hi, everybody. welcome to the "the wall street journal report." i'm maria bartiromo. in health care reform a prescription for economic prosperity. i will talk to the architect of america's affordable care act, ezekiel emanuel. the rally of 2012. is it real? the powerful push or are things better than we think. interest rates at record lows again. it could be time to refinance your home. we'll tell you how to figure it out and what's right for you. the "the wall street journal report" begins right now.

here's a look at what's making news as we head in to a new week on wall street. the market melt up goes on. the dow jones industrial average had the best day in two weeks on thursday. and closed at the highest level since mie of 2008. 100 points away from dow 13,000. the nasdaq on fire hitting a 12-year high this week. the average is moving on easing concerns of europe and encouraging data in the united states. the fed appears open to another round of bond purchases to keep interest rates low and boost the economic recovery. the minutes released this week show the open market committee was divided because of concerns about inflation. americans are still shopping but not as much as some economists were looking for if. retail sales for january rose 4/10 of a percent. slightly lower than expectations. two years after it nearly collapsed in to financial ruin general motors posted the largest profit on record. they made $7.6 billion in 2011. in in spite of the numbers

earnings fell short of expectations with short falls in europe and south america. a lot of signs of hope for the market and the economy but my next guest says things may not be as bright as they seem. david darst is joining us with more. nice to see you. >> thank you for joining us. we have seen a pow erful rally in stocks so far this year. nasdaq up, 13% or so. what do you think is behind it? would you buy in it to here? >> maria, the three res, resolve, resill jens and recovery. the resolve is the european banks. you have reported about the problems in greece, portugal. irelands bonds. this is amazing, in july they were yielding 15% and are below 7% now. they have taken the medicine. they have taken the medicine. italy's bonds have fallen. the operation called long-term refinancing operation, which is set off in december. they will do another at the end of the month, as you know, the 29th of the month.

it is expected to be a trillion euros where they are basically providing funds to keep the banking system liquid. they are not lending to the each other. so hopefully they will use some money to buy bonds. that's the resolve. the resill jens is jobs and housing numbers. the new home sales coming out next week with. we'll see how they come out but housing starts, construction, empire state. >> we are seeing better data. >> no question about it. the third is the resilience. i'm just amazed at the that the u.s. consumer has been borrowing. not on a wild spending spree but the numbers have been hanging in there. so the three rs have been so far able to hold the 3-ds in check, deleveraging, deceleration and dysfunctionalty. >> so is this going to continue, these three rs? do i want to buy stocks or should i wait because of the 3-ds. >> we believe the profit number

will come in lower, in our humble opinion than the street is expecting. if this keeps going gangbusters, people will have to rethink low profit. morgan stanley's chief strategist, he's looking for profits to grow 2.7% this year. >> that's not much. >> no. the street is looking for if 9%. >> 9% -- >> we are looking for 2.7. next year another 11. we are looking for only 3%. you put those two years together. at the end of 2013 we look for the s&p to earn -- it earned last year $97. we looker for it to earn $103 in 2013. so at the end of 2012, if you put $103 times 12 that puts the market well below where it is today at 1350. >> i hear you saying we are looking at a global slow down. things are better in the u.s. but we have a global slow down and it is about to impact corporate earnings which has been the strongest part of the recovery. >> the driver, maria.

>> you are saying it is not spriesed in the market because the market is up and has higher expectations. that tells me the market is going to sell out. >> we would use it as an opportunity to get out of the financials that have move sod brilliantly and broadly, european and u.s. sell those stocks and buy back in to big dividend paying global gorillas, talking consumer staple stocks. talking about technology, area health care. these companies have impregnable balance sheets cash flow generation, ability to raise dividends. >> the dividend pairs is a drouded trade and so what, so a lot of people like to get regularly -- regular income and dividends. so you are still getting your dividend. the fact is they have not performed well in the last year and i checked and it's true. you are getting a dividend but the performance wasn't there. >> maria, the crowded trade aspect, just in general, i would

say breeding is -- breathing is a crowded trade. are you going to hold your breathe because it is a crowded trade? we think this is a longer term, multiyear trend so companies have been sitting on that cash, harboring it. they have been worried. i think it's amazing the confidence that has been growing. the fact that we did not have a deadlock here at the end of the month on the payroll tax holiday. >> yes. >> at the end of this year, morgan stanley's economists, maria, are looking for a fiscal pothole in 2013. that means the obama health care taxes will go up. he's also in his budget called for some things. that doesn't mean they will pass. secondly the expiration of the payroll tax credit and thirdly the expiration of the bush-era tax cuts. we think that will clip the 2013 economic numbers by one to two percent over what it should be

at this point. >> you are a lot more steady and i don't want to say negative but certainly cautious than you have been before, david. i thank you for being so candid. david darst, always great to have you on the program. morgan stanley smith barney. up next we are talking health care. does reforming greater access creditability. and getting the most out of your mortgage, are you missing out on ways to save. back in a moment. [ male announcer ] the inspiring story of how a shipping giant can befriend a forest may seem like the stuff of fairy tales. but if you take away the faces on the trees... take away the pixie dust. take away the singing animals, and the storybook narrator... [ man ] you're left with more electric trucks. more recycled shipping materials... and a growing number of lower emissions planes...

which still makes for a pretty enchanted tale. ♪ la la la [ man ] whoops, forgot one... [ male announcer ] sustainable solutions. fedex. solutions that matter. so i used my citi thank you card to pick up some accessories. a new belt. some nylons. and what girl wouldn't need new shoes? we talked about getting a diamond. but with all the thank you points i've been earning... ♪ ...i flew us to the rock i really had in mind. ♪ [ male announcer ] the citi thank you card. earn points you can use for travel on any airline, with no blackout dates.

two years since the passage of the patient protection and affordable care act. health care and reforming it in the united states still controversial. my next guest is one of the architects of the plan as special adviser to health policy

for. ezekiel emanuel is a professor at the university of pennsylvania. good to have you on the program. thank you very much for being here. >> thank you for joining us. the white house released the president's budget for fiscal year 2013 this week aiming to cut $360 billion from medicare and medicaid over ten years. what's your reaction to the plan? >> well, we do have to cut medicare and medicaid. some of the cuts make sense. they are trying to speed up introduction of generic biologics so we can get generic drugs faster in to the marketplace. some are better fraud and abuse enforcement, which we know we need and they are using more modern techniques, predictive techniques of who's cheating. some are straightforward cuts in how much they are paying various skilled nursing facilities and things like that. >> are you expecting cuts to medicare to continue because of increased costs? >> we will have to -- what i would like to do is modernize

medicare. there are a number of things -- it's been on the books since 1965, there are a number of things we can do to modernize the system that would improve the quality and efficiency of care and reduce costs. >> tell me about that. how do you modernize it with the challenges of expenses? >> i think one way the congressional budget office has shown has the most promise is bundling payments. instead of paying for each individual activity. say you have a hip replacement and you pay for the workup of the hip remacement and the surgeon separately, the anesthesiologist separately the hospital room and hospital stay and post rehabi put it in to on you measure the quality and you let the hospital, with the doctors try to figure out how to deliver it more efficiently. we have done experiments on that and it improved quality and reduced costs. >> i'm glad you brought this up, bundling. this is something that came up

in a conversation this week that i had with the head of a major with hospital and they said where is the evidence that the afford able care act and delivery pay models like bundling are going to impact costs, cut costs? >> so on the bundling, as the congressional budget office showed, that does -- there's been a lot of experiments with that at medicare. there are reductions. as a matter of fact, medicare is now running what is called the ace demo, acute care episodes demo where they are bundling 29 separate cardiac procedures like bypass surgery, pacemakers and eight orthopedic procedures. my complaint is they are only doing it in 11 hospitals. i they is ready for primetime where we have evidence that it improves quality and reduces cost 5 to 10%. i think that is actually the big challenge of the system. implementing things that have been shown in small scale to work. >> let me switch gears and ask you from the patient side of

things. you worked on the president's health care reform agenda for two years. what do you think the most important thing, the average patient out this, does not know about how the reform will be impacting their care and coverage? >> i think by 2020, care for all americans will be substantially better because of the affordable care act. first, by 2020 we will have electronic health records that every doctor, hospital, health dare facility we go to will have access to that. it is a direct result of health care reform. it came in the recovery act. we will have better coordinated care. doctors will be working better with hospitals. fewer hospital acquired infections and other mistakes like drug interactions, falls in the hospital. we will have fewer hospital readmissions. so that when a patient is discharged, really better cared for. we with will have more information about what interventions work, and which don't work and for which patients they are better. all of those will be a lot

better for -- lead to better care for patients. i think the other thing you have to see is that the system is now going to focus on the sickest patients and ensuring they get the best quality care because that's where the money is. >> i have a push back on the price, the expense for companies. if this health care legislation is so positive in terms of really impacting costs, how come we see so many waivers? you are talking roughly 1200 companies have received waivers from participating in this health care reform. many of them employers of low-wage workers. hhs is estimating that is 4 million people actually. so these companies are ranging in size, not all small companies. mcdonald's, labor, teachers unions, they were allowed to the get a waiver from the legislation. so if companies and people can opt out of it, what is supposed to be national reform? how can it work? >> 1200 companies is a small

number of the millions of companies in the united states. if i have got it right, the waiver you are referring to on mcdonalds is a short-term waiver, not a long-term waiver that allows the transition to the full implementation in 2014. >> they were given -- >> more smoothly. >> they were given the waiver because they said, look, we are considering not offering health care benefits to our employees. that's not what the president wanted, companies saying it is too expensive. >> this is an effort on the administration to be more flexible in implementation to smooth the path to implementation. by 2014 we will have exchanges in place, subsidies for people who can't afford to buy insurance. there will be a mechanism. right now one of the problems in our system is we don't have a good mechanism for getting people pooled to get the cheapest price to make sure if they have a disease they are not given an outright denial or a price they couldn't possibly

afford. rather than jump in and say, we are only two years in to this and there are all of these issues -- i agree there are all of these issues, the right time to evaluate a change like this is not in two years. it's in ten years them real question the audience ought to ask themselves and businesses ought to ask themselves is in 2020 will we be at a better place? the alternative was not the greatest health care system in the world with no problems. it is a health care system with a lot of problem s, uncontrollable costs, quality that was very uneven and the affordable care act is not perfect but definitely a step in the right direction. >> your take on what is happening in the supreme court right now. if they rule against the mandate, against the mandate that individuals have to purchase insurance, how does that impact the rest of it? >> first of all, this is an open and shut legal case. talk to every constitutional lawyer. this is open and shut. the commerce clause gives congress the pow er to regulate health insurance and the

so-called necessary and proper clause which says congress can do whatever is necessary and proper to affect that clause says that congress can do this. it's quite clear that the mandate is necessary to get the exchanges working to get people who have preexist ing conditions insurance. the supreme court is going to rule it constitutional. i have two very large bets with billionaires that it will be constitutional. >> so you think -- i may be on the other side of that bet. how will premiums with or without subsidy relief going to stay afford able going forward for the average person? >> the only way premiums can stay affordable going forward is if health care costs moderate going forward and the only way for health care costs to moderate is to figure out better ways of delivering care that are cheaper and higher quality. that's why when we started this discussion we started on bundling and affordable care

organizations and so the public, if they really want their premiums to stay flat should say let's try different ways of paying doctors. that's important to my having a lower premium. >> we will be watching this. dr. ezekiel emanuel. great to have you yo on the program. >> great to be here. up next, mortgage rates lower than ever. is it a good time to refinance? we will have advic

[ male announcer ] we know you don't wait

until the end of the quarter to think about your money... ♪ that right now, you want to know where you are, and where you'd like to be. we know you'd like to see the same information your advisor does so you can get a deeper understanding of what's going on with your portfolio. we know all this because we asked you, and what we heard helped us create pnc wealth insight, a smarter way to work with your pnc advisor, so you can make better decisions and live achievement.

welcome back. the battered housing market has seen mortgage rates pushed to historic lows. is now the time to take advantage of those numbers and come out ahead of your bill? joining me now is "money" magazine donna rosato. mortgage rates are at unprecedented lows. what's going on in the mortgage market? >> that's right. the 30 year nixed rate is 4% and 15 year at 3%. those are amazing low rates. we are seeing more people take advantage of them. of course. something like 43% of people are refinancing in to shorter-term loans, 15 or 20 year loans the highest percentage since 2003. >> what's the refinance option? who's the refinancing option best for? in that case let's go to a shorter maturation. who's this best for? >> if you move to a short-term

loan, 15, 20 year loan you have a higher monthly payment. you need to make sure you can afford it. it is for someone later in their career, someone that can afford the higher rate. it is good for someone who wants to the stay in their home and pay it off. you will save tens of thousands of dollars over the life of the loan in interest. >> those are real, big numbers if you make the change. there are fees involved and so how complicated can this the get? >> it can be complicated. the big thing to know is you are paying more each month but you can get closer say if you want to do a 20 or 21, 22. you will pay more in fees but if you are looking to stay in the home for a long time or you want to retire in that home it's a great move to get rid of debt faster. >> let me get your take on what the government did with

revamping the home -- harp program. there this help underwater homeowners. >> people are saying it is h. a r.p. 2.0. 11 million people have not been able to refinance because they are under water and owe more on their mortgage than their home is worth. the program has been revamped so no matter highway underwater on your mortgage you can qualify for this. you have to be up to date on your payments and you have to have had to purchase the home before june 2009. >> so that's the date. you mentioned paying off the mortgage. what about paying a lump sum to get a lower rate? who is that appropriate for? >> say you don't have enough equity in your home. you know, lenders are strict requirements these days. they are looking for people who have 20, 20 0% in your home. you may pay points.

that is paying one or two percent in exchange for a lower rate. another thing you can do is a cash in refinancing. you go to the closing with some money to, your own money to pump up equity in your home and that way you can meet the equity threshold and have a shot at a lower rate. >> great to have you on the program. >> thank you, maria. >> always great to see you and hear your insights. donna rosato. up next we will look at the news that will have an impact on your money. and a sweating palms, aching head. how to tell if banking is bad for you. ♪

[ male announcer ] aggressive new styling. a more fuel-efficient turbocharged engine. and a completely redesigned interior. ♪ the new c-class with over 2,000 refinements. it's amazing...inside and out. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services.

for more on our show and our guests check out our website. hope you follow me on twitter and google+. look for @maria bartiromo. look at the market this week. monday is president's day. all u.s. markets are closed for the federal holiday. later in the week earning will be out from home depot, hewlett-packard and kraft foods the nation's realtors will report the number of existing homes sold in the last month and the number of new homes sold as well as the university of michigan east latest reading on consumer sentiment. finally today is the stress of working on wall street enough to make you sick? a business professor studied entry-level investment bankers for a decade and found that the fast pace and long hours took a

toll on their health. 8 to 120 hour workweeks survived for four years and for the bankers bodies turned antagon t antagonistic. every person observed developed a stress related physical illment, ranging from weight gain top heart palpitation and arthritis. maybe a case where hard work is not its own reward. thank you for joining me. next weeb hope you will will be here. we will talk to a doctor who says what we know about living healthy may be strong. keep it here for where wall street meets main street. see you next weekend.