for more information about today's show, including details about the people and places we've profiled, log onto our web site, inwinecount ry.com. hi, everybody. welcome to "the wall street journal report." i'm maria bartiromo. today coming to you from outside the new york stock exchange on wall street. we've got the kickoff to the crucial earnings season. green shoots in the economy turning brown? tumbling oil prices. what's next for the markets and your portfolio? we'll talk to nobel prize winning columnist and economist paul krugman. how he thinks we should fix america's health care system and whether we need another stimulus package now. plus the inside secrets of america's millionaires. their road to wealth and how it can help you navigate your own financials. meet the richest men in town. "the wall street journal report" begins right now. >> this is america's number one financial news program. "the wall street journal report." now, maria bartiromo.

>> making news as they head into a new week on wall street. after just 40 days, general motors has emerged from bankruptcy. the dramatically slimmed down corporation will shed four brands, tens of thousands of employees, and more than $100 million in debt. the speed at which this bankruptcy occurred is regarded as a major achievement for the obama administration which committed $50 billion to gm as part of its bailout of the u.s. auto industry. one of the most glossally watched and important earnings seasons in years kicked off. alcoa, dow component, was the first company to report second quarter earnings. the company had revenues of $4.25 billion but lost 26 cents a share, still much better than what analysts were looking for, a loss of 38 cents a share. the dow fell below the 8,200 mark tuesday.

then it moved sideways wednesday and thursday. on friday, the markets were flat. oil prices meanwhile tumbled during the week, falling to a five-week low on monday and dropping even further to below $60 a barrel on concerns about the weakness in the economy and a slowing demand picture. there's a new battle of tech titans. google is taking on microsoft on its own turf. google says it will introduce a new operating system that runs computers in direct competition with microsoft's windows. the software will initially target lower-end portable pcs and will be available in the second half of next year. there's been a lot of discussion this week about the prospects of a second stimulus package. and the current stimulus package, is it working? do we need another one? or should we just give the current stimulus package more time to work out? here to talk more about that is paul macaulay. thank you for joining me on the program. >> good to be here. >> let me ask you about the prospects of the broad economy and where we are right here.

this week we began the second quarter earnings reporting season. it looks like alcoa came in better than people were expecting. what is your sense of second quarter earnings and how corporate america is doing right now? >> i think second quarter earnings versus second quarter of last year will be down very meaningfully. however, earnings expectations actually have been revised up on the consensus in recent weeks. somewhat of a mixed bag. clearly earnings are suffering because the economy versus the second quarter of last year is down. i think the market will stort focusing on forward-looking earnings as opposed to getting obsessed about second quarter earnings. for any individual company, obviously, that will be different. >> are you expecting to see a recovery in the third or fourth quarter of this year, or are you betting on 2010 for the broad economy recovery? >> i think we'll have a recovery here in the second half of the year, as we shift from the dark

side to the sunny side of the inventory cycle. i call it addition by elimination of subtraction. but i don't think we'll have a recovery in the main until we smooth out the unemployment rate and it starts coming back down. that's 2010, we hope. >> how about the stimulus package thing? here we are looking at 6.9%, guessing a lot of people are saving whatever stimulus they may have gotten. they're not necessarily out spending it or. maybe the money hasn't gone to work fully yet. do we need a second stimulus package? bottom line. >> i think we need a second package. to the first question about the effectiveness of the first one, i think it's been effective but it hasn't generated the types of exuberance that people were hoping for. it was never designed to do that. the downside as far as obama saved the same jobs, as much as to create jobs. obviously we've lost a lot of jobs in the first half of the year. but without the stimulus

package, i think we would have lost even more. so i think a lot of people are being too harsh on the stimulus package. that said, i think we need another one, particularly directed towards helping out people who are long-term unemployed by extending unemployment benefits. also revenue transfers to the states, while really cutting back on their expenditures. i think that's the big area we could have a second stimulus package is do something for the states. >> meanwhile we've got a suddenly high budget deficit. a lot of people worry we've seen so much spending and you can't really put a dent into the deficit by raising taxes. the numbers don't add up. are you concerned about the debt and the deficit in this country and what that may mean to both the dollar and the treasury? >> in the short run, i'm not. the world's in a recession. the united states will do fine, i think, on a relative basis. so i'm not worried about the size of the deficit right now. in fact, i think it should be actually a little bit bigger as

far as the second stimulus package. and the bigger issue is long-term how it projects five to ten years, which is really away from the business cycle. we often make tough choices as a country how we want to treat entitlement spending. i think we need to move in the direction of having more means entitlement spending. that's where the debt is longer term. right now, i think the deficit is big and should be big and should be bigger. >> how are you investing today? >> fine. we've been very public about what we've been doing over the last year. we've been overand at mortgage-backed securities have been leaner. that's a good trade for us. we've been overweight. the senior financials are a bit safe for us. essentially we have been concentrating our investments into sectors that are being supported directly or indirectly

by a governmental safety net. meanwhile, we have been a little bit long in duration and a little bit long in the curve. we're going to be fine. >> you're not worried about real estate at this point? i mean, a lot of people worry about commercial real estate. this week we saw a record in credit card delinquencies. many think that the commercial side of things would be the next shoe to drop. does that concern you? >> it absolutely does. in fact, i think the commercial-backed securities market is the biggest concern on the horizon. i think the fed will do some very good in that area in trying to support this process. but the bottom line in commercial is commercial property prices market to market have come down to the point where a great deal of negative equity exists in that sector and it's very difficult to refinance negative equity. so to me, that's one of the biggest black holes that we have

to worry about, a black swan risk in the year ahead. >> paul, thanks so much for spending the time. >> my pleasure, thank you, maria. >> we'll see you soon, paul macaulay joining us. up next on "the wall street journal report," health care spending is one-sixth of the american economy. is now the time to overhaul and it how much will it cost? nobel laureate paul krugman weighs in. guitar hero and other hot american brands with one thing in common. their founders became the richest men in town. what can we learn from their journeys? as we take a break, look at the stock market at the end of the the week.

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a week when president obama

has made several historic visits abroad, take is turning to two of his front-burner issues on the domestic front, health care reform and the stability of the broader economy. here to talk about that is paul krugman, nobel prize winning economist and columnist for the "new york times" and joins us right now. i saw your op-ed on friday, talking the stimulus package and whether or not we do need a second stimulus. tell me how you all come out on this. >> i'm very much for a second stimulus. i thought it was always too small. the economic outlook has darkened a lot. not because the stimulus has failed, because most of it hasn't even arrived yet, but because things happen, stuff happens. and what looks even in january like a too small package really is too small now. we're looking at -- a survey is forecasting the unemployment at the end of 2010 will be as high as it is now. that's a pretty bleak outlook. we need more oomph behind the

policy. >> what will be the measure of success of the stimulus package? is it not true that a lot of the money that taxpayers did receive was actually saved? savings, 6en 9%, which is a good thing. but they're not going out and spending. >> this is why as i said it has to be more focused on government spending as far as you can. now a large check arrives, you don't necessarily spend all of it at once. but sure, the big stuff is helping states avoid budget cuts and then spending on the infrastructure projects that we need. >> both the house and senate right now are looking at health care legislation. we're hoping to see a vote wind the next couple of weeks. the budget office testified to two senate committees. one over $1 trillion, the other $600 billion. can we afford health care legislation? >> sure. those are not big numbers.

keep in mind the federal government projects nationally we'll spend $33 trillion on health care over the next 10 years. we're talking about something that would add maybe 3% to our total health care spending over that period. not counting savings that would probably come along with legislation. reform of medicare. comparative effectiveness. it's probably not actually from a national point of view going to cost anything at all. these are small numbers. we do have to pay for it. par foye it with a combination of medicare savings. probably some kind of tax someplace along the line. this is well within the range of what we can do. >> would the option to purchase public or private insurance plans encourage competition or some people say it would actually dilute isn't it. >> no, it would encourage competition. remember, most states have very little competition among health insurers. a lot of the states -- i look at iowa, grassley -- 51% of that market is one insurer. very little competition out there. give people a plan that competes

and it's going to actually increase insurance. this is not a competitive free market. this is a collection we have out there. >> some have come up with the idea of taxing employer-provided health benefits. something that would have a huge impact on middle class americans. how do you feel about that? >> you don't want to tax the whole thing, no way. there's actually -- right now we have a system where that employer -- it's actually the only thing that holds most participants together. but some tax on a very high number, probably one way or another we're going to see it shift towards a system where this is more of a benefit for everybody rather than something we're accepting some people get plans, some people get nothing. that's okay. i don't object to the principles. >> we know health care expenses is really a big issue in terms of the costs for business, for

consumers. in this economy as you just said, we're watching this economy stall. what is going to get this economy moving again? you say we need another stimulus. >> right. >> at some point. >> i think we -- we should be moving on this now. but i mean, the one thing you know we need to do is we need to provide enough support so we don't fall into a because people are still deleveraging. >> people are still deleveraging, increasing their savings rates. wages. we've seen increase 4% a year. most recently wages are growing at about .7% a year. that's pretty close to serious deflation. once you start that it's hard to get out. >> what happened in l'aquila, in your view in the group of eight met this week in italy. the eight largest industrialized

economies. will we see something come out of that? >> well -- look. >> they've met in london, they've met -- >> i thought talking was infinitely more productive. >> i agree. just tell me. the g-8, first, what do you think? >> it's not much. >> going forward, can the rest of the world help the united states or is everyone looking inward at this point? >> you know, we really ought to be having a coordinated stimulus. but we're having enough trouble even getting a unilateral stimulus package. no, i don't -- >> is there any growth in the economy? >> oh, sure. look, industrial production is probably going to turn positive quite soon if it hasn't already. inventories are drawn down, there's going to be an inventory bounce. there's some signs. stuff is turning up. but none of it looks like enough to actually continue. >> all right, good to have you

on the program. we so appreciate it. see you soon. paul krugman joining us. coming up next on "the wall street journal report," what does your neighbor know about making money that maybe you don't? the inside secrets of self-made wealth. once again, a new era for the isolated culture of north (announcer) it is the most advanced automobile

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many of american's self-made millionaires aren't from wall street or hollywood but may be from your street. joining me is author of "the richest man in town: the 12 commandments of wealth." great to have you on the program. congratulations on the book. this is such a fascinating topic. so you traveled to 100 towns across the united states to talk to the wealthiest residents. all self-made fortunes. what did you learn? >> i learned that the american dream is alive and well. i learned that success can take place in any town in this country. i think so often we view the world of wealth and success, wealth creation, through the lenses of hollywood or wall street. and we forget the country in between where great things are happening. and i love the fact that these richest men in town were not goal-setters. they were executers. so many times i heard them quote

thomas jefferson saying, vision without execution is hallucination. and that fascinated me. because i always thought going into this that they would be the sort of five-year time horizon kind of strategic planners. >> so they didn't have a master plan or structure to it? they got it down step by step? >> step by step. every day they were determined to do better than the day before. like the japanese principle, constant, incremental improvement. many of them still in their 50s, 60s, 70s, 80s today are still doing it. amazing. >> i want to know what they had in common. let me ask about the book's title. it refers to the richest man. are the richest women different from the richest men? >> not surprisingly. there were four women in the book of the 100 that i interviewed. so it doesn't prove that women have yet shattered the glass ceiling of wealth creation but it does prove that it is happening. and i think you'll continue to see it happen more.

but i didn't think of that difference. they were the same entrepreneurs, action addicts, great execution. >> action addicts, interesting term. you said they were resilient before the commercial break. can you tell us about some of the other traits that they all have shared? >> one of the great commonalities is what's failure? failure is an option. i say in the books one of the commandments of the book is, fail to succeed. meaning that they had several failures in their lives. but they kept bouncing back every time from the failure. it didn't seem to scare them. whether they were male or female, that was the common phrase, resilience. it's probably the thing i most admired about the richest man or woman in town. >> the publicly traded companies that are beating market averages was interesting. how successful are the richest men and women on wall street? give us some standouts. >> we should all be investing with the richest man in town because the richest man in town index which i calculate is up

about 28% year to date, versus what's happening with the nasdaq and s&p and dow jones industrial average. so some standouts are green mountain coffee roasters, the richest man in burlington, vermont, bob filler, up 123% year to date. >> wow. >> activision. the makers of nintendo's guitar hero. the brothers bala in albany, new york, the richest men in town. started vicarious vision which they sold to activision. >> these are all just really good ideas. >> ideas brilliantly computed. so many people said to me in the process of this, ideas ar dime a dozen is execution is everything. >> great conversation, so appreciate it. thank you for traveling all around the country for this. this is something that we all could learn something from. thank you. >> thank you. >> randall jones joining us.

do you have what it takes to be the richest man or woman in town? go to our website for a link to the aptitude test. up next on "the wall street journal report," we'll take a look at the news this week that will have an impact on your money as well. television watchers in north korea are seeing something we've never seen before this week. a commercial interruption. is to get as far away from it all as possible. don't let erectile dysfunction get in the way. ♪ viva viagra! viagra, america's most prescribed ed treatment, can help you enjoy... a more satisfying sexual experience. ready to talk to your doctor? find out how at viagra.com ask your doctor if your heart is healthy enough for sex. don't take viagra if you take nitrates for chest pain... as it may cause an unsafe drop in blood pressure. side effects may include headache, flushing, upset stomach, and abnormal vision. to avoid long-term injury,

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check out the website. wsjr.cnbc.com.

find a link to my new blog, maria bartiromo's investor agenda. i hope you will check it out. the stories coming up in the week ahead that may move the markets and impact your money this week. a lot of earnings coming up. five dow components. bank of america, johnson and johnson, jpmorgan chase, intel and general electric make up the list. ge, parent of the company that produces this program. tuesday, we get a look at consumer behavior when retail sales for the month of june will be released. we'll get the index that would show inflation at the wholesale level. wednesday the follow-up, the consumer price index which tracks inflation at the retail level. the federal reserve's open market committee releases the minutes of its most recent meeting. a busy week ahead certainly and possible impact on your money. finally, how's this for strange news. north korean state television report lid aired its first commercial this week -- for

beer. the communist nation is usually wary of capitalist influences. a brewery broadcast a 2 1/2 minute pitch after a news program. the beer promises to help ease stress and improve health. that's the program for today. thanks so much for being with us. next week, join us. guest former dnc chairman howard dean on health care reform. keep it right here where wall street meets main street. have a great week, everybody. i'll see you again next weekend.