Return to Transcripts main page
U.S. Stock Market Assessed; Marijuana Legalized in Colorado; New App Allows Donors to Give to Needy; Russia Prepares for Winter Olympics
Aired January 4, 2014 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, CNN ANCHOR: How much money did you make last year, not from working, from investing? I'm Christine Romans. This is YOUR MONEY. If you haven't already, check your 401(k) statement. Take a look at where your investments stand today after a banner year for the market. You'll probably like what you see.
The Dow up 27 percent, the NASDAQ up 38 percent, the S&P jumped 30 percent. It is rare to see big performance like that. The big question now, can the rally keep going? Stocks sold off on the very first trading day of the year, but most analysts see more gains ahead. CNN Money surveyed 29 analysts asking what they expect the S&P 500 to do in 2014. And 10 percent predicted gain of 10 percent or more. Half expect a five percent to 10 percent gain. And 28 percent say they expect a zero percent to five percent, and seven percent say the S&P 500 will drop this year.
So it's time for the classic bulls versus bears showdown. The bulls owned 2013. Bulls think the market is headed even higher like horns driving upwards. But the bears are trying to claim 2014. Bears claim the market is due for a plunge like a paw swatting downwards.
Matt McCall is the president of Penn Financial, he's also bullish on stocks in 2014. Michael O'Rourke is the chief market strategist at Jones Trading. He's bearish. Let me start with you, Matt, because you're the bull here. Great year last year. You think you could have another 15 or 20 percent her on stocks this year. Why?
MATT MCCALL, PRESIDENT PENN FINANCIAL: There's a lot of reasons, but number one is when you're investing you money, there's a lot of people on the sidelines right now. There's still over $2 trillion sitting in the money market basically making now money. They see the market going up 30 percent. They want to be involved in this market, right? So where do you go? Do you go in stocks potentially with big gains? Do you go in bonds? No. You could probably lose money in bonds. Do you sit in a money market making no money? No. The best asset class out there right now is stocks, and there's so many individual investors that missed out on this big rally that they're going to be rushing into stocks in the first few months of this year.
ROMANS: They certainly have reacted well to a so-called taper, which was supposed to be the end of the big bull run, and they reacted well. Michael, let me bring you in, because you think for the year stocks are actually going to finish low lower, 10 percent lower. But I want to argue with you a little bit. You got 4.1 percent economic growth last quarter, 200 thousand-plus jobs created in the last four months of the year, home prices rising. So why is it bad for stocks?
MICHAEL O'ROURKE, CHIEF MARKET STRATEGIST, JONES TRADING: Well, to put it in perspective, since 2009 the recovery growth has been about two percent. Between 2011, 2012, and 2013 it was the 10th best performance in the past 83 years since 1930. Every episode except for the late 1990s you've had subpar, negative returns every time you've had --
ROMANS: What's the catalyst for a 10 percent decline? We haven't seen it yet. But what makes the stock market fall? Does some event happen or does it fizzle out?
O'ROURKE: I think we're pushed up. I think monetary policy has created a bubble in equity prices. Not so much that they're historically expensive, but what you have going on is they're well beyond the prices they would be without the Fed's help. And as you know that Fed is withdrawing the help.
MCCALL: The GDP, maybe two, two-and-a-half percent next year. Historically speaking, when you have growth about two, two-and-a-half percent, that's the best years for the stock market. If we come in at two-and-a-half percent, it's not robust, but typically the market does very well in that type of year.
ROMANS: I want to circle back to this disconnect between Wall Street and main street. We know that about half of Americans are not invested in the stock market. In fact, they're listening to us and they're saying, wait a minute. I made exactly what I made based on my work, not on my investments. What's your advice to people who may not hold any stocks right now, who may be looking at a 30 percent gain and say, OK, I've got to be in on this gain, I've got to be part of the economy where people are making money.
MCCALL: You have to be realistic. If you think you're going to get into the market now and make 30 percent in the next 12 months, it's just not going to happen. But if you believe in investing for the long term, you have to start putting money into stocks. The problem is people look at main street and they see the headlines and they see the negative news out there. If you look at just the headlines over the last five year, you'd think the market was probably down 50 percent, not up 100 percent. Disconnect from that. Invest in the market. Invest in long term equity.
ROMANS: It's hard to feel good about stocks if you don't feel good about jobs. Obviously you have different perspective. For our viewers who are listening and think the stocks will go lower next year, what do you stay away from, Michael?
O'ROURKE: I would be heavily -- I would have my most offensive position. I recommend people raise as much cash as possible. I think you wait for corrections. I believe you should buy equities for the long term, et cetera. But you know what, we're at record highs in the U.S. stock market and we've had this bubble bust, monetary policy and bubble bust stock market in the last 15 years. I think that this is the time to sell. You're at highs. You'll get better opportunities to buy in the future. ROMANS: For both of you, the viewer who's watching us today is somebody who is probably somebody trading in a 401(k). That's what they have. Maybe there's a taxable account somewhere. Your advice to someone is to still continue to buy in this market?
MCCALL: I would continue to buy in the U.S. market. And in a 401(k) you obviously have options outside of the United States. I think Europe is a great opportunity as well. Valuations are extremely low, 20 percent below the historical average. But you want to be in equities and stay clear of bonds. As interest rates go up, bond funds go down. I want zero exposure to bonds.
ROMANS: If you believe Matt McCall's world view, that's what you believe. If you believe Michael O'Rourke's worldview, in your 401(k), what do you do?
O'ROURKE: I'd be heavily in cash. I agree with Matt on bonds. I think bond yields are rising higher, which, again, that will be another drag on the economy. We talk about where mortgage rates are going to be this year. A year ago we talked 3.5 percent. Now we're approaching five percent, next year, probably north of five percent. So you're going to see a slowdown in the economy, and that cash on the sidelines, you'll be able to come in and buy things at better prices.
ROMANS: All right, so nice to see both of you. Two different worldviews completely. How about we keep checking in this year and we'll figure out where we go? Nice to see both of you, thank you so much.
In a record-setting year only one stock can be number one on the S&P 500. It's a company you know well and it's CEO is getting a big raise. Give me 60 seconds on the clock. It's "Money Time."
ROMANS: It's a 50 percent raise this year for Netflix CEO Reed Hastings. That means a $3 million salary plus a $3 million allowance for stock options. Netflix was the tot stock in the S&P 500 last year, up nearly 300 percent.
Big donations from big donors. There were 15 individual gifts of $100 million or more last year. That's four more than in 2012. Facebook's CEO Mark Zuckerberg made the biggest donation. Facebook shares valued at almost $1 billion to the Silicon Valley Community Foundation.
Online shoe company Zappos is doing away with formal job titles. Instead workers will be responsible for several different roles and will answer to one another instead of a big boss.
Home prized jumped 13.6 percent in October from over a year ago, the largest 12 month gain since the height of the housing bubble.
ROMANS: Most parent probably don't want their children growing pot for cash, but one Colorado family is making a business of it legally. (BEGIN VIDEO CLIP)
MARY ROTHERHAM: He's my son and I'll do anything for him.
(END VIDEO CLIP)
ROMANS: Coming up, not everyone in the state supports Colorado's law. Inside the fight against recreation marijuana, next.
ROMANS: Right now in Colorado anyone over the age of 21 can do something no one else in the world can. They can walk into a store and buy legal, licensed marijuana. Sales are strong. There are around 30 stores selling retail pot now in Colorado, and many of them had lines out the door this week. The state government feeling good about the sales as well. Every retail pot purchase is subject to a 25 percent tax plus the regular 2.9 percent sales tax. The additional revenue will initially amount to about $67 million buck as year. A little less than half is designated to build schools. That's according to state tax officials. The new law marks the end of a long fight for marijuana advocate, but it's just the beginning for those against the use and sale of the drug.
Miguel Marquez joins us now from Colorado with more on the anti- marijuana movement there. Hi, Miguel.
MIGUEL MARQUEZ, CNN CORRESPONDENT: Well, you wouldn't guess that from this live show. If I'm looking a little green today there, Christine, it's because I'm surrounded by green and we're in a house that has lots of green light on these plants.
Look, marijuana is here to say. It is legal to purchase and to consume anywhere within the state's borders. But that's not to say it is welcome everywhere.
MARQUEZ: When you think of Colorado, you think skiing, charming western towns, and now, of course, legal, recreational pot. No surprise, not everyone is thrilled.
What does Greeley think about that?
MAYOR TOM NORTON, GREELEY, COLORADO: Well, the voters of Greeley turned it down when they had an opportunity to turn it down.
MARQUEZ: Greeley survives on farming, ranching, and oil. Just north of Denver, it's the biggest town in Weld County.
What's your concern?
SEAN CONWAY, WELD COUNTY COMMISSIONER: We're a guinea pig. Colorado and the state of Washington are guinea pigs.
MARQUEZ: Recreation sales in Washington start later in 2014. Weld County may have said nom but there is one hold out here, a tiny place called Garden City, only a few blocks big, expects recreational pot to be huge.
What is it like to be the only place in weld county where this is allowed?
JOHN ROTHERHAM, OWNER, NATURE'S HERB AND WELLNESS: It's -- I guess I'm lucky.
MARQUEZ: Lucky to be one of four pot shops here. Rotherham, who expects to triple his business next year, won't sell recreational pot for a few months yet. But the customers are already there.
ROTHERHAM: We're averaging 50 to 75 phone calls a day.
MARQUEZ: And this is a family business. That's dad and mom, both in their 70s, trimming pot. They first told their son he was crazy. Then they changed.
MARY ROTHERHAM, OWNER'S MOTHER: He's my son and I'll do anything for him.
MARQUEZ: But it's not just Weld County wrestling with the potification of Colorado. Ski areas, often a tradition of lighting up on the lips, aren't turning a blind eye anymore.
If I'm caught smoking pot on a chairlift, will my pass be yanked?
MELANIE MILLS, CEO, COLORADO SKI COUNTRY, USA: I think there's a high likelihood of that. You can expect to have your ski vacation here and not be smelling marijuana smoke.
MARQUEZ: As the Centennial state takes a leap into recreational pot, there is uncertainty for some, a warning for others, what was ignored or looked past before, now zero tolerance.
ROMANS: And that's such a good point, Miguel, especially the ski resorts. They have a two-pronged issue, people who are maybe openly smoking on the resort grounds, and then their employees as well. We know that the law is very clear. Employers have a lot of rights to fire their workers for smoking pot even not on the premises. It's going to be the next legal frontier, I think, for the workers who have the right to smoke but they might not be able to keep their job.
MARQUEZ: Look, there's going to be a lot of adjustment as this law gets going. Amendment 64 was very clear it gives power to the smallest possible entities. So even for hotel, for instance, that has smoking rooms, that hotel can decide whether it will allow pot to be smoked on premises there. Same thing for employees. Look, employers don't want their employees showing up drunk either. They may go further in marijuana in certain industries, but in this industry it's probably going to be OK and a lot of employers will probably be OK with it. But that will be something that employees will have to speak out.
ROMANS: I think it's really interesting when you mentioned drinking, because what employment law experts say is they've been working -- companies have been working so hard to push smoking and drinking away from the employment base, right? Now here's a third thing to screen for, right, tobacco smoking, drinking, and now all these things are legal. It doesn't mean your employer is necessarily going to like it, and I think that's going to really be an interesting new frontier. We'll continue to cover that with you. Thanks, Miguel. What a great live shot.
ROMANS: Up next, want to give to the homeless? There's an app for that. We'll explain next.
ROMANS: You can text message just about anything these days -- find out transportation delays, send a friend a video clip, and now you can text money directly to a homeless person. And 600,000 Americans are homeless, roughly the population of Milwaukee, and A HandUp, a new for-profit organization, developed an app that links donors directly to those in need so you know exactly who is getting your money. Our Dan Simon explains.
DAN SIMON, CNN CORRESPONDENT: Rodney Bell is a professional modern dancer, and he does it all from a wheelchair. But after getting laid off last year from his dance company in Oakland, California, the 42- year-old says he lost the ability to support himself and wound up homeless.
RODNEY BELL, HOMELESS: Everybody's busy. There are days when you need to have housing and you need to be fed.
SIMON: Born and raised in New Zealand, a motorcycle accident caused him to be paralyzed from the chest down. Too proud, he says, to panhandle or directly ask friends for money, Rodney instead is handing out these business cards that instructs people how to text in cash. It also lists a website where you can learn more about him.
BELL: Hi. My name is Rodney Bell and I have a disability. I'm a paraplegic.
SIMON: And dozens of others.
BELL: It's easy to ride up and say, I need this, I need that. And then people go -- it's less believable then giving them a card where they can actually go online and see this organization.
SIMON: The organization is called HandUp, a San Francisco for profit startup that aims to use technology to help those most in need.
ROSE BROOME, FOUNDER, HANDUP: We're trying to solve the problem of what do you do when you pass somebody on the street and you want to help them but you don't know how to help them. You're worried if you give them cash it will actually end up hurting them. People feel really conflicted.
SIMON: Founder Rose Broome says the key was partnering with Project Homeless Connect, a city program to recruit people like Rodney, but also to make sure the donations are used for good.
BROOME: While we let our members decide how they want to use their funds, for the most part, your funds cannot be used on alcohol or on weapons.
SIMON: Members are not handed cash. Homeless counselors will buy things or pay bills with the donations. Rodney's account so far has generated $400.
BELL: Within a couple of weeks.
SIMON: Does that surprise you?
BELL: Yes. That's a huge surprise. I don't know how to take that.
SIMON: For now HandUp is just in San Francisco, but the goal is to have it spread to other major cities with large homeless populations. And 100 percent of the donation goes directly to the individual, but users are also given the option to give to HandUp itself to keep the company running. As for Rodney, he says he'll use his funds to get a laptop, in part he says to help him look for jobs and get off the street.
Dan Simon, CNN, San Francisco.
ROMANS: Coming up, this week's monster nor'easter meant long delays at the airport. But what if you could just skip the line? And one metro ticket, that will be 30 squats, please.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: A very popular one I've noticed has been, here you go, the superman.
(END VIDEO CLIP)
ROMANS: In Moscow, instead of buying tickets with rubles, you can pay by doing an old gym class favorite. We're going to explain next.
ROMANS: If you were supposed to fly on Thursday, maybe you're just making it home today. And 100 million people in 22 states battered by a monster winter storm this week. More than 2,000 flights cancelled, 8,000 delayed, and that means long lines in airports across the northeast and Midwest. But what if you never had to deal with the stress of lines at the airport or anywhere else ever again, what would that be worth to you? We hit the streets to see in a little segment we like to call "What Would You Pay?"
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: I don't think I'd pay anything. I mean sometimes you have to stand in line.
UNIDENTIFIED MALE: If I was an adult and I had all the money in the world, probably half a million.
UNIDENTIFIED FEMALE: I find excitement in waiting in line.
UNIDENTIFIED MALE: I don't. I feel like $1,000 easily or more to never wait in line again.
UNIDENTIFIED FEMALE: We come from Venezuela and you have to line up for everything. So $1,000 maybe.
UNIDENTIFIED MALE: I'd pay however much it takes. I'm very, very impatient. So I feel like we pay for time anyway.
UNIDENTIFIED MALE: Well, 10,000 euros, $10,000, for the rest of my life.
UNIDENTIFIED FEMALE: $260.
UNIDENTIFIED MALE: What about you?
UNIDENTIFIED MALE: I'd go for 20 bucks. I don't mind. Frankly you can do everything online at the Internet as opposed to online standing there.
(END VIDEO CLIP)
ROMANS: Hate long lines? You're going to have deal with them if you're planning to travel to Sochi for the Olympics. Here's the score. Call it the legal equivalent of jumping the turnstile. You can ride the subway for free in Moscow if you're willing to do something you may not have done since high school gym class. It's a move to build excitement for the upcoming Winter Olympics in Sochi. Phil Black has our story.
PHIL BLACK, CNN CORRESPONDENT: Beneath the freezing streets of Moscow is the cities underground train system, the metro. It was a source of great pride to the Soviet Union. Some of its stations and platforms are spectacular. This is a recent attempt to build national pride with the metro. These people are buying tickets. With the winter Olympics coming to the Russian city of Sochi next February, the government wants people to get excited and get moving. Instead of accepting 30 rubles for a ride, about $1, this machine allows people to pay with 30 squats. We saw lots of enthusiasm, some big age differences, and some interesting techniques. Sometimes there was even lineup, but the numbers were still pretty small. There's only one squatting machine for the whole metro system that moves as many as 9 million people day. The regular ticket booths were getting a lot more traffic.
So I asked this woman, why are you lazy? Apparently that's a rude question in Russia. She denied it and accepted the challenge. I held her handbag and she squeezed out a confident 30.
Apparently you can't call other people lazy without having a go yourself. It is a bitterly cold Moscow day. What could possibly go wrong? Another popular one I have noticed, here we go, the superman. It's not counting. There's the squatting chicken. I've seen that a bit. It's popular. The dancing Cossack, pretty easy, or so I thought. And 59, 60. The man said, one more time. Annoyingly, he was right.
UNIDENTIFIED FEMALE: I did 29.
BLACK: No. I said 50.
UNIDENTIFIED FEMALE: That's what it said.
BLACK: Everyone else seemed to be much happier with the experience. They told us they'd like to see more of the machines and think it's a great way to build Olympic spirit.
Phil Black, CNN, Moscow.
ROMANS: That's it for YOUR MONEY. We'll be back next Saturday at 9:30 a.m. and 2:00 p.m. eastern time. Have a good weekend.