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A look at Martha Stewart's Trial; Are Anti-Spam Laws Working?

Aired February 7, 2004 - 13:00   ET


JACK CAFFERTY, HOST: Hello. Welcome to the program. I'm Jack Cafferty. Coming up on todays edition of IN THE MONEY, real men don't ask directions. We will hear from a journalist who said Washington called for a war plan on Iraq, and then threw it out.

Plus stock answers. We will bring you up to speed on the Martha Stewart trial. Find out who is taking the stand and who is taking the heat.

And think of it as the world's longest job interview. The Democrats are campaigning to run your county. We'll ask GE boss Jack Welch if any of them has the leadership it takes to make it work.

Joining me as per usual, two of our regulars, CNN correspondent Susan Lisovicz, and "Fortune" magazine editor at large, Andy Serwer.

So, the president is going on "Meet The Press" tomorrow to have a little one-on-one hour long interview with Tim Russert. Some in the White House probably suggesting its time for him to get out there and get off the defensive and go on the attack a little bit. The news for the president lately has not been very good. No weapons of mass destruction according to David Kay. George Tenet saying nobody told the White House that Iraq was an imminent threat. The deficits, the budget. The kids getting killed in Iraq two months ago it was the president's election to lose. I'm not sure that's the case.

ANDY SERWER, "FORTUNE" MAGAZINE: And the other thing is the Democrats are getting all the headlines with the primaries. And yes, they are attacking each other, Kerry vs. Dean vs. Edwards, et cetera, et cetera, however, they are also attacking the president. So, every night on the news the headline is "This is what I can do for America and why the president isn't doing a great job." Going on TV like that is a risk, but I think they feel like he has to do it.

SUSAN LISOVICZ, CNN CORRESPONDENT: Well, it's especially interesting, because President Bush has only held by what I've read, 10 press conferences during his tenure as president. That is very low. Much less than his father, for instance. And this is a one-on- one. This is a reporter who can do many follow up questions. And he's also president, so there has to be a certain amount of respect that has to be paid to the commander-in-chief. But, you laid out the agenda. It's a very challenging time for him.

CAFFERTY: Maybe Tim can start with, why don't you tell us who was in those energy meetings. Maybe he could start with that.

LISOVICZ: You are referring to his interview with the vice president, perhaps?

CAFFERTY: It's been a hectic week for the Democratic presidential candidates with a batch of primaries out of the way and more straight ahead.

For a look at what's coming up, we are joined now by CNN's senior political analyst Bill Schneider.

Bill, the DNC Chairman Terry McAuliffe, said it is important for the Democratic Party to get a leader selected soon, so the infighting can stop.

How soon do you think they might get that done?


That's a good date, that's February 17th. That's when we will have the Wisconsin primary. Howard Dean says that he is aiming to win that Wisconsin primary. And if he does, it will be a whole new ball game and he'll have momentum going into super Tuesday on March 2nd. If he does not win and the polls show him running fourth right now in Wisconsin, then it could all be over. Of course much depends on whether John Edwards or Wesley Clark win either Virginia or Tennessee on Tuesday, February 10th. But the earliest we are likely to see a conclusive result would be February 17th, otherwise it could go to super Tuesday, March 2nd, and that's probably going to be the climatic event of this nomination.

CAFFERTY: How big an issue is the war in Iraq, Bill?

We have got David Kay saying there are probably not weapons of mass destruction. George Tenet saying nobody told the White House that Iraq was "An imminent threat." We seem to be having trouble in post-war Iraq getting things set up for a transfer of power.

Is there anything left for the Democrats to beat the administration over the head with on that issue?

SCHNEIDER: Sure. The idea that President Bush and the White House misrepresented the evidence leading the United States to go to war with Iraq. I don't think it would be wise, I don't think it would work for Democrats to run against the war. It's a war that in some sense the United States won, and most Americans continue to believe that it was a war worth fighting, Democrats don't want to be in the position of defending Saddam Hussein or saying we would be better off if we were in power. What they can and are arguing with some bitterness is that President Bush misrepresented the evidence deliberately, perhaps, misrepresented the evidence to fight a war that he intended to fight all along. And that was deceptive and that wrong.

CAFFERTY: Bill, thank you. CNN senior political analyst, Bill Schneider. Appreciate you being on the program.

Critics of the administration's handling of Iraq are not just concerned about what the White House knew going in. They are wondering how that knowledge was used, misused or ignored. In the latest issue of "The Atlantic Monthly," national correspondent James Fallows takes a long tough look at some of those questions. The article is called "Blind Into Baghdad."

And James Fallows joins us now from Washington. Nice to have you with us.


CAFFERTY" Almost unbelievable that there was a whole set of reports done before the war on what we should be doing in Iraq after the war, and at some point they were simply ignored is that the gist of what your investigation turned up here?

FALLOWS: Essentially, yes. I think the biggest surprise is we have been treated to all these reports of intelligence failure about prewar Iraq and what it's capabilities. I think most Americans are surprised by the intelligence success of how accurately the Army, U.S. Army, CIA, the Army War College, other institutions foresaw what the problems were likely to be after the military victory in Baghdad.

LISOVICZ: James, perhaps one of the most disturbing specifics is the consequences of sending the Iraqi army home.

Can you explain why that, in your opinion, was devastating?

FALLOWS: There were two central points in almost every prewar expert body made it. One is the importance of preventing looting and disorder immediately after the fall of Baghdad, because they said there would be no power, so the U.S. had to be the power. Otherwise it'd be the kind of disorder we saw. The other thing they all said was that the Iraqi Army would be a crucial force for holding the country together. Partly it would provide manpower to do all things the U.S. military is having trouble doing now, from guarding borders to providing security.

And partly it was a main force of unity in an otherwise very divisive country. So, there are all these elaborate plans laid out, especially by the Army War College of how you would peel off the evil top layer of the Iraqi army, but then leave the 95 percent of just actual conscripts and troops there to do work for us, as opposed to what's actually been the case. They've been disbanded. They were sent home with their weapons, but without a paycheck. So, they're much of the resistance right now.

SERWER: Jim, to play devil's advocate here, because I realize people in the administration are sort of privately acknowledging things were a mess after the initial military victory. But war is hell. We certainly weren't prepared in Vietnam. We certainly weren't prepared in Korea, I mean that was a mess initially.

Isn't this inevitable? FALLOWS: Sure, some degree of unpredictability, chaos, of coping with the thing you didn't think of is inevitable. And I also have sympathy for Secretary Rumsfeld view that you have to be open to the unexpected. But I think what sobered me and doing the reporting, what I tried to convey in this article is, that everybody, you know, everybody thinking who was thinking about post-war Iraq said there are three or four things you have to be ready for. You have to be ready for disorder. You have to think about dealing with the Iraqi Army. You have to accept with certainty that with each passing day American troops would be more in the target role and less the liberator role. So these central, main, inevitable type points. You know, these were not kind of random events from Pluto, these were the main things people warned against.

CAFFERTY: Random events from Pluto. Were you able to gain sense of -- of who decided, one, to throw all this stuff aside, and then two, who is the architect of what happened instead?

FALLOWS: The latter is hard to answer because it is a kind of, you know, trying to -- well let me deal with the first question. It seems to me that most of the crucial decisions interestingly were made inside the Pentagon as opposed to being raised to higher authority, by which I mean the president. It's fascinating to me in the course of a couple months nobody ever told me, we did this because the president said X, the president said Y, the president wanted Z. It was all Secretary Rumsfeld, Vice President Cheney, Secretary Powell, Mr. Wolfowitz. And that made me think of the bitter arguments raging inside the Pentagon may have never reached the president's attention. But Mr. Rumsfeld was the prime mover in most of the Iraq decisions.

CAFFERTY: Was he also the one who figured out the strategy to replace the strategy that had been rejected?

FALLOWS: He specifically told Jay Garner, who was the first kind of post-war administrator. He specificly told General Garner not to waste his time looking at this gigantic future of Iraq report that the State Department had produced. I have a stake in this having read all 2,500 pages of it. But he specificly told him not to bother his time looking at it.

LISOVICZ: James, quickly because we are running out of time. There are already comparisons that what happened in Iraq is on par with the Bay of Pigs which was a huge setback for the Kennedy administration, and Vietnam, which was a huge setback for LBJ who followed him. Is that fair, would you say or premature?

FALLOWS: It's different from Vietnam. You know, the U.S. has to finally make things work in Iraq. But I think as case study of how intelligent people in large organizations can make bad decisions, I try to argue in this piece that the post-war Iraq deserves a place in that pantheon, that Evil Mount Rushmore with the 1965 Escalation and the Bay of Pigs and a case of governmental failure.

LISOVICZ: James Fallows, national correspondent, "Atlantic Monthly." It's been pleasure talking to you. Thank you.

FALLOWS: Thank you.

LISOVICZ: Up ahead on IN THE MONEY -- mostly Martha. We will sort through the mountain of testimony in the Martha Stewart trial and give you the really good stuff and there was a lot of good stuff.

Plus born to lead -- GE legend Jack Welch knows what it takes to run a company. Find out if he sees a leader among the Democratic candidates.

And the tarnish on the Tiffany Network. With the Grammys ahead, see how CBS is handling the latest scandal. We'll check the stock of Viacom, the parent company.


SERWER: It was a big week in the government's case against Martha Stewart. For the first time the prosecution's star witness took the stand. Douglas Faneuil worked as the assistant to Peter Bacanovic. Faneuil contradicted Stewart's version of events on the day she sold her ImClone stock.

For an update we turn to Mary Snow. Mary, what's the latest?

MARY SNOW, CNN CORRESPONDENT: Well, Andy, the government is banking on testimony from their star witness Doug Faneuil to prove it's charge, that Martha Stewart acted on a secret tip when she sold nearly 4,000 shares of ImClone, and then prosecutors claim tried to cover it up.

Faneuil said he gave her that tip with the help of his then boss, Peter Bacanovic. Stewart's broker and now co-defendant. The government's star witness testified he spoke with Stewart on the phone on the day of December 27th, 2001 after ImClone, founder Sam Waksal tried to sell all of his shares. He testified he told her, Peter, meaning his boss, thought you might like to act on information that Sam is trying to sell all his shares. He said she asked for the price and instructed him to sell.

Faneuil also testified that Bacanovic first told him the Stewart sale was part of a tax law selling plan, but later explained that it was a stop-loss order. Stewart and Bacanovic both maintain they had a pre-existing agreement to sell the stock once it got below $60. Now, the defense is pointing out that Faneuil credibility, point out that he initially backed up their story but then changed it to cooperate with the government and plead guilty to a misdemeanor.

The defense asked him about drug use and inconsistencies in his story. They are trying to paint him as the rookie stock broker assistant and trying to show Faneuil had an axe to grind with Martha Stewart. An e-mail produced from October 20 -- October of 2001 in which Faneuil wrote to a friend,"Martha yelled at me again today. But I snapped in her face and she actually backed down. Baby put Miss. Martha in her place."

Faneuil complained in another e-mail that Stewart had been rude to him on the phone and a defense attorney pointed out that Faneuil once told the government about a phone conversation in which Stewart had been put on hold and then complained about the music saying she would leave Merrill Lynch and her broker if they did not change the music. The cross examination so far has been done so far by an attorney for Peter Bacanovic. On Monday, Martha Stewart's lawyer will get to ask questions, also ask him about Stewart, Faneuil told the court he never met -- Susan.

SERWER: All right. Mary Snow, thank you very much.

LISOVICZ: Joining us now to talk about the case and how each side is doing is securities lawyer, Jacob Zamansky. He's a managing partner at Zamansky & Associates. Good to see you again.


LISOVICZ: So we have Peter Bacanovic's attorney doing the cross examination of Douglas Faneuil and our correspondent Mary Snow says the attempts seem to be that -- to insinuate that Doug Faneuil had some sort of axe to grind.

What will Martha Stewart's lawyer on his cross try to show this coming week?

ZAMANSKY: Well, Morvillo, Martha Stewart's lawyer will have to show that the story that Mr. Faneuil is saying doesn't make sense. I think he's done a good job, Faneuil, in connecting all the dots in the case. Showing that Bacanovic told him Waksal was selling, telling him to tell Martha Stewart, and worse, Faneuil knew it was illegal and went out and did it any way.

SERWER: Jake, Andy Serwer here.


SERWER: Big question, if you were Martha Stewart's attorney, would you have her take the stand?

We would love it, but would you do it and will she.

ZAMANSKY: I don't think they will have any choice but to put her on the stand. Faneuil, was a very compelling, very believable witness. The story Martha and Bacanovic are tell doesn't really seem to make sense. That they had a sale at 60. There's no written evidence of that. The day before a major announcement takes place, she's selling. She has to take the stand to refute it. I don't think they have any choice.

CAFFERTY: Jake, Jack Cafferty. To what degree does the kind of stuff Faneuil is talking about have a subtle impact on the jury?

Things like she hung up on me. She swore at me. She called me an idiot. She screamed at me about the background music. I mean, she had a reputation before this started as not being the kindest soul on the planet. And now, all of a sudden under oath, we are getting sworn testimony that, in fact, she might not be a nice person does that have a subtle effect on the jury or how does that play? ZAMANSKY: Well, first of all, it makes Faneuil look more credible. This is what people have thought about Martha Stewart, that she is rude, abrupt, and abrasive. So, it makes Faneuil look more believable. And also, she does not seem like a nice person. If you remember Mr. Quattrone, who was tried a couple of months ago, smiling every day, looking like a nice guy. It's hard to sympathize and acquit somebody that you don't like. So, I think it's helping the prosecution.

LISOVICZ: Jake, what about another witness for the prosecution, that is a friend of Martha Stewart. On the surface it would seem that she could even be more damaging because she has no reason to lie. Doug Faneuil worked at Merrill Lynch, was in some way involved in this transaction. But this is a woman who is accompanying Martha Stewart on her vacation, was within earshot of what was going down.

What are you hearing about that and what do you think about the potential damage there?

ZAMANSKY: That witness could be the nail in the coffin for Martha. Again, her friend saying she heard what went on that day. If Faneuil is to be believed, she is probably going to be able to corroborate that Martha Stewart wanted to dump the shares. She called Sam Waksal and there's going to be corroborating evidence from Martha's friend. So, I think that's going to be devastating. And there's not going to be discussion, from what we heard, about a $60 sale, which is Martha's story from her friend. She is with her on the plane, she's hearing everything. It's going to be devastating to I think to Martha Stewart.

SERWER: Quick last question, what kind of penalties is Martha Stewart looking at if she's found guilty?

ZAMANSKY: Three years in jail with no parole, no probation. This is a federal system. She could be sent to jail for three years for obstruction.

SERWER: All right that would not be a good thing for Martha prospective. Jake Zamansky, attorney, thank very, very you very much.

ZAMANSKY: Thank you.

SERWER: There's more to come on IN THE MONEY.

Up next, show stoppers. CBS is taking a beating over its programming moves. See what the turbulence means for shares in its parent company Viacom.

And later running a country like you run a company. We will ask corporate guru and former GE CEO Jack Welch which candidates look like leaders.

Plus getting off the gerbil wheel. We will hear from an author who says you don't need to save big to retire well. Like that.

(COMMERCIAL BREAK) SERWER: Could any company catch more flack than Viacom has caught over last couple of days?

The owner of CBS and MTV was the target of anger after the Super Bowl and Janet Jackson's wardrobe malfunction. And they also took a heat when the street learned that the powerful media investment firm, Capital Research, cut its stake in Viacom by one half since 2002. But the widely held class B shares are in strong shape compared to its media competitors, Disney and CNN's parent company Time Warner, that would make Viacom our stock of the week. You know, the Super Bowl was not all bad. The PR was just absolutely out of this world. It was a great game, and the ratings were fantastic. I'm not shedding too many tears for Mr. Redstone and Mr. Karmazin who you know.

LISOVICZ: I don't think any analyst says this is a long-term drag on the stock. Which should be mentioned, the stock is way off its all-time high in the 70s, trading in the low 40s now. You have to remember one of the things this media company has, people like Mel Karmazin, who's a hawk on the stock price. Les Moonves, of CBS, Sherry Lansing of Paramount, Tom Freston of MTV, has really deep management talent who have been there for a long time. And you can not say that with some other big media conglomerates.

CAFFERTY: I'm not sure how talented the management is when you hire MTV which sells...

LISOVICZ: It's one of their companies.

CAFFERTY: Which sells sex to 15-year-olds. I mean, that's what they do, but they are a cable channel. When you hire MTV to produce the half time show of the most widely watched and generally accepted family viewing event in this country, the Super Bowl. I mean, how talented is the management -- it wasn't just Janet Jackson. That whole thing. They had some clown with a hole in the American flag walking around. Got some idiot grabbing at his crouch like he's got some sort of STD.

SERWER: A lot of people like that. Kid Rock was out there with the poncho looking great.

CAFFERTY: How talented is the management to offend people by allowing that garbage go on the air.

SERWER: A lot of people were not offended. A lot of people like that stuff.

CAFFERTY: The only thing they didn't have was Rosanne Barr singing "The National Anthem" and then spitting on the ground. I think it was a terrible mistake for CBS and for Viacom.

SERWER: They are trying to put all the properties together, because they have MTV, VH-1, and they got CBS, they've got Nickelodeon. I think they've done a really good job of doing that. And this is synergy, baby. It's synergy, and you love it.

CAFFERTY: No. LISOVICZ: Good news for you is that Fox gets the next Super Bowl and they have been looking Andre Costolana (ph).

CAFFERTY: There you go, I heard a funny idea, may be it's not so funny, but somebody said AOL bought the half time show. If AOL asked for their money back there was some suggestion that CBS might make Janet Jackson and that kid that sang with his name, Justin Timberlake, make them refund the money. About $7.5 million. Interesting idea.

SERWER: You'd like it if Yo-Yo Ma did the half time show.

CAFFERTY: More ahead on in THE MONEY. I like the kid with the -- tearing the whole in the flag and putting it over his head.

SERWER: It's a poncho.

CAFFERTY: It's a flag, partner.

The grit beneath the glitz. Find out how a business legend rates the Democratic presidential candidates on leadership. We're talking about Jake Welsh.

And later, how to get retired without getting tired. A segment I personally am looking forward to with a great deal of interest. We will hear from a business journalist who says you don't have to burn yourself out to earn enough money to get out of the rat race. Back after this.



CAFFERTY: Running the United States is probably not all that different from running a really large multinational corporation. The president of the United States has more nuclear missiles then the average corporate CEO, but they both manage people and money and foreign relations. They deal with nasty competitors, they are worrying about the marketplace.

Jack Welch knows about corporate leadership. And although he says he is backing George Bush, he has done some research and done a little work on spotting a potential leader among the Democratic presidential candidates.

Mr. Welch is the former chairman and CEO of General Electric. He's a former boss of mine, when I worked at NBC. He now works as a consultant to the CEOs of the Fortune 500 companies. And it's nice to have you with us. Welcome.

JACK WELCH, CORPORATE CONSULTANT: Jack, it's great to be here. Thanks.

CAFFERTY: John kerry has the big mo and is the odds-on favorite to wind up with the nomination. Based on the way you would assess them from your view in the corner office of a place like GE, is he the right choice? WELCH: He's going to be the choice, so I don't think it makes much sense to do a lot of second-guessing. I wrote a piece two or three weeks ago where I thought it was a closer race and tried to articulate what each should do. But I think this game is over.

CAFFERTY: Why? Why is it over so quickly?

WELCH: Well, they ran out of money. Look, as a Republican, I wish they didn't catch on to Dean that early. You know that was a -- that was a very bad break.

CAFFERTY: Was it that thing in Iowa? Did that really...

WELCH: No I think it was before that. I think "Newsweek" did a piece before that. Other people have done some pieces before that. I think, without question, they spotted him before.

LISOVICZ: But, you know, you boiled it down to something easy to remember, the four Es. GE companies, they run on this efficiency model, the Sigma 6. For electing a viable candidate, it's the four Es. One of them being energy.

WELCH: But I think it's one to look at. But I think in a presidential campaign I -- I think likability is a big issue. So, you have to be energized.

LISOVICZ: You have to have edge.

WELCH: Edge. But the voters have to feel you. I think John Edwards has does a nice job, because he knows how to reach juries and he can get out and do...

SERWER: No, no, he is a great campaigner. I wanted to ask you, getting back to Kerry, though, what do you think he's got? Assess him for us.

WELCH: I think he has lots of energy. I still think his edge is going to be questioned now. The more I have gone into his record one position, another position, you -- you might not like what Bush does, but you know where he is. And Kerry's flip-flopps on so many issues are going to cause -- both sides are going to have a clear-cut race. There's a list of what Bush has done, whether you like it or not, and there's 20 years of Kerry. And it's not going to be a question of -- of, excuse me Jack.

CAFFERTY: No, I'm curious about your thoughts. You said you are backing President Bush. Things have changed in the last couple of months for President Bush. He was the odds-on favorite in every poll you looked at to beat any of the Democratic candidates. All of a sudden that's not the case anymore.

Kerry for two weeks running in "Newsweek," in a hypothetical matchup would beat the incumbent president. David Kay says he does not think there are weapons of mass destruction. George Tenet says we never called Iraq an imminent threat. The economy is not producing the jobs that have been lost here in the last two or three years. The deficits are a concern to people. There are issues that seem to be piling up at the oval office door and suddenly the president is on the defensive a little bit.

WELCH: Michael Dukakis left the Democratic convention 18 points ahead and lost in 1988, OK? Once you had the president hunkered down in the White House saying nothing, and the Democrats have had their say, and had their party, this happens every time. And we'll have to see where it goes.

Now, I could come back and go at each one of those things you said. David Kay, if you read what he says, versus how they report it, he said clearly he would have made the same call.

If you go to the economy, we had a meager jump this morning, we had 112,000 jobs, but the economy is very, very strong. What are some other things you rattled off?

CAFFERTY: Well, the deficits. The Democrats are saying they're going to have to either roll back the tax cuts or raise taxes. The deficits are projected to go through the ceiling as far out as the eye can see.

WELCH: More and more Democrats are going to realize a good economy helps deficits. Mike Bloomberg in New York, as we all know, a year ago was dying over deficits. And he was doing all kinds of things. Along comes a good market, better bonuses on Wall Street, better revenues, and he announces three weeks ago, hey, guys, we got a surplus.

Now, that continually is going happen. This is not a killing deficit. It's a large number, but we have $10.5 trillion economy. We can handle this. If we didn't not use our fire power this time, when would you use it? We had a real recession, and unemployment today is 5.6 percent.


WELCH: 5.6. Andy, you have been around, that's a low number.

CAFFERTY: That's pretty good.

LISOVICZ: But job creation is the problem. And a lot of economists say that the job creation needs to be triple for the economy to be on a more solid ground.

WELCH: Well, you know, there's all kinds of arguments on that. There's the household number, there's the payroll number. More and more people are self employed. They don't show up in that number. I don't believe that if unemployment, as -- employment gains as weak as they say they are, I just don't believe it, and yet the consumer confidence index at the highest levels I've seen in years.

So, if people feel this good, some number is wrong. Either consumer confidence number is wrong, or the employment number is wrong. You know -- those statistics, I just don't buy into. LISOVICZ: Can we talk about your own economics? Because there are headlines lately about your post retirement book, which apparently was trumped by none other than Donald. But $4 million for a how-to book is not a bad deal, is it.

WELCH: You know, it's what the market would pay. I don't know if it's a good deal or not.

SERWER: You believe in the free market system, I take it.

CAFFERTY: Maybe it's the co-author.

WELCH: I think may be the co-author.

SERWER: You were saying she was the one with the brains any way.

WELCH: No question.

CAFFERTY: How about writing a book with your fiancee and still have a wedding day planned.

WELCH: Oh, no, no, we've written op-ed pieces together -- it's the best deal in the world. I think somebody said you take all the credit and she does the work. It's a hell of a deal.

LISOVICZ: Do you recommend it long-term though?

WELCH: Absolutely.


WELCH: Absolutely. We have more fun doing this than you can imagine.

LISOVICZ: When are you going to get married?

WELCH: In April.

LISOVICZ: Are we invited?

WELCH: You're all invited.

CAFFERTY: Appreciate very much having been on the program. You add a touch of class to the joint.

WELCH: Thanks a lot. You're very nice to say that.

CAFFERTY: It's true.

SERWER: Yes, it's great to see you Jack.

Former CEO Jack Welch, and author I should mention as well.

LISOVICZ: Prolific author.

SEWER: All right. Just ahead, if you think -- if you don't think you had enough saved for your retirement you may be too pessimistic. We will talk to the author of "Retire With Less."

And critics say sometimes the candidates can sometimes stretch the truth. So why not have fun stretching the candidates. Allen Wastler will have the the fun site of the week in just a few minutes. Stay tuned.


SERWER: Seems like yesterday that the only retirement worry most people had was finding the right beach to build their house on. Of course things change, now more and more people are concerned about not being able to retire.

Not to worry, our next guest has tips on getting to your golden years on budget. He is Fred Brock, author on retire on less than you think. welcome.

FRED BROCK, AUTHOR: Fine. A pleasure to be here.

SERWER: Good. So, we all don't have to live on cat food later on in life. Tell us a little bit about your game plan here.

BROCK: Well, the book that I have written, "Retire On Less Than You Think," actually takes issue with the mutual fund industry's contention that you need 70 to 80 percent of your preretirement income in order to retire comfortably. And I just think that's unreasonable. And I look at a number of cases, a number of examples that demonstrate that.

What people ought to be looking at is not income but their expenses. And preretirement expenses are much greater than post retirement expenses. When people retire, a lot of expenses drop. They probably have a house paid for. There's no more work-related expenses. If they are willing to move to a cheaper part of the country, it's even better.

Imagine somebody in San Francisco, where the median price of a house is about $434,000, selling that house and moving to Tucson, Arizona, where the median price is $120,000. If the first house is paid for, or mostly paid for, suddenly you can buy a house free and clear, have a nest egg leftover, your expenses go down. You've given yourself a huge raise.

LISOVICZ: Fred, all that makes sense. Let's not forget about the early bird specials, my parents are big on that. But, you know, one thing that you have'nt mentioned is the fact that healthcare rises. It is beating inflation by a long shot and that's something that, you know, retired people typically have a need for on a more regular basis. What about that?

BROCK: Well that's true. Healthcare is a big problem. There's a chapter in my book that deals with that. Only about a third of companies provide healthcare to their retirees. The rest of the people, many people, are on their own.

There are ways to deal with that. You may have to use some of your savings to pay for healthcare until you are eligible for Social Security. Now, you can have Cobra from your employer that continues for 18 months after you leave your job, and then after Cobra is expired you can switch to a federal program called Hippa, which guarantees coverage in whatever state you live in. You just have to pay for it, it's a bit expensive.

There are some ways to cut the expenses. One way is to have a high deductible policy. If you have enough money to cover the small stuff, have a policy that just pays for big things.

CAFFERTY: How is the retirement landscape likely to change in this country as the baby boomers begin leaving the workplace? There are dramatic changes ahead. I'm not sure anybody has an exact handle on what they're going to look like, but change is coming. What do you see happening when this huge wave of babyboomers retire?

BROCK: There are extraordinary changing coming. For one thing, the baby boomers are changing the face of retirement. They're not going to retire like their parents. The idea of being retired equals being on vacation all year long is out.

The boomers will want to continue working. They will want to deal with hobbies, deal with things they always wanted to do but on their own terms. Things that perhaps they were interested in, but couldn't do during their careers because they did not make enough money.

Also, the boomers, surveys show the boomers are more and more willing to move in retirement. The boomers don't have enough money saved. They have not been good savers like their parents, they have been spenders. They have been spectacular consumers. They have -- they have a lot of debt.

When they retire, they are facing -- they will face reality and many of them will move from the high-cost coastal cities like New York, San Francisco, Boston, Washington, and so forth. They will move to less-expensive parts of country. Surveys show that clearly.

It used to be when you did a study on retirement, the question was do you want to move when you retire? 80 percent of the people said no. The boomers now, more than half say yes, I'm willing to move.

CAFFERTY: All right, makes sense, particularly if it's a question as you mentioned, of moving to a place from San Francisco where housing costs are high to a place like Omaha, where housing costs are low. The problem is you wake up and you are in Omaha. That's another program, we'll talk about some other time. Fred, nice to see you.

BROCK: Thank you.

CAFFERTY: Fred Brock, editor at "The New York Times." Author of "Retire On Less Than You Think."

Coming up, webmaster Allen Wastler -- I'm just kidding if you are watching in Omaha. Webmaster Allen Wastler will join us on a report of spam, and the fun site of the week. A lighter look at the face of American politics.

And you can send your ideas, compliments, psychological problems, addictions, recovery programs or whatever else might be right at the front of your consciousness to us via e-mail,


CAFFERTY: President Bush signed the anti-spam law into December. Since then you have not been getting junk mail or e-mail or spam, right? Our webmaster, Allen Wastler, joins us now to explain why it's not working. Boy, is it not working.

ALLEN WASTLER, MONEY.COM: I would be willing to bet you are probably getting more spam now than you used to.

SERWER: Now, that's effective.

WASTLER: All right. And actually an outfight called Bright Mail did a little measuring thing, and they figured out that it increased from December 2003 to January 2004, with that law smack dab in the middle, it increased by 2 percent.

CAFFERTY: Remember all the posturing of politicians, we're going to pass a law, by god, we're going to take care of this spam problem. Isn't it nice the government is out there to help us?

WASTLER: Now, let's give the government a break, it takes a while to implement all the facets of the law and there's some built in. But there's a big criticism that the approach they took is not really the right way to do it.

Now, Europe has a tougher law. And this is where it gets interesting, OK. Europe has the tougher law. We have kind of a weak law, and now it's becoming a trade issue because in Europe, okay, they got a tougher law but they still have a spam problem, OK. Worldwide 60 percent of the e-mail you get is spam. In Europe it's 53 percent. Guess where 80 percent of their spam comes from?

CAFFERTY: Right here.

WASTLER: Right here in the United States of America.

LISOVICZ: Is it true it's the biggest U.S. export, even bigger than the film and entertainment industry?

SERWER: That's why it's a good thing. I like spam. Some of it's fun to read.

CAFFERTY: It's the only mail Andy gets.

SERWER: That's true.

WASTLER: The thing is, a lot of people have the notion it's people in China, people doing this. It's not. The companies are actually...

SERWER: It's Canadian pharmacies. That's what it is. You know what I'm talking about.

WASTLER: If you look at this list, these lists are the top spam countries. We are top in the list. Why? Well, because we got the softer law, so, you know, they can spam people over in Europe and the spammers can go ha.

CAFFERTY: They can go how?

WASTLER: It is more economical here. We have better telecom systems if you are going to honk out spam...

SERWER: Is that the verb, you honk it out?

CAFFERTY: That's that computer talk.

LISOVICZ: Is it true that spam will be extinct in two years?

WASTLER: He is saying that. He's got a three-pronged approach. The first two, I think are kind of, you know, it's kind of cute techno stuff. The third one is an idea I have been sort of expousing for a couple years, yet about it's stamps. E-mail stamps. If it's an economic problem, charge people for it, the cost structure changes..

CAFFERTY: There you go. Fun site of the week.

WASTLER: You've been talking about the candidates, right?


WASTLER: And now we hit the point where they start stretching things and twisting issues. I have a place where you can do it yourself. There is old Kerry. The Botox so worn out there. Oh, sorry, Kerry. Howard Dean, don't you wish he didn't repress so much.

SERWER: He looks like a cone head.

WASTLER: He keeps things inside.

CAFFERTY: Oh, this looks like fun.

WASTLER: Your favorite there, Kucinich. Just go to sleep. Go to sleep.

SERWER: Don't touch his ears!

CAFFERTY: Nice to see you, my friend.

WASTLER: And of course we have the incumbent. Uh oh, the nose is growing.

CAFFERTY: That's cruel. But that's -- what fun would it be if it wasn't. Thank you, Allen. Allen Wastler.' Just ahead, as we continue, your answers to our question of the week. And remember, you can send us your thoughts, ideas, criticisms to us at

But first, Susan has today's edition of "Money and Family."


LISOVICZ: If you are thinking of renovating your home, remember that 90 percent of renovation plans go overbudget. So here are a few tips to help you avoid the money pitfalls of home improvement.

(voice-over): First, be sure to research the costs before you start. "Remodeling" magazine is a good source for finding out the average cost of your renovation in your area. Check out their Web site at

Next, you will need to find contractors who are legitimately licensed and carry liability insurance. A good online source for this is When you interview the candidates, insist on seeing work they have done for somebody else. This will give you a good idea of the quality of their work.

Once you've hired a contractor, ask for a work schedule in advance. It's important to assign one family member to talk to the contractor during the project. Not a site supervisor. Be sure to monitor the work by setting up in person or telephone meetings.

And whatever you do, do not let your payments get ahead of their work. I'm Susan Lisovicz for "Money and Family.



CAFFERTY: Time now to check your answers to our question about how much you learn from the presidential candidates from television. Marie wrote this, "I don't learn much from the mainstream media. I watch the debates on C-Span, but the other networks spend too much time on polls and talking about who should stay in and get out of the race."


CAFFERTY: And we got this letter from Florida, "I don't get much information I need from TV. I need to know who the candidates are, how they made their money and their voting records. We hardly see that kind of report."

Adrian wrote this, "how can you learn anything about the candidates from TV? They change their opinions with every new poll, my eyes glaze over. And I run to the Food Network."


CAFFERTY: Time now for our e-mail question for this week, "what will it take for you to retire at 65?" Send us your answers to We will read and commiserate with you, next week at this very same time and same station.

You also should check our show page at That's where you will find more show information and the highly sought after fun site of the week address. This week you can distort the appearances of candidates running for the nation's highest office. Keeping this program on a high plain.

Thank you for joining us for this edition of IN THE MONEY. Thanks to the regular gang, CNN financial correspondent, Susan Lisovicz, "Fortune" magazine editor at large, Andy Serwer and managing editor, Allen Wastler.

Join us tomorrow 3:00 Eastern time when we will look at campaign cash, talk to President Reagan's former political director about what the candidates are doing with the money once they get their hands on it. That's tomorrow at 3:00, until then, enjoy your weekend.



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