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Stock Market Up; Negotiating Strategies Discussed; Interview with Les Gold
Aired July 20, 2013 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, HOST: Another week, another record high for stocks. But are you missing out? I'm Christine Romans. This is YOUR MONEY.
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Did you miss your chance to run with the bulls? Not those bulls. I'm talking about the bull run in your investments -- 20 percent. That's how much U.S. stocks have climbed this year. A 20 percent gain in any other aspect of your life would certainly get your attention, your weight, your paycheck, your gas prices. But your stock portfolio, perhaps the only way to build wealth in America right now, is on fire.
But that's only if you're invested. The problem is, half the country is not invested in the stock market. Maybe you're still scared the bulls are going to gore you. That's what the last recession felt like. Plus, good-paying jobs are scarce, wages are stagnant, so as for money to invest, it's are hard to find, I know. But what if you had $1 million?
UNIDENTIFIED MALE: I would put it all in one stock. That would make me invest more aggressively.
UNIDENTIFIED MALE: I don't really follow it so I don't know what's going on.
UNIDENTIFIED MALE: I don't feel secure in the stock market in the United States.
UNIDENTIFIED FEMALE: I keep my money under my mattress.
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ROMANS: Under your mattress? Most of us don't have $1 million to invest. Unless you have high interest credit card rates keeping you down, you probably have some money to put to work. But investment advice is like medical advice. It has to be tailored to your needs. Keith McCullough is a money manager and a friend of the show. Keith, what are your clients asking you right now? Are they scared -- let's use another metaphor, kids with a bowl of jelly beans who just can't stop eating right now?
KEITH MCCULLOUGH, CEO, HEDGEYE RISK MANAGEMENT: The reality of the base of answers you just had there are quite representative of the institutional base of investors, too. People are still scared, which is precisely why the stock market keeps going up. People are kind of fighting last year's war.
And I think you made another great point, which is if your weight was up 20 percent, you would definitely have some issues with that. But in this case the stock market is up 20 percent, and for right reasons. Jobless claims are on the downside this week. We have a stock market that's on fire. And really, in terms of economic advice or advice for your portfolio, you have to get out of bonds. That's another thing people need to be paying attention to. You sell bonds because growth is rising, and that's something where people should not lose money. Rule number one, don't lose money.
ROMANS: So many people have asked me this week, what should I do with my 401(k)? Your takeaway is the end of the world trades like gold and bonds, people should be scaling back their bond exposure. That's what you're telling people.
MCCULLOUGH: Yes, we've actually told people to sell their entire bond exposure. So I think that's the biggest risk by far. So again, if the biggest risk is, perversely, growth, which is kind of an interesting fear, but it's fear itself. So if you're really scared, you're buying gold and you're losing money, you're down about 25 percent. You're long bonds and you're losing money, I think you got to get out of that stuff. If you want to be long growth, you get long growth, with is sell bonds.
ROMANS: We just got some free financial advice from Keith McCullough there. Annie Lowery is an economic policy reporter for the "New York Times." Annie, something interesting I found this week. Ben Bernanke talking about how Congress is holding back growth. The first think he said in his testimony this week is that Congress is holding back growth. Congress facing all these roadblocks you can see on your screen, passing a budget, dealing with budget cuts, the debt ceiling, immigration, all of these things Congress has to deal with. Will we get progress on all these fronts? Will Congress get out of the way and not be a roadblock at some point?
ANNIE LOWREY, ECONOMIC POLICY REPORTER, "NEW YORK TIMES": At this point it seems very likely they will do these trillion cuts known as sequestration, about $85 billion of which will hit this year, and then they'll keep on for the next decade. And so it seems like there isn't a lot of motivation on the part of Congress to get rid of those.
But we do, we have to raise the debt ceiling this fall, probably right around Halloween, and it seems like that might be a trigger to get Congress to take care some of these other issues. There are some folks who want to do tax reform, some folks who want to start on Fannie and Freddie. And right now Congress is really stymied and not a lot gets through. They have to act with the debt ceiling, and the hope is that this will spur them forward to get passed the lack of momentum that they've had.
ROMANS: The Fed chief Bernanke this week said the plan to pull back on stimulus is dependent on the economic recovery. Does that scare policy maker in Washington who have the wind of the stock market at their backs at this point? LOWREY: Ben Bernanke has said this before. He said the fed is pushing on the accelerator as much as they can, it's buying all of these assets. It's desperately trying to get investors to invest. And the economy is looking a little better, but not much. The growth is fine, it's not great, it won't bring the employment down really, really fast. And so Ben Bernanke wants Congress to do more.
But they've been recalcitrant, they haven't listened to them. So it seems unlikely that Congress is going to go on spending spree any time soon. And deficits remain somewhat high because of where we are in the cyclical recovery.
ROMANS: So Keith, let me ask you, with all of these, I guess, macro and global issues, should people be more worried about when to get out of this dream run or how to get in if they're not in already? It's a really interesting time to talk about your position in the stock market and in these big asset classes.
MCCULLOUGH: Yes, and the reality is people are along two big asset classes, stocks and bonds. So you get out of bonds and you have to be buying these pullbacks in stocks. I like to buy them on three to six percent pullback. So if you missed it, you missed it. You have to get over it and get on with your life.
At the end of the day, if you get back to what Bernanke is really doing here, I think to a degree it's fear-mongering itself. And I think Washington is actually scared of growth. For him to blame policymakers, if he just got out of the way and got on with it, if the tapering got on with it, the dollar would strengthen, interest rates would rise just like we saw in the 1980s and 1990s and everyone wouldn't spend their day just being worried. I think that that's a really top-down, central planning issue that we need to get rid of, we need to get confident, and we really need to let markets clear.
ROMANS: Keith McCullough, Annie Lowery, thank you both for your perspectives this weekend. See you soon.
What else happened this week that matters to "YOUR MONEY"? Give me 90 seconds on the clock. It's Money time.
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ROMANS: Corporations are sitting on record piles of cash, but don't expect to see it in your paycheck next year. Employees can expect raises of just under three percent.
According to a new study the hardest working country is Mexico, followed by Chile and Korea. Mexican workers log about 500 hours more work a year than a typical American worker for a fifth of the pay.
McDonald's employees may want a side of fries, but it told the company hold the advice. The fast food giant angered its workers by offering a financial guide. The guide advised getting a second job, offered no budget for food, and allocated just $20 a month for health care.
Further evidence of the stock market boom -- five years after the Wall Street meltdown, IRA balances are at a five-year high. The average kitty now more than $81,000, up 53 percent since 2008.
The agency set up to protect consumers in the wake of that financial crisis is finally getting a leader. Congressional Republicans stood in the way of Elizabeth Warren's brain child, the consumer financial protection bureau, for years.
UNIDENTIFIED MALE: This is not the case.
ROMANS: So she beat them and joined them by winning a Senate seat in Massachusetts. And this week Richard Cordray was finally confirmed by that same Senate as the agency's first director.
And remember Sketchers? Now the company has to pay us. The company is dishing out $40 million for falsely advertising those shoes would tone your bootie.
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ROMANS: Coming up, buying, selling or pawning, this guy's negotiating skills are hardcore.
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UNIDENTIFIED MALE: I'll give you the whole package including two chain saws, four nail guns, the golf clubs and a crowbar, $800 altogether. Thank you very much. I'll have them write you up.
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ROMANS: Les Gold from "Hardcore Pawn" teaches me how to get a deal. That's coming up after the break.
ROMANS: For some the way to easiest way to make a buck is to sell their stuff. And this guy is ready to talk numbers if you've got something he wants.
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UNIDENTIFIED FEMALE: An old liquor bottle, some old albums, stamp book. Don't you think this is worth something?
LES GOLD, AUTHOR, "FOR WHAT IT'S WORTH": No. A whole lot of nothing.
UNIDENTIFIED FEMALE: I told you it wasn't worth nothing.
UNIDENTIFIED FEMALE: You need to watch your trap because this means everything to me.
UNIDENTIFIED FEMALE: It don't matter. They don't want it.
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ROMANS: It's only worth what someone will pay for it. Others stand a chance at big money. (BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: I have a compass here. My mother has a friend who gave her this early century compass.
GOLD: How much would you take for this thing?
UNIDENTIFIED MALE: $150?
GOLD: OK. How did you come up with that number?
UNIDENTIFIED MALE: Well, I don't believe there are a great many out there.
GOLD: Let me go see. Back in a second.
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ROMANS: How much is that thing worth?
ROMANS: Wow. Les Gold is star of "Hardcore Pawn" on our sister network TruTV. His book is called "For What it's Worth, Business Wisdom from a Pawnbroker." Welcome to the program.
The Dollar stores, pawn stores, these are economic indicators. We've been watching them for a long time, but there's a lot more to learn from that in the economy, how to do business, how to negotiate, how to be a good negotiator. What's the number one rule?
GOLD: Be a good negotiator.
GOLD: It's very simple. Three easy steps -- emotion. When you're selling something, bring the emotion out to the buyer. When you're the buyer, have no emotion because you're going to pay too much. Know your bottom line and know when to walk away. And that's in any kind of deal.
ROMANS: You also say everyone, no matter what your job is, you must know how to sell.
GOLD: Well, you need to know how to negotiate. Whether you're a seller or buyer, it's all the same thing. You're just sitting on a different side of the desk.
ROMANS: How do you remove the emotion from the situation? Like that woman in the clip. This means something to me, you're telling me it's worth nothing. How do you remove the emotion?
GOLD: I'm emotionless. When people come in, they try to get all the emotion out of me. They try to make me believe I want to buy it. I have to look at it from a business perspective. I have 50 employees. They need to get paid. We need to pay the light bill, we need to pay the rent. So every deal I make is strictly a business decision.
ROMANS: Imagine you work for Les Gold and you try to go in to ask for a raise from a guy who knows how to negotiate better than anybody! So for me, for everybody else out there, I'm trying to negotiate a raise at work. What's your advice for anybody asking you for a raise?
GOLD: Go in with a number. Don't depend on your boss to give you the number. If you're making $15 an hour, go in and say, I should make $16.
ROMANS: Should it be higher than you think you deserve?
GOLD: Well, that's a decision you have to make. But give the reasons why you want the raise. I'm a better employee. I've done x and y. Make sure you have bullet points. Tell the employer why you should get that raise. Don't depend on him to make that decision for you.
ROMANS: Do you think men and women negotiate differently? I mean, you have a daughter and a son who work with you. Do you think women are not as good negotiators as men?
GOLD: I do not.
GOLD: I think women are just as good as men, they just have to believe. You've watched the show. Watch Ashley. Ashley learned from a great professional -- me. So she knows exactly how to negotiate. That's the key. It doesn't matter, male, female, it makes no difference.
ROMANS: Women think they're going to come off brassy and aggressive when they go in and say this is what I'm worth. The statistics are clear, men are more likely to ask for more money from their first job than women are. And in my book I say over the course of a career, a woman can make half a million dollars less because at the first job she didn't have the confidence to know she could ask for a raise in the first job.
GOLD: That's what you just said, they don't have confidence. It doesn't matter, male or female, you must have confidence. In my book, I talk about believing in yourself, making sure that you understand how important you are. I talk about my janitor. Here's a guy that works for me, came to me homeless. He wanted $20 for a bracelet, I gave him $200. It was one of those things. I gave him a job the next day. This guy cleans the bathrooms and is so proud of the way he does it. That's what you have to do as an employee, give 110 percent, not just 100.
ROMANS: Your stores in Detroit, we know that Detroit is having hard times economically, the city itself. You travel around the country a bit. What are you seeing out there? What are you seeing about how people are feeling? When they come to you, I mean, they come to you because they need money, because they're, in some cases, in pretty dire straits. GOLD: Not necessarily. People come to me because they want great deals. They're smart, and that's the key. You want to go to where the deals are the greatest. Come to Detroit, come to American jewelry and loan, or go to your local pawn shop. That's where you'll get great deals. But as I travel around, the economy is slowly getting better.
ROMANS: You do think it's getting better.
GOLD: I think it's getting better, and I say that because my loan line is getting shorter. My redemption line is getting longer. Retail sales are still empty. But because gold has gone down, it makes it a more viable option for people to buy.
ROMANS: So you're worth a little less today than you were a few weeks ago.
GOLD: Yes, but I'm always Les Gold.
ROMANS: Les and I hit the streets for a lesson in hardcore negotiating. You can visit YOUR MONEY blog page at CNN.com/YOURMONEY. Watch Les show me how to get the best price for a bracelet. I learned a lot.
Up next, the motor city goes bankrupt. What this historic filing means for the people of Detroit.
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UNIDENTIFIED MALE: A percentage of our wages every year into that, so it's not something that's being given to us, it's our money.
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ROMANS: And later, less is more for some beach goers. The speedo has lots of fans, but not everyone is taking the plunge. We'll tell you who is holding out.
ROMANS: Detroit. Detroit was once the wealthiest city in America. It was known as the arsenal of democracy because in World War II it went from manufacturing cars to manufacturing airplanes and munitions and tanks. Literally the people and the industry in Detroit changed the course of history.
And Thursday, this week, after years of manufacturing job losses and economic decay, the arsenal of democracy filed for bankruptcy. CNN's Poppy Harlow has been covering the story from Detroit. She joins us now. Poppy, how does bankruptcy work for an entire city? This is the largest municipal bankruptcy this country has ever seen.
POPPY HARLOW, CNN MONEY CORRESPONDENT: Hey, there, Christine. Yes, that's right, it is the largest municipal bankruptcy by far in the history of this country, $18.5 billion in debt. That is how deep in the red this city is. It's unprecedented. So the way this all comes out in court is yet to be seen.
But what we do know is this is going to mean some pretty steep cuts for bondholders here, but really, also, likely cuts for retired and current city workers. Their pensions and their health care benefits hang in the balance. That's what so much of the focus has been on here in Detroit today in the wake of this bankruptcy. What is it going to mean for people who are counting on those pension checks to come in?
Now, here's what Kevin Worthy, the emergency manager of the city of Detroit who made this decision along with the Republican governor, Rick Snyder, of Michigan, said. They said, look, people are going to have to take cuts in the near term, but in the long term, what you're going to have is a city that gets back on its feet. You've got 78,000 abandoned homes here, 40 percent of the street d lights don't work. The average response time for policemen is 58 minutes. It's unacceptable.
So what they're saying is we can't pay what we promised, but by not paying all of that back we will eventually have more money to put into city services. That's the upside. But there is pain to get there, Christine.
ROMANS: So much pain. And what it means for city pensioners and retirees and active duty city workers as well. You're talking about firefighters who breathe smoke for 20 years, who put their own money into their pension plan and now they're going to have to get a haircut, right? Everyone is going to have to take a haircut.
HARLOW: Yes. I mean, look, we don't know the numbers yet. That will be fought out with lawyers in court for months, maybe years. But look, I just interviewed Kevin Worthy, the emergency manager here, and I said, is there any way you get out of this without pensioners making some sort of concessions? And he said no. They're going to have to make some sort of concessions whether on the pensions or the health care benefits.
I caught up with some of these people that are here, down here upset. One is Janet Woodson. She worked for the Detroit public libraries for 32 years. She said I put up my end of the bargain, they need to put uphold theirs. She is among the retirees actually trying to sue to block this. Here's what she told me.
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JANET WHITSON, RETIRED DETROIT PUBLIC LIBRARY EMPLOYEE: We are now in bankruptcy, so I guess my pension is in jeopardy, which would mean to me that it has serious repercussions for my life.
HARLOW: Like what?
WHITSON: I believe at this point it means I would lose my home.
HARLOW: Your home?
WHITSON: Like some people, I have a very large payment on my home. It's not an outstanding pension, it's a pension that I can live on comfortably if it's accompanied by my Social Security, and yes, my home is in jeopardy.
HARLOW: So these are real people with really big concerns, Christine. I talked to a retired police officer here and he told me, this is a mess. And he said we're going to fight for what we are owed.
ROMANS: It's just such a sad, sad story, but we'll focus on this, of course, and the process. We'll be talking on this program and with you, too, Poppy, about what some of the business owners and people in Detroit are doing to try to lift their city up, and there are a lot of really exciting things happening. Poppy Harlow, thanks, Poppy.
ROMANS: Up next, from speedos to shark attacks to stolen wallets, Richard Quest, as only he can, takes a look at what beachgoers love, hate, and have come to expect on vacation.
ROMANS: With summer temperatures hitting sweltering highs, many Americans are heading to the beach. Expedia has released its annual flip-flop survey. Think of it as the best and the worst of the beach, according to beachgoers. Whether it's speedos, skinny dipping, or sand castles, different countries have very different ideas of what's fun at the shore. Here's Richard Quest.
RICHARD QUEST, CNN CORRESPONDENT: The flip-flop survey is a fascinating account of how we all like to spend our holidays. What a diverse lot we are -- 17 percent of Germans have gone nude on the beach, a number that's up from last year, while 34 percent of Norwegians find something skimpy like the speedos quite acceptable.
Other countries, like the French, are also partial to something like this, while most other countries, particularly the Americans, want something more robust with gusseting. And 90 percent of Germans love to swim, while 52 percent of Indians like to make sandcastles.
When it comes to fear on holiday, 54 percent of Americans feel their lot will be stolen, and 85 percent of Singaporeans fear sharks, while some fear drowning.
Put it all together with fears and skimpy speedos, it's quite amazing that anybody ever manages to have a break.
Richard Quest, CNN, on the beach.
ROMANS: Join me tomorrow at 3:00 p.m. eastern, African-Americans feeling left behind in this economic recovery.
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UNIDENTIFIED MALE: We don't see how the market is going up. We don't see that point, because all we get is what comes down here, you understand, which is the crumbs from the rich man's table.
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ROMANS: We're taking to the streets of Brooklyn, fighting to break the cycle of crime and joblessness. That's YOUR MONEY, tomorrow.