The DOW at 13,000 and What It Means For You; America's Trailing in the Sciences
FREDRICKA WHITFIELD, CNN CORRESPONDENT: Hey I say A for effort. Go ahead, Mr. President. All right. A look at the top stories in a moment, IN THE MONEY is next, here is a preview.</s>CHRISTINE ROMANS, CNN CORRESPONDENT: Thanks. Coming up on IN THE MONEY see what pushed the DOW to 13,000 and what it means for you. Plus tips on protecting your identity from a con man gone straight. And later find out what it means for the economy that America's trailing in the sciences. All that and more after a quick check of these headlines.</s>WHITFIELD: Now in the news. In Karbala, Iraq a suspected suicide bomber targets people while they prey at least 52 people dead, more than 80 injured near two Shiite shrines, it is the second bombing in Karbala this month. At least 28 people dead, 44 wounded, all victims of a suicide bombing in Pakistan's northwest Frontier Providence. Among the wounded, Pakistan's interior minister and his son. So far, no claim of responsibility for the attack. A top U.S. state department official has resigned after admitting he was a client of an alleged high-priced call girl ring in the nation's capital. The state department official confirms to CNN that Randall Tobias stepped down because of the revelation that he used the escort service. We'll update the top stories at the bottom of the hour. Now time for</s>IN THE MONEY. ALI VELSHI, CNN CORRESPONDENT: Welcome to IN THE MONEY, I'm Ali Velshi.</s>ROMANS: I'm Christine Romans. Coming up on today's program see what it means for America's money now that the DOW hit the 13,000 mark.</s>VELSHI: Plus, what a reformed con artist can tell you about keeping your identity safe.</s>ROMANS: And see if you earning what you deserve as we check the pay gap between men and women.</s>VELSHI: Now the one place where the gap is, there's no gap, is when you are trading stocks on the stock market. Thirteen thousand, just a number in some ways, but it really is, it's a surge. It's a strong market. It's earnings results that show that people continue to buy things from America's businesses.</s>ROMANS: Dow up what, 1,000 points in six months, up 5 percent from that horrific rout in February. The market doing well, you mentioned earnings,</s>VELSHI: We saw earnings from the oil companies, of course. No surprise there. We saw Apple saying that they sold more than 10 million iPods in the last three years. Microsoft.</s>ROMANS: Pepsi had good number, Amazon. Go down the list it was incredible. Someone on this program earlier this year, when everyone was belly aching about the Dow falling apart in February said, listen, we'll see 13,000 before you know it. A young man named Ned Riley.</s>VELSHI: Ned Riley, who is the chief investment strategist at Riley Asset Management joins us now from Boston, Ned you said it at the beginning of the year. You keep telling people don't worry about it, you even think this market is going further. The question people are asking me what do I do now? Do I sell or do I buy?</s>NED RILEY, CHIEF INVESTMENT STRATEGIST, RILEY ASSET MANAGEMENT: No, I'd buy right now and, Christine thank you for that complement. The young man, I'll go a long way with that one.</s>ROMANS: I'll take it.</s>RILEY: No. I think people should be continuing to average in to the market. You know, people are too my optic, they are to short term oriented and they listen too much to Wall Street. Wall Street keeps crying about the fact that we need big corrections to move further. I don't believe that has to be the case. And as long as they continue on that kind of thinking, then I feel really good about the market. The more the skeptics are out there the better off investors are to put their money in. Old saying, buy when they're down and when everybody's complaining.</s>ROMANS: Yes, but you know close your eyes and buy the highs to I mean we are right here at 13,000, that old saying on Wall Street, but GDP came in on Friday less than people expected. So much of this profit growth is coming from overseas, we're hearing a lot how the United States isn't growing as much as other places and these big companies have been sort of downsizing their responsibilities on benefits, they have been buying back their own stock. Not necessarily investing in their U.S. operations. Are those reasons to be cautious or at least to keep in the back of your mind?</s>RILEY: Well Christine you bring out some really good points there. My only position on that is that companies are learning to live in a much different environment, a slower growth environment. It isn't just organic growth in the tops eye. It is growth via cutting cost, growth via buying acquisitions and cutting costs out of those. The dollar, weak dollars helping multi-national companies. Many of them obviously have more than 50 percent of their revenue coming from overseas. So that is actually a benefit, not a detriment. And when you put it all together in terms of a companies focus, this still is going to be focusing on labor, and more labor costs. I, found fortunately for the American worker, may mean less, but the companies I think are going to maintain this record level of profitability, almost a record in terms of return on equity and an absolute record in profits. I don't know what people are talking about, 13,000. We are at record highs in all those and I don't see a recession in sight because the Fed's on the ball.</s>VELSHI: What else could derail this market? Are there things that can derail this market? High gas prices, lower home prices, home sales? Inflation, what can set this thing off?</s>RILEY: Well, basically, I'm going to say it. Too much growth in the economy is obviously going to bring on inflation. I think the inflation number for the first quarter is history. That's what the market is saying, saying on Friday. Clearly, if we go forward, the slower the growth, the more it will prompt the Federal Reserve to take a look at interest rates. Watch the ten-year Treasury bond yields. If they start creeping down, and today, on Friday there were 457, I believe, people are looking for 5 percent and 5.5 percent. So the bottom line is long term interest rates are starting to indicate the economy is going to be slowing even further. That means high gasoline price, the housing market's going to cause problems undermine the growth but the bottom line is slower growth is going to get lower inflation, which will get lower interest rates which definitely isn't going to help the stock market.</s>ROMANS: Ned we keep seeing the consumer, whether it pretty well -- you know you got record levels of household debt, Seven 1/4's of a negative savings rate, gas prices, some say they are going to reach you know almost maybe to $4 a gallon this summer. But the consumer just keeps on charging. Right?</s>RILEY: It does and the strange thing about this, Christine, they have leveraged up obviously in the last seven or eight quarters. But the net worth of households has also grown very rapidly. Even though we have had a retrachment (ph) in prices, we have $53 trillion of net worth in the consumer's pockets. When they start to look at the daily bills and things like that, I understand the leverage. But remember, those savings number that you see do not include home equity or retirement plans. So the bottom line is, the consumer's actually better off financially than, say, three to five or seven years ago.</s>VELSHI: All right. Ned, I've been sitting around waiting to put my money in to something. The market you say continues to go up. What do I invest in?</s>RILEY: Basically for the investor that doesn't have time to look every day at their stocks and research them, I still believe in ETF, Exchange Traded Funds like index funds. And for people that want to at least do as well as the professionals, or maybe do better. You know, a Spider wishes that S&P; 500 Index Fund will simulate the market. So if the market's up 5 percent year to date, the Spider going to be up 5 percent and not to worry about the Intel's versus the Microsoft's versus the IBM's versus the Coke. The bottom line is I would buy ETFs, have diversity in the portfolio, like buy some QQQQs which is the Nasdaq 100 top stocks or if they feel adventuresome, buy financial stocks with what I call the XLF, basically, financial stocks in a Spider RNF, exchange rated funds.</s>ROMANS: Ned do you buy them right here even after a record week in the Dow? You buy them now or you wait for a pullback?</s>RILEY: No, I would put my money in as I do, as I've done historically. Basically, put it in a more systematic basis.</s>ROMANS: Right.</s>RILEY: When the market's down, it's great. When the market's up -- yeah. You've got the Dow cost average. I've done this too many years and I haven't found anybody that's consistently picked bottoms and tops in markets ever.</s>ROMANS: All right. Ned Riley.</s>VELSHI: Till after the game. Ned thanks a million. Always good to have you out here, putting your neck on the line. We'll be happy to tell people when you get right which is a lot of the time.</s>ROMANS: And when you get it wrong --</s>VELSHI: We'll tell them that too. Ned Riley is the chief investment strategist at Riley Asset Management in Boston. You know what's neat, is Ned always talks about the fact that we talk about gas prices every spring and going up to $4. There are forces that could make $3 gas something that we're not worrying about because we're worrying about $4 gas, $3 gas could end up looking like a bargain for you. So we're going to talk about that and we are also going to see where your salary stands as we learn about the gender pay gap. Stay with us on IN THE MONEY.