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CNN IN THE MONEY

Halliburton Scandal Emerges; Dean Doing Damage Control; What are Bush's Election Chances?; Martha Stewart Holding Her Own in Court

Aired January 24, 2004 - 13:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

ANNOUNCER: From New York City, America's financial capital, this is IN THE MONEY.
JACK CAFFERTY, HOST: Welcome to the program. I'm Jack Cafferty.

On today's edition of IN THE MONEY, sitting tight. From Iraq to unemployment, nothing has shaken George Bush's grip on the Oval Office. As we head into the New Hampshire primary now, we'll see if Democrats are up against what might be called a bulletproof presidency.

And according to the public, Martha Stewart is one of the celebrities using public relations big time in her legal fight. We'll look at whether spin works when the famous go to court. We'll talk to famous trial lawyer Robert Shapiro about that.

Crime doesn't pay but justice does. As the Scott Peterson murder trial hits the road to San Mateo, find out why a high profile case like this can bring a town some pretty easy money.

Joining me today, some of our regular gang, the IN THE MONEY veteran, CNN correspondent Susan Lisovicz; "Fortune" magazine editor at large Andy Serwer.

So, we got this story that you were talking about on "AMERICAN MORNING," concerning Halliburton.

ANDY SERWER, "FORTUNE" MAGAZINE EDITOR: Yes.

CAFFERTY: Apparently, there's a report out that a couple of employees took some kickbacks from companies in Kuwait.

What do we know about this, and perhaps even the more important question, is any of this stuff with Halliburton ever going to have any traction? So far, a lot of discussion about Halliburton and his relation to Dick Cheney, but I don't see where the issue has much traction.

SERWER: Well, I think part of the problem is, it's a bit complicated.

But what we know so far, No. 1, the company disclosed it itself and discovered it in an internal audit, a $6 million kickback, apparently, involving two employees over in Kuwait.

The same unit that was involved in the gasoline situation where the company was accused of overcharging the U.S. government. Didn't involve gasoline specifically, and the company hasn't said exactly what businesses it's involved in.

But you can see, it's complicated stuff, Susan.

SUSAN LISOVICZ, CNN CORRESPONDENT: But in some ways, you know, the government sort of brought it on itself. There was -- Halliburton won this enormous competition through no competition.

CAFFERTY: Right.

LISOVICZ: So perception is a problem when you get these reports that there are kickbacks in something that could, you know, be extremely lucrative.

And Jack, let me point this out, it is an election year.

CAFFERTY: Really? I had no idea.

LISOVICZ: Politics.

CAFFERTY: That goes back to what I said in the beginning, though. We had the allegations of overcharging on gasoline, now we've got the allegations of kickback. Everybody says Halliburton got a no- bid contract, but...

SERWER: And the vice president, of course, used to be the CEO of the company, and the company was being investigated previously about other...

CAFFERTY: But I haven't seen -- I haven't seen any evidence that anybody is really that concerned about any of this stuff when it comes to Halliburton. I mean, you get...

LISOVICZ: Democrats are. Democrats are.

CAFFERTY: Indeed.

Speaking of Democrats, let's move on.

Kerry is on the move up there in New Hampshire. Dean's on the defensive a bit as the Democrats head towards the nation's first primary. That would be Tuesday in New Hampshire.

Joining us from Manchester with a preview, CNN's national correspondent, Bob Franken.

Bob, nice to have you with us.

BOB FRANKEN, CNN CORRESPONDENT: Nice to be here.

CAFFERTY: Let me start with Howard Dean and the fact that finally, late in the week, his organization got into some serious damage control following that outburst after the Iowa caucuses.

We see Kerry ahead in the polls in New Hampshire. Is it because Dean blew it in Iowa or because Kerry came out of there with so momentum that he's just going to be unstoppable, at least through Tuesday?

FRANKEN: The answer is yes.

CAFFERTY: Thank you.

FRANKEN: Probably a little bit of both. Probably a little bit of both.

And what's intriguing now is the idea of momentum. Kerry has momentum. It's upward momentum. Dean has momentum. It's downward momentum. His campaign has decided to do the self-deprecating, warm and fuzzy strategy to try and undo the damage of the speech. And it's an open question whether it will work.

I will tell you that they pulled out all the stops when they had Dr. Dean's wife here, her stand by her man appearance on television. And again, people are going to have to completely change their minds after Howard Dean became the kind of thing that gets involved in the Jay Leno effect, which is to say he comes under ridicule. And that's a real hard thing to stop.

CAFFERTY: His wife had been conspicuously absent from the campaign trail up until the speech in Iowa.

Is it possible to tell which is the real Howard Dean? Is he warm and fuzzy, or a guy who lets the veins stand out in his neck with his sleeves rolled up and gets carried a little away at times?

FRANKEN: Apparently, the answer is yes.

CAFFERTY: Thank you.

FRANKEN: Seem to have a theme going here. But you know, I mean, yes. Just check with any television producer, and you usually find that they are the same way.

So, you know, a human being probably has a variety of different personalities. Politicians are normally more adept at hiding the ones that they don't want people to see. And maybe that's the problem with Howard Dean, that maybe he wasn't quite ready for the intense scrutiny that a serious candidacy might generate.

CAFFERTY: One last quick question, General Wesley Clark had New Hampshire all to himself, didn't go to Iowa. How's he doing up there, going into the voting Tuesday?

FRANKEN: You see, that's an interesting subplot. As the polls go on, I think that the person to watch is Wesley Clark. It is possible that Clark might be the one who ends up in the competition with Dean. And if Clark would beat him, that would probably be devastating for the Dean candidacy.

CAFFERTY: All right, Bob. Thanks a lot. I appreciate you being on the program with us. CNN's Bob Franken, reporting from New Hampshire.

Whoever winds up with the Democratic presidential nomination will face a president who is looking not just powerful but almost untouchable. Then again, a lot can change between now and November. The election's still 10 months away.

For a look at whether the Bush presidency is bulletproof, we're joined from Syracuse, New York, by Rogan Kirsh, who's a political science professor at Syracuse University's Maxwell School.

Professor, nice to have you with us. Thanks for joining us.

ROGAN KIRSH, SYRACUSE UNIVERSITY: Thanks. Good to be here.

CAFFERTY: At this point, is this President Bush's election to lose? And if so, how might he go about losing it?

KIRSH: It is his election to lose, although a lot depends on who the Democratic candidate is. And there's, I think, a lot of ways in which he can lose it.

His real strength up to date has been the war on terrorism. In a kind of ironic turn, it may be the success of the war on terrorism -- America not having been attacked for 28 months -- leads many Americans minds away from the incipient fear of a terrorist attack into more domestic kinds of concerns like jobs, the environment, education, immigration, health care and health care costs.

Those kinds of playing fields are ones that George Bush does not do as well on. We know that from polling. We know that from Americans' recent opinions about how they feel about those sorts of issues.

So if the election turns away from the war on terror and towards domestic issues of the sort I just laid out, that's problems -- that is a problem for George Bush.

It's also the case that Iraq and the continuing dreadful tragedy of American soldiers dying there, as long as that drags on, that can be a problem for the president, as well.

What most analysts believe is the Bush administration is banking on a pullout from Iraq, American troops pulling out. But once again Americans, then turn their attention away from what's going on in Iraq and to what's going on here at home. The records doesn't look so great, at least in some ways, for President Bush in that regard.

LISOVICZ: Professor, you laid out quite a number of issues there.

Let's get to one specific, and that is the budget, and spending and something I could not believe my eyes. Earlier in the week, when the "Wall Street Journal" itself on its editorial page was criticizing the government for its spending, and that looming, that huge deficit.

And not only that, not only the "Journal," but you've seen other, more conservative parties like the Heritage Foundation taking -- up in arms about the issue.

How sensitive is the president there?

KIRSH: I think that's a very good point. I mean, I would be worried if I were the Republicans about the conservatives trying to peel away on exactly that budget issue.

Bill Clinton during his presidency, domestic spending went up about 2.5 percent overall.

A president -- a Republican president, George Bush, who came into office vowing to cut spending, in his three years, domestic spending is up on non-defense, discretionary spending, by 8.2 percent, over three times what a liberal Democratic president spent.

That's a remarkable kind of fact. And I think you may see conservatives start to question the president's budget priorities.

You're already hearing, also, concerns about the fact that he never vetoes any Democratic or even some of the more expensive Republican proposals in Congress.

So as spending spirals and the deficit grows, you don't just have ordinary Americans out in the hinterland worrying about the rates of spending, you also have conservatives, the president's red meat base, starting to wonder what kind of guy is this in office?

It's the same kind of fears that conservatives came to have about George Bush's father, the first George Bush, and it eventually lost him the election. So I think it's something the White House is going to be looking at and worrying about.

SERWER: Rogan -- Rogan...

KIRSH: At this point it's hard to roll back that spending, though.

SERWER: Rogan, let me jump in here. I mean, let's face it, though, there's an awful lot that's going on that's right in this country.

KIRSH: Absolutely.

SERWER: The economy seems to be recovering. You did mention the war on terror. We have not been attacked since 9/11.

And just looking at some of your math, you know, you need 270 electoral votes. You seem to be indicating the Republicans have 250 in their pockets. Democrats have only 210. So they don't need that much to win this thing, do they?

KIRSH: Correct. There's about 70 electoral votes that both parties are going to be fighting very hard over as we roll towards November. It's states that were very, very close between Bush and Gore last time. And there's no indication they won't be this time. They're all over the map: Florida, of course, yet again, Minnesota, New Mexico, Washington state. I think both parties. because there's such strong polarization in this country right now, nine of 10 Republicans supporting Bush ardently, three of four Democrats disagreeing powerfully with his policies.

There's such polarization that the real fight is going to be over those 70 key electoral votes in states that I think right now are up for grabs. Democrats...

CAFFERTY: Professor, let me go back -- I'm sorry. Let me go back to this idea of the deficits.

There's a war on terror. You pointed out we haven't been attacked in 28 months. It costs money to improve security and make those kind of things happen. And the war in Iraq costs a lot of money.

The tax cuts that were put in place are generally credited by economists across the board with helping pull this economy out of recession and get it back on track.

The Democrats all suggest the solution to this is to eliminate the taxes and raise, you know -- eliminate the tax cuts, raise everybody's taxes. I wonder how much people care about the deficits when the solution is you take more money out of my paycheck every week? I mean, is that really an issue, you think, that has traction with the average voter?

KIRSH: Probably not in terms of deficit. But taxes do. You put your finger on the button.

I saw a very surprising poll result in the latest "New York Times"/CBS poll about taxes.

It turns out that 19 percent of Americans responding to this poll, the usual kind of broad sample, 19 percent believe their taxes have been reduced by George Bush's tax policies. But 32 percent say -- again, this is a "New York times" poll -- say their taxes have gone up as a result of those policies. Forty-four percent say it's made no difference.

So I think, again, when the president sits down with his chief advisers and thinks about where are we vulnerable, what do we have to worry about, they may wonder about their tax cut message getting through the way they want it to.

I think you're probably right, most economists do say the tax cuts have helped steer the economy in the right direction. But if voters aren't hearing that, aren't seeing it that way, this far out, again, I think that's a source of worry.

LISOVICZ: You know, professor, one of the buzzwords we heard in the last election were those soccer moms. And one of the things you hear soccer moms get concerned about is the environment. We haven't heard a lot about it so far this early in the election, but just a few days ago, the interior secretary signed off on a plan to open just under nine million acres of Alaska's north slope to oil and gas exploration.

These are the kind of things that get the environmentalists up in arms. Furious. And you're starting to see the campaigns already on television attacking the White House.

How much of an issue will this be by November, in your view?

KIRSH: Again, if there's not a major terrorism issue, if Iraq is relatively quiet, the public's attention turns to issues like the environment.

We know from the last election that George Bush ran as a positive environmentalist. He had to do so, I think, against Gore in a nation where most people list themselves as strong on the environment or strong supporters of environmental policies.

There's a lot of places in which the Bush administration is vulnerable on this issue. I think what you'll see, I suspect very strongly what you'll see is a number of new initiatives coming out of the administration, suggesting how positive and in support they are of cleaning up the water, cleaning up the air. Those sorts of issues.

At the same time they can't alienate their industrial and corporate base that depends on reduced environmental regulation. So this is one that the White House is going to have to take a page from Clinton's book, I think, and triangulate, try to steer somewhere between strong environmentalism and the kinds of anti-environmental regulation that I'm sure they hear from their strongest supporters. They've got to steer a kind of Dick Morris track, if you will.

CAFFERTY: Good work. Triangulate. Professor, we're going to have to leave it there. I appreciate your being on the program.

KIRSH: You bet.

CAFFERTY: Thank you for joining us.

Rogan Kirsh teaches political science at Syracuse University.

Coming up on IN THE MONEY, opening arguments in the court of public opinion. Martha Stewart trying to put a spin on her legal troubles. We'll look at whether it's working when famous trial lawyer Robert Shapiro weighs in. He joins us from Los Angeles.

Later, out of the picture, as Kodak announces layoffs ahead. See how the company's new focus on digital imaging is affecting the stock. It's about time, Mr. Kodak.

Plus killing the competition. Another book that treats business like war is just out. We will talk to the author. He's a former Army guy. He says there are a lot of parallels between the battlefield and the boardroom. (COMMERCIAL BREAK)

LISOVICZ: Martha Stewart's trial on insider trading charges is finally underway in New York. And while the multimedia magnet fights for her professional life in a federal courthouse, she's also battling in the court of public opinion with a million-dollar campaign to defend her image.

But is that an investment that will pay off with the jury? Noted criminal defense attorney Robert Shapiro joins us now from Los Angeles to look at the value of P.R. in a criminal case.

It's good to see you again, Robert.

ROBERT SHAPIRO, CRIMINAL DEFENSE ATTORNEY: Thank you very much. It's good to be on with you.

LISOVICZ: And you know, it's kind of crazy here. You're 3,000 miles away, but all of our cohorts and colleagues are downtown outside freezing outside federal courts, because one of the problems for the media is that we haven't been allowed into the final process of jury selection. So that's one thing that's been -- they've been harping on.

On the other hand, there's been a lot of attention paid to Martha Stewart's handbags. Some very expensive Birkin (ph) bags. There's been countless commentary about that.

How is she holding up so far? Do you think the fact the press is excluded and she exudes this image of well class (ph) and very affluent?

SHAPIRO: I think she's holding up very, very well under the circumstances.

There is nothing that is more stressful in life than being a defendant in a criminal case. And when you take that criminal case to the federal district court in New York, just walking in the building is terrifying for most people.

So under the circumstances, she has an aura of confidence. She appears to be concerned but somewhat relaxed. And I think she's doing an excellent job.

SERWER: Bob, can you assess for me Martha Stewart's situation in terms of her legal team? Where does she stand right now? I mean, I'm under the assumption that this woman would have been better off if she would have settled.

What do you think the government was offering?

SHAPIRO: Well, that's an excellent question.

First, the effect of the media has been such that, even when the spot was announced and we start to talk about it this morning, it was referred to as an insider trading trial. It is not. She is not charged with insider trading.

And that's one of the things the jurors are being questioned about. And so the effect on the media -- by the media has been enormous because all the jurors believe she was there because she is being charged with insider trading.

She's actually being charged with giving false statements to investigators who were investigating the insider trading and for misleading her shareholders as a result thereof.

So the media has a huge, huge impact on these cases and what the jury perceives to be the charges and whether or not the jury, in fact, has an affinity for the person charged or looks at them with contempt.

CAFFERTY: Martha Stewart, of course, claims that she's not guilty. And that's the reason they're going to have a trial to see whether or not she lied or not. And the various other things they alleged.

In the meantime, she has a web site that she's using to try to spin public opinion. She's got access to the media that the common person charged with a felony doesn't have. And she's even gone to doing focus groups to try and get a sense of how a jury pool might perceive her.

My question is, as a man knowledgeable in these matters, is that the kind of a strategy that could backfire if the public finally decides that here's a powerful, wealthy woman who's trying to gain, perhaps, an unfair advantage? If she's innocent, what does she need do all this stuff for?

SHAPIRO: The way I would look at that is I don't think the public is going to hold that against her. In fact, quite the opposite.

If she wasn't Martha Stewart, if it was somebody who happened to be working behind the scenes on this show, and there was an incident involving a $40,000 allegation of insider trading, nothing virtually would happen.

These cases are rarely, if ever, brought. They're exceedingly difficult to prosecute.

And so the fact that it is Martha Stewart has elevated this case and put her in a position where she must do these things to defend herself. Because otherwise just the allegation itself, when it's made by the United States attorney and put into the federal courthouse, takes away the presumption of innocence and immediately installs the assumption of guilt.

She has to do everything within her power to try to level the playing field as much as she can.

LISOVICZ: You know, Bob, meanwhile, you've got your own high- profile criminal case coming up with the great music producer, Phil Specter. Are you going to be employing, are you employing any of these techniques? Because there's been a lot of negative press that's been out there about your own client, about his penchant for guns and, of course, the terrible situation that unfolded in his very own home.

SHAPIRO: Phil Specter, based on the evidence, will clearly be able to present, based on the testimony of the investigating authorities for the sheriff's department, that the gunshot wound that was inflicted on the victim in this event was consistent with being self-inflicted.

Beyond that, this is a subject that I'm not talking about. And letting this case take place where it should, and that's in a courtroom.

SERWER: All right. We thank you for your insights. Robert Shapiro, criminal defense lawyer, thanks much.

SHAPIRO: You're welcome. Nice to be with you.

SERWER: Time for a break. But just ahead we'll check on whether the cooler weather is cooling off the hot real estate market.

Plus, would you like to have this suspected murderer in your town? Before you answer, make sure you know the facts about the economic boosts a big-time trial can bring.

And we'll have one market observer's top stock picks for 2004. It's out with the new and in with the old. So stick around.

(COMMERCIAL BREAK)

LISOVICZ: Now let's check the week's top stories in our "Money Minute."

Former Enron accounting chief Richard Causey has pleaded not guilty to six charges of fraud. Prosecutors say Causey and former Enron CFO Andrew Fastow worked together to craft phony earnings numbers and hide massive amounts of debt.

Mixed news on the jobs front from Big Blue. IBM announcing that strong earnings are making it possible to add 4,500 jobs here in the U.S.

But that probably won't stem the job exporting tide at Big Blue. Published reports showed IBM expects to save $168 million by shipping several thousand jobs overseas through 2006.

One memo stated that hiring a programmer in China costs just $12.50 an hour, compared to $56 an hour for a U.S.-based programmer.

And the real estate market is starting the new year on a strong note. The Mortgage Bankers Association says a record number of people filed applications for new mortgages last week. Applications jumped to the highest level since the association began keeping track in 1990. Mortgage rates are currently at six-month lows.

SERWER: All right, Susan.

The digital photography boom is bringing more changes to Eastman Kodak. And that's bad news for a lot of people working at the company.

Kodak plans to cut its work force by up to 24 percent by the end of 2006. That's between 12,000 and 15,000 jobs. The company cites reduced demand for conventional film. No kidding.

Kodak's shares are just about where they were a year ago, but they're off by more than 50 percent from where they were trading in 1999. That makes a struggling Kodak our stock of the week.

And you know, guys, when we were growing up, the yellow boxes in the drugstore, I mean, that was as close to a monopoly in the country as you could get. Every single camera had film. It grew with the economy. As more and more people got wealthy and went on trips, they bought cameras, and the business just grew.

Then came Fuji. Then came digital photography. And it's been tough.

LISOVICZ: It's a terrible story for a company that really pioneered the film business more than a century ago. I've been up to Rochester. That is a company town.

SERWER: Right.

LISOVICZ: And those jobs were considered cradle to grave, and so many things have changed.

CAFFERTY: Like the rubber industry out in Ohio and the automobile industry up in Detroit.

The sad commentary of the cruel irony is on the day they announced they're going to fire 15,000 people, the stock went up $3 a share. Wall Street, obviously, looking at the bottom line. Fifteen- thousand people are going to be looking for work.

LISOVICZ: Wall Street views it as steps that the company has to make. But you know, what's really interesting, also, after this, the "Wall Street Journal" had a front-page story about how, while Kodak is slowly trying to get into the digital camera movement, it is losing its base in what it has left of the film business.

The biggest pharmacy chain -- I don't know if you read this story -- Walgreens, is actually in cahoots with Fuji now.

SERWER: Right.

LISOVICZ: Which would be considered slanderous just a few years ago. SERWER: And it's not like this company hasn't tried things. They've tried those marketing plans. And of course, they got into chemicals. You remember Eastman Chemical going back.

CAFFERTY: Right.

SERWER: And also pharmaceuticals, as well. They tried to get into the digital business. But it's a shrinking business. You have to look going forward, you guys, will the stock remain on the Dow Jones Industrials?

Eastman Kodak, I say AT&T are the two most vulnerable to eventually to being replaced by say A Fedex or UPS because neither one of them is in there.

CAFFERTY: Andy, what is the mistake though in not recognizing the digital imaging is here? It's part of the present, it's the wave of the future. Digital cameras the fastest selling cameras in the country. It's like they're not in the game.

How come?

SERWER: I don't know. Good thing I'm not the CEO. It's a huge problem. Huge.

CAFFERTY: All right.

SERWER: Maybe unsolvable.

CAFFERTY: All right. Just ahead, 2003, a good year for most investors. We will look at which stocks could be the biggest winners in 2004. Here's a hint, they have dividends.

And some military leadership could be what the doctor offered for some ethically challenged companies. Talk to a former army officer who maps out his theories on the similarities between the battlefield and the boardroom in a brand new book. Stick around, we're back in a minute.

(COMMERCIAL BREAK)

(NEWSBREAK)

CAFFERTY: 2003 was a solid year in the stock market. Dow Jones up 25 percent on the year. Nasdaq Composite posting a very impressive 50 percent gain. But while tech stocks were the place to be last year, this year investors might want to think about good old-fashioned dividend paying stocks. Here to explain and talk more about it, "Time" magazine Dan Kadlec.

Dan, nice to see you as always.

These stocks have kind of lagged the rally, so to speak. And yet some of them pay a dividend which is far in excess of any kind of return you can earn if you put your money in a savings account or money market account. Why aren't more people buying more dividend stocks and what all of a sudden is going to make them more possible?

DANIEL KADLEC, "TIME" MAGAZINE: That's the big mysteries. Dividend stocks rose on average about half what the tech stocks rose last year. Yet these things are starting to yield nicely, 3, 4, 5 percent in some cases. People have not gotten on to the concept yet. They are thinking in the old terms of the tech bubble. And bidding up the Lucents and...

CAFFERTY: Some of the same suspects.

KADLEC: The same of old suspect. I'm not here to say there's another bubble building because I don't believe that. But eventually they will rotate back to companies that make more sense. Big blue chips that pay a dividend that make real money and have proven themselves over years and years and years. And I think this year, for 2004, that's where you want to be.

LISOVICZ: You'd think investors would have learned a very painful lesson from two years ago.

(CROSSTALK)

LISOVICZ: Greed is something that is universal and it's certainly a force in the market. Let's talk about sectors.

Are there certain sectors that investors can easily tap into that pay nice dividends?

KADLEC: If you look at the top dividend payers, you're going to find a lot of financials out there. I'm not sure that's where you want to go too heavy now. If you get a bump in interest rates in the near-term, those are not going to perform all that well. I like dividends on a broad level. You will find classic defenses, you'll find some classic cyclicals. I think you want to own them all or at least a good cross section.

SERWER: One thing that happened last year you had the tax changes. There was some excitement about the dividend stocks, but as you mention, the techs sort of caught fire at the end of the year and ran ahead. Maybe (UNINTELLIGIBLE) will catch up. I think we should point out probably, you should be wary of stocks with dividend yields that are too high because that can indicate a problem like a Merck, which is surprising the dividends are high because that stock has been beaten down. Because it's had some trouble right?

LISOVICZ: Or an Altria. Altria which of course, the parent company of Philip Morris.

KADLEC: There are always the legal issues there but that company has never missed the dividend. The stocks, you maybe have a list -- 12 stocks we pointed out this week. 25 years consecutive of raising the dividends and they all have above-average yields. That's the kind of stability and safety you want to look for. CAFFERTY: A lot of companies over the last year, year and a half, two years as the economy went through the recession were cutting dividends and reducing the amount of dividends. And I wonder if that does not make people gun shy.

KADLEC: Right, again, there's always an argument for diversification. We had Kodak, a blow-up with Kodak. And that is a risk, which as Andy points, a very high dividend yield is warning flag.

SERWER: Red flag.

KADLEC: I would say anything over 6 percent is a red flag.

CAFFERTY: Put up the top -- the first screen again, if you can. The top six on Dan's list. Look at the very top. Consolidated Edison. Pays a dividend of 5.2 percent what did our grandparents tell us, buy the public utility companies and hold on to them.

Five percent is not a great deal of money when you talk about the Nasdaq up 50 percent. 5 percent beats the pants off a lot more traditional kinds of investments.

KADLEC: And you will get some appreciation in the stocks as well as people come back to the dividend theme. You mentioned the tax thing, that's huge from the top rate of almost 40 percent now, dividends are being taxed at the capital gains rate of about 15 percent. We have got lots of closely held companies that are issuing dividends and raising dividends because the owners of the companies understand they can take a windfall by just raising the dividend. It's another way CEOs are paying themselves. They are raising the dividend because they own a lot of stock. And it's going to catch on.

(CROSSTALK)

LOSIVICZ: You are saying really that a investor would still diversify your portfolio but go more heavily -- ramp up on dividend- paying stocks?

KADLEC: Right. Without a doubt. I think income's going to be important this year. I don't know where the markets are going, but these stocks will outperform.

SERWER: And just quick last question. You are seeing holdouts in the tech sector. Microsoft went and paid the dividends. Cisco, Dell, Oracle, come on, guys, get with the program.

KADLEC: They are sitting on billions of dollars of cash.

SERWER: Not paying any dividends.

KADLEC: Not paying dividends, you know, maybe they're reinvesting in things they think will pay more, but investors want the dividends.

LISOVICZ: Give me-give me. And you gave it to us. Dan Kadlec, some good advice -- good investment advice. Senior editor of "Time" magazine, good to see you.

KADLEC: OK.

LISOVICZ: We have to step out for a second. But when we return, fighting the enemy in combat and in commerce. We will look at how war plans can be applied to business plans.

And cashing in on the media circus. See how high-profile trials can boost a town's bottom line.

First though this weeks edition of money and family.

(BEGIN VIDEOTAPE)

LISOVICZ: Tax season is right around the corner. For many families it will be business as usual. But if you are a parent who unexpectedly lost your job in 2003 doing your taxes will be a whole new ball game. Here are some tips to help you stay ahead of the game. First unemployment benefits are considered income, and are therefore taxable. Second there are a few ways you can reduce your tax burden. Your job search costs are tax deductible as long as they exceed 2 percent of your adjusted gross income that means the cost of producing a resume, job travels, even a job coach. And if you had a dramatic change in family income you may become eligible for the child tax credit. If you have kids under 17 and a family income less than $110,000 you can get a $1,000 per child tax credit. You can go to the IRS Web site for more details at irs.gov.

I am Susan Lisovicz, for money and family.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

LISOVICZ: Tips about treating business like war are probably as old as business and war. But now there's a new book on the subject from a former dean at the National War College. Let's meet the author and find out if what works on the battlefield also works in the boardroom. We are joined by Kenneth Allard whose book is called "Business As War: Battling for Competitive Advantage."

Welcome.

KENNETH ALLARD, AUTHOR "BUSINESS AS WAR": Thank you.

LISOVICZ: It's a pleasure to meet you. The military is a form of violent economics. And it seems like certainly the business world is especially violent these days.

Is it all about exporting jobs? Is that why it got so much uglier?

ALLARD: I think what it's really about is the fact the competition out there, as you guys report all the time, is getting tougher and tougher. This world is increasingly globalized, information-based, also terribly unforgiving not only of incompetence but any degree of inattention. Today's executives have to be better than ever before. The good news is we won the cold war. The free market is dominant. The bad news is you got a whole bunch of competitors out there that want to come and eat your lunch.

LISOVICZ: And they are in some cases.

ALLARD: Absolutely.

SERWER: I'm interested, in a lot of ways business and war are similar, in a lot of ways they're not. You can't get away with Lead, follow or get the hell out of my way in business. You got human resources department. You've got sensitivity training.

ALLARD: All that.

SERWER: You've got all this stuff.

So, how are they different?

Is it really a good fit to talk to them together like this?

ALLARD: Let me give you a good example. You were talking about Mel Gibson's latest movie. Let's talk about his last movie, OK, "We Were Soldiers Once and Young." That was the army I grew up in. We knew who General Hal Moore (ph) was, who was the character that Mel Gibson played. He said my boots will be the first ones on that battlefield, the last ones to leave. We are all going home together. Now, you contrast that with this world that we are seeing all the time of CEO prep walks, and suddenly you realize that's a different world than the one I grew up in. I'm used to a different form of leadership. It's not the arrogant, hey do it my way or take the highway approach. It's is hey, more than anything else you have to care about your people and mission, and put them first.

CAFFERTY: Surely things like greed and corruption were not born with Enron and WorldCom. I mean, they've been around since the days standard oil was formed, and the Robber Barons that go back before the income tax laws, when the great, great big business empires were built, the railroads, companies like that.

What's different about today's climate that makes the military parallel particularly applicable?

ALLARD: As Susan said, it's as old as war and business. But the thing is today we have gotten away from some of the emphases on values and character that were once part of that same business epic. There was another standard you were held accountable to. And what amazes me now is the fact that you don't have to get deeply into it. I quoted an eminent sociologist who said, you know, hey, your morals are not improved by business school, in fact, they are sabotaged by business school.

SERWER: Whoa. That's an indictment.

ALLARD: Which is a terrible indictment. I taught at West Point, OK. Up there, the quickest way to leave is to commit an honor code violation. I'm not saying that we are perfect in the military any more than you are in business. The but we understand the importance of values, if you don't live up to the values in either business or war you are in trouble.

LISOVICZ: Ken, it's wonderful, reassuring to hear character, good character matters, that leadership matters, that standards matter. But how can you say that in a time and place when we have NAFTA, when we have China as a member of the WTO, when you've had maybe a dozen trade agreements over the last year. There are plenty of great characters, hard-working Americans and their jobs are going off-shore.

ALLARD: We deserve better leadership. And the thing that bothers me more than anything else, you know, we are exporting all these jobs, OK?

The reason why we are doing this is because we cannot get on top of the idea called strategy. Because you are making short-term decisions. A lot are driven by the market. If you are in a competition with a guy playing checkers, it's best if you don't -- a guy playing chess, it's best if you don't play checkers. You have to think long-term. And everything about the market, everything about the business world today, is against that. So, to the extent you are able to do that, that's the result of leadership, of efforts in a specific business processes that you have to install.

CAFFERTY: "Business as War" is the name of the book. Ken Allard is the author, he's the former dean of the national war college. He knows of what he writes. Nice to see. Thanks for being us.

ALLARD: Good to be with you.

CAFFERTY: All right. Coming up on "IN THE MONEY" as we continue big names means big bucks. Find out why towns get rich when a celebrity trial comes calling at the local courthouse.

And if something is on your mind please don't keep it to yourself. We are anxious to hear about your problems, your issues, your -- yes. Within limits. Show some restraint. But you can write to us about the stories we are covering, stuff you might like to see on the show. E-mail address inthemoney@turner.com.

(COMMERCIAL BREAK)

CAFFERTY: No big surprise here, most American cities not too wild about having suspected murderers in their midst. However, that changes when the suspected murderers become defendants in sensational trials that could bring in big bucks.

Are Web master Allen Wastler joins now with more on this trend.

ALLEN WASTLER, MONEY.COM: Yes, you know. A little -- earlier in the week, the judge in the Scott Peterson trial said I think we will have to move venues here to give him a fair trial. All of a sudden all the California counties are going, me! Me! Pick me! Pick me! And the reason is that they figure the whole hoard of reporters that will follow this trial all over the place will bring a lot of money with it.

SERWER: We are so cheap. You know, we are just going to be buying cheeseburgers and cokes. It's not like you know.

WASTLER: Actually San Mateo figures they will get $6 million, if not $16 millions if it's not long. Yes, CNN cheap news network, right. But thing is -- here's the add-on benefit, OK. Speaking as a CNN news manager I can see this, so you got your camera crew out there and reporters out there and stuff. And the trial takes a break. Guys, come on. Let's see something here. Go to a human interest story or go do something about some attraction here in San Mateo.

LISOVICZ: That's where the Chamber of Commerce comes in, I mean.

WASTLER: That's right. They are already checking off lists of possible stories people can do while they are out there.

This whole thing of macabre trends. I mean, if this is something you can do all the time. I like that. Macabre trends.

CAFFERTY: It sounds like our kind of regular feature here, doesn't?

Speaking of which, the fun site of the week has to do with the meltdown of Howard Dean. I got letters from a viewer on "AMERICAN MORNING." He said the Internet gives and the Internet takes away. And of course, Howard Dean got all his early support on the Internet. And the guy wrote the Internet was full of references to Howard Dean and his "I have a scream speech" he made out there in Des Moines. And that takes to your fun site of the week.

WASTLER: Opportunity for creativity.

CAFFERTY: Absolutely.

WASTLER: A few tracks have come out where they have taken his exuberant and interposed it with various songs. I have brought a main site.

(BEGIN VIDEO CLIP)

HOWARD DEAN (D), PRESIDENTIAL CANDIDATE: Yes! Texas and New York! And we go South Dakota, and Oregon, and Washington and Michigan!

And then we will go to Washington, D.C. to take back the White House! Yes!

Yes!

Yes!

(END VIDEO CLIP)

(CROSSTALK)

LISOVICZ: I don't know what it is.

WASTLER: I think he was just, you know exuberant and getting them going.

LISOVICZ: I was not offended or (UNINTELLIGIBLE).

WASTLER: I see coaches do it all the time. Any ways they can go to our page and get that and go and find all the techno trash.

CAFFERTY: I bet we get you a little thank you note from the Dean campaign for that too, don't we? Don't you think in the next week.

WASTLER: Any publicity, good publicity.

CAFFERTY: Just as long as they spell the name right. Thanks, Allen.

Coming up, we will read some of your e-mails. That's fascinating stuff. You can always get in touch with us and share with us the issue that trouble you late at night. The address is inthemoney@cnn.com Back after this.

(COMMERCIAL BREAK)

CAFFERTY: It's time to check your answer to our e-mail question of the week about whether you would turn in a co-worker if he broke the law in order to get ahead.

Rod in Colorado, wrote "I suspect I would turn in a law-breaking co-worker but I would talk to the co-worker personally first. It is better to handle these in house."

A viewer named Elvis, I didn't know he was still around, he wrote this "I would never snitch on a law breaking co-worker. Let the police figure it out. Snitchers are usually motivated by jealously and hate. Loose lips sink ships. No one likes snitch." And other cliches we didn't have time for.

But Jeremy took a different and more pragmatic approach. He said "Yes, I would turn in a cheating co-worker and then I would take his job."

LISOVICZ: More like it.

CAFFERTY: My kind of guy.

(CROSSTALK)

CAFFERTY: Time for this week's e-mail question which is this -- which of the current Democratic candidates has the best chance of defeating President Bush in November?

Send your answer to inthemoney@cnn.com. Be sure check us out on the Web. Our show page address is money.com/inthemoney. You can find get information on up coming shows. Find the always high sought after fun site of the week and as well as recipes for various kinds of muffins. Thank you for joining this week's edition of IN THE MONEY.

SERWER: He's kidding.

CAFFERTY: Yes, their aint no muffins.

Thanks to the gang, CNN financial correspondent Susan Lisovicz, "Fortune" editor at large, Andy Serwer. Join us tomorrow, we will be here at 3:00 Eastern time. At which time we will look at movie piracy and whether Hollywood will get slammed as hard as the record companies did. That's tomorrow at 3:00. See you then.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com

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