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YOUR MONEY

2nd Half of 2008 Economic Outlook; Resume Tips; Who Is Rich?

Aired July 5, 2008 - 13:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


RICHARD LUI, CNN ANCHOR: First off, more than 5,000 families are out of their homes in Southern California this holiday weekend, 40- mile-an-hour wind gusts are fanning a wildfire in and around the city of Goleta.
And there is jubilation inside a helicopter once 15 hostages find out they are being rescued from rebels, the Colombian government released this video showing the emotional flight to freedom. The hostage holders were tricked into giving up their captives.

And three of the freed hostages are Americans. They haven't talked publicly but promise they will. In a statement the men say: "We understand that a lot of people are eager to see and hear from us, and they will. But right now more than anything, we just want to be with our loved ones. We ask that the media respect our privacy as we reunite with our families."

President Bush is heading to Japan at this hour for his final summit of G8 members. The talks are expected to focus on the slowing global economy, soaring oil and gas prices, and food shortages in the developing world.

And Iran is saying its nuclear program remains unchanged, indicating it has no plans to meet a key Western demand to stop enriching uranium. A government spokesman says its nuclear program is for peaceful purposes only. The U.S. and Western allies believe Iran is trying to develop nuclear weapons.

And we'll update your top stories at the bottom of the hour. Now it's time for YOUR $$$$$.

ALI VELSHI, HOST: Welcome to YOUR $$$$$ where we look at how the news of the week affects your bottom line. I'm Ali Velshi. According to a CNN/Opinion Research poll out this week, 93 percent of voters say the economy is extremely or very important to their vote for president this November and that's probably because we're halfway through 2008 and things aren't looking so hot.

The markets are down double digits. The price of oil has risen about 50 percent since the beginning of the year. And the housing market is showing very few signs of thawing out. So we brought our good friend Stephen Leeb, the president of Leeb Capital Management here to tell us whether the glass is half full or half empty for the rest of 2008 and beyond.

Stephen, great to see you. I think you are generally a half full kind of guy in life. STEPHEN LEEB, PRESIDENT, LEEB CAPITAL MANAGEMENT: I am, I am.

VELSHI: But this economy we're in with housing, with inflation, with energy prices and with the stock market, would even challenge an optimist like you.

LEEB: Well, Ali, at first glance, but given all of these bad things: high oil prices, this credit crisis, everything else, the economy, though it's not moving ahead in a rapid way, it's not really falling apart either. I mean, a lot of the very hard numbers, unemployment insurance claims, the people getting laid off, they've risen but they haven't risen that much.

Industrial commodity prices, prices apart from oil, they're hanging firm, which is a sign of business strength. And just this week we've got news that manufacturing in this economy is actually on the upswing.

VELSHI: OK.

LEEB: So that there are some signs that the economy really is acting fairly well, especially in the face of tremendous headwinds, as you pointed out.

VELSHI: But it may be affecting our viewer disproportionately because they pay for gas. They probably have a home which they have seen decrease in value, and they buy food. And we've seen the increases in food.

LEEB: Right, I don't want to minimize any of that. I mean, this is a painful economy in many, many ways, but we've seen worse. I mean, maybe that's the best way of looking at it. And from a viewer's point of view, from an investor's point of view, it's good to remember that the only really, really all-encompassing bear markets, those that take everything down with them, only occur when we have a massive recession like '73-'74, for example.

You had a massive recession and you did have a massive bear market.

VELSHI: Right.

LEEB: This time around the bear market has been very selective. It really has focused on financial stocks. And right now the signs are that it's not going to spread that much further.

VELSHI: Well, let's talk -- when we talk about a bear market, we usually mean the technical term, it means 20 percent off of the high of the market. And since October's highs, we're about there. We're about 20 percent off of that.

LEEB: Right.

VELSHI: More relevant if you happened to have made your first investment last October and you happened to have to sell it this week because over time a diverse investment in the stock market, as our viewers hopefully have in their 401(k)s and IRAs, they have survived pretty well.

LEEB: They should do very well. And again the thing to focus on is the economy. Even in the 1970s, where you had sky-high inflation, the only bad times were when we had a major recession. So this economy and this market can tolerate high oil prices if high oil prices just produce high inflation. That's my guess.

There will be stocks that will go up. There will be stocks that will be fine to buy. You're going to have to be a little bit more selective, maybe focus on energy, maybe focus on gold. But you don't have to worry about, let's say, a 2000 bear market, where things go down 40 percent and you lose half or two-thirds of your portfolio, that is not in the cards, in my opinion.

VELSHI: So viewers out there, they're hearing on the news that there have been these big double-digit losses in the markets in the first half the year. June, in fact, was the worst June performance since the Great Depression. And then maybe they will get their statements of their 401(k) and they will see these losses in most cases because they affect people.

I mean, you will see what you are looking at there, the first six months of the year, almost 15 percent on the Dow, 13.5 on the Nasdaq, 13 percent on the S&P 500. What should they do when they get their statement?

LEEB: I think they should look and see, do I have good stocks, good funds with strong, long-term records? If I do, I would stay with it. The other thing, a little bit of advice, is because we are in an uncertain world, Ali, I mean, I do see things as half full, but I can't ignore all of these he is headlines, I would, if possible, maybe put a little bit of money into precious metals which are always good for insurance, and a little bit more into energy and commodity plays, because we are in a world in which there is a lot of pressure on commodities, on energy.

VELSHI: Right. And there is really -- there are some people who say it's a bubble, but fundamentally the long-term trend for energy and commodities is up, because of the growth, right?

(CROSSTALK)

LEEB: It is distinctly up. I mean, you have got 5.5 billion people in the world, or 5.8 billion last I heard that are all emerging at once and they need a lot of commodities. They need food. They need oil. They need steel. You name it, they need it. And it's going to be very, very tough to satisfy those needs.

That doesn't mean it has to be in black picture here. But it does mean you have to be mindful of that. So own a little bit of commodity mutual fund or a commodity stock or an energy stock, a gold stock, doesn't mean to reorganize everything in your portfolio. But just be aware of that.

VELSHI: Thank you for the good advice Stephen Leeb. Always a pleasure to see you. Stephen Leeb is the president of Leeb Capital Management. He has written a lovely book on oil that you should read as well.

Coming up next on YOUR $$$$$, jobs that won't dry up despite the downturn in the economy. See if yours is one of them, or whether if you want to get into one of those jobs.

And later, what is rich? The presidential candidates have an idea and we're going to find out where you stand and what it means for your bottom line. Stay with us, you're watching YOUR $$$$$.

(COMMERCIAL BREAK)

VELSHI: New jobs numbers out this week are giving us a better idea of the employment situation in America. Susan Lisovicz joins us now with the details -- Susan.

(BEGIN VIDEOTAPE)

SUSAN LISOVICZ, CNN CORRESPONDENT: Hi, Ali. Well, the U.S. economy shed 62,000 jobs last month, to be exact. That was roughly in-line with estimates and a relief here on Wall Street where there were concerns it would be even worse.

But it also reinforces the fragility of the economy, because the biggest economy in the world has now shed an average of 73,000 jobs a month for a total of 438,000 lost jobs this year. Many analysts say the U.S. economy should be creating 100,000 jobs a month just to keep pace with the population growth.

We saw big losses last month in manufacturing, construction and business and professional services. That offset gains in government, education, and health services, and leisure and hospitality.

April and May losses turned out to be considerably deeper than first thought. The report shows 8.5 million people are out of work. That's up from 7 million a year ago. And that may be one reason why the unemployment rate held steady at 5.5 percent when many analysts were expecting it to dip just a notch.

A separate report showed the weekly number of newly laid-off people signing up for unemployment insurance rose sharply to a level that many analysts say raises recession flags. The bottom line, companies are being squeezed in an economy weakened by a housing slump and credit crunch, consumer spending has dropped, costing firms revenue, while prices for many things have gone up and pressured profit margins. And that situation cannot be easily resolved -- Ali.

(END VIDEOTAPE)

VELSHI: Thanks, Susan.

Even in a sluggish economy there are areas of job growth. Sarah Needleman is a career reporter for The Wall Street Journal. She's going to tell us about which industries are still safe havens.

Sarah, good to talk us to you. Thanks for joining us.

SARAH NEEDLEMAN, REPORTER, THE WALL STREET JOURNAL: Thanks for having me.

VELSHI: Well, we really sort of always look at these job reports and we see that one of the bright spots tends to be health care. And there is still growth opportunities in health care. Where are they and why?

NEEDLEMAN: This is true. Well, in health care we have an aging U.S. population. We have Baby Boomers who are retiring and these folks need medical attention. And we're living longer due to better health care technology. So there's a great demand for health services. And there's a huge demand for nurses.

We always need good nurses to work in hospitals, out-patient clinics, et cetera. There is certainly demand for doctors. But also hospitals need personnel. They need administrators, human resources professionals, maintenance workers. So it's really across the board. So these organizations are growing and they have a need for talent in all areas...

(CROSSTALK)

VELSHI: And good, portable careers because there are hospitals or health care facilities all across the country. Another area that grows and that also gives you some portability is education.

NEEDLEMAN: This is true. In a down economy, people tend to turn to higher education. So they may go back to school. So there's a great demand in the higher education world. And there's always going to be a need for elementary school, high school teachers, and then that trickles down to the need for administrators, maintenance workers. There are all sorts of -- school bus drivers, et cetera.

So these are steady areas where we're always going to have a demand for workers.

VELSHI: Now you know, one of the positive consequences of a low dollar is that more Americans are staying in the U.S. for their vacations and more tourist s are coming to the U.S. for their vacations because their currency is stronger than the American currency. And that, I guess, helps the hospitality industry.

NEEDLEMAN: Absolutely. That's going to fuel demand for workers at resorts, hotels, travel agencies. And with gas prices the way they are, lots of folks are going to be using public transportation. So that's going to continue to boost demand for talent in the leisure hospitality industry.

VELSHI: We don't usually think of government as part of the job trend, but the fact -- I think that you made the point, governments are always in business. So...

NEEDLEMAN: They certainly are.

VELSHI: ... you just know where to look if you are looking for work. NEEDLEMAN: Yes, and the government has a wide range of jobs. Think public parks, beaches, cultural arts center. Then think about criminal justice system, we have police officers and firefighters that are always in need, utilities, public zoning issues.

So there's need for people who can do urban planning and things of that nature. So there's a wide range of jobs that are government- related and they're not going to go away anytime soon.

VELSHI: And you know, when we talk about the job trends and the jobs that are sort of big over the years, this one always comes in. This career always comes in and we don't always -- I mean, it doesn't seem like the sexiest one, but public accounting is a growing field in America.

NEEDLEMAN: This is true. The Sarbanes-Oxley Act of 2002 made it so that companies need to go through very strict procedures to make sure they're compliant. So this has created a steady demand for auditing professionals -- tax professionals to make sure companies are meeting those needs.

There is also a demand for people who have greater interests in making sure that their finances are secured, that they're getting the most money back in terms of their taxes. So there is demand for people to make sure they can help folks manage their finances properly. So there's always going to be a steady demand for accounting and finance types.

VELSHI: All right. Sarah Needleman, thanks for the good advice to our viewers who are watching this and either looking to see whether they're in the right careers or interested into getting into another career. Sarah Needleman is a career reporter with The Wall Street Journal.

Well, with the recent job cuts that we've seen and the fear of getting laid off, some of you might be thinking about updating your resume. And now experts tell us it's something you should be doing all of the time. And here to give us some pointers on how to get your resume up to speed is Ines Ferre.

Ines, we were talking about these types of careers that are out there. The first step in many cases is a resume. And I'm told that the first step in a resume is to make it about what you can contribute to the organization more than a listing of your jobs.

INES FERRE, CNN CORRESPONDENT: Yes, how you can help their bottom line. And it's really a positioning tool for getting the type of job that you want. Now, Ali, the average hiring manager spends no more than 20 seconds looking at a person's resume, so it has got to be an attention-grabber.

Now remember, a resume doesn't get you the job, it gets you the phone call for the interview. And having just one version of your resume in today's market just doesn't cut it. Career coach Jane Cranston says that if you want to create the most possibilities of landing a job, you will need several versions of your CV. (BEGIN VIDEOTAPE)

JANE CRANSTON, CAREER COACH: People should have a resume that specifically details what they're doing, as if they wanted an identical job or the next step after that job. That's the easiest resume to write.

The second one should be a resume that is skills-based. So talks about all of the things that you do that are applicable in a lot of different jobs: project manager, leader, training, facilitator, acquiring -- hiring good people. And the last one is a resume that really talks about the job you may want that you're not particularly qualified but you're spending it. You're spending the skills that you have to get the job you want.

(END VIDEOTAPE)

FERRE: Now the more focused that you are in your resume, the better for the type of job that you're going for. And really you want to illustrate, as you were saying, how you can help the company, how you've helped the bottom line, how you've helped them save money, how you -- how many people you have managed, things that are...

(CROSSTALK)

VELSHI: Your real tangible accomplishments.

FERRE: Exactly, exactly. Also, on the important skills that you've acquired in your previous jobs. So, again, you want to position yourself for the type of job that you're going for and maybe -- for example, maybe you were a manager in your last job and you know that the manager position is hard to come by. So you want to try and get some other type of job.

So you want to put your skills -- the skills that you did as perhaps a manager, so that the person knows that you were a manager but that you can do other things besides that.

VELSHI: You know, our good friend Brad Karsh, who often comes here and talks about resumes, he says, when you're talking about your skills, we're not talking about the fact that you can use Microsoft Word or the Internet, that's sort of an assumption that people are making. We're talking about things that you can do that will help them.

FERRE: Yes. And if you've been out a job for a while, let's say maybe you've been helping out with some organizations, with some charities helping raise funds, helping with those kinds of skills. So there are things that even if you have been out of the job that you've been doing, those are things...

(CROSSTALK)

VELSHI: They are legitimate and they can apply to the job that you're looking for. FERRE: Yes, exactly. And then using keywords, active verbs in your resume, also key words because people are -- there are people that are scanning this and sometimes there are computers that are scanning this.

VELSHI: Oh, I see.

FERRE: So make sure that it's keyword rich. And you know, nowadays, like, for example, they use "project manager" a lot. That's something that's...

VELSHI: I see.

FERRE: That's -- yes. And then the other thing of course is it should sizzle, it should pop. This is something that's an attention- grabber and you should try and make it as attention-grabbing as possible.

VELSHI: Ines, always great advice for me. Thank you so much. Ines Ferres giving us good advice that you can use to get that next job or keep the one that you're in.

Coming up after the break, foreclosures continue to mount throughout the country, but one county in Virginia is fighting back and we're going to tell you how coming up next.

(COMMERCIAL BREAK)

VELSHI: Jennifer Westhoven joins us now, as she does every week.

And, Jennifer, a few months ago you told us about in Syracuse you could buy foreclosed homes starting at a dollar, now you've got a different story about foreclosed homes, this one's in Virginia.

JENNIFER WESTHOVEN, CNN CORRESPONDENT: Yes, I love seeing these ideas that counties are coming up with. They're all struggling with all of these foreclosed properties, a huge headache for the local government. A suburb of Washington, D.C., has this idea, it's Fairfax County, Virginia. They want to fill up the empty homes with local cops, firefighters and teachers who basically have been priced out of the neighborhood.

I mean, so many areas have the empty homes, they're crime magnets. They keep neighborhood prices down. It's the idea though to use them to help middle class families get some affordable housing that's interesting here, what they did.

VELSHI: And those are the folks that you want in the neighborhood.

WESTHOVEN: Yes, exactly. They are the first responders in some cases and then they get a subsidized mortgage.

VELSHI: A very good idea. Well, keep on bringing us those ideas. Listen, an idea that you've got to bring us that isn't so great is we saw the numbers for June auto sales and these few months have been just getting worse and worse for the auto companies.

WESTHOVEN: They were terrible. I mean, it's eight months in a row, but it's a huge slide, 18 percent overall. GM sales down 18 percent. Now it did manage to hang onto the number one spot, General Motors, for now, selling the most vehicles in the United States. But it was not just Detroit: Toyota, Nissan, they saw some big slides as well.

When we are going out and buying something, boy, what a big change here. I mean, people obviously want to get more mileage, it's just the speed that we've changed our habits. Ford called it breathtaking. The Ford F-150, for 26 years, as long as I've been a business reporter, you know, dominating America's top seller list, not only to get knocked down from number one, it got knocked down to number five.

The Honda Civic is now the number one best selling car in the United States.

VELSHI: Wow. That's incredible. Now that was not a -- the jump in Honda sales wasn't even substantial, it was about 1 percent. So we're just generally in a car-buying decline.

WESTHOVEN: Yes. I mean, people are just trying to cut...

(CROSSTALK)

WESTHOVEN: ... wherever they can.

VELSHI: All right. Let's also talk about -- in this effort to get more mileage, we've done these stories and others have on something called "hyper-miling," this way of driving that apparently can -- in some cases can double the fuel efficiency of your car.

WESTHOVEN: Yes, I mean, some of the ideas are really great, right? And I love trying to see how much more money that you can get.

(CROSSTALK)

WESTHOVEN: Yes, I love it, but...

(CROSSTALK)

VELSHI: Take all that extra stuff out of your car, and don't have sort of impediments to -- you know, the wind efficiency and stuff like that.

WESTHOVEN: Yes. but this stuff, AAA is saying people are getting dangerous about this. So they're saying you want to be really careful in some of these measures. So in some of the techniques out there -- so for example, you know, hyper-miling is the trend overall. But some of them are dangerous. So one of the problems is shifting into neutral.

So you're going down a roadway, I mean, that can be really a problem because sometimes you lose your power steering, your power brakes if something happened. Another one is called drafting. This is -- in terms of the physics, I love the idea.

VELSHI: Right. You're behind a big truck...

WESTHOVEN: Please don't do this.

VELSHI: ... and (INAUDIBLE) a whole lot less wind resistance, so you're burning less gas.

WESTHOVEN: Yes. They create this whole low pressure zone behind them so if you tuck up them -- the problem is how closely do you tuck up? I mean, you can lose your entire -- the stopping distance that you need. If something goes wrong on that highway -- you know, right? It's not worth it for 50 cents and a $1 the next time you fill up your gas.

VELSHI: And then this business of not entirely stopping at intersections.

WESTHOVEN: Yes. Which is illegal, I mean, the ticket is going to be a lot.

VELSHI: So AAA is not liking this and I have heard some police departments saying they don't love it either.

WESTHOVEN: Sure. And I imagine -- I mean, the trucks can't see you behind them, that has got to be really scary for them if they find out that you're doing that.

(CROSSTALK)

VELSHI: Yes, there's a reason why used to have a -- I mean, I get it. I get why people are so frustrated and you can't just go out and sell your car that doesn't get great mileage, because you'll take a bath on that and you'll pay a premium to buy another car. So you're trying to everything you can. And we encourage you to do everything you can, but be safe about.

WESTHOVEN: Yes, and I love the concept though that people are having all of these blogs pop up, how can you get every single mile out of that gallon.

VELSHI: Just don't buy that stuff that they tell you will get you more mileage. That has not proven to be the case. But thank you for all of this, Jennifer Westhoven, as always.

Coming up, what is wealthy? Barack Obama wants to dial back the Bush tax cuts and make higher income households pay more. Who qualifies as rich these days? We're going to have a look.

But first, this week's "Right on Your Money."

(BEGIN VIDEOTAPE)

VELSHI (voice-over): Falling home prices means more opportunities for buyers. But with lending standards tightening, improving your credit score is more important than ever. JOHN ULZHEIMER, CREDIT.COM: If you want to guarantee yourself the best rates and the best terms that any lender has to offer, you really need to be boasting a 750 across the board. Now of course, you can still get approved with a score lower than 750. You could even get credit in the mid 600s but you should not expect the best rates and the best terms in the mid 600s.

VELSHI: The easiest way to give your credit score a boost is to pay off high credit card balances and avoid opening new lines of credit.

ULZHEIMER: If you are in credit score improvement mode, you really need to kind of take a step back, no knee-jerk reactions. And tackle the things that are costing you the most. Pay off the collection or settle them. Pay down the credit card debt as much as possible, and by all means do not exit the credit environment as a means for improving your credit score.

VELSHI: And be aware, closing credit cards just because you rarely use them will not help your credit score. Hold on to older credit cards. The longer you have managed credit, the better your score will be.

And that's this week's "Right on Your Money."

(END VIDEOTAPE)

(COMMERCIAL BREAK)

LUI: Good Saturday to you. "Now in the News," firefighters are waging an air war against two wind-driven fires bearing down on homes near Malibu, California. Five thousand families have been evacuated so far. More could be ordered to leave.

And some new pictures tell the inside story on that dramatic hostage rescue in Colombia. Look at those tears of joy in this picture here. This is the scene inside of the helicopter moments after the 15 hostages learned that they were out of the clutches of Colombian rebels.

Three Americans held for more than five years say they were overwhelmed with emotion and thrilled to be back on U.S. soil. In a written statement the former hostages say they know you want to hear from them but first they want to get reacquainted with their loved ones.

Iran says its nuclear program remains unchanged indicating it has no plans to meet a key Western demand to stop enriching uranium. A government spokesman says its nuclear program is for peaceful purposes only. The U.S. and Western allies believe Iran is trying to develop nuclear weapons.

President Bush is headed to Japan at this hour for his final summit of G-8 members. The talks are expected to focus on the on the slowing of the global economy, skyrocketing oil and the gas prices and food shortages in the developing world. Investigators say fireworks could be responsible for this apartment fire in Toledo, Ohio. The blaze destroyed eight buildings and left more than 100 people homeless.

Coming up at the much to the hour CNN SPECIAL INVESTIGATIONS UNIT, "Danger, Poisoned Food." Now back to YOUR MONEY.

VELSHI: Taxes aren't the sexiest issue in the presidential race but they really are very important for the long term. Probably more important than some of the issues that we're dealing with in the moment and both candidates are talking a lot about them. Here's a quick look at where Senators John McCain and Barack Obama stand. Senator John McCain favors extending President Bush's tax cuts from 2001 and 2003. He has said that he would eliminate the alternative minimum tax if elected and create an alternative income tax code that would be simpler than the one we're now using and you'd get to choose which one you want to use.

Senator McCain is also in favor of reducing the corporate tax rate. Senator Barack Obama, on the other hand, wants to dial back the Bush tax cuts for certain groups and make sure that people on the higher end of the income spectrum pay more. He would increase capital gains and dividend taxes and reexamine tax benefits for high earners.

All right, so the question is, where do you fall in this? Who exactly is a high income earner? Allan Chernoff has a look.

(BEGIN VIDEOTAPE)

ALLAN CHERNOFF, CNN CORRESPONDENT (voice-over): Jeff and Kim DeNick do almost all of their own chores. And their kids wear hand me downs and even though in the next presidential term they expect to earn close $250,000 a year. What Barack Obama describes as wealthy.

SEN. BARACK OBAMA, (D) PRESIDENTIAL CANDIDATE: We've got a shift in our tax values that disproportionately benefits the wealthiest Americans.

CHERNOFF: But the Denicks say they don't feel rich, nowhere close to it. Kim clips coupons and shops for the cheapest gas. Jeff does his own home repairs.

JEFF DENICK, HOMEOWNER: You really have to watch what you spend each week, each month just to make sure that you have enough of what you need.

CHERNOFF: Kim is a pediatrician, Jeff is a school guidance counselor who works as a swim coach in the summer. The DeNicks and their three children live a nice but not extravagant four bedroom home in Marlton, New Jersey outside Philadelphia. A suburb where the cost of living is far higher than most other regions of the country.

KIM DENICK, PEDIATRICIAN: We pack our lunch every day for work and there's -- it's not often that we go out to dinner.

CHERNOFF: Senator Obama says he would raise taxes on couples earning $250,000 or more. And increase the amount of income subject to Social Security payroll taxes.

SEN. JOHN MCCAIN, (R) PRESIDENTIAL CANDIDATE: I believe we should protect the American family against tax increases.

CHERNOFF: Senator McCain says he wants to extend the Bush tax cuts, that lower rates for the wealthiest Americans but policy analysts Ann Mathias says McCain won't be able to deliver.

ANNE MATTHIAS, DIRECTOR OF POLICY RESEARCH, STANFORD GROUP: There's nothing he can do. He can't issue an executive order. He can't sign a piece of paper. He's pretty much at the mercy of Congress.

CHERNOFF: And unless the political balance of Congress changes it'll be in the house of Democrats. Determined to let the tax cuts expire as scheduled in 2010. Jeff and Kim DeNick, registered Republicans, say federal tax policy is important to them especially since they pay nearly $11,000 a year in state property taxes but they're undecided as to whom they'll vote for.

You're Republicans, would you vote for Obama?

K. DENICK: We talk about it.

J. DENICK: We do talk about it.

CHERNOFF: Allan Chernoff, CNN, Marlton, New Jersey.

(END VIDEOTAPE)

VELSHI (on camera): If you're afraid that you could get hit with the higher taxes after the November elections, let's bring Tom Henske into the discussion. He's a partner at Lenox Advisors. A financial advisory firm in New York City. Tom, good to see you. The fact is that Barack Obama's been very clear that he will tax what he calls the highest income earners. The question is where do people fall into that? Does that mean people who earn over $250,000 a year can fully expect to pay more taxes around under an Obama administration.

TOM HENSKE, LENOX ADVISORS: I think that has got to be the guess that has to happen. Deficit's grown to $1 trillion. There has got to be a way that we raise money and I think the common wisdom from Barack Obama's standpoint is going to be to raise taxes.

VELSHI: All right. So if you are there or somewhere else -- first of all, most Americans wouldn't see those Bush tax cuts eliminated under either of these candidate. They've both said they will keep it for most people but if you're on the higher end of the income scale what are the types of things that do you to be able to protect yourself.

HENSKE: Well, this is a don't do it on your own environment, so clearly you need to be getting financial advice from an adviser whether it's an accountant or financial planner. The things to think about are, should I begin to realize tax today in anticipation of the tax being higher tomorrow. So conventional wisdom used to be to defer taxes as long as possible on things like income. Well, maybe it makes sense to realize some of that income in 2007.

VELSHI: Pay a lower tax rate on the anticipation that you might pay a higher tax rate later. How do you know how to make that decision? Is it just by following the election and we have this legislation goes?

HENSKE: I just think if you look down the road there's nowhere else for it to go. If your budget deficit is at $1 trillion the taxes are going to go up. They've been low for a very long period of time and I think we've enjoyed that and now it's time to pay the piper.

VELSHI: So even if you're not in the very rich category one of the things many people don't take advantage of are the annuities. Give me the elevator pitch on an annuity and why I would consider having one.

HENSKE: Two reasons. Number one tax deferral. So your investment gains, if capital gains rates or ordinary income go up, that means that your portfolios are also subject to additional tax. So you're sheltering tax. You're putting in post tax dollars but it's growing tax deferred. Number two with volatile market. There are a lot of guarantees in these new products that are out and it's very important to be invested in the long term, if the only way that you can be invested for the long term emotionally is to have that floor, annuities make a good choice.

VELSHI: A floor meaning a limit to what you ...

HENSKE: A minimum of five or six percent growth. Think about in today's environment if you were guaranteed a five of six percent rate of return with an upside of nine, 10, 11 percent, that would appealing to most people.

VELSHI: You also talk about municipal bonds. These are bonds where the income tax-free.

HENSKE: Right so, if the rate goes up on taxable income, it also ordinary income from taxable bonds will be higher. And municipals will make a great choice for most people in their portfolio.

VELSHI: What's the danger for the municipal bonds? The municipality goes bankrupt?

HENSKE: Obviously you always have that risk. But relative to other risks out there, it's a very minor risk.

VELSHI: And every municipality or anybody issuing a municipal bond, whether it is a state or project of some kind it's all rated, there is a credit rating.

HENSKE: So you can look under the hood somewhat. Obviously you never really know, as we've seen pass but clearly it gives you a better indication than maybe an equity might.

VELSHI: And of course you say 401(k)s because it's a very obvious -- for all workers who have one it's an obvious tax sheltered investment.

HENSKE: I would actually take it one step further. I would look at the Roth 401(k).

VELSHI: Right.

HENSKE: The Roth 401(k) is where you ...

VELSHI: You pay the tax now.

HENSKE: That's right.

Pay at a lower bracket supposedly today with tax free growth going forward. And if tax rates do go up you would have wished to have done a lot of that in 2007.

VELSHI: OK. Good to talk to you Tom, thank you very much. Tom Henske is a partner at Lenox Advisors.

Coming up on YOUR MONEY, your budget on a diet. We'll find out what that Fourth of July barbecue is costing this weekend as food prices continue to soar.

(COMMERCIAL BREAK)

VELSHI: You're headed to a barbecue this holiday weekend. feel grumble to what you have to pay at the gas tank. If you're hosting a barbecue feel free to grumble about the soaring food prices. Just how much has the inflation hit the holiday barbecue? Cnnmoney.com's Poppy Harlow joins us with more. Poppy, give us the bad news.

POPPY HARLOW, CNNMONEY.COM CORRESPONDENT: Hey there, Ali. The numbers are pretty staggering. We'll get to gas prices in just a minute but first, folks who want to take a look at what that Fourth of July barbecue is costing this weekend versus just five years ago. 2003 may not seem like a long time ago but when it comes to food and gas prices, it can seem like an eternity.

For a comparison, we took a look at government's Consumer Price Index. The latest available data was for May. So we compared that to May of 2003. Now for starters, let's say you want a hamburger at your barbecue. A pound of beef has gone up nearly 25 percent per pound. If you prefer a cheeseburger like I do, a slice of American cheese, that'll run you about 10 percent more. Now Ali, I don't know if this applies to you but maybe you're skipping burgers altogether and going with healthier fair.

VELSHI: No, it doesn't apply to me but it may apply to some of our viewers. So go ahead.

HARLOW: I think it does. How about salad, folks. A pound of iceberg lettuce, that will cost you seven cents more per pound than it did five years ago. So more expensive across the board, Ali.

VELSHI: I'm not really worried about the lettuce but I am worried about sides. I'm going to move in on those sides. What are those ...

HARLOW: Mac-n-cheese. If you want the good stuff, the side dishes, they will run you more. A bag of potato chips that's gone up more than 12 percent but that's nothing compared it a side of beans. A pound of beans soared more than 50 percent. And remember that leap isn't just five years. Percentage-wise the biggest food price jump for all of the items that we looked at. A bit of a surprise there and if you're thirsty from all of that food you're going to be paying about 20 percent for a two-liter bottle of soda. I like to call it pop.

VELSHI: Yeah. I grew up calling it pop as well. But we both call the -- we have the same name for dessert. How much are deserts costing?

HARLOW: They're also getting more expensive, too. Ice cream and those kind of things. Ice cream was actually up about nine percent. The unhealthiest stuff was actually hit with a less severe price increase in the healthier alternatives. In fact, chocolate chip cookies were slightly cheaper than five years ago.

VELSHI: No way?

HARLOW: Way. And however if you opt for fruit, look at the jump in the price of apples, for example. In 2003 red delicious apples were less than $1.00 a pound. And now you'll be paying more than 25 percent more for those apples and finally you can't did a story of inflation without mentioning gas prices so brace yourself. We all know that the national average for gas right now above $4.00 across America but five years ago the average was $1.44. What that means, Ali is prices have nearly tripled in just five years. Bottom line, most people have not seen their salary jump 180 percent since 2003. So maybe skip the barbecue altogether but I had a better idea.

VELSHI: What's that?

HARLOW: Pot luck. Everyone contributes to the cost.

VELSHI: I have to say we've been talking about inflation and food for a long time and I thought I knew much of this stuff. The beans thing really threw me.

HARLOW: The beans thing and the cookies thing.

VELSHI: So cookies are cheaper than they were and beans are way more expensive.

HARLOW: So you can have cookies and water and have everyone bring a little (ph).

VELSHI: I like that. Bring the beans. Anyone asks me what to bring to my party, I'll say bring some beans.

All right, Poppy, good to see you.

Coming up next on YOUR MONEY, how DVR technology is changing the way that advertisers catch your attention.

(COMMERCIAL BREAK)

VELSHI: Well with the long holiday weekend I have no idea when you are watching this, that's because of the growing number of TV users are using DVRs, digital video recorders. You record what you want to watch and you watch it when you want to watch it and you can even skip the commercials. TiVo's a pioneer in this area. And I sat down with the company's CEO, Tom Rogers, and asked him about the concept behind time shifting in television.

(BEGIN VIDEOTAPE)

TOM ROGERS, CEO, TIVO: TiVo started as a really convenient way to time shift programming. Instead of you having to be on the network's schedule, being able to be on your own schedule. And being able to see things when you want to see them. And that was incredibly liberating for a lot of people.

We've gone from a world of choice, a lot of channels, to a world of consumer control over that choice. Which is what TiVo really gave people.

VELSHI: It's a good people that people will routinely, I'm going to TiVo something. They might not really be using a TiVo.

ROGERS: Anything TiVo enthusiast knows that there is a huge difference between the experience of just having a generic cable satellite DVR and TiVo and it's very hard for people to understand that difference without experiencing it. Comcast beginning to roll out a version of TiVo. Cox, another major cable company is going to be rolling out TiVo later this year. And so some of the great sources of that confusion out there are actually going to have a stake in making it clear to people what's TiVo and what's not.

VELSHI: You can zip through commercials with a DVR. I've got to figure the advertising world is going to find a way to get around that and I'm still going to get, somehow I'm going to get advertised at or advertised to.

ROGERS: When I first became CEO of the company TiVo was viewed as a real pariah in the advertising industry. You know it was kind of, get out of here, guys. You're ruining the business. We have to have advertising. That's the bread and butter of how great television programming and including CNN gets supported. So we have to find ways that consumers will want to watch ads. Don't force anybody to watch a commercial. But when they decide there's something they're interested in, let them go deeper.

Instead of 30 seconds let them go in for three minutes. Why do that when it's hooked to the TiVo? Because you can pause the program and you can spend three minutes finding out about your favorite movie or your favorite car and your program is sitting there without you having missed a second.

(END VIDEOTAPE) VELSHI: Well, as viewers use TiVo and other DVRs to zip past commercials, advertisers have to find other ways to reach you, the valuable audience, so it's no surprise that product placement within TV shows is on the rise.

According to P.Q. Media, advertisers spent nearly $3 billion last year on product placement. That's up more than 30 percent from the year before and it's only expected to grow. Last week, the FCC announced plans to re-examine and evaluate requirements for disclosing product placement to viewers. Robert Thompson is the director of the Center for Study of Popular TV at Syracuse University. Robert, good to see you again.

ROBERT THOMPSON, SYRACUSE UNIVERSITY: Thanks for having me.

VELSHI: My question is a big who cares? Why do I care that product placement is on the rise?

THOMPSON: Well, I mean I suppose if it got to a certain extent, the programs could start getting completely buried with it, but then we would quit watching it and the market would adjust. This is not news from the beginning of radio through the first 15 years of television, even the news, the "Camel News Caravan," the "Plymouth News Caravan."

VELSHI: Maybe it's more discreet these days.

THOMPSON: Well, and as late as 1969, if you watched the news, the moon landing on ABC, there were big Tang logos on the front of the desks of the people reporting it. If you watched on NBC, Gulf Oil logos, this is the news reporting, the landing on the moon as late as '69. So we had this period where this stuff went away a little bit. And now it's coming back. Everybody thinks it's going to be the end of the world we know it. And some of this stuff actually can be pretty funny.

VELSHI: Well, give me an example of that which works well that the audience wouldn't reflect badly on.

THOMPSON: The comedies I think is where it works best. "The George Burns-Gracie Allen Show." In the middle of every episode, George and Gracie would start talking about Carnation evaporated milk, and it was integrated with a bunch of really funny jokes and it was sometimes the best part of the entire episode.

The problem is if you're doing a serious drama about an orphaned child, you're probably not going to want to say wow, that cola was really refreshing in the middle of discussing the fate of this poor infant.

So there are places like "American Idol" where I think you're absolutely right. Who cares if they're taking swigs of Coke every five minutes? Who cares if the cast is riding around in Fords? Those commercials where they ride around in the Fords are actually a lot more fun to watch than a regular commercial and they're pretty TiVo- proof. VELSHI: So why does the FCC care, then, what's the harm?

THOMPSON: Well, I think if we're going to call these things ads, which they are, if $3 billion is being paid to get these products placed into the show themselves, then they are advertisements. And in that case, they need to adhere to truth in advertising, so as long as they're not making claims for these products within the context of the shows that aren't true, I think they're fine. If in fact there was a remake of Popeye and some spinach company started placing spinach there and Popeye was then becoming really strong, if it's an ad placed into the program, then I guess you can't claim something other than it is.

The other thing they would do is want to have it disclosed more. It said at the end of the credits, but if anybody has watched credits at the end of a TV show lately, you need a microscope to even see them.

VELSHI: And a flashlight usually.

THOMPSON: Exactly, yeah.

VELSHI: All right. So what's your guess as to the future of this? Do you think we're going to be having everybody using DVRs, skipping commercials and all the money made from TV is going to be in product placement?

THOMPSON: Well, in the immediate future, the 30 second ads are not going away. So if you think those things are going to go away, they won't. We're going to see more product placement. Continuation of the 30 second ads, DVRs coming up with ways, they have already come up with ways that if you fast forward a banner ad comes up.

So all that is going to happen. And then 10, 20 years from now, we're going to have totally integrated advertisement, of course, where if you're watching an episode of a show and you like the lead person's blouse, you click on it and you can give a credit card number and have the lead person's blouse.

VELSHI: That might be useful to us. Robert, good to talk to you. Thank you so much for being with us.

THOMPSON: My pleasure. Thank you.

VELSHI: Robert Thompson is the director of the Center for the Study of Popular TV at Syracuse University.

Coming up next, what you had to say about YOUR MONEY this week. We're going to hear your e-mails, up next.

(COMMERCIAL BREAK)

VELSHI: Time now to take a look at some of your e-mails from the past week. David writes in and says, "During the oil embargo of the seventies, highway mileage speed limits were reduced to 55 mph nationally to save gasoline. I'd love someone to figure out exactly how many barrels of oil that would save daily if it was reimplemented. I drive a Toyota Prius and driving from Los Angeles to San Francisco recently I reduced my speed from 75 to 60 miles per hour with a resultant fuel saving of 20 percent. I assume all cars would have a similar savings regardless of being a hybrid or not. Instead of reducing gas taxes or offering an incentive for someone to build a better battery, I wish one of our presidential candidates would take this old idea and run with it."

Great suggestion, David, I think they should do those other things, too, but it's a fact that you save money if you reduce your speed.

Well, from Kansas City, Kristine writes, "In a recent show, CNN has provided excellent information on various options consumers have when it comes to fuel efficient cars with one glaring omission. Diesel cars. I drive a 2006 VW diesel Jetta and I get an average of 40 mpg and 50 plus on the highway. My six foot son rides comfortably in the back seat, the car is peppy, even with the air conditioner running, and has a huge trunk. VW, BMW, Mercedes are all offering clean, fuel efficient diesels in the United States this year with more to come."

Good point. They really do. We probably should do more on diesels. You are paying a lot more for diesel, though, than you are for regular gasoline. I don't know if it's a wash or not. We'll check it out.

Another viewer, George from Virginia writes, "Ali, I enjoy the show. What is happening to the U.S. economy? I'm very scared something really bad is happening. How serious is the problem and what should we do with our money? I stayed out of the stock market since last year but can only one to two percent on a money market account."

Wow. George, this is an issue because you can't really stay out of the markets, you can with some research do some investing that sort of limits your down side. And there are always stocks that are going up, even in a market like this, but it does take some work. I suppose it's better to be safe than sorry. Don't lose the money but you might want to get back into this market in a safe fashion that suits your risk tolerance.

We want to continue to hear what you have to say about this week's show and things that you want us to cover. Send us an e-mail at yourmoney@cnn.com. Thank you for joining us for this edition of YOUR MONEY. We're back here next weekend Saturday at 1:00 and Sunday at 3:00. See you then.

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