yourself. if every dollar you have is being spent you wl never get ahead. and many americans, for every dollar they make they're spending $1 and 10 and that a description for disaster. start with your own budget. but once you start there you now start carving out money that's for your long-term savings and ra y your long-term investments we have 401k. roth iras. you carve out and put it into these vehicle and your lucky yo employer may match something. you put a dollar understand maybe your employee is matching 50 per and gives you a boost towards your retirement. you ve to pay attention to these. one classic mistake a lot of people make is they take all of their money and put it in company stocks. imagine if you work for apple how temptin it would be to put all of your 401k into a company stock? and the words i say to people when we talk about this is, enron. there was a time when it looked just like apple like there was no top to their market price. i'm not trying to imply that and sl going to be or doing anything wrong, i'm just saying when you put one stock you can have a disaster effect. make sure you have a diversified portfolio if you go through the last two weeks the mark set down 2% or seven percent in the last week alone but if you go through this. suppose your 401k you had 40% of your 401k invested the stock market. 10% or 40% means you had a 40% decline. perhaps you have a little gold in the portfolio mitigating the mage to get u through these tough times. >> our guest is you patricia paowell. line for republicans is (202) 737-0001 representative, for democrat, democrat dechlt and we have a line for independent and if you're watching outside the united states. (202) 628-0205. from our twitter page. scott has this point. rather i give you 50,000 dollars in gold or $50,000 in cash? >> that's a very interesting and tough question. being a money manager i would never do all of either. but i certain liam a big fan of cash and i am a small fan of gold at over $1600 an ounce. i was a bigger fan when it was under thousand dollars an ounce. host: republican line with patricia paowell. good morning da. ller: thanks for my call. i had a question for terrillier caller but i guess she can field this one too. how can we trust the stock market when they gave triple-a ratings to pretty much garbage surime mortgage? can you trust the stock market? people live paycheck to paycheck. how can you 408k when the economy collapsed and everyone had to turn to trim-ple-a but i was garbage. how can you trust it? >> referring to s&p and some of the earlier derivatives. >> i don't think you can. when you make an investment in the stock market, you are at risk and you have to know that going in. you can't say, i'll put in and everything will be okay. the reaso that most of us would advise people to have some of the money into the stock mark set th, scks have weathered historically, just about every crisis you can imagine. they have recovered from the crash of 29 and world war ii and from the korean war or the cuban missile crisis. think recovered from 911. if you look at this and you say, there is a really strong history of recovery. but that's a large basket of stocks not any individual stocks. not all companies recover. some go out of business so. i'm not a fan of trusting anyone. i'm a fan though of looking carefully at your portfolio. making calculated risks and i tend to like to buy when things cheaper and not more experience expensive so i don't think people should look to the stock market or corporate america and say, i trust you. that's not what is going to work for you. >> our guest earned her mba at see on the hall university with the market down significantly is it a good time to invest and buy? >> it's always good time to invest. not sure about a good time to buy. i'm not expecting to buy on monday for a lot of my clients. we don't really know how it's going to go. we only have one group of markets open since the downgrade that was the middle east. not sure dubai is a good indicator. but i'm sort of embracing that we might get more of the same. i think it might be a very difficult beginning and difficult week. but i'm not really that concerned. this is not going to cause the world to come apart. it's not good. it's serious but when you look at our economy. we're still growing. we're not in recession yet. i heard you mention on the last segment that larry summers says the probability of recession he would put it one out of three. i would agree with him. that would mean there's two out of three that we don't go into, into recession and that's good. host: nexcaller. good morning. caller: hi patricia. i'm from connecticut. two questions. yes or no if you put a significant culprit from wall street behind bars would things turn around and they might think twice about putting world economy in jeopardy next time around >> i think if you find that someone has done something illegal, then you take the actions that are necessary and you, we have a legal process by which we can put people from corporate america in jail. it's difficult. you can see even in the enron process there's only been a couple of people that have actually gone to jail over that. but i think you have to look at was anything that happened illegal and if it was, then you have to ta action against it and if you did, that would send a tremendous signal that white collar work ers don't like going to jail. >> stock mark set legal iced g legalized gambling. >> i don't agree with that statement but it's legalized risk taking. you have know that the declines can be fast and furious but it' also how we built this country and how we employ the ten office millions of people going to work every day. and it's through this idea of capitalism. i know your viewers identify themsees as republican, democrat or independent and i, identify myself as capitalist. it's an economic philosophy that has worked this country and built a jawinger that economy and weave had struggles and might be just throwing out the baby with the bath water looking for other alternatives. >> why though over the last 20 years we've seen sum wild swings. the market up or down five or six under hundred. is it unusual o sign of the time? >> wild swings were reay a result of i think, the markets and the people investing in the markets disseminating very bad information and i think i said it earlier in 2008 we came peril obviously close to economic close. the wild days in the market were actually rational. that was a fear that we're dealing with something incredibly serious. the swings today going into this weekend before we hit i would have said we're going through a normal correction. little more than 10%. i wasn't exseeively concerned with the downgrade over the weekend but a little more concerned with the weekend. >> why so? >> because i think it's serious. i think they're putting us on notice that we have some structural issues and i think it actually was rather courageous of s&p to step forward and not cave to political pressure and keep the rating at a triple-a. clearly the easy thing would have been to just find a reason and say, please don't do or make any worse but they said, y didn't lower the deficit by the 4 trillion dollars we said would be necessary to create to maintain this rateing so they withdrew it. i think that was a courageous statement and there's going to be fall out for them as a company. >> the downgrade quote reflects our opinion and s&p that congress and the administration falls short of what would be necessary to stabilize the government's medium term debt dynamics. scott has this point from our twitter page. who believes americans will pay back the 14 and a half trillion dollars. and of course it's that figure and the debt agreement that stretched out over the past month with the political give and take that led to the decision by s&p on friday. >> i don't think it's the 14.3 trillion dollars. i think it's the expected expansion of the 14.3 trillion dollars if you look at 2010 we spent approximate nightly 412, 413 billion dollars in interest. the first ten months of fiscal 2011 we spent almost the same amount and still he two months to go. it's the expansion of debt and the fear that when interest rates rise, not when but or if but when that we could get a huge explosion of debt services that would make things truly unmanageable. >> john from minnesota. good morning. caller: good morning. how are you? >> good morning. i'm fine. caller: i reenforcemently retired and all of my nt egg is in a money market with vanguard and i'm thinking about looking at about a thi of it to do conservative investment with maybe a five year span on it. what would you suggest? >> okay. i'm sorry if you gave me your age. i didn't quite catch it? >> 65. >> okay. what you have to look at is how long your really going to be retired and how long you're going to need the money and when you're going to need income from this money. what i usually would say to somebody in your position, you have to look at this as at least 20 year money. it might be 25 or 30-year money because you could be here at 90 or 95. not all of us will make it that far and those that do don't want to run out of money. this has to be long-term money. the pace of spending out of the account will be incredibly important. on some of this money should be segregated saying this money has to be here 10 to 20 years out and that's how you should look at in investing. middle of the road for my office for the last year or so we've been light on equities but not at 0. we've been running at about 30 to 40% of the portfolio being at equities and positions in bonds and also had positions in folds and commodities and i don't see this is differently on the surface for somebody like you. but, if your taking large chunk office money out of this account to maintain the standard of living anything above 4% you have to think and say that money is not investment money but that money belongs in very, veryafe vestments and in all honesty if you're in a money market fund and compare and maybe to bank cd's you might do better. might have to go back and forth. >> if you work for a company that doesn't provide a 401k. what advice do you give consumers and what's the difference between that and a root ira? >> a 401k is actually an expense of a profit sharing plan. provision in the tax code. you're talking about the tax code. it allows your viewers offer employees to contribute in pre tax dollars into a retirement plan that's managed through their employers. usually a separate trust. typically you can put quite a bit of money, for most viewers it's a loft ney. 16 $500 into a 401k. if your over 50 you can put into the neighborhood of $25,000. if your employer matches that and often they'll match the first five or six percent but you put another six percent jaw could have 25% of your gross income going into a retirement plan so it as really good thing. congress has not elected to be as generous the people that have to do it themselves if you have to, you can do a roth ira that is in after tax dollars. not before tax dollars so you get no immediate max benefit. the beauty of a rothir o is if you immediate the standards your ira is in there for at least fiveears and your over 59 and a half you can take all of the money out without incurring any federal income taxes 401k refers the roth ira and that can be incredibly powerful and retirement. your restrictions are much lower though. you can only put $5,000 in. there's income restrictions on that. depending on whether what your filing statuss. filing single or as a married couple and if you reached certain levels you can't do a roth ira. you do get an opportunity to put an extra thousand inor those of us over 50. >> republican line with patricia giving financial advice in uncertain economic times. ann? caller: they can't force you to take the money out with a roth because they have to do the minimum deduction and that hit me when the market was down at a very lowest. but the business of america is business and we have a man who hates capitalism in the white house. until we get him out of there people are not going to be investing and you look at e.p.a. wheree's given a bunch of money. lisa jacks has her foot on the neck of the entrepreneur and took money from the e.p.a. to have rap musicians write a song to get young school children agains business. how's people going to have any faith in this stock market when we have a preside like that in the white house and we need to get him out of there and stev can you stop letting democrats like elliot from new york call in on the republican line and the independent line. you're going to lose all credibility with anybody. host: appreciate our call. it's not a perfect system. we do try our best. paicia paowell you want to respond? >> kind of a hard comment to spond to because it requires more political background than what i represent to have. we go through different kind of philosophies and i think in addition to the political wrangling that's going on in washington, there really is a huge economic argument going on and there's two very different schools of economic thought that are slugging it out. and you have the really took dominance in the great depression and then those that believe more in free markets that were perhaps investing in the prominent member is milton friedman that wrote extensively on the value of capitalism to, and free markets and i think what you see in washington is a tremendous or meant anhich is the way to go as a society. i don't think it's clear which one is going to take dominance. i think the dominance during the crisis of 2008 and it's hard to argue what would happen if - i'm a little more on timistic than you. i think it's been terribly made hard on entrepreneurs and those that create jobs but entrepreneurs are very optimistic and i come from that school saying it's always dawn in america. there's always some guy in a garage trying to figure out how to be the next yahoo and going to create the next 50,000 jobs so i do think it's a struggle, but i am not pessimistic about it. >> ac saying everyone forgot the small saver. most are paying less than one percent interest. how can we grow money if we're not willing to risk it in the market? >> you can't. you can't grow your money if you're not willing to risk it. what you do with a saving as count is you protect your money and you have to decide what's imrtant to you. if what is important to protect that money and have the security that under no circumstances, that will i have a problem and it'll go down if the bank fails i have lay of insurance in fdic and if that's what's important then you're absolutely in the right place and can't eat your heart out about growth if you're a saver. >> dee from st. louis. good morn together yoing to you. caller i have a comment. throughout this show, there's been talking about citizens - the population increasing spending to increase or to improve the economy. at the same time, we're talking about the fact that the average household is spending anywhere between 138 to 110 percent of income and would say that's just to get by. when we want to start talking about the amount of salary dicre energy sis about whats in the average household. we're living off credit. we're not saving because we're trying to get by on you know, what littles being divided between saries and companies trying to make their stocks look better and more attractive to investors. so or you know, bonuses for c.e.o's and i just don't think that - i think i appreciate the idea of saving and i agree with it, but when you look at the conflict in the messages being sent to the american consumer, and the american employee, and i just, i think i know you value capitalism. . we have to gain control of ourselves. there are people that have hit a particularly difficult patch. they have lost their jobs. unemployment benefits are running out. for the moment, i will put those people aside and try to address those of us who have a job. we need to live within our means. what has happened is we have become addicted to debt. . we have been enabled to do things with almost unlimited credit. we have to say no to ourselves. what i tell my clients is the first thing you have to do is get the credit cards out of your wallet. they are shocked and horrified. your standard of living will decline when you do this. if you are not charging starbucks on your credit card and do not have the $4, you are not buying a $4 cup of coffee. you may have to make your own coffee. u will have to refill your water bottle with tap water. take your kids to the library. you may have to take a roommate to make your rent. you may have to share your home to cover your mortgage. these things are not the norm of how people think about their standard of living. they think they could never live like that. sometimes the outcome of not making the cutbacks is you do not have a home anymore. i have literally said to someone that you have to give upour personal trainer and masseuse coming to the house every saturday. they responded they could not do that. where will they go when you are living in your car? it sounds harsh. i know that. we have to be in control of ourselves. it does us no good to go down this road. we have to spend some time on money management. we have to do it as a family. the kids have to be brought in. kids are a tremendous drain on finances. most children have two phrases "i need" and "i want." as parents, we want to give them everything because we love them so much. we have to learn to say no to them and ourselves. it is hard but true. host: we will go to ed on the independent line from maryland. caller: i have saved my money. along came mr. bush into office while i was down in the caribbean sailings. he wiped out all ofy games. all i have left is my principal. how do we protect ourselves from the idiot politicians playing games with our money and giving it to people who do not produce anything other than a shovel in money around and throwing money away and into their own pockets? guest: i do not know that you can protect yourself from liticians. you see the tremendous debate going on in washington. in many cases, there are heartfelt beliefs of the opposite ends of the spectrum of what government should do. i tend to think the government should do less and we should do more. until th is resolved, i think you are always going to feel the government is going to take. part of the debate you hear is that we will tax three people -- rich people. at the end of today, that is probablyoing to happen. you cannot raise enough revenue to cover the kind of deficits we're running by just taxing the rich people. you have to start bringing down the levels. let me give you examples of where governments have done that. in 1986, there was a tremendous debate between ronald reagan and the democrats in washington about raising taxes. eventually, ronald reagan caved in and did not sign the bill for raisintaxes. they decided they were going to tax the rich social security recipients. they were talking about millionaires when the debate started. what we deced was a rich social secury recipient was a married couple making $44,000 a year and an individual making $34,000 a year. those are still levels where the tax rates change on social security. recently we changed how we charge seniors premiums on medicare. it used to be that every senior paid the exact same premium. we decided that was unfair. for a single medicare participant, he will start paying more if you have an income of over $85,000 or a married couple with an income of over $170,000. there are all of these additional thresholds. it is very hard to hold the line you are truly trying to raise revenue. the thing we haveo be cautious about when we raise taxes is if we eat our seeds. we can ma