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YOUR MONEY

Examining When Debt Becomes Dangerous: Personally and On a National Level; Interview With Henry Paulson; Toyota Recalling Prius Cars

Aired February 14, 2010 - 15:00   ET

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


ALI VELSHI, CNN HOST: Welcome to YOUR MONEY. I'm Ali Velshi. Christine Romans is off this week.

We begin today by examining when debt becomes dangerous. For your personal debt, we'll show you exactly what the new credit card rules will mean to you, but first we want to look at what it means for the United States to be spending trillions of dollars that it doesn't have. When does the bill come due, and what are the consequences? We're joined by CNN senior political analyst David Gergen and Diane Brady, senior writer with "Business Week."

Let's start with David, let's put the national debt into perspective how close are we to the edge? For years we've been talking how the U.S. is too far in debt. Why -- why's this conversation heating up so much now?

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: Well, because the deficits that are out there are just gigantic, stretching out indefinitely into the future. The recent projections show that the United States will never balance its budget on the course we're on, and we receive this past week how the instability in the euro-zone with Greece unable to pay its debts and now the fear of that spreading.

But I think Ali; most economists would say it's a two-step process, that for the moment and in the near term our mounting deficits are not as serious a problem as they might appear. Look at how many investors are coming to the United States to buy our bonds in the midst of the instability of the Euro-zone. So we're a safe haven right now.

But beyond this economic recession when we really start coming out in a serious way, there is growing fear that these mounting deficits could reverse things and people would stop buying treasuries. Interest rates would spike and it would throw us back into a serious recession again. So it's a near term versus mid long-term problem.

VELSHI: Diane, let me tell you about what Paul Krugman just wrote. He said, "the point is that running big deficits in the face of the worst economic slumps since the 1930's is actually the right thing to do, if anything deficits should be bigger than they are because the government should be doing more than it is to create jobs." Evaluate that for me. DIANE BRADY, SENIOR WRITER, "BUSINESS WEEK:" Well, I think that's right. And certainly people are not expecting until next year that we're going to start to try and pay down this debt because the big issue right now is jobs. The question is it's the tipping point. Investors' sentiment can turn very quickly.

And as David said, the issue right now is we're going out to the next decade, basically, looking at the fact that the total federal debt is going to be greater than the GDP. That's we are going to owe more than we actually make. That is the kind of situation that makes investors very nervous, and the reality is that most of our debt is held by foreigners.

So they are right. You want to be spending right now. You want to get Americans back to work. But we're coming against the point where it's going be a real issue. And we also have the example of Japan.

So we have a very recent example of a country that many thought did not do enough early on to really kick start it's economy and that has dragged out for more than a decade to the point where people talk about a lost generation now of young people who may never get the type of earnings traction that you want to see.

So we do have cautionary tales that are more recent than the depression to say you have to pour money into an economy especially when it is like this now.

VELSHI: You bring up Japan. Let's talk about the dangers of too much debt and Japan and how it's affecting America. Moody's the credit rating agency recently warned that the AAA credit rating of the United States maybe shouldn't be taken for granted.

Now, we asked our friends at the Peter G. Peterson Foundation how you could be affected if our nations credit rating dropped. Now, with a lower credit rating, investors would be more hesitant to invest in our nation's debt. Something that David just pointed out isn't happening right now. To enticing investors the U.S. might have to raise interest rates.

If interest rates go up, the interest that our government pays on all of this debt that we're carrying goes up, meaning we have to raise more revenue to finance this debt and this could affect you either through higher taxes that you pay or cuts in federal programs like education or transportation, who knows what, and higher interest rates could also make it more expensive for you to borrow from a bank for a mortgage or a car loan, whatever the case is.

David Gergen, think back to the Clinton administration, which is the last time that our government brought in more money than it spent, the last time we didn't have a deficit. How much of that is about government policy and how much of that is the shape the environment is in?

GERGEN: Well, the Bill Clinton and the Democrats then working with a Republican Congress, I'm going to say, pursued policies that were not very popular in the first part of his administration but turned out to be right. That was the Bill Clinton supported tax increases mostly on the more affluent and they were modest but he also supported spending cuts, for Democrats that was hard.

I happened to be there during that '93-'94 period. Getting votes on Capitol Hill I can tell you was really tough. But it put the economy; put the government policy on course. Bob Ruben should get a lot of credit for this. That eventually brought down the deficits, and Bill Clinton along with the Republican Congress left to his successor George W. Bush, you know, significant surplus. He's the first president in modern time who has done that. It was tough politics for him but it was the right thing to do.

VELSHI: So you make the point that in fact it was what the government did as much as the economy. Diane, do you agree with that? Do you agree that it's not just the fact that when times are good we can balance the budget and when times are bad, we can't? Do you think the government could actually take steps to at least start to get us in the right direction, certainly not this year next but in years to come?

BRADY: Very much so. And I think you definitely want to look at the raising taxes, cutting spending. Because one of the alternatives that investors are very worried about is one way to get out of this as you can inflate your way out, that is the U.S. dollar goes down and all of a sudden the value of those investments go down as well and that's what I think people are concerned about right now.

VELSHI: Hold that thought for a second because this is where the discussion's becomes interesting. We're talking about how the countries debt relates to your personal debt. We are going to come back and talk about that with Diane Brady from "Business Week" and with David Gergen.

Now the scene in Washington these days sometimes resemble a horror movie with politicians fleeing from any association to big banks and the bail outs that they received. So how does it feel to be the man who will forever be considered the architect of those bailouts? Christine Romans posed that question to former secretary treasurer Henry Paulson. You will hear his answer next.

(COMMERCIAL BREAK)

VELSHI: Republicans and Democrats don't seem to agree on anything these days. There's one thing they can agree on. They've all seemed to have hated the big bailouts. Christine Romans sat down with the architect of what you think of as the bailout program, the T.A.R.P. program from 2008.

The architect of that, former secretary treasury Henry Paulson. Christine asked him about his personal feelings about those bailouts. It's just one of the topics that Paulson touches on in his new book "On the Brink."

(BEGIN VIDEOTAPE)

CHRISTINE ROMANS, CNN HOST (voice over): Now ironically from your ideological perspective, you didn't think you were going to be the guy who was going to be the architect of the biggest government intervention in capital markets in history.

HENRY PAULSON, FMR. TREASURY SECRETARY: Christine you said it better than I have. In the president's State of the Union address captured the mood of the country when he said Republicans hate these, Democrats hate these, and I hate them and let me tell you, I hated them. But they were much better than the alternative. And you know what? They worked because we needed working with imperfect tools and authorities, we were able to cobble together enough to prevent the system from collapsing and avoid disaster.

ROMANS: You know, you mentioned the president in the State of the Union. He said we hate them like you hate a root canal. And I said this to Tim Geithner the treasury secretary, but that means Ben Bernanke, Henry Paulson and Tim Geithner are the dentists. Because you guys were the dentists. How does that make you feel, the thing that every one hates is the thing that you actually had to do.

PAULSON: Let me tell you. I felt like I was having a root canal.

ROMANS: Without anesthesia.

PAULSON: I was a dentist having a root canal without anesthesia at the same time. But there's a saying in the book "On the Brink," and this was a day or two before we were going to need to step in and rescue Citigroup.

And what really hit me was that I was forever going to be associated with these bailouts, and it would be the secretary treasure that did all these interventions. I then I said that will be the good news. The bad news will be if we can't cobble something that works for Citigroup and if it goes down I'll be the secretary treasurer that presides over another great depression.

(END VIDEOTAPE)

VELSHI: Back with David Gergen and Diane Brady. The reason we have you guys on is because you're honest about this. I think Henry Paulson had it right on there. There's a whole lot of revisionist history going on on Capitol Hill with a whole bunch of people who want to be associated with having nothing to do with those bailouts.

Diane and David, we were all together during that time, and it seemed like the right thing to do to a lot of people who are now saying it was the wrong thing to do. Diane.

BRADY: It was the only thing to do. Don't forget what precipitated this was the bankruptcy of Lehman Brothers. People could not get any money. There was no faith in the banking system; this was as much a confidence crisis as it was a financial crisis. The government had to step in and provide that cushion. There's no question we were looking at a depression and this avoided a depression. Definitely we are in a painful recession but had the government not stepped in with that bailout, it would have been much, much worse. VELSHI: David.

GERGEN: I think that's right. There's an enormous amount of second-guessing and legitimately so about some aspects of it. How did the government handle Lehman Brothers? Should it have let it go? What about AIG? Should those partners have taken a haircut? I think those are legitimate questions. But if you look at the overall response of the federal government, you have to say the United States' response was well done. It did save us from going into a depression.

And frankly, I think the Bush administration in general as well as the Federal Reserve, Ben Bernanke in particular, will deserve more credit overtime than they're getting right now. I think the Obama administration to its credit continued some of those policies. That's why we didn't go over a cliff.

VELSHI: Diane, let's talk about -- we touched on this a little earlier, the fact that this did give us -- this and the bailout. It gets us into more debt in the United States. That debt ends us costing us in the future. But it's already costing us a little bit now as we see fluctuations in the U.S. dollar. In other words, some loss of faith in the U.S. government's ability to perhaps pay its bills over the long term. Are these fears founded?

BRADY: I think they are. And one of the reasons as I said earlier is that one way to get out of your debt is to inflate your way out of the debt. What's saving us right now is the fact that the rest of the world is in trouble too.

VELSHI: David, you know, we're looking at Greece and the fact that their debt problems influence our stock markets here in the United States. The reality is a lot of the world did what the U.S. did. They put a lot of their own tax payer's money or borrowed money into stimulating their economies. What's your long-term view of where we stand? Because increasingly people are getting very skeptical and very worried about the U.S.'s ability to handle its debt.

GERGEN: I'm deeply worried about where we are and governess in Washington and the capacity to deal with this. Paul Volcker is on the airways on CNN this weekend saying he's never seen gridlock like this, and I think he's right about that. Its interesting Ali, how the psychology of the world, balanced power, is changing already.

You know, China, we're learning just this weekend is emerging -- passing Japan to become the second largest economy in the world, and within another 20, 30 years if on the current course it will surpass America and it comes back to this very trenchant question that is now getting some attention, that Larry Summers posed before he went into the Obama administration.

He asked the question how long can the world's greatest borrower remain the world's greatest power. And that's the question that hangs over the United States right now.

VELSHI: And is our debt crisis and the fact that China is still the biggest buyer of new debt in the United States, is that key to answering that question?

GERGEN: It's partly, and we're already seeing some evidence of a Chinese diversifying and they're doing more with straight out equity investments in the United States as well as elsewhere. But I will say this, I think one of the most critical factors in our future is whether Congress and the president can act and show leadership, which they're not doing now.

And bringing not this year but taking the actions this year that ensure that in the years to come we're actually going to see some serious attack on these deficits until we get these debts under control and we don't find a situation where, you know, there is -- we had a dollar crisis and everything goes to -- everything goes up in the air at that point.

VELSHI: We're going to look into that. Clearly our own research from our audience indicates that this is a major, major concern for Americans and I think in 2010 we're going to be studying the debt, the deficit, and economic growth a lot more.

David thanks for joining us. Always a pleasure to see you.

GERGEN: Thanks Ali.

VELSHI: Diane Brady, always a pleasure to see you. Diane Brady from "Business Week."

BRADY: Thank you Ali.

VELSHI: All right. Toyota is on the case. More than 8 million cars being recalled right now for a bunch of different problems? Were those technical problems, were those mechanical problems or is there a bigger problem at Toyota that you need to know about?

(COMMERCIAL BREAK)

VELSHI: Unless you've been living under a rock you heard there was another Toyota recall this week. That makes it three. The Japanese automaker is recalling a 150,000 Pruis cars due to brake problems bringing the total number of recalls Toyota's to 8.1 million cars Toyota's struggle sort of turns a lens on the global nature of the car industry. Parts for cars manufactured all over the world.

Is globalization at the root of Toyota's current trouble? Our good friend Richard Quest of CNN's "QUEST MEANS BUSINESS" and I have now made peace on this issue because we were quite heated about it last year, although Richard made one point that stands out.

And that is Richard you were saying Toyota is a carmaker that makes cars all over the world using lots and lots of different suppliers. That it is not just a Toyota thing, Honda, Nissan, Ford, GM, they all do it. So we can't all get all hot under the collar about a recall and blame the head office in Japan for it. Tell me a little more of your thinking on this.

RICHARD QUEST, CNN HOST, "QUEST MEANS BUSINESS:" Well first of all I think I'm now in an uncomfortable position. Which is unusual for me, I may even have to do a bow of apology a little like the Toyota executives. I foolishly and irresponsibly rode to the defense of Toyota last week claiming that big companies find it difficult obviously to share size and scale of the operation.

Of course, Toyota managed to prove this week that Toyota's problems are Toyota's problems, and the way they ham fistedly dealt with these recalls and their apology has put me very much back in your -- I can't believe I'm, a, agreeing with you, and, b, I'm now in Ali Velshi's camp. To your point of globalization there is something that happens when companies start to move into bringing in products from all around the world and merely assembling it in one place. Quality does seem to go down the tubes, Ali.

VELSHI: And more importantly, the quality that you may in gender as a company, so if you're Toyota and reliability and quality were your touchstones but you're getting a thousand parts in a car made by different suppliers, you can give them the specifications, you can tell them you really want it to work, you're negotiating on cost, and ultimately they may not work on the same basic principles of quality and responsibility that you do.

QUEST: And the biggest example I've got for you of that is Boeing. Boeing building the 787 Dreamliner. The company normally made a lot of the parts, assembled a lot of the parts, and did the whole thing either at Renton or at Everett. All of a sudden the 787 is being built in Asia, in Europe, even in Australia. The pieces are being put together, what happened to pieces arrived in pieces. They didn't match up. The quality wasn't there.

It takes time for an old dog to learn new tricks. Now, I think what we're seeing particularly if you look at the accelerators and the different manufacturers of Toyota, they basically took their eye off the ball, and they're going to pay dearly for years to come.

VELSHI: The one point we should make because I got a lot of e- mails and I got a lot of posts on facebook and twitter about this is Toyota. They outsourced everything all over the world. It's not just Toyota. You point out its Boeing and it is American car makers, its big companies that manufactures stuff all over the world. This is a common problem for a lot of companies.

QUEST: But not only that it's got to be like that. It's got to be. Now, this is where you and I may disagree. It has to be. If you are selling to the rest of the world, the rest of the world turns around you and says, well, yes, OK, we'll buy your products, but we want some of the work. Boeing, Ford, they make the cars where people buy them and they have their suppliers and they have their industry.

VELSHI: Right.

QUEST: I remember -- go on.

VELSHI: I'm sorry to disappoint our viewers, Richard, but we're not going to be able to pick a fight on this one. I'm with you on this. Can you come back in a few minutes and we can talk about something else and maybe we can fight.

QUEST: Oh and fighting with you is just, I'm just buttering you up ready for the ...

VELSHI: Ready for the next one. All right. You stay right there. Richard Quest in London. He's the host of CNN'S "QUEST MEANS BUSINESS." We are going to take another stab at it in the show and see if we can't get him going.

Next, those credit cards in your wallet. They're getting a makeover. All the rules that you thought you knew about credit cards are about to change. What you need to know about sweeping credit card reform.

(COMMERCIAL BREAK)

VELSHI: Major changes. You all have been calling for this. Major changes are coming to your credit cards on February the 22nd. It's all part of the Credit Card Accountability, Responsibility, and Disclosure Act that was signed last year. How are these rules going to affect you, your bill, what you owe, are there going to be new fees? Well Gerri Detweiler is a personal finance advisor for Credit.com she's here to break it down for us. Gerri thanks for being with us.

All I've heard, I would say the most complaints I've heard from viewers and calls and questions in the last year and a half or two have been credit cards, how they don't understand what's going on. How they can't deal with the credit card companies. So here's this act. What does it do? How does it change my life as a credit card user?

GERRI DETWEILER, PERSONAL FINANCE ADVISER, CREDIT.COM: The good news is the feeding frenzy is almost over. The best part of the credit card act is that issuers can't retro actively raise your rate. You no reason they just decide instead of charging you 10 percent they're going to charge you 22 percent. That will be over.

The other thing is that it will be easier to get your bills in on time because due dates are going to be the same every month, no more of the 1 p.m. cut-off times or due dates on the holidays where they don't accept the payment. All of those practices are also outlawed.

VELSHI: They're also going to stop rate hikes on existing balances. What does that mean? If you've got a rate that you've agreed upon on an existing balance, if you follow the rules and pay your bills on time, if you don't by the way, none of these counts. But if you do they can't just arbitrarily raise your rate.

DETWEILER: That's correct. Your interest rate that you're paying right now unless it's a variable interest rate or a teaser rate that has been designed to expire after a certain time period it won't be able to again retro actively raise it. Unfortunately, though, there are a lot of consumers out there who had their rates raised last year or the year before and there's no relief for them.

VELSHI: One of the criticisms of this law was that so much notice was given about how they were going to change it, there was so much delay between when the law was passed and when it was implemented on February 22, that the credit card companies went nuts and did all the bad stuff before this date.

DETWEILER: Yes. You're exactly right we've been serving consumers at Credit.com every quarter and 27 percent last survey just told us that they had their interest rate raised, 13 percent told us that the credit card issuer lowered their credit limit, another 11 percent said the card issuer closed their account. They are reducing reward points; there are all kinds of things. This is a real transition period, but fortunately we at least see an end in sight now.

VELSHI: All right. Gerri, I mean it's one good thing that they're getting some rules out there. That the credit card companies have to live by, that of course, does not excuse personal behavior. You have got to be responsible about your credit. By the way, these protections, am I right Gerri, they do not count if you don't follow your rules. In another words, if you don't pay your bills on time, there are still things that can happen to you.

DETWEILER: That's right. If you are 60 days late they can raise your interest rate retro actively. So you want to make sure that you try to stay up with your payments. But it is going to be easier for consumers because here is what you are going to see on your statement soon. You're going to see the amount and time and money it would cost if you just make the minimum payment.

VELSHI: Ah, yes.

DETWEILER: The amount of money it would take for a three year repayment period. So if you look at that figure and say there is no way I can pay that each month you'll see a number for a credit counseling agency and you can talk to them as well.

VELSHI: I'm glad you brought up both those points. Call the credit counseling agency and look at how long it is going to take you to pay off a bill. You will be shocked at how long it's going to take to pay off a bill if you just make the minimum payments. Gerri good to talk to you. Gerri Detweiler is a personal finance adviser with Credit.com. This is just such an important story.

All right. Big changes also in store for 401(k) s and IRAs coming up this year, 2010. What are they? How do you take advantage of them? Our investment experts are here with free advice for your money. Get a pen. We're coming right back.

(COMMERCIAL BREAK)

VELSHI: For those of you who have investments or you want to have investments, listen up. Joining with me with what you need to know now about your 401(k) or IRA The specialists Ryan Mack, the president of Optimum Capital Management. Donna Rosato, senior writer at "Money" Magazine and Mitch Tuchman the founder and CEO of MarketRiders.

There is some good news out there for anyone with a 401(k). The match is back sort of kind of for some companies or will be soon. This is according to a new survey from Hewitt Associates. Eighty percent of employers which had suspended or reduced their company match in the 2009 401(k) plan are going to restore it in 2010; some of them like American Express and other companies have already done so.

What should you be doing to make sure you're making the most of your money and what if you haven't actually invested yet? Let's ask our specialist. Ryan Mack, let's start with you. The 401(k) match is free money. They tell you there's no free lunch out there. There's a very little free lunch and the 401(k) match falls into that category.

RYAN MACK, PRESIDENT, OPTIMUM CAPITAL MANAGEMENT: The bottom line is I have never heard someone say that I haven't put too much money in my 401(k) program. I've always heard I never put enough. So we have to really, especially because they are going to be matching your money, you know we have people breaking doors down to get free things over Christmas time for PlayStations and what not.

We need to start breaking doors down to get some of this free money that our companies are giving out. This is exactly what is going on, start making sure that by the time we're 65 we can kick back and make sure we're living our golden years in the right way with our 401(k) program.

VELSHI: Donna Rosato, this is actually free money twice if you get a company match. Because part of the free money is if you invest in a 401(k) or an IRA you get a little bit of your own money back from the government that you paid in taxes but if your company is matching it it's kind of like double free money.

DONNA ROSATO, SENIOR WRITER, "MONEY:" Well it is. I'm going to argue even that even if you don't get the match the 401(k) is a really great deal. You're putting away money in your 401(k) that is pretaxed.

That's money that is going to reduce your taxable income and that money is going to grow without the drag of taxes plus you're able to put almost $16,000 a year into a 401(k), one of the few tax advantage vehicles where you can put that much away. And you know don't discount, it's easy. It comes out of your paycheck. You don't miss it if it's that easy.

VELSHI: Yes that is one of the benefits. It's not just the tax benefit but it's the idea that it is disciplined saving. We're not a saving culture. We're certainly becoming more of one after this great recession, but the reality is if you don't see it, you may not miss it as much.

MITCH TUCHMAN, FOUNDER & CEO, MARKETRIDERS: The thing that people need to understand also is that money grows on something called a law of compound returns and if you keep putting a little bit every year into a 401(k), what happens is it's like a snowball. It begins to attract more and more money and over time you end up with a boulder at the end of the hill. So if you're younger, if you are 25, and you start doing this, by the time you're 65, you have a lot more money.

As a matter of fact, if you wait ten years and you start saving at 35, you only have half as much money as if you were 25. It's really important to put this money away tax-free as Donna and Ryan are suggesting and do it as young as you can, and if you're going to get a match, again, it's free money and it allows this compounding effect to grow and grow and grow over time.

VELSHI: And generally speaking it's easy to understand a 401(k) or a 403(b) because you have somebody at work you can call, you probably have some website you can go to. An IRA it gets one level of greater complexity because it is one removed from your work place but can actually be more beneficial. There are a couple kinds of them. What's your thought on IRAs?

MACK: Basically in terms of the traditional versus the Roth IRA which are two of the most popular IRAs individual's use. The basic difference is that whether you're going to pay Uncle Sam the taxes now or if you are going to pay Uncle Sam your taxes later.

With the Roth IRA you're pretty much paying your taxes right now so when you retire at 59.5, when you start taking your distributions out you know exactly what you're getting. But in terms of the traditional IRA where you pay your taxes later, we don't know what your taxable basis is going to be. It might be a lesser taxable base or it might be a higher taxable base.

VELSHI: The idea being that you're older, you're getting ready to retire and you don't have a lot of income at that point so you're not paying as much tax.

MACK: Exactly. The most important thing is sometimes individuals are saying should I put money in my 401(k) and my IRA? At the end of the day, you know Ross Perot versus the average Joe actually pays a less proportion of his income taxes of his income. Well we might the not be billionaires like Ross Perot but we do have access to these things like the IRA and we can really maximize our or minimizing our taxable base like the IRA and the 401(k) programs.

VELSHI: Donna, what do you think?

ROSATO: I agree with Ryan. I think the strategy I would say today is you want to start investing in your 401(k) at least until you get a company match which for most people is about 6 percent of your salary and then it make as lot of sense to invest if you can, if you can't invest in an Roth IRA A lot of people think taxes are coming up and it's great if you can put that money away, you will not be taxed on that withdrawal later.

One thing to keep in mind with the Roth IRA there are income limits on it so you want to make sure that you can meet that, but if you're a young person today you're probably not making as much. So it's going to make a lot of sense, particularly for a young person to be in a Roth IRA today.

VELSHI: Hey, Mitch I have a lot of people who come and show me their 401(k) s because they are concerned about how they have invested in them. They were concerned a year ago. In many cases there's a pie chart that shows how your investments are divided up. And many peoples are just one; it is just in cash or something like that.

It's sort of a second step how you allocate your investments. The first step is just deciding that you're actually going to put some money away and you're saving as opposed to spending and adding to your credit and your debt.

TUCHMAN: Right Ali. The second step and you wrote a great book about it. I'm not trying to overtly plug it but your book is exactly what people need to read and understand. How you allocate the money in your 401(k) will have everything to do with how much money you'll have as you get older. So the thing about a 401(k) is you need to take control of your 401(k). You need to go to your hr department. You need to go to your finance department. And you need to find out what the tools are that are available to you as an employee in terms of taking control of this.

And then also what I would do is I would say show me where the fees are. I would want my HR department to say here are the fees you're paying in these funds. You know, people think they need an MBA or they need a finance degree to do this stuff. It's not true.

You can manage your 401(k) at your employer as easy as you can go shopping for a car over the weekend. If you spend as much time doing that, as you do trying to get an extra $100 out of the dealer you'll make a lot more money with a 401(k) shopping wisely through the funds and using your company resources to help you do that but it's all about asset allocation.

VELSHI: And it's not that hard to figure out. And that is a good point. Get the help you can get to do it. Right now people are a little worried, we saw some volatility in the market but for long-term investors, this is actually one of the best times to get invested because you actually can get in after the market has been charging ahead for so long. You can actually get in and get some discounts. What a great conversation with all of you. Thanks very much for being with us.

Ryan Mack, is the president of Optimum Capital Management, Donna Rosato, senior writer at "Money" Magazine and Mitch Tuchman, is the founder and CEO of MarketRiders. We will have you all back to continue this.

With all the kids shoveling snow, the snow shovels that have been bought, and the salt that has been purchased you'd think that these blizzards would be great for the economy. Why it might not be.

(COMMERCIAL BREAK)

VELSHI: All right. As we speak, some of you are still digging out from the massive snowstorms and blizzards that crossed the country this week. Now look, you know this. I'm from Canada. My co-host Christine Romans is from Iowa. This is not a place for weather wimps on this show. Christine's away. I've gathered some of the toughest people I know. Rachel Sklar joins me now; she is an editor at large for Mediaite and a fellow Canadian. No wimpiness there. And, of course, Richard Quest. Everyone who knows him knows he has never shied away from anything, including a little bit of snow. Listen to this; we've got economic reports, forecasts that say 200,000 jobs may have been lost because of these storms. Another economist said maybe 90,000 jobs may have been lost.

Businesses, they say, bore the brunt of job loss, manufacturing, construction and transportation, people weren't able to hire -- I mean, people weren't able to go to stores. But people bought shovels and they bought salt and they bought snowplows. I don't understand where this comes from. Rachel, let's start with you. Where do these economic forecasts come from? Why would 200,000 jobs be lost because of the snow?

RACHEL SKLAR, EDITOR AT LARGE, MEDIAITE.COM: I think some of the jobs that were not lost were the jobs of economists, and actuaries who figure this stuff out. I'm with you Ali, and frankly the rare relief that you began that way, because that was my reaction. The numbers are all conjecture. What there is extrapolating what might have happened, you know people who started jobs and couldn't get to them, who now will file for unemployment.

VELSHI: Are they all fired because they couldn't get to work? I mean honestly.

SKLAR: I mean these are the reasons that are cited in these reports by you know a guy from Deutsche Bank. I agree with you. You have to build weather into the process. There are going to be weather disruptions.

VELSHI: It's winter.

SKLAR: Of course. Winter like Washington hasn't seen, but, still, these are the things that you build into the process.

VELSHI: I'll cut them some slack in Washington, Atlanta got snow and Atlanta doesn't have the salt and the plows. I get it that it all slowed down. But Richard there was a time when that was OK, snow came for a couple days, chill out, stay home, take a while to get to work. I don't understand this business.

QUEST: First of all, the only thing you need to do with those economic reports is burn them to keep yourself warm during the cold snow. I've never heard such a load of clap nonsense in my life. The truth is that statistic of 200,000 jobs, it's all to do with the fact that some people don't get the work, therefore they sign on for unemployment benefit, it artificially massages the numbers.

And we discovered this in London last year when we had the worst blizzards which shut down the city for nearly several days. What we found out then, oh yes, the old prognostications came out, $3 billion it was going to cost. Don't forget the pent-up demand.

VELSHI: That's right.

QUEST: What you lose on the swings ... VELSHI: You get back next week.

QUEST: You make on the roundabout. I guarantee you the only thing that snow report should be done with is get buried.

VELSHI: Burned to keep warm. All right. Here is the thing, it use to be and again when I was a kid, Rachel you may remember this in Toronto, snow day they didn't really take too many snow days.

SKLAR: I don't remember snow days. I just remember snow.

VELSHI: But if you did have one you'd go tobogganing or you would stay home and you would chill out. Maybe your parents would too. A lot of people are saying today and it use to be a common refrain that the snow day doesn't help you. It doesn't actually give you time off work because you've got the BlackBerry or the iPhone or you got your computer at home and you're expected to actually log in from home, do business as usual. What do we think about that?

SKLAR: Well, it depends what business you're in. Factory workers can't do that from home. I think a lot of us information industries; I could have skyped into this interview. So we forget that there are people who don't spend their entire day wired to the BlackBerry or another device.

That said it's often easier to do work from home and in fact another economic balance that we might see is in small businesses in a few months where all the people who couldn't get to work use that opportunity to work on their other projects.

VELSHI: That's a good point. Richard.

QUEST: Ali, you are far more dangerous than the snow with that sort of talk. You're basically saying you want people to take off and play in the snow. You're bemoaning the fact that you might have to get the BlackBerry out or skyping or do a little bit of work out. The truth is there's no reason at all why you can't do both.

VELSHI: I was supposed to skype into my morning meeting the other day and I told my executive producer I had some kind of technical problem with the internet because otherwise she would have seen me in my pajamas. Rachel Sklar, excellent to see you, editor at large at Mediaite.com. Richard Quest who is now, you are sticking around. You are both sticking around; I just spoiled everybody's lunch with the fantasies of what it is I sleep in.

Next the latest buzz from Google aims to change social networking. Is it going to work and what happens by the way when a branding expert has to recreate her own brand? Mary Snow reports on a small business owner who took own advice in this week's "Turnaround."

(BEGIN VIDEOTAPE)

MARY SNOW, CNN CORRESPONDENT (voice over): Catherine Kaputo calls herself a personal brand strategist, but her company that helped individuals create their own brand was struggling. CATHERINE KAPUTA, FOUNDER, SELLBRAND: So many people were out of jobs. They were afraid to invest in themselves and work with a coach.

SNOW: Kaputa decided it was time for her own rebrand. She started pitching herself to large companies and found a new niche.

KAPUTA: I've been mainly targeting large companies because a lot, especially in this tough economic climate, a lot of large companies are still doing innovative programs for their employees.

SNOW: One of those companies, Pepsico. Like many in the recession, Pepsico wanted to invest in training employees, but didn't want the high cost offsite workshops held in the past. Beverly Tarulli heads up the companies woman's initiative.

BEVERLY TARULLI, V.P. ORG. & MGMT. DEVELOPMENT, PEPSICO: In 2009 it was a tough year for all of us. What we were looking to do was do it in a way that would be cost effective, but reaching the most women we could.

KAPUTA: You always have to build your brand out of authenticity.

SNOW: Kaputa presented a personally branding workshop at Pepsico Headquarters that was broadcast to 12 of the companies' sites throughout the country. She says thanks to her new corporate focus her revenue increased 100 percent in the last year.

KAPUTA: It's been a very tough economy, but amazingly, 2009 was my best year.

Women tend to down play their achievements.

SNOW: And Kaputa says any company can reevaluate and refocus just like she did.

KAPUTA: Really look at your brand. What does your company stand for? Are you filling a need, a niche in the marketplace? Filling a gap that no one else can do?

SNOW: Mary Snow, CNN, New York.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

VELSHI: Time for one more headline with Rachel Sklar, editor at large for Mediaite.com. Great website by the way, you have to check it out. And Richard Quest, host of CNN's "QUEST MEANS BUSINESS." Great show if you get a chance to check out CNNI.

Just in time for Facebook's sixth birthday, which it celebrated last week, Google introduced its own social networking feature called Google buzz. Now the difference Gmail users, those are people who use Gmail, Google's email system will be able to see status updates and share media, pictures, links, websites with friends right from their mail box. My question is did we really need another social networking site? I'm a big fan. Rachel you know I like it. You use it more than I do. Was there a need for this or is this part of Google's efforts to take over the world? What do you make of it?

SKLAR: I think it's a little bit of both. It's a little early to know whether this is just another thing that we don't need or the thing we didn't know we needed.

VELSHI: Right.

SKLAR: At first I found it annoying and wondered what the use was, but I admit I started finding it useful. There's a lot of sharing features. People already sharing links, stuff coming in from Google reader. You can integrate your Twitter stream, which is a point that Google actually made in their press conference. You can go text stuff, so where you post from can be visible.

I mean there a lot of possibilities. And I think what will be really interesting is when they open up the API, which they are planning to do by May, according to ecosystem, which is where I get my geek information when it is needed. Other developers can come in and use the service to create their own private application.

VELSHI: Which has been a big success for Facebook. By the way for all of you out there, before I get to Richard, Rachel and Richard are both very, very active on Twitter. You learn a lot because they post a lot of information. Richard, what do you make of this?

QUEST: What has happened here is that each, if you like Facebook, Twitter, gmail, each had a unique selling point, and then the others decided they had to steal their clones. Facebook decided it had to have what Twitter had and "what are you doing now" and gmail which is an excellent email client needed to have this social networking of Facebook. Twitter of course wants to now have twit pink and all these other things that you can do.

The reality is I don't think any one social media site is going to serve all purposes all the time, no matter how hard they try. What I question and I question Rachel is, there was one phrase that people always talk about never use with social media, what is the social usefulness.

SKLAR: Are you serious? It's incredibly useful for exchanging information and sort of seeing trends. Just for, frankly, for being social. It's an incredibly useful system of communication. It's changing everything. That's the short answer.

QUEST: I can see that. I Twitter and I love to Twitter. I can understand it with a small group of friends, but do you always want to know who you went to school with and what they're doing now? Do you really care?

SKLAR: It's all information. Like I always like to say, it's just a platform and it's what you do with that platform. It's not just for what I had for lunch. This is an interesting article. You were talking about this yesterday and here is an update. These are photos you might find interesting. This event happened, did anybody else experience it? It outsourcing. It's not just one way or two way communication.

VELSHI: I bet you we have more people watching us today because I tweeted that both of you are actually going to be on the show. So that probably helps us to get more information out to people. But that is interesting. The evolution of how we use social media may be more important than how many places we can use it.

Great conversation with both of you. Always a pleasure to have you both on here. Richard Quest is the host of "Quest means Business" on CNNI. Rachel Sklar, a fellow Canadian not scared of the weather, editor at large, at Mediaite.com. Check it out as well. Follow them both on Twitter.

Thanks for joining us for YOUR MONEY. You can follow Christine and me on Facebook and Twitter, at ChristineRomans, at AliVelshi. And you can tune in every week for YOUR MONEY, Saturdays at 1:00 pm Eastern, Sunday's at 3:00. Log on 24/7 to CNNMONEY.com. And you can see me every Monday to Friday 1:00 Eastern, 10:00 Pacific on CNN. Have a great weekend.