tv Wall Street Journal Rpt. CNBC July 12, 2009 7:30pm-7:59pm EDT
today, coming g to you frfr ouide the new york stk k exchange on wallllstreet. we'v've t t e ckckof to thehe crucial earnings season. eeeen chutes andd theececony tuturngg owown? and tumbling oilil priris.s. what's nexext f f the marketsnd your portrtfoo.o. we'll t tal to nobel priziz winner paul krugman. ho heththks we shouldld f fix health care syemem and whether we need aanew s smumulu ckage. >> d ththe secret toamerica' millioionaeses. how it canhehelp you navigate your own finances. me t t richestt m in town. the "w"walststre journal report" begins right now. this is america's noum r onfinancial news rorogr. thth"wall street jojourll report." now marariaarartimo.
here's's a look athat'smamaki news as s we headntnto a new w on wall ststre.. afafr r ju 40 daysys,general motors ererge from nknkptcy. thee dramatically slilimm down cocorpatatn will shed four branan.. tens of thouousassofmployees anmore than $100 llllio in debt.. the speed at w whi this bankruptcy occccrered regarded as a majajor a aieievent for th obama administrarati w wch committed $50 billion togm a pa o o its bailout of the u.s. auautoindustry. one of the most osely watchehed and importantararngsseseass in yeaea kicked off tss past week. alcoa, t alumumin producer and dow compmpont t wa the fst to report sendnduarter earninis.s. the companyny h r revues of $4$4.2billion but t the company lost 26 cents a share. stl much betetrr an what analyststs wee looking forwhwhi was a loloss of centsts srere the marketsere lackluster this ekek. the dow felell below t the 82k tudaday d then moveve sideways weesesy and thursday.. on friday, thehe marketsts were flat. oil prices tumbled d durgg the
wewealling to a fifiveeek low on monday anand droppingfurtrtr to below $60 a barrel concncer a aut theeakness in ththeconomy and a slowing mama picture. >ththers a new battle of thh titans. google is takiningn micrososo on its ownn turfrf google willinintruce a new operatining stst that runs computers i direct compmpititio ththicrosoft's windows. the sowaware will inititilyly targetet lolow-d portableepcs a will be available e t the seco haha of next ye.. there'e'bebeen a lot o of didiscsisionhis weekertainly abououthehe prospectct of a s s ststulus package. and ee current stimulus package. is it wororki?? do weweeeeed another o o or s sd ju givehehe current stimulus pacacka more time too work out.. joinininmeme is paul cculley, managing director o pimcoco. good to hahaveouou on the prram, paul. > gd d toe here, maa.a. >> let msk youbout thehe prospect of thehe broad e ecomy and wherer we are rhtht herere. this week, we began theececon quararrr earnings rororng season. ititooookelike alcoa actually came in betteter than p peoe we
expectining. what is your s sen of seconond quarter earnings and h how corporate amamera a is doingigit no >> i think second quarter earnings versussececd quarter last y yrr will be down v vy meaningfully. hohover, earnings expectatioio actutual h he been revivid d upn the conseseusus in recent eks. soso i think it's g gngngo be a mixexed ba but, cleaearl earnings arere suffering becacausththeeconomy versus thehe sonon quarterofof laststyear,as been gogoin straigig d dow so i ththin the market will stst focusing on forwardoooong earningsgsss oosos to getting obsessed about secononduauaer eaearngs. for r an i iividual compmpan obobvisly, that wl be different. >>rere you expecting to see a recoveveryn n th third or fourt quarter of this year, orrre youu bebethnn 2010 for the broad onony recovery? i think wewe'l have a statistical recoveryry hee in te second half ofthe yearss we shift from thearark side t tohe sunny side the inventorory cycle. i call it addition elimination n straction.
but t i n'n'think we'llavave a recovery worthy ofhehe nee ununl l weeek out on the unememoyoyme rate and itststts comimingacack dn. atat not a sececon halfofof the ar phenomena. that's 2010,, we he.e. > h efffftitive has the stululus package been. reree are loing at a savings te of 66%% suggesting aa lot of pelele aaving whatevever stimulus they may haha gotten. they're not necessarily out andd spending it. or maybehe money hasasn' ne w wor fully yet. do wee need a sendnd stimululu package, bottom linene? >> i thk we neeee a sececon ststimus packagege to your firstueueion about thehe effectivenesess t t first one. i think it'seeeen effective but hasn't generated the typepef exububanancehat people were hoping foror. it was never desesigd d do that. it's too cushion t the down side as presiside o oba sasa, , toave bsbss mhasas to create e jobs. now, obobouousl we've lost a l t of jobobn theirst half o of e yeyearut without thehe stimulul ckckag i think we w wld have lost even more. so think a lot ofeoeoe are being tooararsh on the stimulus ckckag
but that said,d, i think w need another onone, particulalarl didictcted towards helpingng ou people who arere long-derm unemployed by eending unemploymement benefitsnd alsoo revenuee tnsnsrs to the states who are really cutting back o o theieir exexpeititur. and ihihink that's theigig area whe we could havav a second stimululus package i do someteti for thestates. >> meanwhile, a a stubborornlhi budgdg deficit. a lot ofeoeopl worried we're seeingng smumu spendining dd yo n't really pa dent i int the deficit t byusus raisingtaxes. the nunumbss don't addup. are you concernenedbout the debt and the defefic in thihis count anand at that mayeaea too both thdollar and u.u.s. treasusuri?? >> i inhe short run, i'i'm no the world's i a ression. the e ititedtates will do ne, i think, on a relatativ bisis. i i'mot worrrrie about thehe size o oththe deficit r rig now. in fact, i thinkt should be actutulyly aittle bitigigr as part of a secondtitilus package. ththinthe bigger issue onnhehe deficit is longg term,ow the
next five to o nn years, whwhics really away f fmm the business clcle ere we're going t have to make tough choices as countrtry ouout how we wanant treatt entitlement spending. personally think we n nee to mo in the directiti of vivi more meaeans testing of entitlement s sndndin because atat where the e expsive growth and the debt i is longer rmrm but right t no i think the dedefit is biganand shoululd bb andctctuay should bebigger. >>paul, ww your invevestgg todaday? >> we, we've beenn very public about what we'veve b bee doing r the last year. we've been veveeight in the momogage-backed securitieses arenena. it's been a good trade rr . we've e be ovoveright. the seninior financials hass bea good trade for us. so essentially we haveve bnn concentratat our investment in th sectoto that arere being suorted directly or iiirectly byby t governmenentmtatasafety net. ananwhe, we have been a little bit long inn duration, andnd a little bit l lg of the curve.
and we're inin okay. so y youe n not worried abobou real e estee a thisoioint aa t t peoplple worry abobo commercial reaeal estate. this week weawaw a record inn credit cardd dedeliuencies. many think ttt the commercial si o o things will be thehe nex oe to dr.. does thatt concern you? it absololutyy does.. in fact, i thinknkhehe commercial-bacackeseserities maetet ithe bigigstst ccern on the hizon. i think the fed wh its lf prprogm will some veveryood in that area a in termsofof try to support the cucurization process. buththe b botm line i in commercial is thahat commercial property prices, i ifou mark them to markrkethaha come dowown to the ininthehe arereat deal of n native equity exists i i thatececr a it's veve difficicultoto refifinaee with negative equity. sosototo me, t thassne of f th biggest black k hos s th w w hae to worryry aboutut. ouour t tail rk, our acac anan rk in the year ahead. >> paul, wondederf have uu
on the ogogm. thanks for snding the time.. >> my pleasure. ththan you, mamari >> 'll see you soon. paul mccley joining uu >> nextnnhehe wall street urnal report," health carare spending is one-sixthf f e americanan ecomy. isis n theimimto ovoverululit, and how much will it cost? bellaureate paulrugman igig in. then g guirr hero, green mountain coffee and other g gre american brands with t this in common. whwhatan you learn f fro their journeys. tatake look at how the stock market ended the weeeek. (announcer)) th is nine generations the world's most revereluxury sedan. this ia story of over 50,0 c cra-tested cars...
attentntion is turning to twtw his front burner sues onhe domeststic front. heal care refoform and the stabilitity of the broadad onomy. paulul krurugman isobel p pze winnin columni and economistst for "ththe new yo times" and he joins usus right now. od to have youou on the progra. >> gd to be re. >> saw your op ed frida lking about the stimumulus packe and whether we need a send stimululus. tell mee how you all come out o this. >> i very much foror sececd stulus. i wawaalways -- i a always thout it was too small. the economomic tlookas darkened a a lot. not cause the stimululus has failedecause most of f it jt hasn even arrrrived yet but because thingsgshappen. stuff happens. and wt lookedeven in january like a t t small package really lolos too smallll now. we're looki at -- "the wall reet journal" just camame out with i survey of economists. thth are forecasting ununemployme at thend of 2010 wille as high as it is now. that's a pretty bleleak outlook. we need more oomph behind this
is inot true that a lot of e money that tataayers did recee was actually saved. talking about t a savings ratee 6.9% which, obvbviouslys a good thing. but theye not going outut and ending things and buyiyi things. >> a l of us saidd itas to be moretiltedowards governmentnt spending.. consnsumers maspend more of ththat. a large check arrived, they dot -- you donon't expect them to spend all of it at oncece, su. but the bibig stf is helpg stat avoid budgett cuts and en spending o infrastructuree prprojects tt we reallneed. >> bh the housuse and senate right nonow have committees workining on healt carare legislation. we'rhoping to s see a vote within the n next couplple of w. thee congressional budgege offi hahas scor legislation from two budg committees. on adddded up to nearly a trlion. can n we affd health carar legislation? >> sur those aree not big numbers. youant to bear in mind the feferal gornment projectss
nationally w wll spe $3$33 trillionn health c ce over the next ten years. we're talkiabout someththg thatould add maybe 3% t our total hehealth carspending over that period. notounting the savings thahat would prprobably ce along th thee legislation.n. reform of micare, cparative efctiveness and so on. it's pbably not acactually from a tional int of view going to cost anything to g univsal health carare. thesese are sll number you hahave to pay for with a combination of mededicare vings, prprobably se kind taxome ple along the li. but t this well within the rangof what we c can do. >he optionnto p purchase p pc or private inrance plplans encourageompetition or somee people s it w wld dilute . >> it wouldld encourage competition. mo states have vy litttt competition amonong priva health insurers. a lot ofhe states -- i happen to look a at iowa bause of chuck grassley. 70% of that market is just one single insurer. there's veryryittle mpetition ou the. give people a pububliclan thats going to incrcrease insurance.
this is notcompetitive free markrk. this is a collelection carte have t tthere. >ome onomis have floated the ea of taxing employer-provideded heal benets, something that wouou have a huguge impact o on middd class s americans. w do you feel about that?t? >> y you don'ttwant to tax the whole thing. no waway. there's s actually -- r rht nowe have a systetemwhere at ployerax break for providing e benefits isishe only thing that h holds most off our syste togeth. butome tax onn plans inin exces of some very high mber, that'ss okay. probabably, in one way oranothe, we'll be gradually shifting toward the s system where there is -- thisis moree of a benefef that's provided for eveverybody, rather than sometng whereome ople get gold platedlans and some people getnothing.. that's okay. i don't -- the detailsmatter enormoly. >> healalth ce expxpense is reay the biggestst issue in tms of -- in terms o the cost for buness, for consnsers. but thisis economy, as y y just
saidwe're reining watchchg this economy stalled. what is goingto get thihis econonomy movi again? you say we need a ather ststulus? >> that's -- >> at some point. >> i think since these ththings take t te totake effect, we should s srt moving on the send stimulus now. but long ru recovery is hardto see. one thg we know we nene to do is provide enough sport so we don't fall i io a deflflationary spiral. >> bause people are still deleveveraging. >> people ararstill incrcreasing their savings rate. and wages -- we cam into t this wiwith wag grorong abo 4% a year. most recently, wages are growing at about 0.0.7% a year.. that's preretty cse to the ee oferious dlation. oncece you g into thatatit's very harard toet out. >> whaha happened in l'a'aquila your inion? thee gro of eigight met in l'aquila, ititaly. anything comee outf that? >> wl, just rginal movement.
look -- >> what else c c they do att ths poinint? they've met the e 20, they've met in london. >> the last g-20 meetiting was more prodtive thaha the usual meetetg. we don't expect ththat much. >> t g-2020 was definitely effective. but e g-8 th week -- > this wa't much. there were somee smpts good tent. not much more e than that. >> going forward, canthe restt of the world helelp the unitete states or is eryone looking inwa at this point >> you knono we really ought t be having g a coordated stimulus, but we're hing enoughrouble even getting a a unilateral stimul. soso, no, i don't have manany h out ere. >>is there any owth in the econonomy yo can name? >> oh, susu. industrial production is probobly goi to turn positive.e. inventies were drawn down. there's goiningto be ann ientory boun. there's s mesigns, youknow, e gree s shoots are not enenrely there's somome things turning up. none of itt looks like it' enoughghostop us from contininuing t bleed jobs. >> paul, great t toave you on ththprogram. wewe soappreciate it.
paulul krugm joining us on here on wall streetet coming up xt, whatt does ur neighbor know abou making money that maybe you n't? the e inside s secretsof self-m weal. and d then, what w would be new erks for thehe isolateted culturof north korea?a? isis adrtising making inroads in the counist country? ive.
ll, many of america's self-made millionaire aren't from wall street or hollywood, but ey may just be from your street. joining me is randall jes, founder of "worth" magazine and author of "t rhest man in town." the 12 commandments of wealth. randy, great to have you onthe program. >> congralations on the book this is such a fascinating topic. you travelled to 100ow ross the united states to talk to the wealthiest resides, all self-me fortunes. what did you earn? >> oearned tt the american dream islive and well. i learned that success can take place an townn this country. i thin so often w view the world of wealth and success and wealth creation through the lens of hollywood or wall street. anwe forget this vast country in beeen. where grea thingsre happening. and i lovedhe ft that these richest men in town wer not al setters. they were executers. so many times i heard them quote thomas jefferson saying vision
wiout execution is hallucination. and thatascinated me because i always thought ing into th that they wld be the sor of five-year time horizon strategic planners. >>o they didn't have a master plan and a structure to it. th just got it done step by step. >> step step. every day theywere dermined to do bett than the day befo. it was like the janese principle of kaizan. cotant, incrental improvemt. many still in the 50s, 60s, 70s, 80s today, they arstill doing it. their energy is amazing. >> i want to hear what theyll had in common. the book's title refers to the world's rhest men. arthe richest womenifferent from the riche men? >> not surprisily. the were four wom in the book of the 100 that i interviewed. so it doesn't prove that women have yet shattered t glass ceiling of weah creaon, but it does pre that it is and i think you'll connuto see it happen more. but didn't see a vast
fference. they were the same sort of serial entrepreneurs, aion dicts and great at execion. >> action addicts. that's a interestingterm. you said they were relient. you ld me in the commercial break. n you tell mebo somef the other tras th they all shared? >> one of the great commonalities was faile. i say ihe book one of the commandments of wealth is fail to sceed. meaning that the had several failures in their ives, but theyept bounci back every me from those failures. it didn't sm tocare them. so wheth they were male or femaleat was the common trait, resilience. it was probably the thing i most admired about the riest man or woman in town. >> the publicly traded compani belongg some of your subjects are beating the market averages which was nteresting. how successful are the richt men d women on wall stre give smus standouts. >> we ould all be investing with the richest man in town because the richest man in town index is up about 28% year
date. versus what's happening with the nasdaq and the s&p and dow jone industrialrage. mestandouts are green mountain coffee roasters. the richest man in burlington, vermont, bob stler. up 123% year to date. activisi. the makers of nintendo's guitar heroes >> the videogame. the brothers balla in albany, new york, are the chest men in town. they started viciousion whh they soldo activision. >>hese are all, u know, just really good ideas. >>well, ideas brilliant executed. so many people sd to me, and the process of this, ideas are a dime a dozen. execution iseverything. >> rand egrt convtion. we so apecte . thank u for traveng all around the country for this. this is something i thinke all could learn sething fr. thank you. randall jo joining us. so do you have wt it takes
to be the richest man or woman in town? go to wsjr.cnbc.com for aink that aptitude test. up next on the "wall street journal report" a look at the coming newshis week that will have an impact on yr money. and television watchers in north korea have seen sething they've never seen before. a a commeral interruption.
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yoll also find a lk to my new blog. maria bartiroms investor agenda. i pe you'll check it out. thetories coming up inthe week ahe that may move the markets and impact youroney this ek a t of earnings coming ou five dow coonents will rort their second quarter earngs released. bank of amica, johnson & johnson, jpmorgan chase, intel and genal electricake up the list. ge, of course, the parent of the company that produces this program. on tuesday, we get a look at consumer behavior wn retail sales for june will be released. we will also get the produce price index wch would showny inflation at the wholesale level. >>and then on wednesday, the follow-up. the consumer price index which tracks inflaon at the reta level. snd then the federal reserve op market committe releases e minutes o its most recent meeting. a busy wk ahead rtainly and possib impacts on your mon. how is this for strange brew. north korean state television reportedly aired itsery first