US Credit Rating in Danger
ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: From the CNNMoney Newsroom in New York, I'm Ali Velshi and this is "Your Money." The U.S. could get its credit rating downgraded again. Holiday sales weren't as bad as we expected them to be, but there is a catch. And Dell could be ready to go private. Let's start with credit. Ratings agency Fitch warns that Washington's dysfunction could cost the U.S. the AAA credit rating it still has with them. That is if Congress doesn't come up with what it calls a credible medium-term deficit reduction plan. Understand that Fitch is not just looking for an eleventh hour debt ceiling deal that sets the table for another mini-crisis down the road. The federal government hit the debt limit, as you know, on December 31st, but the Treasury is using so-called "extraordinary measures" to pay its bills through mid-February or early March. Now, Fitch predicts that Washington will extend the debt ceiling despite the current war of words between President Obama and Republicans in Congress. So, what happens if we get downgraded? Well, it's happened before. Remember 2011, when Standard & Poor's did it. That hit markets and the wider economy hard, though it didn't cause interest rates to increase. This time could be different, however, because the rest of the world is getting its act together. Even successful businesses like Ford are worried. Here's what CEO Alan Mulally told me today.</s>ALAN MULALLY, CEO, FORD: I think the most important thing, to your point, is that we come together around a solution that allows us to live within our means, to reduce our budget deficits and also to deal with our trade deficits and create an environment where the businesses can grow in the United States. The most important thing is we come together with a comprehensive solution, not just working one piece or the other, but a comprehensive solution where we can start to grow the economy again for everybody.</s>VELSHI: But the order in which we do things matters. First, raise the debt ceiling, allowing America to pay for its bills that it's already racked up. Then come up with a longer term plan that could put us back in fiscal good health. America's ability to meet its obligations should not be held hostage to an agreement on spending cuts. On the money menu, retail sales went up by half a percentage point in December. That's higher than expected. Cars saw the biggest gains with sales jumping 1.8 percent at dealerships. But other stores that see normally sales go up during the holiday season, think clothing and electronics, barely saw gains. Now, while sales are expected to increase in 2013, it is slow going for now. For one thing, Americans are getting a little less in their paycheck now that the payroll tax holiday has ended. And a little less money means a little less shopping for now. Dude, did you hear about Dell? Shares of the computer-maker have jumped about 15 percent in the last two days after a Bloomberg report said that it is in buyout talks with a couple of private equity firms. The company, founded in CEO Michael Dell's dorm room in Texas back in the '80s, has been struggling lately as p.c. sales drop off. Now, going private would allow Dell to concentrate on new opportunities like mobile computing and other areas without seeking approval from shareholders. Dell isn't commenting on the rumors. Well, America's economy could be poised for a comeback in 2013. I want to admit to being biased, not partisan, but definitely biased against the stupidity of politicians who are willing to put your economy at risk. I am worried that these battles over the debt ceiling, these ridiculous sequester cuts that are coming up next and the refusal to agree to a budget could derail an economic renaissance here in the United States. But investors don't seem all that worried, at least for now. While some of you asked me whether you should wait until the debt and budget stuff is worked out to get back into the stock market, investors have put $19.8 billion back into U.S. stocks and stockholding funds since January 1st. Markets are doing well, too. The S&P; 500, which may look like your 401(k) or your IRA investments is already up about 3 percent for the year and hit a five-year high last week. Now, in a low interest environment, like the one we're in now, you're not going to make money without being in stocks, but be careful. A recent CNNMoney survey of money managers and investment strategists predicted that the S&P; would only go up about 4.5 percent this year. That's after gaining 13 percent in 2012. What they're afraid of Washington's unending partisan warfare getting in the way of economic growth. As I said, 2013 could be the year that America cruises back into prosperity. There is a domestic energy boom. There is a return of manufacturing. They're going to create job opportunities for Americans, but businesses hate uncertainty and, as Washington battles over issues that are important to America's economy, debt spending and budgets, businesses will continue to hold back on investment and on hiring. I'm glad investors are so confident right now. Let's hope Washington doesn't mess it up for you. That's it for me, from the CNNMoney Newsroom in New York. I'm out. Same time tomorrow.