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YOUR BOTTOM LINE

Are You Better Off?; The 140-Character Small Business Makeover

Aired October 20, 2012 - 09:30   ET

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


CHRISTINE ROMANS, HOST: Thank you. See you at the top of the hour.

Good morning, everyone. I'm Christine Romans.

Are you better off today than you were four years ago? I'm going to show you three charts that make the case to elect President Obama, and three charts that show it's time to now change to Governor Romney. And guess what? One of them is the very same chart.

First, the case for Obama.

Household net worth. After being decimated during the depths of the recession it's coming back. It's coming back. Net worth is up 22 percent since the 2009 low.

Next housing -- home building is at a four-year high. Up almost 34 percent since November 2008. Home building sustains construction jobs. It moves money throughout the economy, truck sales, home improvement stores, appliances, the works.

Add in rising home prices, falling foreclosures and it looks like the housing recovery is beginning and it's real.

Finally, jobs. The unemployment rate is now 7.8 percent, after being stuck above 8 percent for nearly four years. The number of jobless Americans is the lowest now since the president took office.

Ah, but it is this very same chart that makes the case for Governor Romney, too. Seven-point-eight percent unemployment is still to high, and 23 million Americans unemployed and underemployed, as Romney likes to say, still too many.

Romney makes a strong case that this is not where the country should be. He has two more pieces of evidence for this. We're spending borrowed money to do it. Four years ago, the national debt stood at $10.6 trillion. Now, it's $16 trillion and counting, which brings me to the deficit -- the yearly shortfall between how much the government takes in and how much it spends.

Just one month after taking office, the president vowed to cut the deficit in half. It stood then at $1.4 trillion. This year, the Congressional Budget Office puts that number at $1.1 trillion. Progress, but, no. The president did not make good on his promise.

Henry Blodget is the CEO of the online publication "Business Insider". Will Cain is a CNN contributor and our resident conservative.

Henry, you say we're better off than we were four years ago. But you've also brought a chart with you.

Let's talk about the chart that you brought. This is the chart that you say might get the president fired. It shows the current unemployment rate versus the administration's predictions for where we should be both without and without the stimulus. Either way, we're supposed to be closer to 5.5 percent right now.

Can Obama win with these numbers? And tell me, tell me about this chart.

HENRY BLODGET, CEO, BUSINESS INSIDER: Well, the polls would suggest that he can win. This chart has been out there in the long time and he's been ahead in the polls and so, it looks like he can win.

But this is an important chart. It shows the Obama administration really underestimated how bad things were before they came into office and how much the stimulus would do and as you mentioned unemployment is still way to high.

ROMANS: Will, you look at that chart and this is exactly what surrogates for Romney has been saying. Look, there's been false promises all along. They've underestimated the depth of the crisis. Don't give them another chart.

WILL CAIN, CNN CONTRIBUTOR: What the chart highlights is, what do I like to do, Christine? Question the premise.

The question is wrong. Are you better off that are four years ago? I don't like the question. Conservatives use it to indict President Obama. I don't like it when others use it to defend him, because you're picking two arbitrary points in time and differentiate them through an inauguration.

The truth is: are we in a recovery? Yes, I hope so. We've recovered from every recession we've had, including the Great Depression.

The question is: is it as good as it should have been? Hard to prove otherwise. Hard to prove it is, or it isn't. But that's the right question. Is it as rapid and as healthy as it should have been?

ROMANS: Well, is it the president's fault that it isn't more rapid?

CAIN: Well --

ROMANS: Conservatives say yes.

And I want to bring in -- I want to bring a sound bite here from Ken Rogoff, who I asked him this week. I said, look, we keep hearing that you should vote for Mitt Romney because the president made the recovery worse, and this is what Ken Rogoff said.

(BEGIN VIDEO CLIP)

KEN ROGOFF, ECONOMICS PROFESSOR, HARVARD PROFESSOR: We look backwards -- no, I think Romney's advisers have been wrong to say that this is all his fault, that it would have been much better if he had done something else. When you have a deep financial crisis, you look at U.S. history, you look at other countries, it's very hard to come roaring back.

(END VIDEO CLIP)

ROMANS: The world's leading experts on financial crises and recoveries says Mitt Romney's advisers are wrong. Doesn't he deserve a second term?

CAIN: Well, Ken Rogoff is 100 percent right. Henry knows this. I know this. It takes seven years to come out of recession, on average, worldwide, from a debt and de-leveraging recession.

Did President Obama make it worse? Here's my indictment. My suggestion is by focusing on health care, reforming the health care market in the first year, he caused a huge distraction in the market and that's what set the recovery back.

BLODGET: Well, let's give him credit though for focusing on the stimulus first, which a lot of people argued helped. You put all the charts there together. Here's the stimulus, here's the bottom and then there we come up on all the charts.

And you can say, OK, would have happened then anyway? Maybe. We'll never be able to prove it.

CAIN: Economics is maybe. I've seen it on "Business Insider," you have all the charts. They're up. That's great. But stimulus is one thing among plenty, like the Federal Reserve printing tens of trillions, billions of dollars.

And, by the way, we run that deficit you showed every year. That is stimulus in itself. So, what caused the recovery to happen? Economics is a big maybe.

ROMANS: So, why does Mitt Romney have a leadership vision that you think is better than the president's on this? Because, you know, I'll be honest, one of the criticisms of the president is we don't know what the second term agenda would be.

CAIN: Right.

ROMANS: The first term agenda of Mitt Romney and how does -- does he like come in on the coattails of a recovery that might be under way?

CAIN: Well, first of all, a very valid legitimate criticism of Mitt Romney is, I don't know because he hasn't given you exact specifics. But I would like to hope it would be, it'd be centered around certainty, first of all. Not injecting these uncertainties like health care reform into the marketplace.

And here's where Henry and I have a big disagreement. We argued about it in the green room, who causes a recovery, who creates jobs, do rich people create jobs?

I think Mitt Romney to focus on lower taxes would enable the people that actually create jobs.

ROMANS: Do rich people create jobs?

BLODGET: Absolutely not. They are important, the same way the sun is important in an ecosystem, but go try to grow a tree in Death Valley. It's not going to happen.

We have plenty of investment capital right now. The problem is not that rich people don't have enough money to invest. The problem is consumers are totally strapped, and they have debt coming out of their ears. And as long as they are working off their debt and they don't have jobs and they don't have good jobs, it is very hard to get the demand in the economy to actually --

CAIN: We agree on that diagnosis. It's the cure I'm not sure about.

Do you cure that cancer through investment or through creating what I think would be a false demand?

ROMANS: You know, a billionaire this week told, Christine, there aren't enough opportunities. There's plenty of money in America. There aren't enough opportunities.

And how do you create the atmosphere for people taking a risk for those opportunities and that atmosphere is here. Who unlocks that?

BLODGET: And the reason there aren't opportunities -- again, because consumers don't have enough money. If we did, we were able to borrow it through all the Bush years and the 10 years before that, and so forth, but now it's stopped. People are deleveraging.

The key thing we have to fix in this country that neither candidate has offered a solution for is how to get middle class wages rising again.

ROMANS: I want to look at this Gallup poll and I want Will to weigh in on this. It's U.S. economic confidence number and it shows that we're at highest level since late May. Confidence, you know, just two weeks and change ahead of an election is now at the highest since May and it's largely driven, Gallup says, by Democrats and independents. Independents are feeling better about the economy.

So is that good news for the president?

CAIN: Yes, you would have to think that's good news for the president but how revealing is it. As I said earlier, we're going to have recovery. We've recovered from every recession. Confidence is going to come back.

The question is -- from a political perspective, did you aid it or did you inhibit?

ROMANS: Another chart for Henry -- this chart could be in the president's favor here. This is one, the S&P 500 over the past four years. Individual investors, of course, are pulling out of the market. Wall Street is going strongly for Romney.

Does the strong performance in stocks help the president, or is it not connected to Main Street enough?

BLODGET: Oh, I think it definitely helps him. And, in fact, if you line up the polls in the stock market, it's remarkably similar. People are very much affected by it.

ROMANS: And one other chart that's really interested here, too. Are you better off? Look at your paycheck. As we talk about the premise, you're talking about the premise of over four years doing the "are you better off?" -- this is 2000 to 2010. Average household income went up a buck, housing and transportation costs went up $1.75.

So you've got a middle class that hasn't been feeling the benefits of any kind of rising in the economy for over a decade. Is it too arbitrary to say four years anyway?

CAIN: It's too arbitrary to say a decade. It's been happening for 30, 40 years. The question has much more to do about an economic transition, moving away from an economy that had a full spectrum of jobs, manufacturing, to one that is more mature, that has only certain kinds of jobs, that has less to do with presidents and has more to do with economies and transition.

ROMANS: All right.

BLODGET: I agree with that. I would love to hear Mitt Romney, though, offer a solution to that, especially given that he was such --

CAIN: I would love President Obama to find another solution.

BLODGET: Fair enough.

ROMANS: This is a nice way to start a Saturday morning with all of the charts and you guys to talk about them.

Thanks, everybody. We'll talk to you soon, Henry Blodget and Will Cain.

BLODGET: Thank you for having me.

ROMANS: American jobs, American skills, American excuses. I'll rant on the skills gap and how to fix it.

(COMMERCIAL BREAK)

ROMANS: Corporate chieftains say there are 600,000 unfilled American manufacturing jobs, unfilled jobs because they can't find good enough workers. They make it sound like we're a nation of Lucy and Ethel's, from "I Love Lucy," you know, wrap things, talking on the assembly line, can't keep up, shoving candy in their mouths and pockets, anywhere. Their skills obviously are not up to par with the technology at hand.

Of course, that was for comedy. This is for real. There are 12 million people out of work, and the big jobs discussion in corporate suites is the mismatch between the f jobs of today and the skills of today's Lucy and Ethel.

But is the so-called skills gap really just an excuse not to hire? This week, a study by Boston Consulting Group delivered a long, overdue dose of skepticism. It estimates the United States is short some 80,000 to 100,000 highly skilled manufacturing workers. That's less than 1 percent of the nation's 11.5 million manufacturing workers.

The study also concludes that corporate America bears the blame. Employers won't pay more for the higher skills and experience they demand. Quote, "Trying to hire highly skilled workers at rock bottom rates is not a skills gap."

Corporate America has spent 20 years rushing overseas for the cheapest labor they could find, and the current whining about not being able to find skilled labor rings hollow.

Look, the United States cannot compete if our workers cannot perform these jobs. We all agree on that, and our middle class cannot recover if Americans are not hired for these jobs.

Here's what we need: Better K through 12 education, with an emphasis on science, technology, engineering and math. We need public job training programs that actually work and are targeted and efficient, not tangled in bureaucracy.

And we need companies to invest. If you can't attract the best candidates, offer a higher wage. If you can't find the workers, then train them.

Last week, four big companies formed a new coalition to train 15,000 of our veterans to work in advanced manufacturing. General Electric, often criticized as a major outsourcer of American jobs, it will invest $6 million in the program.

We'll be watching to make sure this is a real effort and not just an exercise in public relations. There are 23 million potential workers for you, corporate America, the unemployed and the underemployed. The workers are there. It's your move.

Coming up --

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: It's called pincer.

UNIDENTIFIED MALE: Pinterest.

UNIDENTIFIED FEMALE: Pinterest.

UNIDENTIFIED MALE: Pincer is a new one, I'm going to (INAUDIBLE).

(END VIDEO CLIP)

ROMANS: Do you own a small business? I'm going to tell you why you must master social media. That's next on YOUR BOTTOM LINE.

(COMMERCIAL BREAK)

ROMANS: This next story is essential for any small business owner. Your customers don't live around the block anymore. They live around the world, and their language is social media. If you don't understand it, you'll be out of business.

(BEGIN VIDEOTAPE)

ROMANS (voice-over): There's Facebook, Twitter, Pinterest, Google Plus and Instagram, just to name a few. The tangled web of social networks leaves small business owners like Flora Shepelsky scratching their heads.

(on camera): Social media is the new word of mouth. This is how people are talking.

FLORA SHEPELSKY, OWNER, DESIGNS BY FLORA: Well, that's what I'm told. I'm embarrassed to say, I -- I haven't believed in it.

What do you think of this?

ROMANS (voice-over): Flora's business manufactures and sells high-end wigs. The cost: anywhere from $2,000 to $10,000. Every wig comes with flora's personal touch and privacy.

SHEPELSKY: It's not an item that you walk by and say I'm going to go buy me a wig.

ROMANS (on camera): This is a very different kind of customer/shop owner relationship because this is a very personal. This is a very personal thing to buy.

SHEPELSKY: It's a marriage.

ROMANS (voice-over): Today, though, she's not giving a customer a makeover. She's getting one from a social media expert Gary Vaynerchuk.

GARY VAYNERCHUK, SOCIAL MEDIA EXPERT: If you're not on Facebook and Twitter in 2012/13, you're basically not a relevant business in our society.

ROMANS: Fifty-three percent of businesses use social media. That's up from 44 percent last year. But Vaynerchuk says few use it effectively.

VAYNERCHUK: Everybody thinks about social media as promotions, as e-mail, as talking. Twitter, more than Facebook or anybody else is about listening, less pushing the PR that you've got in and opening a store and more searching on Twitter to jump into the conversations.

Facebook is different. If you were to jump into somebody's conversation on Facebook, they would be upset. Facebook is much more private, it's your profile. But you've had 102 people like this page. They want to receive information.

ROMANS: The goal, to get people online to spread Flora's message. But to find those people, she needs to look beyond Facebook and Twitter.

VAYNERCHUK: If you were lucky enough to be in the women demo and really try to story-tell to women, Pinterest is becoming almost a must.

And then if you're looking for a hipster, younger crowd, that's when you get into Tumblr. By you taking pictures of Instagram and taking those pictures and putting it out, people will see it 15, 20, 30 people at a time. Not in one lump sum, but they'll share it. And that's one platform.

I think Instagram is a must for you as well.

ROMANS: It may take some time to master the social media web, but Flora has mastered one crucial step, posting here her first Instagram picture.

(END VIDEOTAPE)

ROMANS: Wow. OK. You can't just set up your social media profiles and your accounts and forget about it. Some small businesses worry about the time it takes to turn social media into effective advertising.

But Gary Vaynerchuk says you need to compare the time you'll spend with the money you'll save. And you should always be on the lookout for extra time in your day that you can use to build relationships online.

Best of luck to you, Flora.

All right. Ben Stein is known for his role as an economics teacher in "Ferris Bueller's Day Off." He also hosted a game show called "Win Ben Stein's Money." You know Ben Stein.

But before all that, he was a presidential speechwriter. Did he write for: (a) Richard Nixon, (b) Jimmy Carter, (c) Ronald Reagan, or (d) George Bush Sr.? Anyone? Anyone?

I'll have the answer after the break.

(COMMERCIAL BREAK)

ROMANS: Ben Stein is a well-known economist. He was a speechwriter for President Nixon. And oh, yes, this.

(BEGIN VIDEO CLIP)

BEN STEIN, ECONOMIST/ACTOR: Bueller? Bueller? Bueller?

(END VIDEO CLIP)

ROMANS: Now, Ben Stein is advising all of us to slack off a little like Ferris Bueller. He writes financial basics are boring, it's much better to be adventurous. He writes a lot of stuff like, but I bet he doesn't mean it, considering that his new book is titled "How to Really Ruin Your Financial Life and Portfolio."

On the list, the how-not-to list, it runs 49 different ways to ruin the portfolio. Number 18, by the way, is believe that those people you can see on TV actually tell the future. We'll skip over that one.

STEIN: I'm not pretending the tell the future, and neither are you. We don't pretend we know the future. That's for fortune tellers.

ROMANS: We do know the financial world is full of people who are trying to fleece you.

STEIN: We sure do know that.

ROMANS: Why do smart people do dumb things with their money?

STEIN: Because we would like to believe that there's some magical way, instead of just doing basic, simple things which will get us -- you know, you know Charlie Munger? Of course, you do.

ROMANS: Of course.

STEIN: Charlie Munger, vice chair of Berkshire Hathaway, very famous, successful lawyer, best friend of Warren Buffett, says it is not necessary to do extraordinary things to get extraordinary results with money management.

All you have to do is simple things. Invest in broad indexes of stock, don't play games with commodities, don't play games with futures and insurance you don't understand, don't play games with foreign exchange, don't trust your money to people who promise certain results, don't go on margin, make a definite plan to match assets with liabilities.

Incredibly simple stuff, and yet the results are breathtaking.

ROMANS: Yes. Well, you know what, how about going by your gut? Like your gut really tells you, you should buy. You got an Internet connection, your gut tells you should go with something everybody's talking about?

STEIN: Don't do it. Just buy the indexes, the broadest possible indexes. You can get them for almost no money from Fidelity or Vanguard. Just go with them and you will make a lot of money over long periods of time, and with minimal risk.

ROMANS: When you boil down all that advice from Charlie Munger and from the Warren Buffetts of the world, the Ben Stein of the world, boring is better.

STEIN: Boring is better, especially better if you wind up with more money at the end. We face a catastrophe for the retirees of this country. They're just not going to be prepared. An enormous number have virtually no savings for retirement. Quite a large number have literally zero savings for retirement.

ROMANS: Yes.

STEIN: What are they going to do? Their future is bleak.

I recently had a conversation with the head of a huge company that sells insurance and annuities, who said the number of people who will be able to retire at the same level of living they had in their mid-50s is below 10 percent.

ROMANS: Whose fault is that, the market or theirs?

STEIN: No, it's their fault. But it's also the market's fault. No one could have predicted such a bad market we've had the last 10 years, for the last 10 years.

No one would have predicted the real estate crash as bad as it was. A lot of people predicted a correction, but as bad as it was, I don't remember anyone predicting that.

ROMANS: The whole world thought this time is different. They thought we could live on borrowed money. We can take the money out of our house to pay for the kids to go to college. They didn't think they needed to save for college or save for retirement because everything was going up. And that was really bad as well.

STEIN: Well, isn't it interesting that you say that, and that is exactly what we hear coming out of the government? Basically, we can keep borrowing, we can keep printing money, we don't need to do anything particularly difficult. The Democrats say we'll raise taxes a little bit on people with incomes of $200,000 and $250,000 and up. The Republicans say, oh, we'll close some loopholes.

Nobody's saying we have to make hard choices. And in life, we do have to make hard choices. That's a very unfortunate fact of life.

ROMANS: And the book is called "How to Really Ruin Your Financial Life and Portfolio." And you're saying Washington is really ruining its financial life and its portfolio.

STEIN: Unbelievably. I mean, look, we have a deficit equal to the gross domestic product, in fact, more than -- total debt, rather, more than the gross domestic product. That's never happened before in peacetime. That's a very, very dangerous situation. It's not going to lead to a happy ending.

ROMANS: There are three sources of prosperity: your house, your job, your investments. We know home values are starting to rise. I mean, I think the housing recovery -- it's real. It's very depressed, but real.

STEIN: Well, when you live in New York, it's very strong here. It's not so strong in other parts of the country.

ROMANS: Wages are stagnant. Investors are pulling out of the market. Take a look at this.

STEIN: Some are. Some are.

ROMANS: You know, look, I mean, over the past four weeks, these are domestic equity mutual funds flows out of them.

STEIN: Do you know what the total is? It's out of many trillions.

ROMANS: So you don't think people are running scared?

STEIN: I think everyone's scared. Everyone in his right mind except Warren Buffett should be scared. But the total outlooks on the stock market are very small compared to the total amount in the stock market.

ROMANS: All right. Here's 49 ways to ruin your financial life right here. Why we do dumb stuff with our money.

Ben Stein, really nice to see you.

STEIN: Nice to see you.

ROMANS: Do you have enough money to retire? Or do you have a plan to get there? Do you? I don't know. I don't think I do.

STEIN: I do.

ROMANS: He doesn't.

I want to know. Find me on Facebook and Twitter. The show's handle is CNNbottomline. My handle is @ChristineRomans.

I'll be back later on "YOUR MONEY", 1:00 p.m. Eastern, with Ali Velshi. Having your cake and eating it, too. We'll find out if Governor Romney's tax plan can actually lower your tax bill and shrink deficits at the same time. We're going to try to make that math works. That's today at 1:00 p.m.

Now back to Randi Kaye and "CNN SATURDAY MORNING."