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The Economy Showing Some Positive Signs: Is It a Mirage or Truly a Sign that the Economy is Turning a Corner?; The Key to Boosting Your Career Prospects; Republicans Still Concerned Over President Obama's Budget
Aired March 29, 2009 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ALI VELSHI, CNN HOST: Welcome to "YOUR MONEY." I'm Ali Velshi.
CHRISTINE ROMANS, CNN HOST: And I'm Christine Romans.
At long last, this economy has a pulse, housing, durable goods, the market, all showing some positive signs. This hour, we find out if this pulse is a mirage or truly a sign that the economy might be thinking about turning a corner.
VELSHI: We're also going to tell you the key to boosting your career prospects right now. A simple step you can take even with all of the layoffs to find a new job or even to change careers.
ROMANS: But first, let's take a look at the headlines. The budget battle in on, the fight over TARP and stimulus were not for the faint of heart, but now here comes the toughest fight of them all for the new administration. Ali, perhaps, the central question in this massive budget, what is investment and what is spending and can the president sell us on the fact that all of this spending isn't actually investing.
VELSHI: That is going to be what it hinges on, because one of them sounds bad and one of them sounds pretty good. This was supposed to be the week that the president was going out there to sell his budget which was the blueprint for the country to Congress and to the American people. In fact more so to the American people than Congress.
It was still a little derailed by other things that are going on, but let's listen to what the president says about this massive budget that he's proposing.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: It's not just a budget; it's a blueprint for our economic future. It finally tackles those things that we have been putting off for far too long.
(END VIDEO CLIP)
ROMANS: One of the things here, too, there has been some concern that maybe his growth assumptions may be too optimistic and then also among some of the Republicans there is concern about just how big the spending is and they philosophically don't think that we should be spending this much money whether it's spending or in investment. Let's listen to Senator Judd Gregg.
(BEGIN VIDEO CLIP)
SEN. JUDD GREGG (R), NEW HAMPSHIRE: The practical implications of this are bankruptcy for the United States, there is no other way around it. If we maintain the proposals which are in this budget over the 10-year period that this budget covers this country will go bankrupt.
(END VIDEO CLIP)
ROMANS: All right. Get ready for another big fight.
VELSHI: This is what it comes down to. The thing is for the last several months all of these fights have really gone down ideological lines about how you deal with the slowing economy. Does the government step in and make up for all of the spending that we are not doing as consumers or does it cut back? In your own household if you ran out of money the answer isn't to continue to spend, but your household and the economy are actually different things.
ROMANS: I think that Americans are concerned about our budget deficit, about -- and the president says he'll be able to cut that in half by the year 2013, but even cut it in half you're adding some $7 to 9 trillion of new debt. It is the difference between what we earn and what we spend. The national debt is the sum of what we spent that we don't have and that is a big number.
VELSHI: About $11 trillion, but you said something about how the administration's budget, your own budget in your own life depends on how much money you earn. You have to be able to say this is how much I'm going to take in, so this is how much I'm going to spend and the government makes assumptions about the economy and that is some of the question. Are their assumptions correct about whether we're going to recover? Now we have seen, as you said, some signs of life.
ROMANS: I would call them as someone on my face book said, there are a few positives in the economy, and someone wrote back and said those are micro-positives.
VELSHI: It's not an avalanche of negative news as you also pointed out. Let's take a look at these signs of life for micro- positives or glimmers of hope that we've seen in the last week and give you a sense of how you're reacting to things going on in the economy.
The first one is last week the Federal Reserve put in about more than a trillion dollars into the economy and much of that went to Fannie Mae and Freddie Mac, $750 billion. That was money that could be used to give to your bank in order to give you a loan, they buy mortgages from your bank, and your bank has more ability to give you a loan.
The mortgage rates dropped to 4.63 percent for a 30-year fixed mortgage if you have 20 percent down. That is a historic low, we haven't seen numbers like that in decades. That means housing affordability is getting easier. Then we've seen in February compared to January, the purchase of existing homes increased by 5.1 percent.
They're still down compared to what they were last February, but that's a nice jump and existing homes are about 90 percent of the market. About 10 percent of the market is made up of new homes. They were up, too, from January to February, about 4.7 percent.
The thing about this is this could be good news because it means there are construction jobs for people. It could be bad news because we still have many, many month's worth of existing home inventory out there that we need to get rid of.
Finally, we had an interesting economic indicator and that is orders for durable goods. Durable goods are things that last three years or longer. That could be anything from appliances to aircraft. There was a bit of an up tick in machinery purchases which might be an indication that maybe because of stimulus money or maybe because businesses are thinking that the economy will go better, they're making more purchases.
Up 3.4 percent in February, compared to January, that had been down for six months and a lot of people thought it was going to continue to decrease. So these are four real signs of a glimmer of hope and they've got nothing to do with the stock market.
ROMANS: That is right. And then Friday we also saw that personal spending went up a little bit even though personal income went down. There are all these layoffs so we still are dealing with the layoff story, but you mentioned the stock market, the S&P 500 which is the most important gauge for you, really, for your 401(k) and the likes of the 401(k), posting the best month and it is on track for the best month since 1974. That was a time when we were coming out of a very tough period.
VELSHI: On a percentage basis.
ROMANS: Coming out of a very tough period and it turned out ultimately to be the beginning of a new move higher. So it was something that a lot of people are talking about right now, wondering if maybe, maybe, maybe something good to be happening.
VELSHI: We want to be careful to not see trends in things until we've seen a few months in them. The reality is there are real things that are going on out there. We always talk about a few things that make you feel wealthier. The value of your home going up, your income going up and your investments for retirement going up.
ROMANS: One of those three is going up.
VELSHI: We might see some action in the stock market. We're still a week away from that jobs number for March. We get that in the end of March, first week of April and we're still expecting that and we're expecting the unemployment rate to go up probably 600,000 people to lose their jobs so we're not out of the woods yet. ROMANS: Now I want to add another thing that is a slight positive for the week and that is the sort of feeling of confidence and a few different people in the markets and people who advise the marks are telling me that this idea of the administration seeking this new regulatory power might -- it might make some moves into this confidence thing. If you have confidence that an AIG is never going to happen again, then maybe you have confidence to take your savings and invest it.
Or maybe you have confidence to do more spending. It is all about returning confidence. Timothy Geithner, the Treasury secretary, of course, going to the hill outlining Uncle Sam as a super regulator, someone to prevent this systemic risk problem from ever happening again.
VELSHI: Systemic risk means protecting companies that are so big we've heard the expression, too big to fail, so connected to the rest of the economy, that they're in danger of failing someone will see it ahead of time, but there's some concern from different parties about this power. Some people called it a power grab. Others have called it unconstitutional and one congressman actually made the point that if you do this you might actually be encouraging these companies to take risk. Listen to this.
(BEGIN VIDEO CLIP)
REP. SCOTT GARRETT, (R) NEW JERSEY: Forgive me if I'm still a skeptic when we only hear we only have a systemic regulator that this will never happen again especially if moral hazard is institutionalized with the entire new designation of systemic risk- free institutions that will never happen again. We will only be encouraging that it will happen again in some future time.
(END VIDEO CLIP)
ROMANS: So moral hazard is when you know someone will bail you out in the end that you do things and you take risks that you wouldn't normally take because you know it's coming down the line.
VELSHI: I understand that, that's like saying because I know that there are police on the interstate I can speed because I know they'll catch me? That's a good point.
I'm not sure that holds a lot of water. Moral hazard is a real issue the idea that once you have bailed somebody out it encourages risky behavior. I think most people in America agree we've had a lack of effective regulation in this country.
One thing the administration has started to say which they hadn't said earlier is that maybe they modeled this around the FDIC, the Federal Deposit Insurance Corporation, which has really been a stand out regulatory agency in the last year. You have heard about bank failures but they haven't pulled the economy down, nobody's lost money on an insured deposit, the bank shuts down on a Friday and it opens back up on a Monday. Sheila Baird who runs the operation is highly regarded. ROMANS: And you know this is talking about registering hedge funds, it is talking about looking at complex OTC, over-the-counter derivatives. I don't mean to get too wonk.
VELSHI: That is pretty wonky.
ROMANS: A few things like the credit default swaps that got AIG in so much trouble. Somebody actually having oversight of all those things.
VELSHI: Well, can this new plan and the various plans the administration has put out there, could the economy out of the tailspin we're in. Are we still headed toward bigger plunges in the market? Stephen Moore and Stephen Leeb are here to talk about it.
VELSHI: Well, there's another huge story that happened this week we haven't had a chance to get to yet. We are going to tell you about this now. This was the administration's toxic asset plan. The plan to relieve the bank of these toxic assets that are on its books.
Let's take a look at what this actually means. It starts off with the government partnering with private enterprise, private companies, and money managers, to buy up some of these toxic assets from the bank. We'll get to what those toxic assets are later, but that's the stuff that is holding these banks up from making loans.
The government and private companies get together to buy it. They'll put down some of the money required to buy it as if you were buying a house with lets say 20 percent down. Who puts up the rest of the money? Also the government, the Federal Reserve and the FDIC will provide guarantees for those purchases. The private enterprise involved in this, their risk is fairly low and they will free up some where between $500 billion and a trillion dollars that is how much the value of the toxic assets that the government is planning to buy up.
And that money should be able to be used to make loans and get credit flowing again. Let's imagine that those toxic assets are an armor or a dresser, an old beat up one that is in your house, maybe it's in your garage, you need the space and frankly, you need the money because times are a little bit tough. You have yourself a garage sale and you put this dresser out there.
You know, those folks who always show up at these yard sales before everything gets started and they get there really early in the morning because they can find the bargains and they know where the values are. They pick up this dresser and put it in their trunk and they buy it before anyone gets there and they drive off with it. What do they do?
They take it back to the shop, they shine it up and refinish it and the next thing you're looking at that same dresser in the window of an antique store some time later because it might take time before the economy improves and people want to buy that dresser but it's selling for a lot more money than you sold it for in your garage sale. That's a flawed analogy, but it might give you a sense of what's going on.
What does that mean to you? That $500 to $1 billion that this is going to free up for the banks, that is the money basically that they get from the yard sale, that should turn into money that they can loan to businesses and individuals freeing up the credit crisis that we're in at least to some degree.
Number two, we've seen some of those very, very depressed bank stocks has started to go up and they may have encouraged other parts of the market to go up with them. That matters if you if you have a 401(k) or an IRA. There's been a positive reaction to this banking plan so far, but it is still early days.
And number three, the government is the major investor in this plan and frankly all of the other plans out there, but if the government is party to buying that dresser and that dresser turns out to have value down the road the government stands to profit on it and when the government makes money, that's your money, that's tax money so that could somehow work its way to you in terms of either lower taxes or recovering from the economic situation we're in.
Again, a very flawed analogy because it's a complicated system that we've tried to make very simple, but that's bare bones, what they're trying to do.
ROMANS: Bottom line, being that they want to get these toxic assets off the bankbooks so the banks can get healthy and if the banks get healthy and then the economic recovery begins.
Now as President Obama's economic recovery plan evolves, its critics are by no means following along party lines. Liberal columnist Paul Crudman (ph) of the "New York Times" spoke out against the president in the blog writing, "I feel that when the plan fails, as it almost surely will the administration will have shot its bolt. It won't be able to come back to Congress for a plan that might actually work. What an awful mess.
VELSHI: Well is it an awful mess? Joining us now is Stephen Leeb, he is the author of "Game Over," how you can prosper in a shattered economy. And from Washington Stephen Moore he is an editor writer at the "Wall Street Journal," also with a book, Steven.
STEPHEN MOORE, EDITOR, "WALL STREET JOURNAL:" "The End of Prosperity."
VELSHI: Right, OK. "Game Over" and "The End of Prosperity." Are these the two guys to be asking about whether it will work?
I did oversimplify that analogy just to get into the discussion of what exactly this plan is. Tell me what your take is on it. Let's start with you Stephen Moore, I did over simplify that analogy just to try and get into the discussion of what exactly this plan is. Tell me what your tack is on it.
MOORE: This is the first time, Ali, in the history of this country that I agree with Paul Crudman, but I think he is right and this is an extremely risky plan and going back to your analogy which I thought was a pretty good one. The problem with this plan, remember when you were a kid and you used to play pass the bomb and it would explode in someone's pocket when the detonator goes off.
The real issue is who will absorb these losses? The toxic plan, these are bad mortgages, Ali, that people haven't been repaying and these are properties that are in foreclosure and I have a real problem with the taxpayer taking the losses here and we're exposing taxpayers to somewhere in the neighborhood of a half a trillion to a trillion dollars of additional losses and that's on top of the $10 trillion debt that we're talking about in the president's budget. I just don't like rewarding losers.
VELSHI: You have to agree with Stephen Leeb on something. Stephen you also point out that the bottom line that you think this is an issue with property values in many cases, some of these toxic assets are actual mortgages on properties and that's a concern for you as well?
STEPHEN LEEB, AUTHOR, "GAME OVER:" Yeah, it's a major concern, Ali.
I think your analogy again is an excellent one and just sort of sticking with it, let's suppose that dresser is actually holding up the home. In some way it's structurally significant to the whole house, remove it even for a second and the entire house collapses. That's the case with many of these banks. Citibank right now, Citigroup, whatever you want to call it, has $300 billion in toxics assets.
If you take that off their books even for a second or if you write them down to $200 billion even for a second they are broke, and you have another catastrophe on your hands, and this is why I totally disagree with Stephen Moore. If you want our country to have any chance to move forward, I think you have to pony up much more money to make these banks healthy. Unfortunately, I don't like it, but I do like America. I don't want to see us gravitate toward a system in which the government controls absolutely everything.
ROMANS: I think ...
MOORE: That's not where we're headed with this. I mean, look, the last thing I want is the government controlling everything, but we've gotten into a situation in the last six months where every failing institution, and every institution that's made bad decisions is being bailed out by the government and what we're doing is actually bailing out banks that made bad decisions.
You know when I talk to community banks around the country they're outraged by this and they're saying why should we have to pay more taxes to bail out our competitors that are larger and historically have been more profitable. I go back to the moral hazard issue that you're rewarding people who made bad decisions. That's not the American way.
LEEB: Stephen, you can't throw out the baby we the bathwater. Believe it or not, I'm totally on your side. I believe in capitalism and free enterprise, but you're not going to get from here to there unless you're willing to bite the bullet and do something you don't want to do.
LEEB: Hold on, one more thing -- the government will control everything!
MOORE: But let's get around one central issue, somebody has to absorb the loss, right? Either it's going to be the banks that made the decision and their shareholders or it's going to be the taxpayers who ...
LEEB: They'll be bankrupt.
ROMANS: Gentlemen, I want to give Timothy Geithner the treasury secretary the last word since both of you have major concerns about his plan. This is what he said in the "Wall Street Journal" in op ed, he said, "Simply hoping for the banks to work these assets off over time risks prolonging the crisis in a repeat of the Japanese experience."
Stephen Moore, we know the Japanese experience was not pretty. And that's something that our policymakers really want to avoid. Is he right we have to do something? You just disagree with how he's doing it?
MOORE: We now have four treasury plans going back to the original $700 billion TARP Plan and what Tim Geithner has come full circle around to is the original plan that Hank Paulson proposed six months ago.
Look, I think that actually what we've been doing is exactly imitating the problems that Japan has made and you're right, Christine, if you look at what's happened to the Japanese economy, they've lost two-thirds of their asset values and how did they do that?
They've done 10 fiscal stimulus plans. They tried to print more and more money just as we're doing here. I think we're using the failed Japanese model that's why, by the way, the Germans, and the French and even the Swedes are criticizing America for too much debt and to much socialism.
LEEB: We certainly aren't following the Japanese. The Japanese never took those toxic assets off their banks and for that reason they experienced ten years of an absolutely crumby economy. If we repeat that here you're going to see -- if you think this is government control, you haven't seen anything yet.
VELSHI: That's the perfect place to end. You guys, it's such a pleasure to have you both here. It's a smart discussion with people who have different takes on things.
MOORE: I love you guys' sunny optimism. I want some of that. VELSHI: We want to make sure it's not misplaced, but Stephen Moore, thank you very much for joining us editorial writer with the "Wall Street Journal."
And Stephen Leeb is always author of "Game Over." Thanks to both of you.
ROMANS: Why selling a stock at a loss could actually be good for your wallet.
ROMANS: All right. If you are out of a job you might be feeling anything, but charitable right now, but our next guest says doing good might serve you well in your job search.
VELSHI: We've heard about this before. We wanted to get deeper into this. Jennifer Merritt, our good friend is career editor at "The Wall Street Journal." Jennifer good to talk to you. It's not top of mind to people who are struggling and out of a job, but tell us about the importance and benefits of someone volunteering if they are out of work.
JENNIFER MERRITT, CAREER EDITOR, "WALL STREET JOURNAL:" You know first off, you can actually gain some extra skills that you might not have thought about. If you go volunteer somewhere a lot of people feel take they're volunteering because they want to do something good. You might be able to brush up on old skills or learn new skills and you are going to fill in employment gaps.
So it is not like you're totally out of work, yes you are not getting paid, but you're doing something that you're going to be able to talk about in an interview. When you go to an interview you can say well I'm doing marketing for the Red Cross and I recently did do this type of project, it shows that you are still current.
ROMANS: Look if you are painting the walls at a local school with some other people who are painting the walls at a local school and you strike up a conversation and one of those people gets hired and they remember that they know about you and your expertise and they also know that you're a go-getter and you have been out there filling every minute that you possibly can, that can be helpful.
One thing, some people can't do a lot of volunteering either because they're taking -- either they can't afford a babysitter anymore and they can't do day care anymore and taking care of children. It's important to also volunteer, a lot of the experts have been telling me and tell me what you think, Jennifer, volunteer with your Trade Association or professional people in your group or in your industry.
MERRITT: That's right. That's really critical and there's a lot that they need done. They're still doing conferences and meetings and meet-ups. If you volunteer to help organize one or take down names as people come in the door you are actually getting your own opportunity to network because not all of those people are out of work. A lot of those people are still working and still doing their five hours a month of volunteer work. The other thing you can do is get more involved in something you've never had time to get involved in. You might even find that you like it and if you're working with a non-profit when the economy gets better you'll be first on the list to get hired if it's something that you're considering going into anyway.
ROMANS: It really fills the time gap that your employer wants to see that you've been busy.
VELSHI: As you said, you can get specific experience and great networking. Jennifer you always bring us such very specific tips that are helpful to people in the job search. Jennifer Merritt is career editor with" The Wall Street Journal."
ROMANS: I think people should know that it is going to take longer to get another job, it really is and when you look at labor statistics data, it shows that people are out of work longer than they've been before.
VELSHI: And our statistics indicate, we have 4.9-5 percent unemployment before the recession started. The best indication right now is we will get back to that level in 2013, 2013. So let's not, you know, be as creative as you can. You can't volunteer for five years full time. You need an income and a, it's a good thing to do and it could be good for you.
ROMANS: Everyone is looking to save money in this economy. Let's look at how to save money when filing your taxes. Tax attorney is Roni Deutch; she is also the author of "The Tax Lady's Guide to Beating the IRS." There are three killer deductions. I love the tax lady's guide -- I want to beat the IRS, too. Three tax deductions you say you cannot overlook. What are they?
RONI DEUTCH, AUTHOR, "THE TAX LADY'S GUIDE TO BEATING THE IRS:" Doesn't it sound great to beat the IRS?
So many people are unemployed as you just discussed. Job hunting expenses. You can I know it costs thousands of dollars sometimes to find a job. Save your receipts, people, you get to deduct it. What else? Home office. You have so many people unemployed, starting a business out of their home, why aren't they claiming the home office deduction. It's worth thousands of dollars, guys. Let's start claiming it.
What else? Medical expenses. Millions of people have no medical insurance, but they still get sick. When they get sick they go to the doctor and they pay for it. Guys, save those receipts, you get to deduct it. We've got to find ways for taxpayers to save money on their taxes. A little bit of knowledge will go a long way.
VELSHI: This stuff's in your book and people can find out about this. Let me ask you something, I think the IRS is probably busy with Madoff right now in terms of auditing, but as times get tougher people do want to get more creative about what they can deduct and there is a line. Some book keepers and accountants are more conservative than others and how do you take as much advantage as you can of what is available and what is legal without triggering an audit.
DEUTCH: You're bringing up an outstanding point. The IRS is busy with Madoff we know that, but here is the issue, if you know what you can deduct you are going to deduct it. We all have that fear Ali, of being audited and the IRS said in June of 2008 that they're going to audit people at unprecedented rates, why? They only collected $2.5 trillion in '07 they need about $4 trillion.
So people need to know, don't be afraid of the IRS. Take the deductions you're entitled to and forget about the fear of being audited. You're legally entitled. Again, you have to learn a little bit about deductions and you will save thousands of dollars.
VELSHI: All right. Keep all of the documents; make sure you've got them. You call the tax lady, Roni Deutch she is the author of the "The Tax Lady's Guide to Beating the IRS." Fantastic, good advice, thank you for joining us.
ROMANS: Is the administration's toxic asset plan going to get us out of this financial mess or is it simply more poison to an already- ailing economy. White House economic adviser Austin Gould will join us next.
VELSHI: OK. One thing is for certain the administration isn't standing by ideally in this financial crisis. The question is are they doing the right things to get the economy back on track?
ROMANS: Wall Street economic adviser Austan Goolsbee he joins us now from the White House to walk us through all of these moving parts on the economic recovery plan that the president has. We were just sort of saying that six or seven months ago we were talking about the bank bailout in TARP and then it was the stimulus fight.
And now, there's the budget and there is new regulations, new powers that are proposed for the treasury secretary and also the toxic assets plan and there are so many different things. How can you clarify to the American people why all of these different things are going to matter to them and their livelihood?
AUSTAN GOOLSBEE, WHITE HOUSE ECON. ADVISER: Well, look, I don't think it's hard to explain to people why it's going to matter because you just look out the window. I mean, we've lost more than 4 million jobs since the recession began. We've had a very tumultuous time, credit in all sorts of areas have dried up and yes, each one of these things is somewhat technical, but I think when you combine stimulus, housing program and small business lending and the TARP Program which is geared to get consumer, auto, student loan credits going. We have a financial rescue to the banks.
GOOLSBEE: And financial regulatory regime to prevent this thing from ever happening again. I think it does sort of hold together. It's just you have to go through a lot of pages. This is one where you have a new house and you show up at the house and the roofs on fire and the gas is leaking in the kitchen and the basements flooded and there's an attack dog in the backyard and you have to do these one at a time, but ultimately you can't just do one. You've got to do them all together otherwise you can't live there.
ROMANS: How does helping these banks help us? A lot of people still see it as Washington bailing out bad behavior from banks. How do you, very clearly to the American people make the case that we should do it?
GOOLSBEE: Well, that's mixing a few issues. What I say about the toxic asset program that was outline is that this is one piece in a multi-piece process to try to get the financial system stable, healthy and lending again.
So, the reason that the president is concerned about this is not for the sake of the banks themselves. It's because the state of the banks has a major impact on the state of the economy, and we've got the GDP shrinking at really pretty historic negative rates and we've got major, major job loss and a lot of that can be tied to the lack of credit in a bunch of areas.
VELSHI: Let me ask you about jobs for a second because we have three pillars going on here. People have seen typically seen wealth develop through an increase in their home's value and an increase in their salary or an increase in their investments. We'll leave the stock market aside for a second. We know what you're doing on the home front, but we're a week away from a major jobs report.
The jobs report for March, we're expecting again possibly more than 600,000 jobs to be lost and the unemployment rate to go up. We'll be closing in on double where we were when this recession started and one of the concerns is that the assumptions that you and the White House have used about economic recovery about the things that are going to change to get this economy turned around might be a little rosy.
Tell me about that.
GOOLSBEE: Well, I don't totally agree with that. This comes up in the context of the budget discussion.
GOOLSBEE: Make two observations. The first is the currant circumstance nobody should be trying to balance the budget in the deepest recession since the 1930s. What we have to do is use everything in our power to prevent this from morphing into something worse. So I agree with you. I think the jobs report from all of the expectations I've seen is going to be another pretty negative jobs report and that's where the president's focus is on trying to kick start and get the job market turned back around.
On the issue of why not keep changing the forecast in the budget itself, so the rather technical question of the forecast, there is a process. You can't go back and do the entire budget forecast machinery every week. There's a process, and at the next review we'll take in all of the information that has come since the last review where they made the forecast. Some of that, there have been some pieces of good news. There have been some pieces of bad news. We'll go out and make the best forecast possible at the next revision.
ROMANS: Can I ask you a quick question? Earlier this week the president said that we inherited this impossible situation, this huge deficit, specifically about the deficit, we -- your administration inherited a $1.3 trillion deficit and we got several viewer calls and e-mails and some of these I reports from people who were supporters of the president who said I don't want to hear that anymore that you inherited it because now I want you to fix it and I want to know ...
VELSHI: It's your house with the roof on fire and the attack dog in the back.
ROMANS: Is it time to move on from the inheriting language? Do you think it's a risk at all?
GOOLSBEE: I'm not a language expert. I'm just an economist. I know the fact is when the president says he's going to cut the deficit in half and lays out a detailed budget that cuts the deficit in half, there are some of the critics saying oh, but cutting the deficit in half needs a big deficit and there, I don't think there's anything else to say, but if somebody digs you a big hole it takes you a while to get out of it. There's not any other way to say that.
ROMANS: All right. In case you take your hands-off your eyes and took a look, the stock market is up, but will it last?
ROMANS: All right. Stocks have absolutely shown some signs of life rallying for the last few weeks and that's got investors thinking the worst may be over and others are waiting for the next shoe to drop.
VELSHI: That's why it's a market. Is it time to get off the side lines and get your money back into the market? Ryan Mack is the president of Optimum Capital Management. And he joins us now. Ryan what do you say? You think people should have an investment strategy all of the time not just because the markets have ...
ROMANS: You think if you are out of the market now you're a complete fool.
RYAN MACK, PRES., OPTIMUM CAPITAL MANAGEMENT: I love this market. I am a bull. I have been saying for quite some time that individuals need to start purchasing stocks on the cheap. You don't run away from a sale if they're selling your favorite shirt for 50 percent off, you shouldn't run away from the stock market if it is 50 percent off and right now stocks are trading very cheap.
Smart signs and glimmers of hope. At the end of day durable goods and housing sales are two of the most volatile economic indicators and we don't look at that as a trend for the long run, but at the end of day we're cheap. We've been trading off of skepticism and fear and Washington policy legislation for far too long and now it's time to step in and put a little bit of money on the table and see how it goes. I think it will pay off for you in the long run.
ROMANS: But knowing that stocks can go down in the near-term is another shoe to drop, knowing that that you should be risk capital or investments for the long term and you actually have some advice for people. If they have some money that they want to invest for the next five years, you've got a couple of mutual funds and you have an actual stock for people to buy. If you're brave and you want to be in there, Ryan, what should we have?
MACK: If you have six to nine months living expenses and you've eliminated your credit card debt and you are ready to put some money in the market, one of the first one's I have is Perkins mid-cap value investor fund. I feel this fund has a good investment strategy. They have a good investment strategy.
They have a good investment company that have a good management, execution, relative low debt levels and they're willing to keep money on the side lines if they feel that they can't find any particular stocks or investments that are attractive at the moment and they've had pretty decent returns compared to their sectors. So I definitely like Perkins mid-cap value.
ROMANS: And we are going to go to that JMCVS that is the ticker symbol. That's when you tell your broker and you dial in to Etrade. That's how you buy it.
VELSHI: Even though you buy mutual funds because they're diversified, they are not a single stock doesn't mean you buy one mutual fund. You say this is not a core holding. This is something you have as part of your portfolio or perhaps a smaller part of it.
MACK: This is a supporting fund. This is not one that should be your core holding, again they are great and in this market right now we need to find out where the values are. They're a value investment- type fund and they invest in stocks at a nearly historical low and the core holding is one that takes up the core of your portfolio, but this is one that is a supporting role in your portfolio.
VELSHI: Let's take a look at Nappier World opportunities and the ticker there is EXWAX.
MACK: This fund here again is great. They had a 21 percent stake in health care. When many other competitors had lower than a 10 percent stake in health care. So they're overweight in a sector that did well over in this past economy. They had a remarkably under weight in the financial sector which we all know has been getting ravaged and they've had great opportunities and great selection strategy in going into emerging markets and really navigating through some of the most profitable segments in the emerging markets.
The management has been there with an average experience of over 15 years. They had a proven track record of stocks across selects of wide industries. So this is one with good international exposure and one to step out there and they're pretty good at doing it.
VELSHI: Give us 20 seconds on Johnson & Johnson. This is one particular stock that you say people should consider.
MACK: They've come off a little bit and they're in the top 70 percent of their number one and two of their products in the top 70 percent of the market. They're baby boomers and they'll be using their products in some form or another over the next ten years. They've had a couple of risks in terms of patent losses that they've had to deal with, but again they're a leader and they have a diverse healthcare segment that ensures them against downturns in the market. They're very diverse. I feel in the long run, great opportunity.
ROMANS: Ryan Mack, Optimum Capital Management. Thanks Ryan.
VELSHI: This economy is anything, but fun and gains right now, but that one might be the one place that people are turning to to get away from this economy.
ROMANS: Wait, wait, wait. Whoa! All right. Nice save. Nice save.
VELSHI: You know the last time I played a video game was Atari.
ROMANS: No kidding.
VELSHI: But I hear this is all the rage.
ROMANS: Let me tell you what is a recession-proof industry Ali and that is video games. Gaming, Jack Trenton is the CEO of Sony Computer Entertainment in America and he joins me with some play things. I've lost my co-anchor for the next few minutes, I'm sure.
Welcome to the program.
JACK TRENTON, CEO, SONY COMPUTER ENTERTAINMENT: Thanks a lot, Christine. Great to be here.
ROMANS: How recession proof is this industry? You came back from a conference with new products and like and you say last year was a record year in terms of numbers and sales for this industry and things are still tracking pretty good even though we have this tough retail environment.
TRENTON: No question about it, $22 billion last year in the U.S. alone. That was an 18 percent growth. We're early into this year but we are up 11 percent again and you cross your fingers when you say recession proof, but so far, we've been incredibly resilient as an industry.
ROMANS: So why? What's the appeal there? Is it escapist? People can't give up their new, slick, cool technology? I mean, what is it?
TRENTON: Several of the things that you just pointed out there. I think in the great depression it was Shirley Temple in the movie houses and now you've got interactive entertainment that appeals to really male, female, old and young. You've got a generation of adults like Ali that started out with Atari.
ROMANS: So it's not just the 12 to 17-year-old teenage boys who don't have a life anymore, it's actually grown up ...
VELSHI: I think I'm changing my weekend plans.
TRENTON: It's absolutely mainstream entertainment. Our average consumer is 33-years-old. We're 45 percent female.
ROMANS: What percentage female?
TRENTON: 45 percent.
ROMANS: Really? But you can do -- you can download videos on this kind of technology now. You can you surf the internet. You can hold pictures. There's software to adapt all this stuff so it's not just gaming. In some cases it's more like a console that can do a lot of different things for their life. Maybe that's why women are so interested.
TRENTON: I think that's the thing people are discovering. There's something for the Playstation 3 for the entire family even if not a gamer, downloading video pictures, digital video. With our Playstation network, you can download movies or TV shows, rent or own them. So there's really something there for everybody. I find my Play station 3's on whenever my TV is on and my entire family enjoys it.
ROMANS: Funny thing is, our Playstation 3 is on even as we do our job.
TRENTON: That's exactly how it should be.
ROMANS: So, listen, look into the future. What do you see in the future? I look at this and this technology now and I can't believe it. I haven't touched a joy stick until Ms. Pacman. I'm not one of the 45 percent of women who are among the people who are using these things. Look forward for me. This looks like incredible technology.
VELSHI: Sweet jump coming up.
TRENTON: This is clearly mainstream entertainment. This is something that's going to appeal to everyone in the family. And we like to call the Playstation 3 a wolf in sheep's clothing because you can take somebody like you, Christine, who has no interest in gaming but you may enjoy watching digital pictures or video on your big screen TV at home, you may enjoy watching movies or downloading TV content into it.
But ultimately, you get your hands on a controller and something sucks you in. You get a game like Motor Storm that Ali is playing there but you have another one like Flower where you are typically playing as the wind and you are blowing through these beautiful meadows.
VELSHI: That totally doesn't sound like any fun. You're playing the wind and blowing through the meadows?
TRENTON: Yes. It's a Zen-like experience, 9.99 on the Playstation network.
VELSHI: I'll stick with this one.
ROMANS: That's not true. He was just doing the flowers one and he said it wasn't manly enough.
TRENTON: He'll play that one at home, though, behind closed doors.
VELSHI: It's all research. Oh, wow, that hurt!
ROMANS: Jack Trenton, CEO, Sony Entertainment. Thanks for dropping by. Nice to hear something about a business, an industry at least that is bucking the trend. Jack Trenton, thank you so much.
TRENTON: Thank you.
ROMANS: All right. If you think President Obama is an international superstar, think again. We'll find out from Richard Quest why the president may have a rude welcome waiting for him next week in London.
VELSHI: The ultimate quest is our segment with Richard Quest. The host of "Quest Means Business" on CNN. Richard Quest. Richard, you know, we've been tweeting and we're on twitter. You're a very active twitter and I read all your tweets. You know what they are?
Richard, I'm on the way to the airport, I checked in. I'm going to a fancy place. He jets around the entire world and now he's going to the G-20. I don't even know what they do, the folks who are there, like the presidents and prime ministers. But since you're at all these fancy events, tell us, other than your fantastic travel points that you seem to be getting what exactly this is for.
ROMANS: Is it caviar and networking among the world's biggest leaders? Is that what it is?
RICHARD QUEST, CNN HOST, "QUEST MEANS BUSINESS:" No, this time -- for goodness sake, have you ever heard so much bile and jealously coming across the satellite.
VELSHI: That's exactly what it is.
QUEST: Absolutely. It's naked in its obviousness. The reality is this G-20, the group of 20, 80 percent of the world's economy will be represented. Countries from the U.S. to Europe, through to Japan, China, India, the Brits, Russia, Australia. I can't go and name them all, I always miss someone else ...
ROMANS: Wait, is that prime minister from the Czech Republic going to be there that says we're paving the road to hell. Is he going, too?
QUEST: Interesting you say that because, of course, the Czechs do have the presidency of the European Union at the moment, that's a very, very tricky point. What he said, though, was, yes, this idea of being on the road to hell. It's going to be an interesting one, this G-20, because there are few environments where world leaders can come together. But actually they're amongst themselves. If you think about it for a minute.
They're going to sit down in the room and they're going to go, hello Fritz. Hello, Barack. Good morning, Gordon. How are you, Nicole? And they all know that they're in this nasty mess and they've got to get out of it together. So if you dump excrement on him, he's likely to dump it back on to you. And it really is a case of cutting each other's throats. You either hang together or swim together.
VELSHI: What could possibly come out of this that would be of interest to our viewers? What might happen? Might they make some deal to come out with some master regulator for the world? Might there be discussion of a unified currency that is not the U.S. dollar?
QUEST: No. If they go down that road, then they're on a hiding to disaster. If they even open that Pandora's Box, there will be the most banal statements about needing greater regulations. They will commit themselves to the successful conclusion of the Doha Round Trade. You know the moment you mention the Doha Round, it's all over but the shouting. You might as well as stayed at home and had another tea.
The reality is what they're going to do is try to work out what's working and what's not. Do we need more stimulus in some places? Do we need less in others? Because, again, fundamentally, this is the one environment where they can all talk together. If they start the blame game, they will all hang together.
VELSHI: Richard Quest, I really do encourage people to lock into Richard on twitter at Richard Quest. Join us as well, Christine Romans and me. But we can't guarantee as much excitement as Richard late for flights and checking in and fantastic upgrades.
QUEST: It must be very difficult being as bitter and twisted as you are.
VELSHI: It's difficult but I'm getting over it. Richard, always our pleasure. You have a fantastic time at the G-20. We'll be sure to watch you from our own normal homes.
ROMANS: Did you say hurling excrement?
VELSHI: Always a good way to end the show.
ROMANS: Thanks for joining us. Make sure you join us every week for YOUR MONEY, Saturday at 1:00 p.m. Eastern and Sunday at 3:00.
VELSHI: And you can also logon 24/7 to CNNMONEY.com. Have yourselves a great weekend.