CNN IN THE MONEY
Arafat Loses Financial Control of Palestinian Authority; New Trends in the Death Care Industry; Analysis of Target Stock
Aired July 5, 2003 - 13:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
SUSAN LISOVICZ, HOST: Welcome to IN THE MONEY. I'm Susan Lisovicz in for Jack Cafferty.
Coming up on today's program, cash and change. Yasser Arafat is a rich man lead a poor people. We will look how his money has been affecting peace moves in the Middle East.
Plus going out in style. We will tell you how some undertakers are using show biz glitz to rake in the dead presidents.
And right on target. Find out how the trendy retailer hit the bull's eye and left Sears running to catch up.
With Jack Cafferty off trying to get the barbecue lit this holiday weekend, I'm minding the show with a couple of other regulars. We will aim to bring you a little of that cranky, curmudgeonly Cafferty thing that Jack does so well, and who best to fill in his very large shoes? Andy Serwer. Go Ahead.
ANDY SERWER, "FORTUNE" MAGAZINE: I'm trying.
LISOVICZ: Frown Andy!
SERWER: Nasty! Jack, where are you?
LISOVICZ: Editor-at-large with "Fortune" magazine. And also with us today, we are lucky enough to Andy's "Fortune" colleague, senior writer Shawn Tully. And, you know, guys, it's all about independence this weekend, but there are millions of Americans who are much more independent that they want to be.
The jobs report came out, highest number in nine years, 6.4 percent.
SERWER: Yes, people have got to be unhappy out there. Two million Americans have lost their job during the Bush administration, and the unemployment rate ticking up, sort of not let us really believe that a recovery is under way.
SHAWN TULLY, SENIOR WRITER, "FORTUNE" MAGAZINE: Yes, also comes at the same time -- we had this big spike in interest rates that no one expected. The Fed cut short-term rates, and all of a sudden mortgage rates jumped way up, which is a big negative for the housing market. With the combination of job losses plus higher mortgage rates, and that's been the big cash cow that consumers have been counting on to support them though this crisis.
LISOVICZ: We have this extended jobless recovery, and everybody is banking on the recovery in the second half. It's going to be very difficult with that spike in the unemployment rate.
SERWER: And going back to the President, you know, it's interesting because he will be the first administration since Herbert Hoover, where he has the job losses. Every other administration, going all the way back to then, there has been job growth. It could still turn around by the election, but obviously, this is a huge concern, not only for Americans but for him.
LISOVICZ: He has got about 18 months to work on it, and he will be working overtime on it. Another thing in the news today. Thanks, guys.
Now switching gears. Israelis, and Palestinians finally have something to smile about this week. After 33 months of violence and nearly 3,000 deaths, peace looks like it's finally beginning to break out. Three terrorist groups, Hamas, Islamic Jihad, and the Al Aqsa Brigade, all signed on to a three-month cease fire, which bans attacks on civilians, soldiers, and settlers. In return, the Israeli army has pulled its forces out of the Gaza Strip and withdrawn completely from the ancient city of Bethlehem.
Of course, the elephant in the corner for all these developments is Yasser Arafat, the chairman of the Palestinian Authority. After being sidelined by the U. S. and Israel, questions are now being raised by Arafat's role in the region. For an update, we are joined from Jerusalem now by our colleague, Dan Lothian. Hi, Dan.
DAN LOTHIAN, CNN CORRESPONDENT: Hello, Susan. Well, Yasser Arafat continues to be trapped inside his compound, what's left of his compound in the West Bank city of Ramallah. He's been there since December of 2001. That is when Israeli trooped moved in and raided his compound after a series of suicide bombings.
He has not been the public face that we have seen in this latest go at peace. In fact, it has been the prime minister, Mahmoud Abbas, who has been out front in the negotiations, not only with the United States, but also with Israel.
However his stamp of approval has been on everything that has come from the Palestinian side. Mahmoud Abbas saying at the Aqaba meetings that nothing ever happens without first consultation with Yasser Arafat, that there is nothing that comes forward before he first talks to Arafat about it. But, certainly, Arafat's face has not been out front in this latest round of peace.
LISOVICZ: So, Dan, what exactly does the U. S. and Israel want for Arafat in the future?
LOTHIAN: Well, that is certainly the mystery question at this moment. Certainly, the United States, I guess in the best case scenario, the United States and Israel would not want Arafat to be anywhere around. They would like to just see him gone.
He really has been marginalized in this entire process, but if Arafat were to be around, what the U. S. and Israel would want is for Arafat to have some kind of elder statesman type title, where he is popular, he is respected by his people, but he has no real political power. I mean, Arafat is very popular among Palestinians. According to some recent opinion polls, he is the most recognizable, is the most popular Palestinian figurehead, Abbas having single digits. But Abbas is the front person in this round of peace, but Arafat continues to be very popular. So the United States, Israel would like to see him have some kind of role where he can remain popular but not be involved in the political process.
LISOVICZ: Still very much a force to be reckoned with. Dan Lothian reporting from Jerusalem. Thanks, Dan.
Yasser Arafat may not be front and center in today's peace negotiations, but as the old saying goes, money talks, and Arafat has got plenty of it. Until recently, Arafat controlled the $5.5 billion of international aid donated to the Palestinian Authority since 1994. Israeli intelligence reports estimate Arafat has skimmed over $1 billion from that aid money, stashing huge sums overseas Switzerland and the Arab world.
Joining us today to talk about Arafat's assets is Nathan Vardi, staff writer from "Forbes" magazine, who recently wrote the article, "Auditing Arafat." And a fascinating article it is. Welcome, Nathan.
NATHAN VARDI, STAFF WRITER, "FORBES" MAGAZINE: Thanks for having me.
LISOVICZ: So, basically your article says that basically, Arafat's popularity is not about his charisma or his seniority or his ideas. It's all about his money, which he puts to work.
VARDI: Well, I mean, his popularity comes from many places, and for a long time, one of these places was definitely his pocketbook. He controlled most of the finances of the Palestinian Nationalist Movement back when it was the PLO and it was being funded by Arab petrol dollars. And as well, when the Palestinian Authority came into being and was being funded by foreign aid and Israeli tax transfers and other funds, he would control most of the funds, make sure no one else could have it so they couldn't have any political constituency, and would dole it out in order to increase his popularity and support from key people.
TULLY: Nathan, to what extent has he been cut off from control of the big money flow coming in from the territories? We have a new finance minister, Fayyad, who is a very, very professional, highly thought of, a Ph.D. from the University of Texas. To what extent is there more transparency, and are the reins and the controls over the money levers been taken away from Arafat?
VARDI: Salam Fayyad has totally changed the dynamic of the Palestinian Authority's finances. Arafat no longer has anywhere close the latitude of being able to control Palestinian funds or direct them. Salam Fayyad has really taken control of most of the public funds, most of the companies that the Palestinian Authority owns, and, you know, the tax transfers that come from Israel.
So he's not done. He has a big battle ahead of him, but in the year that he's been in place, he has totally changed the dynamic.
SERWER: Nathan, you write about Yasser Arafat and the new finance minister, Salam Fayyad, but I want to ask you, how does Mahmoud Abbas fit into this picture? The new prime minister, where does he fit in with regard to this money flow?
VARDI: Well, I think he can just sit back and enjoy the fruits that Fayyad grows in the finance ministry. Fayyad is incredibly popular with the Palestinian people. They don't like the cronyism and corruption that has been rampant through the Palestinian Authority for the last 10 years. They see someone who is earnestly doing something about it, and as long as he is allowed to continue to do something about it, I think that will only increase Abbas's legitimacy and the legitimacy of whoever governs, the Palestinian Authority.
LISOVICZ: You know, Nathan, one of your theses is in this story is, take the money out of Arafat's hands, reform a corrupt financial system, and you could reduce the violence. Are you saying that we have seen these kinds of talks a direct result of Arafat not being able to siphon off some of the money coming into the Palestinian Authority?
VARDI: I think so. I mean, for one thing, it has certainly taken power out of Arafat's hands. That's something that makes Israel more comfortable. You know, Israel now is transferring tax dollars to the Palestinian Authority again. It's something that it didn't do that for a couple of years, and it is doing it because they trust Fayyad and trust what he's doing, and they feel comfortable that those monies aren't being diverted to bad people anymore. That is something that wasn't the case before.
So, it is making everyone, the Americans -- you know, everyone likes what Fayyad is doing, the American administration, the Palestinian people, the European leadership, the Israelis, and when you get four of those constituencies all agreeing on something in that region, that's really something, and that raises huge amounts of political capital.
LISOVICZ: Salam Fayyad may come -- emerge as one of the big heroes in the peace talks in the Middle East. Nathan Vardi, writer of the article, "Auditing Arafat" for "Forbes magazine, a really enlightening article. Thanks for joining us.
VARDI: Thanks for having me.
LISOVICZ: Coming up on IN THE MONEY, a bye-bye with bling-bling. Undertakers are going overboard with wild ideas to win business. Find out why Death, Inc. isn't just wearing basic black anymore. Plus for richer and for poorer. Love can last forever, and so can paying for a wedding. We will check out the high price of a trip to the hitching post.
And Target hits the mark. We will tell you how the up and coming discounter swaps places with retail legend, Sears.
SERWER: Millions of Americans plan for everything. They save for their kids' college tuition, invest for retirement, and get all kinds of insurance. And now more of us are planning our own funerals, as the death care industry, as it likes to be called, branches out in hopes of making bigger profits.
Joining us now to talk about the new and wild ideas that may be coming to a funeral home near you is "Time" magazine business writer, Lisa Takeuchi Cullen, who wrote a piece about the trend in the latest issue. Lisa, welcome.
LISA CULLEN, BUSINESS WRITER, "TIME" MAGAZINE: Thanks.
SERWER: Is this something that you have written about before, the death business.
CULLEN: I have. It's a fascinating industry, and there are constantly new trends to write about every few years.
SERWER: What's going on now? What are the latest?
CULLEN: I think, due primarily to baby boomers, a lot of people are demanding unique, new personalized funeral services where they hadn't before, and so there are a lot of very, sort of almost wacky different trends coming up that people are taking advantage of.
TULLY: Lisa, are these usually the families or the individuals before the die who are planning these creative funerals?
CULLEN: Baby boomers right now are planning mostly their parents' funerals, and either that whole process is turning them off, and they are thinking, gosh, I really don't want to burned my own children with this, or this is really so somber and so gloomy and so sad, I really want something more celebratory and happy for my own service. And so, some of them are, yes, planning their own funerals.
LISOVICZ: So without further adieu, do tell some of these with wacky new trends. I did read about one, a lobster-shaped coffin, but there's more. There's much more.
CULLEN: Well, let's start with that casket in particular, it's an art dealer in L. A., frequently goes to Africa to find new art, and he found this giant, 10-foot tall lobster shaped coffin. He happens to be -- he happens to be an avid deep sea fishermen, and so he lugged it home, and much to the chagrin of his wife, it's propped up in his living room, and he says, this is my wide ride, this is how I am going to go. LISOVICZ: What about people that are cremated and then the carbon is made into diamonds? This is incredible. The gift that keeps on giving.
CULLEN: They do last forever. Seriously, a company call Lifetime, I think in Illinois, that takes the carbon from cremains, which is the lingo for "cremated remains," and turns them into actual diamonds that people are wearing as jewelry.
LISOVICZ: So you can wear grandma?
CULLEN: Yes. The fascinating thing about that company I find is that a large portion of their business comes from pet cremains.
TULLY: This speaks to Jack Cafferty as the guy who loves barbecuing, and he was embalmed and placed next to the barbecue pit, and his neighbors and relatives just circled around as if he were still there.
CULLEN: There was a couple, yes, that decided to do that. But again, it was emblematic of the way he lived his life, his wife felt that this was a great symbol of his, you know, his happy personality, and he loved to barbecue. He loved to have neighbors over. So at the wake, they laid him out right next to the barbecue pit with a soda- packed cooler, and I understand people stood around, they laughed, and they talked about him and reminisced.
LISOVICZ: A coral grave, there's something about a coral grave?
CULLEN: I think you are talking about the reef?
CULLEN: Yes, they meld your cremains into these concrete walls. You are familiar with the company, I guess.
And then they, you know, roll you out into the ocean, and you can forevermore swim with the fishes.
LISOVICZ: Feed the fish.
SERWER: The Mafia thought of that first.
LISOVICZ: On the other hand, you can be shot up into space.
CULLEN: You can. That's the other way to go. There is a company in Texas that is making quite a bit of hey doing that. They take your cremains and put them in a capsule, which they place on a rocket and shoot into space.
SERWER: How much does that cost? CULLEN: That can cost anywhere from a few thousand dollars to tens of thousands of dollars, depending on the package that you choose.
SERWER: What does this say about a culture, about a society? I mean, have you thought about that? The Egyptians built these massive a tombs. Now we are getting into lobsters and coral reefs. I mean, where are we going here?
CULLEN: You know, it's not that strange to me because if you think about the New Orleans funerals, there has been a history in this country of sort of celebrating death -- not death so much as the life of the person who lived. And I think baby boomers are really taking back the industry from, you know, what you know is a notoriously pushy and sort of bullying industry that has forced these expensive sort of unnecessary packages on people for generations.
LISOVICZ: And exploiting people at a very difficult time.
CULLEN: They have. And Jessica Mitford wrote about this famously in "The American Way of Death." And, you know, when she revised her book in the 1990s, she found that nothing really had changed. And I find it fascinating that it took the baby boom generation, as they have so many other things, to really reshape this industry by demanding what they want.
LISOVICZ: All right, Lisa Takeuchi Cullen, thank you very much. A great article. You don't have to just watch "Six Feet Under." You can read "Time" magazine. A great story. Thanks much.
LISOVICZ: And time now to check your responses to our e-mail question of the week. We asked viewers whether they were looking for a job and how long they had been looking. Curt from California wrote what was, unfortunately, a very typical e-mail. "I have been looking for a job since November of 2000. I work in the computer business in Silicon Valley." Say no more, Curt. "It's been far from easy."
Tim in Georgia wrote, "I am 45 and have been unemployed for two years and four months. I have gone through all my savings and even tried to joining the Military. I should be fighting in Iraq, not some young kids who have their whole lives in front of them." That's so sad.
But most of the e-mails we received came from Americans in their 50s, like Fred in Kentucky. "I have come to find out that all the years of experience don't count once you reach the age of 50. My telephone interviews go extremely well, but as soon as they see me up close and personal, it's all over. There is age discrimination in this country." And, Fred, that is an issue we take seriously. We are going to be addressing it in tomorrow's show at 3:00 p.m. Eastern.
And again, you can e-mail us at firstname.lastname@example.org. We will have our new e-mail question of the week a little later in the program. Up next on IN THE MONEY, Target gets a little oh-la-la. Find out how the discounter with a flair for design trumped one of America's most venerable retailers.
Plus watch us the bite the hand that signs our paychecks, our corporate parent AOL Time Warner. We will speak with the author of "Stealing Time," a book on the media merger that puts the sin in synergy.
And write and tell us what's on your mind about mergers gone wrong or anything else on the program today. Our e-mail address is email@example.com.
LISOVICZ: Time to look at the week's top stories in our "Money Minute." It seems like nothing can cool off the red hot real estate marked. Applications for mortgages rose more than five percent last week, even as rates edged higher. Americans rushed to get home loans before rates increased even more. They're smart.
Kraft Foods says it will decrease portion sizes and provide more nutrition information in an effort to freeze rising obesity rates. The nation's largest food company also says it will eliminate all in- school marketing to kids.
And here's a shocker. Lawyers are making more money than ever. Revenue at the nation's 100 biggest law firms rose 8.5 percent last year, bringing the total take at those firms to $38 billion. Partners at those firms made an average profit of $847,000. Not bad.
SERWER: In what seems like a major sign of the times, Target has now overtaken Sears as the fourth largest U. S. retail chain. Target has been outperforming its competitors in the retail and discount sector for years, all at a time when similar chains like K-Mart, Montgomery Ward, and Woolworth's were all fading from the scene. That makes Target our stock of the week. And, you know guys, it's not just Woolworth's. Ames, EJ Korvettes, Kresge, Caldor, Radley's (ph), Zayres. Sound familiar? I mean, does this company really have what it takes, Target?
LISOVICZ: Well, you know, Target made cheap chic, and that's why we call it "Tar zhay."
SERWER: I'm tired of that.
LISOVICZ: It has been able to really carve out a niche in that big discount arena. There's Wal-Mart, the 800-pound gorilla. Nobody can beat it on price, but Target is much hipper.
SERWER: It is.
LISOVICZ: It's trendier.
SERWER: Great marketing, right?
LISOVICZ: Roy Orbison -- do you know your Roy Orbison?
SERWER: No, fill for me.
LISOVICZ: Anything you want -- that's their new advertising campaign.
SERWER: All right, that's good.
LISOVICZ: Multi-generational, good graphics.
SERWER: A lot of colors, a lot of sexy.
SERWER: I really don't think this company does anything different, except for marketing and keeping their stores cleaner. But maybe that's' enough. I mean, the stock has been moving, right?
TULLY: The stock has been actually pretty flat since around 2000. It has been up and down slightly, but that's a good performance for 2000.
SERWER: Now, but listen here. I did a little work on the stock. Over the past five years, the stock is up 50 percent, while Sears, the company it just passed, is down 50 percent. And it's true, it has sort of slowed down. It was sort of a super star previously, but people love this company. They love the chicness, like you said.
LISOVICZ: And Sears -- I mean, remember Sears was a Dow 30 company and in the last five years or so was removed from the Dow 30 list because it just really couldn't play with the big boys any more. It's really has had a problem. The softer side of Sears, not only an advertising campaign.
SERWER: "The Big Store" they used to call it out of Chicago. What's interesting also about Target is that, you know, it's not a new company. I mean, it was Dayton Hudson, Marshall Fields, and what they did is they started Target, and that became a star part of the company.
LISOVICZ: And they renamed it.
SERWER: ... and they renamed the company "Target". Right? They've got that Michael Graves stuff in there. Like I said, I don't think there's a whole lot of different stuff there. They just sweep the aisles.
LISOVICZ: Well, you know what's also going to be very tough for K-Mart now that it's out of bankruptcy to compete with those two, to really, you know -- it made one of the fatal mistakes trying to compete with Wal-Mart on price, fell back. It's still got Martha Stewart though. The Martha Stewart line and Jaclyn Smith and Kathy Ireland.
SERWER: Target and Martha Stewart might be made for each other, right? TULLY: It's unbelievable. You go into K-Mart. The stuff they are giving away, the prices, the discounting. Actually, they also have this system where you can use your credit card or check out yourself..
LISOVICZ: You know, they do it in grocery stores.
SERWER: Well, K-Mart might be joining our list. I mean, they went into bankruptcy and came back out. But, you know, it is so tough. There's so much capacity out there. I mean, there is so much stuff. You go into these stores, battery prices, film prices, Cheetos, cookies, and the prices aren't going up. It's very hard for these companies to make money.
LISOVICZ: Well, it's not only, remember, the prices. They want good service. They want well lit, well stocked.
SERWER: Sweep the floors, that's what Target does. I keep going to that. That's what Target does. They sweep their floors.
LISOVICZ: So would you buy the stock?
SERWER: Would I buy the stock? I would say over time, Target will continue to do well. I'm going to leave it at that. I am going to be a little standoffish.
TULLY: I wouldn't buy this stock. I think you hit on some of the reasons. Unfortunately, the stock, like a lot of stocks, is just expensive. The PE is well over 20, and it just can't grow that fast.
LISOVICZ: And remember, Shawn Tully, we have to give him his due because you sold your Time Warner stock...
SERWER: Forget about Warren Buffett, I mean, this guy...
LISOVICZ: ... on the day the merger -- we salute you.
SERWER: Yes, we're not worthy.
LISOVICZ: Still ahead on IN THE MONEY, one plus one equals trouble. We will speak with the author of a new book on the AOL Time Warner merger and how it shook up a media empire and a few employees along the way.
And here comes the bride, there go the savings. Wedding season is here, and we will tell you what it costs.
LISOVICZ: Welcome back. The merger of America Online and then CNN parent, Time Warner, was once called the perfect marriage of new and old media, but now the outlooks is something less than perfect to say the least. Nearly all the top executives involved in the deal have stepped down. The company has lost billions of dollars in market share, and the U.S. government has started not one, but two investigations into its accounting.
Our next guest it an expert on the merger and what seems to have gone wrong. Joining now from our nation's capital Alec Klein, author of the book, "Stealing Time." Welcome, Alec .
ALEC KLEIN, AUTHOR: I am happy to be here.
LISOVICZ: There are so many things that we can talk about, the difference in the corporate cultures, the clash of big egos. You see that actually in a lot of mergers, and they work it out. But the accounting is where you really came in. That's what brought you to the forefront, the shady kind of accounting that appears to have been done on America Online's part, and that is something that really could have stopped this in the process.
KLEIN: Well, it's interesting. It started as a classic newspaper story. I got an anonymous tip from somebody who said I ought to check something out, and I began to look into it, and it took me about a year, but "The Post" ended up putting out a story -- a series of stories, showing how AOL had inflated its advertising revenue at a critical time, both before its merger and after the merger, and once the stories came out, as you know, the two investigations by the government were launched, the company ousted Bob Pittman, the COO. They revamped the company. They admitted that they had improperly inflated $190 million in revenue, and that number may still grow.
SERWER: Alec, yes, interesting stuff. I know that you did lead to those two investigations -- your stories led to those two investigations, but I wanted to ask you to take a step back. We hear a lot about AOL Time Warner, but why should anyone really care about this company? I mean, what is so important about AOL Time Warner?
KLEIN: Well, basically, it touches all of us, right? We are talking about the largest media company in the world. We are talking about Time; CNN; Warner Brothers, a music division that touts Madonna and Jewel. You know, on the AOL side, they are talking about 30 some odd million subscribers. It is pretty much dominant throughout the world, and as consumers, we are all touched by it.
But we are also touched by it as investors. Investors throughout the world have been affected by this merger. Many, many people have lost millions of dollars, you know, on top of which the Time Warner employees, many of those who had invested in the stock of the company, lost their retirement savings. So, we are talking about a merger -- the largest merger of our country and the devastating impact that it had.
TULLY: Right now Dick Parsons says, my God, what were we thinking? Everyone admits this was a horrible mistake. When you just put a pencil to the number, and you saw the kind of premium that AOL was paying for Time Warner, it looked just mathematically, given what the two companies were earning together, there was no way this deal could enrich anybody. What went wrong here? How could so many smart people have been so wrong?
KLEIN: Irrational exuberance. I mean, we are talking about AOL, which had about a quarter of the revenue of Time Warner when the merger was announced, and yet AOL was the acquirer. I mean, it's sort of stunning when you think about it today. But we were at the height of the dot com boom, and everyone thought that this was our future, the media was the Internet.
And so the idea was that AOL was at the vanguard, and it would bring Time Warner, this stodgy old firm, into this new era. And obviously, we now see that things have turned out differently than that.
LISOVICZ: Alec, you talk about the irrational exuberance, and your book is full of anecdotes that show the kind of fast money and people who really hadn't been working out in the corporate arena very long, you know, the rabbis praying for AOL stock to rise, or the woman, the AOL executive, who had her Stairmaster moved, I guess at company expense, from hotel to hotel when she was traveling on business.
KLEIN: Right. Well, what happened was she used her Stairmaster wherever she went. She forgot it on one particular business trip. She couldn't find one in the hotel, so she just went out and bought one, used it, and left it at the hotel and kind of went on her merry way.
LISOVICZ: Hey, Alec, does she still have a job?
KLEIN: Well, I didn't disclose who she was in the book. I didn't want to embarrass her. But suffice it to say she a was a critical member of the company who really helped it grow.
So, but what's interesting is not so much who she was, but the fact that many people at the company were affected by this incredible wealth. You know, suddenly they had these stock options which made them millionaires. We are talking about the secretaries who were retiring, people coming into the company with airplanes and Ferraris, and things got a little bit out of hand. There were company trips to the West Coast to visit strip clubs. It got out of hand.
And some people said that, you know, what happened was, when you have that kind of wealth, you sort of lose perspective. It's the whiff of power and money, and AOL was sort of feeling like they were writing the rules, or that there were no rules, and so they felt they could do these things, even though today it seems ridiculous.
TULLY: Alec, one thing that you did. You have all of our respect here as business journalists. You did a lot of forensic accounting work to uncover the problems that everyone else was missing, and it was some very -- numbers that weren't even that enormous that really made this whole thing unravel and brought out the truth. How did you get enough advice, or how did you kind of -- who guided you through those numbers? Because that's really tough for any financial journalist.
KLEIN: Yes, well, first the people I would like to thank are the people at AOL who gave me these internal company documents, these confidential documents, and then walked me through it. These are people risking their careers, you know, believing that "The Washington Post" would protect them and that we would tell the story because they felt something wrong was going on.
But the numbers were mind numbing. The deals were incredibly complex, and I went to numerous accounting experts, legal experts, but it really depended on the people within the company, AOL, to show me where the skeletons were. And fortunately, we did that.
It's interesting -- before the stories ran, AOL said, you don't understand the numbers you are looking at, you don't understand our confidential documents, and you've got it all wrong. They came around afterwards, as we now see, and have admitted that, in fact, we were correct and that the numbers were inflated.
SERWER: OK, we have to leave it there. Alec Klein, reporter for "The Washington Post" and author of "Stealing Time." Thanks very much. We look forward to your book.
Coming up on IN THE MONEY, something old, something new, and something borrowed, plus something green? Weddings don't come cheap. We will tell you how the thrill of a lifetime time can mean the bill of the lifetime.
Plus hot numbers will tell you about the combination that turned out to be worth $100 million for a Maryland lottery winner.
LISOVICZ: It's July, and that means we are in the middle of high season for weddings. While some people just see the romance of it all, many others are consumed with the huge cost people can face, even for a modest affair. Joining us now to talk about all that is Antonia van der Meer, editor-in-chief of "Modern Bride" magazine. Welcome.
ANTONIA VAN DER MEER, EDITOR-IN-CHIEF, "MODERN BRIDE": Hi, thank you.
LISOVICZ: You know, this is one is business that truly is recession proof.
VAN DER MEER: It's tough to beat it. We are finding that people obviously -- they fall in love no matter what's happening, no matter what the economy, no matter whether we are at war, and they will proceed with their weddings, and they want certain things for those wedding.
LISOVICZ: We really saw it after September 11 that people didn't shy away. In fact, some people were committing, tying the knot, precisely because of it.
VAN DER MEER: That's right. They were. I think, especially in bad times, people want these feel good events. They need them. So, they are even more committed to gathering together with their family and friends and doing the wedding of their dreams.
LISOVICZ: Antonia, how big is this business, and is it growing? What are sort of the vitals of this thing?
VAN DER MEER: It's big. This is a is $120 billion industry.
VAN DER MEER: Huge. If it were a Fortune 500 company, it would be listed number six.
TULLY: There are nightmares about the cost overruns of weddings, and people ending up spending much more than they ever budgeted for or imaged that it would cost them. Can you go online and just get competitive bids? Is there anyway that the Internet or any way that you can get your cost down for a wedding and make it competitive>
VAN DER MEER: Well, brides are very tech savvy right now, and so they are going online, and they are doing some of their shopping online, or at least they are shopping around. They are reading magazines like "Modern Bride" and going online by dot come, and they are finding out how much things cost. They are budgeting very carefully for this because although we are seeing this is a very recession resistant business, it is one where people care deeply about what they are spending. The average wedding is about $22,000.
LISOVICZ: That's a downpayment!
SERWER: I've got two daughters...
LISOVICZ: Look out!
VAN DER MEER: Yes!
SERWER: I mean, are there program? Are there programs? Forget about college. Are there programs for dads to start saving for their daughters? I mean, is there a business of that?
VAN DER MEER: Here some good news for you because dad are not paying all the time anymore. Yes, we've seen a big change in that.
LISOVICZ: That's because of the age of brides has been...
VAN DER MEER: The age of the bride has elevated to about 27 now. But who's paying is the bride and groom are paying themselves, actually, about 30 percent of the time. And about half the time, the bride and groom are paying with the help of either their parents or the groom's parents, so we are only seeing, you know, a much smaller percentage, about 17 percent of people who are going to daddy for the money.
LISOVICZ: It's interesting, Antonia, because brides and grooms are so much more pragmatic these days. "The Wall Street Journal" just had an article the other day about how invitations are going out by e- mail, and a lot of people are...
LISOVICZ: No, actually, there were some etiquette experts who said no.
VAN DER MEER: Can we talk about that?
VAN DER MEER: We find, actually, that people are more involved in doing really unique, creative invitations, and, in fact, that -- the formal aspect of the invitation is growing. I do not see the e- mail invitation as being a popular trend.
SERWER: Good. I'm old school.
VAN DER MEER: I think that that's too informal for people. You are spending a lot of money on this wedding, and you do want it to be really special, and I'm sorry, but it's much more special to get a beautiful, creative invitation in the mail than to get an e-mail invitation, and we have even seen things like boxed presents. I mean, they are doing beautiful things with these invites.
LISOVICZ: But what about the pragmatic approach that so many brides and grooms are taking with, for instance, the registering at Home Depot or L. L. Bean, or you can help pay off their mortgage, things like that.
VAN DER MEER: We are seeing very creative registries right now. I think this is one way that brides and grooms are responding to the economic times.
SERWER: I have to tell you, the registering online thing is one of the greatest things ever to happen in the history of mankind. You just sit there on your PC. A friend is getting married, and you just point and click, and it's so -- that's such a wonderful thing, isn't it
VAN DER MEER: It is. It's made it so much easier, and the bride and groom can go on, and they can shift the things around and buy more bowls, and you will see the big registry thing, too, guys are very involved, like look how much he loves it, you know, something, because he can go online, and they love the fact that in the store, there's the registry gun, you know, the scanner gun? Very big. Very big. Very good boy toy.
TULLY: Do you advise people to do all this wedding management on their own or bring someone in to do the management for them?
VAN DER MEER: A number of brides will choose to work with an event planner, and they can -- they usually make up their cost by being able to get you a reduced price on vendors and things, and that's very effective for brides and grooms who are very busy and can't be doing it all themselves or who want that extra attention and extra help. SERWER: You know, the cakes these days. I mean, everything has just gotten so bigger. That's the way to put it. Everything has gotten so much more fabulous. How much do some of those really big, fancy wedding cakes cost nowadays?
VAN DER MEER: You can -- it really depends whether you have, you know, you are trying to feed 100 people or you are trying to feed 400 people. Some of these cakes can cost you know, $500. Some can cost thousands of dollars. So, it's big.
And the average dress, for example, is about $800, but you are going to accessorize because there's the shoes and the veil and the jewelry, and averages are also funny things. People will spend thousands of dollars on their wedding dress, $4,000 or $5,000.
LISOVICZ: Hello, Vera Wang.
SERWER: Yes, that's right. All right, we have to leave it at that. Thanks a lot, Antonia van der Meer of "Modern Bride."
VAN DER MEER: You're welcome.
SERWER: Appreciate it. Still to come on IN THE MONEY, how to draw $112 million. We will tell you about a lottery winner who did it by the numbers.
And is something stuck in your craw? Send it our way. Our e- mail address is firstname.lastname@example.org. First though, time for this week's edition of "Fortune Fundamentals."
SERWER: You often hear people talk about short selling, but what exactly is it? Well, short selling is simply making a bet that a company's stock price will decline. Let's say you are convinced that shares of company ABC are going to drop. What would you do is borrow 1,000 shares of ABC from a broker. Then you sell those shares, which trading for, say, $55 each, giving you $55,000. Now lets say ABC follows your script and falls to $45 a share. You would then buy back those 1,000 shares for $45,000 and return the 1,000 shares to the broker, giving you a $10,000 profit before fees.
It sounds simple, right? Well, actually, it isn't, and that's because stock prices usually go up over time. And remember, you always have to return those 1,000, and if the stock is moving higher, the sky is the limit for what you might have to pay.
SERWER: A part-time postal worker and pet sitter is America's newest mega millionaire. Baltimore's Bernadette Gietka stepped forward Wednesday to accept her hundred and --$183 million, excuse me -- I don't want to shortchange her -- jackpot from the June 20 Mega Million drawing. After taxes, she will get 76 million bucks. Not bad. Gietka says she will still work part-time. I am not sure I get- ka that. I mean, she still works. Why do you work when you have that much money?
LISOVICZ: She likes her job.
SERWER: I like my job, but if I get a lot of money, I am not working any more. I mean, it's very simply.
LISOVICZ: Well, you know, I think history has proven big lottery winners don't always spend their fortunes wisely.
SERWER: Oh, we know that one.
TULLY: And you probably have relatives descending on you.
LISOVICZ: ... swarming on you. This woman needs to get out of town quick. And she's unmarried. Somebody tells me she's unmarried.
SERWER: You know what they should do is make a reality TV show. They should make a reality TV out of this, find a husband for her. I mean, that would be great, right?
LISOVICZ: I think they already have about five of those on the air, Andy.
SERWER: But this is real. I like this idea.
LISOVICZ: But you know, I think the most surprising part of this story is that she sat on the secret for so long, right?
SERWER: Why do they do that?
LISOVICZ: It was a month ago.
SERWER: Why is she working? I still don't get that part. Why is she going to continue to work at the post office and sitting pets? I'll take care of your St. Bernard.
LISOVICZ: IN THE MONEY our next guest, next weekend, why don't we have her?
SERWER: Yes, let's see her.
LISOVICZ: She can answer all of these pressing questions.
Now let's get to e-mail because we have a lot of them. Chuck from Iowa wrote in about our segment on the growing rate of personal bankruptcies. "One way to turn the corner on this issue would be to require all students to get some education on how to use credit cards." Another concept. "That curriculum should be made uniform throughout the United States." And you know who should pay for it? Probably the credit card companies.
SERWER: Yes, or the woman in Baltimore. LISOVICZ: John from Virginia had this novel idea on how to deal with telemarketers who protested the new national do not call list. "The next time you get one of these guys representing the telemarketing industry and he says people don't mind telephone solicitations, challenge him on the spot to give out his personal home telephone number live on CNN."
SERWER: That's a new wrinkle, live on TV. I'd like that.
LISOVICZ: Yes, I'd like that. And Rick from Colorado had this to say about investing in Krispy Kreme doughnuts. "Fast food joints are already looking down the barrel ludicrous obesity litigation. Doughnuts are next. When all the lawyers dies, I'll come out of my cave." But, you know, Krispy Kreme shareholders have done pretty well.
SERWER: The stock keeps moving up, but it is true, if the fat police run riot across this land, it's going to be bad news for that company.
LISOVICZ: Bad, very bad new.
Now time for our e-mail question of the week. On this July Fourth weekend, we are asking you, what does it mean to be a patriotic American today? Send your answers to email@example.com, and Andy Serwer will wave the red, white, and blue as we read them on the air next week.
SERWER: Yes, OK.
LISOVICZ: And that's all for this Fourth of July weekend edition of IN THE MONEY. My thanks my co-anchor, "Fortune" magazine editor- at-large, Andy Serwer, and "Fortune" Senior writer, Shawn Tully. Join us tomorrow 3:00 p.m. Eastern time when we will examine whether older American workers are increasingly becoming the target of layoffs and other workplace discrimination. Ageism in America will be our subject on IN THE MONEY. Again, that's tomorrow at 3:00 p.m. Eastern time. See you then.
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