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Obama's Economic Speech: Substantive Or For Show?; Changing The Conversation In Washington; Is It Fair To Expect President Obama To Do More To Close The Gap Of Racial Inequality?; Energy Prices On The Rise; Sex, Lies And Money
Aired July 28, 2013 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, CNN HOST: President Obama says he's seeking a better bargain for the middle class. A bold economic agenda or another speech for the dustbin of history?
I'm Christine Romans. This is YOUR MONEY.
Good paying jobs and affordable college education. Investment in infrastructure. A secure retirement. This week at Knox College in Illinois, the president laid out what he called the cornerstones of middle class security.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: When the rungs on the ladder of opportunity grow farther and farther apart, it undermines the very essence of America.
(END VIDEO CLIP)
ROMANS: It's not the first time President Obama has spoken at Knox College.
(BEGIN VIDEO CLIP)
ROMANS (voice-over): Eight years ago, in June 2005, when the president was then a newly elected senator, with less gray hair, he delivered the commencement address there.
In it, he laid out his economic vision for the country, stressing the importance of education for combating the job-threatening forces of globalization and technology -- familiar themes, yes, but a very, very different time.
Back then the unemployment rate was 5 percent. Today, it's 7.6 percent. GDP was growing at an annual rate back then of more than 3 percent. Today, it's 1.8 percent.
In 2005, tuition at Knox College was $24,960. Today, it's more than 38 grand. That's a rise of 53 percent. It's something you have seen nationwide.
(END VIDEO CLIP) ROMANS: The president says this country has cleared away the rubble of the financial crisis but he also says there is much more to do. The question, will a renewed laser focus on the middle class change the conversation in Washington?
Kevin Hassett is a senior fellow at the American Enterprise Institute, and was a key economic adviser for Mitt Romney's presidential campaign.
Stephanie Cutter will be a host of CNN's "CROSSFIRE" when it debuts this fall. She was also, of course, President Obama's deputy campaign manager in 2012.
And Jessica Yellin is CNN's chief White House correspondent.
Jessica, I want to start with you.
By my count, Wednesday's speech at Knox College is at least the third major economic push or reframing of these economic issues since his reelection. A new NBC "Wall Street Journal" poll shows the majority of Americans disapprove of how this president is handling the economy, and here is the Republican reaction.
(BEGIN VIDEO CLIP)
REP. JOHN BOEHNER (R), OHIO, SPEAKER OF THE HOUSE: But his speech turned out to be all sizzle and no steak. That's assuming that there is any sizzle left after you've reheated this thing so many times.
(END VIDEO CLIP)
ROMANS: All right. So, no new policy in this speech, but the president here is trying to reset, he's trying to reframe for what?
JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT: He is looking ahead to the debt and spending fights that are going to happen in fall when Congress sets out to set next year's budget out and deal with the debt ceiling. And so he is using his megaphone to try to start that conversation in a different pitch this time, Christine, and to focus not on the numbers, but on the notion.
So, instead of having a conversation that's about the size of the deficit and bringing that down, that will be more about things like education, jobs, retirement savings.
It's the White House's view that the president does better when he can focus on those kinds of topics that the American public can understand and relate to than when it's entirely about the deficit.
And that's also, I should add, one of the reasons they think his numbers come down; whenever he is locked in battle with Congress in Washington, you see his numbers come down. When he goes out to the people, his numbers tend to rebound.
But I would just throw up a note of caution here, which is that, look, this is a little bit of the same dynamic we have seen before. One person -- he has been out there attacking Congress this week,; Congress is accusing him of being the engine of division. It's a little bit of role reversal but it's the same old dance we have seen for a lot of years.
ROMANS: I know.
And, Kevin, let me bring you in, the president calling out Republicans for not tangoing, saying you can't just be against something, you have to be for something.
And Democrats are passing around bumper stickers like this on Twitter -- I hope you can see it -- Republicans accusing the president of not creating jobs is like Lucy accusing Charlie Brown of not kicking the football . In other words, Republicans are Lucy in this scenario.
(BEGIN VIDEO CLIP)
"CHARLIE BROWN": This time I am going to kick that football clear to the moon.
(END VIDEO CLIP)
ROMANS: Kevin, the president called for universal pre-K, infrastructure investment, lots of other middle class-friendly objectives. The deficit has been coming down. So, why not?
KEVIN HASSETT, SR. FELLOW AND DIR. OF ECONOMIC POLICY STUDIES, AEI: Right. You know, I think that the interesting thing, looking at the speech, was that it was pure campaign mode.
He was very insulting and condescending towards Republican opponents and he was blaming them for obstructing his great ideas, but then he didn't really offer any new great ideas, but he promised that, in the next few weeks, he would. It's a very odd speech.
The TV show that jumps to mind is -- I thought he was kind of like Basil Fawlty in "Fawlty Towers" and Manuel, the silly, stupid waiter as the Republican, and that's the attitude that he had towards them, which isn't really a great way to start a negotiation.
But I think that the real news this week is that it's related to the economy improving -- and the deficit going down because of the improvement in the economy -- is that the debt showdown in the fall, which might even go into the winter, is probably going to be a lot different than the other ones because the deficit will have been declining as we go into it.
And so what's going to happen is that there's going to be kind of a Christmas tree bill, and the president posing and getting ready for a Christmas tree bill, where we -- you know, we have maybe the Keystone pipeline and a few of the little things that he likes.
Those are going to be the things that get the debt limit lifted, this time probably, not some kind of a big deficit showdown. I think that's what the speech was really signaling --
ROMANS: I want to bring in, Stephanie.
HASSETT: -- as he was getting ready for a Christmas tree bill.
ROMANS: I heard a lot of verbs in there that I think Stephanie is going to take issue with, that he was insulting to Republicans, that he was posing for something.
But you know, look, he has a lot that he wants to accomplish on the economic agenda, and he said it, but he can't do it without Congress.
A lot of these big goals can't happen without bipartisan support. If he can't find a way to work with this Congress, he's not going to get these things done.
STEPHANIE CUTTER, HOST, "CROSSFIRE": Well, you know, let's put all of this in context, because I think that's important.
Over the course of his first term and now, six months into his second term, I don't think Congress has been refusing to work with him because they're insulted by his rhetoric. They're refusing to work with him because they think it's a winning strategy to just oppose everything he does.
I mean, let's look at what the fundamentals of their economic plan are: repeal and cut. We know that doesn't work.
The purpose of the speech this week I think was to remind the American people who is fighting for them, because right now, the president stands alone in that regard. Republicans in Congress, particularly in the House of Representatives, are fundamentally opposed to working towards middle class equality, and that's a problem. And that is a hurdle for the president getting this done.
That doesn't mean he is going to stop trying. He is going to try until the last day of his presidency. That was the purpose of this speech, to remind everybody, if we want to grow the middle class, if we want a strong economy, if we want growth for years to come, we have to take care of these fundamental things that we know work.
ROMANS: We have another block to talk about all this, guys. So, don't go away. Jessica, Stephanie, Kevin, stay right where you are.
Jobs are coming back, but they are not the jobs that built the middle class.
(BEGIN VIDEO CLIP)
OBAMA: The first cornerstone of a strong, growing middle class has to be, as I said before, an economy that generates more good jobs in durable, growing industries.
(END VIDEO CLIP) ROMANS: Does the president or anyone really have a way to fix it?
ROMANS: We're not there yet.
President Obama touts the progress his administration has made on jobs since the Great Recession, but he also acknowledges more needs to be done.
(BEGIN VIDEO CLIP)
ROMANS (voice-over): Now the economy has added 6.6 million jobs since the labor market hit bottom in February of 2010. But nearly 9 million jobs were lost overall during the recession, and the jobs that are coming back are not -- not all of them -- the same quality, as the jobs that were lost.
Today, a third of U.S. workers make less than $24,000 a year, a third.
Jessica, the issue of stagnant wages, it doesn't get all that much of attention, much play in Washington, and one of the things I worry about is that no one really knows how to fix it.
I mean, you look at Knox College where the president was speaking, the problem with stagnant wages and losing good-paying jobs started even before this financial crisis, and we haven't fixed it yet.
YELLIN: That's true. It used to be that when productivity rose and so did wages, and last year wages were the lowest percentage of our annual gross domestic product than they have been on record.
Look, I think that part of the problem is exactly what you say, is that nobody really knows how to fix this problem.
I think this administration would tell you that a big part of the challenge is that health care costs now eat up a much greater portion of everybody's wages and so more money goes into the health care pot instead of take home pay. And if they can help bring down the cost of health care, that will help you get more money in your paycheck in the future.
So, Obamacare is a big plus in that regard. Not everybody is going to agree with that. A lot of people take issue --
ROMANS: This is something that, I mean, American -- millions of American families, it is their reality, and it has this knock-on effect across the economy.
And I feel like we can't be an economy, Kevin Hassett, we cannot be an economy that has all these people who are doing great, but then you have this vast middle that doesn't have an outlet or doesn't have a place, and that's something that neither party has really been able to fix, Kevin.
HASSETT: Right. But I disagree that we don't know how to do this. There is a really big economics literature that's sort of, I think, documenting where the wage slowdown is coming from. You know, if you've got a lawn mowing business, and you want to make more money, you need a faster lawn mower. You need more capital.
And right now, we've got a really unfriendly environment for capital in the U.S. and we are chasing all the jobs and all the machines that could lift wages here in the U.S. overseas.
I think that the president correctly has said he wants to do something about that. People in the House have said they want to do something about it, but they haven't been able to get it done.
I think that if there's going to be any hope for the middle class, if you really want to have a middle class agenda, which was not a focus of the president's speech, then the way to do it is to try to get people the machines they need, the tools they need so that they can actually earn a higher wage. And to do that is to -- really to have a big corporate tax reform.
ROMANS: I would agree with you that you need corporate tax reform, you need tax reform. I would disagree with you; I think that the focus of the president's speech was middle class issues, and he was appealing to middle class voters. You and I will disagree about that.
But let me bring in Stephanie, because in both of these speeches at Knox College, the president mentioned the local Maytag factory that shut down back in 2004.
Knox actually tracked more than 400 of the workers who lost their jobs, and found that those workers are making 10 grand less now than when they were at Maytag. And it's interesting; those jobs left there, left Galesburg; they went to Mexico and South Korea. And then after that, they moved again and they went to China.
I mean, this is a globalization story and how American workers were hurt and then hit by the financial crisis.
What should we be doing about the focus on the quality of these jobs?
CUTTER: Well, exactly what the president said this past week. The president's tax reform plan cuts the manufacturing tax rate to 25 percent for one specific reason, to bring manufacturing jobs back to this country because those are better paying jobs.
The president's proposal on universal pre-K, that's to create better skilled workers over time, to fill those high skilled jobs. Those are better paying jobs.
Infrastructure has a lot to do with creating better paying jobs. First, it brings jobs back to this country because companies know that they can ship their goods all over the world, if they have good infrastructure here.
Number two, it pays higher paying jobs. It creates higher paying jobs.
ROMANS: It's such well-worn territory.
Everybody, thank you so much for dropping by this weekend. Really nice to see you all. We'll do it again, very, very soon. As you can see, there is a lot to talk about, agreement and some disagreement, too. Thanks, guys.
Despite Martin Luther King Jr.'s incredible achievements, his ability to tackle poverty in the African-American community was cut short by his tragic assassination. It was nearly 50 years ago now.
With so much progress since the days of MLK, overwhelming racial inequality in the economy, in money, is still the norm today.
So, our next question we want to ask: is it fair -- is it fair to expect President Obama to do more about it?
ROMANS: We have seen President Obama take strong stands for many causes -- immigration, gun control, and his support of gay marriage even led "Newsweek" to dub him the first gay president. But President Obama has done little to ease racial inequality when it comes to America's pocketbook.
The U.S. is the country where the unemployment for African-Americans has long, long been double the rate for whites.
In 2012, the median net worth of Americans was more than -- white Americans was more than $110,500. That's almost 18 times, 18 times the median net worth of African-Americans, which was just shy of $6,000, just about $6,000. That gap grew significantly in the wake of the financial crisis.
But since President Obama took office, he has mostly steered clear of these issues, rarely addressing topics like affirmative action, mass incarceration and racial profiling. That changed following the protests over George Zimmerman's acquittal in the shooting death of Trayvon Martin.
(BEGIN VIDEO CLIP)
OBAMA: Understand the challenges that exist for African-American boys. The poverty and dysfunction that we see in those communities can be traced to a very difficult history.
(END VIDEO CLIP)
ROMANS: Former "New York Times" columnist Bob Herbert is a distinguished senior fellow at Demos.
Bob, 95 percent of African-Americans voted to put President Obama in office in 2008, 93 percent voted to keep him there in 2012.
There is this question, this president has really steered clear of the color of money until recently.
BOB HERBERT, DEMOS: Right.
ROMANS: Do African-Americans, does the black middle class and the black electorate, do they want more from him on these issues?
HERBERT: Yes. You know, I've had extensive conversation with people across the country -- I'm working on a book. And if you talk to African-Americans privately, you will sense feelings of disappointment.
But you will very seldom see them expressed publicly because people are torn. On the one hand, they'd like to see the president do more. On the other hand, a lot of blacks are resentful of the way Obama has been treated by the Republicans, by sort of the racial tenor of the criticism of him and that sort of thing.
So, black people are sort of in a push-pull situation.
ROMANS: It's interesting, because you can say the same thing about the LGBT community and then the president sort of delivered for them. You could say the same thing about people who wanted to get out of the wars in Iraq and Afghanistan, wanted to close Gitmo, but they still support this president.
He's tried to be a president for all Americans, not a president for different factions. Even as he has turned and had policies tailored to specific groups, should he have policies tailored specifically to African-American youth? He mentioned young men, young boys -- African- American boys.
Does he need to come out and do something?
HERBERT: Even before you get to the policies, you have to address these issues. You have to talk about them. And you know, he is, obviously, the president of all Americans, but that means that if there is a problem over here with women, if there is a problem here with gays, if there's a problem with African-Americans, you have to address those problems honestly and, you know, I think vigorously.
You know, too often when it comes to African-Americans, that hasn't really happened. It is not -- it is not just with this president but I think that this president may even have been more reluctant than some other Democratic presidents who address issues related to blacks, I think, in Obama's case.
ROMANS: Why do think so?
HERBERT: I think that in Obama's case, he feels that it is harmful to him politically to address the race issue very often at all, that there will be --
ROMANS: (Inaudible) Bill Clinton.
HERBERT: -- that there will be pushback from the white community, that a certain percentage of whites, whatever it might be, will say, oh, hey, he's there to give everything for the blacks or something along those lines.
I think that's a mistake, by the way, but that's the calculus he's made.
ROMANS: When you talk about poverty, the president did talk about poverty, especially poverty for young black youth; look, 35 percent of blacks live in poverty in this country. You can compare that to 13 percent of whites.
Before this segment we posed the question: is it fair to ask the first black American president to do more for black Americans in their money? Is it fair to expect more from him on this?
HERBERT: You know, it's a question of what you mean by to expect more. What I would expect from Obama is not more nor less. What I would expect from him is to look at the issues as they are -- as they prevail right now and to address them, to address them forthrightly.
I don't think President Obama has.
ROMANS: All right. Bob Herbert, we'll talk about it again. Thank you. Nice to see you.
HERBERT: Yes, great.
ROMANS: All right. Coming up, the energy boom was supposed to put money in your wallet. Instead it's blowing out your car's tailpipe. It's escaping out the windows in your home. You've been running the AC and you're going to pay for it. I'm going to tell you why, next.
(COMMERCIAL BREAK) ROMANS: It was supposed to be Saudi America. We are producing a lot more oil and natural gas, but are you feeling it? The promise of thousands of new jobs and lower energy bills nowhere in sight. And this summer, driving the car, running the AC is getting more expensive. Gas prices have surged after dropping just a few weeks ago.
Take a look at this. From the July 4th holiday weekend until Monday, you got gas prices up 17 cents a gallon. Electricity prices are also rising.
Check out the change at the wholesale level in some of the country's biggest trading hubs. In Massachusetts, up 101 percent; in New York State, up 65 percent; Washington, Oregon, Illinois, Arizona, and California, all with huge gains.
Why? The Energy Information Administration says it's because of the rise in the price of natural gas; that's used to make electricity.
Luckily for some, energy producers buy natural gas in bulk years ahead of time, so you might not see those increases in your energy bills, at least not until maybe next year.
Now many areas got a big break from the sweltering heat this week, but you may have to keep that air conditioner on well into September. The National Weather Service predicts higher than expected temperatures across most of the country over the next three months. You can see where right there.
But let's go back to gas for just a minute. It's not just changes in demand that move prices for gas anymore. Some refineries here in the U.S. are having a variety of problems. Plus we're in hurricane season; oil prices are volatile. The conflicts in Syria and Egypt, those cause worries about the supply chain.
And big banks -- big banks may also be contributing. A Senate Banking Committee hearing this week discussed whether banks that own power plants, pipelines, and other physical commodities businesses pose problems for consumers.
(BEGIN VIDEO CLIP)
SEN. ELIZABETH WARREN, (D) MASSACHUSETTS: But I also don't think that most retirees realize that their pension or retirement savings are used to pave the way for big banks to be able to control an electric plant or an oil refinery.
(END VIDEO CLIP)
ROMANS: Tom Kloza is an expert on everything from the well head to the gas tank. He's also chief oil analyst at Gas Buddy.
Nice to see you, Tom. So big banks, tensions in the Middle East, demand, cash-strapped Americans, refinery problems, is there a simple way to explain why gas prices are rising when we are flush with oil and gas in this country?
TOM KLOZA, CHIEF OIL ANALYST, GAS BUDDY: Well, we're part of the world, and we do have the privilege numbers in terms of cheaper crude than the rest of the world, but there are a billion people elsewhere in developing countries that are moving into the middle class, let's say, in this generation.
So we're going to see some settlements of world oil prices. But relative to the rest of the world, we've got better prices for crude, we've got much cheaper prices for natural gas and we've got a little bit of a privileged continent atmosphere.
People don't notice it because they're paying about what they paid in the last three years for gasoline, but you look a generation ago, and it was, oh, a dollar or a $1.50 a gallon lower.
ROMANS: So it could be worse? Without all these new supplies of oil and energy, it could -- it would be worse?
KLOZA: It could be worse. And I think that we need to remove out of the equation that we're not going to go to $5 and $6 or anything like that.
ROMANS: We're not?
KLOZA: No, we're not. Only if we had some sort of major cataclysmic event like a major Mid-Eastern (sic) war. We've got plenty of refining. We've got plenty of domestic crude. We're producing more crude oil right now than we have since December of 1990, and we're going to go into the '80s in terms of matching production (inaudible).
ROMANS: Oh, yet we complain. We might be an entitled continent, but we complain. I mean, look, there was a commenter on a recent Gas Buddy blog that said that gas goes up like a rocket and down like a feather.
Do you think prices have peaked for this move?
KLOZA: I think they've peaked for this year. We got to $3.78 in February, which was sort of in anticipation of what might happen. They peaked unless we get events. And by events, I mean if we get a hurricane in the Gulf of Mexico, you can almost take whatever the category of the hurricane is and move it in some sort of exponential like cubit, and that will be how much gas will go up.
But without that and without Egyptian violence breaking out into the Suez Canal and elsewhere, I think we're pretty close to a top and I think we'll see much lower prices in the last 100 days of the year.
ROMANS: Yes. Well, I'm telling you, I'm so glad to turn my AC off. I mean, if it isn't put in the gas tank, it's going to paying my electric bill this summer.
KLOZA: Could be.
ROMANS: Nice to see you.
Here are the other stories that matter to your money this week. It's not all just about the gas tank. Give me 60 seconds on the clock. It's "Money Time".
ROMANS (voice-over): Good news for Apple. It sold 31.2 million iPhones last quarter. No one saw that coming. The bad news, profits sank and investors are still waiting for Apple's next big thing.
A new study finds parents are forking over less cash for their kids' college. Instead students rely more on scholarships and they're bunking up with Mom and Dad.
One kid who doesn't need a college fund, Kate and William's royal baby boy. Estimates for the cost of raising the prince at a million bucks, and that's with a rent-free palace.
If the royal baby wants a Taco Bell kids' meal up, he's out of luck. That's because Taco Bell won't be selling meals with toys anymore. Taco Bell is the first national chain to dump the kiddie menu.
You might also say goodbye to mail at your door. The cash-strapped Post Office pushing to cluster boxes instead of door-to-door delivery. You can Google this next story. Google accounts for 25 percent of all web traffic in North America. That's bigger than Facebook, Twitter and Netflix combined.
And Netflix could use some more of that traffic. Bringing back "Arrested Development" helped bring in lots of new viewers, but not enough to keep investors happy.
(END VIDEO CLIP)
ROMANS: Facebook finally delivers. The company had its best day ever on Thursday, rallying 30 percent after making big inroads in mobile advertising. The stock is still 10 percent below the IPO price of 38 bucks, but several Wall Street firms are now raising their target price above that threshold.
Then there's the housing market. Home prices are up more than 12 percent from a year ago. This is according to S&P Case Shiller. This market is no old bull; it is a young pup. Housing website Zillow predicts home prices will rise another 5 percent over the next year nationwide and double digits in some markets.
So where should you put your money now?
Before we ask Wall Street, let's hear from Main Street.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: If I had some cash to burn, I would most likely buy real estate.
UNIDENTIFIED FEMALE: I would probably buy stocks.
UNIDENTIFIED FEMALE: I think the stock market on the whole has always done better.
UNIDENTIFIED MALE: I feel like the housing market is going to eventually go up.
UNIDENTIFIED MALE: But if I'm looking to make a real return on my investment, I'm going to buy some stock.
UNIDENTIFIED FEMALE: If it's not under my mattress, it would probably be in real estate.
(END VIDEO CLIP)
ROMANS: If it's not under my mattress. There is always somebody putting it in the mattress.
Let's ask the experts.
Keith McCullough is CEO of Hedgeye Risk Management; Michelle Meyer is the senior U.S. economist at Bank of America.
Nice to see you guys. Wow, Keith, if we talk hot market, look at Facebook. And now the targets are getting bumped up.
Is this "fool me once" with all the hype here or are you buying in?
KEITH MCCULLOUGH, CEO, HEDGEYE RISK MANAGEMENT: Yes, I definitely wouldn't buy Facebook today. What I'd actually do is if you own Facebook, I'd take it, I'd sell it and I'd buy a house with it, Christine.
ROMANS: You would!
MCCULLOUGH: Yes, I think that's the right call. People feel -- and should feel -- comfortable in housing in particular. Your supply is tight. Demand from a mortgage -- think about your mortgage payment as a percentage of your income. It's at a historical low, so that's affordable. And prices, as you pointed out multiple times, are rising, which is a great time to buy a house.
ROMANS: Michelle, lots of debt on housing this week. Existing home sales, Michelle, slipped in June, but new home sales are at a five- year high. You look at some of this housing data, do you agree that, you know, with mortgage rates falling for the second straight week, that the read on the housing market is still quite bullish?
MICHELLE MEYER, SENIOR U.S. ECONOMIST, BANK OF AMERICA: I think it is. And I think the fundamentals are very supportive of home prices continuing to rise.
We have very low inventory; we have a lot of pent-up demand coming from household formation and also coming from people that were sitting on the sidelines, waiting to feel more comfortable about the idea that housing is once again an appreciating asset.
So I think we are seeing a continued improvement housing demand. It could be volatile; it always is volatile. The data is very noisy, so we have to be careful of reading too much into one month.
ROMANS: (Inaudible) it's a gain for the 1 percent, this real estate game at the moment, because when you look at first-time home buyers, they're 30 percent of home sales, and first-time home buyers tell their realtors -- the NRA reporting that they can't find the house they want in their price point; they can't find something they can afford. That's probably because of an inventory issue.
And also they're still having trouble getting mortgages. You look at some of these other markets, 57 percent of the purchases in like Florida are cash purchases; 80 percent of purchases in the last year in Vermont are cash purchases. Doesn't seem like it's a gain for the masses. It still seems like the people who have money are making money in real estate.
MEYER: Well, it still in many ways is a distorted market. We came off of the biggest housing recession since the Great Depression. We've had a lot of distressed inventory and we've had extraordinarily low production, extraordinarily low construction.
So I think, yes, in terms of clearing out the distressed inventory, in terms of moving the existing property, it's been driven by that higher end individual.
Once we start to see new construction pick up, which is more focused towards that entry-level homebuyer, then I think we begin to see the resemblance of a more normal housing market. We're not in a normal market. This is the beginning of a turn which ultimately will be towards a more stable market.
Keith, you said earlier take that Facebook stock and buy a house with it. If you ask the question stocks or real estate, is the answer both?
MCCULLOUGH: Yes, I think it's both. But again, it's all about the duration of your holding, so I think you had a lot of normal people give you that explicit answer. And I think on stocks you got to keep buying pullbacks, because what the market is really doing, and Facebook is a shining example of this, is that the market is saying, hey, look, we like growth.
Even though the rest of the world is trying to scare the hell out of you every day, fear is for sale, bonds are for sale, so you want to sell those, and you want to buy stocks on pullbacks, and then you want to take your gains and you want to buy longer duration assets like a home.
Again, I agree with a lot of what Michelle had to say on that. Affordability and a lot of metrics is right where you want it to be. Now you just need that type of supply to come online.
ROMANS: All right. We keep hearing, if you have a house, buy another. (Inaudible) big hedge fund guy last week, if you have one house, buy another. That's the best place for anybody to make money these days.
Michelle, thank you so much.
Keith, nice to see both of you.
Coming up, sex, lies and money. From Anthony Weiner to Wall Street, these days it's hard to find anyone to trust.
ROMANS: Sex, lies and money, from your wallet to your vote, it is hard to find someone to trust this summer. I'm Christine Romans and this is YOUR MONEY. (BEGIN VIDEO CLIP)
ROMANS (voice-over): From the political field to the playing field, it seems like no one is leveling with the American public these days.
ANTHONY WEINER (D), NEW YORK CITY MAYORAL CANDIDATE: Citizens are more interested in the challenge they face in their lives than anything that I have done embarrassing in my past.
ROMANS: Danger: Anthony Weiner's bad behavior didn't end after his resignation, but will it end his political career? Both Weiner and Eliot Spitzer went from rising political stars to tabloid staples. Now they both want another shot.
ELIOT SPITZER (D), FORMER NEW YORK GOVERNOR: The public is going to give me a fair hearing.
ROMANS: From the political field to the playing field, Yankees third baseman Alex Rodriguez has admitted to doping in the past. Now the highest paid player in all of Major League Baseball is facing a scandal that threatens to end his career -- cheating.
It's why Ryan Braun (ph) was just suspended without pay for the rest of his season. It's why Lance Armstrong was stripped of his seven Tour de France titles. His response this week to a scoop from the Justice Department over his former sponsorship by the Postal Service? Armstrong says they should have known he was doping.
LANCE ARMSTRONG, PROFESSIONAL CYCLIST: The reaction and the fallout was more than I expected.
ROMANS (voice-over): And more lies alleged on Wall Street.
The government is going after one of Wall Street's big dogs, indicting billionaire Steven Cohen's hedge fund, SAC Capital, charging it with insider trading, wire fraud, just the latest in a summer of sex, lies and money.
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ROMANS: Joining me now are CNN's political power couple, Margaret Hoover, John Avlon, also the executive editor of "The Daily Beast."
OK, guys, we have seen Anthony Weiner's wife, Huma Abedin, stand by her man. But New York Democrats, I don't think they're going to be so loyal.
After this week's scandal, Weiner fell from the top spot in the race for mayor, his favorable rating plunged 22 percentage points from last month.
Margaret, OK, it's one thing to allow redemption and somebody gets a second change.
A third chance, is he going to get a third chance? MARGARET HOOVER, CNN CONTRIBUTOR: A third chance may be too far even for New York voters. When you polled 73 percent of New York Democrats -- by the way, this is only a Democratic primary we're talking about, and he only has to be in the top two. Now he's in a statistical dead heat for the number two spot with the two others climbing up.
And 73 percent of Democrats who are going to vote in the primary said Huma Abedin's testimony, character witness for her husband, made no difference to them at all. So a third chance may not actually happen.
ROMANS: I mean, is this what voters -- I mean, what do you know that he says is true or false or --
JOHN AVLON, CNN CONTRIBUTOR: Yes, I know. The guy is clearly a narcissist and, we have to assume, a pathological liar. He lied to his family about something that he had already been punished very publicly for. And you can take the medical route and say, oh, it's an addiction. Well, I don't give a damn.
You deal with that in your private life, not on the New York voters' dime, trying to run for mayor of New York.
But the larger problem is this massive deficit of trust that we're seeing actually increase over the last couple of decades. And part of problem is people in positions of authority aren't trying to hold themselves to a higher standard anymore. It doesn't seem like they are.
Back people who aspired to be Abe Lincoln, or even that idea of noble public service that the Kennedys tried to embody, however flawed they might be, we've seen a steady slide in personal behavior. These people are so arrogant, they're so narcissistic, they think they can get away with anything, and that sends a message that further defines deviancy down.
ROMANS: There's also winning. People want to win, whether it's in politics or it's in sports. The government now is suing Lance Armstrong, claiming that he violated his contract with his team sponsor, the U.S. Postal Service.
But OK, I want you guys (inaudible) respond to this.
Lance Armstrong's lawyer offers an eye-popping defense this week to get this case dismissed. I want to you read this quote.
"The government wanted a winner and all the publicity, exposure and acclaim that goes along with being his sponsor. It got exactly what it bargained for."
AVLON: This is the dark side of the American dream, that will to win that we all admire, working harder, being more successful. Folks, especially if they're narcissists, feel like they can cut corners and they'll get that competitive edge and they will be rewarded for it in the near run. So then the sin becomes getting caught, not the actual cheating. ROMANS: This is like a summer of lies. I'm just telling you, it's just the summer of lies. I mean, every newspaper, the front page, every blog, everything is about how we've been lied to, who is being cheated, who is being punished, who is trying to dodge punishment.
I mean, even when you look in my wheelhouse, Wall Street, we're talking about fines for -- you know, we're talking about SEC charges, we're talking about fines for Halliburton for --
AVLON: Destroying evidence.
ROMANS: -- we're talking about all kinds of different things. No matter --
HOOVER: The good news is they're getting caught, right?
AVLON: Your brain is hurting from all the lying. Yes.
HOOVER: The good news is they're getting caught, right? And there is moral outrage about it and we're having this conversation. Look, this isn't OK. This isn't how we play. We play fair, we have laws, we have rules and we're enforcing them because it matters.
AVLON: But let's be completely honest. A lot of corporations, a lot of campaigns feel that they will break laws and then they'll pay a fine after the fact, once they've survived a court case.
ROMANS: (Inaudible) doing business, cost of doing business.
AVLON: The cost of doing business, and you know what, the comparative fine, $200,000 in the case of Halliburton outside the other payments they're going to have to make to Fish and Wildlife, that is a slap on the wrist for a multimillion-dollar corporation. So therefore all of a sudden it is a rational bet to make.
ROMANS: It's winning, winning, winning at all costs, and adulation from shareholders or from bosses or from viewers or from --
ROMANS: -- sports, it's all about the bottom line.
AVLON: But guess what. You know, night follows day, consequences will kick in eventually.
ROMANS: I hope there's not so much lying next summer. The summer of lies!
Thanks, you guys. Nice to see you.
All right, coming up, a rare glimpse at modern life -- if you call it modern -- inside super secretive North Korea.
(BEGIN VIDEO CLIP) IVAN WATSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: These kids, we've talked to some of them. They love things that most children love -- cartoons, rollerblading. But when you ask them what they want to be when they grow up, many of them say they want to be soldiers to protect their country.
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ROMANS: Our Ivan Watson with remarkable access to North Korea's economy, right after this.
ROMANS: Kim Kardashian wears them, so does Beyonce and "Modern Family's" Jessie Tyler Ferguson. What am I talking about, what do they all wear? Spanx. Those celebrity endorsements helped the company's founder Sara Blakely build a $1 billion clothing empire, all without spending a dime on conventional advertising, and all by selling something you're never even going to see.
Zain Asher sat down with her to find out how she did it.
ZAIN ASHER, CNN BUSINESS CORRESPONDENT: The simple answer, Christine, is through word of mouth. Every man out there who lives with a woman knows exactly what Spanx are. You put them on, they suck you in, they give you that desired shape. A very simple idea, but the woman who came up with this idea went from selling fax machines door to door to making $1 billion in under 10 years.
Take a listen.
ASHER (voice-over): Sara Blakely admits she's not your typical CEO. She's never taken a business course, nor did she have any experience in her field. But she's a grade A student when it comes to not taking no for an answer.
SARA BLAKELY, FOUNDER AND CEO, SPANX: I got laughed at a lot the whole way, but I learned that you had to keep going.
ASHER (voice-over): Blakely is the world's youngest self-made female billionaire, thanks to Spanx, tight-fitting shapewear for women, an idea that came to her while she was getting dressed for a party.
BLAKELY: There was a void for undergarments for women. So Spanx came out and created a completely invisible, lightweight shaper that became second skin.
UNIDENTIFIED FEMALE: They really give you a nice shape. They will suck you in without being too tight or uncomfortable. I'm getting married and I need to wear something that holds in all the goods so that nobody can see everything that only your husband should be seeing.
ASHER (voice-over): Since launching, she sold 10 million pairs all over the world without spending a dime on advertising.
UNIDENTIFIED FEMALE: If a girlfriend tells you at a cocktail party or at -- sitting in a restaurant about a product, you tend to become much more loyal and interested in it, I believe, than if somebody showed you a glossy picture in a magazine.
ASHER (voice-over): Especially when that girlfriend is Oprah.
OPRAH WINFREY, TALK SHOW HOST: I've given up panties. I wear Spanx. That's more information than y'all need to know.
ASHER (voice-over): One mention from Oprah and 20,000 pairs of Spanx were sold in less than a day.
BLAKELY: You can imagine, it's like winning the lottery as an entrepreneur.
ASHER (voice-over): But Blakely's road to success didn't start out easy. After failing to make the cut for law school, she settled on a job selling fax machines.
BLAKELY: I always say failure in many cases is life's way of nudging you and letting you know you're off course. And if I hadn't failed that LSAT, Spanx would not exist.
ASHER (voice-over): After patenting her idea, she begged factories to start making it. Although they refused, Blakely refused to stop trying.
BLAKELY: When I grew up, my dad used to encourage my brother and me to fail. So I would come home from school and sit at the dinner table and my dad would say, "Kids, what did you fail at this week?"
And if I didn't have something to tell him, he would be disappointed. So if we weren't failing enough in our home, it meant we weren't trying new things.
ASHER: And the takeaway I got from that interview is that if you have an idea for a product, it doesn't have to necessarily be the most original, no one's ever thought of idea. It can actually be the simple idea. She found something that every woman in America would have a need for, but I think what she did differently was execution, the way she went about it.
And actually, I'm going to tell you this, Christine. It's like she went -- her product first launched in the big department stores, she would literally go to those department stores, stand by the checkout lines and tell people why they should buy her product.
ASHER: How many entrepreneurs would do that? I mean, maybe a lot, but I --
ROMANS: She had a good idea, but she also had the sales acumen. I think it's so interesting, you said she was selling fax machines door to door.
Zain, so nice to see you. Thanks for bringing that to us.
Les Gold from "Hardcore Pawn" is back. We just posted a fresh video on our blog, featuring more of my adventure with the star of truTV's "Hardcore Pawn." We hit the streets together of New York, and I got a little lesson in negotiating.
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UNIDENTIFIED MALE: They're silkscreened by a friend of ours from Brooklyn, so it's all American made for the (inaudible).
LES GOLD, "HARDCORE PAWN": Wow, $20. How much would you take for three of them?
UNIDENTIFIED MALE: Sixty.
GOLD: No deal? There's no deal? (Inaudible) cash?
UNIDENTIFIED MALE: No deals on the T-shirts.
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ROMANS: Hey, we bought those T-shirts. I have those T-shirts in my hand. And we did not pay $60 for those. To see how low Les got him to go and how you can learn how to do it yourself, go to our blog at CNN.com/yourmoney.
"CNN NEWSROOM" starts right now.