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tv   Your Money  CNN  May 28, 2011 10:00am-11:00am PDT

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if the coffee is from cuba, it might taste a little different. the company's added roasted peas, the vegetables to the coffee blend. cuba had done this for decades before going to the pure stuff back in 2005. come back and join us again at 2:00. we'll talk about what you need to do with your finances before you go on that summer vacation. i'm fredricka whitfield. "your money" starts right now. it's the economy, stupid. or is it? i'm ali velshi. welcome to "your money." 82% of americans say economic conditions are poor. if history is a guide, president obama should have a tough time convincing voters to give him another term next year. candy crowley, chief political correspondent and anchor of "state of the union" is with me. why are more republicans not lining up to take this president on in 2012? >> reporter: i think there are a
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lot of individual reasons for individual candidates who decided not to run. but i have to tell you, you look at those figures and you say, whoa, the president is in for a rough reelection ride. should he get it simply because if that many people think the economy is poor, that certainly is not going to help him at the voting booth. but here's the rub. they don't actually blame president obama for the economy. 55% of americans blame george bush. just 30% blame president obama. so he is running counter to conventional wisdom in that people still blame president bush and i think, by extension, republicans for the current state of the economy. so i don't think it's the -- while it looks like a great number and republicans ought to be jumping in and saying, oh, wow, the president is really vulnerable. when you look inside the numbers, he is less vulnerable than that would imply. >> let's look at the republicans
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who said "no." jeb bush, donald trump, mike huckabee. but let's focus on two others. indiana governor mitch daniels and house budget committee chairman paul ryan, two guys associated with money, both present clear contrast to president obama's view of how to fix this economy in the united states going forward. candy, do conservatives fear that they simply don't have a message that is going to resonate with voters on a national stage when it comes to the budget or particularly paul ryan's plan to overhaul medicare which does not seem to be gaining traction? >> reporter: i think conservatives are more worried they don't have the messenger. they firmly believe they have the message. but this is what we were just talking about. mitch daniels decided not to run not because he happens to think that he can't beat president obama. he decided not to run because he's got some real family considerations there, a wife and children that really don't want to be exposed to the limelight.
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they've had at times a very rocky marriage that ended in divorce and a remarriage. they didn't want to be out there. paul ryan right now is a very powerful republican. he's very young. he could run at some other time. remember when barack obama ran and was a candidate and everyone was like, why are you running now, you're so young? and he said, this is a timing thing. the ryan people said this is not his time and he's got time. >> mark preston is our cnn political editor. republican primary voters in new hampshire are giving us a glimpse at which candidate they would trust to handle the economy, basically look at those numbers. it's basically mitt romney at 44% and everyone else. mitt romney, can he gain the support of the tea party which is really driving the agenda for the republican party these days and make himself a viable candidate? >> well, mitt romney is clearly going to have trouble with certain segments of the tea party who are frustrated. they think he's a flip-flopper
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and they don't like what he did with health care in massachusetts. but for mitt romney, those are great numbers up in new hampshire. mitt romney sees new hampshire has a must-win if he wants to win the republican nomination. and unlike in 2008, ali, what we're seeing from mitt romney now is he is running entirely on the economy. he thinks that he can be someone who can come in, who can fix it and turn things around. while we heard a lot from mitt romney back in 2008 of social and economic issues, he's squarely focusing on economic issues. >> those exhibition issues that matter right now the most are the budget deficit. diane swank joins us. the hottest topic in washington is debt and deficits and that's about the budget. but specifically, the countdown to august 2nd, the day that treasury secretary tim geithner says he can't keep america from defaulting on its loans if we don't raise the debt ceiling. a number of republicans are challenging the notion that not raising the debt ceiling would be catastrophic. you're an economist.
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what happens both here and in the rest of the world if we do not raise the debt ceiling before august 2nd? >> there was a technical default around the debt ceiling back in 1979. and that was just a mistake where they literally used to send out the checks and the checks got there a little bit late a day or two late and just from that, without all the politics around it and the game of chicken going on, we saw 60 basis points spike in treasury bonds from that alone. that gives us some warning that this is not something to play around with. >> for our viewers who don't trade in treasury bonds, 60 basis points increase, .6% affects your credit cards. it affects your loans, affects a mortgage you're trying to get. >> everything. it's really akin -- think of it as an individual. would you call up your banker and say, oh, by the way, i might or might not pay on my loan in august and i'm going to threaten you with that now and not think that that would hurt your relationship with your banker? that's just ridiculous. this is just silly to put this in the middle and play chicken with the debt ceiling as a
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political leverage point. i don't understand it. no country goes out in the world and tells their debtors they might or might not be insolvent on august 2nd. >> mark, who's going to blink on this one? >> that's a really good question. i'm not sure that we have the answer right now. i think bottom line is i think we're going to see the debt ceiling raised. the fact of the matter is when you hear these dire warnings in the end, ali, we can have all the political gamesmanship that we have here in washington, d.c. right behind me. but the fact of the matter is, something needs to be fixed. something needs to be done. >> candy, you have watched every political game being played and some of it is the art of compromise. it does seem that we hear from ideological conservatives and the tea party that compromise isn't on the table? >> reporter: yes, but inside the republican party when it comes to this issue, just talking about the lawmakers on capitol hill, that's a minority.
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i will say the treasury secretary didn't do the cause much good when he said, we went past the debt ceiling a couple of weeks ago but i can make it work till august. >> that's confusing. >> reporter: sort of feeds the whole thing that like it doesn't really matter. but in the end, there are plenty of folks on both sides, including the leadership, that know that this is a dire need and that they need to do it. congress expands the amount of time its allotted. they will push this up to the very end. but it will get done. >> candy, mark, diane, stay where you are. the debt is a major issue for americans. so are their jobs. which one is more important? can you deal with both at the same time? i'll ask this great panel when we come back. you're watching "your money" on cnn.
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let's go to mark preston right now. mark, earlier this week, there was a special election in new
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york in an area that was traditionally republican, a democrat took that seat. and this budget business, this deficit business, and particularly what the republicans are thinking of doing with medicare may have influenced this. tell us about this. >> sure. what we saw up in the special election up in new york state is that democrats did a very good job of trying to convince voters that the fact that the republican proposal here in washington that paul ryan proposed would strip medicare as we know it as it is right now. he put the fear of god into a lot of voters. democrats were also successful in getting the turnout, getting more democrats to turn out. this is a traditionally republican district. republicans should have held on to this seat. but they were not able to. but it really does have greater consequences on republicans talking about trying to fix things in the long term but understanding what are the political consequences by doing things that are unpopular such as attacking entitlements as voters know them today, such as social security and medicare --
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>> diane, this is not entirely unlike some of the discussions gone on in europe. talking about entitlements, this were things people expected to get and the government said, we're in too much trouble, you're not going to get those same things. and they were rioting in the streets and it's hurting their economies. how does that compare? should this be a warning signal to us? >> it certainly is a warning signal. it's a shot over the bough. the u.s. is in much better shape. yesterday i was talking to senators working on bipartisan long-term restructural of the deficit. one of the things they were talking about is what's going to happen np britain. britain has done major austerity programs and now they're paying the consequences on their economy right now. and they had to do that because they had no choice. they pushed it to the limit and they got a downgrade on their debt. we don't want to go there. there was a real comment that sort of inspired people. we don't want the brits to outdo
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us when their in a worst position than we are and we have some opportunities. there is some movement here to think that we can probably get something done. but the politics of it -- the confusing of the short term, the december celling, the long-term structural stuff are two different situations and it's starting to be separated in washington. >> candy, you are the expert at this. you have to ask people complicated questions about this every sunday. people are not yet talking about specifics about how to curb our long-term spending. everybody has numbers about how much they want to cut. but when it comes down to specifics, as we saw in that election in new york, voters may not go with the republicans on this. >> reporter: well, yes. and especially in a lot of ways, it depends on a sales job and the republicans say, well, we've framed this wrong. but you're also seeing republicans beginning to back away from this. listen, there is a commonality of purpose, if you will, i think. you can question the will.
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but there's certainly a commonality of purpose between the two parties. they all know that they have to do something about the debt. >> that's right. >> reporter: but to ask politicians to not politicize an issue in an election cycle is too high a climb. it's going to show up next year. and the question is -- and i think this is key to me on why they don't have this debt ceiling thing and this debt -- some kind of debt package together, is the american people haven't clamored for it. nobody goes home and says, hey, lift the debt ceiling. you know why? because no one's explained over and over and over again which is what you have to do when you're a politician, what the price of not lifting that debt ceiling is going to be. no one's explained what the price of that long-term debt is. >> in our polling, you've seen it, people want to lower the debt ceiling, they want to get control on spending. they want to balance the budget but they do not want their entitlements cut, they don't want services cut.
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there really is a disconnect here. you can't have both. >> no, you can't. let's compare it to this nuclear power. not in my back yard. when it comes to intimtentitlem not if it's my entitlement. people are looking further down in future generations saying, we don't want to put the burden on our kids and our grandkids. but you know what? we don't want our medicare cut. we don't want our social security cut. that's why you have all this posturing here in washington. as everyone has said, they're absolutely right. nobody is going to be giving specifics because it's going to hurt them in the short term. and for them, that's the 2012 elections. >> from a nonpolitical, economic perspective, what is the solution to economic growth, to debt reduction and to creating more jobs? >> i think the key is not going too much upfront but having a plan over the next 10 to 15 years phases in on both the revenue and expenditure side. economists are agreed on this.
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id ideo ideo ideoljically republicans don't want to raise the taxes. you can do it phased in over time so you get a better tax code. who needs a complicated tax code like we have? don't we want corporations bringing the jobs back here instead of booking their profits abroad? there is con kens mosensus movie tax code reform. we need to rein in some of our spending but also deal with the revenue side, a more reasonable and reforms to tax code. but it means some people will pay more taxes as well. if you make it a cleaner tax code, there's a lot of benefits to that as well. >> the three of you are all compromiser and all logical. candy, mark, diane, thanks so much. listen, an mba can go a long way toward helping you work toward that dream job and a dream salary. we're going to show you just how far some people are willing to
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everybody's looking for an edge. when it comes to education, some people are getting that edge by traveling around the world. they're taking note of china's growing economy and heading there to get their degrees. c cnn's reporter has the story from beijing. >> reporter: eric is studying to get an mba at his top choice school. the 33-year-old thought after applying to an ivy league but instead chose to take classes here in an up-and-coming program in china. >> a lot of emergency is happening in the chinese markets. a lot of the big-name companies are setting up their bases here. >> reporter: with the u.s. market depressed, more americans are looking for jobs outside the country. china is a popular place for students like sidner and denise who both want to get close to a burgeoning market.
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she turned down a spot at columbia in university to attend this business school in china. if she stays here or returns to the evolving marketplace back home -- >> i started to realize, most of my clients are chinese. most of my business clients are either coming to expand their business in california or american companies that want to go to china to expand their business there. >> reporter: the number of mba programs here has skyrocketed from six to decades ago to nearly 250 today. some programs almost half full of students from overseas. school officials admit the start salaries of their graduates are lower than those of american schools. but they say their schools offer real-world china experience. >> learning with my chinese classmates. speaking mandarin. i've also gone to a couple of interviews with some local banks. i had to be interviewed in chinese.
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and i think it's not the kind of experience that i would have gotten back in the states. >> reporter: sidner is optimistic about how the networking will help build his career. >> whether i decide to stay here and work in china or go back to the united states and work for a company in a way that would allow me to llias between both would be great. >> eunice, your subject in that story talked real-world china experience. how much does that mean in the real world? >> reporter: there is a concept here in china known as social networking. it's an important part of chinese business culture. the students we spoke to said here they get the opportunity to really meet with lots of different people from various businesses across industries, both on and off campus.
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they also pointed out that they got a chance to share and swap stories with their chinese classmates who gave them a little bit more insight into the chinese way of doing business. one example was how to pitch a business idea to your boss, which is a bit more subtle and a bit more complex than it is in the west. one student actually said to me, you hear about the stuff all the time, you read about it in the books, but it's really different from daily interaction with people who have the experience themselves. >> so if somebody's watching this and they can't really travel or live overseas but want to tap into this chinese economic growth, what can you recommend to students in that position? >> reporter: well, one of the other options that allowed the students here -- whether or not they should go for a program back home that has a strong international track. that's another option that people can really consider. these programs have excellent professors. they also oftentimes as part of their curriculum have some
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overseas trip. so the point is that they should try to get as much exposure as they can to the market that they're interested in or make themselves as competitive as possible for that next job. >> eunice, great job. last week, we had an exclusive interview with elizabeth warren. this week, she came under attack by republicans. why it happened and whether or not she can overcome it to run the consumer financial protection bureau next. [ male announcer ] redesigned power e-trade pro. it's like hardwiring the market right into my desktop. launch my watchlist -- a popping stock catches my eye.
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with copd, i thought i might miss out on my favorite tradition. now symbicort significantly improves my lung function, starting within 5 minutes. and that makes a difference in my breathing. today i'm back with my favorite team. ask your doctor about symbicort. i got my first prescription free. call or click to learn more. [ male announcer ] if you can't afford your medication, astrazeneca may be able to help. welcome back to "your money." christine romans, host of cnn's "your bottom line" joins me along with chrystia freeland. if you saw the show last week, you saw my kvconversation with elizabeth warren about the steps she wants to take to protect
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consumers. this week, she came under attack by republicans. listen. >> it's gone beyond your advice to treasury. you're also providing advice to other governmental agencies? >> congressman -- >> you could use the word congressman a number of times. but i'm asking a very simple question. >> i believe an empowered consumer is a consumer who cannot only protect himself or herself but one who can change the market. >> mr. chairman, i give up. >> chrystia, elizabeth warren gets grilled like she's a wall street fat cat for wanting to set up the consumer financial protection bureau which will hopefully protect consumers from the great recession and the financial crisis that we have. what is it about elizabeth warren that gets republicans so fired up?
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>> i think it's probably three things. the first thing is wall street hates her. elizabeth warren really was the person who came up with and spearheaded this idea of a consumer protection agency. if it really gets up and running, it will cut into the profits of big banks and it will give them less room for maneuver. they don't like her. and politicians who are close to wall street don't like her. >> at the moment, there are 44 republicans who are in some fashion trying to either hold up her appointment or take the teeth out of the agency, christine. it's weird to me that they're setting this up as a position. it's going to backfire on them. >> reporter: here's the thing. she's an outsider, she's representing consumer interests in a place in a place where people say -- because she doesn't play the game or hasn't for years, there's not that usual horse trading that happens behind closed doors, the little give, the little take. it's just elizabeth warren saying what she thinks should happen with this agency. the thing that makes her
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attractive as an overweight is the thing that might make her ineffective. >> richard, what happens outside the united states? is someone who stands up for consumer protections an outsider? >> in terms of the parliamentary way in which they get beat up -- we had an example of that. the minister responsible for the coast guard managed to get beaten up before a parliamentary select committeement politicians play to the peanut gallery when they get somebody in front of them. and they puff up their chests and they say that they are the voted, elected representatives of the people and how dare you -- >> that's exactly what happened here. >> how dare you have the temerity -- and do you not now you are infringing -- and on and on it goes. if it wasn't so comical, it would actually be serious because these are the very same people who will happily talk the hind legs off a donkey given
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have the chance. and they are the very same people who will not given a yes or no answer when asked on a matter of policy. but put them on a panel and they're off to the races. >> good to know we're all exactly the same around the world. >> i agree with richard about the theater. and i do think politicians are drama queens wherever you go. but on consumer protection, when it comes to financial products, american consumers have less protection from the government than consumers in a lot of other countries. canada has aggressive protections in terms of what consumers can do -- some say thooets that's a restriction. >> it is. >> it is. but it saves you from yourself. and that's the debate going on right now with elizabeth warren. >> i'm very curious as to how this one plays out. taking the sides against consumer protection is going to come back and haunt someone in an election commercial. the times of stuffing money under a mattress for a rainy day
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seem to have been long gone. we've seen the savings rate tick up in the united states. a new study by the national bureau of economic research showing that 50% of americans would struggle to come up with $2,000 in a pinch even in a minor emergency like a home repair. christine, this doesn't jive with what we've been seeing for two years now. the savings rate is being increased in america which means to me those who have some money are saving more and there are a whole lot of people, half of the population, who are saving nothing. >> reporter: data this week also showed that people are paying down their credit card debt. but paying down your debts and de-leveraging your personal balance sheet doesn't mean you have enough money saved yet. what happened was the housing bubble. and a housing bubble we are still feeling. people haven't built up the cash cushion well enough. and when you're talking about rising health care costs, the longer you're going to have to work before you retire, the rising cost of education, rising cost for all the things you put to feed your family -- it's
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really still a very serious situation for american families. >> is this a behavioral problem or just a sign of the economic times? >> i think it's more a sign of economic times. people had a lot of debt. they're still paying that off. and if you are unemployed or not as employed as you would like, not working full hours, or working at a job at the bottom of pay scale, it's really hard to save up that $2,000. >> richard, i have a story specifically for you here because it's a real treat to have you here working as opposed to on one of those several vacations you take. americans are not savers but we are work-aholics. not only do americans get less vacation than everyone, they also don't seem to take the vacation they get. richard, what's going on with the rest of the world? are y'all just lazy? >> no, no, no, stop that now! reverse the question, ali. what's wrong in the united states? you are archaic.
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it is medieval, the way in which people get two weeks vacation and even then feel guilty about taking it. ask any ceo, do you want a workforce that is rested, engaged and focused? and then ask them, how do you expect people to do that if you let them have ten days' vacation a year? yes, ali, in this room behind me, everybody gets up to five weeks vacation, including national holidays, paid vacation -- don't do that. don't do that. >> my word, as you would say. that's smashing. i think it's time for us to gang up on christine. rules in canada are much more liberal. explain yourself, christine. >> reporter: we love to work in this country. but there are also some analysis of that same data that shows in some cases it's because people don't want to spend the money on
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a vacation. i guess they could stay home and take the day off. but they don't have the money to spend to go away. so they might as well be working. >> the other interesting thing to me about americans is that the rich work as hard or harder than the poor. it's not just about money. people at the very top are working some of the longest hours. >> back to you, richard, seems like you're just lazy. >> there is some calvinistic about it. you're terrified the boss might notice that you take a vacation. the one thing i've noticed having been to france, italy and spain where people denigrate their work ethic, the fact is their productivity is very high. they just don't do work for work's sake. if they don't have to be at work at 7:00 a.m. and they go home at 6:00 because the work is
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finished, how many of us around this table now has answered an e-mail between the hours of 11:00 and midnight? >> ali's doing it right now. >> yes, of course! >> richard, you win. we're all taking a vacation after this show is over. richard quest, stay where you are. chrystia freeland, stay where you are. christine romans, stay where you are as well. linkedin made a huge splash last week with their official public offering. why big financial institutions got first dibs on the stock and why you were likely kept out of the loop, up next. &t is at work, building up our wireless network all across america. we're adding new cell sites... increasing network capacity, and investing billions of dollars to improve your wireless network experience. from a single phone call to the most advanced data download, we're covering more people in more places than ever before in an effort to give you the best network possible. at&t. rethink possible.
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back now on "your money" with richard quest, christine romans and chrystia freeland. chrysler has paid back $7.6 billion worth of bailout loans to the government. the canadian government and the u.s. government. talk about the bailout leads to washington which, of course, leads to politics. democrats were quick to spin the news in their favor. a democratic national committee blog praised president obama instead of republicans, quote, good thing mitt romney, tim pawlenty, newt gingrich and other leading republicans weren't in charge. they would have simply let detroit go bankrupt, end quote.
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christine, is it true? did the heroic democrats save chrysler from the evil republicans who were going to let them wither on the vine? >> except some supporters of mitt romney were saying, this is what he had pushing for all along, a controlled bankruptcy of chrysler so you could let this whole thing work out. when you have both sides taking credit for it, it's interesting that just a couple of years ago bailouts were a dirty word. now you have fighting in political circles about what gets credit for the bailouts. >> they happen to think this auto one worked out. at the time, it was entirely likely that it wasn't going to happen. >> absolutely. and actually, i would push back a little bit against this sort of "he said, she said" interpretation of what happened. this was a controversial and politically difficult thing for the white house to do. it was definitely led by the democrats. it is definitely going against the really strong prevailing republican ideology. and the fact is it actually
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worked. this intervention by the state saved two companies. >> the bush white house at the time, the outgoing white house did support the idea. mitt romney has deep roots in michigan, also supported it. how did it play for you, richard? >> basically, the u.s. government ended up being the lender of last resort and taking the place of a failed banking system. the banking system, they could have picked up the slack. if you look at the t.a.r.p. overall, most of the money from the t.a.r.p., absent aig, has been now paid back with profits and with interest. but that -- and everybody says t.a.r.p. was a brilliant idea and hip, hip, hooray. but the recession that came as a result of the crisis was so bad that so many other costs -- detroit had been allowed to go to the wall. the unemployment benefit, the health care costs, all the attendant costs that would have gone with that would have dwarfed, dwarfed the seed
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capital that went to chrysler. >> that is far too nuanced a way of looking at things, richard. parsing it all together and seeing how it fits into the big picture. a new research shows that billions in stimulus funds went to contractors that owe the government $757 million in back taxes. about 5% of all contractors who got stimulus money are now delinquent on their taxes. these are the projects designed to build roads, create jobs. chrystia, do you think taxpayers got a raw deal on this? >> sure n these specific instances, absolutely. having said that, on balance, was the stimulus a bad idea? no, absolutely not. and if you look at the countries which really cut back sharply in the teeth of the recession, their economies are much weaker than the u.s. economy. >> richard? >> no way. you can't let that go along. >> you're in britain. you guys are in huge trouble.
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>> we're cutting back now because we have a budget deficit of 10% which can no longer be sustained. >> sure it could be sustained. >> if we didn't -- and we'd end up like greece or portugal or ireland where the bond market would make its own judgment. the ten-year -- >> in contrast with those countries, britain issues debt in its own currency. you know the parallel is not exact. >> and indeed, we also issue elongated debt. but greek debt -- why is greek debt at over 17% when the greek financing for the next year or two is guaranteed by the ecb and the eu? the fact is simple -- because they still haven't taken the necessary measures to bring the deficit under control. >> to bring the conversation back to where we wastarted, i think i'm getting agreement from everybody here that the fact that these back taxes are owed,
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it shouldn't be used as a justification that it shouldn't have happened? >> at the time, there were overseers of the stimulus who say they expected 7% waste, fraud and abuse. i'm not condoning it. i'm saying it really is rotten that someone would take my money and put it in their pocket. but at the time, the goal was to get as much money working in as many different ways as possible as quickly as possible. that money is still at work somehow in the economy. >> keep your eye on the big picture. on these vast programs there's going to be a bit of waste, finagling -- >> richard quest, our big picture guy today. linkedin debuted its ipo last week reminding many of the days of the tech boom. take a look at this. the stock priced -- what they offered it out at, at $45. but that's not where it opened. it opened at $83.
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quickly jumped above $100 a share. but the celebration prompted many questions. it is institutional investors, not us, who get access to the $45 ipo price. a company like linkedin pays for extensive research to be done to set that price. investors felt that shares of linkedin were clearly worth way more than the $45 it came out at. richard, you tell me which likely fits best -- a case of incompetence, the price they set at $45 was too low? two, it was a case of cronyism where the game is rigged for inside players who got an $83 stock for 45 bucks? or the last theory, the price of $45 was right but the fervor to get in on this ipo like the tech boom that we went through drove shares to irrational levels? which one was it? >> a combination of number one, they were incompetent in setting the price, and number three,
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they just got it wrong and there was much greater demand. there were only 7 million shares offered up. it doesn't surprise me. you want a nice pop on an ipo, a stag price. you want 10%, maybe 20%. they got 100%. it's not as bad as linux in 1999 -- >> taking us back. >> make us think about the tech booms. average investor who gets in on that first day no matter what it costs. >> richard did not say cronyism. i'm not sure. i think there are a lot of insiders who got a chance to get in on that. i'd never count on a little bit of cronyism on wall street. i'd say it's a blend of all three explanations. >> chrystia? >> i think it's mostly number three. i think the bankers were genuinely surprised. i think in their heart of hearts, they probably think that linkedin isn't worth quite as much. >> maybe it's worth the 10% that richard talked about or 20% more but they priced too well and people are too evening tore get
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a piece of the action? >> i think we're in the middle of a real boom in internet tech stocks. we saw this week with the russian search company having a really successful ipo. i think they were just surfing a wave and the wave went higher than they thought. the other important point to note is for the actual owners and founders of linkedin, you might think, did these guys get -- i was going to say screwed -- did they get screwed by wall street? i think the answer is not so much because the truth is, they still own most of the company. this has made them one of the sexiest companies on the street. and actually i don't think they're that unhappy with their bankers. >> there's still time to figure out how to price these things. it is a little bit like in 1999. >> chrystia calls it a boom. we'll continue to talk about this. thanks for joining us, the markets are up, the markets are down. it's not necessarily an investing atmosphere if you are faint of heart. i'm going to show you how to defensively invest your money
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well, may has been somewhat of a seesaw month for the stock market. there are steps you can take to invest if you want to do so cautiously. jim awod is of zephyr management. economic uncertainties like the slow recovery and europe's debt problems and the end of the fed's bond-buying spree are heading up fears about where the market is heading. the dow is down by about 3%, 4%. are you worried about that? >> you have to say there's a lot that can go wrong. cyclicly you have tail winds the emerging markets and the united states. you are growing. there's a lot to worry about. i think an investor has to worry about possibilities. you have to position yourself for each eventuality depending on what your opinion is. >> that doesn't mean not
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investing, necessarily? >> no. there's not a case for being overly bearish, but a case for being more conservative than has been appropriate for the last two years. >> we often talk about ex--traded funds which is a basket of stock. you like spy which is the s&p 50. >> right. the recovery of the last two years, small stocks have done phenomenally well. they got hurt the most when the market went down. they're the ones who recover fastest when the economy recovers. >> because they're nimble. >> they're nimble. but the stocks also tend to be very vollive. when they go up, they go up more than you expect. when they go down, they go down more than you expect. it doesn't take much money to move them either way. with the phenomenal move in slow stocks, in may small stocks are down more than big stocks. to the extend you want to position yourself a little more cautiously, you would sell small stocks and go into big stocks that have a global footprint,
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good balance sheets, less leverage, pay some dividends and that would allow you a way to stay invested, but more conservatively. >> the s&p 500, while it has dipped, is a 23% run. let's talk about gold. a lot of people continue to worry about inflation. they worry about the u.s. dollar. you have picked an etf, exchange traded fun with the sicker symbol iau. tell me about this. >> what you're saying is if anything can go wrong, the most likely thing is debt, most likely in europe. if that happens, if there's a problem, won't want to own debt. they're not going to want to own currencies. there's a large percentage of the world that goes straight to gold, particularly in emerging markets. a cheap direct way to buy it is through this etf. it's constructed to track the price of gold bouillon. it's got a low cost, it's liquid. you can get in and get out. for the average investor, if you want to own gold, this is a good
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way. >> the one thing to keep in mind, when people are looking for an exchange-traded fund, you can do this one which tracks gold or others that are a basket of gold companies. >> absolutely. i'm not opposed to either. this is the most leveraged to the price of the metal itself. >> as you've always recommended, the average viewer should be diversified. >> absolutely. you should have an asset allocation, review it regularly and rebalance periodically so that you're not extreme in your investment view. the reality is a lot of blocking and tackling down the middle. that's how you make money. >> always great to see you. thanks so much. jim awad, a good friend of our show. are massive spending cuts the key to saving the economy? perhaps the answer can be found in europe or in my xyz which is coming up next. maybe you didn't hear. but dimes, nickels, even pennies have power now. because the volt charges for about a buck fifty a day.
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making most commutes gas-free for just a handful of change. so we're taking it back. all of it. we have some driving to do. the 2011 chevrolet volt. it's more car than electric. naomi pryce: i am. i'm in the name your own price division. i find empty hotel rooms and help people save - >> - up to 60% off. i am familiar. your name? > naomi pryce. >> what other "negotiating" skills do you have? > i'm a fifth-degree black belt. >> as am i. > i'm fluent in 37 languages. >> (indistinct clicking) > and i'm a master of disguise >> as am i. > as am i. >> as am i. > as am i. >> well played naomi pryce.
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time now for the xyz of it. this week president obama was in ireland raising his glass of guinness and toasting the country's fighting resilient spirit. what you didn't hear much is about the sheer pain they've been experiencing. the country has been cutting spending for several years and the government imposed austerity measures as a condition of accepting an international bailout. while we consider austerity measures in united states as a way to cut spending without increasing taxes, it would be instructive to see what's come of the irish belt-tightening. as is often the case in austerity programs, their growth has slowed and debt mounted. unemployment rate approaching 15%. the same across europe, greece, portugal, spain, even the uk. all of these countries adopted
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austerity to get the economy to grow. bad enough to spark violent protests in some of these nations. some conservatives in the u.s. including members of the tea party are causing for european-style austerity measures here in the united states. those calls will get louder as the debt ceiling fight comes to a head. i trust they'll set ideology aside and look at the lessons of europe. it's crucial to cut the debt in the medium and long term, but doing so before growth has a chance to take root could jeopardize a real recovery. cutting too severely could lead to high unemployment. what's needed is compromise, something? short supply. the clock is ticking on the debt and our aaa credit rating is on the line. let's hope we can put the politics aside and get us back on sound fiscal footing without derailing this fragile economic recovery. while we could all use the luck of the irish, we don't need the kind of


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