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Your Money
Can the Recovery be Speeded Up; The Rich Run Congress; Greece Defaulting; Battle of the Sexes; Another Tech Bubble?; Foreclosureville, USA; Protecting Your Money
Aired June 18, 2011 - 13:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, GUEST HOST: President Obama is being hammered on the economy as fear of another recession persists. But are Republican presidential hopefuls offering any fresh solutions?
Welcome to YOUR MONEY. I'm Christine Romans. Ali Velshi is off today.
CNN Opinion Research polls continue to show 4 out of 5 Americans feel that economic conditions today are poor.
Will Cain is a CNN contributor. Will, numbers aside, people are not feeling this recovery. The Republicans just had their first New Hampshire debate, seen here on CNN. What are they offering in terms of a solution that President Obama is not?
WILL CAIN, CNN CONTRIBUTOR: Tax cuts. How about that, Christine? You ever heard a Republican offer tax cuts?
(LAUGHTER)
CAIN: I'll tell you what I wish I'd hear from them, Christine, what (ph) I think they could. How about tax reform? I'm talking about taking all the deductions and dumping them in the trash. And then you could lower rates. I think that would have a very positive economic effect.
How about coupling that with even a little infrastructure and education spending? And how about entitlement reform? That -- that --
ROMANS: New spending? New spending? Those are fighting words for Republicans, Will!
CAIN: Yes, well, you're exactly right. And listen, these guys aren't idiots. That is a proposal that I just put together that you will not get elected on. So they'll stick with tax cuts.
ROMANS: All right --
CAIN: And by the way, that's more than Obama's offering.
ROMANS: All right, Roland Martin -- he's a CNN contributor, as well. Roland, one thing that became crystal clear after this week's CNN GOP debate -- all of the Republican candidates plan to attack President Obama's record on the economy.
Let's look at that record. Today we have a 9.1 percent jobless rate. We have an exploding budget deficit. And we have economic growth that's simply not enough to create new jobs. We measure economic growth, you guys, in GDP. If you look at here, you can see, though, growth has climbed out of the gutter since 2009, when it was shrinking at a rate of 2.6 percent. That was horrible!
But now it is growing at 1.8 percent, not as strongly as last summer, but that's when stimulus measures were in full effect. And right now, it's simply not enough to meaningfully lower the unemployment rate, but it has climbed out of that gutter.
Now, for most people, the economic indicator that matters the most is their job. In January of 2009, when President Obama took office, 820,000 jobs were lost in that one month. Overall, 3.3 million jobs are gone since Obama became president. But the White House is right when it points out the job growth over the past year -- some 1.4 million jobs have been added over the past year.
Roland, if a voter is basing his or her choice on the economy, can President Obama win on this economic record?
ROLAND MARTIN, CNN POLITICAL CONTRIBUTOR: Well, first of all, they have to make the argument. You saw Congressman Debbie Wasserman Schultz this week say, We own this economy. She also began to articulate that the turnaround started because of our policies.
Now, sure, nobody wants to sit here and be honest and say, Hey, we were in a ditch, we were horrible, it was just a terrible economy, which is all true. But also, Fed chairman Ben Bernanke has said this is going to be slow growth. What Americans can't get used to is the fact that we're not going to have some huge explosion overnight and we're going to see massive jobs.
We put ourselves in a horrible situation, and when you do that, it actually takes time. Now, folks may not buy it, but it's also a reality. And every Republican can talk about tax cuts. We know that tax cuts under President George W. Bush contributed to our deficit. We have to own up to that, but many of them don't want to do that.
ROMANS: All right, Harvard professor Ken Rogoff is the former chief economist at the IMF and an expert -- the expert -- on financial crises. Ken, simplest terms possible -- with the recovery apparently weakening, how real is the threat of slipping back into another recession, or does it feel so dismal to the American middle class, it doesn't matter anyway?
KEN ROGOFF, FORMER CHIEF ECONOMIST, IMF: It definitely feels so dismal to the American middle class that it's not going to feel great, no matter what. I think we can expect a slow, halting recovery. We could go into a technical recession, where output's actually falling and we're losing jobs instead of creating them. I think we'll continue to get jobs. But this could take years before we really feel completely better. MARTIN: Christine, one second. We keep saying the economy is weakening. But we're basing that on what, one jobs report? I mean, the reality is this year. We're going to have starts and stops. Again, we keep trying to compare 1984, 1992, when Clinton was there, and we think that all of a sudden, we're going to see 300,000 and 400,000 jobs created.
Also, the American consumer has changed, in that our spending habits have changed. Our economy is so predicated on spend, spend, spend -- people have finally gotten the message, I can't keep spending like I used to. I need to have some discipline and focus personally when it comes to my checkbook.
CAIN: Christine, let me say this to Roland. If the economy isn't weakening, we can at least say it's not getting better. And here's why. The main problem in the economy, the seed, the cancer in the economy is debt. And I'm not talking about just federal government debt, household -- historic levels of debt.
Now, listen. Ken Rogoff knows a lot more about this economy than I could ever pretend to. And if I was at a dinner party, I'd ask questions instead of give opinions. So I'm not going to pretend to do much different here.
And what I'd ask Ken is this. Ken, you said the same thing about debt. And you have said that the mortgage market, housing market is at the core of that and we have to look at write-down, principal write-down, debt relief.
But here's my question for you, Ken. If you do that, aren't you rewarding, like, a decade's worth of bad behavior? Isn't it essentially saying the idiots won?
ROGOFF: Well, you have to do it in a way where there's some giveback. So if you write down people's mortgages, they have to give back some of the up side if prices go back. You have to design a program where there's some penalty for it.
But you know, you're absolutely right that there's so much debt out there. Consumer debt has is really double what it was maybe 30 years ago. And this is not a typical recovery because of the debt. That's what's making it slower, not the government --
CAIN: Ken, how to you deleverage that?
(CROSSTALK)
MARTIN: Will, here's my problem. You keep saying rewarding those people who made some mistakes. Here's the problem with that. The people actually who did mistakes, guess what? Our home prices have fallen as a result of this situation.
Secondly, you're seeing school districts, hospital districts having to cut services because the property values have dropped. So when you say reward those people, you also are looking at an entire economy affected by the drop in home prices. ROMANS: Well, I want to ask Ken --
MARTIN: And sales taxes, as well.
ROMANS: I want to ask Ken a little bit about this whole idea of the zombie consumer because that's something that -- I mean, it could take years -- and you said it yourself, Ken. It could take years for the consumer to have a balance sheet that's repaired enough so that they can actually be powerful again in the economy.
Am I right here? I mean, there's a lot of debt that we still have to work through. As much as we've already done, there's a lot more to go.
ROGOFF: There really is. I mean, I actually think having some inflation would be helpful to try to bring wages and -- up relative to all these debts. There's not another pretty way to do it.
We also can go in and try to write down the debts. There's not an easy out. But it's not also time to panic. I think these people are proposing massive stimulus again, more government spending. This isn't a typical recovery. Debt is the problem. And if the government's going to spend money, it ought to be on something to bring down all the household debt.
ROMANS: Can I ask you -- let me ask you a quick question because you're going to get Republicans and Democrats, Ken, who are arguing immensely over the Bush tax cuts. Ten years -- ten years -- exactly we've been talking about Bush tax cuts. Did they contribute, and how much, to our debt problems?
ROGOFF: Well, I think Will hit the nail on the head with what we need, and it's the problem with the Bush tax cuts. We need to get rid of as many deductions as possible, lower the tax rate so people have incentives to work, to build, to create. President Bush -- the tax cuts were fine, except that that was an opportunity to improve the tax system, to reform it. We made it messier. And now the tax rates are really low, it's harder to do the reform because it's harder to do it in some way that everybody gets something.
ROMANS: I see (INAUDIBLE) wanting to jump in, but don't quite yet because we have to make a couple of bucks in the next two minutes. Will, Roland, Ken, stay right where you are.
America's debt may be unsustainable for the long term, but do we need even more money from Washington in the form of another stimulus right now? Well, what about those tax cuts and tax reforms? Don't go away.
(COMMERCIAL BREAK)
ROMANS: All right, steam was coming out of Roland Martin's ears before the break when we were talking about the Bush tax cuts and whether, in the end, they were good or bad for America. Roland?
MARTIN: Well, you look at the OMB, when you what they have to say, and we look at the GAO. I mean, at the end of the day, we sit here and we always say, Tax cuts, tax cuts. Now, look -- look, I'm a high-income earner. Sure, I would love to sit here and keep saying, Oh, cut, cut, cut. But the problem is, we want to sit here and say, Cut but also spend, but also, if you cut taxes, don't cut the oil subsidies. Don't -- as Will talked about, don't cut the deductions.
Look at what's happening in Europe right now. The people there are freaking out because of the austerity plans because guess what? They have lived that way for so many years. And when you have so much debt, you're going to have to stop something.
And same thing in this country. We don't like to let go of anything. And so at some point, we have to have some kind of balancing act. You can't keep saying, Cut, cut, cut, cut, that's going to solve all our problems. It's not.
CAIN: Yes, but we need to -- we need to distinguish two things, Roland, and that is there's the current economic problem and the debt attributable to that inside of households.
MARTIN: True.
CAIN: And then there's the federal government debt. Now, you're right, the tax cuts don't have a real positive effect on federal government debt, but they can have a positive effect on our economic system that is in the tank right now. So there's only a couple solutions you have. You know, another stimulus bill, cut some taxes, or as Ken said, print money, QE3, inflate ourselves out of the debt.
I would ask Ken this. If we're looking at our -- and as you said, Roland, it takes a long time to get out of this situation.
MARTIN: Yes!
CAIN: Ken, how long are we talking just to make ourselves realistic, seven years? How long will we be in this situation?
ROGOFF: Well, I mean, I think it's going to gradually improve over the next few years. I mean, it has been gradually improving. But you know, we may in three or four years still have 6.5 percent unemployment. It may never go back to the way it was.
I want to, Roland, distinguish between tax cuts and lowering the rates but maybe raising revenues by getting rid of a lot of deductions. I mean, I think that's where President Bush failed to improve the tax system. That was a big missed opportunity.
MARTIN: But here -- here's the problem because you have people like Grover Norquist, who will make Republicans sign these pledges, and we saw it this week, where he was sitting here, saying that if you change certain things, that equates to a tax cut (SIC). Republicans even saying -- Senator Tom Coburn saying, Wait a minute, we're getting rid of subsidies. So he equates any change as somehow being a tax increase.
Mike Huckabee, when he ran for president in 2008, same thing. He raised fees. Oh, you'll raise taxes. And so --
(CROSSTALK)
MARTIN: -- a political fight.
ROMANS: This is why comprehensive tax reform --
MARTIN: It's crazy!
ROMANS: -- which has been so difficult -- but comprehensive tax reform, fixing the system, getting rid of the loopholes, making fair and simple tax brackets for everyone and companies is so important. Now, a lot of people say that's, you know, politically so impossible, but they've had health care reform. They're talking about Social Security and entitlement reform. Maybe that's something (INAUDIBLE) Ben Bernanke has pushed for it, and members of both parties have also talked about it.
I want to talk about spending, though. America overspends. Quite simply, we have a debt that stands at more than $14 trillion and counting. But will we spend more in the near term to avoid slipping back into a recession or worse?
Ken, do we need more stimulus in one form or another, either the Fed or Congress, to boost a slowing recovery? Politics aside, should we be spending more money right now?
ROGOFF: I don't think we should have another big stimulus. We need to pull out of this one slowly. I don't think it's the problem. This is not a typical post-World War II recession. This is a financial -- post-financial crisis recession. There's too much debt out there. And if we're going to spend money, we should address that.
On the other hand, the Fed ought to do what it can. Unfortunately, the rollout for QE2, its big buying bonds program, wasn't very successful. The foreigners hated us. A lot of Americans hated the Fed. They didn't sell it well. But we need to get inflation up. That's really important as part of this recovery.
ROMANS: All right --
MARTIN: (INAUDIBLE) I got to say -- let me go personal, Christine. Seven years ago, I filed for personal bankruptcy because I had almost $100,000 in health care costs as a result in having no health insurance. And so when I did that, guess what I had to do? I had to change the way I lived. I had to change my spending habits.
When we talk about the personal debt of consumers, but also of government, it requires a change in habit. The problem when we have these stimulus programs, the first one with President Barack Obama, one third of that stimulus package was tax cuts to appease Republicans. Folks still weren't happy.
So at some point, you cannot keep spending your way out of a mess. You have to suck it up and realize it might take me four or five years to change my lifestyle, pare my habits down, to get out of my mess. But spending our way out of it is not going to be the answer.
ROMANS: Well --
MARTIN: Accept the pain.
ROMANS: The question is, accepting the pain and how much pain and how do you do it? And that's were politics get involved because depending what party you're in, you think that you're living within your means in different ways.
(LAUGHTER)
ROMANS: Let me ask you this, Will. By a two thirds to one third margin, Americans say government is doing too much that should be left to business. Will, should we forget the stimulus talk, let Washington get out of the way and just trust the private sector to start hiring?
CAIN: That's certainly a good principle to start with. I do think that Ken's right. We're in a very unique situation that can, in my opinion, extend beyond recession and resembles things like 1930 more.
So yes, let's enable the private sector in whatever way we can. But in order to address our federal government deficit, we could do things like reform entitlements, Medicare, Medicaid, Social Security, at the same time as doing some short-term measures like infrastructure and education, as I said earlier. I think that's a way, a responsible way you could address both of our problems at the same time.
ROMANS: All right --
MARTIN: The problem, Will --
(CROSSTALK)
ROMANS: -- tax reform, education reform, all these are easy, simply things we should be able to do quite quickly.
(LAUGHTER)
MARTIN: But two thirds of Americans don't want to cut their entitlements!
ROMANS: I know.
(CROSSTALK)
ROMANS: We've got to leave it there, gentlemen.
UNIDENTIFIED MALE: It's all the same.
ROMANS: Roland Martin, thank you so much, Will Cain, and of course, Ken Rogoff. The book is called "This Times it's Different." and if you want to know anything about financial crises, you've got to read Ken Rogoff's book because (INAUDIBLE) it's really -- it's required reading to understand the economy right now. Thanks, guys. Up next, why the companies on President Obama's jobs council know how to create plenty of jobs, just not for you.
(COMMERCIAL BREAK)
ROMANS: President Obama has a jobs council he can turn to for advice. But just whose job are they concerned with? Richard Quest is host of CNN's "QUEST MEANS BUSINESS," Alfred Edmond is senior vice president and multimedia editor-at-large with "Black Enterprise." Leigh Gallagher is assistant managing editor at "Fortune."
When it comes to keeping his job, President Obama knows it's your job he better be concerned about.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I will not be satisfied until everyone who wants a good job that offers some security has a good job that offers security.
(APPLAUSE)
OBAMA: I won't be satisfied until the empty storefronts in town are open for business again.
(END VIDEO CLIP)
ROMANS: When it comes to fixing unemployment here at home, is President Obama seeking advice from the right people? Many of the biggest companies represented on the president's jobs council, like Procter and Gamble, Intel and DuPont, to name a few, GE, as well -- they bring in the majority of their revenue from sales outside the U.S.
Alfred, is it too cynical, as someone suggested, that this council could also have something to do with securing corporate support for the campaign trail and not really creating jobs in this country?
ALFRED EDMOND, MULTIMEDIA EDITOR-AT-LARGE, "BLACK ENTERPRISE": Well, I think that's a cynical look at it, but I do believe that you really need to diversify the kinds of business leaders who are providing advice for this jobs council. I think you got to look at some of the companies that really do have most of their workforce here in America, and then work with the larger global leaders to address these problems.
ROMANS: Leigh, it's simply a matter of fact that a lot of the growth is coming from overseas, and the people who have the president's ear on jobs creation are people who are making their money from economies growing elsewhere.
LEIGH GALLAGHER, ASST. MANAGING EDITOR, "FORTUNE": That's really true. I mean, there is the thought that the private sector is going to solve our jobs problem. But these are large companies that can really kind of latch onto markets that are growing overseas, which is where most of the growth is happening right now and make the shift (ph) there, and they're benefiting from that.
That doesn't mean that they don't have good ideas. These are some of the best people in business. I mean, Jeff Immelt, Sheryl Sandberg, Ursula Burns from Xerox -- these are the biggest names in corporate America. So I think they can still offer good ideas.
But I think small businesses is where we can really see -- you know, those small businesses are really feeling the pain, and it might be interesting to get more input from them. I mean, they're the people who --
(CROSSTALK)
ROMANS: You know, and that's what they say, too, quite frankly. I mean, they say that, too, and say that they have not really -- some of those big small business groups -- I know that sounds like an oxymoron -- haven't been invited to the table.
Richard Quest, let me ask you this. I mean, there are those on the left in this country who say that the Jobs Competitiveness Council is more like a job outsourcing council that the president's listening to.
RICHARD QUEST, HOST, "QUEST MEANS BUSINESS": There's a couple of points. First of all, the companies you're talking about -- yes, they do make a lot of their money, in fact, most of the revenues in many cases, outside the United States. But those profits that those companies create goes into the shares and the dividends that then make up people's 401(k) plans. So it's not a zero sum game in that respect. It's in everyone's interest that those companies do actually create wealth, as well.
Also, the sort of CEOs that you're talking about know how things have to be done on a macro scale. When you're talking about shifting an economy the size of the United States, introducing new policies that may not have obvious effects one way or the other, you really do need to have the big players because they can put it into the proper context.
ROMANS: Richard, I will just say that for many people who are out of work, to hear that, Well, look, you should just be an investor of this company, that's how you -- that's why it's not a zero --
QUEST: No --
ROMANS: I mean, they want a job, and these companies are sitting on $2 trillion --
QUEST: No --
ROMANS: -- in cash and aren't hiring. So for the people who are out of work --
QUEST: No --
EDMOND: But when it comes to job creation, this is the role these companies can really play. They are, outside of the federal government, the biggest spenders in the United States. And so if you're looking for small business to create more of the jobs, then the larger, multi-national corporation has to find more ways to spend money with these smaller businesses to create the jobs that are going to hire --
(CROSSTALK)
GALLAGHER: The other issue here is that, you know, many of the things they've suggested are things that have been suggested before. They're all good ideas. But we need to put them into action. I mean, training, making more jobs in tourism and construction -- those are great ideas. But we actually have to turn them into action, and that really hasn't happened yet.
ROMANS: Let's stay on small business because this summer, more than half of all small businesses say they'll be shrinking their workforces, as opposed to adding jobs. That's according to a report from the National Federation of Independent Business. When asked what the most important problem facing their business was, 1 in 4 said poor sales. Then you look at retails sales. It dropped in May for the first time in 11 months.
Leigh, poor sales leads to less hiring. Less hiring turns to poor sales. What does it take to break the cycle?
GALLAGHER: This is a really interesting point because small businesses -- I mean, if you look again at big corporate America, profits have never been stronger. Across the Fortune 500, they're huge. But small businesses are not seeing that. And it's because -- you know, the fact that sales is a problem means that people aren't buying enough stuff. Big companies can cut costs and reap huge profit gains, but small businesses can't do that.
That's why small business is a very important indicator to watch. And it sort of highlights the same divide that people talk about that's going on between Wall Street and Main Street. It's happening between big business and small business.
ROMANS: And Richard -- you know, Richard, we saw another statistic this week, that $15 billion was how much small business loans fell in the most recent quarter -- $15 billion. Two reasons -- banks are stingier with their lending because they have to be, but also, small business didn't want to take on new debt. They were not going out asking for new debt because they're in a position where they feel like they can't because their sales don't reflect it.
QUEST: The point here is really that the recovery post-2008 recession -- the problem is it's not a demand-led recovery. And that's what's been happening in previous recoveries after a recession. It's always the consumer, it's always the demand that has pushed things forward again, and that's not happening this time.
Now, Larry Summers, former Treasury secretary and adviser to the administration, writing in "The Financial Times" this week, has been talking very much about how the policies need to be adjusted to create more demand. The problem, of course, is everybody is stuffed to the gills still with debt. They don't have any equity in their homes. So of course, that is another problem. It's going to take time for this to work its way through the pipeline of the economy.
ROMANS: OK, stick where you guys are. We've got a lot more to talk about to run through all of this. When it comes to making money in the stock market, it might be better to leave that to the woman of the house, Leigh. The difference between how women and men invest next.
(COMMERCIAL BREAK)
ROMANS: 2010 was a great year for stocks with the S&P 500 gaining nearly 13 percent. That's just one of the reasons that members of Congress may not be feeling your pain.
Among the wealthiest members of Congress, House Minority Leader Nancy Pelosi, she's worth at least $35 million back in 2010. That's according to new financial disclosures. That's up 62 percent from 2009.
One of her Republican colleagues in the House, Representative Darrell Issa, he's worth at least $220 million. That's up 37 percent. Of course, he made his money before he came to Washington.
Richard, you've got the royal family in London. So you have some rich people there, but this is supposed to be the people's house. From your point of view across the pond, is America just a nation run by a bunch of rich people?
QUEST: Please. Please! Get off your high horse on this question. All right, so there are a couple of rich people in Congress who either have made their money through family connections or through other enterprises before they went into politics.
But does anybody think that Nancy Pelosi has gone into politics to make money or indeed anybody really goes through the grunt and the grind of getting into the House or the Senate so what point are you making? There are rich people in politics?
ROMANS: Yes. People - look, these people, they've got a lot of money. We're talking about the average household income in this country, $50,000. I mean, do you think that it disconnects them a little bit from what's going on?
EDMOND: I think for most people in Congress -- you don't go to Congress to get rich. You're not getting paid enough.
ROMANS: But you can't go to Congress unless you are rich.
EDMOND: That's the issue. It's harder and harder to really become a political representative, a congressional representative if you either don't have a lot of money yourself or you don't have access to a lot of money.
And in an economy where people who are middle class and lower middle class are struggling, it doesn't inspire confidence in your representatives to know that they really can't feel your pain, for the most part. But it's going too far to say that they're going to Congress and getting rich off going to Congress.
ROMANS: What do you think, Leigh?
GALLAGHER: Well, I think we can find plenty of examples of people in Congress who aren't millionaires, but --
ROMANS: And it's taken Barney Frank about 30 years of being in Congress to be able to amass $1 million, I think.
GALLAGHER: But here's the point, OK, even talking about the people who built their wealth before coming to Congress, if they're invested in the stock market, that's great.
That's the equivalent of having a CEO invested in its own company. You want the people to be incentivize to bring the entire economy back and that's exactly what's happening --
EDMOND: Except we're talking about an economy with a stock market that's going up, but people aren't getting jobs.
GALLAGHER: That's true. That's a very fair point.
QUEST: Hang on. One thing you do need to think about. Never mind how much money they've got. What about the benefits that they enjoy while they're in Congress?
That, perhaps, is more important -- the pension benefits, the sickness benefits, the medical benefits. It's those things that perhaps means they can't understand the difficulties of ordinary working Americans.
ROMANS: And that is probably very true. I want to switch gears and talk about protests against austerity measures in Greece. This week, they turned violent. There are fears of a possible Greek default.
Taking its toll in the U.S. on markets as well, could it get worse here at home, too? Former Federal Reserve Chairman Alan Greenspan thinks that a default by Greece is, quote, "almost certain."
Richard and he says that that could help drive the U.S. economy back into recession. Richard, why would Greece defaulting on its debt potentially cause such a catastrophic outcome for the United States?
QUEST: Firstly, if Greece goes, goes Ireland and Portugal -- the contagion effect. And secondly just as important the so-called confidence factor, the Lehman effect. Who in your counterparty is good for their money and who is not?
Of course, a small country like Greece has no direct effect on the United States. That is a given. But the ripple effects as they move out from the Mediterranean, that's where you need to be -- ROMANS: We started with class wars. I want to move into gender war now, if we can. That is always not confrontational. Are women less likely to get in on risky IPOs?
When it comes to investing, seems women and men have very different strategies. A new study by Barkley's at Landberry Research shows that men have a higher risk tolerance than women.
Surprise, surprise, men feel better about trading frequently and trying to time the market and they tend to get less stressed about it.
Women on the other hand, tend to have a greater desire for self- control. Leigh, it's you and me against Richard and Alfred. Are we better investors? Is that what I take to this?
EDMOND: Yes, women are better investors. Yes, if you're measuring it by how effectively to invest, how much money they make. For a long time, the investment clubs were big.
Studies showed that all female investment clubs outperforms mix gender and all male clubs and the biggest reason is, is that that women are less risk averse. That women don't have their ego tied into being right.
They're much more willing to say, you know what, maybe this isn't the best thing to stay in. We get into it and we're like, this stock is going to perform and I'm going to hold on until it does.
ROMANS: Tell us why we're better investors?
GALLAGHER: Well, I think the risk is a big part of it and the emotion is a big part of it, but it really is true about the risk thing. We have a 40 under 40 list at "Fortune" and every year we get a lot of flak, but there aren't that many women on it.
And it's solely because this has been proven. There's a study, there's been others to say that women don't take as much risk. It takes a lot of risk to try to start a company like Google. You won't find a woman entrepreneur who's started a company of that size
That's changing and we hope it will change more. I can't wait until that list is 50/50 or even more, but it's really true. We don't take risks. We don't raise our hand in a room full of men. This is behavior that is true. A lot of people have actually said the financial crisis might have been worked out differently if there was a woman in the room --
ROMANS: This is why at the highest echelons of any business or any government, Richard, it's important to have a mix of men and women because you can temper risk with sober, good judgment and analysis and good judgments can be made.
QUEST: And if I would have suggested the opposite, you would be the first person to be shrieking sexism at me. The best person in the room should make the decisions and the fact is women do slow and steady while men are boom and bust. ROMANS: Women are the long-term stock and men are a tech bubble, is that what you're telling me? Is it back to the days of the tech bubble?
Some are wondering if this internet radio company, Pandora, if it's bubble time again. It went public this week. Pandora is the latest in a slew of initial public offerings for historically unprofitable tech companies like LinkedIn and Groupon.
Alfred, Pandora shares have swung wildly so far. What's driving the demand for companies that have yet to be consistently profitable again? It really feels like '99 to me.
EDMOND: Well, let me say, it is not the same as '99.
ROMANS: Good.
EDMOND: A lot of the IPOs and tech companies from the tech bust before, it literally was air. I mean, literally you could not explain the profit model.
I think there's some of that still here now and I'm not sure I totally understand Pandora's story. But I think there are other companies that are going public now, that there is a credible story and that it's not total air.
ROMANS: What do you think, Leigh?
GALLAGHER: Well, there is certainly some froth out there. The market is famously susceptible to psychological factors. My dry cleaner told me this morning that Facebook is going public next year. That's a sign of the times.
But I will say, you never want to say it's different this time. But these companies, first of all, there are five big ones not counting Pandora. Actually, there's five big, big ones.
There were 300 in 1999. These companies, these five, actually all of them, even Twitter, they're making money. LinkedIn -- these companies are profitable. LinkedIn has 100 million users, tons of revenue. There are the financials to back this up.
There hasn't been access to these companies. People have been waiting a long time this time around. It's tempered. There's not a -- I can see why people are comparing it to 1999. It is a little bit different.
ROMANS: Richard, I'm telling you. But it's all about the Facebook IPO. That is the Holy Grail, the Facebook IPO.
QUEST: Nope, nope, nope. Your other guests -- in 1999, we said it wasn't like the previous bubble.
ROMANS: I know, yes.
QUEST: Then it wasn't like the previous one. The fact is we -- path to profitability we heard. Look, we would be better off holding our nose, saying it's a bubble and working out how we're not going to be carrying the can when the doo-doo falls on us from above.
ROMANS: Look, I'm a woman, I'm not taking these risks.
GALLAGHER: I agree with you.
ROMANS: Richard Quest, Alfred Edmond, Leigh Gallagher, thank you so much. Love the conversation. Nice to see you all this week. Have a wonderful weekend.
We hear every day about the pain caused by home foreclosures. Up next, find out what it's like to live in Foreclosure City, USA.
(COMMERCIAL BREAK)
ROMANS: Take a look at this. Foreclosure filings have been on the decline now for eight straight months. This is according to Realty Track.
In May, filings dropped 33 percent compared with the previous year and 29 percent fewer homes were repossessed by banks. But for one town, Plainfield, New Jersey, that is not the reality. There, the bank owns more homes than anyone else. Here's CNN Money's Poppy Harlow.
(BEGIN VIDEOTAPE)
POPPY HARLOW, CNNMONEY.COM (voice-over): At a bird's eye view, Plainfield, New Jersey may look like lots of small towns across America. But when you walk the streets and talk to the folks here, you start to realize something. The bank owns a big chunk of this city.
REGINA PERRY, PLAINFIELD RESIDENT: I moved in three houses, and three of the houses that I've lived in have foreclosed and I was forced to move.
HARLOW: Of the roughly 9,000 homes in Plainfield, nearly 900 are in foreclosure. That's almost three times the national average.
LEA MCDONALD, PLAINFIELD RESIDENT: It's terrible. I mean, my kids have to walk past these empty houses and I'm afraid for them.
HARLOW: You won't find padlocks or boarded-up windows, but it's not tough to find people thousands of dollars in debt on their homes.
(on camera): Right here on East Front Street alone, there are 25 homes in foreclosure. And just down the way, on Berkeley Terrace, you'll find eight more.
(voice-over): Crime is now rampant in Plainfield. The police spend their time breaking up gang activity and determining which came first is a chicken-and-egg situation for Mayor Sharon Robinson-Briggs.
(on camera): Do you feel as though that the amount of foreclosures really, the foreclosure crisis in this city led to this increased gang violence?
MAYOR SHARON ROBINSON-BRIGGS, PLAINFIELD, NEW JERSEY: There may be a relationship in terms of certain areas in the city of Plainfield where some of our residents have been laid off, who feel kind of hopeless at this point.
HARLOW (voice-over): The highest density of foreclosures is near the gang violence, 123 within a half-mile. But there are hundreds more, all over town.
MCDONALD: The town is going down. Taxes are going up. We're suffering.
HARLOW: Today, home prices continue to fall. There are layoffs in the schools and the city has cut 50 percent of its workers since February.
At Rise N' Shine Restaurant, the owner says business is slumping.
SAUL GUIDARDO, RISE N' SHINE RESTAURANT: There are ups and downs. Some days are better, some days are slow. It's tough.
ANDREA DOYLE, PLAINFIELD RESIDENT: Unless like something can turn around, we need a miracle.
HARLOW: A miracle?
DOYLE: We need a miracle.
(END VIDEOTAPE)
ROMANS: All right, Poppy joins me now. What do the banks say about, Poppy, foreclosing on so many homes? They are essentially the homeowner in this town.
HARLOW: Absolutely. What I always think is interesting is the difference between a bank owning a home and a human living in it is a bank doesn't fix chip paints. They don't go out and eat in restaurants. They don't buy things in the town. They don't support the town in the way a resident does.
We've reached to the two biggest lenders in Plainfield, New Jersey, Bank of America and Wells Fargo. Bank of America just gave us a statement saying they're committed to helping their customers retain their home.
We've also asked Wells Fargo. They say they continue to work with their borrowers to find alternatives to foreclosure, but when we asked both to come on camera with us. Some experts from the area said they didn't have those people available.
We wanted to hear from them what's going on in this area and how it can be fix it.
ROMANS: And it's so tough for some of these residents because in many cases, they were renters from someone who owned the home. Then they get bumped out.
HARLOW: Three times.
ROMANS: And if you're the bank, would you rather have somebody paying rent or would rather have an empty property? They have to start designing some programs that are going to make some sense.
HARLOW: And I think that the scary thing is what did this mean for the town long term? It's already bad enough to have one in 10 homes in foreclosure. I mean, that one block had 25 homes in foreclosure.
Can you imagine if you're up to date on your taxes and your mortgage if that's your neighbor? It hurts you a lot, but the ripple effect for this town. The mayor said they've lost hundreds of thousands of dollars in revenue. That affects job. They've cut half their workers in less than a year for the city.
ROMANS: It affects the school system.
HARLOW: It's the ripple effect. If you have this stubbornly high unemployment and it's not getting better, it doesn't matter how much your loan is modified because you don't have a job, you're not going to be able to pay it at all.
ROMANS: That's right. Poppy Harlow, thanks so much. Foreclosure City, USA, it's an important report. You can see more of them at cnnmoney.com
When the markets pull back, investors run for cover. But there are some safe ways to invest your money. We'll walk you through it next.
(COMMERCIAL BREAK)
ROMANS: If you checked out your 401(k) or investments in the last month and a half, no one would blame you for feeling a little queasy. Whether this is a correction or a troubling sign of worse days ahead, it is no surprise that many Americans are nervous about their money.
But there are sectors that historically perform well during a volatile market. Matt McCall is author of the book "The Next Great Bull Market." Matt, what are the strongest sectors in this type of a market?
MATT MCCALL, PRESIDENT, PENN FINANCIAL GROUP: This type of market, you look at sectors that basically -- things that we need. So you look at health care, consumer staples, utilities, things that no matter how good it is day to day.
No matter how many people are unemployed, we have to wake up every morning and go buy diapers for the kids. It is things we're going to buy no matter what is going on.
ROMANS: We're showing people the consumer staples, select sector spider. This is an exchange traded fund, XLP, the ticker symbol, up 16 percent over the past year.
MCCALL: Yes, this is going to be things such as Kraft, Procter & Gamble. Again, you know, when the kids wake up and they're hungry for lunch, you can go buy some Kraft macaroni and cheese.
You're going to be buying things that we actually need. Sure, they -- if the market completely sells off like a couple of years ago, every stock gets hit.
You look at what is called, the staple, the staple is the fact we have to go out every darn day and buy products that are made by the companies that make up the exchange traded fund.
ROMANS: All right, not sexy, but it will give you a little bit of a return and that's what you're looking for when the stock market is going sideways or lower.
OK, for folks who want to invest but safely, you picked a stock and an ETF. Let's start with Kraft Foods, ticker symbol KFT, same kind of concept.
MCCALL: Same kind of concept. What is nice about this as well is it pays a 3.4 percent dividend.
ROMANS: Just owning the stock, they're paying you to own their stock.
MCCALL: They're paying you 3.4 percent. I mean, think about trying to get a CD or money market these days, 3.4 percent is actually a lot of money that you're getting each year for holding this stock.
Not only that, this stock is actually up 10 percent this year versus the market, only up 1 percent. It had a very nice run and, again it goes back to the -- I hate to use the word things, but things we need to buy.
This company, you look at a chart, it is very strong. So this is stock I'm looking to buy on the pullback we had in the market, it is a great opportunity on Kraft.
ROMANS: So that pullback is a reason to step in and get it, that's a good time to buy.
MCCALL: Yes, absolutely.
ROMANS: The ETF, you pick hold some of the top drug and medical related stocks in the market. The ticker is XLV. It's had a little bit of a pullback.
MCCALL: It's had a little bit pullback. This is the opportunity because a lot of people say, man, Matt, I want to buy stock. I want to buy an ETF, but it is hitting a high.
Well, I tell them, wait for the pullback. Here XLV is pulling back right to that sweet spot that you want to be buying and it is a lot of big drug companies. Johnson & Johnson, Merck, Pfizer, the big names that a lot of people didn't like for many years, but now they've been a comeback.
And again, you had this emergence, the demand for health care, drugs, medical equipment, in this ETF, a basket of those stocks without taking that company's specific risk to get exposure to that entire health care sector.
ROMANS: All right, Matt McCall, the book is "The Next Great Bull Market," those are three incredibly interesting tips and we'll watch them for you. Thanks, Matt.
Whether you're President Obama or one of the many Republican candidates running for president, I've got a message for you and it's a strong one, "XYZ" is next.
(COMMERCIAL BREAK)
ROMANS: Time now for the "XYZ."
Zero, that's how many times candidates mentioned the word education during CNN's two-hour Republican presidential debate.
Yes, it is early in the campaign season, and there are a host of other important issues, the war, debt, deficits, Medicare, social security, yes, and to be fair the candidates weren't asked about education either.
But if we want to maintain our place in the world, education needs to be part of the conversation and part of the politics because education leads to innovation, which leads to jobs and right now, frankly, we need more of both.
We spend twice as much per student than we did a generation ago, yet we're still behind in subjects like math and science. Only 14 percent of all undergraduate students enroll in a stem subject, science, technology, engineering, math.
A third will switch out of these fields and only two in five will graduate with a stem degree or certification within six years. As the president said this week, quote," these are the jobs of the future, the jobs that China and India are cranking out."
Those students are hungry because they understand if they get those skills, they can find a good job, they can create companies, they can create businesses, and create wealth. And we're falling behind in the very fields we know are going to be our future.
We need quality education to get back to the top and we need our leaders to make it a priority. Sure, it is a complicated and controversial issue, everyone from teachers to parents to unions and reformers, they have an opinion.
But if we're serious about our future, serious about our economy, we need to get serious about educating the next generation of Americans. Let's start by making it part of the political conversation.
That's my "XYZ."
Thanks for joining us for this conversation this week in YOUR MONEY. YOUR MONEY is on every Saturday at 1:00 p.m. Eastern and Sunday at 3:00 p.m.
Don't miss me and "YOUR BOTTOM LINE" that's Saturday mornings at 9:30 a.m. Eastern.
Have a great weekend, everybody.
