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Your Money

Second recession, Renaming Health Care Reform, Briefonomics

Aired August 30, 2009 - 15:00   ET



CHRISTINE ROMANS, CNN ANCHOR (voice-over): Is this finally the turning point? An economy on the mend, but at what cost? Trillions in deficit suggest a desperate attempt to make sure the best days of this country are not behind it. With the red ink, green arrows on Wall Street, if you've got the money and the nerves, what to buy in the stock market.

And it's the end of the road for clunkers, but Uncle Sam still has more free money just sitting in your home. Tax breaks, if you know where to look. Get ready, it's time to talk YOUR MONEY.


Welcome to YOUR MONEY. I'm Christine Romans. Ali Velshi has the week off.

Why are so many people ready to call the turn in this economy? The evidence just this week includes consumer confidence, much stronger than expected. As Americans save more and cut their debt, they're feeling better about the future. And purchases of big ticket items rebounded, led by aircraft, up 4.9 percent in July, the biggest gain in two years.

And more evidence of bottoming in housing, new home sales rose 9.6 percent in July, the biggest jump since the collapse last fall. It's just one part of the housing market but it shows builders are finding buyers for new homes. And because interest rates are still relatively low, mortgage applications rose 7.5 percent this week.

So is it time to call the turn? The stock market certainly has. Stocks are at highs for the year, but caution, some like Nouriel Roubini, the economist who famously predicted this financial collapse, they're warning of more trouble to come in the form of a second recession. So, let's see if evidence of the economy on the mend is a golden opportunity or fool's gold. Dan Gross, the senior editor at "Newsweek." Peter Schiff is president of Euro Pacific Capital.

Dan, let me start with you. Is it real, the turn, do you think that it's real this time and why?

DAN GROSS, EURO PACIFIC CAPITAL: I think so. You know, we did a cover story in "Newsweek" a few weeks ago saying the recession is over, but good luck surviving the recovery. I think since then the evidence has grown stronger that the economic trends are moving in the right direction. You know, the severity of the decline in the fourth quarter and the first quarter when the economy was shrinking at a six percent annual rate caused so many people to pull back so much, so many companies to cut so much, we're now building off that lower base, so we're still way below where we were a year ago, but we're above where we are in April, May and June in many sectors.

ROMANS: So, you're in the fool's gold category, here. You think that thinking the economy is going to recover here , it's just not realistic?

PETER SCHIFF, EURO PACIFIC CAPITAL: No, it's not. I think maybe the "Newsweek" cover is a good contrary indicator. I just saw some of the graphics that you were showing, Americans are spending more money again, buying more houses, cars, big ticket appliances, but where are we getting the money? We're borrowing it, we're going deeper into debt to buy more stuff that we can't afford. We are making the problems worse. We're not solving them.

ROMANS: Let me ask you, Dan, about the second half of the year, what it looks like for the home seller, the homebuyer, the person looking for a job. You mentioned that the "Newsweek" cover was very clear when it said, you know, have a good time in the recovery because it's not going to feel that great. We're still going to have an issue with unemployment, aren't we? We're still going to have an issue with consumers who are chastened and if the credit runs out, they simply don't have money to spend.

GROSS: Absolutely. Look, with unemployment, remember, our last recession ended in November, 2001 and we continued to lose payroll jobs through the middle of 2003. Employers are very tough about not wanting to add people, so I think unemployment is not going to look that great.

For home sellers and home buyers, obviously there's this tax credit for buyers. The volume is picking up, but the reason it's picking up is because prices have really fallen a lot so we have more activity at a lower volume. So the cost of buying a house now is much lower than it was, requires you to take on substantially less debt than it did a year ago, two years ago. So, the inventory if it is coming down for homes, that's the good news. The bad news for sellers is that they'll have a difficult time getting what they paid for that house in '04, '05, '06.

ROMANS: You think this bubble is still popping, though, you think that we have a credit-fueled economy that is still popping.

SCHIFF: Sure, look, the air is still coming out, there's a lot more air left. The government is trying to reflat it. It can't work and they should be doing, if you wanted to devise a plan to destroy our economy, all you'd have to do is adopt Ben Bernanke's monetary policy.

ROMANS: But, they say they're rescuing our economy. They say that we have to do this to rescue our economy and building it for the future. You say it's a recipe for destruction. SCHIFF: No, that's exactly what we did in 2001 and 2002, we rescued the economy with one percent interest rates and expanded the budget deficit and we rescued it by creating a housing bubble. We set the stage for the disaster of 2008, and I can assure you that the problems we are in the process of creating right now are far worse than the ones that we think we're solving, and the disaster that awaits and it's not going to be five or six years from now, it might be one or two years from now, is going to be much worse than anything we experienced in 2008.

ROMANS: And you talk about this disaster that looms. What does that disaster look like to you?

SCHIFF: Well it's going to look like a collapsing dollar and when the dollar plunges in value it's going to send prices for everything Americans buy through the roof, especially for the price of things like food and energy, it's going to destroy the value of everybody's savings, it's going to destroy the value of everybody's wages, and it's going to wreak economic havoc in this country and, you know, what we've seen in 2008, it is a Sunday school picnic compared to the disaster the politicians are now creating.

ROMANS: You know, Dan, Robert Reich, on his blog, the former Labor secretary, on his blog, a liberal, earlier this week talked about the concerns about the federal budget deficit numbers and said the only thing shock being $1.6 trillion federal budget deficit for this year is it's too small. The only thing alarming about it is it's too small. He said we have to think big to try to get this economy out. That seems to be, I mean, he's to the left of this administration, but that seems to be the calculus here, spending big now to fix the economy and prevent the kinds of things that Peter's talking about.

GROSS: Absolutely. Look, they're in the school that says the stimulus was too small. I would say, though, we have all of these apocalyptic talks of the size of the deficits coming forward. These things have a way of not coming true. Remember back in 2000, the were forecasting a $5 trillion surplus in the early '90s, there was talk of those massive budget deficits by the end of the decade, it was balanced. If you look at some of the policies, I would say where I think Peter may be wrong is that the difference now is that we have, I think, much more competent policymakers.

SCHIFF: Oh, come on.

GROSS: We had, in addition to bad executive management throughout this past decade, really bad, policy execution at the Federal Reserve, at the SEC, at all the regulatory -- I personally have more faith in what's going on.

SCHIFF: I don't know what you base that faith on.

ROMANS: Let him finish. Let him finish.

GROSS: I'm sorry?

SCHIFF: I don't know what you base it on.

GROSS: Well, experience, for one. But let me give just one example. Remember a year ago, when we passed the TARP, it was $700 billion. We thought the cost of that was going to be $700 billion. Well, of course, nothing like that amount has been appropriated and in fact if you look at the program where they were putting money into the banks, they took $200 billion, they bought preferred shares, would pay a five percent interest rate, so far, we are making money, the taxpayers are making money on that.

SCHIFF: We're not making money.

GROSS: Sure we are.

SHIFF: Dan, no, we're only making money because the government handed out free money to Wall Street and they gambled with it and they're able to pay it back, but they've created bigger, bigger problems, as a result.

ROMANS: All right.

SCHIFF: You know, you're talking about, we need to spend our way out of this problem. We spent our way into this problem. We're not going to get out of it by more spending, more government spending, more borrowing. We have to save our way out of this problem. We have to produce our way out of this problem. We have to deregulate our way out of this problem. We have to shrink government to get out of this problem. Everything that we have done has made the problem worse and if you can't see that, you know, I...

ROMANS: All right, and we have to leave it there, but that's a fascinating discussion. Thank you both for dropping by. Dan Gross, senior editor of "Newsweek," Peter Schiff, president of Euro Pacific Capital. Gentlemen, thank you for a spirited discussion that will continue another day, I'm sure.

Stock advice for the brave and the solvent who want to buy something.

Plus men, listen up. How old is your underwear? You heard me right, how old is your underwear? The answer to that question may hold the key to the nation's financial future. Don't worry, we'll explain, next.


ROMANS: Welcome back to YOUR MONEY. time now for the ticker. Every week we take you beyond the headlines with some of our special friends, Roland Martin, CNN political contributor is here, special friends.


ROMANS: And Richard Quest, host of CNN's QUEST MEANS BUSINESS. He's traveled across the pond from London to be with us today. We're very pleased. All right, the late Senator Kennedy's passing this week comes at a crucial time for health care reform, it's an issue that may have meant more to him than any other issue in 47 years in the Senate.


SEN TED KENNEDY (D), MASSACHUSETTS: This is the course of my life, new hope that we will break the old gridlock and guarantee that every American, north, south, east, west, young, old, will have decent quality health care as a fundamental right and not a privilege.



ROMANS: Senator Robert Byrd has even suggested renaming the health care reform after Senator Kennedy. It's interesting, though, some of the senators, Republican friends have said, now, now, now, now you don't rush through historic legislation just because you really liked somebody.

RICHARD QUEST, CNN INTERNATIONAL ANCHOR: You take the move when you can and do what you can as quickly as you can, and if there is a window of opportunity, this isn't, I'm not coming down one side of the argument, I'm giving you the rail politic of it, if there is a moment, an opportunity you ram it through because it may not come again.

ROMANS: That's why they're seizing this opportunity.

MARTIN: Yeah, I agree. Obviously, Republicans are going to be highly critical of any effort to push through health care legislation. But look, we already see what's happening. You still have to have an actual bill. Everybody keeps talking about the health care bill, there is no one bill.

ROMANS: Oh, there's thousands of pages. Thousands of pages...

MARTIN: Thousands of pages of multiple bills. You know, the House version, but you have four or five different things happening around the Senate. So absolutely, you seize the moment. But the reality is the Democrats still have the votes in the House and the Senate, the president must bring together those progressive and those blue dog Democrats to make it happen.

QUEST: The fascinating part as an outsider looking in, in this debate, is you have the best health care in the world and amongst the worst health care provision in the world. And that disconnect can only be breached by spending money, I'm afraid.

MARTIN: And also, when we talk about health care in this country, and folks say it's the best in the country, it's like yeah, it's the best if you have a job. It's the best if your company actually covers you. But, there are a lot of people who have jobs, who are making $6, $7 $8 an hour or so who don't have health care. And so look, that's a reality.

ROMANS: About Teddy Kennedy, Senator Kennedy, and all the things -- you know, I was just trying to make a list of things we can sort of credit to him, you know, for example the ramps in the sidewalks where, for disabled people to be able to move a wheelchair and in your -- where you work. Title IX, for example, minimum wage, how many stories I do in the past few years about the senator and his passionate feeling about working people and minimum wage? Three million people became American citizens...

MARTIN: But here's what's interesting.

ROMANS: I mean, this is the guy who has consistently believed his beliefs, pushed the legislation that he wanted to push and was consistent on that.

MARTIN: Now, big business talks about the minimum wage but the reality is, this is also the guy who drove deregulation of the trucking industry and the airlines. The reason you have competitive pricing right now is because he said let's break up this sort of price setting we've been setting and in fact, airline practices have fallen, just (INAUDIBLE) some 45 percent since that was pushed through. You can credit him for making it happen, Jimmy Carter signed it.

QUEST: The truth of the matter is in any legislature, whether it's the Senate, the House of Commons, it doesn't matter, in any parliament, frankly, a large percentage of the members there could stay at home, they do so little.

MARTIN: Right.

QUEST: The reality is only a very small number of the true giants and they are the ones that you look back to, the rest come along for the free ride and the expenses.

MARTIN: I was reading a story about this whole deregulation thing. The interesting thing is, he did not have any true power over the actual bill. Cannon, who was from Nevada, he actually had the power, but he used the press and his subcommittee to drive the agenda.

ROMANS: Interesting, right.

QUEST: He also at numerous times chose committee assignments because he could see the way the political...

MARTIN: There you go.

QUEST: Notice he didn't -- wasn't big on foreign affairs except...

MARTIN: There you go.

QUEST: By and large that was not his forte, but he would choose labor subcommittee, he would choose (INAUDIBLE), he'd choose these areas where he knew he would have a fundamental effect on the economy on the lives of people.

ROMANS: And the working man and woman in America.

MARTIN: Absolutely. ROMANS: All right, another person we talked about giants, President Obama tapped Ben Bernanke for a second four-year term running the Central Bank. The president credited Ben Bernanke with moving aggressively and creatively to avert economic disaster. But gentlemen, I pulled up some sound from my old file. Bernanke was also slow to recognize the scope of the subprime mortgage crisis, May 17, 2007.


BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: We do not expect significant spillovers from the subprime market to the rest of the economy, or to the financial system.


ROMANS: Oops. The depression expert credited with averting a second depression didn't see it coming and no one really saw it coming, but this is a guy who was 2007, in May, just like everyone else saying subprime mortgages, they're not going to be a problem for housing or for the rest of the economy. Do you think some sound bites like that are going to come up in this confirmation hearing?

QUEST: And if they do, do you really worry what he might have said back then? The house was burning, he put out the fire, how he has to rebuild.

ROMANS: But he was in a burning house saying this house isn't on fire.

MARTIN: All members of the Senate were in the exact same house with him.

ROMANS: Yeah, that's true.

MARTIN: And Alan Greenspan was in the house and the Wall Street folks were in the house. If you want to put people in the House, trust me the new Cowboys stadium could not hold all the people who were in his burning house.

QUEST: And the person who lent the money on the house was also involved. The fascinating thing about...

ROMANS: Is he the right choice? Is he the right choice?

QUEST: Well, you know...

ROMANS: You can't switch a horse mid stream, I mean, you got...

MARTIN: This will be the absolute wrong time to make a switch. You have some kind of confidence in Wall Street. You don't want all of a sudden just royal the markets like crazy.

QUEST: But, the fascinating part about this, which I absolutely, it's just deliciously ironic, is he's got to spend the next four to five years undoing what he's just done in the last two or three years. ROMANS: That's right. Oh, yeah, and I think the exit strategy is even more perilous than the emergency measure.

QUEST: Because, at the end of the day the strategy to get everybody out of the mess was just throw a wall of money at it, just throw money -- print, print, print and print some more. But getting out of it without either a double dip or inflation.

ROMANS: All right, speaking of Alan Greenspan, Alan Greenspan had a little bit of an economic indicator he liked to watch, sales of men's underwear are up in the first half of 2009 and according to Bernanke's predecessor, Mr. Greenspan, that means the economy may be headed for better days. We found this in "Women's Wear Daily." Greenspan believes that sales of men's underwear could accurately predict swings in consumer behavior.

All right, briefonomics, the Greenspan theory of briefonomics, that when men's underwear sales are up, it's somehow good for the economy? I guess men don't change their underwear very often, when they do it means they're optimistic?

QUEST: No, no, you said don't change their underwear?

ROMANS: I'm sorry, don't buy new...

QUEST: It's not the same.


MARTIN: Big difference!

QUEST: And we'll leave that one. Look, it's a wonderful economic indicator. There are a dozen of them out there, everything from candy and cookies to underpants. The best quote was, when you want to feel a little bit special, you can go and buy some new smalls.

MARTIN: Look, I prefer to watch Victoria's Secret, myself, so I'm not looking at men's underwear. That's the window I'm looking at. Alan Greenspan, if that's your thing looking at men's underwear, hey, have at it, but that's not mine, baby.

QUEST: Thank god, we never got into the discussion of whether Alan Greenspan was a boxers or a briefs, because frankly that would have put me off...

ROMANS: After a couple of years we're looking for any economic indicator we can that can show...

QUEST: Not Alan Greenspan's boxers, please.

MARTIN: Lace, baby, lace! I'm sorry.


MARTIN: Not what I'm wearing, but I'd rather see it.


ROMANS: All right, listen. We got to abandon ship here or we're all going to be sent up to H.R. and it's going to happen fast. All right, next, the stock market's on an upswing, someone out there is making a profit. I don't know if it's any of us, but is there a way for to you get your share? We'll look at what stocks you could be buying if you're solvent and brave, right now.

MARTIN: Buy some Hanes!


ROMANS: Are you playing offense or defense with your money? You have every right to be nervous, your stock investments were decimated, they're still down a third from where they were before the recession, but there's also been the rally of a lifetime from the 12-year lows in March, stocks are up more than 50 percent, 50 percent. Should you be buying right now? And if you are, what? We asked our good friend and money guru Ryan Mack to drop by and give us his advice. He's the president of Optimum Capital Management.

Ryan, a lot of people are really nervous right here, but watching they're watching these returns, they're watching green arrows in the stock market and they're saying wait a second, are you tell me I got killed in the market blood bath and now I'm missing this opportunity? What should people be thinking right now?

RYAN MACK, OPTIMUM CAPITAL MGMT: Well, the major thing is, have a strategy and stick to it, the same thing I said I'll say today at 9,600, the same thing I've been saying this 6,600, is that you want to make sure you have the dollar cost investment strategy before you invest in the market, do you have your (INAUDIBLE) living expenses, do you have your budget, is your credit improved, do you have your estate plan in place, your insurance in place, then you can have a successful investment strategy that you can endure for the long run and keep your money in the market and let your money work for you in the market responsibly.

ROMANS: All right, you've got a mutual fund here, right? It's actually called the Royce Special Equity Investment.

MACK: Yes.

ROMANS: Do you buy it now?

MACK: I love it. I love it right now. Charlie Dreyfuss was a domestic fund manager of the year in 2008. He is very keen in terms of his strategy and analyzing balance sheets. He spends most of his time with the rest of his staff going over these statements, it's a small cap fund. They have 25 percent of their investments now in cash, which means that you're going to get a limited amount of upside, because they take a lot of that risk off the table, but you're also going have shelter downside risk. Small caps coming out of the recessions a lot of times some of the most successful companies come out of the recessions. ROMANS: You have something called an ETF and Exchange Traded Fund, it says SPDR Gold Shares. You like SPDRs here, you like the gold shares here. Why?

MACK: Yes.

ROMANS: This is the hedge again that Ben Bernanke can't do the job and get it done right.

MACK: Exactly, what Ben Bernanke did in his first term, he I going to have to unravel in the second term. And just in case he doesn't do it in the most efficient way you're going to have to hedge against inflation, because we're going to see some inflation. I don't think this should be a core holding.

ROMANS: This is a hedge against something going wrong and we have a big inflation.

MACK: Ten to 15 percent exposure in your portfolio should be fine.

ROMANS: All right, health care select special sector SPDR, the SLV. This is, you think, a play health care reform.

MACK: Yeah, well, if we don't get the public option then health care companies are going to actually -- they're going to like that decreased competition and this could be -- you're going to see the health care companies start to profit from this. People are still going to be buying pharmaceuticals, they have two-thirds of their holdings in pharmaceutical companies and even if we get the public option it's a broad-based defense mechanism against the equity portfolio as the health care segment does not typically move with the rest of the broad market.

ROMANS: All right, if you have $1,000, maybe you're got $5,000 that you want to put in the stock market, you want to buy stock. You say, you could buy McDonald's.

MACK: Look, McDonalds, if you just drive down the streets looking at McDonalds, they're refurbishing, they're rebranding their image, they look great, they're becoming a fierce competitor even to Starbucks, even, because they had the release of their coffee line, so I mean, not to mention they own 45 percent of their land and 75 percent of their buildings. They're franchise and their rent payments are always very stable, they're kicking out 3.5 percent dividend yield. You're not going to get the volatility of the rest of the markets, it's a great long-term holding for the conservative investor.

ROMANS: All right, I say anybody who has a few bucks to figure out how to invest it, that's a good problem because a lot don't. But, we asked Ryan to come up with things for you to buy. And thanks so much for dropping by. Ryan Mack from Capital Management.

Ryan's going to stick around, actually. You know, you get what you pay for, so we're told. "Ticker" will take a look at whether cheaper is actually better when it comes to your health care. (COMMERCIAL BREAK)

ROMANS: So many stories this week. Let's get back to the "Ticker" with Ryan Mack of Optimum Capital management and the one and only Richard Quest, the host of CNNI's QUEST MEANS BUSINESS.

All right, here's where we begin, the U.S. ranks 37th on the United Nation's list of the world's best health care system, 37th. Former with "Washington Post" correspondent T.R. Reeve looked more closely at the health care systems of those countries that outrank us. What he found was that unlike other nations, we combine bits and pieces of various models from other countries. Should we commit to one model and do it well and if so, which countries would be best?

Richard Quest who has gone to the doctors on every continent I'm sure, what do you think?

QUEST: I think the reality is that the health care debate in every country is just about impossible. Forget whether or not the U.S. system is the best or the U.K. or the German or the Australian or the Canadian. They're all variations on a theme, but nobody is happy with their health care providing and the way it's paid for. And to put it another way, that article you're referring to was best summed up by the fundamental tenet, is there a universal right to health care and the moment you've answered that yes or no your options then become clearer.

MACK: And I have to say terms of Kennedy, his legacy, I hope that we really understand what he stood for. You know, it was a right, not a privilege and we don't want to reduce Kennedy's name to a name on a T-shirt. We want to uphold his legacy to make sure that we move forward to something that is -- no matter what you what say, this is a problem that needs to be fixed. Thirty percent of everyone, of those earning between $30,000 and $75,000 a year are having problems paying for the health care that they have coverage now. These costs are going unbelievable.

QUEST: The amount of nonsense that I have heard about the British health care system, the National Health Service, the NHS is what it's call. I mean, pull the plug on grandma, death panels, heard the lot. Let me tell you one little thing.


QUEST: Right and left of politics in the U.K., far right conservatives to out and out socialists; nobody will dare touch the National Health Service. It is so enshrined in the British mentality, that you do have universal access to health care. Now if that means you have to bit of a ticky (ph) wait sometimes, so be it.

All right, we have to leave that particular subject there. But if we're talking about fixing health care, it is going to cost money, right? And if it costs money, it adds to our deficits and our debt eventually, unless you figure out a way to pay for it -- $9 trillion. That's our projected deficit over the next 10 years. It's a number too big to comprehend even for those of us who do numbers every day until you get stuck with part of the bill in the form of higher taxes.

Should we be outraged that our government is maxing out its credit card and that we're responsible for the debt down the road? I mean these numbers, no one is saying raise taxes today. Everyone realizes that there's a big financial crisis here that we're trying to get out of. But when you look at $9 trillion in budget deficits over the next 10 years, it is breath-taking.

MACK: Well one you have to realize that the Barack Obama administration is being a whole lot more transparent. The previous administration did not put the cost of the war into the budget. And a lot of the things that he's having in terms of rosy colored budgets and deficits, things of that nature, are all things that are on the table in terms of counting your actual costs. And the health care debate, he's going to have a health care legislation he won't sign unless it's fully paid for.

So these are things we can at least be a little bit more comfortable with. Secondly in terms of raising taxes, you know 43 of the 50 states according to the National Conference of State Legislators say we are not going to be near our deficit without raising taxes or cutting programs.

ROMANS: Well, those are state taxes. We're talking about on the federal level, right? We know -- look, where you live, we know that your fees and taxes, I mean you're paying more for the right to live where you are most places whether you know it or not.

QUEST: Any politician that is going into an election in the next four years and is not telling the electorate that their taxes will go up should be locked up, because it's dishonesty.

ROMANS: They won't say it, though. They will not say it.

MACK: They don't want to lose the election. It's a political move.

ROMANS: I don't know what it is but even in this administration when two of the big money men said they couldn't rule it out or hinted they couldn't rule it out, oh, my gosh.

QUEST: Goodness sakes. Do you think the people out there are a shilling short of a sandwich? Of course not. They know you cannot have budget deficits of 10 to 12 percent, at $9 trillion, $10 trillion, $11 trillion deficit for the foreseeable future and not have higher taxes. This is not macroeconomics by the way.

MACK: Right.

QUEST: This is not some great high finance. This is kitchen economics. This is household economics. Charles Dickens summed it up, "You earn so much, you spend more, result, misery."

ROMANS: All right, we've got time for one more, the recession here in the U.S. having a devastating effect on Mexico. The "L.A. Times" reports that Mexicans living abroad are sending less and less money home as U.S. jobs and income dry up. Remittances are one of Mexico's top sources of foreign dollars. I mean I think, Ryan, what this really shows is that the economy up and down the scale, we're talking about little glimmers of hope. But for a lot of people, millions of workers here in this country, there simply isn't enough money to send home. That just shows you the impact of the recession.

MACK: I think that sometimes there's a huge disconnect between those who have and those who do have not within this country. And the disparity within incomes seems to continue to grow especially after we keep having these bubbles and bursts. I mean, we just saw a huge rally from 2004 to 2007 in which all these individual banks and the high net worth individuals were able to increase their net worth but the average mom and pop at home were looking at the television saying how come my real wages are not rising? How come I'm still having problems paying my bills and living from check to check and everybody else says we're in this great economy? We have to look to see what we can do to help more of the broader individuals.

ROMANS: I think it's interesting there's a lot of my sources who are in the comprehensive immigration reform camp who would like to see some kind of addressing the issue of so many people working off the books in this country with no protections, they would like to see citizenship, a pathway to citizenship. They last week were saying they think there's good momentum for some kind of immigration reform next year and I say after a bruising health care reform, and it's a recession, you know, has this been moved off the back burner? We're just going to have the status quo?

QUEST: You've got problems that you must address, problems that you'd like to address, and problems that you're never going to address, and you have to work out in politics what you'll get in economics, what you're going to do at any particular point.


QUEST: Health care is one that must be addressed, the country will go bankrupt if you do not address the health care issue. Immigration is a thing that should be addressed. The question becomes whether it has to be addressed after a bruising vicious battle.

ROMANS: 2010 midterm elections and hmm, there's politics, economics, and reality.

QUEST: But is there a necessity to address it? Not desirability, but a necessity to address it?

MACK: I definitely feel on the immigration reform, I mean we don't want individuals here who should be paying taxes allowed to live here without paying taxes and contributing to the economy as a whole.

But on the other side, we understand that these individuals have lives, and do we want to treat them like humans and they deserve to be treated in a humane way. So there's a huge debate that's going on and a reasonable debate that I can see definitely sides on both sides but I think the president is coming to make sure that at the end of the day, send them to the back of the line, give them a pathway to reform and make sure that at the end of the day, we can try to put these people on the books so we can start having them contribute to the economy as a whole.

ROMANS: And in the meantime what these numbers show I think is that everyone is suffering, people who are on the books, people who aren't on the books who had jobs, people who don't have jobs, that's what these numbers that are out there. Gentlemen, thank you so much.

Cash for clunkers may be history but there are still, yes indeed, there are still some big tax breaks if you can find them. They're going to save you a whole lot of money. We've put together a master list.

Plus everything that you need to know when it comes to college students and managing their money.


ROMANS: It's the end of the road for clunkers, that popular tax break to stimulate the economy but Uncle Sam has more free money for you, just sitting in your home. Big tax breaks, if you know where to look. Here's where to start, a tax break on the house itself. First time home buyers can still qualify for up to $8,000 on either their 2008 or 2009 tax returns, but you better hurry up. You have to close on your new house before December 1st to qualify.

There's also money in making your home more energy efficient. If you buy qualifying energy-efficient windows and doors or sky lights in the next year and a half, you can get a tax credit equal to 30 percent of that cost, that's up to $1,500. The same goes for an upgrade of your insulation and your roof. You can check out for the details there.

Let's head back over to the garage. You don't have a clunker, never did? There is still stimulus money for new car buyers, yes there is. You have to buy a new car before January 1st, 2010, you might be able to write off state, local and excise taxes on your 2009 tax return. The taxes vary state by state but if you have a $35,000 car you can save about $600.

And if you traded in a clunker, don't forget you can write the taxes off the clunker, too.

And finally, you may qualify for help with junior's college tuition. Under the expanded American Opportunity Credit, you get an annual credit of up to $2,500 per student. That's for tuition, fees and books, that's for this year and next. Free money in your house.

Speaking of college and money, according to a report from Sallie Mae, last year, 84 percent of college students had credit cards, on average, seniors graduated with $4,100 in credit card debt. Our next guest says college students should start the school year with a financial check-up. Beth Kobliner is author of "Get a Financial Life." Thank you for joining us.

BETH KOBLINER, AUTHOR: Great to be here. ROMANS: That's a lot of credit card debt, $4,100. You say the first thing to do is you've got to have a budget.

KOBLINER: Absolutely. You have to have a budget. Parents send kids to college with care packages. Get a financial care package. Have your kid go on to learn how to put together a budget and find a low cost bank with very low fees for banking. And that's the first thing you want to do.

ROMANS: Be credit card debt free. That's hard.

KOBLINER: Absolutely. Don't get a credit card until you're a junior or senior in college. It sounds like a crazy idea. But you know something, freshman, sophomore year, kids are young, they're not really understanding, they're worrying about their grades and doing well in school, so absolutely wait until junior year.

Now the new rules say in 2010 you'll have to, in February, you'll have to have a parent co-sign with you or you have to prove you have income in order to get a credit card if you're under age 21.

Still, I'm a firm believer, wait until junior or senior year before you get a credit card. I've interviewed dozens of colleges over the spring and kids are drowning in credit card debt. They have massive amounts of debt, they don't know what to do and they can't get jobs so I'd say, number one, avoid credit cards.

ROMANS: Even for an emergency, a lot of people think the kids should have a cell phone and a credit card for emergency but it causes more problems when you have a credit card.

KOBLINER: It causes more trouble. How about a debit card, you can link your debit card so if there is an emergency, your kid can take money that's already in the account rather than rack up tens of thousands of dollars.

ROMANS: And they will. All right, protect your credit score, how do you do that?

KOBLINER: Well number one thing to do is know what it is. Look at or you can look at Fico,

ROMANS: You have to a little bit for that, right

KOBLINER: $16 for that, you get a copy of your credit score, you get a copy of your credit report and a credit score and you want to know what the score is, if you have a credit score at all and be aware of the fact as a student now, if you do have a credit card and you're late, even just one time, you can end up charging tens of thousands of dollars more in interest down the road when you go apply for a mortgage or go apply for an auto loan. So you're really, your credit score is your reputation and a lot of young people aren't told that.

ROMANS: Let's talk about student loans, you say stick to federal student loans. KOBLINER: It's so confusing for parents who are applying right now for their kids, they're taking out loans and it's difficult to decipher, stick with staffer student loans, Perkins student loans, those are the federal student loans with low interest rates.

If you need to get more than those loans, see if the college offers some discounted loans. Try to avoid those high rate private student loans. They're very expensive. And when you have to pay them back, it's much more difficult.

ROMANS: You have to make sure you have health insurance. Gosh, I remember this myself. You can stay on your parents' health insurance if they have it, there's also health insurance you can get through the university sometimes.

KOBLINER: That's right.

ROMANS: It's important to be insured in college.

KOBLINER: Absolutely. There's a large percentage of students, about 30 percent who don't have health insurance. So you want to make sure you can be under your parents' plan and also of course if a parent loses a job during this very tough economic time, you want to make sure to contact the college, because often the deal that they're offering in college is pretty good. It's pretty low cost and it will cover you at the very least for the catastrophic major problems, if you have the major accident or something happens, at least you know you'll be covered for that.

ROMANS: All right, the book is called "Get a Financial Life." It's an important checklist. Beth, thank you so much for joining us.

KOBLINER: My pleasure, thank you.

ROMANS: All right, if this economy makes no sense to you, you're not alone. The myth of the rational market next.


ROMANS: The financial disaster of the last two years surprised Warren Buffett, Alan Greenspan, Ben Bernanke. So what chance did the average American really have to beat the market and avoid this disaster? "Time" editor-at-large Justin Fox has penned the book "The Myth of the Rational Market." The end result of his research? He's done trying to beat the market as a stock picking game. Welcome to the program. It's a fantastic read and I've been covering markets for a long time. The very first thing I was ever taught the market is always rational. I mean, the sum of the fear, the greed, the information and the misjudgments are all there in the market. The market is never wrong. Boy, a lot of things happened to sort of blow that out of the water.

JUSTIN FOX, TIME MAGAZINE: Well, the difficulty is, there's one argument that it's hard to outsmart the market at any time and I don't disagree with that. I think some people can do it but I can't. And you probably can't, and most of the viewers probably can't. ROMANS: I'm pretty sure I can't, right.

FOX: But at the same time if you look at after the fact, what prices were and what subsequently happened, financial markets aren't the best predictor of the future. They aren't the most commonly rational assigner of values in the world. There's fear. And we said fear and greed, that's a big part of the pricing.

ROMANS: Right, you look at home prices, for example. There was nothing rational about that no matter how you slice it.

FOX: I mean for certain individuals making decisions maybe, but in terms of, yes, were the prices of rational judgment of what loans should be going for, what houses should be going for? No, it was a disaster.

ROMANS: So why didn't the people who know all about this and are so smart not get it? I mean, why did Alan Greenspan, why did Alan Greenspan not see there are booms and busts and why did they start to underestimate what happened?

FOX: Well, the funny thing is the really strong Chicago version of this myth of the rational market is there are no booms and busts, the market's just properly predicting the future. Greenspan believed there were booms and busts. He just thought we had such sophisticated markets and especially all these derivatives markets that it would allow us to cushion the effects. And so he didn't ever argue that there weren't bubbles.

ROMANS: Did he think they could regulate themselves?

FOX: It was a couple of things. One, he thought markets could basically regulate themselves, not perfectly. The other is he from experience had learned that he probably wasn't a good judge of when we're in a bubble and when we weren't because he made this famous speech in December '96 about the irrational exuberance in the stock market and then prices just kept going up and up and up.

And the lesson he took from that is I'm not the guy to call the bubble. I'll just clean up afterwards. And I understand where he was coming from on that. I don't think he was totally wrong, but it ended up being really problematic.

ROMANS: Is he a villain I guess of everything that happened to us?

FOX: At some level his belief that financial regulation was mostly irrelevant I think was part of the problem. I have trouble painting him as a villain because he's kind of cuddly or whatever, but yes, he's a villain. And to a certain extent we all are and human nature is. Markets do this, they go boom, they go bust. We deal with the consequences afterwards.

ROMANS: Though after all the smart stuff in this book and all this history about markets and the way markets think and react, the market right now, is it rational right now? FOX: I mean, that's the classic thing. We'll know in a couple years, I guess. The crucial thing and this is this classic quote from Benjamin Graham, legendary investor and teacher of Warren Buffett, which is the market is not a weighing machine, it's a voting machine. And that's really what's going on right now. People are voting with their purchasing of stocks and driving prices up, and they're doing it for some reasons -- it's partly because the world economy hasn't totally fallen apart. It seems to be stabilizing a little bit. So that's a real rational reason for prices to go up a bit. Beyond that, everybody is guessing. A lot of emotion is involved. Who knows?

ROMANS: All right, Justin Fox, the book is "The Myth of the Rational Market." He's also editor-at-large at "Time" magazine. Thanks so much.

FOX: Thanks for having me.

ROMANS: All right, coming up next, we're playing dress up. If you want to sport as many stripes as possible and look like my friend Ali Velshi, find out where to buy the clothes of your favorite anchor for an affordable price.


ROMANS: I'm here with my friends Richard Quest and Roland Martin, and you know they're quite nicely dressed.

MARTIN: You know how we roll.

ROMANS: These are the things of guys they wear a suit one time and they don't want to be caught dead in it again, I mean right? Jeanne Moos has the story of a new Web site, listen up guys, that lets you shop from the closets of TV anchors and reporters.


JEANNE MOOS, CNN CORRESPONDENT (voice-over): Want to wear what they're wearing?


UNIDENTIFIED FEMALE TV ANCHOR: Good morning, Darlene (ph).



UNIDENTIFIED FEMALE TV ANCHOR: Felicia Gorordo (ph) joins us live from Miami.

MOOS: You can dress like a TV anchor for peanuts at

UNIDENTIFIED FEMALE: Send to us your gently worn TV clothes and accessories.

MOOS: Most TV anchors like CNN's Kiran Chetry have them, castaways in the closet.

KIRAN CHETRY, CNN ANCHOR: Let me show you what's been rejected.

MOOS (on camera): Someone told you not to wear this?

CHETRY: Yes, so that's why it's up here.

MOOS: Your boss?

CHETRY: Yes. But I shall not reveal names.

MOOS (voice-over): A perfect candidate for TV News Closet.

UNIDENTIFIED FEMALE: Maybe you're out of the business now like me. Maybe it doesn't fit. You don't like it.

MOOS: TV people send in, say, this turquoise jacket and dress. The Web site sells it for $30 and splits the proceeds with the owner. The names of the owners aren't specified, though a certain morning anchor in the southwest seems to be cleaning out her closet, selling several items. Anchors come in all sizes, right?

JOLENE DEVITO, TALENT DYNAMICS (through telephone): Anchors do come in all sizes.

MOOS (on camera): But do they come in mainly small?

DEVITO: We have an abundance of small sizes right now.

MOOS (voice-over): Jolene DeVito was on air for 15 years. Now, she's running a Web site through a talent recruiting and coaching outfit called Talent Dynamics.

CHETRY: Definitely give this away. I can't wear shiny.

MOOS: The site also sells items for men and not Ron Burgundy stuff. Take this custom-made suit from a primary anchor in a top five market. Most of the clothing isn't designer. Though Kiran hasn't yet said anything, she's got plenty of rejects.

CHETRY: Here we go - the piece de resistance.

MOOS (on camera): This is maternity?

CHETRY: Elastic equals maternity.

MOOS: You do need maternity stuff?

DEVITO: Absolutely.

MOOS (voice-over): The idea is to sell the hand-me-downs to local TV people who can't afford expensive clothing.

(voice-over): Of course, maybe you wouldn't want some of the TV clothing once you found out where it's been.


MOOS (voice-over): Take the orange top CNN's Deb Feyerick wore to help deliver a calf.

FEYERICK: Oh my gosh! It gave birth to a calf.

I wasted no time getting it dry cleaned.

DEVITO: Send it away.

MOOS: It's the birth of a Web site. Jeanne Moos, CNN.

(on camera): I'm just never in an anchor's closet.

(voice-over): New York.


ROMANS: Roland Martin just told us he has 150 pocket squares.


ROMANS: One hundred and fifty pocket squares?

MARTIN: Look, first of all, I'm doing my best personally to try to upgrade the closet clothing on CNN. So when I filled in for Campbell, somebody came on the show and I would say you need a pocket square, young man. So Richard, when I came in, I said he needs a pink. I have one in the office that will go well with that.

ROMANS: Do you wear pocket squares?

QUEST: They are so last year.

MARTIN: Oh, no, no, trust me. But you have the right attitude to wear it, Richard. You can do it.

QUEST: You need these.

MARTIN: No, no.

QUEST: That's what you wear.

MARTIN: That's what we call a belt.

ROMANS: I have two issues with this story. One, gently used. TV anchors, we don't gently use our clothes. They're covered with makeup and they're gross. And they have writing on them. Just the TV makes them look OK. And the other thing was, you know, the idea that you're only going to get $10 or $15 for that jacket, I'd keep wearing it.

QUEST: Any poor sucker that wants to buy clothes from a TV anchor, we are the cheapest...

ROMANS: What about Ali? Ali's not here today. MARTIN: If you know how to shop, the key is to buy a $500 suit for $150. You just have to know how to shop.

ROMANS: All right Roland, since you have 150 pocket squares and how many suits, what do you think about Mr. Ali Velshi?

MARTIN: I have given Ali some of my pocket squares, as well.

ROMANS: I don't see him wearing any pocket squares.

MARTIN: That's the problem. So he messes it up.

ROMANS: What about the suede vest?

MARTIN: You know, I'm from Texas. But I can't get with the suede vest. I can get with the cowboy hat, although he ticked me off when he wore a University of Texas shirt on the air. I literally cussed him out. I will defriend you if you do it again. The motorcycle helmet is not cute, no.

ROMANS: What about the sunglasses? I think he's going to wear the sunglasses.

MARTIN: The sunglasses work, because he also rides motorcycles so it works, but I'm not wearing the suit with the motorcycle. But he needs to do the pocket squares, he needs to.

QUEST: What about the extra padding that has to go around here?

ROMANS: For what?

QUEST: So it doesn't ride up when you're sitting down so whatever you do, wherever you move, it all stays.

ROMANS: It sounds to me like there's a market for these clothes.

MARTIN: Richard, I was born with these shoulders. I got you on that one.

ROMANS: All right, thanks for joining us on "Your Money." You can follow Ali Velshi and me on Facebook and Twitter at Christine Romans and at Ali Velshi. Make sure you join us every week for "Your Money" Saturdays at 1:00 p.m. Eastern, Sundays at 3:00. You can also log on, 24/7, to Have a great weekend, everybody. Thanks for coming on.

MARTIN: It's a new fashion show.