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Lou Dobbs Moneyline
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Aired December 24, 2001 - 18:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANNOUNCER: This is LOU DOBBS MONEYLINE for Monday, December 24. Sitting in for Lou Dobbs, Jan Hopkins.
JAN HOPKINS, CNN ANCHOR: Good evening, everyone. Tonight, the man who authorities say attempted a weekend plane bombing sits in a Boston jail cell. And police in three countries are looking for answers. Richard Reid, as he calls himself, tried to ignite explosives in his shoe on a transatlantic American Airlines flight. The passengers were able to subdue him.
This morning, Reid was ordered held in jail. Police, meanwhile, are trying to determine how Reid obtained the explosives, how he got them on board the plane, and if he had any links to Osama bin Laden.
Susan Candiotti joins us now with more. Susan, what do you know?
SUSAN CANDIOTTI, CNN CORRESPONDENT: A lot of questions out there, Jan, this evening. So many questions surrounding Richard Reid, but few answers coming during his very brief court in Boston, this day before a federal judge.
So far, sources say no links have been established between Reid and any known terror group. The six foot four, 200 pound defendant, wore not only leg irons, but handcuffs as well, when he appeared before a judge in Boston this day to hear the charge -- single charge filed against him, interference with a flight crew. However, officials say more charges could follow.
Before court, CNN has learned, he met for 20 minutes, Reid did, with British consulate officer there in Boston. Reid carries a British passport. Investigators are also looking into two other names he apparently used. Again, questions involve did he have other accomplices, where did he get his hands on the explosives hidden inside his sneakers?
(BEGIN VIDEO CLIP)
MICHAEL SULLIVAN, U.S. ATTORNEY: Preliminary results from the FBI lab have concluded that there were functional improvised explosive devices in both of Reid's sneakers. Additional tests are being conducted. This investigation is ongoing. And the United States Attorneys office and the FBI are working together to aggressively pursue every possible lead. (END VIDEO CLIP)
CANDIOTTI: Another area of examination includes this, why was Reid cleared in his second attempt to take a flight from Paris to Miami, after he was stopped during his first attempt by authorities in France? He does have another court appearance scheduled for Friday, this Friday in Boston another bond detention hearing. And he will have a court-appointed lawyer at that time. And tests are currently underway at FBI headquarters in Washington to try to determine the nature of those explosives hidden inside his shoes, sources tell us. There were about 10 ounces in all -- Jan.
HOPKINS: Well, Susan, there's even a question of whether that's his real name and whether he's from Britain, right?
CANDIOTTI: Well, yes, although you heard authorities say they are working under the assumption that he is a British citizen. He was traveling with a British passport, which by the way, was issued just about two weeks ago at the British embassy in Belgium.
Now, of course, they are also looking into two other names, at least two others that they know about. So of course, there remains a question as to whether that is indeed his true identity. But for now, that's the name he was using on his passport, authorities say.
HOPKINS: Thanks, Susan Candiotti in Miami.
And in the wake of the attempted bombing this weekend, airports around the world are taking extra precautions.
Jeff Flock is at Chicago's O'Hare Airport. Jeff, what can you tell us about security there? Is it even tighter?
JEFF FLOCK, CNN CORRESPONDENT: Even tighter security here today, Jan. That's one of the headlines. The other headline is that it hasn't been so bad, partly because what you see behind me, there's a happy traveler, very light travel today. So the increased security hasn't been as bad as you might expect.
Off to the right, perhaps, if our camera pans off that way, you see onto the magnetometers here at O'Hare. With the naked eye, you're not able to see people actually being told to take their shoes off, but I assure you it's happening. Pictures perhaps from Logan Airport in Boston I think we have. And those give you some sense of what people have been going through today.
We talked to one traveler from Colorado who says that everyone on his flight had to take their shoes off and put them on the magnetometers and have them x-rayed and run through there. Another man from Logan said that someone took his shoe off and peered inside of it, poked around inside of it. He said he had a sense the person didn't really know what they were looking for, but clearly they were looking.
And again, all of this, this increased security, hasn't been bad today on this Christmas Eve, Jan, because the loads have been reasonably light. With the weekend, a lot people traveling then.
That's the latest from O'Hare. Back to you.
HOPKINS: Thanks Jeff Flock in Chicago.
In the war in Afghanistan, American warplanes have been carrying out attacks against Taliban ammunition storage facilities north of Kandahar. U.S. officials say the movement of Marines into Tora Bora to search caves is "imminent." That is the reason that U.S. planes are conducting few bombing missions in the area right now.
In the Afghan capital of Kabul, interim leader Hamid Karzai appointed Northern Alliance General Dostum as deputy defense minister. Dostum has been critical of the new government, saying the Northern Alliance is underrepresented in the ruling group.
Jordanian troops arrived in Afghanistan to help carry out peacekeeping duties and set up and protect a field hospital in Mazar- e-Sharif. In Kandahar...
(SINGING "WE WISH YOU A MERRY CHRISTMAS")
U.S. troops ushered in Christmas Day, singing carols and in some cases, sending good wishes home to family members via satellite.
Somewhat subdued Christmas festivities tonight in Bethlehem. Not very many visitors. And among the missing, Yasser Arafat. The Palestinian leader barred by Israel from traveling to Bethlehem until and unless, he arrests those who killed an Israeli cabinet member.
Chris Burns is in Bethlehem tonight and joins us now. Chris, what's the situation now?
CHRIS BURNS, CNN CORRESPONDENT: Jan, well a very moving scene inside the Church of the Nativity, which is just over my shoulder. Inside the church built on top of the grotto where Mary, according to the Bible, Mary gave birth to Christ. So inside the church it's filled with people who are worshipping the 2000th birthday of Christ.
In that church there is an empty chair, with a kefia on it, being the trademark kefia of Yasser Arafat himself. And so, he is being remembered and thought of in the church as midnight mass proceeds. A very moving atmosphere inside for those inside, and also for the billions of Christians around the world.
However, outside the church, where we're standing, the square, the Manger Square outside here is a very great contrast, where you can see that people have thinned out. Very, very few people in here.
Whereas in years past, it used to be a very, very festive atmosphere into the wee hours of the morning with lots of music, stages, lots of decorations. And that being not only because Yasser Arafat has been barred from attending for the first time since 1995 when the Palestinian Authority took power in Bethlehem and in other parts of the West Bank and Gaza Strip, but also because a number people in Bethlehem have died as a result of the violence in recent weeks, violence where the Israelis have cracked down on the militant attacks, attacks that have left dozens of Israelis dead in this 15- month old uprising against Israeli occupation, where more than 1,000 people have died, most of them Palestinians.
So the violence has flared up in recent weeks. And you could see on some of the gift shops that have been shuttered up because of the violence, those gift shops have posters on them showing some of the people who have died. So a very somber atmosphere out there, in contrast to what's inside the Church of Nativity just over my shoulder -- Jan.
HOPKINS: Thanks, Chris Burns in Bethlehem.
The leading electronic retailers in the country, Best Buy and Circuit City, say that sales are being helped this Christmas by customers' focus on home entertainment. That's since the September 11 attacks. Stocks in both companies tonight are trading near 52-week highs.
Bruce Francis is here with a closer look at the high-tech draw this holiday season.
BRUCE FRANCIS, CNN CORRESPONDENT: Jan, apparel hasn't been doing that well this year, but tech certainly has. High tech retailers are keeping official tallies as tightly wrapped as Christmas presents right now. But high-tech gifts this year appear to be dominated by two words, thumb candy.
That's video games by any other name. Microsoft's Xbox and Nintendo's GameCube are battling it out for the hearts and minds of game lovers this holiday season. The good news, both companies have been reporting strong sales of the console so far. The bad news, neither company makes any profits on the machines. And retail margins are thinner than a slice of Christmas ham.
Naturally, those two new consoles, plus the reigning PlayStation 2 from Sony are on Best Buy's hot list this season, but the retailer wouldn't take sides. The electronics retailers says that MP-3 players are also hot items, along with anything digital, especially cameras.
Even PCs, they say, are selling well, and not just on the low end. No word on whether consumers are snapping Compaqs on the expectation that they'll become collectors item. That brand, after all, is doomed to extinction if the merger with Hewlett-Packard goes through.
Now on Amazon's hot list, the $99 DVD player is an especially hot item this year. The online retailer says that consumers especially bargain conscious right now. And like Best Buy, Amazon says their digital cameras also bestsellers. And interestingly, Amazon says that emergency-related items, like police and fire scanners and walkie- talkies are also putting in a strong showing. And consumers are really emphasizing things like safety right now in their choices, Jan.
HOPKINS: We also know that consumers have not been spending a lot of money on vacations. So are they spending that money elsewhere? FRANCIS: It looks like, as you mentioned earlier, this whole cocooning idea. If you're going to stay home, why not stay home and enjoy some video games? After all, you're getting a lot of push from your kids from that. And things like anything digital, cameras, all that, all things to use at home and close to the family.
HOPKINS: Thanks, Bruce Francis.
And while some high tech items are selling well this Christmas, as Bruce was just telling us, many retailers are suffering. Despite huge discounts, despite longer store hours, sales have been slow and they're expected to end up flat to just slightly higher, compared to a year ago. Some retailers say that shoppers are being very selective.
(BEGIN VIDEO CLIP)
MICHAEL GOULD, BLOOMINGDALES CHMN. & CEO: Wherever we had newness, wherever we've had fashion, where we've had exclusivity, like a Motorola I90-C telephone, a very unusual item, the customer has responded. So the customer is certainly there. The customer just need to be excited a lot more than just basic merchandise.
(END VIDEO CLIP)
HOPKINS: Bear Stearns retail analyst Dana Telsey has been cruising through the stores in New York City today, checking out how the retailers are doing. Dana joins us now from outside Macy's in midtown Manhattan.
So Dana, where are the customers? And what are they buying?
DANA TELSEY, BEAR STEARNS: Happy holidays, Jan. The customers today are buying items for their home. They're also buying a lot of consumer electronics. And essentially what they're not buying is apparel. Coats, sweaters, outerwear, they certainly are at discounted prices.
HOPKINS: So the consumer really has changed his or her ideas of what to buy since September 11? Or is this all because of the weather?
TELSEY: Basically it certainly is a bit because of September 11. The events of 9/11 certainly has caused increased job losses and lower consumer confidence. Consumers want to keep their cash close to their wallets and are basically being more careful about their spending. This is going to be a holiday season where consumers spend time with their families, rather than look for latest or greatest gifts out there.
HOPKINS: So even though we have lower interest rates and lower prices for gasoline, the consumers are continuing to save money, rather than spending it in the stores?
TELSEY: Exactly. And we've seen that this holiday season, where holiday season sales will probably be flat to maybe down a little or maybe even up a little bit at best. The last time we had a holiday season as poor as this was in 1990, when there was also an event and also the economy was in recession.
HOPKINS: Now we know that retailers have been discounting prices pretty dramatically, but are people buying or are they still staying away?
TELSEY: Basically, the two best weekends of the holiday season were the weekend after Thanksgiving and just this past weekend. The traffic doesn't seem nearly as great as what it been over the past holiday years, but it wasn't expected to be. Basically, the only store and some of the stores that we've seen with inventories may be a little bit less than last year was perhaps Bloomingdales, which is a division of Federated, that seemed a bit cleaner.
HOPKINS: So the retailers, when they report profits, those profits will look pretty glum, won't they?
TELSEY: Exactly. On January 10 is when most retailers report their December sales. And essentially, you might get some small increases, because they sold a lot of units, but the level of discounting certainly hurt their profits.
HOPKINS: And the discounters are the ones that have really done well, as people look for value, is that right?
TELSEY: Exactly. Wal-Mart today reported an early indication of their holiday sales, up positive in the 4 to 6 percent range, up near the 4 percent range for this upcoming holiday season. The discounters are faring well, because they have need-based items at good prices, and consumers are looking to buy everything at one place.
HOPKINS: So Dana, do you see big crowds there at the very end of the shopping season?
TELSEY: So far we've been in all the department stores around the city today. You definitely are seeing crowds, but not as many shopping bags as you would expect to see at the close of the Christmas Eve.
HOPKINS: Thanks. Dana Telsey at Bear Stearns. Thanks for joining us from outside of Macy's.
TELSEY: Thank you. Happy holidays.
HOPKINS: Happy holidays to you as well.
It may be a blue Christmas for many retailers, but it will be a white Christmas for many in the Northeast. Heavy snow is now falling in the Buffalo. A foot or so has already fallen. Two feet or more expected. Many of the rest of us will have to settle for a Christmas without snow. In fact, there are only half as many white Christmases now compared to 40 years ago. That's according to the Oak Ridge National Laboratory. Scientists there have no explanation for the decrease, but they warn not to read too much into it.
Coming up next, riots toppled Argentina's government last week. Now the new government is trying to convince its people and the world, that it will survive. We'll head to Buenos Aries for the latest.
And then, we'll tell you how Brooks Brothers is turning to technology to help boost sales and revive the business suit business. And from Carlos Santana to Dave Matthews, these are the guitars of choice. Tonight, a special report on a very small company that's doing well, despite the slow economy.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: I'd like to tell my wife and my kids merry Christmas, I love them. I miss them. And my parents, my brothers, all the family, hi, I'm doing OK. I love you guys.
(END VIDEO CLIP)
HOPKINS: Argentina's new president Adolfo Rodriguez Saa is moving quickly to try to rebuild his country's crumbling economy. After suspending debt repayments, the government today drafted plans to inject money into the economy by simply printing it. The new currency is designed to ease Argentina's severe liquidity crunch, and will be used alongside the country's peso. Economists say the move is tantamount to devaluing the peso, which has been pegged to the dollar at a rate of one-to-one. And that's been for the last 10 years.
Jonathan Mann joins us now from Buenos Aires with the latest effort to jump-start the second biggest economy in South America -- Jonathan.
JONATHAN MANN, CNN CORRESPONDENT: Jan, let me tell you first about Buenos Aires today, because it really is a very changed city. Maybe it's the quiet couple of days behind them or the celebration that's just ahead, but the people of Argentina, especially the people here in Buenos Aires went from crisis to Christmas in just the space of a weekend.
Today, they were out in the streets enjoying a warm day in the southern hemisphere. Some are strolling, doing some window shopping. No one has any money to buy anything, really, but it doesn't cost anything if you don't actually go home with the goods.
While they were out enjoying themselves, the new president, as you mentioned, and his team were at work. And we had some more news from them, after the enormous default that Argentina has declared, there was also plan for a new currency, that helped create jobs in this country where nearly 1 in 5 workers is unemployed.
That new currency, we learned today, is to be called the argentino. And it will take its place alongside the peso and the U.S. dollar, which is also widely used here. Oddly enough, the announcement, the word that it is to be called after the country itself, came to us via the minister of sport. I say that's odd because in a country with this kind of economic trouble, it is of course no game.
(BEGIN VIDEO CLIP)
MARTIN REDRADO, CHIEF ECONOMIST, FUNDICION CAPITAL: The president is trying to put some order, some social peace in a country that has riots and that's seen very sad stories in the streets. So basically, he's a transitory president. He's trying to cool down things and he's trying to put things in order.
(END VIDEO CLIP)
MANN: Some economists, as you say, think that this is going to be helpful. It's going to inject liquidity, because people here literally are running out of cash. Other people say that it is a devaluation by another name.
Argentina could take that step directly. And it's been under some pressure to do so, but the government doesn't want to. And here's why. People earn their livings. They run their businesses in pesos, but they buy their cars and they buy their homes with loans that are denominated in dollars. They take business loans in dollars.
If the peso suddenly loses its value, they'll be earning a lot less and still paying those old loans. And that would be a crushing burden that this government just doesn't want to inflict its people with.
Jan?
HOPKINS: But Jonathan, I guess the good news is that the state of crisis, food riots, etcetera are at least stopped for the moment?
MANN: That is the good news. And you're right to wonder -- people are right to wonder if they're stopped for good. Unemployment here is 18.3 percent. The recession is in its fourth year. And after this default, this economy is set to shrink and shrink dramatically, painfully. The rioting is not widely expected to occur, but I think a lot of people are expecting here there is still going to be a lot of anger.
Jan?
HOPKINS: Thanks very much, Jonathan Mann in Buenos Aires.
The latest moves by Argentina to put its fiscal house in order are not going to work and could actually harm the economy. That's the view of our next guest, Joyce Chan, of J.P. Morgan.
Welcome, Joyce. So it's not going to work?
JOYCE CHAN, J.P. MORGAN: I don't think it's going to work. I think de facto, there will be a devaluation. The key fear is that an increase in the money supply could risk another bout of hyperinflation or very high inflation for Argentina. And certainly the country will remain in recession.
Also, this government only has two months. So we will have elections coming up and still quite a lot of political uncertainty for the coming weeks.
HOPKINS: And so, basically, the government has not paid back its debts. I mean, it just says we're not going to pay. And what's it going to do with that money? Or is there money?
CHAN: Well, there really isn't money. The cash flow situation had gotten very precarious in Argentina. And they're basically printing currency to be able to pay Christmas bonuses, government salaries and even cutting government salaries. So I mean, they simply had run out of cash. Reserves had gone down tremendously over the last few months.
HOPKINS: And people are not able to take very much money out of banks, because there were runs on banks, right?
CHAN: Yes, and bank restriction will certainly have to continue. If they reopen the banks some day later this week, which it's not certain exactly what date that will occur, they will certainly have to keep restrictions to prevent capital outflows.
HOPKINS: You know, it's interesting when Mexico had problems with the economy, the U.S. bailed out Mexico. This was a number of years ago. And it had a good result. Mexico paid back loans and the economy is doing better. This time, the U.S. has not been involved with really any help to Argentina. Is that the right approach?
CHAN: Well, the U.S. and the IMF has had a number of programs with Argentina, which they have not been able to comply with. So the decision was made that until there was more clarity in the situation and a more permanent government in place to really step back from the situation. I think this has largely been anticipated by the marketplace. You do see more calls from European governments and also Latin American governments to help Argentina. But I think deliberately, the U.S. is staying on the sidelines for this one.
HOPKINS: The people that are hurt by this are banks in the U.S. and in Spain mostly. Is that right? With the government saying we're not going to pay back these loans.
CHAN: Well, the U.S. bank exposure is not so large. The European banks are more exposed than the U.S. in this situation, which is different from the Mexico crisis. I think though that most banks had anticipated the crisis well in advance. The country's in its fourth year of recession. There had been political calls for restructuring debts since June. And I think that by the time this happened, most people had anticipated it, which is why the contagion to other countries has been quite small so far.
HOPKINS: So that's the good news. This has not spread to even Brazil and countries that are adjacent to Chile.
CHAN: It really has had very little impact on other countries. I think it will have more impact on Brazil, because it will hurt the trade flows. You're already hearing reports out of union leaders in Brazil that they think they could lose, you know, many jobs because of this. But I think that the impact has been minimal because this was a crisis that has really played out in slow motion, for not just number of months, but almost years.
HOPKINS: One of the things that a new government says that it wants to do is to create more jobs. And clearly with the country in recession, and people not having jobs, that's an important thing to do, isn't it?
CHAN: Well, the government has vowed to create a million jobs. I don't know if they've come up with a strategy or an articulated plan about that. But the fear is that, you know, they will print money, that they will, you know, really increase the risk of very high inflation once again, which is the whole reason why had they pegged the currency to begin with, to get rid of the hyperinflation, which is in the thousands.
HOPKINS: This is a real mess?
CHAN: This is a very precarious, fragile situation. And I think it will remain so for some time to come. I think it's going to be quite different than some of the other recoveries we've seen in emerging markets. People are used to sharp drop and a fast comeback. And I think in Argentina's case, it's going to be more difficult just given that they're dealing with a currency, a debt crisis and a political crisis simultaneously.
HOPKINS: Joyce Chan, thanks very much.
CHAN: Thank you.
HOPKINS: And still to come, the troops in Afghanistan took time out to celebrate Christmas, but there was no time out in the war against terrorism. We'll have the latest developments. Former Defense Secretary William Cohen lends his perspective on the war and the deteriorating relations between India and Pakistan. And forget the pins and the chalk marks, Brooks brothers is turning to technology to boost suit sales. Those stories and more when MONEYLINE continues.
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HOPKINS: This Christmas season has been a challenging one for retailers. Consumers are concentrating on necessities. And many people are staying closer to home. But the season has been especially tough on companies that sell clothes. Now Brooks Brothers, one of the oldest names in the business, is turning to high technology for help.
Susan Lisovicz has the story.
(BEGIN VIDEOTAPE)
SUSAN LISOVICZ, CNN CORRESPONDENT (voice-over): Abraham Lincoln was wearing its label on the night he was assassinated. Bill Clinton was wearing it the day after he was elected. Clients over the years have also included J.P. Morgan, Clark Gable, and Jack Kerouac.
But 183-year-old Brooks Brothers is feeling its age. Marks and Spencer sold Brooks Brothers in November to the parent company of women's company, Casual Corner for about a third of the price it paid 12 years ago. So Brooks Brothers has gone high-tech in haberdashery.
UNIDENTIFIED FEMALE VOICE: Your scan has been completed. Please stand by while the computer processes your data.
LISOVICZ: In 12 seconds, a three dimensional map that captures over 20,000 data points can be created through digital scanning. A custom suit that traditionally takes six to eight weeks can now be completed within 15 business days for only about $100 more than an off the rack version.
JOE GROMEK, CEO, BROOKS BROTHERS: This is for a long-term traditional customer who maybe wants something unique or has a difficulty with the fit. It's for a young modern guy who wants a new way of shopping. And it's for people who just enjoy custom. So we get a broad selection here.
LISOVICZ: Another attraction, the economics of suits made to order.
JOHN DIXON, EXEC. VICE PRESIDENT, BROOKS BROTHERS: No markdowns, no inventory, no carrying cost. It's retail nirvana.
LISOVICZ: But it has been anything but nirvana for Brooks Brothers this year. November sales were down 6 percent. December is expected to be only slight better.
(on camera): Apparel is one of the toughest sells in this economy. And the American workplace has gone increasingly casual. Brooks Brothers is walking a tightrope, trying to attract younger customers, without alienating its core clientele.
(voice-over): Veteran retail analyst Kurt Barnard says it's too little, too late.
KURT BARNARD, BARNARDS RETAIL TREND REPORT: Brooks Brothers has two challenges. First of all, the tailored suit is essentially not very much in demand these days. And the second one is, to persuade men to come back to Brooks Brothers.
LISOVICZ: Brooks Brothers says digital tailoring will account for 10 percent of business at its flagship New York store. But even the digital fit isn't perfect. Customers typically try to suck in their gut during the scan. This model didn't like what he saw.
UNIDENTIFIED MALE: Well, mine said that I needed to do more sit- ups. So.
LISOVICZ: Digital tailoring doesn't do any tapering on the human form.
Susan Lisovicz, CNN Financial News, New York.
(END VIDEOTAPE)
HOPKINS: In Afghanistan, some Marines are already celebrating Christmas. (SINGING)
They've attended a midnight mass under a tent at the Kandahar Airport.
The 28-year-old man accused of trying to light his shoes on fire aboard an American Airlines flight appeared before a federal judge in Boston today. The judge ordered Richard Reid to remain in custody until an evidentiary hearing this Friday. Reid's shoes are believed to have contained an explosive substance.
After the incident, the FAA ordered airlines to take additional security steps at airports, including random shoe checks.
The world's two newest nuclear powers are moving more troops along the disputed border of Kashmir. Gun battles and shelling have increased along the border. India's government also expelled a Pakistani embassy employee for allegedly trying to obtain Indian defense secrets.
U.S. Marines are preparing to search cave and tunnel complexes in the Tora Bora region. For more on this, and on the increased tension between India and Pakistan, we're joined now by MONEYLINE regular, Former Defense Secretary William Cohen. Welcome.
WILLIAM COHEN, CHAIRMAN & CEO, THE COHEN GROUP: Good evening, Jan.
HOPKINS: Now the search for Osama bin Laden clearly continues, but we hear reports that he probably has escaped or he may have escaped. What do you think?
COHEN: I don't think we know. Everyone is now guessing. It's just a 50/50 proposition, where President Musharraf of Pakistan said the likelihood is probably that he died. But, I think that's just a guess on his part as well.
What's taking place right now on the ground, is our forces are using thermobaric bombs basically to suck the air out of those caves, and without destroying the caves per se, so that if he is in fact killed, they'll be able to recover the body. But no one can tell you at this point with any certainty if he's alive or dead, or if he's in Pakistan or Afghanistan.
HOPKINS: When you were defense secretary, you had information that he had access to helicopters and maybe a gulf stream jet. So, if he's alive, what are the chances he's still in Afghanistan?
COHEN: Well, I think the chances are still quite good that he's in Afghanistan. Any country that accepts him is inviting disaster. And I think, plus having a $25 million dollar price tag on his head, eventually someone's going to turn him in dead or alive. So I would say his chances of going to another country and living for any extended period of time are quite small. But, we'll have to wait and see how this continues, we will continue to pursue him with as much aggression as we can. I know this is a high priority for President Bush and his entire team and indeed for our country. So, I think that if he's on the run, he's going to be -- continuing to be on the run until we catch him.
HOPKINS: There is an increased terrorism threat as we've seen this weekend, with a person charged with trying -- it looks like trying to blow up a plane coming to the United States. What does that tell us about airport security? What we have had so far and maybe what we need to have?
COHEN: It tells us that it's still inadequate and fairly significantly inadequate in this respect. We don't have corresponding checks in some of our European capitals as we do here in the United States, and we're still quite efficient here in the United States. I think right now we're going to see a greater intensity as far as taking shoes off. And, of course, I think most people would say better sleepless or at least shoeless in Seattle rather than lifeless in Sri Lanka.
But that doesn't really spell the trouble for the airline industry that we can expect to see if these techniques continue to cause long delays, that's going to diminish airline traffic in greater numbers. I think what we have to do is have much greater investment in high technology that makes this kind of inconvenience really reduced to a much lower level. And then the airline industry, I think, can bring back the numbers they need to be a viable industry again.
And so the industry has survived so far, with an infusion certainly from the federal government. But, we have to have more technology, more security and better security personnel with better techniques. That's going to be required if we're going to continue to attract the traveling public.
HOPKINS: One of the things that's quite different from September 11, is that clearly passengers come to the aid of the staff on board a plane to subdue a passenger.
COHEN: Well, that's true. I think there's also a question, not only in terms of the lack of security checks for this particular individual, but we were told that there will be air marshals aboard planes. Now certainly, that doesn't apply necessarily to planes emanating or originating from overseas. But we have to have much more security, and, yes, we want to have the passengers participate, as they did here, very heroically.
But that should be the responsibility of the airlines in providing that kind of security and the federal government. We shouldn't be delegating all the responsibility to passengers on board, although they'll continue to play a key role in calling attention to any kind of inordinate or extraordinary activity in the part of other passengers.
HOPKINS: Pakistan and India, how closely do we have to watch this situation? How volatile is it?
COHEN: It's very volatile. We have a situation where Pakistan on the one hand is being very helpful to the United States, deploying some three brigades on the border of Afghanistan to make sure that the Taliban and the al Qaeda forces don't sneak through and help search for bin Laden and others, if they have already come into Pakistan.
At the same time, they've also activated all of their forces. They've canceled all leave for their military and placed them in the border with India. India, in turn, is responding in kind. The bad news is that both countries have nuclear weapons, there is no good news to this story, but we could say, the better news is that because they have nuclear weapons, then perhaps each country will exercise far greater restraint in the present and the future, given the consequences that could come about if they ever resort to exchange of nuclear weapons.
HOPKINS: Thanks. William Cohen of The Cohen Group.
COHEN: My pleasure.
HOPKINS: Still to come tonight, Santa came to Wall Street today, but he didn't leave much in anyone's stocking. We'll have that story. We'll also tell you what's happening in the housing market. Sales are rising, but the value of those homes is not. And, does "Lindows" sound too much like Windows? We'll tell you why Microsoft thinks so. And what Bill Gates intends to do about it.
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HOPKINS: Seems everyone's getting into the Christmas spirit, except on Wall Street perhaps. Santa was on Wall Street, but there was no Santa Claus rally. Saint Nick rang the closing bell, but his presence did little to boost stock prices. Concerns about airlines after this weekend's attempted bombing of American Airlines Flight 63 left the Dow unchanged. The Nasdaq and the S&P 500 were down slightly on the day.
In corporate news tonight, Polaroid is asking the courts for $3- 1/3 million. That money would be used for severance payments to its workers. Polaroid, which filed for bankruptcy in October, is afraid that without the payments, the workers will leave the company too soon.
Adolph Coors is buying the Carling label for $1.75 billion. Belgian brewer Interbrew is selling Carling as part of its acquisition of Bass Brewers. And Lucent Technologies has found a buyer for its billing and customer care assets. CSG Systems will pay Lucent about a third of a billion dollars in cash for those assets.
Mortgage rates have been rising recently as long term interest rates creep higher. But even though the cost of owning a home goes up and down, one thing has remained constant. In recent years, most Americans have been taking comfort in the fact that their homes have been steadily increasing in value.
That may not be the case much longer, as Kitty Pilgrim explains.
(BEGIN VIDEOTAPE) UNIDENTIFIED MALE: This is a nice fireplace.
KITTY PILGRIM, CNN FINANCIAL CORRESPONDENT (voice-over): The American dream, owning your own home. 75 percent of Americans do, and take comfort in the fact that their home is at least one investment that won't lose value. Not true according to top economists.
MAUREEN ALLYN, ZURICH SCUDDER INVESTMENTS: Safe as houses we always say. Well, you know, we really ought to learn better than that. House prices have fluctuated from time immemorial.
PILGRIM: Across the country, the median home price has dipped in September and October. Economists are watching closely to see what happens in the next few months. The average sale price went down 4.3 percent in September and nearly 2 percent in October. That kind of price erosion is significant.
DAVID HORNER, MERRILL LYNCH: If they would continue to fall for several more months, then that would be somewhat problematic, because, given the slow down or the recession in the economy, the fed would like to see asset prices hold up here, so it doesn't exacerbate the slow down.
PILGRIM: In recessions, housing prices generally do fall. This economic slow down has not been typical. Up until this most recent data, prices have held up. The worry is that price erosion on most Americans' chief asset would further undermine consumer confidence.
LARA RHAME, BROWN BROTHERS HARRIMAN: So much was made of the wealth effect when the stock market was falling. The fact is, the wealth effect from your housing price is a lot more important. The fact that this has really been the foundation that consumers have based their spending on, if this goes away, that poses a much greater risk to the economy and consumer spending.
PILGRIM (on camera): People are aware of the housing market in their own neighborhood, it makes for daily conversation. That's one fact they don't need to get from an economist or even a broadcast like this one. That's one statistic they can get easily on their own.
Kitty Pilgrim, CNN Financial News, New York.
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HOPKINS: A startup software company calls its operating system "Lindows." but another more established software company, Microsoft, is not amused. Microsoft is asking a federal court to block "Lindows" which it calls a Windows copycat, and says violates its trademark.
Steve Young has that story.
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STEVE YOUNG, CNN CORRESPONDENT (voice-over): Microsoft says it isn't trying to stop a product, it's trying to nip a name knockoff in the bud. Lindows.com claims its operating system, "Lindows" runs Microsoft Windows application as well as those for Linux, the free operating system from the Open Source Movement. Lindows OS was supposed to be ready for online download by the end of the year at $99 bucks, much cheaper than products one letter away.
But Microsoft has gone to federal court seeking an injunction, necessary, it says, to prevent consumer confusion, and to protect the brand it's spent $1.2 building and promoting since 1983.
Running to court may sound hypocritical to those who remember Microsoft saying companies should stop whining and let the best products compete in the marketplace.
JOHN MCPEAKE, PRUDENTIAL SECURITIES: Microsoft has championed the Darwinian theory of competition in technology and I think that's the best one. But that does not mean that they cannot access the courts if something flagrant comes up like this.
YOUNG: In support of its case against copycats, Microsoft points to precedence from real estate. Century 21 versus Century 31. No. From the software business, Apple versus Pineapple. Uh-huh. And from diapers, Huggies versus Dougies. No way. Microsoft says it's not trying to throw its weight around, a spokesman told MONEYLINE, "we'd prefer to work with Lindows to resolve this problem without the need for legal action."
Translation, "Lindows, change the name, lest consumers think it's some sort of jointly developed product." Through a spokeswoman, Lindows CEO Michael Robertson, founder of mp3.com, several times declined our request for an interview.
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(on camera): Microsoft notes trade speculation that eventually the software giant might make a Linux version of Windows, so there might yet be a "Lindows" for Microsoft -- Jan.
HOPKINS: But Microsoft wants to have the name for itself. Not to have someone else have the name.
YOUNG: That is the inside betting.
HOPKINS: And what do the experts say? Is it a trademark violation?
YOUNG: This being Christmas Eve, we didn't reach any lawyers, but one of the most savvy guys in the business, John Vorat, that is, journalist, says he doesn't think that it's copyright violation, but he's not a lawyer, he's just a wretched journalist like ourselves.
HOPKINS: And so what do you think, as a journalist?
YOUNG: Only time will tell.
HOPKINS: Thanks, Steve Young. Coming up next, they are the guitarist musician's love and their popularity has meant prosperity for one small Maryland company. We'll have that story. And we'll hear from one viewer on stepped-up airline security and what exactly that means.
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(SINGING)
HOPKINS: Midnight mass at the Vatican.
In the war against terrorism, a man who allegedly smuggled explosives inside his shoes on board an American Airlines jetliner appeared before a judge in Boston today. Passengers and crew say the 28-year-old man, using the name Richard Reid, tried to set his shoes on fire. If convicted, he faces up to 20 years in prison.
Afghanistan's new interim leader Hamid Karzai has picked a Northern Alliance general as deputy defense minister. General Dostum helped negotiate the surrender of Konduz and led troops in the capture of the northern city of Mazar-e Sharif.
A member of Afghanistan's interim government backs U.S. claims that a convoy struck by American planes contained al Qaeda members. The Afghan leader also says Stinger missiles were fired at U.S. war jets. 50 to 60 people were killed in the attack by U.S. forces. Another local official says the convoy was made up of Afghan tribal leaders, and not al Qaeda.
"WOLF BLITZER REPORTS" begins in a few minutes, and for a preview, let's go now to Wolf in Washington. Wolf?
WOLF BLITZER, CNN ANCHOR: Thank you very much, Jan. We'll have latest on that mysterious American Airlines passenger who allegedly tried to ignite explosives in his shoes. Also, I'll have a special Christmas Eve interview with Lynne Cheney, the wife of the vice president. She speaks candidly about the impact of the September 11 attacks on her life. She'll also take us on rare tour on the vice presidential residence. You won't want to miss it. Jan? Merry Christmas.
HOPKINS: Thanks, Wolf. Merry Christmas to you.
The country is working its way through a recession. But that hasn't stopped a small Maryland company from carving out a niche for itself, and a big market for its products. Electric guitars.
Tim O'Brien has the story of a company that seems to be hitting all the right notes.
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(MUSIC, "AMERICA THE BEAUTIFUL")
TIM O'BRIEN, CNN CORRESPONDENT (voice-over): Paul Reed Smith loves to play the guitar, but he learned early on his music would never set the world on fire. So he tried something else. To make the guitars that others might use to set the world on fire, and as the economy sinks into the first recession in a decade, Reed's PRS Guitars is having the best year in its 16-year history.
PAUL REED SMITH, PRS GUITARS: In our absolute best year we grew 50 percent.
O'BRIEN (on camera): Up 50 percent?
SMITH: 50 percent. Went from 14 million to 21 million in one year.
O'BRIEN (voice-over): Smith attributes the company's growth to good luck and good work, starting with the wood he selects from all over the world.
SMITH: Yeah, I mean, that's the holy grail of wood, look how deep the curl is, and that's the way the tree grew.
O'BRIEN: And by sound.
SMITH: We've also got a piece of 30-year-old Brazilian rosewood here. Listen to the tone of it. And if I turn it, it's got a different note. Isn't that great? It's a musical instrument just in a raw piece of wood.
O'BRIEN: The lumber is first hand cut, then machine-shaped, sanded, stained, and hand-buffed over and over again.
UNIDENTIFIED MALE: A really good finish will look like a mirror when it's done.
O'BRIEN (on camera): The PRS Guitar is high end. Average price, $2,000. Some, like this one, go for ten times that amount.
(voice-over): Smith says he's found it unbearable to part with some of his creations. He lent one $20,000 model to his friend Carlos, and never got it back.
SMITH: Well, the next phone call I got was, "Can I have it?" And I went, "uh yeah." So I no longer have it. Now Carlos has it.
O'BRIEN: Carlos is Carlos Santana, one of the world's premiere musicians who swears by the PRS guitar.
CARLOS SANTANA, MUSICIAN: When something cooks for Thanksgiving, like, you know, you could feel the sauce. You know, the secret of life is the sauce. You know if you're cooking. The secret of life is the tone. So when you put personal, physical passion and effort into a guitar, you're going to feel it.
O'BRIEN: It may be that buying a shiny new guitar is simply a feel-good investment in not-so-feel-good times. An opportunity that PRS Guitars is quick to capitalize on.
SMITH: We're trying to get you to open a case and go "Huh!" Have artistic arrest. Which is, if you open the case, and you make that sound, you're going to buy it.
O'BRIEN: And they do. Tim O'Brien, CNN Financial News, Stevensville, Maryland.
(END VIDEOTAPE)
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UNIDENTIFIED MARINE: It's really good to get mail, especially out here, right near Christmas. Just feels good to get some stuff. Good to see everybody else getting a lot of stuff too.
UNIDENTIFIED MARINE: It feels nice just to get mail anytime, but around here, you know, you think about everybody back home and what happened, and it's like really hits home.
UNIDENTIFIED MARINE: It's pretty motivating, and it really lifts up the spirits of the Marines out here as well as the sailors that we have out here with us, it's a -- it's a recharge of batteries, pretty much.
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HOPKINS: The markets are closed tomorrow for Christmas day. The bulk of economic reports this week are due on Friday. Consumer confidence expected to have risen in December. Expect new home sales and durable goods orders to rise as well. And we'll have an inside look at the insurance industry, with the chairman and CEO of Aflac, that's on Thursday.
Now for a look at your thoughts.
After the latest threat to the safety of air travelers, Susan in Oregon writes: "I find it amazing the FAA is 'stepping up security.' I thought security was already 'stepped up'."
Deepak writes with a concern about the auto industry, he wants to know: "What's the outlook for the auto industry for next year, knowing that future sales have been booked this year" because of that zero percent financing. This year looks like it's going to be the second best on record. About 17 million vehicles sold. Next year is expected to be strong as well, but a lot depends on the economy of course. And there's concern in the auto industry that the recent sales bonanza will impact next year. Automakers also admit that the zero percent interest rate promotions can't continue and most, in fact, will expire in January.
From old established businesses to new ones. Brian Norgard in Rhode Island writes: "Will investment and venture capital activity increase any time soon? I'm sitting here in my dorm room at Brown University hoping so. I have an idea!" Well, Brian, it depends on the idea. Venture capital activity in Internet and telecom start-up continues to decline. Biotech investment is better than most. Despite the drop this year, Price-Waterhouse-Coopers estimates that VC spending will total about $30 billion, about a third of last year's level, though, and even so, that's still near record highs. So don't worry, if you want to get a good idea off the ground, there is still money out there.
E-mail us: moneyline@cnn.com. And please include your name and address.
That's MONEYLINE for this Christmas Eve. Thanks for joining us. I'm Jan Hopkins, in for Lou Dobbs. Good night from New York. "WOLF BLITZER REPORTS" begins right now.
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