Up to the Minute (CBS) snippet - 2005-12-29 (year in business)

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Transcript

Language: English (original, YouTube automatic captions)

[0:00] [music]

[0:03] >> Okay, now for some perspective. Joining

[0:05] us for a look back on the year in

[0:07] business as well as a look ahead into

[0:08] 2006. We welcome Jeff Colvin, senior

[0:11] editor at large from Fortune magazine.

[0:14] Magazine, Jeff, good morning to you.

[0:15] >> Morning, Steve.

[0:16] >> Uh,

[0:17] let's start with something that's been

[0:19] on everybody's minds, I guess,

[0:20] especially in the last half of 2005.

[0:23] What's going on with gas prices at the

[0:25] pump? I mean, we we saw a huge spike

[0:27] after Hurricane Katrina. It's throttled

[0:29] back somewhat now. Home heating oil,

[0:31] natural gas, still very high, still a

[0:33] big problem for the economy.

[0:35] >> It's a big problem for a lot of

[0:36] individuals, for a lot of consumers,

[0:38] just because uh refining capacity is not

[0:41] very plentiful in this country. People

[0:43] don't think about it very much, but an

[0:45] awful lot of our uh gasoline and other

[0:47] oil products are refined outside the

[0:49] United States. Well, uh total global

[0:52] demand really affects how much of that

[0:54] is available for us.

[0:55] >> Now, and that never used to be the case.

[0:56] >> No, it didn't used to be the case, but

[0:58] you know, year after year, we haven't

[0:59] built a refinery in the United States in

[1:01] over 20 years. Now,

[1:04] when uh gas prices went up right after

[1:06] Katrina,

[1:08] uh this was a huge crisis, or so people

[1:10] thought. It's important to remember, gas

[1:12] prices today are lower than they were

[1:14] before Katrina happened. But heating oil

[1:16] prices are high, people are bothered by

[1:18] it, and look, we're going to have to

[1:19] live with this. Global demand for oil is

[1:23] very high, largely because of China, and

[1:25] it's not going to go down.

[1:26] >> The sleeping giant, the Asian giant is

[1:29] is awakening, and there's it's having

[1:31] just a amazing

[1:32] >> amazing effects on demand not only for

[1:34] oil, but for cement, aluminum, wood,

[1:37] steel.

[1:38] >> All the raw materials.

[1:39] >> A part of the reason we can't get enough

[1:41] oil and gasoline here is because the

[1:43] ships are not available. Why are the

[1:44] ships not available? Because you need

[1:46] steel to build them, and the steel isn't

[1:48] available because of the demand in

[1:50] China. So, this is a huge multi-layered

[1:52] effect.

[1:53] >> And we can expect that to continue.

[1:55] >> It's going to continue. It's simply not

[1:56] going to change.

[1:58] >> Let's talk about something that happened

[1:59] just

[2:01] a couple of days ago. We had something

[2:03] that that economists understand a little

[2:04] bit better than I do, but the interest

[2:06] rate curve

[2:07] >> Yes.

[2:08] >> where in effect long-term rates

[2:10] >> Right.

[2:10] >> rates for for the 30-year bonds and so

[2:12] forth actually moved lower

[2:14] >> Right.

[2:14] >> than short-term rates.

[2:15] >> Right.

[2:16] >> Now, what does that mean to Joe Sixpack?

[2:17] >> Well, this is a tough thing to to relate

[2:19] to Joe Sixpack a little bit cuz it's one

[2:21] of those things that normally nobody

[2:23] talks about except the real experts on

[2:25] Wall Street, the so-called yield curve.

[2:27] It's really very simple. All it means is

[2:29] that interest rates for 20- and 30-year

[2:33] bonds are usually kind of high because

[2:35] you're going to wait 20 or 30 years to

[2:37] get your money back. Well, there's a lot

[2:39] of risk in waiting 20 or 30 years.

[2:41] >> You tie it up, you should be compensated

[2:43] for that risk.

[2:44] >> for that risk. Whereas one or two-year

[2:46] bonds lower risk, lower interest rates.

[2:49] Well, what happened was that went

[2:51] backwards. The interest rates on the 20-

[2:54] and 30-year bonds are actually now lower

[2:57] than interest rates on the one- and

[2:58] two-year bonds. What does that mean?

[3:00] Well, it means that the market thinks

[3:02] things are going to be kind of slow in

[3:04] the economy going a few years out. In

[3:06] other words, maybe forecasting a

[3:08] recession.

[3:09] What do you think?

[3:10] >> Are you forecasting a recession here and

[3:12] now?

[3:12] >> No, I'm actually not. I really am not It

[3:14] has to be said actually, something you

[3:16] rarely hear.

[3:17] The economy looks pretty good right now.

[3:19] If you look at all the numbers, economic

[3:21] growth, productivity, unemployment

[3:23] You'd have to say the economy is looking

[3:24] pretty strong. Now, could we have a

[3:27] recession? Well, we could, but I don't

[3:29] see any reason to expect it. So,

[3:31] >> a lot of people have their major

[3:33] investment tied up where they live, in

[3:36] their homes. And there has been talk of

[3:38] a real estate bubble.

[3:40] >> Right.

[3:40] >> Are we at the top of the real estate

[3:42] market in most of the country? And if

[3:44] this is I mean if if you have an

[3:45] investment property, or let's say if

[3:48] you've got a house

[3:48] >> Yeah.

[3:49] >> you have an opportunity to rent

[3:50] somewhere and you don't mind moving this

[3:53] a good time to get out?

[3:54] >> If you live in one of those superheated

[3:56] markets, and I can't mention all of

[3:58] them, but we all know San Diego, Miami,

[4:01] Las Vegas, and a few others are

[4:02] superheated markets. My own view, and

[4:05] this is somewhat controversial in the

[4:07] real estate industry, but my own view is

[4:08] this is clearly a bubble. It is indeed

[4:11] an unsustainably high level of prices.

[4:14] And so, to answer your question

[4:15] directly, if you have a chance to sell,

[4:18] and you can rent instead, you know,

[4:20] Look, depending on the requirements of

[4:22] your job and your family, and so forth,

[4:23] if you could really do this, it's

[4:25] probably not a bad time to do it. Now, I

[4:27] always say,

[4:28] you can't time the market precisely, and

[4:30] you may end up kicking yourself for a

[4:32] year if prices continue to go up for a

[4:34] year, but then I always say, remember

[4:36] what Bernard Baruch said when he was

[4:38] asked how he got so rich. He said, "I

[4:39] always sold too soon."

[4:42] >> Sage advice.

[4:43] >> Yes, it is.

[4:44] >> Let's talk about the other market, the

[4:45] stock market.

[4:45] >> The stock market.

[4:47] >> Uh

[4:47] where do you think it's going to go? If

[4:49] If I am going to sell my primary

[4:50] residence, cash out, put some of it in

[4:52] the market, what's going to look good

[4:54] this year?

[4:54] >> People like you and me should not be

[4:56] putting money in the market unless we

[4:58] can leave it there for a good long time.

[5:00] And by that, I mean 5 years, 10 years,

[5:03] or even more.

[5:04] If you ask me what the market's going to

[5:06] do in the next 6 months, or 12 months,

[5:08] or 2 years, I will tell you, first of

[5:10] all, I don't know, and second of all,

[5:13] nobody else knows, either. But you and

[5:16] I, if we're going to go into the stock

[5:17] market, should go in it for a good long

[5:20] time. And in my view, the evidence is

[5:22] overwhelming,

[5:24] we should not try to pick individual

[5:26] stocks. In other words, we should invest

[5:28] in the market, meaning an index fund

[5:30] that owns essentially every stock. Buy

[5:34] it, and forget about it. Years from now,

[5:37] have a look at it.

[5:38] >> We have time to look quickly at another

[5:40] issue that's going to affect a lot of

[5:41] consumers in the early part of 2006.

[5:44] More and more banks are starting now to

[5:46] increase the minimum payments

[5:49] >> On credit cards.

[5:50] >> Doubling them in some cases.

[5:51] >> Right. And you have to understand

[5:53] they're doing this not because they want

[5:55] to, but under pressure from regulators.

[5:57] The regulators are doing this because

[5:59] they think they are helping consumers.

[6:01] They want to help consumers. Because the

[6:03] truth is if you make the minimum payment

[6:05] on a credit card, it can take you 40

[6:07] years or more to pay it all off. The

[6:08] regulators say that's crazy. You should

[6:11] have to pay off more each month so it

[6:13] doesn't take so long. Problem is those

[6:16] higher payments could hurt.

[6:17] >> So thank you for that help, regulators.

[6:19] Is that it?

[6:20] >> That's it.

[6:20] >> Okay.

[6:21] >> Jeff Colvin, senior editor at large for

[6:23] Fortune magazine. Thank you so much.

[6:24] >> My pleasure.