big goals: help the gulf recover and learn from what happened so we could be a better, safer energy company. i can tell you - safety is at the heart of everything we do. we've added cutting-edge technology, like a new deepwater well cap and a state-of-the-art monitoring center, where experts watch over all drilling activity twenty-four-seven. and we're sharing what we've learned,
for more on our show check out the website, otm.cnbc.com. follow me on twitter and google plus. first, let's look at the stories coming up in the week ahead that may move the market and impact your money. it's another heavy week of earnings with dow components merck, pfizer, exxon mobil, and proctor & gamble, all reporting the second quarter results. mastercard, sprint, nextel, and aig will also release quarterly numbers. on tuesday, the federal reserve's open-market committee will convene for a two-day meeting on monetary policy. on wednesday, the gross domestic product for the second quarter is due. typically, a market-mover. and on thursday, automakers will report sales for the month of july. and then, on friday, the markets will be watching for the jobs report, the big number of the week.
that may very well set the tone for the markets. finally today, are you rich? a recent survey of investors by ubs asks, what is wealthy and found that in these uncertain time, 60% of respondents with balance sheets greater than $5 million considered themselves wealthy. of those worth $1 million to $5 million, just 28% said they felt rich. and it's all how you look at it, i guess. thank you so much for joining me. next week, a rare look at supporting a future generation of innovators. i'll talk to the parents of amazon's founder, jeff bezos about kids and big ideas. each week, keep it right here where we are "on the money." have a great week, everybody. i'll see you again next weekend.
>> oh-ho! mama mia! >> ted turner is one of the largest individual landowners in the united states. he owns two million acres across 12 states. he's been described as a genius and a jackass. he's decided to reflect on a tumultuous life and more or less tell all. >> good girl, dixie. >> ted turn may have mellowed a bit, but he's still incapable of pulling his punches. >> now there's not anybody i don't like. but after this interview's over, i may not like you. >> [chuckling] yeah. [ticking] >> i suppose you can say anyon