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tv   Squawk Box  CNBC  August 24, 2012 6:00am-9:00am EDT

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angela merkel and francois hollande have delivered strong words to greece insisting it must show fiscal reform progress or face the judge and then the jury. in return for patience from europe's leaders following a meeting yesterday the german leader said it's important everybody stood by their commitments while the french prime minister said he wanted greece to remain in the eurozone but must make their words necessary efforts for that to happen. the treasury is consulting with other regulators on the next steps to take for money market funds. early they are week sec chairwoman mary shapiro dropped a highly-anticipated vote for new rules on the mutual fund industry after losing a swing vote to push forward the reforms the new rules aim to reduce risk. lance armstrong has announced he'll no longer fight accusations he used performance-enhancing drugs. the country's anti-doping agency
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will strip armstrong from his titles and ban him from cycling. he's refused to cooperate with the process that he's calling one sided and unfair. >> at least you have your own music. >> i do. >> difficult hour. >> armstrong gives up the fight or he admits -->> he doesn't admit anything. i'm tired of fighting with you guys. >> take all my titles, take everything? >> eventually going to do that regardless of what he says at this point. >> wow. >> it's been a long, long battle. between the doping agencies around the world or anti-doping agencies and armstrong. >> what do you think of the days? you followed this more closely than the average joe. >> i would think it would be disappointing. >> if he came forward -->> he gives up because he can't -->> i think he's sick and tired of fighting. this guy was an american hero.
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seven straight. >> he hasn't admitted anything at this point. so, you know. >> we follow some of the things that have happened or come forward. people on his team who have come forward. >> what's most unfortunate regardless of what happens in sports whether it's usain bolt who has this tremendous olympic, compete in the 200, first man to do that in a number of years, and then it's always in the back of your mind these days, is it clean? did he do it clean? did he hit those home runs because he was clean? >> they nabbed these guys. >> you look at these guys in baseball. you looked at where they were ten years earlier. where they are now. what their body size looks like. you look at this and know there's something. >> i'm so glad there are no accusations or no one even
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raising those issues with a guy like usain bolt. there has to be something for pure athleticism. >> i thought you were going say for "squawk box" anchors. >> you were completely juicing. i can tell. the size of your head. >> it grows because of that. >> absolutely. >> and other reasons. let's be honest. >> right, exactly. st. louis fed president's interview on box yesterday making a lot of news. he pushed back against the notion that the central bank was locked into another easing program saying fed minutes were stale. >> if we were to resume which i think we will, you know, 2% growth maybe a bit stronger than that in the second half the year, unemployment ticks down through the rest the year, you know, that's not a great outcome but to me that's a good enough outcome to keep us on hold. >> later in the day, bill gross had some comments to the contrary saying another round of fed easing is almost a done
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deal. >> what they basically said is that this will be a relatively open ended program in terms of size, in terms of time, in terms of what the asset class is that they buy so the fed has the flexibility even in the face of a strengthening economy to the extent that's happening to basically modify their posture going forward. i think it's almost a done deal. >> gross says u.s. gdp isn't strong enough to dissuade the fed from jumping back in with more purchase of bonds and securities. charles evans says he sees a lot of reason for more easing including more bond purchases. on one hand i don't think bullard is speaking for the majority of the board. when the minutes said many members want to do more qe i don't think bullard is among them, i don't think his argument is among them. on the other hand bullard sit there's and makes a very compelling case about why maybe
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now is not the time to jump for the fed, so i think the market has to judge that. i don't know necessarily if the market don't the first part quite to heart. jim bullard is a smart guy, i think he has an interesting take on economics and monetary policy is not the guy that's leading the charge now and in charge of the board. >> these things should be called or should be known as the fed not up-to-the minute because they are not. >> they are old. >> they don't tell you much of anything other than what was happening in a room more than a month ago. any commentary on the most recent data that comes out and then we're left with people, bill gross and everybody playing a parlor game as to what are the odds they will come out? >> right. >> is that good or bat for the markets? >> another inflection point for the economy. i got to speak to jim off set a little bit an one thing he was
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talking about was this incredible, you know, cyclic cyclicality in the data about this strong winter followed by the spring and he said three years in a row, at some point you got to say there's something in the data that's causing this to happen. if that's true that's a reason for the fed hold off. by the way the markets shouldn't for get that in the absence of fed action i want gets better economic growth in its place and i think if the market weighs between fed action and growth it will take growth every time. >> bullard is not a voting member but i do think a consensus is important for bernanke who likes to take everything on the table. one of the most important things he said yesterday is if things continue like they are you're not going to see a gigantic action from the fed. that doesn't mean no action. he clarified that too. if we see programs coming from here it won't be a repeat of qe2, it means smaller programs,
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month to month type of thing where you get back to the idea where the fed was raising or lowering interest rates at a quarter point at a time. >> does that mean like, let's say that scenario that end up happening, does won't buying doesn't happen. it's more speaking to the market rather than anything. >> partly language. there's a contradiction. on one hand they argued at the zero bond we have more tools and we have quantitative easing and it's similar to rate cuts. but it's not similar to rate cuts in the following way. they only did it in big buckets. they did 500 billion or 600 billion. what i'm sure bullard is saying, we have to make qe empe qesemm
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to rate cuts. there might be an idea we're not hitting our targets so we'll do this meeting additional qe. >> it strikes me all of the conversations you heard from this from pimco and bullard and everybody in between they could all be right. you could see some action from the fed. will the market view it as significant enough to kind of rally and boost stocks or will it view it as this is bad news because you it means the economy is not doing enough of a joibt self and not getting a massive boost. >> that's the danger. it has to say we're doing it for this reason. the reason we're doing it the economy is not so great. it has a confidence effect on the economy. i want to know if the fed does qe do i still get the steak dinner. i told him no qe3 after qe2. i don't know it was open ended.
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>> you may lose. >> my bad for not cashing in. >> for not taking that up. we saw big moves after the fed did release those minutes two days ago and saw some counter moves yesterday as people worried that the fed wouldn't step in as much. gold got a massive boost, jumped by 1% on those minutes. people are talking about gold. do republicans really love gold? "financial times" is reporting the republican party will call for the creation of a commission for restoring that link between gold and dollar. this is part of the platform that the gop is expected to adopt next week. marsha blackburn who co-chairs the platform committee says this is not an effort to pla indicate congressman ron paul. paul has been a champion of returning to the gold standard. president nixon dropped the u.s. off the gold standard back in 1971. take a look at price gold and you'll see right now $1607.
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big bump a couple of days ago. >> one of our guests looking for 1700. >> let's get a check on other markets. yesterday a big drop to the markets. down by 115 points for the dow and if you took a look at this the dow is down for four straight days. it has its first triple-digit drop since july 24th. it's indicated slightly higher for the futures, but, again, we are on track to snap a six week winning streak for the dow if we continue on. the dow, s&p are both poised for their worst week. oil prices are down 20 cents, 95.99. the ten year note right now yielding 1.646%. not a major move from where we were yesterday but certainly down, the yield down from where we had been earlier in the week. the dollar today if we want to
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take a look, the dollar is stronger across the board. dollar/yen is at 78.53 and the euro still sitting around 1.2529. >> one more point on the fed and markets here which is that there's different takes on the fed. euro 1.25, gold at $1700. commodities are banking on qe. look at stocks. that's another point. but clearly, and this is something we maybe get to in the global market report and later on talk about the euro. ecb looks like it's on the cusp of a lot of things. >> we got a market guest who thinks that will continue to happen too. we'll talk to him in a just a little bit. let's bring in ross westgate. he's standing by in london. you had an interesting conversation about an hour, hour and 15 minutes ago about how the fed looking at it from this
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perspective of should the fed act before the election or not, and should they be paying attention to their job you laid out better than just about anybody i've heard this contradiction of things you think the fed -- doesn't matter this fed action doesn't do any good for the economy but shouldn't do it before the election because they don't want to influence the election which you can't haste both ways. you laid it out better than anybody i've ever heard. >> maybe if you're not there all the time maybe it's easier to look at thing. you got a job, right, mandated to do a job, you get on with the job. it's not about whether the policy is effective. you do the job in the best poway. isn't that what you want from your institutions? maybe i'm old-fashioned. that's the way i was thinking about it. steve raised a good point, we talked about the ebc, what is the job? we got so much now we're waiting for here on the table with not only the fed but ecb meetings and political meetings.
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political shuffling is under way and we still don't quite know what's going to happen. we think we got a road map or path we're not sure how it will play out. equities today a little bit cautious in europe. not by a huge amount. slim losses for european stocks as we go through this session before the u.s. hope. pretty flat for the ftse 100. half a percent quarter on quarter from minus .7. strux -- construction was revised. xetra dax down. ibex is down about a third of a percent at the moment. spanish yields rose up 6.5%, back down slightly but antonis samaras is meeting with angela merkel. likely to meet a wall of resistance to getting any extensions on bailout but we have to wait for the troika
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report before we know what happens with greece. it puts thought of a greek exit back on the table. back to you. >> the ten year treasury yield has fallen for the past five session but still up for the month of august. where will it head from here? so, yelled yields fell and the bonds rallied a bit. on the expectation of less qe. okay. so the fed is supposed to come in and do quantitative easing which is supposed to lower yields and the market goes lower on expectations of less qe. do you understand what's happening? >> i think essentially how much is priced in. at this point one qe program by year end is there's 80% chance. i think if you actually do get qe which is what we saw after qe
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1 and 2 interest rates have risen. if the fed does qe3 rates will rise. i disagree. qe3 will be so much less effective than qe 1 or 2. as the be market is a little skeptical about what lower interest rates will do at this point. even if the fed the office do qe3 it's not obvious to he interest rates are right. we have a huge head wind from europe. the fact that we have a fiscal cliff that feel is responsible for rates declining. >> what happens if they do qe3, if the stock market goes up, don't you get money coming out of the bond market and doesn't rates go up? >> a fair point and that's a little bit of what did happen after qe 1 and 2. the problem this time the fed will act with the stock market at fairly high levels. you can argue is the market already pricing in a lot of qe3? if you look at qe 1 and 2, high
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stress levels the fed acted. you have this relief in the stock market, increasing interest rates. if they were to act now and listen to the fed, they are not talk being about financial conditions as being a reason for them to act. they are talking about the fact that they are not reaching their mandate. my problem with this it's not an interest rate problem. the transmission mechanism from low interest rates to the economy is broken. so i think even if they were to lower interest rates i'm not even sure the stock market will go up as much because i think the stock market should be very concerned about a fiscal cliff rather than -->> there's two different securities, the potential target of qe3 and the expectation is dramatically different for each market. the fed would not have a huge impact if it bought additional. >> right. that's a fair point. there were concerns around liquidity in the mortgage market. we heard from the minutes. i would agree with that.
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i think a lot of analysis tends to be how much net assurance that the fed can buy. in the mortgage market there's not a lot. but there's a lot outstanding. they can buy mortgages from you and the hope is you go out and buy stocks. my problem is the fed has been, you know, buying a lot of securities, treasuries over the last three years. look at infusion into the bond market it's very high. since '08 we had almost 500 billion in bond influence versus outfloss stocks. this year that trend has intensified. this argument that interest rates are low everybody will buy stocks it's not happening. >> we have to leave it there. thanks very much. >> thank you. >> when we come back we'll talk about raining on the gop parade. isaac is closing in. will it be a hurricane by the time the republicans take the stage. we have the preview and john
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welcome back. we're tracking isaac as it inches closer to the from a coast. will it wreak havoc on the gop convention in tampa. let's get the forecast from the whatever channel's alex wallace. good morning. >> good morning. isaac something we're watching very closely. let's get you the very latest. 5:00 advisory coming in from the national hurricane center. not a whole lot has changed in terms of its screen. still a tropical storm. 45 mile-per-hour sustained winds. moving to the west at 15 miles per hour. that's the only real difference. instead of moving west-northwest, moving due west. 200 miles south of port-au-prince, haiti. you can see rather large, still tough time getting its act together. not seeing much in the way of strengthening. despite the fact we have the center of the circulation well to the south of these islands to the north we're still dealing
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with impacts because of how large this system is in and around puerto rico, seeing heavy downpours in the western edge of the island, look at more, that's on off towards the south and all rushing its way northward working its way towards the dominican republic and then haiti as well and that can be a big problem in haiti. folks still living in tents and that can lead to some serious situation with the flooding. projected path, moving its way over towards cuba towards the weekend. mountainous terrain. eastern parts of cuba. that should disrupt it and keep it from strengthening. once it emerges in to the gulf, west coast of florida including tampa still within that cone and even if the center of the circulation does not make to it that area again such a large system we may find some impacts there early next week in tampa and as we head to the mid-part of the week on wednesday parts of the gulf coast having to deal with potential category 1 hurricane. guys, we'll follow it closely as we get through time.
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>> alex, thanks very much. it is the calm before the storm for the gop. right now we're a weekend away from the convention kick off date. john harwood will be heading to tampa and he joins us right now with a preview. i was looking at a new poll out in "usa today" that says the public has soured on all of the presidential election campaigns saying that this is an electorate that's evenly split but the survey shows president obama has an advantage in the intensity of support but republican mitt romney with an edge in voter enthusiasm. how does the gop try to play on that when they come to tampa? >> what's important, becky, about the conventions it's the nominee's chance especially for a challenger who is not well-known as the president to introduce him self to the american public on his terms. and so the question is, can mitt romney capture the attention of the american people, tell a bit of a story of himself and his
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values, who so and what made him who he is in ways that make him more appealing. barack obama does much better on the likability measures but mitt romney has an advantage on the economy which is the most important issue, but the controversies over his tax returns, his bain capital records have under cut some of that advantage to some extent. through ann romney's speech, through paul ryan's presentation and mitt romney's acceptant speech, that's an opportunity for him to lift up some of those numbers with the challenge being the hurricane and the storm is going to detract southeast attention and the networks have cutback coverage considerably already despite the hurricane. >> the other question becomes does mitt romney use this convention in that way, the "wall street journal" has a story on the front page about saying he will not use this campaign, mitt romney will not use this campaign as a way to
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personalize me like a piece of meat. he believes to present himself as an expert on the economy and can improve things. >> he's proven he's not inclined towards opening himself up the way some other politician dose. but he's got to do it some extent. his campaign knows that. he has resisted talking in the past very much about his faith. he did let some reporters go to church with him the other day. but he needs to find a way to connect with americans because, you know, you look at our nbc/wall street journal poll this week, you asked to rate the presidential candidates on likability and being easy going and somebody you can relate to. he was swamped by obama on that dimension and that's one of the assets important the president even in a weak economy, even with people feeling bleak about the current state of the economy and their economic prospects and to some degree the future, that
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still helps when you got a president who people feel comfortable with at some level. >> john, albeit in the "journal" today from mitt romney himself what i learned at bain capital. he's already laying the ground work for how he plans on introducing himself more to the public and certainly defending his record while in the world of private equity. >> no question about it. this is something that the democrats have hammered on. you've had that advertisement that didn't even run on television but provoked a huge amount of discussion featuring the laid off steel worker who told the story of his wife, lacking health insurance, got sick and the romney campaign hit back hard at the obama campaign and said hey that's way out of bounds to suggest smimitt romnes responsible for her death. but that's the difficulty the way you get put on defense of those issues of wall street and high finance. >> good to see you john. see you soon.
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coming up is gold getting its groove back. we check out the trading in the precious metal. and trading in that other yellow commodity, corn. at 7:00 a.m. a special event. "squawk" health care summit. it has cleveland clinic, ceo of mount sinai hospital. former surgeon general. more "squawk" is next. so we built it. chances of making this? it's a lot easier to find out if a trade is potentially profitable. just use our trade & probability calculator. and there it is. for all the reasons you trade options-- from income to risk management to diversification-- you'll have the tools to get it done. strategies. chains. positions.
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good morning, everybody. welcome back to "squawk box" here on cnbc.
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i'm becky quick along with steve liesman and scott wapner. joe and andrew are off this week. in our headlines one economic report ahead as we finish out the week. government out with durable good orders. economists are looking for a 3% rise. that comes after june's 1.3% increase. while the u.s. patent trial involving apple and samsung continues a south korean court ruled that the two did infringe in some of each other's patents. the court has banned from certain products from each company on store shelves. is this foretelling of what's to come here. boeing is sticking to its release schedule for the new versions of its 777 and 787 aircraft. that affirmation came in a note to employees and follow ad report in seattle times jet makers slowed down the production schedule for those orders. >> they lost an order from
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qantas. >> they are having problems. >> let's check a check on markets. take a look what futures remember setting up for on this friday. dow would open modestly higher. s&p virtually flat as the nasdaq. take a look at gold. we're watching was happening in oil, i should say. oil was pulling back this morning, gold was a little bit weaker. there you get a look at the energy markets. wti, brent both pulling back slightly. take a look at the ten year treasury yield, back around 1.65. that's where we set, 1.656 is where the ten year note current leadership sits. take a look at dollar. lot of focus over the dollar. euro has had a nice run. gold was giving a little bit back this morning as well but very much in the focus of fed watchers as well. there's a look at gold down about a quarter of 1%. let's get our trading block. ceo of macro risk advisors and
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the editor of ultimate wealth report join us. guys, welcome. dean, turn to you first. rally over or is this just a breather? >> it's hard to say. the market has been very choppy, sideways seems the direction. we spend a lot of time on market volatility. one thing we can say about august there's been be a absence of volatility. people have taken vacation. people don't seem to have conviction right now. there's a lot of let's see what draghi does, what bernanke does. >> you can't tell? >> it's very difficult to say. our work is focused on trying to hedge portfolios. >> sean, do you have an opinion on that question, whether this rally that we've seen that has taken the s&p to a four year high, the nasdaq to the highest level since 20 houston and the dow to a four year high. >> we've been over bought for a while. we could see a pull back in the near term. but, i mean still countries around the world are
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stimulating. ecb will stimulate. china will stimulate. u.s. of some sort will stimulate. that's bullish for stocks. >> what happens if the fed doesn't come with more qe3. you're hearing from, you know, obviously the fed members themselves, bullard yesterday on this very set, bill gross is weighing in today, goldman sachs says there's a 30% chance. let's say they are right. if there's a 30% chance what does the market do>> if there was no stimulation from the market i do believe you would see a stock market pull back. that's a huge gamble. if you have stocks pull back politically that's suicide for obama who is trying to get re-elected. i don't think that will happen but it's possible. >> during the break the judge asked me if i could lower the value of the euro before he goes on vacation next week. okay. which i think is interesting because he thinks i'm that powerful. let's move beyond that. i don't know how i would do it.
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i mean if i was to do a report that says ecb to do less in spain what would the euro do? >> well identify been surprised by the resilience of the euro and i think the euro will head higher. i think the euro can go to 1.28, 1.30 before it's all said and done. it's very difficult to lower the euro. you would think with nuts and bolts popping off the euro machine, euro is one to dollar but it hasn't. >> i take the opposite view. i think almost anything that the ecb does or doesn't do will lead to a lower euro. if they don't do enough in spain the euro has clearly got this credit contagion element where bond yields rise in spain. people exit from the euro and flock to some other currency that they are more safe in. if ecb comes with all in like the fed has done, it's weakening. >> less ecb action or more
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action? >> calm before the storm just because everybody is away? >> that would be my view. >> i would.out more ecb action priced in by the market the last couple of days has caused the euro the rise in value. >> sometimes the euro is the risk on asset. but certainly a currency can get, you know, diluted by central bank action. the ebc will have to do so much for this long that ultimately if they are to save the euro it's about pushing it lower. >> judge, you're on your own. >> give us the view on gold. how the central bank talk factors into where gold goes from here? >> gold is building a base. it got tired for a while. the expectation was for even more central bank action to drive it higher. you know, i think there's a misunderstanding how gold works. it tends to not do well when the dollar rallies. people say it's a hedge against stock market turbulence. we don't think that. we think gold will go down if
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the market rallies. if the fed comes back with a very, very strong statement it certainly is the case that the gold bulls may have their day. >> sean the other yellow commodity, corn has had tremendous run. how much of it depends on where the dollar goes? >> corn isn't too dependent on the dollar. not a high correlation. corn, this rally is long in the tooth. can it go up higher, it could? i would really rather be in something that's beaten down and ready for a turn around rather than where the rally has transpired and gone historic highs. >> if your specialty is hedging portfolios, if that's what you do for a living how do you that right now? >> have this opportunity where there's a lot of focus on the vix. the vix has been falling.
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>> rising of late. >> a little bit. off of very low levels. it's been depressed because the market has been so quiet. what that does it makes options expensive even when the vix is falling. that said, you go out the october and november there are so many known catalysts that we're looking at whether it's fiscal cliff or all the stuff that needsed to work out in opportunity and you have an opportunity to hj your portfolio at what we think are very low levels. >> enjoy the weekend sean. we'll see you again soon. >> comments, questions about anything you see here on "squawk," e male us at we're back in a moment. [ male announcer ] at scottrade, we believe the more you know, the better you trade. so we have ongoing webinars and interactive learning,
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welcome back. it's friday. right now those dow equity futures up by six and a half points. it's friday. wake up. friday and right now we're looking at a few green arrows at least for the dow and nasdaq future after a down day yesterday. the dow was down by 115 points. the dow and s&p are on their worst track for, let's see, this week they are on their worse week in nearly three months. we'll see what happens today. if things don't get a huge bump today you'll see the dow break a six week winning streak. orange juice futures are on the move. traders and investors taking action once tropical storm isaac started to head for the sunshine state. joining us now from the weather
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channel is paul walsh. >> and well-known orange juice drinker. >> that's right. paul, we all start to worry when we start to see some of these potential hurricanes tracking and wondering where they are headed. what do you think in terms of what it means for florida at this point? >> you know, the track is starting to slowly move a bit to the west so we're starting to see it trend towards, more towards the center part of the gulf. florida definitely still under the gun. definitely going to be impacts as people begin to prepare. florida hasn't had a really strong hit in a long time. that's going to have an immediate impact on consumers. usual suspect, home centers, the big box, mass merchandisers will see an influx of traffic as we move into the weekend. but it remains to be seen. we have to watch this one very closely. >> when will we know how bad it
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will be. what's the timing you expect us to figure that out? >> as we move into the weekend, it will get more clear. track of the storm, again, has been shifting a little bit to the left and the intensity forecast are always the most difficult part of these type of storms. we'll have more clarity as time goes on. we're watching it very closely and certainly the people that are in florida and gulf coast are and should be watching it very closely. should be taking preparations at this point. >> paul, i want to get to this orange contract story. as you said, the track has shifted to the west. also true as i under it, that almost all of the citrus group is to the south, right? no oranges in citrus county because it freezes and there's no -- i don't think there's any ompl oranges in orlando county. as i saw that cone, it's not a hurricane even when it passes close to the south part of florida, so every time this
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shifts to the west you should have pressure coming off these orange juice contracts, right? >> i think we'll have to watch the track very closely but i think you're right in the way you're assessing it, and one of the things that could be interesting too is watching it track to the west and seeing how that could potentially affect the energy infrastructure and perhaps prices for nat gas and oil. if it gets over open water it can intensify and put pressure on energy prices. >> are you dr. o.j.? >> i spent five years in florida. every time it was cold you report on the orange juice industry. there's no orange up north. if it passes west no impact on the orange contract. i'm just saying it could be one
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of those liquidity things. every bump up, any little reason people flock into a commodity i wonder. let's tell you about what's coming up. a rundown on the european agenda that could impact the markets. at 7:00 a.m. a very special event. "squawk's" health care lineup. it includes the cleveland clinic, eat no, mount sinai, and former surgeon general. you guys got any problems. >> richard carmona is running for senate in arizona. interesting guy. ] when a major hospital wanted to provide better employee benefits while balancing the company's bottom line, their very first word was... [ to the tune of "lullaby and good night" ] ♪ af-lac ♪ aflac [ male announcer ] find out more at... [ duck ] aflac! [ male announcer [ yawning sound ]
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or are breast feeding should not use androgel. serious side effects include worsening of an enlarged prostate, possible increased risk of prostate cancer, lower sperm count, swelling of ankles, feet, or body, enlarged or painful breasts, problems breathing during sleep, and blood clots in the legs. tell your doctor about your medical conditions and medications, especially insulin, corticosteroids, or medicines to decrease blood clotting. talk to your doctor today about androgel 1.62% so you can use less gel. log on now to and you could pay as little as ten dollars a month for androgel 1.62%. what are you waiting for? this is big news. welcome back. let's hear the latest on europe from our next guest. joining us from new york is the
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analyst at the eurasia group. what is the ecb expected to do and i'm interested in what you expect to be the direction of the euro through the rest of the year. >> there is clear expectation that the ecb is going to step in at some point and start buying large amounts of spanish sovereign debt. the problem is the ecb stipulation is very clear. madrid first needs to apply for a program. it needs to make progress with its reform agenda and at that point the ecb may be willing to step in and buy some spanish sovereign debt. there is a big play in madrid right now. the assistance will come with an explicit timetable. there will be degrees of freedom for the government restricted so there is somewhat of a disincentive for them to apply at this point. if he doesn't the ecb can't do anything. there is a big risk the market may be disappointed. >> in other words the ecb does not step in and do the bond buying. >> the ecb cannot substitute government action.
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it can act as a complement but can't lead crisis management or shoulder the burden of crisis management. that has been the bank's consistent position throughout the crisis. i don't think it changes at this point. >> what about rates? is there an expectation on your part that they get the parity as in down at the basement of rates at zero? >> i am not expecting ecb to move on the interest rate at this point. we're looking at the more innovative aspects of the talk meaning potentially sovereign debt purchases. i don't think another long-term financing operation is a potential at the meeting. >> scott wapner who has been sort of dragging all morning long just woke up and has a question for you. >> the finnish foreign minister said -- >> can't even get it out. >> -- his family is planning for a eurozone breakup. how do we assess that? >> i think there is a lot of noise from the large creditor countries, finland, netherlands,
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germany. that is designed to keep pressure not only on the greeks but also the portugese, irish, spanish, italians to continue moving forward with their reform agenda. there is a complex web of signaling between creditor and debtor countries, between ecb and member states. that is primarily designed to keep pressure on reform for countries to reform. i wouldn't read too much into this. the idea that finland is going to leave the euro at some point and reintroduce the national currency i don't think is credible. >> what about when it comes to the greek situation and how much leniency they're going to get when it comes to austerity? >> the program is clearly off track and there's been large revenue under performance and implementation slippage because of the election uncertainty over the last couple months. now we hear they're looking for a relaxation of fiscal targets by a couple years. i think there is recognition across the troika that the adjustment has been too front loaded. the economy is clearly in a tail spin so they can look to rebalance that. we're looking at a couple years
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at max. the problem is more relief obviously means more money and that's a very difficult conversation right now with creditor countries. there is the potential for some kind of fudge meaning the government issues t-bills. you extend european financial stability facility loans by a couple of years and that could potentially create space for a year without the creditors needing to dip into that pocket. that doesn't make the program more sustainable. >> do you think we'll hear anything from the ecb president next week? he's going to be speaking on saturday, next saturday in jackson hole. the question is can he really break any news when he's over here at bernanke's party? >> i think it's unlikely. the ecb has understood that communications policy needs to be more savvy. when they introduce the securities market program, the bond buying program last year, they said it was going to be time bound and limited. clearly, that diminished market impact but it was designed to keep pressure on creditor
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countries. so i think they won't be too explicit because they recognize the need to make sure they have market impact but at the same time they don't want to take the pressure off the country. they're in a bit of a bind. it's a delicate balancing act but i don't think the ecb is going too be too specific with the specific modalities of bond buying because if they do so they take pressure off countries to reform. >> can merkel engineer aid for greece and keep her job? >> i think so. i think so. the initial signs coming out of this greek administration are actually quite positive. for the first time you have the appointment of a credible finance minister. he has appointed a robust economic team. you have a much more cooperative relationship between the prime minister and the new finance minister. that is new since the inception of the crisis. you have a government that commands a large majority in parliament 179 out of 300 seats. nobody wants that blood on their hands or to be seen to be pushing the greeks out.
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as long as you have an administration in athens that is willing to play ball, that is sending the right signals, it's going to be very, very difficult for merkel to adopt a very hard line stance. now, that being said there are clearly concerns with the bureaucra bureaucracy. implementation has been a problem. there are human capital and capacity constraints. we expect those to buy again at some point next year. >> thanks very much. very interesting. >> thank you. >> dr. cosgrove is in the house which is my back hurts from carrying you for the last 55 minutes. >> came in, dragged -- you were out drinking last -- >> oh, boy oh, boy. >> he said liesman you got to help me out today. >> we are very fortunate. we do have a "squawk box" special event. carrying the nation's woes and woes onset as well. it is kicked off by dr. toby cosgrove the president and ceo of the cleveland clinic. thankfully he is here onset. dr. cosgrove, good morning. great to see you. rs are just beg to dabble with the idea of hybrid technology,
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"squawk box" solving america's health care problems. >> ow. ow. >> we are taking stock of health care providers and finding out what the rising cost could be for your bottom line. >> on call this hour the cleveland clinic ceo and president toby cosgrove. >> and t. rowe's chris jenner here to present solutions and crunch the numbers. a special edition of "squawk box health care summit" begins right now. ♪ doctor my eyes tell me what is wrong ♪ >> good morning. welcome to "squawk" here on cnbc. i'm scott wapner with becky quick and steve liesman this morning. let's get you set up for the
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trading day by taking a look at the futures, see where we're heading. it's been a few down days in a row for the dow. looks like a little pop at the open but certainly not much. going to be modest gains or losses for all three of the major averages. there's a look at the fair value board. so modest moves in either direction. the headlines this morning, the fed debate over further easing rolls on. chicago fed president charles evans telling cnbc overnight that there's, quote, a lot of reason to do more including more bond buying. yesterday in an interview, though, right here on "squawk box" st. louis fed president james bullard dampened hopes the fed would institute further easing measures any time soon. as we look ahead to the gop convention next week republicans are said to be eying a return to the gold standard. financial times says the party will call for the creation of a commission that will study that issue. the link between gold and the dollar was dissolved by president richard nixon back in 1971. meanwhile the democratic convention is gaining two business leaders as speakers. the dems have added costco
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cofounder jim senegal and car max cofounder austin ligen to the speaker list and the party says they'll make the case for president obama's economic policies. becky? >> judge wapner, thank you. >> got it. >> we do have a special morning on "squawk box" diving into the world of health care today from costs and picking the right health care provider to investment themes in the sector calling this the "squawk box health care summit." we have a very special guest in studio joining us for the next two hours, toby cosgrove the president and ceo of the cleveland clinic. toby, it's great to see you. >> becky, thank you very much for having me here. >> we are getting ready to get into first the republican national convention then the democratic national convention, health care is going to be debated left and right, a million different things will get tossed around. we'd like to really come up with some answers this morning about what needs to be done in health care and trying to figure out some solutions. you say that the debate we're having right now is the wrong one. why is that? >> the debate we're having right
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now is political. we are talking about how we pay for it. we're not talking about what the actual problems are with health care. what we really need to do is deliver more health care value for your dollar. continue to improve quality and decrease costs. what's happened over the last 50 years is we've seen quality continue to go up. let's take hiv for example. hiv used to be a death sentence. now drugs have come along and people are living with a chronic disease. but what we've seen also is the drugs are expensive. so while the quality goes up, the costs continue to go up. so we've got to figure out how we continue to drive the quality up and at the same time costs down. really only two ways that you can take the costs down. >> which are? >> one is you've got to have a more efficient delivery system. we've got to figure out how hospitals collaborate and don't duplicate services. and are most efficient.
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and how doctors wind up collaborating and not just doing something because it's going to bring more money to their pockets. and that's about one of the things we do at the cleveland clinic. we're all salaried at the cleveland clinic. i as a heart surgeon didn't make any difference whether i did three heart operations a day or just two. didn't make any difference to my bottom line. i got a salary. so there was no incentive to do more or to do less. one of the things that came out of this is that mayo clinic has a very similar program. if you look at the hospitals across the country, mayo clinic and cleveland clinic turned out to be low cost in medicare patients for the last couple years and i think it's basically because we weren't incentive to do more for people. >> you mean you weren't incentivized to doowop rations that weren't necessarily, that were unnecessary operations? >> we were doing just what we thought was necessary for the patient, not more, not less. no incentive to do more
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operations, more tests, just what the patient needed. >> how much of a problem is that across the country in terms of just doing things you know you can get, almost billable hours like a lawyer would be churning things out? >> i think it's a substantial issue. and i think what we need to do is we need to change the incentive for doctors not to just do more but to make people live better. and that means that you want to keep them out of the hospital. you want to keep them well. you want to reduce the incidence of disease that they have. you want to deal with the chronic obesity problems that are across the united states. and we know that 10% of the health care costs right now in the united states are secondary to obesity and by 2020 it's expected to go to 20% of health care costs in the united states. so the two things we've got to do is have the efficiency of the hospital delivery system and we've got to reduce the burden of disease -- smoking, lack of exercise, etcetera. >> now you sound like mayor bloomberg.
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>> i think health care providers all over the country are talking about the fact that they are dealing with chronic obesity problems and smoking problems. >> well, if irene rosenfeld and indra and don johnson were sitting at the table right now, pepsi, kraft ceos. are they doing enough? >> they are starting. i don't think there is any question they realize they have to be part of the solution and the solution will require all kinds of people across the united states involved -- government, food industry, medicine, and people to begin to talk about problems that are uncomfortable. they've got to talk about obesity. it's a disease not a social problem. >> at some point, you know, got to stop talking and start doing. right? i mean, we went two years ago as i was working on the obesity documentary for cnbc. certainly awareness over the last two years on the issue has been raised but the problem has only gotten worse, right? how do you get more action from
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the people who can actually make a difference? >> i think that the food industry has got to be involved. i think that they are starting to have awareness of this. but i think most importantly people across the united states have got to be educated. i don't think -- i think the ar weighness is starting but i don't think has anywhere near permeated throughout society. look how long it took to reduce the incidence of smoking in the united states. it took 50 years to get the incidence of smoking down 20%. the scary part is it's going up again. so we need to constantly drill on this so people understand what a big problem this is and we've got to go to schools and bring up exercise at schools. we have to get people away from just sitting at the computer and all day long. all kinds of things we can do. we put together a situation at cleveland clinic where we give everybody free weight watchers, free curves, free access to our gyms. we've taken sugar drinks out, changed our cafeterias. we've lost 330,000 pounds.
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>> how much are the rising costs of health care directly related to obesity related diseases -- diabetes, heart disease, etcetera? >> 10% right now of the health care costs in the united states are secondary to obesity and going up. and if we don't do something about it we'll never control the cost of health care in the united states. >> let me ask about the politics of all of this. obama care has been called -- i mean, it is the most controversial part of any -- of any bill passed by a president in at least the last decade. >> certainly the most polarizing. >> most polarizing. i don't know where you come down. is it as bad as people say it is? >> we knew we had a major problem in the united states. we've seen, and we didn't have a sustainable health care delivery system. in fact, we don't have a delivery system at all in the united states so we know we had to change the system. and the one of the reasons i think it is so emotional and so clinical is it affects
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absolutely everybody in the united states personally. >> right. >> throughout their entire life. so i'm not surprised that this is a very polarizing issue. but we had to change and this is just the first step and change is going to go on for i think five or ten years as we continue to refine. >> this gets the coverage and makes sure everyone is going to be covered but it doesn't tell us how we'll pay for that and it doesn't deal with the idea of how you have enough supply to go around. how do you have enough doctors to deal with it? how do you have enough hospitals to deal with it? >> well, it has dealt with the access. it has not dealt with the costs. we'll see costs go up and also a major shortage of doctors. >> but they say that's not the case, you know, anybody who put this plan together says you will not see costs go up, that this actually pushes the cost curve down. that's not true is it? >> no, i don't think that's true. and the estimates coming out of the budget suggest that costs are going to substantially bump up and not come down. and we can't, i don't think, cover 30 million more people
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without having increased costs. we are going to see costs go up and we'll see technology continue to get better and more things we can do for people and we've got 10,000 people a day that are becoming 65. and so this population is exploding over time. so we're going to see costs continue to go up. but i think what we're starting to see now is a change in what's going on with hospitals. we're starting to see consolidation. and we're starting to see hospitals come together in systems and then we'll start to see systems begin to come together across the country. now you don't want every hospital having to build all of the things to support medicine. for example we just had to spend $170 million to build a data center. i can't believe every hospital system wants to do that. so we need to share those sorts of things so we can reduce the costs. >> we have a lot more to talk about with you.
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you're also looking at shares of eli lilly. >> yes. let's look at shares of lily this morning, down about 1%. the company is saying a study of a new alzheimer's drug did not meet the primary end points in the study. the drug was designed to treat patients with mild to moderate alzheimers disease. however, lilly does point out the drug did slow cognitive decline in certain patients. it says that aspect is encouraging and that studies involving the drug will continue. dr. kenneth davis of mount sinai is considered an alzheimer's expert. we'll ask him about this latest development at the bottom of the hour. lilly also saying that the next step will be determined after -- >> is this a negative thing or positive? >> it's negative. >> encouraged by the pool data that appears to show -- >> but the bottom line is the study did not meet the end points. >> okay. >> in the phase three trials. excuse me as my voice goes out. my voice didn't meet the end points of that story. >> alzheimer's is a massive issue. >> alzheimer's is a huge
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problem. in fact, right now if you get to be 80 years old your chances of having alzheimer's is 30% and that is a huge social and economic problem for the united states going forward. >> shows you the risk obviously. innovation is not stopping by any means for these drug companies. >> no. >> but the end result is always a risk. >> there is always a risk in society. you can't do things and not have risk with it. we have to have a certain tolerance for risk. obviously our risk tolerance is substantially low, but we're going to see problems and we have to continue to push forward. >> it is interesting. two news services have taken this a little differently. again, when you look for some of the headlines on this, toby, they say that the drug maker says a secondary analysis of pool data across the trials shoes statistically significant slowing of cognitive decline. >> dow-jones says some optimism
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from lilly about alzheimer's trials. reuters says lilly says did not meet phase three end points. >> what's going on here? >> it sounds like you've got some help for early alzheimer's which is a good thing. and it may not be the absolute answer and i don't think you will see -- you've seen lots of drugs for alzheimer's come along. none are perfect so far. >> i think the difference here is while they did see cognitive decline -- i'm sorry, slowing of cognitive decline -- it was not in patients with moderate alzheimers disease. >> okay. that might explain it. >> so more advanced alzheimer's patients didn't see the positive effects the company hoped for. thus you're seeing the decline in shares. >> we have the best group of people ever on "squawk box" to answer these questions this morning. up next a facebook shareholder with an important decision to make in november. keep or sell his shares when the lockup expires. we'll ask him next.
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comments or questions? send them to squawk.cnbc.
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welcome back. futures this morning indicated slightly higher for dow and nasdaq futures s&p off slightly.
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yesterday was a big down day for the markets dow down by 115 points. right now the dow and s&p are ontrack for their worst weekly performance for the last three months. we'll see how things shake out today. we're keeping a watch on shares of bristol-meyer squib. the company has abandoned development of a drug to treat hepatitis c after the death of a patient in the trial from heart failure. with several others hospitalized bristol stock though this morning after getting this news last night bristol's stock was raised to a buy rating from neutral from bank of america. there is a look at the stock right now. >> all right. facebook stock manetime has lost half of its value since going public in mid may. the recent sale of shares by the facebook board member and early investor peter teal also generating investor doubts. another lockup expiration and huge one is ahead in november. joining us is kevin landis the ceo of first hand technology fund which has 600,000 shares in
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facebook stock which he purchased for $31.50 a share. good morning. good to see you. >> thanks. good to be here. >> that's tough. 31.50. >> yeah. it would be better if we were buying it today. >> you bought this on the secondary. >> that's right. and when you buy on those exchanges you buy the restrictions that come with the shares. so we bought the lockup as well. >> what do you make of the situation at facebook? why have the shares struggled so much? >> you know, it is funny. if you look at the progress of the company they've identified the most important thing they need to do which is have a good mobile strategy. they keep those 900 million going to a billion people engaged when they get up and out into the world. but if you look at the stock, it couldn't be any worse. every indicator you would normally see is heading in the wrong way. >> let me ask you a question. why structure your fund in the way that it's structured?
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why buy the shares on the secondary market. >> right. >> rather than just in the public markets like everybody else? >> we've been technology investors in san jose basically since the mid '90s or early '90s and it used to be that you could find a sort of an out of the way, interesting, up and coming tech company and just drop a trade because they were all public. these days not so much. typically the companies get their greatest growth spurt before they go public because they're going public so much later in their life cycle. so if you want to add value as a money manager and get sort of an off the beaten path or a stock not in everybody else's portfolio you have to be able to jump over that ipo barrier and get them earlier. >> were you wrong to believe in the valuation of this company based on some of the trading and private market or the second market? there's a lot of blame to go around in terms of why the stock is trading where it is. >> right. >> you can blame morgan stanley, blame the facebook executive management team. >> right. >> and certainly you can probably throw some blame at the
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private market as well for setting the valuation, the enabler in the first place. >> right. well, it's a thinner market. so in any thin market you want to be a little more skeptical. i'd say professional investors, they're pretty good at deflecting blame and blaming the company when their investments don't work out well or blaming other market forces. but you always take responsibility. just because you can buy something early doesn't mean you're immune from the risks of paying too much. >> i'm a little confused because it's a bit like the casablanca i'm shocked, shocked that people are selling their shares after the lockup. i mean, to what extent does the current share price reflect a reality that we knew was going to happen, which is that when they went public after a certain amount of time some guys were going to cash out. >> right. >> and, i mean, this is at least one opt plis tick view of the stock. okay? you have to work this through. that these guys are going to sell shares, there will be pressure on the stock. after we get through a certain period you get a consolidation. what is the real flow? >> there are lockups on all of these things.
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>> i know. >> right? the share price was screwed up from the get-go, right, and only i think the -- a lot of the outrage has to do with whether certain people knew about some of the issues at facebook whereas others, the little guy, didn't. >> right. >> right? >> and insider selling has been heavier here than -- it's kind of unprecedented the level of insider selling. people follow insider selling as one, sort of one gauge on their dash board right? >> should he step up? >> or step down. >> a major stake in my company. >> he has a major stock in that company. >> more of a major stake. >> you know, i don't know where he could get enough cash to meaningfully move his stake up because he's got so much in so much of his wealth is already there. >> are you ready to give up on this company? are you going to sell when the lockup comes in november? >> let me put it to you this way. there is an old story about a bunch of guys out in the woods all hunting together and they
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notice the animals are all kind of going the other direction. at first it's one or two and then stephen king does this wonderful job of saying well more and more animals coming and pretty soon just like a flood. all the animals are going the other way. the guys start looking at each other and there is this growing sense of foreboding like i don't hwan's ahead but probably not good. that's kind of how it feels when you own facebook today because all these guys are going the other direction. >> just tell me. are you going to sell? >> well, i can't answer that today. i mean, the facts will be different in november. i mean we'll see. by the way, what we do with facebook depends on what they do right here. we have people raving about having great apps, mobile apps and how they love being on facebook out and about on their smart phone, then it's working. they've identified the right problem and are doing the right thing about it. >> do you think they have to figure out how to monetize mobile by november? >> you need to make sure you
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hang on to everybody when they go mobile. remember, the original facebook vision was being coded in the dorm room at a pc. it was being coded at a desk. >> but zuckerberg has shown that is a priority. >> yes. >> he wants to own the world before he profits from it. >> that seems to be his m.o. here. >> and the company absolutely understands what they need to do which is to get that right mobile strategy first and foremost. >> i have to ask a quick question. i want you on the record. >> scott is blowing the break here not me. >> your fund -- i know you've been subject to some criticism for the fact that you guys decided to take your fund into a business development company. >> yes. >> which is fairly unusual for mutual funds. the criticism of that being that that enables you to invest in private companies. >> right. >> more so than you otherwise would be able to as a mutual fund. >> oh, absolutely right. it's for what i just described earlier which is more and more often when we find an interesting company it's still private. so now we have basically one
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fund if you want to buy public equities and another fund if you want to basically a fund that individuals can participate in. so you can try to get the early companies before they're famous or you can get just listed companies either way. >> what's the fallout for shareholders then to all of that? >> well, for us the fallout is that it's a 6% position in our fund and the rest of it is very heavy in cash and we can get better prices on other private companies now because those prices have come down since facebook has come down. >> okay. >> very quickly, guys, there are some headlines moving and i'm not sure where she is speaking but this headline is that germany's merkel says that germany is ready to help greece. she does say that she believes that the greek government is doing everything. she is very deeply convinced they're doing everything they possibly can but she also says that words must be followed by deeds but the last headline crossing is that germany is ready to help greece. that's what merkel is apparently saying.
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we'll get up to date as we get more headlines. >> thanks very much. coming up grab your knife and fork. we dig into some stock music, breaker international. ticker eat. "squawk box" will be right back. man, i'm glad aflac pays cash. aflac! ha! isn't major medical enough? huh! no! who's gonna help cover the holes in their plans? aflac! quack! like medical bills they don't pay for? aflac! or help pay the mortgage? quack! or child care? quack! aflaaac! and everyday expenses? huh?! blurlbrlblrlbr!!! [ thlurp! ] aflac! [ male announcer ] help your family stay afloat at plegh!
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now the answer to today's all of ak trivia question. which state has the highest island mountain in the world? the answer? hawaii. >> aflac! ♪ make me feel fine >> the bottom of the ocean right? welcome back. we're watching shares of brinker international today the parent of the chile's and romano macaroni grill chains is increasing its dividend to 20 cents from 16 cents. the company also authorized a $500 million share buy back program. brinker stock is just off the five-year high. a pretty good story right there. >> again, the greek prime
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minister samaros is in berlin meeting with angela merkel of germany. this is the press conference after all of that. we told you some comments very briefly just before. merkel is saying greece can expect no rush to judgment in germany. also saying that she does believe that the greek government is doing everything they possibly can. also saying though that the deeds have to follow these words at this point. they'd like to see more. but also saying, samaros is saying greece will fulfill its commitment. merkel also saying germany and france want greece in the eurozone. we'll see how this plays out in the market. >> take it a little bit with a grain of salt. the guy is right there. she is going to say nice things. >> that seems to be how the market is taking it as well. we had seen dow futures up by six or seven points. they've gone slightly lower at this point down about 11. >> any kind of pop whatsoever? >> i don't think -- >> probably not right? >> probably not a huge move on this. not seeing it circulated here. this is the standard press
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conference. >> i've got the euro weakening. >> it's been down all morning but if you have the interday i have a little move down by a couple bips. >> it's difficult to read into headlines and movement just simply -- >> the run from 22 to 25. >> the latest headline merkel, germany and france both insist greek fulfill their commitments. nothing is a done deal. we'll have more on this as we continue this morning. also our health care summit is going to come right back after a quick break. stick around. "squawk" will be right back. still to come the rising cost of health care and what it means for patients and investors. guest host cleveland clinic ceo toby cosgrove is joined by the ceo of mount sinai hospital. and then fund manager christian air puts the winners and losers on the sector. the "squawk health care summit" continues right after this. mom's smartphone... dad's tablet...
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welcome back to "squawk box" everyone. in our headlines this morning chicago fed president charles evans tells cnbc that the slow economy means that the central bank should do more to help including more bond buying.
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he is sticking to his view that the fed should keep rates low until unemployment falls below 7%. also eastman kodak is looking to sell its imaging unit so it can concentrate on printing and business services. kodak says that if it can sell the document imaging and personalized imaging units along with a planned patent portfolio sale it should be able to merge from bankruptcy sometime next year. we do have some mixed news for eli lilly. it says that an experimental drug to try and treat alzheimer's did not meet the primary end points in a study but it was shown to reduce cognitive decline in some patients. lilly says that's encouraging and that studies will continue but, steve, we have another expert onset who has a slightly different opinion. >> we'll get to the bottom of this story. the fight over health care reform heating up as we get closer to the presidential election. joining us onset is dr. ken davis president and ceo of mount sinai medical center. thanks for joining us. >> pleasure to be here. >> you were absolutely definitive when we asked you about the eli lilly story. >> not good news. in a broader context of the cost
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of health care, alzheimers disease is exploding as a public health menace. it's a big driver of health care costs. we've got to develop a treatment that slows the progression or can stop it and prevent it. the greatest, most important hypothesis now that has been tested in a number of different trials with a number of different drugs is to block amaloyd disease, the plaques in the alzheimer's brain. the lilly drug just like the johnson & johnson pfizer drug, other drugs that have preceded it have all been able to bind to that protein and the idea was to clear it out of the brain. very often in fact we do clear it out of the brain. but it doesn't seem like it's really doing very much for alzheimer's. it's not really slowing the course. it's not preventing the disease. the larger issue this raises is are we giving the drug at the right time? and if we're not, how long do
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you have to give the drugsympto an effect? to take it into another context it's likely you might have to give this drug 15 years before people are symptomatic. >> which means it needs to be tied to things like genetic testing? >> there are now imaging tests that can show us amaloyd in the brain well before people are symptomatic. here is the larger question for us. patents run out before these drugs will be shown to be efficacious. unless we change patent law in the united states, around drugs like this, we're never going to have the incentive that is necessary for companies to develop these drugs. >> can we just go back before we get to the larger question and i want to make sure we understand the more immediate question. what about what lilly said that there was some sign that it does some good in i guess early stages. is that right? >> before you answer that let's point out also the shares have
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turned around. lilly shares now are higher by more than 1%. >> that's because the company is saying this is positive, too. >> it's -- can you take any positive from what the company is saying or is it company spin? clearly the market thinks it's not as bad as -- >> in my career i've done a lot of alzheimer's studies and clinical trials. when we finish clinical trials we always look at other analyses and those other analyses do many different sub analyses and have a tendency to show us things, whether they're real or not, has to be validated in a subsequent study. now, if you look at the lilly press release, they'll point out that in fact they had a hint that the mild to moderate patients might be showing a therapeutic response, decreased cognitive decline. so they stipulated that for their second study they would make that a primary outcome
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measure. decline in mild to moderate patients. it didn't make it in the second study. so perhaps they can design yet another study. perhaps that study should be done in people who are not yet symptomatic but have a scan that's positive. but what they'll have to look at, like everyone has to look at is how much patent life is left here before this drug goes generic? >> let's talk now about the broader issues. you're talking about the real issues being costly, end of life care, which is something you deal with more than most hospitals at mount sinai. talk about mount sinai itself and the age of the average patient there compared to other hospitals. >> well, mount sinai is known as a hospital that does really, really good geriatrics. one of the best in the country in geriatrics. not surprisingly, lots of people who are more elderly with more elderly problems come to mount sinai. so we see a lot of end of life issues. and end of life care is terribly
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expensive. 30% of all medicare dollars will be spent on 5% of patients in the last year of life. we have to ask, how can we make that more effective? what we really have to ask is, are we keeping people alive in a way they want to be kept alive? what we don't have for many patients is advanced directives and living wills. they give us direction. the consequences, we do everything we possibly can. >> can't even have this conversation. we don't even have the language. >> well, to both of your points, though, toby, we've talked about this in the past and i read your notes, doctor. you both feel these are conversations that need to take place between doctors and the families and the patients. correct? >> right. i think doctors are just as anxious about dealing with end of life as families and patients are. >> right. >> we really have to have those very candid discussions and every time i've had one of these discussions with a family,
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they're always greatly relieved that i'm having the discussion with them and doctors really are taught to try and preserve life. they're not taught to begin to deal with these issues. that's a whole process of education i think. >> but again, it's the families who make the decisions. you're not talking about someone in washington making a decision. >> it's a major public issue. if we were to talk and ask about for example how many years of life do we get from that 30% of spending versus how many years of life do we get from the 70% of spending, i have to think it's one of the least productive. i just said that word. >> the difference is how you go about doing it. if you have, maybe you pay doctors for the palliative care so they spend the time with the patients and families to discuss their options and then the families get to make these decisions. >> exactly. >> you're not talking about a bureaucrat making a decision about what we will and won't pay for. >> we know that palliative care is something that enhances satisfaction for the families and for the patients in those
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last months. unfortunately, we don't use palliative care as effectively as we could throughout the country. when new york state did a study that looked at the efficacy of palliative care it saved a lot of money and it improved satisfaction. >> we're also penalized in a way for hospitals for example your mortality rate, palliative care goes into figuring out the mortality rate for a hospital and, so, your cancer survival rates may not be as good and that's all public information. >> and i think it's part of obama care, too, though, is that you're paid based on statistics on how many people fall in your hospital? >> penalties for things like readmissions and some of those disadvantage some hospitals and advantage others. >> because you have a large, elderly population. it's probably more likely to -- >> both in cleveland and in new york there are some communities that are terribly impoverished and they bring patients to the hospital who just don't do as
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well as other patients. >> you clearly have an emergency room at mount sinai i would assume right? >> of course. >> so on the level here are you -- where would you put yourself on the affordable care act so-called obama care? is it more positive for you, the services you're providing in an emergency environment? now you'd be compensated in ways that before you wouldn't? >> this is a very complicated act. and there are very good things about it, the extension of care to impoverished communities, some people who aren't covered because they come to the emergency room and they just cost the hospital a lot of money, and there are other things about it that are not as advantageous for the hospitals. we've already agreed to big cuts in things like charitable care payments that are really not going to at least in our case be overcome by the additional patients who are being covered by the aca. >> this is a hugely complicated issue. it is an emotional and moral
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issue. we're going to go to break and continue the conversation but i just think having the language to even have this discussion about how much we should pay for people to live and for how long, that is really what it's about. >> all right. as we said, we'll have much more with these two gentlemen at the table and at the top of the next hour the "squawk" health care summit brings in aetna's ceo mark bertolini. just did an interesting deal a week or so ago. we'll talk to him about that. tap... pinch... and zoom... in your car. introducing the all-new cadillac xts with cue. ♪ don't worry. we haven't forgotten, you still like things to push. [ engine revs ] the all-new cadillac xts has arrived, and it's bringing the future forward.
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wow. welcome back. we're back with a very special health care summit. onset is dr. ken davis president and ceo of mount sinai medical center. our guest host today is dr. toby cosgrove the cleveland clinic. incredible amount of expertise. we're in the middle of a difficult discussion here. we kind of moved it over to an interesting idea during the break which is we spend a lot of money keeping people alive on machines who need transplants. there is more we could do as a society to get people to donate organs. >> absolutely. in the united states we have an automatic opt out. the assumption is if your license doesn't say i'm a donor you're assumed to not be a donor. in some countries in western europe like spain, if your license does nothing the assumption is you are a donor,
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automatic opt in. in spain they have twice the availability of organs. if we just look at kidneys for instance, dialysis across this country and medicare costs a very large amount of money. a transplant for one time is expensive. over the lifetime of a patient a transplant saves medicare system between $300,000 and $500,000 a lifetime. with the number of additional organs we get from an opt in instead of opt out policy we'd save between $3 billion and $5 billion in health care a year, $30 billion to $50 billion over ten years. >> you can see the same thing for hearts. more people die on the waiting list for a heart transplant than are heart transplanted and do well and they're now taking people out 10, 15, 20 years very successfully. >> what is the hold up? how do we increase it? more education? how do we progress? >> i think what you're talking about here is legislation that begins to change what you have
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on your driver's license. and so that you are opted in as he talked about rather than opting out. >> certainly people are making the decision though whether to opt in or opt out so to speak but how do we get more people to opt in? >> i think it would be a terrific dialogue to have. when you look at what the dialogue has been over health care reform it's been so politicized that we can't talk about issues like how does the society feel about opt in versus opt out? is that a moral question or is it which side of morality does it fit on? what is the ethical argument? perhaps as a society if we really had that discussion we'd say you know what? in a moral judeo christian society we think it's a good idea to opt in. we think that is a better position to take. >> if you were writing in that i was talking about death squads when i said it should be a broader discussion about this, which i'm not. >> that is the political side, term for the whole thing. >> yes. >> having the discussion between the doctor, patient, including the family i can't imagine a more important discussion for those people to take on
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personally and what i don't understand is why it was taken out of the affordable health care act to have that palliative care -- >> there was a different proposal. >> it was part of the plan wasn't it? >> it paid doctors to have discussions about end of life. >> because it is a time consuming conversation. it was taken out because of the death squad politicization. >> a billing code. right now there is no billing codes in that a doctor can't figure out how to get paid for having what is a very long discussion around death and dying. which is only about what do you and the family want? it's a hard discussion to have. >> the whole thing is the great conundrum of the health care system. we're keeping people alive longer because drugs are getting better, treatments are getting better, less, fewer people are dying because of heart disease because of statins and whatever else which is a great thing. so they're living longer, which is, you know, taxing so to speak the heck out of the health care system because we have to pay to keep these people -- >> they're dying now of chronic
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diseases. as we talked about alzheimer's earlier, six of the seven causes of death in the united states are chronic diseases. the only one that's not are accidents. >> it's a little weird in the sense that we're having a conversation about the problem of living longer. a little oxymoronic in the sense that we could have another conversation which is that people aren't living long enough and they're dying from disease which they're not doing. it seems like it's -- there should be at least a certain positive aspect in this we could have as a society. >> of course. >> but nobody mentions that. nobody talks about that. >> it's about the quality of life at the end of the day. you have to understand it's all about the quality of life and a lot of people are living a lot longer with a lot better quality of life than they ever have before. >> people in their 80s doing stuff people in their 50s would have been happy to do. >> victims of our success. >> a good thing. >> dr. davis thank you very much. we really appreciate it. i have questions viewers have been sending in. i'll try to get answers in the break when we come back. >> no billing for that so we can't answer them. >> he is one of the most successful mutual fund managers in the health sciences arena. chris jenner has out performed
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the markets since 2009. we'll get his prescription for profits after this. at the top of the next hour aetna making news with its purchase of coventry health. is more consolidation needed in this industry? we'll ask the ceo coming up. what makes a sleep number store different? you walk into a conventional mattress store, it's really not about you. they say, "well, if you wanted a firm bed you can lie on one of those. if you want a soft bed you can lie on one of those." we provide the exact individualization that your body needs. welcome to the sleep number store's biggest sale of the year. not just ordinary beds on sale, but the bed that can change your life on sale. the sleep number bed. never tried this before. this is your body there. you can see a little more pressure in the hips. take it up one notch. oh gosh, yes. when you're playing around with that remote, you get that moment where you go, "oh yeah" oh, yeah!
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welcome back. with all of the changes in the health care sector what is the best prescription for your portfolio? let's bring in chris jenner. he oversees $4.5 billion for the five star t. rowe price health
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science fund the fund up 27% year to date. good to see you again. had you on recently on "halftime" so good to connect on "squawk." >> good morning, scott. >> what is your best play right now in the health care sector now that we've had some time to digest if you will the affordable care act? >> scott, the things that we are very much focused on are really a reiteration of some of the things you hear in the prior discussion such as cost effectiveness, quality outcomes, and important and new medicines. i think probably at the top of that list is gilead sciences ticker glid. the idea here is, and just to kind of put it at the other end of the spectrum as to what eli lilly reported today. >> sure. >> the disappointing news in alzheimer's and our inability to find the medicine that is going to effectively treat that grievous illness. on the other end of the spectrum
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i think gilead sciences is at the cusp of introducing a very new, important therapy for another grievous illness, hepatitis c. so we put that at the other end of the spectrum there is fair progress being made and investors have a really good ride here because of the value that is likely to accrue to this company over the next decade. >> you have a lot of expertise and experience in this area just in general. can you weigh in on the lilly news this morning, how you see it? stock was down initially. now it's up more than 3%. >> well, i share the view that it is disappointing for the alzheimer's area in general and the question i think people are stepping back and asking is how powerful is the antiamaloyd hypothesis? we've had two analysis about the
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news, the pfizer and j & j therapeutic that has failed and now we have lilly's product that has failed. people are going to be asking three central questions. how strong is the hypothesis? were these the right agents to ask the question and, specifically, are we addressing the right treatment population? i think what we're going to kind of pull out of this news is that the treatment -- the patient population that is probably best suited for these therapies are going to have to be well earlier in their disease, the so-called very mild to moderate. now, the issue is how do we correctly identify those patients at a time where we can successfully intervene? >> aetna coventry obviously made news earlier in the week. do you expect more consolidation especially around the issue of medicaid? >> i do, but increasingly there's not that many players left. you know, we were, and i think, scott, we were having a
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conversation a few months ago where we talked about ameri group and that company has now been snapped up by well point. there's only a few left. and there's only a few buyers left. so i think that the theme of consolidation will persist but probably given the number of players to both the bought and to buy will come at a slower pace. >> is there a most likely to be bought company out there that you have your eye on? >> well, we have some bets here. when i was last on the program we talked about cnc. but i don't think that's necessarily just a play on acquisition. i think they've got a long runway based on medicaid expansion. so i would just share with the viewers that if an acquisition doesn't materialize and we're not necessarily betting on one but if it doesn't materialize there is a long runway of profitable earnings growth here based on a multi year medicaid
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expansion. >> kris, a pleasure as always to have your insight on the program. we'll see you again soon. >> thank you for having me. >> when "squawk" returns aetna's ceo mark bertolini joins us on issues facing the health care industry. the "squawk health care summit" continues. there he is. in just two minutes. [ male announcer ] it's a golden opportunity to experience the ultimate expression of power... control. [ engine revs ] during the golden opportunity sales event, get great values on some of our newest models. this is the pursuit of perfection. we're all about options trading. we create easy-to-use, powerful trading tools for all. look at these streaming charts! they're totally customizable and they let you visualize what might happen next. that's genius! we knew you needed a platform that could really help you elevate your trading. so we built it. chances of making this? it's a lot easier to find out if a trade is potentially profitable. just use our trade & probability calculator. and there it is. for all the reasons you trade options--
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welcome back to "squawk box" here on cnbc. first in business worldwide. i'm becky quick along with steve liesman and scott wapner. joe and andrew are off today. we are hosting a very special health care summit today. our guest host for the morning
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has been toby cosgrove, who is the president and ceo of the cleveland clinic. he's also a doctor and heart surgeon. we're going to be joining right now aetna's ceo mark bertolini and dr. scott gotleib from the american enterprise institute will join us in a little bit. former surgeon general richard carmona but first scott has your morning headlines. >> one economic report ahead as we finish out this week, the government out with durable goods orders for july at 8:30 a.m. eastern time. judges and economists are looking for a 3% rise following june's 1.3% increase. u.s. equity futures at this hour as we wrap up the week we'll have a slightly lower open here. the dow is going to continue its most recent slide. s&p, nasdaq look like they'll pull back albeit slightly off the open. the report is that the republican party will call for the creation of a commission to explore restoring the link between gold and the dollar. that's part of the platform the gop will adopt at next week's convention.
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congresswoman blackburn who chairs the committee tells the financial times this is not an effort to placate congressman ron paul who has championed a return to the gold standard. president nixon took the u.s. off of it in 1971. let's check out the price of gold this morning. it's down by oh, slightly less than one-third of 1%. chicago fed president charles evans telling cnbc he sees, quote, a lot of reason for more easing including more bond purchases. >> in the spring we became perhaps a little complacent when the economic data appeared to be better. now it's back tracked and things aren't doing as well. chairman bernanke testified before congress and has made public comments that we really need to see stablization in the labor market and improvement. in my mind that's a key marker, you know, i've said we should continue to do more until the unemployment improves at least until 7%. >> the fed's current view reiterated at its latest policy meeting is that it will need to keep interest rates low until at least 2014.
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in our global headlines this morning angela merkel and olan have delivered strong words to greece insisting it must show fiscal progress. the german leader said it was important that everybody stood by their commitments while the french prime minister said he wanted greece to remain in the eurozone but it must make in his words necessary efforts for that to happen. european equities this morning as we show you mostly lower, modest losses. becky, i'll return to chambers and we'll have a conversation with a couple docs. >> all right. judge wapner thank you. back to our health care summit could special incentives promote quality in our health care system? joining us right now to talk about this and more is aetna's chairman, president, and ceo mark bertolini. mark, we also have dr. toby cosgrove here from the cleveland clinic. you two both have done some pretty phenomenal things when it comes to bringing down health care costs at your own companies. you've got some great ideas about how we can tackle the health care costs when it comes to the nation. mark, why don't you start off telling us a few of those
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things? >> sure. i think we've tried a lot of different approaches, you know, including the carrot and the stick. quite frankly, what we've come to the conclusion is that unless we make it simple for people to access information and to make the change, the motivation isn't going to be enough unless we make it simple to do. so our whole focus has been on people with chronic disease is to focus on mirroring high tech with high touch and for people who are generally healthy just high tech. and so a few experiments we've done on the high tech high touch front on particular patients, usually the protocol is take your medication and watch your weight and call us if you have a problem. but the moderating of the weight is always a problem. sometimes taking the medication is. we put bluetooth technology into scales and said, take this home and in the morning take your medication and just stand on the scale. and if the weight moved by 5% in a week we sent a nurse to the house. >> why is that 5% move so important?
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>> because if they're gaining water weight that means they're going into congestive heart failure. >> it includes filling up again. that is something you can tell very quickly. >> you can. if you get right on it, you can stop it. and so we have the nursing out to the house, make sure they're taking the meds if they're not reinforce that. if they are call the doctor and get the dose changed. before they leave the house, roll up any loose rugs because people shuffle when they walk and fall and break a hip. with that program we are able to reduce by 43% our readmissions. >> i think you made a really important point there. you send somebody to the house. >> right. that is the high tech -- >> and that is the high touch part of it. we've tried all kinds of ways, by calling people, it just hasn't broken through that. you actually have to have a person-to-person touch to make that happen. >> with congestive heart failure admissions costing $80,000 each we can afford to send a lot of nurses out to the house. so on the chronic disease side it is really high tech high touch and the generally healthy
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population what i like to call real consumers of health care what we decide, what we've done is built a way for people to get health care conveniently. and we're launching this with a number of clients this fall for january 1st release where people can buy on the spot market health care that's available for them now. >> what does that mean? >> so i'm on the way home from work. i need a flu shot. haven't got one. what are the four or five places near me right now i can get one? so what we're doing is buying excess capacity out of the market from doctors' offices, imaging centers, walgreens, cvs, and we're putting it online for people to be able to access instantly. >> kind of what we heard yesterday from zoc doc. >> our whole approach is redefining quality as convenience for those people that use the health care system episodically. >> and as far as convenience is concerned, everybody talks about access. access is really about insurance. access is not actually getting
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to see a health care provider so one of the things we did two years ago, we said you call up and you want to have an appointment. we'll see you today. and we asked everybody when they call up, do you want to be seen today? last year we saw 1 million same day appointments. the reason is we don't know over the telephone if somebody needs to see a doctor or not. similarly, we've got to shorten the amount of time people get to be seen in the emergency rooms. you have to develop access where you can actually see somebody not just have insurance. >> you put in a call center so people don't get stuck on the perpetual hold and call profits. >> exactly. and they now answer the phone with less than 30 seconds. >> i don't understand all of the nuances of the ryan medical plan but what i do know is that there's an idea out there, and it's an economic idea, that if we put more of the decision making down at the patient level and the cost of this, that we will have better outcomes. do you agree with that idea that what we need to do is -- it's
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not just shoulder the burden but make more of the costs of medical care apparent to the patient. >> by having the patients have a little more skin in the game. >> that will ultimately create better outcomes for costs. >> but here's the issue. we've had online for the last five years the top 30 procedures for every physician in the united states and their actual charges. we've made that available to every one of our members. we also have a payment estimated that allows them to process a claim before they go to the doctor's office to know exactly how much they'll pay. >> you know what? i'm an aetna customer and i didn't know that. >> right. and when people don't use it because either they don't know or it's not convenient and so you need to create this sort of real time capability. i can get it now. and so the advent of mobile technology can really make the change. and, you know, this struck me when i was in shopping for a gift for my daughter that she had to have. i go to the store. i find it on the rack she wanted
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it. i bar code scan it. google shopper pops up and says, you want to know where else you can get it? i picked the place where it was cheapest and google maps pops up and gives me walking directions. i brought the whole thing back to work and said i want this for health care. if we can create that kind of instant simplicity and transparency, then people will act. >> but it's different to know the price. it's a different thing if i have to pay that price. if it's all on insurance -- >> if you're paying 10% instead of a -- >> what's happening now is a lot of -- 50% of the increase in health care costs for employers across the united states over the last four years has been shifted to employees. >> yes. >> through benefit changes, big deduct ibls, out of pocket maxes and premium sharing. employees are now paying for their health care. if it runs three more years they'll pay as much as the employer. >> but one of the probls is when you start doing that, when the economy turns down people don't have jobs and so on they are not
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coming to get health care. >> no they are not. >> and so it has a negative influence on how healthy the country is if you put too much of the economic burden on them such that they're afraid to come and get their health care. >> i just have to push back. because my paying more of my employer sponsored health care plan does not give me incentives either way to look for the most economical health care. i'm just paying this. they don't give me more choice unless i somehow, unless they get to a point where it's cheaper for me to go out and buy different health care. but the point is, and i think one of the points in the voucher programs that are talked about, are when i go to make a decision, i want to -- i have an incentive. >> people are paying out of pocket, so if they're paying out of their health fund 100% of the visit until they go through their fund then i'm going to shop. we're seeing that happen now on these high deductible plans.
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the first nickel is out of my own pocket. >> is that part of the reason, we've had several discussions over the last several weeks on this program about the idea that health care costs have stopped growing quite as rapidly. we had peter orz ag on the show. some people say it's because of the downturn in the economy. i hadn't thought of this idea. if a lot of costs are getting pushed back to employers are they better shoppers? >> the phenomena we're seeing, people lost a lot of the wealth in their homes. they started to lose a lot of their personal disposable income. and they had to pay more for their own health care costs out of pocket. real time. and so all of a sudden they're starting to say do i really need this? we've seen utilization, last year was the lowest i've seen in my whole career of utilization. not price changes but utilization of services. so what we saw was this dramatic drop. >> in other words the net result of giving more costs to employees is they use it less. >> absolutely. people are not getting their
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hips replaced. they're not getting their knees replaced. they're splitting pills. they're doing all sorts of things to save costs in health care because the burden is being pushed to them. so the economy has had a real effect and, you know, i think also we have to give a little credit to the health care industry, which is beginning to try and be aware of costs and we're working harder and harder at trying to drive costs down. so the costs, the inflation rate and health care has come down for the last six or eight years consistently. last year was 3.8%, which is down significantly from where it was previously. >> it's still not enough. we still have a lot to do. >> yes. >> we are making some improvement. okay. if twou wiyou two will stay wit we'll take a quick commercial break and when we come back continue our conversation with aetna's ceo mark bertolini and our guest coast today dr. toby cosgrove of the cleveland clinic. steve? >> oh, yeah. and the next half hour our health care summit continues with scott gotleib of the american enterprise institute. inc. he'll have something to say
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about these things and former surgeon general richard carmona. they'll talk about the drawbacks and benefits of president obama's health care plan. durable goods numbers for july, due at 8:30 eastern. maybe an appearance by santelli. [ male announcer ] let's level the playing field. take the privileged investing tools of wall street and make them simple, intuitive, and available to all. distill all that data. make information instinctual, visual. introducing trade architect, td ameritrade's empowering web-based trading platform. take control of your portfolio today. trade commission-free for 60 days, and we'll throw in up to $600 when you open an account. that's a good thing, but it doesn't cover everything. only about 80% of your part b medical expenses. the rest is up to you. so consider an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company.
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good morning. welcome back to "squawk". the futures take a look at where we're sitting ahead of the open. slightly to the down side. you see the dow would open down about 6.5 points. s&p giving back a little bit. nasdaq as well. so this recent selloff that we have seen over the last few days looks like it will continue at least off the open of trading today. check out shares of msg. that being madison square garden, big spike 8.5%. the owner of the world's most famous arena earned 37 cents a share for the fiscal fourth quarter 15 cents above estimates. revenues came in substantially above consensus. the quarter of course included an extended playoff run by the rangers meaning plenty of ticket sales. >> mario was here earlier this week saying this is a stock he loved. he told us this two days ago, wednesday.
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>> he owns shares of it. he really likes it. let's get back to our health care discussion with aetna chairman and ceo mark bertolini and our guest host dr. toby cosgrove of the cleveland clinic. scott, you wanted to take the conversation someplace. >> you brought up the ryan plan so i thought we'd go a little political. the thought that you did the coventry deal because you thought obama would be re-elected. true? false? >> not true at all. you know, you have to consider an election, particularly a change of administration, and any acquisition you do, but i think our bet is that if we're going to fix the nation's debt and the deficit we've got to fix medicare and medicaid. and the products and services that coventry offers and we offer as well are the kind of services that are going to help us fix that. >> isn't it fair to at least think that, okay. if you think obama is going to be re-elected, and maybe there are going to be some changes to medicare and medicaid as the
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fiscal cliff, etcetera, is addressed, that it would be advantageous for you to do a deal like that? i think that's along the lines of thinking. >> right. but under romney and the ryan plan, you have the same thing. more medicare advantage, more block grants for the states for medicaid. you really can't lose. with the overhang on the stocks associated with health care reform right now, there is no better time to buy than now. after the election should there be a change in administration, you'll see a pop in the stock. and so i think our whole view was this is the right time to do it. let's get ready. by the way, you want to have it closed before you go into 2014 so you can price the products and make sure you're going to health care reform rights. you want to get ahold of it well before then. we are running out of time to do anything that big. >> the day the deal came out i was doing some research and i saw a statement you had made three or four weeks ago which you said were not interested in bulking up in medicaid. isn't that in fact what you did with the coventry deal? >> i was very specific.
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i said we are not interested in buying a big medicaid player at the current multiples and margin expectations. i was very clear about that because people kept pushing us to do it. >> okay. >> every time i would talk about medicaid, the market would go up on all the stand alone medicaid players because i thought we were going to go out and buy one. the expectations run to eligibles and the way the medicaid program is going to work in the future, are way over blown, way too hot. we believe those stocks were priced way too high. >> dr. cosgrove, do you think, i'm not even sure what this means, but what does the repeal of obama care mean? do you think those who have been covered by obama care will -- could possibly be not covered? do you see that as a given in our society now? >> first of all, i think it is probably not reasonable to think we'll have a repeal of this law. it was a huge law, very difficult to get through, and so i think it is unlikely -- >> even under a republican administration. >> even under a republican -- i think -- >> do you agree with that. >> i would agree with that. >> mark and i have talked about this back and forth.
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the supreme court ruling. everybody was concerned about that. we didn't think it made a heck of a lot of difference about what we'd do going forward. similarly i don't think the election will influence in a major way what we have to do. the things we're talking about are the wrong discussions to be having. we're talking about a political discussion. we are not talking about actually solving the problem of decreasing the costs at the same time we continue to improve the quality. we have got to get back to the fact that we cannot control the costs of health care without just by deciding who is going to pay and what we're going to pay for. >> what should be on the table that's not right now? >> i think we really need to get at the underlying structure of health care and the way it's delivered. right now we pay for every piece of service rendered to a sick person. we do not pay to keep people well and improve productivity or quality of the population that we serve. and so we've got to reverse that dynamic. we've been, you know, the
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affordable care act has done a couple things. action forcing event number one which has caused hospitals like cleveland clinic to come, and the payors to come together and sit down and say how do we solve this problem? because the train is coming. >> and we also know that we can make a difference. one of the things we've done by our wellness and beginning to deal with the patients, 70,000 employees that we ensure, by looking after their chronic diseases, we've changed the curve. >> one of the criticisms i've heard for example of a company like aetna and its role in the broader health care system, a huge number of people involved making sure that the person they work for doesn't pay for the given service. and this gets to what i believe is an extraordinary administrative cost built into our system. in what way is aetna, by itself, with its army of people making sure that, a, you don't pay or somebody, you don't pay a lot, is part of the problem? >> we don't have an army of
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people that i employ. >> platoon? >> not even a platoon. we have a bunch of people -- >> field rangers? >> would you believe girl scouts? >> 79% of the claims we processing through our systems and are never touched by a human hand. >> okay. it's auto adjudicated. the other stuff we pull out are things like unnecessary procedures like cardiac procedures. there's been recent press on that. where we catch things in the system that are inappropriate. and are contrary to the safety of patients. and so we work with the medical community to do that. we have doctors that do that and nurses that do that but we don't have a bunch of people sitting back trying to figure out how to deny a claim. >> let me follow up. you said how many cases are auto adjudicated? >> 79%. >> do you think the public has any idea about that? >> no, no. >> it doesn't mean they're automatically improved. >> i'm bringing that up as a bad
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thing. >> right. >> do you think the public has any idea that if they're denied a claim that a human had no decision making process in that? >> no they don't understand nor do they care quite frankly. >> you don't think they do? >> no. all you care is if your claim got approved or not. >> think about the service model. which is if we do everything right, then we never get a phone call and people don't know we're there. the only time we get a phone call is when somebody is upset. >> so 21% of the time you have someone calling in about something? >> 21% of the time we're looking at the claims. >> what was the number five years ago? >> oh, it was 50%. >> so you've raised the auto adjudication? >> sure. >> can you talk about administrative costs? >> yeah. the administrative costs i think are one of the things we need to do is have consolidation of administration across the health care and it gets to be a very big issue supporting i.t., h.r., all of those things in the revenue cycle, all of those things cost money.
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if we can consolidate health care systems and take advantage of that, just like every other industry in the united states has done, if you look at food services, look at the financial services, if you look at book stores, they've all come together to take that administrative cost out of the industry whatever it is. we haven't done that. >> and i would argue that claims processing across the industry probably ought to be done -- we don't need to do it anymore. >> just like i.t. >> i want to ask you before we lose you, we did have a discussion earlier today with dr. davis of mount sinai about organ transplants. he believes that we would be in a much better position if we would make it an opt out program instead of an opt in. therefore assuming that you are an organ donor unless you say i don't want to be one. >> i agree. >> you are an organ donor. >> yes. >> can you tell us about your involvement and what you've been watching? >> sure. in 2007 as a result of my son
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going through cancer for a number of years, he needed a kidney. i gave him my left kidney in may of 2007. i was home on the third day, off pain medication the fourth day, back to work in a week. before they used to have to cut you in half to get the organ out. now they just take it out laproscopically, a bit like a slot machine. after that i had a gentleman named garret hill come to see me and he said i have a problem. i want to donate my kidney to my daughter and i couldn't because i wasn't a match so i went looking for somebody else who wasn't a match for their child and we could swap. i came wup this computer model and if we get enough people in the data base we can do a bunch of matched organ transplants at the same time and get everybody a perfect organ. and that's what he started. that helped fund that program and get him started. he is doing matches that are 10, 20, 30 and my son had to have another transplant just a few months ago and it was a five
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couple partner match. >> five links. >> five links. >> i am an organ donor. my license says it. you should be too. >> i'm embarrass ld i'm not. i'm going to change that. >> and i am. >> i am, too. >> every concert i go to phil makes a speech. he received an organ and he's been playing for 15 years additional beyond that. >> it's been a pleasure having you onset with us. >> great to be here. >> thank you very much, mark bertolini. >> when we come back our health care summit continues with dr. scott gottlieb of the american enterprise institute. also a former surgeon general, richard carmona, both joining us in the second half of the hour. first durable goods numbers for july. as we head to break take a look at the u.s. equity futures. up by about three, s&p down by less than a point. [ male announcer ] while many automakers are just beginning to dabble with the idea of hybrid technology, it's already engrained in our dna.
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welcome back. we are just seconds away from the durable goods data for july. rick santelli is standing by at the cme in chicago. rick, a few seconds until the numbers. we're looking at 3% after a 1.3% number. we were pretty sure the aviation numbers are going to boost the
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raw number but we'll be looking inside for business investment, a sign of confidence that's out there as well as how many futures are buying durable stuff. >> you're exactly right. ex-transportation,is where the weakness may be. here we go. exactly as we were just discussing up 4.2 on headline. now let's go through the exs. x transportation in the negative territory down 0.4%. if we look at the proxy for business spending, they are, you know, the capital goods orders, nondefense, pull out aircraft. those were down 3.4%. that is many multiples of what we were anticipating which is actually very close to an unchanged number. here's where it really gets bad. on every level. let's look at all revisions. headline revision, goes from positive 1.6 to minus 1.6. ex-transportation division goes last month minus 1.1 to minus
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2.2. and the proxy for business spending, that moves from originally released last month of minus 1.4 to minus 2.7. so really when you take into account revisions and the exes the headline number has a problem standing alone. >> i want to go back over it with you. i see here, i had the prior new orders at 1.3 and revised up to 1.6. do i have that wrong? >> yeah. i see prior durable goods headline originally 1.6 now minus 1.6. if my wire service numbers are correct. >> okay. i'm not seeing that on the table. i got a positive 1.6. let me look at another table here. i still see positive 1.6 on new orders, rick. i don't see a negative there. but maybe that's just missing a sign on the table i'm looking at. i'll look at another one. let's talk about right now the current -- >> 4.2, yeah. >> 4.2 which is positive. it's all driven by nondefense aircraft which is up 53.9% after
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being up about 33% in june. and getting at the business investment proxy, minus 3.4. that looks correct after a minus 2.7. rick, i think you might be right on that negative being wrong here. only because everything else looks negative in the june number. and i just -- no, mike just e-mailed me saying it is positive 1.6 rick. >> all right. you know, i apologize. i'm looking at our server. >> that's what happens with breaking news. that's just the story. we do our best to give you what we see. >> still up there. minus 2.2 ex-transportation? >> i have that too which is crazy. again, in the prior month aircraft was a huge number. so you take out the aircraft. >> right. >> i will also point out that one anomaly in this month's data is, and you think health care is hard, dr. cosgrove. we're just trying to do economic data here. we had defense capital goods down 13.6 so that would bring
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down the ex-transportation number as well but it doesn't really enable you to rationalize what's been going on. one thing the federal reserve has noted is that business spending has lost a bit of its luster. it was one of the bright spots in the economy. business spending was up and for the last couple months. now it's been down. it is a very volatile series. the question whether or not, is this a sort of permanent trend we have this decline in business investment spending? it's something we have to watch. i well tell you motor vehicles were up 12.8%. that is a good sign. there was one other good sign which is unfilled orders for manufactured goods was up 4.4%. i'll give this a neutral to slightly negative on this number. >> let the debate on more stimulus from the fed go. keep going. >> i'm not sure it's influential enough, scott, to really move it either way. >> people are going to be talking about it either way. >> that's right. >> we got to move on. rick, thanks very much. >> absolutely. >> okay. scott? >> all right. steve, thanks so much. >> you have to do this. >> i do. >> with a straight face.
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>> why with a straight face? a story catching our interest, what happens in vegas stays in vegas. and sin city is making plenty of hay out of prince harry's naked pictures that have gone public. check out this ad in the "usa today." here it is. full page spread. no pun intended in the "usa today." nbc's stephanie gosk has more on this royal controversy from london. so how is this playing over there? >> first of all let me say it's almost impossible to avoid the puns on this story. >> yeah right. >> just about anything that comes out of your mouth can be misconstrued. it's taken the country by storm and the internet. it is embarrassing for the prince and for the palace. it was three days ago these photos appeared online. this is basically what the internet is made for. and they spread lightning fast. but it is an interesting development here in this country because the palace trying to kind of curb the flow of this
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story went to the press complaints commission here in this country and said these pictures were a violation of prince harry's privacy. they were taken in his hotel suite without his knowledge and then released to the press. now the british media because it's been very sensitive after the phone hacking scandal decided not to run with them until today. the sun tabloid put it on the front page and the editor felt it was necessary to come forward and say he didn't believe prince harry was really trying to guard his privacy in that moment in las vegas. >> you would think that perhaps his security detail would take away all mobile phones or camera phones upon entering that room. is this also perhaps, i mean, look. let's face it. prince harry already has a bit of a partier image i guess much more so than his older brother so is there any view over there that this is just harry being harry? >> that is definitely a view. i think if this had been william it would be a much bigger deal.
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having said that, people are still asking that same question you just asked about the security team. they should have taken cameras and cell phones away from guests particularly guests that they hadn't seen or didn't know before that evening. a lot of people want to know why they didn't. th there are legitimate security reasons why phones shouldn't be in rooms and security experts are saying that really should have been part of their job. we don't know exactly what went down in that room. we don't know how many people were in that room. despite what the website tmz, which is the first site to have put these photos online had described, we don't really have details of that party. all we see are these pictures, which are damaging enough for prince harry at least in the short term. long term for the royal family i would say they are in such good stead in this country right now after the last year and a half or so, the wedding, the diamond jubilee, the olympics, it's going to be tough to put a chink in that armor. >> yes. all right. stephanie gosk, thanks so much. and "squawk on the street" will
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have much more on this story coming up at the top of the hour. >> okay. when we come back, our health care summit continues with dr. scott gottlieb of the american enterprise institute. he'll talk to us today about the hidden cost he sees in president obama's health care plan and what he is telling the romney campaign. and then former surgeon general richard carmona is calling the affordable health care act a good first step but he wants to lower health costs with the focus on prevention. "squawk" will be right back. tdd#: 1-800-345-2550 when i'm trading, i'm totally focused. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 and the streetsmart edge trading platform from charles schwab... tdd#: 1-800-345-2550 gives me tools that help me find opportunities more easily. tdd#: 1-800-345-2550 i can even access it from the cloud and trade on any computer. tdd#: 1-800-345-2550 and with schwab mobile, tdd#: 1-800-345-2550 i can focus on trading anyplace, anytime... tdd#: 1-800-345-2550 until i choose to focus on something else. tdd#: 1-800-345-2550 trade at charles schwab for $8.95 a trade. tdd#: 1-800-345-2550 open an account and trade up to tdd#: 1-800-345-2550 6 months commission-free online equity trading tdd#: 1-800-345-2550 with a $50,000 deposit. tdd#: 1-800-345-2550 call 1-800-836-8799.
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i've got a nice long life ahead. big plans. so when i found out medicare doesn't pay all my medical expenses, i got a medicare supplement insurance plan. [ male announcer ] if you're eligible for medicare, you may know it only covers about 80% of your part b medical expenses. the rest is up to you. call and find out about an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. like all standardized medicare supplement plans, it could save you thousands in out-of-pocket costs. call now to request
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your free decision guide. i've been with my doctor for 12 years. now i know i'll be able to stick with him. you'll be able to visit any doctor or hospital that accepts medicare patients. plus, there are no networks, and you never need a referral. see why millions of people have already enrolled in the only medicare supplement insurance plans endorsed by aarp. don't wait. call now. welcome back. the affordable care act has yet to take full effect leaving many wondering how exactly the system will look as reforms roll out. joining us now is scott gottlieb, a practicing physician or resident fellow at the american enterprise institute. he joins us now from the new enterprise associates life sciences conference in montana. dr. gottlieb, great to have you. you are also an advise tower r
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romney campaign. it is good to have you and your views when we have great guests today. toby cosgrove is right next to me. i'll involve him heavily in our discussion because one of the main points that you make is if you ask a hospital ceo do they innovate, no. they copy from startups you say. you say that the obama care in your words, hospitals will not innovate. instead they will consolidate. let's ask mr. cosgrove after you respond to that remark. >> i advise the romney campaign. i am not speaking for them or representing them today. i think one thing the health care plan really does is punishes excess returns on invested capital in health care services. you're seeing venture capital lead the health care services space. if you look at the great innovati innovations in health care delivery that have come about, dialysis, home hospice, all of it has come out of venture backed companies, startups that had good ideas, got venture capital funding in many cases, and then those ideas became main stream as people realized they
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were a good concept to improve patient care. hospitals generally don't innovate but copy ideas they see in the private sector. and so i'm worried you won't see real innovation, delivery of care. there seems to be a perception that if you just consolidate physicians around hospitals the hospitals are going to invest in better coordination care and do things to help improve delivery. on the margins i think they will. by and large the hospitals can train themselves. >> let's go to the ceo and ask him. do hospitals innovate? >> i think there have been a lot of innovations going on. interestingly, you see what's happened in venture capital. it's moved from devices to doing things increasingly with i.t. and trying to have a better delivery system and take efficiencies that i.t. can bring to health care. so no longer pharmaceuticals as much. no longer devices. but moving toward the delivery system of health care. and i think that's where there is a tremendous opportunity to bring a lot of efficiencies and have a system of health care in
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the united states which we really don't have now. >> scott? >> the other thing i think, that concerns me, is that it's just physician productivity generally goes down as you see this consolidated arrangements taking shape under the affordable care act. this isn't a rule. there are hospitals that are exceptions and certainly the cleveland clinic has done a very good job in terms of improving efficiency but generally as physicians become consolidated around hospitals in owned relationships, cap tated relationships all the data shows that on the whole productivity goes down so we talk about an impending doctor shortage because more people will be insured and in the market demanding services. those people even if they lack insurance right now are demanding services just doing it very inefficiently. the biggest driver of the difficulty seeing physicians in the future is that the doctors we do have, clinicians we do have, we'll see the productivity decline. if you believe the only way to solve our fiscal challenges is to get more productivity, more health care for every dollar of gdp we spend the last thing you want to do is implement reforms that drive down productivity in the sector. >> i frankly think it's what you
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consider productivity and i think productivity is going to wind up being not measured on just how many -- how much you do but how -- what great care you take of patients. and that's when i think bringing doctors in and salarying them so they're not dependent upon how much they do but what care they take of patients, really will drive down the cost of health care. it will eliminate a lot of things that we do duplicate or unnecessarily in expanding care. i'm not sure i agree with you completely on efficiency. if we incent people just to do more they'll do more. if we incent them to take better care of patients they'll take better care of patients. >> look, i didn't think you would agree with me entirely. you know, i think you've done some very good things where you are. i don't know if the model can be replicated across the entire united states. there are certain institutions able to do things that are special and you can't expect every institution to be able to do that. >> i think it all depends on what the financial incentives
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are though. >> yes. >> you look at the basis of the cleveland clinic and the mayo clinic, the incentives are all around not doing more. the incentives are around taking care of patients and an integrated system so there is no direct incentive for the physician to do more. that's proven out when you look at the dartmouth study that those two institutions with their models of paying doctors have been lower cost for medicare patients than the last two years of life. >> there's a lot of problems with the dartmouth study. it only looks at medicare data. it doesn't look at what's happening in the private sector. by and large what we're seeing happen is that the risk is being transferred to the providers. the risk is going from the insurers. they used to be the ones bearing the risk, the actuarial risk for health care or reinsuring health care if you will and are the ones best expert at understanding actuarial risk. they're not transferring it to the providers who are the least able. if you look at 1990s when providers tried to bear
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actuarial risk with the psos they failed. that worries me that the people in the market the most adept at understanding risk are transferring it to the people in the system who are probably least adept at understanding it. i think it will lead to bad consequences as you see these institutions consolidate in local markets that don't understand how to bear the risk and manage physicians. as you see the medicare reimbursement rates gelt driven down by entities like ipad when it is no longer profitable to own the physicians. i don't know what is going to happen because the physicians aren't going to be able to unwind these relationships and go back to practicing the way they were. they won't be able to get bank loans to do that. this won't be the 1990s where people consolidate, find it doesn't work and go back to doing what they were. >> enjoy the weekend. we appreciate your insight on this important issue. >> thanks a lot. >> example again of just how complicated. >> and we're not done yet. coming up reducing health care costs for businesses. we'll talk to former surgeon general richard carmona, next. [ male announcer ] whether it's kevin's smartphone...
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welcome back. corporations both large and small have serious concerns about the rising cost of health care in the united states.
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joining us is dr. richard carmona a practicing physician, former u.s. surgeon general and now the democratic candidate for u.s. senate in arizona. doctor, good to have you here. >> good morning, becky. nice to be with you. >> it's great to see you. thank you very much for joining us. we would like to talk a little bit about what you see. we've been looking for solutions all morning long. if corporations really want to try and address the rising health care costs what do you think they need to do? >> well, they need to a lot of things. currently of course the cost is being transferred to corporations small and large. when we look at the incremental variables that contribute to the cost of care there are a lot of answers right in front of us. we spend 18% of our gdp on sick care today. it's really not health care. 75 cents of every one of those dollars is being spent on chronic diseases most of which are preventible. right there is a big opportunity in working with the public to reduce costs. >> is that an opportunity through education? is it -- are these incentives that need to be offered in?
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>> well, there are incentives that can be done and certainly your guest host my friend toby cosgrove can tell you a lot about what he has done in cleveland clinic what he's done cleef l cleveland clinic. the public needs to become engaged. we can no longer tolerate bad behavior that affects the health spread out across the system. it's important to engage the public, no matter whose plan you put into play, it's going to be increasing costs over the next decade and significantly increasing costs. >> you've done a great job raising our attention about the risk of secondary smoke and you've obviously been a big champion of wellness, participating in obesity problems and smoking issues and the importance of exercise.
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we've seen that by putting these things in place we've been able to reduce the costs of health care and we think that it's important for health care institutions to model what actually is important for good health going forward and not being a health care organization, not a sick care organization. are you seeing this catch on across the country? >> toby, i think it's picking up and largely because of the economic drivers that our friends in the business world are desperate, health leaders are desperate to find solutions and best practices that you allude to are absolutely what we need. now to incentivize the public to become engaged and make those healthy decisions. i think most of us understand the increasing cost and disease burden. the bad news is, it's going to be a long haul for us. >> you know, one of the things that is is really disturbing to
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me is the fact that we now have a generation that may not live as long as their parents did. and just because of the epidemic of obesity. what do you think we can do to raise that particular issue and make people understand the importance of beginning to deal with it? >> well, toby, you and i have worked on this for many years and you have set nice models to motivate and incentivize the population. obesity is the greatest cause factor of disease in the history of mankind. if you don't have a disease, you will get disease. type 2 diabetes, accelerated cardiovascular disease and if you already have pre-existing disease, it will make it worse. so making sure that everyone understands that gaining weight is very bad for your health and the fact is the outcomes are very significant in that you
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have more disease and it is very, very costly over decades for the -- for our businesses. >> but, doctor, are you saying that it should go further? are you saying punitive? maybe we should pay taxes by the pound. >> well, right now we are paying people -- insurance rates are going up if they smoke. i think we have to look at things that are going to be a bigger incentive for people to begin to control their weight. >> dr. carmona, you're running as a democrat crate for senate. you served as general surgeon under president george w. bush. when you look at the plans out there, whether it's the president's affordable care act or the paul ryan's issues that are trying to deal long-term costs when it comes to health, where do you come down? >> well, the fact is, we need more. several presidents going back a century have attempted to transform health care and, of course, it becomes politicized and we get lost in a political
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debate rather than a substantive debate. on this accountable care program, there are some prevention models in there but i think dr. cosgrove would agree with me, we need much more, we need a more business plan associated with that. but an aspiration for health care is something we all should be pursing. >> dr. carmona, we want to thank you for joining us today. >> thank you. >> good to hear from you toby. coming up, the final thoughts from tony cosgrove. >> final thoughts? nobody told me about that when i agreed to come in. >> announcer: we'll talk to republican senators ron johnson and bob corker about their expectations for the gop gathers and we'll get the tea party take from matt kibby.
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subject on "squawk box." it's been quite a morning. highs of the day up more than 8%. it's taken a round trip in premarket trading. >> it's crazy. >> the alzheimer's drug did not meet primary points in a study but then the stock bounced back and the drug did slow down deteriorati deterioration in some patients. >> our guest has been dr. tony cosgrove. we've heard from a lot of different voices about what needs to be done to take this conversation seriously. your thoughts on maybe what the most important aspect and maybe that is depoliticizing this conversation. >> i think that's important to say. this is a very emotional topic that involves everybody across the united states and very personally and we've got to understand that we've come a long way in health care. health care is better now than it ever was and we probably have
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the best health care in the world, the highest technology. but we have moved such to the point where the cost is breaking us. half of the deficit in the united states is secondary to our obligations in medicare. we've got to control the costs of health care. we've got to do what many other indices have done, to have a more delivery system, a real system of delivering care and we've got to decrease the burden of disease. we've got to look at smoking, the epidemic of obesity and convince people to have more exercise and get out there and take care of themselves. those things account for 70% of the cost of health care and chronic diseases. >> the structure of obama care will be debated for years, if not decades. >> yes. >> what's indisputable is it's great that we're having the conversation, right? it's forced america to have this conversation. >> you know, and lennon had a wonderful quote. he said, decades go by and


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