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Betting on Recovery; A New Housing Boom?; Opening the Gates; BlackBerry's Last Stand; Timing the Market; Dumping Guns; Big Games, Big Bucks
Aired February 3, 2013 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, CNN ANCHOR: More jobs in January, a bull run on Wall Street and a rebound in housing. All that should signal economic recovery is on the way. But with Washington dysfunction standing in the way, is that a safe bet for you and your money?
I'm Christine Romans and this is YOUR MONEY. Ali Velshi is off this week.
The economy sure looks like it's ready to take off, 157,000 new jobs added in January. The unemployment rate rising slightly to 7.9 percent from 7.8 percent. There's room for improvement. But it continues a trend. Now 28 months strong. A trend of more jobs added every month.
Stocks are soaring with the S&P 500 a good example of what Americans are holding in their 401st and IRAs crossing the 1500 threshold for the first time since the dark days of the recession back in 2008. And housing, the very thing that helped fuel that recession, well, it looks like it's making a comeback.
2012 was the best year in real estate for five years. Home prices jumped 5.5 percent year over year in November. That's the biggest gain in six years. And with interest rates at historic lows you can now get, yes, 3.5 percent on a 30-year fixed mortgage. Home price should continue to go up.
But it's not all positive. Gross domestic product, the broadest measure of economic activity, shrank for the first time in three years coming down ever so slightly by 0.1 percent in the fourth quarter of 2012. So with stocks and housing looking up, why should GDP come down?
Blame it on Washington. Showdowns on Capitol Hill over fiscal cliffs, taxes, spending, budgets, issues hugely important to economic certainty but may have pushed businesses and government to hold back on their spending until the dust settles in Washington. The only problem with that is that the dust may never settle in the nation's capital.
(BEGIN VIDEO CLIP)
SEN. MITCH MCCONNELL (R), MINORITY LEADER: If the White House spent nearly as much time trying to actually fix the economy as it did claiming it was fixed and then finding excuses and scapegoats when its premature pronouncements turned out to be false, I suspect the economy would actually be doing better than it is today.
(END VIDEO CLIP)
ROMANS: Austan Goolsbee was a key member of that White House economic team. Today he is a professor of economics at the University of Chicago Booth School of Business.
Austan, you were chairman of the president's Council on Economic Advisers. In fairness, this White House spends a lot of time blaming Republicans for economic problems. Has it gone overboard? Perhaps too much politics and not enough policy? Because, I mean, we did have an election.
AUSTAN GOOLSBEE, PROFESSOR, UNIVERSITY OF CHICAGO BOOTH SCHOOL OF BUSINESS: You know, I thought that was kind of a weird cheap shot to come from the minority leader. I think the difference between being recovered and being in recovery is pretty different. And that is we're growing at a modest pace. We should be growing faster, but we're about the fastest growth of the advanced world. But we still have a long way to go before we're back to where we were pre-bubble days and prerecession.
I think the jobs numbers, they were OK, you know, they were about what was expected. We saw over the last year we've added a little more than two million jobs. That's a decent year. But we got to get the growth rate up above 2 percent to see something superior to that.
ROMANS: And that's been a consistent message from you and the White House. And you talk about, you know, comparing with the rest of the advanced world. You've got unemployment in the Euro area at 11.7 percent, a part of the world where they are tightening belts and cutting budgets.
I want to bring in Greg Valliere. He's the chief political strategist at Potomac Research Group in Washington.
Greg, no surprise that Senate Majority Leader Harry Reid, a Democrat, has quite a different take from the Republican Mitch McConnell on why an economy that's supposed to be in recovery just shrank for the first time since the recession. Listen.
(BEGIN VIDEO CLIP)
SEN. HARRY REID (D), MAJORITY LEADER: The moral of the fourth quarter is a repudiation of the Republican playbook. Growth went down in the fourth quarter because of reduced government spending. And a reticence of the private sector as Congress fought over the fiscal cliff.
(END VIDEO CLIP)
ROMANS: Was that GDP number a repudiation of the Republican playbook?
GREG VALLIERE, CHIEF POLITICAL STRATEGIST, POTOMAC RESEARCH GROUP: Maybe a little bit. But let me tell you, Christine, I think the clouds are starring to lift in this city. Maybe they can be embarrassed. The period between Christmas and New Year's was so humiliating. They look so pathetic that I think this playbook of seeking confrontation has been abandoned. We are not going to have a debt ceiling default crisis. We're not going to have a government shutdown. Yes, we'll probably have sequester for a few months. But I think these great epic struggles that worried the markets are starting to fade as a strategic policy.
ROMANS: Do you think we're going to the sequester? Do you think it happens, Greg?
VALLIERE: For a while, yes. I think on March 1 we begin at least on defense and discretionary spending. If there's enough squawking maybe by late spring, early summer, it gets undone. We'll have that. So there's still some headwinds. There's this and there's the higher payroll tax. So maybe first-half growth would be a little slow but I think the stock market is sending us a message that by the second half things could be looking much better.
ROMANS: You know, this week, Austan -- I want to bring you in -- we moved closer to the unthinkable, those automatic across-the-board spending cuts, the sequester, that President Obama promised us would never happen. Listen just a few months ago.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: First of all, the sequester is not something that I propose. It's something Congress has proposed. It will not happen.
(END VIDEO CLIP)
ROMANS: I don't know, Austan. That could be the one election promise the president fails to keep, the sequester, a critical part of the fiscal cliff punt that delayed the New Year's decision on those cuts on March 1st. What happens if the sequester happens?
GOOLSBEE: Well, in fairness, I think that cliff was about that the sequester would not happen on January 1st, because he was saying they would be able to reach some kind of agreement. They reached an agreement just to kick things down the road.
ROMANS: I don't know. He didn't say January 1st.
GOOLSBEE: I think the second --
ROMANS: He said the sequester will not happen. But OK, I'll -- go ahead.
GOOLSBEE: Well, you took only a, whatever, two-second clip out of a speech and press conference which was all about --
ROMANS: It was a debate. It was a debate.
GOOLSBEE: -- the run-up to January 1st.
ROMANS: Yes. GOOLSBEE: Look, the reality is we know that over the long run we've got to bring the fiscal position more in line, and the debate is about how much will be of cuts to discretionary, how much on entitlements, how much will be new revenues. That debate will continue and so the biggest problem of the sequester was just that it was going to be sudden, not that the magnitude was a -- was a thing that was scary.
ROMANS: All right. So --
GOOLSBEE: So I actually think something like the sequester is likely. They're going to -- we're going to be in a period of government retrenchment. I don't think there's any way around it.
ROMANS: So what it's going to look like? Because that debate, what you were hearing right there was sound from the president and his challenger, Mitt Romney. It was a foreign policy debate about defense spending cuts in the sequester happening at the beginning of the year.
So then if it's going to happen, just not at the beginning of the year, what's it going to look like and what's it going to do to the economy?
GOOLSBEE: I think there are going to be -- we're in a period of retrenchment at the state, local, and federal level. The government is shrinking. The revenues are low. I mean, every pressure is going in that way. I think it probably will not end up looking like this just automatic across-the-board cuts but you're likely to have at the least very hard freezes on all forms of spending in nominal dollars so nobody can spend any more than they spent in the last year or even if there -- even if there were inflation.
VALLIERE: Well, I would add that ironically the budget deficit is falling, certainly as a percentage of GDP. And we will get next week I think on the Tuesday from the Congressional Budget Office new budget figures that show that, in fact, the deficit is dropping and dropping pretty significantly.
ROMANS: Guys, one last question, to each of you, quickly. I mean, you've been watching the markets for so long. We've got -- we've got near records for stocks. GDP shrank, jobless growth, OK. What -- why is the market so excited about what's happening either corporate profits or the economy, Austan?
GOOLSBEE: You know, that is -- that's a good question. I think a lot of people have been asking it. I think we have been in the context of record corporate profits. And remember the fundamentals of the stock price, if you added up all the money that the market forecasts that the company will make in the future, that's how much the stock should be worth.
So record corporate profits in some sense should have been reflected in higher prices already, and now -- and the only reason they weren't, I think, was because people were afraid that -- Washington might blow it up or that there might be some worldwide conflagration. And as those fears have eased I think the stock market has kind of eased into where it would have otherwise been already.
ROMANS: And the Fed, Greg?
VALLIERE: Two words, Christine -- Ben Bernanke.
ROMANS: I knew you would say that.
VALLIERE: I think that he has made it very clear the Fed will stay extraordinarily accommodative until we're out of the woods and we're not certain we're out of the woods quite yet.
ROMANS: All right. Greg Valliere, Austan Goolsbee, nice to see you both. You have a great weekend, gentlemen.
VALLIERE: You bet.
ROMANS: One bright spot in the housing -- in the recovery, rather, is housing. Prices, sales, builder confidence have been rising steadily over the past year. Combine that with historically low interest rates, now seems like a perfect time to buy. My next guest says that's actually a terrible idea. Robert Shiller, arguably the smartest man in the world on housing. After the break.
ROMANS: It's the single largest investment most of us will ever make in our lifetime. The house. The decision to buy or sell is never easy. The past several years have been hard on homeowners. Steady price declines over the last five years caused many get out entirely. But the picture has been changing in the last year or so. Since January of 2012, prices have gone up more than 6 percent nationwide according to S&P's Case-Shiller index that's now the gold standard for measuring the health of the housing market.
I want to bring in Robert Shiller. Yes, he's the Shiller in the Case- Shiller. He's also a professor of economics at Yale University and the author of "Finance and the Good Society" as well as many, many other great books. He's famous for calling the end of the dotcom bubble and the housing bubble.
You know, Robert, you can't really argue with the numbers over the last year. Prices are up. Mortgage rates are at historic lows. But, Professor, you're not ready to jump on this whole housing is in, you know, a big roaring recovery bandwagon, are you?
ROBERT SHILLER, PROFESSOR, YALE UNIVERSITY: No, because -- I mean, I see that they're up and they will probably go up. Good chance they'll go up for some time longer. But it's not as clear as people would say. The media seem to be jumping on to this as a transformation.
ROMANS: We haven't had anything good to say in seven years, Professor.
(LAUGHTER) Give me a break. I just wanted to report something that is going up.
ROMANS: But you can understand why so many people are finally saying my home value is not going down anymore and that psychologically means so much.
ROMANS: Put it in perspective for me, then.
SHILLER: Well, we still have very -- we've seen a recovery in housing starts and housing permits, but they're still at near-record low levels. You know, this is an uptick. Most of this -- or half of this is seasonal because it occurred during the second half of 2012. The last two months were actually down. Nobody seems to notice that. They're up on a seasonally adjusted basis. The seasonal factor has been getting stronger and so it's not clear.
You know, it does look good. But I'm also looking for the longer horizon, which I think people who buy houses are focused on.
ROMANS: You, sir, are the --
SHILLER: And it's very hard to predict these things.
ROMANS: You sir are the --
SHILLER: It's very hard to predict --
ROMANS: On the one hand, on the other hand -- on the other hand economist.
We just want to look at that one hand which is we finally have some green arrows.
ROMANS: Part of the problem, Professor, you know, you've argued it's psychological. People saw what happened in 2008, they're too scared to buy a house after the collapse. Do you think the American dream of owning a home has changed in some fundamental way over the past few years?
SHILLER: That's -- it's interesting to consider that. It seems like there has been a change. Most new household formations have been rentals, or most new -- the increase in homes has been entirely explained by rentals, not purchases. The homeownership rate has fallen from 69 percent to 65.5 percent. It's not -- the recent studies have not given any economic explanation for that. It shouldn't be going down. Mortgage rates are at near record lows. But yet people are pulling out of homeownership.
ROMANS: We know that about half --
SHILLER: So --
ROMANS: We know that half of Americans, according to another study this week, are one financial calamity away from a total financial wipeout. So people don't have the savings, too, to go after -- you know, I'm not actually surprised that homeownerships, they're declining if half Americans don't even have three months saved in the bank. You can't buy a house, can't become a new homeowner under those circumstances.
Robert Shiller, we'll talk again soon. Very nice to see you. Have a great weekend, sir.
SHILLER: My pleasure.
ROMANS: All right. Coming up, the richest man in America wants Washington to fix this.
(BEGIN VIDEO CLIP)
BILL GATES, CO-CHAIR, BILL AND MELISSA GATES FOUNDATION: I'd love to see him solve illegal immigration, a tougher problem. The high-talent immigration has kind of been held hostage to that broader problem.
(END VIDEO CLIP)
ROMANS: Bill Gates on why American needs to open its gates or risk damaging this country's competitiveness.
ROMANS: I saw something in Washington this week that made me do a double-take. It's become so rare I thought my eyes are playing tricks. You know what it was? Bipartisanship. That's right. Bipartisanship in Washington on the issue of immigration reform in this case. Eight senators, four from each party, stepped forward to offer a framework for overhauling the U.S. immigration system.
(BEGIN VIDEO CLIP)
SEN. JOHN MCCAIN (R), ARIZONA: I don't think I have to remind anyone the last major attempt was over six years ago. Now we will again attempt to commit the resources need to secure the border, modernize and streamline our current immigration system, and create a tough but fair path to citizenship for those here illegally.
(END VIDEO CLIP)
ROMANS: A day later the president threw his full support behind the effort.
(BEGIN VIDEO CLIP) OBAMA: I believe we are finally at a moment where comprehensive immigration reform is within our grasp. But I promise you this -- the closer we get, the more emotional this debate is going to become.
(END VIDEO CLIP)
ROMANS: The president is right. Immigration is an issue that inflames passions and it has huge ramifications for the U.S. economy. That's why the richest man in America has something to say on this subject. This week I sat down with Bill Gates. He says America is throwing talent by kicking educated immigrants who create jobs for the rest of us out of the country.
GATES: The United States has benefitted from the fact that capable people, whether you call that smart or whatever word you use, have wanted to come to the United States, whether it's South America, Asia, Europe, we have been a magnet for talent. And that's partly why, with higher defense budget, medical budget, why we can continue to be such an example. It's partly why our universities are so strong.
And yet our immigration system makes it very hard for those people to come in. So, you know, somebody is being offered a job here for over $100,000, there's other jobs created around that job. You don't want to discourage a company from having to put that job --
ROMANS: Do we discourage them then?
GATES: You can be a student at UC Berkeley, foreign born, get this wonderful subsidized education, Microsoft offers you a job for over $100,000 a year, and we have to say if the country will keep you. And most those students are told they can't stay, get out of the United States.
ROMANS: They take the education, they go start a company somewhere else.
GATES: Well, they have to. They have to go to Canada or India or somewhere else. No other country does it that way. And most of the immigration proposals do look at those students and say, yes, let's keep them here.
ROMANS: You see consensus on that, then, you think?
GATES: Yes, although, you know, the broad issue of how do we make sure in these technology areas where we're so short that we both invest domestically in improving education while we allow these to come in. It will be interesting how this shapes up.
Yes, it is promising.
ROMANS: We have to import talent and grow talent.
GATES: Yes. It's more promising now than it has been. Microsoft even made a proposal, which may or may not be adopted, but the fee for these visas be increased and that go back into science and math education. So it's great to see this problem the U.S. has is getting onto the front burner may -- we may see progress here because on both sides of the aisle people are saying some of the right things.
The numbers here are not anywhere comparable to the illegal immigration. And I'd love to see it solve illegal immigration, a tougher problem. The high-talent immigration has kind of been held hostage to that broader problem.
ROMANS: You think they'll fix both?
GATES: Well, the ideal is to fix both. If you could fix neither you'd at least want to go and fix the high-skills thing. But for the fist time in many years, I see a real prospect that they'll actually fix both.
ROMANS: If they fix either the high -- the talent part of it or the whole immigration problem, is it something that unleashes some -- finally some job growth in the American economy?
GATES: It will be helpful. It means that we're taking this advantage that we have and not throwing it away.
ROMANS: Check out more with Bill Gates on this week's "FAREED ZAKARIA: GPS." "FAREED ZAKARIA: GPS" airs every weekend, Sunday at 10:00 a.m., 1:00 p.m. Eastern.
New name, new operating system, new phone, but will it be enough to save BlackBerry? Find out.
ROMANS: BlackBerry has suffered through network outages, falling stock prices, and stiff competition from Apple's iPhone and Android devices. Now the company is looking for a turnaround. This week it announced that the company will change its name from Research In Motion to BlackBerry. It also debuted the new BlackBerry 10 operating system and announced new phone models running it.
But is that enough to save this company?
Ali Velshi got his hands on a new BlackBerry phone. He's been test- driving it for a week.
JEFF GADWAY, SR. MANAGER, PRODUCT MARKETING, RESEARCH IN MOTION: There's no buttons on the BlackBerry Z10. ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT (voice-over): No buttons may not be news to you, but it's big news for BlackBerry users. Many of whom won't know what to make of the Z10. Canada's Research In Motion is counting on this totally virtual phone to allow it to live to fight another day.
After a yearlong delay and years of neglecting the onslaught by Apple and Android-based phones, RIM finally unveiled its new BlackBerry 10 mobile operating system and the first phone to run it.
THORSTEN HEINS, CEO, BLACKBERRY: We needed to make sure that we deliver the quality that people expect from us. Right call, and frankly we got out of the noise and the holiday season would have left us to launch earlier, sure, but I think now we have a lot of attention as you can see and it was the right call.
VELSHI: As a longtime BlackBerry user and hard keyboard lover, I've been evaluating the new phone in real world conditions. I'm a heavy user and a champion thumb typist. Being new to the virtual keyboard world, my e-mail output has been cut in half while I got used to it. But the company says the keyboard is easier to use and more intuitive than its virtual competitors.
GADWAY: Select it just by flicking it --
VELSHI: The piece de resistance with the keyboard is that it grabs words from your device and names from your contact and predicts in a very customized way what you're likely to type, allowing you to compose entire sentences just by flicking the complete words, which appear on the keyboard, up toward the screen. All of it can be done with one hand.
GADWAY: All right. Let me try something.
VELSHI: For those users for whom a virtual keyboard is still a nonstarter, you'll have to wait until April for a model with a hard keyboard. Built on a brand-new operating system, not a single line of code is copied from BlackBerry's existing platform. Battery life isn't great, but unlike iPhone and many Android phones, you could still change a dead BlackBerry battery.
(On camera): Here's an interesting feature for those of you who use a corporate BlackBerry with strict company rules but who also carry a separate phone for your personal use. The BlackBerry 10 uses something called Balance, which basically allows the device to be strictly split, so that the corporate side of it can adhere to the company's rules, say, no photos or personal e-mails, while on the other side of the split personality, you can do all of your personal business.
GADWAY: These are secure. The information in them is secure. So I can't take anything out of the work space, into my personal side. Similarly, when I'm on the personal side, as an end user, I can remain confident that none of the tweets that I'm sending, the pictures that I'm sharing are things that my employer can have access to. So it's really and truly a dual persona device. VELSHI (voice-over): The two sides of the device, if you will, never cross each other. Keep in mind, though, your company has to authorize and enable this feature.
(On camera): Research In Motion's ultra-secure, ultra-efficient, back-office systems allowed them to dominate the corporate world. Increasingly, though, companies are letting people choose what device they use. Back in 2009, 20 percent of all smartphones globally were BlackBerries. Today, it's just 6 percent. The stock is down more than 80 percent in five years. The question is whether this phone can change all of that.
(On camera): Who are you trying to steal from? IPhone users or Android users.
HEINS: I'm not stealing, I'm winning.
VELSHI: Who are you trying to win?
HEINS: We're not excluding anyone from what the future BlackBerry experience is going to be so we want to win as many as we can.
ROMANS: All right. Mobile customers in the U.S. can expect to see new BlackBerry 10 models at phone retailers by the end of March.
Up next, boom or bubble? Stocks hovering near all-time highs, but is this market for real? Find out next.
ROMANS: The Dow just finished its best January since 1994. And the individual investor finally getting in the game sinking $16 billion into mutual funds in the first three weeks of the year. This after yanking $150 billion out last year.
It's human nature. You need convincing before you feel comfortable investing. Maybe you feel emboldened by Ben Bernanke and the Federal Reserve pumping hundreds of billions of dollar into the economy. It's something that money manager and friend of the show, Peter Schiff, spoofed in this cartoon. He likens it to athletes taking performance- enhancing drugs.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: Yes or no, did you ever utilize risky monetary stimulants to artificially boost your central banking performance?
UNIDENTIFIED MALE: Yes.
UNIDENTIFIED FEMALE: Was one of those financial steroids MBS or mortgage-backed securities?
UNIDENTIFIED MALE: Yes.
UNIDENTIFIED FEMALE: Yes or no, artificially low interest rates?
UNIDENTIFIED MALE: Yes.
UNIDENTIFIED FEMALE: Or an unnaturally long time with a commitment to continue them indefinitely?
(END VIDEO CLIP)
ROMANS: It goes on like that and it's kind of clever. You may feel like the economy is healthier than the most recent GDP report indicated showing the first shrinking of the U.S. economy since the recession or maybe you're just looking for ways to put your money to work and stocks look cheap.
Take a look at the CNN Money Fear and Greed Index. We're in the extreme greed mode right now. Did you miss your opportunity?
Let's bring in a couple of people who put money to work on behalf of investors. Ryan Mack is the president of Optimum Capital Management. Lee Munson is the founder and chief investment officer of Portfolio LLC.
Gentlemen -- Lee, let me start with you. Your clients want yield. Are stocks the only place right now to get real returns?
LEE MUNSON, FOUNDER AND CHEF INVESTMENT OFFICER, PORTFOLIO: Yes, I do think that they are. I think that you still are going to always have to have a balanced portfolio. What we have to think about is stop asking these wrong questions about where are we going to get yield from, where are we going to get this juice that people want. It's always a great time to have a balanced risk managed portfolio and I don't think that you can have yield be the prime driver.
You have to look at absolute return but I think you always have to step back. Why are we investing in stocks or investing in bonds? It has to fit your own personal situation. Until we do that, I don't think anybody should be really investing in anything. So get a financial plan and it will dictate exactly what kind of assets, what kind of things you should have in that. Then you don't have to worry about timing the market or, you know -- we can enjoy silly things with Peter Schiff.
ROMANS: And -- right. And that was all for your enjoyment. I'm not making an editorial statement at all on that commentary.
But I'll tell you something, Lee, you know, I keep saying all weekend, I'm saying rebalance. I mean, if you're asking, should I be in stocks right now, my answer to you is, when was the last time you rebalanced? You know, you want to take advantage of gains when you get them and make sure that you have the right asset allocation, something that Ryan talks about a lot.
You know, Ryan, there's also this perception that stocks are undervalued given other periods when stocks were nearing highs. What do you think is different about this time around?
RYAN MACK, PRESIDENT, OPTIMUM CAPITAL MANAGEMENT: Well, I think this time, you know, I think the appreciation of the market definitely has a lot with what the Fed is doing and putting $85 billion a month into the economy. I think that -- and now, you know, we're seeing the housing market starting to level out. We're starting to see the deleveraging of banks. Finally starting to lend again. So we're starting to see some signs, small signs of improvement.
I think of this economy as almost like Michael Jordan when he came back from retirement the fist time. You know?
Before he -- he won three championships and then he was great and everybody is so used to him being the best player. But when he came back, he was a little rusty and they just weren't used to him being not as good as he was before. So we're going to take some time. We really are at 2 percent growth GDP economy and moving forward. It's going to be like that for a while. So I couldn't agree with Lee anymore. This is the time to start taking a look at your overall picture and see exactly what your financial goals are to see if it's right for you to step into -- into the economy.
ROMANS: I know. But after this week everyone is talking about stocks and how far they've come and why they're there.
ROMANS: So a question for both of you. Take a look at this graphic we've made from (INAUDIBLE) Associates. This is showing the stages of a bull market. This bull market is nearly four years old. And you know that's long in the tooth for an old bull. But old bulls can still run. If we're in the exuberance phase of stocks here, are we about to repeat history and trigger another comment like this one?
Speaking of, you know, I guess you could call him the Michael Jordan of monetary policy. Alan Greenspan, 1996.
(BEGIN VIDEO CLIP)
ALAN GREENSPAN, FORMER FEDERAL RESERVE CHAIRMAN: How do we know when irrational exuberance has unduly escalated asset values?
(END VIDEO CLIP)
ROMANS: Ryan, weigh in.
MACK: Well, absolutely. I believe that this economy mean -- look, in the first three weeks, I mean, there's a lot of money came back from retail investors. So a lot of people are saying the retail investment is coming back. Well, if you look at it again, this is only for the first three weeks. Is it going to sustain itself for the long run?
I don't think it could be sustainable for the long run especially -- we've got $11 trillion right now sitting in cash and getting zero percent interest rate in money market accounts. So a lot of folks still have a lot of money on the sidelines and I think that we still have a lot of skepticism about exactly how long this is going to continue.
So what I'm just telling folks is say, look, you know, if we have $10,000 in credit card debt, this is not your time to get into the economy. If you have, you know --
ROMANS: In the stock market, you mean.
MACK: In the stock market. If you have a financial goal of buying a house or buying -- starting a business in the next year, this is not your time to use the stock market as a gamble to put in this economy.
ROMANS: And that's a really good point because, you know, there's who should be in stocks and how you should be weighted and what your individual goals are, what Lee was talking about, and who shouldn't be looking at stocks near record highs and saying, oh now is my time to get in.
MACK: Absolutely. I mean, again, right now we have to look at what your individual goals are, again what you said. You know, the credit right now, we still have a lot of -- to me, we have two Americas out here, you know, individuals out here are not investing in the stock market, they don't care really about $14,000 on the Dow because they're still trying to worry about check to check, living day to day, and they still have yet to even start a portfolio.
So we have to understand that middle America right now is still struggling, they're still trying to move forward, and asset appreciation does not equal economic growth. So we have to understand there's a difference between the two. And until we start seeing that $1 to $1.5 trillion of capital come off the sidelines for businesses we're not going to really see true economic growth come back and starting to see an upside to that GDP.
So, overall I think it's great that we're seeing a stronger economy in terms of a stronger stock market but I would rather see the stronger economy come behind it.
ROMANS: And, Lee, you wrap it up. I mean, I guess with your -- your thoughts for the year. Where are we going for the year in the economy and market?
MUNSON: Well, I think that we're going to see an all-time high this year. I mean, I'll be bold. I think that we could see 1575 on the S&P. But we're talking about these ideas about the two Americas, about the psychology of the market, about, you know, the ponderance of cynicism about this, I think people have to remember one thing. You know, if you've got money out there a year from now that you're going to need for an Alaskan cruise and you need to keep that cash there, if you're one of the few who have money to retire, don't make the mistake of cashing out your entire portfolio just because you're worried about a crash.
Have some sort of way of accounting for something that you need next year versus totally cashing out. I see that happen with retired baby boomers all the time. I think the market goes higher, I think interest rates are going to go no place, and I think if you don't have a plan I keep telling people this is the perfect time to surrender to a financial plan. You've got it in, you've got the fundamentals, and you've got Uncle Ben pumping billions into the system. So there's never been a better time to get your act together.
ROMANS: Uncle Ben. And it's not an ice cream. It's the Fed chief.
Lee Munson, Ryan Mack, so nice to see both of you today. Come back again soon. We'll talk about it again.
MACK: Thank you.
ROMANS: We just talked about whether to put your money in this market. But what happens when the market and your morals conflict? Pension funds and other big investors are coming under increasing pressure to divest their gun holdings even as a run on guns boosts firearm companies, their profits, their sales. We'll take a look next.
ROMANS: Gun and ammunition sales have skyrocketed since the Sandy Hook tragedy. Demand is so great Wal-Mart is now limiting ammunition sales to three boxes per day per customer. Background checks for gun purchase is best way to track sales. Those background checks have exploded. In fact, eight of the 10 days with the highest number of background checks since 1998 have occurred since the December 14th shooting in Newtown.
The gun business is booming even as public pension funds and other big corporate investors face growing pressure to divest their gun holdings. The question, will it make any difference to gun companies' bottom line?
ROMANS (voice-over): Ending apartheid in South Africa, putting pressure on the tobacco industry. In the 1990s, big pension funds took a stand. And after the massacre in Newtown, some want to do the same with gun violence.
(On camera): You think this is as big as apartheid companies and pressure on companies not to deal with South Africa and as big as divesting out of tobacco companies?
BILL DE BLASIO, NEW YORK CITY PUBLIC ADVOCATE: I think it will be just as big and I think it will be just as big because people feel this is a threat to their lives now, a threat to their children. ROMANS (voice-over): In Philadelphia, Mayor Michael Nutter released a set of Sandy Hook principles for gun makers and retailers like Wal- Mart if they want to get pension investment money. In Chicago Mayor Rahm Emanuel is urging TD Bank and Bank of America to cut their lines of credit to gun companies. In New York, the city's Public Advocate is pressuring 12 big fund managers to dump their investments in gun stocks.
BLASIO: We're telling them you have to get out of these investments, they have to do it now. Look, this is a break point in American history.
ROMANS: One of the funds, Tiger Global, says it has no position in any gun company and has no intention of owning one. Another fund, the Cerberus Capital Management, said it will sell Freedom Group, the maker of the Bushmaster rifle used in the Newtown shooting.
In the days following that massacre, California public schoolteachers learned their pension fund invested in Freedom Group.
CHRIS AILMAN, CHIEF INVESTMENT OFFICER, CALSTRS: I was devastated when we realized that we had this investment in our portfolio.
ROMANS: This month, the teacher fund announced it would dump any gun and ammunition holdings that are illegal in California.
The NRA says all of these efforts are, quote, "Trying to drive a stake through the heart of the Second Amendment by bankrupting gun companies." But will any of this public pressure matter?
ROMMEL DIONISIO, SENIOR VP OF EQUITY RESEARCH, WEDBUSH SECURITIES: What has happened since the Newtown shooting is that gun sales have absolutely exploded. These firearm stocks are probably going to see record sales in earnings over the next few quarters.
ROMANS: Rich profit margins, huge sales, shares of Smith & Wesson are up 8 percent in the past month. Sturm Ruger up 17 percent. But pension funds are big investors, and analysts concede if the pressure continues it could cap share prices.
ROMANS: So pressure on share prices yet but a threat to their business? Probably not. The analysts we talked to says the publicly traded gun companies are rolling in so much cash with profit margins in excess of 20 percent they don't really require capital from outside investors to stay in business.
Joining me to talk more about guns and the business of firearms is Richard Feldman, he is president of the Independent Firearm Owners Association and a former NRA lobbyist.
And just this idea that the public pension funds want to put pressure on gun manufacturers a la apartheid and smoking, do you think -- do you think they have any chance? RICHARD FELDMAN, PRESIDENT, INDEPENDENT FIREARM OWNERS ASSOCIATION: Well, I can't tell anyone what to do with their own money, but when you see the mayors acting as economic terrorists, saying that you shouldn't invest in lawful companies, the outcome is going to be insignificant. If the banks were to fall for this kind of economic terrorism, two can play that game.
ROMANS: Wait. Wait. Why do you think that Rahm Emanuel and Mayor Nutter -- why do you think they're economic terrorists?
FELDMAN: Well, by saying that they're not going to allow pension funds or moneys invested in banks that loan money to legitimate businesses here in the United States? Two can play that game. There's far more money in those banks owned by gun owners in this country than by controlled by the mayors. It would be very careful if I were those banks in thinking if you're going to fall for that kind of a threat, because many people can play that game.
ROMANS: They do think that this -- and many of these mayors and many of these pension fund managers and people who are, you know, their responsibility is managing the money for retirees, public sector retirees, you know, they say that they think there's going to be more pressure on the gun companies' bottom line, that at least there's going to be regulatory pressure on the companies, and even as an investment point of view -- put aside the moral question, as an investment point of view, get out of that, get out of the way. You don't agree?
FELDMAN: Well, if you're investing to make money, doesn't take much to see what's going on in the firearm industry at moment. If the rest of our economy was like firearms, we wouldn't be worried about a debt.
ROMANS: Let's talk about the president's push for stricter gun laws. It's facing an uncertain future in Congress, I guess. Take a listen to what he told Univision.
(BEGIN VIDEO CLIP)
OBAMA: My suspicion is we're seeing more bipartisan discussion on the immigration issue than on the gun issue.
(END VIDEO CLIP)
ROMANS: So it's not clear that legislation can pass, but you pointed out the gun companies are making a ton of money and you're seeing a run on the guns in stores. What's driving it?
FELDMAN: American consumers are putting their money where they're ultimately going to be voting. They're in favor of guns. Look at the favorability of the National Rifle Association. It's in the 50s. The Congress is around 10 percent. I know which way I'd rather be.
ROMANS: Let me tell you this, something that can really hurt gun companies would be lawsuits. Right? If you're a company and you have a product and that product hurts someone, usually you get sued over it, but this industry is protected by law from most liability claims. What should the gun industry -- why, does it have this special kind of immunity that virtually no other industry gets? I mean you were a lobbyist for the industry. Do you know better than anybody, why is the product of a gun maker protected when other products aren't?
FELDMAN: Guns are capable of great lethality. That is their utility. When they're in the hands of law enforcement or a civilian protecting themselves, we all applaud it. When those guns are in the hands of a criminal or a deranged individual, it's a horrible tragedy. But the gun manufacturers make a product that is supposed to operate correctly. When it operates correctly in the good guys' hands, that's great. When it's in the wrong hands, it's horrible.
Our focus in this country must be to zero in on in whose hands are the guns.
ROMANS: All right. I know you've spoken a lot about that. You've actually been at the table with the vice president and others on this debate. And we'll talk to you again very, very soon, Richard Feldman, president of the Independent Firearm Owners Association.
Thank you, sir. Have a nice weekend.
FELDMAN: Thank you.
ROMANS: Up next, tight ends and high rollers aren't the only ones who could cash in on this year's Super Bowl. That is, if you believe in an old market superstition. We'll explain next.
ROMANS: The cost of your Super Bowl party is going up. Last summer's drought caused the price of chicken, beef, dairy, even alcohol to rise. But that won't stop Americans from downing 30 million pounds of snack food and more than 1.2 billion chicken wings Sunday night. 1.2 billion wings. In all, Americans are expected to spend $12.4 billion on food, decorations and even new TVs for the big game.
Alison Kosik follows the money as we get ready for some football.
ALISON KOSIK, CNN BUSINESS CORRESPONDENT (on camera): We're at Beckett's Bar and Drill in New York City where they're getting ready for the Super Bowl. And did you know the Super Bowl has really turned into quite the American holiday? Americans will wind up spending more than $12 billion just on game day. And most of that is going to be spent on food.
(Voice-over): Just on Sunday we're expected to eat 30 million pounds of snack food, 158 million avocados, we'll drink 50 million cases of beer and chew on 1.2 billion chicken wings even though the price of them is up, says our wingman.
JOHN DAVIE, CEO, CONSOLIDATED CONCEPTS: There's huge demand and the producers, the major producers are producing less chickens. There is a shortage but it's not like, again, it's not like the consumer are going to be without chicken. It's more they're going to pay a lot more for it.
KOSIK (on camera): Tell me about pizza. Biggest pizza deliver day of the year.
DAVIE: Absolutely. The consumers can relax and not get too stressed out. They're going to still pay about the same price for pizza. But the cheese prices are up. And that's a major proponent to pizza. Definitely the drought last summer is just starting to take effect. The prices are really starting to rise dramatically.
KOSIK: What is about it food in general during the Super Bowl?
DAVIE: Well, I think it has a lot to do with finger foods, and that's where I think most consumable activity happens. Pizza, you know, burgers, chicken wings, beer, it all about just grabbing and eating.
KOSIK: Like animals.
DAVIE: Yes. Exactly. Well, football and eating like animals. It all goes together.
KOSIK: Here's another thing we'll be buying more of, TVs, but we're going to be getting a bargain.
(Voice-over): TV prices fell last year and are expected to fall even more this year. The price of what you'll watch on TV is another story. $3.8 million for 30 seconds of ad time.
(On camera): Is there really a way to track the rate of return on those millions of dollars spent on ads?
BOB LIODICE, CEO, ASSOCIATION OF NATIONAL ADVERTISERS: Yes, absolutely. The ability to understand the return on investment has gotten far more sophisticated over the past few years. Twenty years ago, no. It was truly a wing and a prayer. Now it's absolutely scientific. They wouldn't be just dropping a $4 million bomb on their CEO's lap if it didn't pay back.
KOSIK (voice-over): Some of the biggest spenders will be in the stadium on game day, face value for tickets is $850 to $1250. But on Stubhub, prices start at $1600, enough to make you queasy, even if the 30 million pounds of snack food didn't already.
(On camera): I want to give you one last number. Guess which sales are going to spike 20 percent the day after Super Bowl Sunday? Antacids.
Alison Kosik, CNN, New York.
ROMANS: No matter how much you spend for the Super Bowl, you could be in a position to make it all back if you're wisely invested. An old Super Bowl indicator says a win for a team from this National Football League's NFC Division, the San Francisco 49ers, this year, is better for investors than a win for a team from the AFC, in this case, the Baltimore Ravens. When the NFC champ has bon the Super Bowl, the market has averaged a 14.6 percent return versus a 7.3 percent bump after an AFC win. That's according to S&P Capital IQ.
There you go.
Thanks for joining the conversation this week on YOUR MONEY. We're hear every Saturday 1:00 p.m. Eastern, Sunday at 3:00, and weekdays at 3:30. You can find me on Twitter, my handle at @ChristineRomans, and of course Ali, Ali will be back next week. Until then you can find him on Facebook and Twitter. Have a great weekend.