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CNN IN THE MONEY

Does al Qaeda Favor Bush or Kerry?; Home Renovations That Pay Off When You Sell

Aired August 15, 2004 - 15:00   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.
SUSAN LISOVICZ, CNN CORRESPONDENT: Welcome to IN THE MONEY, I'm Susan Lisovicz. Jack Cafferty is off this week. Coming up on today's program.

Voting by force: As Bush and Kerry face off, there's concern about a terrorist attack to spin the elections. Find out which candidate al Qaeda likes best.

Plus, shattering the silence: Getting young people to the polls can be tough, but a new project is out to make it happen. See how the latest research could shape the election.

And put your money where your life is: We'll look at home renovations that pay off when it's time to sell.

Joining me today, a couple of IN THE MONEY veterans and my friends, Money.com managing editor, Allen Wastler, and "LOU DOBBS TONIGHT" correspondent, Christine Romans.

You know, whether it was the Federal Reserve's statement on interest rates over the past week, whether it was the performance of the stock market, or geopolitical events around the world, it came back to one common denominator -- oil.

CHRISTINE ROMANS, CNN CORRESPONDENT: Oil.

ALLEN WASTLER, MONEY.COM MANAGING EDITOR: Oil. And you saw the prices shoot up, up, up, you know, the Mideast stuff, that's getting to be like backburner. Now we got YUKOS, and we got this hurricane sort of messing with supply...

LISOVICZ: And Venezuela.

ROMANS: Absolutely, that's coming up as well.

WASTLER: Venezuela's in there too.

ROMANS: I mean, President Hugo Chavez, the last time there was a -- you know protests in the street disrupted oil output there, people get very concerned about that.

WASTLER: It's very difficult. But, you know what? I get to peek at what people are clicking on on the Web site, the business news Web site for CNN, and when we do oil stories you get the initial rush of interest, and that's sort of the trader institution traffic, but when you talk about sustained consumer traffic on it, it's not that heavy -- $45 a barrel oil does not attract attention. But we put up the story about, OK, now your gas prices are going over two bucks a gallon, that suddenly went into public interest.

ROMANS: Well, how about heating oil? I mean, heating oil is going to be something that people are going to start paying attention to this fall. When you have $45 a barrel oil, almost half of heating oil input price is a barrel of crude. You've got 250 to $400 extra per household forecast people are going to be spending for heating oil this winter. So, even if these prices start to come down a little bit, you're still going to have the follow through for the consumer this winter.

LISOVICZ: And Wal-Mart has been talking about it for months. Wal-Mart is the kind of store -- well, the world's biggest, first of all, but it really sees the discrepancy on the rising price of oil and the lower amount of goods that are purchased at the store, and that's very telling.

WASTLER: They've even estimated how much certain price rises in gasoline will take out of their customer's pocket that they can't spend at the register saying, "Oh, I and I think I'll take the extra candy bar, too." So, you know.

LISOVICZ: Yeah. It all adds up, that's for sure. And when we talk about oil, oftentimes we talk about terrorism, violence. Terrorism isn't just violence, it's violence with an agenda. It's about using fear as a tool for change. And officials in Washington are concerned that al Qaeda plans to whip up that fear in the months ahead to affect the U.S. election. After all, it worked earlier this year in Spain. But one thing isn't clear, and that's whether George W. Bush or John Kerry would be al Qaeda's candidate of choice.

To help us with that question, we're joined from Washington by Mary Louise Kelly. She's the intelligence correspondent for National Public Radio.

Welcome.

MARY LOUISE KELLY, NPR CORRESPONDENT: Hello.

LISOVICZ: So, I guess the obvious first question is, does al Qaeda care who wins the election in November?

KELLY: That's a very good question. The indications from officials here in Washington is yes, that they do -- that they are trying to influence it. We've heard the president's national security advisers repeatedly, over the spring and throughout this summer, saying that the intelligence they have points to that al Qaeda is, in fact, as they put it, "trying to undermine the democratic process," trying to influence...

LISOVICZ: Yeah, but who is the candidate that they would like to see win?

KELLY: That is another really good question. I mean, on a certain level, it's hard to say. We don't know what exactly Osama bin Laden is thinking. You can, however, look and get some sense from monitoring al Qaeda-linked Web sites, chat rooms that Islamic extremists are visiting. And the prevailing sentiment there, according to people who I have interviewed, who monitor these on a regular basis, seems to be that they think that there is some merit to a second term for President Bush. The argument being that whatever your personal view of the president is, he is widely disliked in the Middle East and other parts of the Muslim world, and that therefore, if you are an al Qaeda terrorist it serves your interest well to have someone in the White House against whom it's very easy to rally public opinion.

ROMANS: At the same time though, he is the war president and he is the president who has come down hard, very hard on al Qaeda and on -- you know, the Middle East, and Iraq in particular. I mean, getting him out of office, you would think maybe -- it's weird. You can read it both ways, you know.

KELLY: You can totally read it both ways, and you're absolutely right. When you interview Republicans on this subject they say "it's of course in al Qaeda's best interest to see a President Kerry;" the argument there being, as you say, President Bush has taken this country to war twice in the name of fighting terrorism. He is certainly no softy on the subject. And from that point of view you could certainly make the case that it's your terrorist's worst nightmare would be another four years of Bush and Cheney.

WASTLER: Mary, suppose that there was an attack between now and the election. It was sort of ambivalent which candidate it was aimed, if it was aimed at any. Who do you think the American public might rally around? Would it go with the war president or the new guy?

KELLY: I suspect that in the immediate days and weeks following an attack, you would see people, exactly, Americans rallying around the president. I mean, we all remember the weeks immediately following September 11, when it became almost unpatriotic feeling to question the Bush administration's policy.

On the other hand, you know, you can make the case that if an attack were come to pass between now and November, that it would be proof that despite three years now of trying to reform intelligence, of trying to sharpen our counterterrorist efforts, of trying to improve homeland security, that al Qaeda is still capable of attacking the U.S. and the Bush administration has not been able to stop that.

So that's the interesting thing. If you're trying to sort of parse what al Qaeda's strategy is in all of this, it's not even clear, A, who they would like to see in the White House, and B, if there were to be an attack, which way that might swing votes.

LISOVICZ: Well, you know, one of the things that we've learned about al Qaeda is it's very patient, and it certainly has a specific goal, because -- because it would be so close to the election, I don't think there's anyone, including any of the powers that be at -- inside al Qaeda who could predict who would win the election. So, do you really think that they would spend the precious resources that they have on doing something that close to the election?

KELLY: Well, again, we know in terms of intelligence that's been made public that there do appear to be indications that they are thinking along those lines. Certainly, al Qaeda has demonstrated over and over and over, they want to harm the U.S., they want to harm U.S. interests. It's hard to imagine a more spectacular way of doing that than disrupting the U.S. elections.

That said, there's a lot of very influential people who follow these -- follow these types of issues who say it's true, it's very difficult to say whether, in fact, they are interested in influencing the election. Again, look at September 11, the most spectacular attack in al Qaeda's history, that was not linked, as far as we can see to any particular date, anniversary, trying to influence the outcome of any particular event. It was just when they thought they could pull it off.

ROMANS: March 11 is another important date...

KELLY: Sure.

ROMANS: That was the Madrid bombing. I mean, do you think we've learned anything since then? I mean, it seems to me, at least, that the rest of the world was really shocked that a bombing affected the election there. Although I guess some people argue that it didn't, as well. That party was already on the way out.

KELLY: I think -- I think the consensus has emerged that al Qaeda, the al Qaeda-linked cell that pulled off the Madrid attacks back in March did manage to turn that election. The polls up to the attack were showing that the conservative government was going to be reelected. The attacks went off; three days later, a stunning upset vote.

So it does appear that they disrupt the election. Now, did they set out to do that? Was that the goal, or did they just figure if we time this attack sometime around the elections we can piggyback on all of the extra publicity that that would bring? We don't know.

We do certainly know, as I say, I think they did disrupt the election. Certainly, al Qaeda and its followers watched that and said "Hey, I wonder if we can try to pull this off again."

LISOVICZ: Another reason why this year's presidential election is going to be such a nail biter.

Mary Louise Kelly, intelligence correspondent at National Public Radio. Thanks for joining us.

KELLY: You're welcome.

LISOVICZ: Now, if you don't watch ads, you can't watch us, unless you have TiVo. So we're going to pause for a few commercials. Coming up after the break, how to shape up the future in just one minute. Check out some radical strategies to get young people to the polls.

Plus, Yankees stay home. Phone companies are shipping their jobs all the way to places like India. Find out why one CEO decided that wasn't such a great idea after all.

And, run it up the flagpole and see if anyone salutes. With the Olympic games under way, see how you rate on guessing the flags of the world in our "Fun Site of the Week."

(COMMERCIAL BREAK)

LISOVICZ: They are the wild card in the presidential election, those GenX and Y kids now being targeted with get out the vote campaigns sponsored by celebrities like P. Diddy, Russell Simmons and Bruce Springsteen.

With over 20 million 18- to 24-year-old eligible voters, some of America's youngest citizens could well determine who wins the White House this November. Joining us to talk about what's important to young voters is Ivan Frishberg. He's the communications director of the New Voters Project, a youth mobilization campaign working in six swing states.

Welcome.

IVAN FRISHBERG, NEW VOTERS PROJECT: Great to be here.

LISOVICZ: It's great to get young voters interested. It's important to get them registered, but that doesn't mean they're going to vote. How do you get them out of bed, out of the car, out of the -- you know, the Starbucks and actually in the polls to vote?

FRISHBERG: Sure. The thing that we've looked at is all the research that says the best way to get out a young person to vote, to get them engaged is to go and talk to them. It's really a very simple thing, that the grassroots, peer-to-peer contact actually works. And that means talking to somebody at their door, giving them a phone call, or even somebody turning next to them in class and saying, "Hey, this is actually an important election and we've got issues at stake. We should be making those guys pay attention to us."

ROMANS: I have a theory about why young people have such a hard time kind of connecting with the candidates. Part of the problem, I think, is that the -- you know, they're not even old enough -- you have to be 35 to be the president of this country, so you know, kids, 18-year-olds, 20-year-olds are so far away from being eligible to be the president, the president's always somebody who is much older than they are, and traipsing around the country with -- you know, grown children and a wife, and you've got a 22-year-old who's just trying to make ends meet or is going to college. They don't really relate to the president, or to the people who are running for office.

FRISHBERG: That's definitely true. I mean, I've talked to candidates who are older and they -- and elected officials who say, you know, quite honestly, sometimes I have a hard time relating to my own children. So, thinking about a broader population of young voters is a little bit tougher.

But there's another thing, which is that all of these candidates hire campaign consultants, and the consultants tell them, "Oh, don't bother with the young voters." I mean, they're being told at a professional level that it's not in their best interest to target younger voters, because they're not sure who they're going to vote for, they're not sure if they're going to turn out to vote. So that gets to this big problem of candidates just not actually taking the first step of talking directly to young voters.

WASTLER: Ivan, a lot of people argue that the younger demographic really sides more with the Democratic Party platform. Does this project feed votes to the John Kerry campaign?

FRISHBERG: The -- no, I mean, it's interesting, there was an article the other day in "The Washington Post" that started to show a slight edge to Senator Kerry in some of the recent polling, but in the 2000 election, it was pretty split between Al Gore and George Bush for the youth vote. And when we started our project, back in the fall, when we sort of announced it, the polls were all showing that college students had a much stronger and more favorable opinion of President Bush. So the point is that it's really -- it's a fluid vote, it's a very big vote, as you were mentioning, close to 25 million young voters per election time this November.

LISOVICZ: Right, and...

FRISHBERG: And they're really fluid and up for grabs.

LISOVICZ: Right, and Ivan, you said the way that you interest this group is to talk to them. So, they're talking to you. What are they telling you? What are their issues? What's most important to them?

FRISHBERG: The big issues are the war, the economy, and then a whole cluster of education issues, a lot of which is around paying for college, dealing with student loans, all of those sorts of issues.

And some of the issues, I mean, they're everybody's issues. It's not like there's a difference between how young people are looking at the war and how the whole country is looking at the war and the situation in Iraq.

There are some of these unique issues, though, like college education, and when they think about the economy they're talking about not -- or they think -- you know, prescription drugs or health care and how can they afford that, but they're thinking do they get a job that provides basic health care? There's some nuances to the issues, but by and large, it's a lot of what everybody's thinking and talking about.

ROMANS: Ivan, is the youth vote going to come out on November 2?

FRISHBERG: We think so. The polls have shown a significant spike in the interest, the level of engagement that -- among young people. Certainly over the polls that took place in the 2000 election. And so, we're expecting there to be a significant increase in young people turning out to the polls.

One of the other reasons is that there are these unprecedented efforts that you're talking about, such as the New Voters Project, some of the celebrity efforts to turn out young voters, and a lot of that organizing is being done on a grassroots level, which, as we said, is the thing that we know works with young people.

WASTLER: Ivan, your project, is it concentrating on the swing states that could determine this election?

FRISHBERG: We were looking at states where we knew that we could organize folks. We looked at the Census Bureau data to figure out how densely populated they were so we could go door-to-door, and we looked at all the election rules, but we also wanted to make sure that we were focused on states where there was going to be some media attention. You know, where -- when we were turning out young voters, the people were going to be focused on that so that we could get the candidates to really pay attention to the young voters in those states, and hopefully the young voters across this country.

LISOVICZ: You know, Ivan, an extraordinary op-ed piece in "The New York Times," about a week ago or so, Bruce Springsteen writing an op-ed piece about the importance of this election, and then on the same day announcing this huge concert with R.E.M., John Fogerty, Dixie Chicks, Dave Matthews. Do those things really work? In other words, sure, it gets headlines, and people will go to the concerts, but maybe they just want to go hear these fantastic artists.

FRISHBERG: Right. You know, celebrities definitely get a lot of attention. They certainly want (ph) to help the effort, but on their own they're not going to make the difference. A lot of what they're for is ginning up the base. I think the people that go to see Bruce Springsteen at these concerts, they kind of know how they're going to vote. That's not really the question for them. But the combination of the celebrity activism out there, what is going on with how they connect that to grassroots efforts can really have a big impact.

ROMANS: I think in the youth vote there's always the skeptics, just like in the other part of the population, the skeptics that -- you know, musicians are to make music. You know, you don't listen to a musician for political views.

FRISHBERG: Right.

ROMANS: All right, thanks so much. Nice to see you. Ivan Frishberg.

FRISHBERG: Pleasure to be with you.

ROMANS: Communications director of the New Voter Project.

Coming up right after the break, toys are them, but maybe not for long. We'll have the latest on Toys 'R' Us; it's our "Stock of the Week."

Also ahead, skip the language lessons: Some companies think outsourcing to places like China makes sense. We'll meet a CEO who did his homework and decided otherwise.

And quick answers to tough questions: Find out how the presidential candidates are using e-mail to make a connection with voters.

(COMMERCIAL BREAK)

LISOVICZ: Now let's take a look at the week's top stories in our "Money Minute." Federal Reserve chairman, Alan Greenspan and company, moved to increase interest rates by another quarter point. The move was expected Tuesday by most investors, but it angered some critics who say the economy is not strong enough yet for back to back rate hikes.

Kenneth Lay won't be getting that speedy trial he wanted. The ex-Enron CEO told the judge in the case he'd even waive his right to a jury trial in order to get things going by September, but the judge says he won't even set a trial date until October. Lay faces fraud and conspiracy charges in connection with Enron's collapse.

And maybe Donald Trump should spend more time concentrating on his businesses and less time on reality TV. The Donald's hotel and casino company went into bankruptcy this week, and he decided to step down as CEO. Trump insists none of this will affect his personal bottom line. He claims his stake in the business is only 2 percent of his net worth, but no one has really kind of figured out what his total net worth really is.

ROMANS: Talk about a company that may soon need a big name change. The folks at Toys 'R' Us are thinking of getting out of the toy business. The company is looking for a way to focus on their more profitable Babies 'R' Us division. Toys 'R' Us has been steadily losing market share to Wal-Mart, which is now the world's biggest toy retailer.

Toys 'R' Us is trading near its year's highs, but the big changes to come at the company make it our "Stock of the Week."

Now, over the past 10 years, I took a look at this stock. If you put $10,000 in Toys 'R' Us shares exactly a year ago, it would be worth about $4,100 right now. So, investors definitely could use some changes at Toys 'R' Us, indeed.

WASTLER: Definitely. Definitely. You know, this week's news though, I thought was really overblown by the media, and I don't think it's the media's fault, I think it's the company's fault. They put out a very vague press release, saying we're going to spin off Babies 'R' Us, OK that was easy enough to understand, and we're going to think about getting rid of our global toy division.

Now, you know, what does that mean? You know, all your global toy business? Well, does that include domestic or not? I think they were talking just about their international unit, but the fact that they wouldn't make anybody available to clarify, what did you actually mean by this, sent a bunch of media organizations off saying, "They're going to dump toys, get out of toys, you know."

LISOVICZ: And hence, you saw "The Wall Street Journal" headline that said something like, "Toys Were Us."

WASTLER: Yeah, I mean, it's an opportunity for great headlines.

LISOVICZ: But, you know, I talked to somebody within the company who's familiar with the strategy, and it was twofold. One is that the Babies 'R' Us division, which is a growth area, and which is, by the way, not toys, spinning it off, because that is a successful area, part of the business, but they are still trying to figure out what to do with the toys business -- business, and of course, that's what the media seized upon, because that's what you think about in a company named Toys 'R' Us.

ROMANS: And this is as much a story about Wal-Mart as it is about Toys 'R' Us, because Wal-Mart, over that same past 10 years when Toys 'R' Us stock has -- you know, been cut in half, Wal-Mart has taken over the toy business. It's the largest toy retailer out there. So, people -- consumers definitely want to buy the cheapest toys, and the cheapest toys are at Wal-Mart, and Toys 'R' Us, with the word "toys" in its name, just can't keep up.

WASTLER: Well, that's why I think it'd be silly for them to get out of the toy business altogether. Because, if you get rid of the toys, what have you got? Well, Babies 'R' Us, well that's certainly -- you know, it's a fast growing department, but it's a fraction of it. What are you left with? You're going to be a regular retailer? I mean, OK, Wal-Mart stomped all over us in toys, now we're going to let them stomp all over us in everything else.

LISOVICZ: Well, it just shows how ruthless retail is, because Wal-Mart, of course, has put so many businesses out of business, whether it's groceries, whether it's electronics, whether it's books. The thing that it does with toys, which is particularly painful, is it deliberately takes losses on toys. They call them loss leaders, just to get people into the store because they know they'll buy other things.

But some people say it's poetic justice for Toys 'R' Us. Because, don't you remember going to little toy shops when you were growing up? Well, where are they now? Toys 'R' Us put a lot of toy shops out of business. And now, you have the big 800 pound gorilla doing the same.

ROMANS: And FAO Schwarz, happened to them, Toys 'R' Us now in trouble. I mean, maybe it just isn't the retail environment to be specialized like that when you've got -- you know, Wal-Mart and its big boxes selling everything under the sun, cheap.

WASTLER: One point for investors to remember when they're thinking about Toys 'R' Us, it does have a lot of land. Key locations. OK? ROMANS: Real estate.

WASTLER: So, that is a very hard asset that it still has in its portfolio. If it can figure a way to leverage that land, there might be a comeback story there.

LISOVICZ: It's got...

WASTLER: They're already trimming off some stores...

LISOVICZ: It's got -- you got John Eyler, who's running the show from FAO, and I wouldn't rule them out, but it's a very difficult, very difficult time for that company.

ROMANS: It's got a great ticker symbol, T-O-Y. If you're not selling toys, how can you have that ticker symbol?

WASTLER: That's a winner.

ROMANS: All right, there's a lot more coming up on IN THE MONEY. Just ahead, home sourcing. Find out why one CEO from Georgia decided to outsource his jobs to another town instead of another country.

And later, everything but the kitchen sink: Upgrading your home can pay off, but only if you do it right. We'll have some tips for you.

And true colors: With the Olympics under way, think global, as we see how many flags you can name on our "Fun Site of the Week."

(COMMERCIAL BREAK)

(NEWSBREAK)

ROMANS: Outsourcing has become the belt-tightening exercise of choice for close to 1,000 U.S. companies, but as some recent studies have shown, sending American jobs offshore is not saving executives as much money as they had planned. Dustin Crane, founder and CEO of Aelera Corporation, a software developer, traveled to India, China and Armenia to learn the pros and cons of outsourcing firsthand.

He joins us now. And what you have found is that if you are just swapping out American jobs to cheap overseas labor markets just for the cost benefit, it is not exactly everything that you hoped for.

DUSTIN CRANE, FOUNDER, AELERA: It's a pleasure to be with you. Yes, I discovered in my journeys that many of the cost savings that are anticipated just are not seen. You know, my journey included these travels to these other foreign nations, and I discovered that there are many talented people, and there are very interesting things to be had over there. But as we did a business case analysis of setting up our operations for software development offshore, we found that the labor rate is just one of many attributes that add cost -- or labor rates save money, but there are other attributes that add cost to doing business offshore. When we looked at the business case and realized that these additional costs really took away much of the savings, we found that the savings just were not as big as everyone expects. We have studied many U.S. companies, and actually did a survey and discovered that many of them expected 40 to 60 percent savings. But as it turns out, those savings turn out to be somewhere between minus 20 percent and 20 percent.

WASTLER: Dustin, can you give us some hard examples of where the labor cost savings wasn't worth it because of some other costs? What are some of those costs that are not considered?

CRANE: Well, you know, U.S. companies have bought into the concept of saving money by looking at the low labor rates, but if you look at knowledge transfer, the cost of communications, the cultural differences and trying to explain the needs of the solutions that were trying to be built over there, also the infrastructure difficulties. There are a number of factors that net-net add up small amounts of additional costs, maybe 10 percent there, 15 percent additional cost there.

Plus, you are dealing with a very remote location across the world, which means the meetings are held 10.5 hours out of sync, and these things all kind of add up and chip away at the cost savings. If you focus on one thing, and that is the labor rates.

And India has done a really good job at selling those labor rates and enticing U.S. companies to set up these software development companies.

LISOVICZ: But you know, Dustin, I'm curious, I'm wondering why other CEOs have not learned this yet. Do you think it has anything to do with the fact that you yourself went there, that you went undercover, that you saw the conditions, and what you saw in some cases you really didn't like?

CRANE: Yes, that's excellent. I actually went and observed and visited these software development centers and actually went, as you said, undercover a bit to understand what our employees over there that we would have would live through in order to provide the services for our clients. And what I think these other companies have missed is they bought into the concept of saving on labor rates, and they are now experiencing these additional costs.

Our information, our research shows that there are these additional costs. And the savings are not as great as they used to be.

Now, they are in a kind of a perplexing situation, because they are trying to save this money, it's not happening, and they really don't think that they have an alternative. And we are trying to help people understand that, yes, you do have an alternative. You can have those kinds of cost savings with lower risk by keeping it close to home. The things that are available in Bangalore, in Hyderabad, in Punai (ph), in Guanzhou (ph), China, those things can be had very close to home in a place such as Savannah. ROMANS: Well, and it's so interesting, too, because when you are moving American jobs overseas, as a company, as a CEO, because you are trying to boost your bottom line, in a way that's a very short-term way to boost your profit. But in the long-term you are undermining the consumer base in the United States that's buying your products.

If you embolden another -- you know what I mean? I mean, it can be a long-term detriment as well. Also in India, what we have found is that the legal system is not like it is here. In China, you have intellectual property rights issues, and this knowledge transfer, as you pointed out, longer term can be a problem for companies as well.

CRANE: Certainly, I mean, you hear the story like last week where a U.S. company based in California lost their intellectual property because someone took the source code and e-mailed it outside of their company there in India. So there are these risks that really kind of mitigate the savings.

I talked to a CIO of a large mid-market company last week, and he said that they had success with offshoring, but they only experienced a 10 percent overall savings. And that he felt that the risks associated with doing business offshore did not mitigate those savings.

WASTLER: Dustin, reading the research of what you did, you've encountered some working conditions that were -- I was thinking, holy cow, this is an IT equivalent of a sweatshop. Can you give us real quick just a couple of typical stories and scenes?

CRANE: Yes, I remember one scene in Hyderabad. Where I was brought in to a software development center, and it was in a very small building, and we had 20 or 30 people crammed into these little tiny rooms. They literally were elbow to elbow. They had the width of about a keyboard to work and do their development. And two of the rooms, the air conditioners had stopped working. There was no air conditioning.

And I just thought, my gosh, this is a sweatshop for software development. I'm not sure this is the type of environment that really allows the highest level of productivity for employees.

We also saw incredible pollutions in Guanzhou (ph). I couldn't stay in the city, it was so polluted I had to actually leave and go back to Hong Kong so that I could breathe that night. And I thought to myself, these are not necessarily the best conditions for the type of work where it takes a long stream of consciousness to solve a complex business problem.

I think many U.S. companies now are facing that. Our study shows that they are having difficulties, not in one, or two, or three areas, but in multiple areas. And those problems are starting to add up in the savings.

LISOVICZ: You raise a lot of good issues. Dustin Crane, the founder of Aelera Corporation. We should say that you are something of a hero in Georgia because your company is creating jobs, up to 250 jobs that will stay within the state. Thank you so much for joining us.

CRANE: Thank you.

LISOVICZ: You are watching IN THE MONEY, the show where financial news flips off the wing tips and puts on the flip-flops.

Coming up, homemakers and home remakers, find out which parts of your house pay off when you are putting big money on renovation.

And the virtual handshake: See how the presidential campaigns are engaging the public online.

(COMMERCIAL BREAK)

LISOVICZ: For the last several years, America has been on a nesting boom. Homeowners across the country have been pumping cash into everything from finished basements to media rooms. But before you spend a fortune for a full facelift for your home, you might want to consider what future homebuyers are going to think when you're ready to sell.

Joining us with a look at some smart home improvements projects is Jack Otter, articles editor with "Smart Money" magazine. Hi, Jack.

JACK OTTER, EDITOR, "SMART MONEY" MAGAZINE: Hi, good to be here.

LISOVICZ: I guess like one of the first things to learn is that you don't have to go over the top, and that it's a good idea not to curb your enthusiasm.

OTTER: Well, I think you should curb your enthusiasm just a little bit. I mean, one thing we are finding that -- frankly I find to be a very good trend is that subtlety might be returning. We started with the front yard of the house, for example. Real estate agents say that's pretty important. It's obviously the first impression, just like when you meet someone; the first thing that that buyer sees is the front yard. And they say you don't need the coy fishpond.

LISOVICZ: Oh, why not?

(CROSSTALK)

OTTER: But some nice landscaping, maybe light the trees subtly, a flag stone walkway up to the door. That gives a great first impression to any potential buyer.

WASTLER: OK Jack, now, looking at it next is the entryway, right?

OTTER: Yes, exactly.

WASTLER: OK, now, how hard do I have to work at it?

OTTER: All you have to do is make the money and then hire someone to do it. ROMANS: I like that idea.

OTTER: Yes, I mean a great way to make your entryway look fabulous is to install hardwood floors. I don't think you want to do that yourself. But if you have someone do it, it can look great.

ROMANS: You know, it is interesting, we just had the home sales data this week; they were showing the average price of a home about $188,000. I was talking to somebody who was saying that, you know, in the existing home market, there are a lot of old houses out there, and something new that people are really into now is the office, the home office with all kinds of hook-ups and two different work spaces, because you have two income families.

And you know, mom and dad are both working on projects sometimes on the weekends. What should that home office look like, and how much do you need to spend to spruce up maybe just a standard little den into a real home office?

OTTER: Well, it can get pricey. Because as you have noticed, I mean you're probably going to have to rewire the place if you want two computers, and maybe a television, and who knows, maybe the kids want a gaming console or something. So you have got the wiring costs. You are also going to probably want to spruce it up with some nice wooden paneling or something like that. We are looking maybe $7,000 to $15,000, depending on how crazy you want to go.

One thing to keep in mind, as you mentioned people working at home, in order to take the tax deduction, the IRS is pretty strict about this. They want to know that nothing is going on in that space other than work. So, if you can convert a garage or something that is really a separate space, that will make that easy.

LISOVICZ: Darn that IRS. Well, you know, the next tip is the media room. Now, we work in a media room five days or more a week. That has no attraction for us here on IN THE MONEY, but it does have for civilians outside of the TV world.

OTTER: Sure. So they can watch you in comfort.

LISOVICZ: We like that, too.

OTTER: That's the priciest thing we looked at. That's an interesting story. What's going on here is that the living room is becoming less and less of an interest to people. I think back to when my parents would have a dinner party, everybody would start in the living room and then move into the formal dining room. I mean, now, as you know if you throw a dinner party, and everyone is in there in the kitchen with you.

So while the living room goes away, when people do want to watch the game or something, the media room is where they are doing it.

LISOVICZ: You are assuming we are having dinner parties, by the way. We are too exhausted to cook.

WASTLER: OK, Jack, you were talking about everybody being at the kitchen during the parties. Right?

OTTER: Exactly.

WASTLER: So what do we have to do to the kitchen?

OTTER: Make it look pretty. Granite is all the rage, as you probably know, it has been the rage for a while. It does not cost as much as you would think. And it is funny, supply and demand is kind of working backwards here. Developers are now putting granite in standard, and so the price is actually coming down as demand has increased.

So you are looking at anywhere from $6,000 to $8,000 to install the island and redo those counter tops.

ROMANS: There all these crazy stones that people are using now too. You say be careful on what kind of stone you are using because it can be -- it can handle spills differently and can be harder to work with.

OTTER: Well, absolutely. What my wife and I did was we actually got little slabs from Home Expo and we just started pouring stuff on it -- olive oil, vinegar, whatever we usually spill. And it was interesting. You could really see how some -- there's something called silo (ph) stone, and it looks fine. You could not tell anything we did to that, and some of the others were stained. So definitely, I recommend giving them a test run.

ROMANS: You talked about subtlety, is subtlety important in the kitchen too? Because you know, having spent the last three years looking around apartments in New York to buy and having bought none of them, I should point out -- I have seen a lot of different types of kitchens. And kitchens can be very, very personality driven. If you want to resell -- if you are doing an upgrade and you want to resell your house in the next few years, should you try to stay subtle?

OTTER: Absolutely. Because you just don't know what the buyer's taste is going to be. I mean, again, referring to what we did; we bought an apartment with a lot of really bright yellow and bright blue everywhere. And so we did some repainting. And if you don't want the potential buyer to figure that into their cost of buying your place -- yes, I mean I would go with sort of dark hues and the granite, stick to basics on the walls. And that's going to offend fewer people when they are looking at your apartment.

LISOVICZ: Jack, but it seems like every personality likes the oversized shower. Is that something that is very expensive? How worthy is that?

OTTER: It can get expensive, because you might have to add new pipes. Most people have three quarter inch pipes leading into their bathroom. If you have got this massive showerhead, or maybe two showerheads some people like in the shower...

ROMANS: Those rain showerheads, where you have one on the ceiling and three on the wall. I don't think I would ever go to work. I would just stand in there all day.

OTTER: That's a good point. I mean, people use the shower every day, maybe twice a day. And these Jacuzzis meanwhile are gathering dust. So that is why the shower has become more important. And it does make sense. It's a luxury you really enjoy every day.

ROMANS: Although I have heard, though, from several people that you want to make sure you still have a tub somewhere in your house. Don't go showers all the way, because young families always need a tub for dirty little kids.

OTTER: Yes, that's true. And once again, I can refer to my own situation. Our 11-month-old daughter loves that tub.

ROMANS: All right. Jack Otter, articles editor, "Smart Money" magazine. Thanks for dropping by today.

OTTER: My pleasure.

ROMANS: We will be right back right after this break.

Coming up on IN THE MONEY: National treasures. Flags are not just pretty pieces of cloth, they are powerful national symbols. With the Olympics under way in Athens, see if you can match flags to their homes. That is on our fun site of the week.

And flag us about the issues (UNINTELLIGIBLE). Send us an e- mail. The address is INTHEMONEY@cnn.com.

(COMMERCIAL BREAK)

LISOVICZ: Presidential campaigns have tried to get their unadulterated message directly to the voters for years, but now the candidates finally have a tool that can help them communicate with the voters 24/7 without any editing or interruptions. And it's all thanks to the World Wide Web. Our Web master Allen Wastler has more on that and the always-popular fun site of the week.

WASTLER: Brave new worlds in, like populism and democracy and what not. OK? Even before the candidates would talk to the media, and we decide what's good for you, thank you very much, and we'd let you know what your answers are going to be.

ROMANS: We are your filter.

WASTLER: Yes. That's right.

(CROSSTALK)

ROMANS: And now we have been foiled.

WASTLER: If you go to JOHNKERRY.com and GEORGEBUSH.com, they have what they are billing as blogs. Now, being an Internet purist, I would say this is not purely a blog, OK, but what it is a chance for the general public...

LISOVICZ: It's a blah, blah, blah.

WASTLER: It's a blah, blah, blah. It's a blah, blah, blah, blah. And where you can actually ask questions and hold a little debate directly with the people involved in the campaign.

ROMANS: Interesting.

WASTLER: Now they patrol those bad boys pretty heavily, and I have a feeling, speaking of filtering, that a little filtering is probably going on there. But it is an interesting way, if do you have a question for a candidate or just about the platform or about an issue, to go directly and not have to go through us dweeby journalism people, you know, and just go and ask yourself.

ROMANS: Speak for yourself, Mr. Wastler.

WASTLER: They are not doing great traffic numbers so far. The week of the convention, OK, John Kerry he got about 771,000 hits on his site that week, OK, which was a big boost. All right, and three times more than what the Bush Web site has been getting. So, those are big numbers for those types of things.

We are early in the campaign. I will point out in that same week, MONEY.com got more than 35 million hits.

ROMANS: Shameless plug.

WASTLER: So let us know when you are ready to join the big boys. OK?

ROMANS: You know, what is interesting about it too, is that you go there to talk to them and you have already found -- they have already found somebody who wants to know. Like you watch TV and you see an attack ad, you might not get through to anybody. But this is a way that they are going to you. You are not having to pay all this money to go out on the airwaves.

WASTLER: That's right, and you have that direct connection.

LISOVICZ: Low cost.

WASTLER: And a lot of them are definitely trying to use this. And it's sort of a miracle of the Internet is that you are allowed to do that, as long as you have got enough staffers and campaign workers willing to patrol the site. So there you go.

LISOVICZ: Well, the miracle of the Internet is of course always the fun site of the week. You are going to quiz Christine and me today.

WASTLER: All right, we have got the Olympics coming up. Right? There is going to be a lot of flags...

ROMANS: Yes, they're here.

WASTLER: ... flying up and down. It's important that you know your flags.

LISOVICZ: OK, know your flags.

WASTLER: So we've got a site for you. Here is the first one.

LISOVICZ: Oh, you have to name one of these four? Christine.

(CROSSTALK)

ROMANS: You know what, I think it's Scotland. But it might not be. Wales is yellow. So maybe it's Wales.

WASTLER: There you go. You figured it out. It's Wales.

LISOVICZ: That was good power of deduction, Christine.

WASTLER: That was a tough one. That was a tough one. We got a little bit...

(CROSSTALK)

LISOVICZ: I'm going to know this one. This one is Finland. It is Finland.

WASTLER: There you go, Susan.

LISOVICZ: I knew that.

WASTLER: You rock!

(CROSSTALK)

WASTLER: Here we go. This one should be easy.

ROMANS: This is Iraq, for sure.

WASTLER: There you go. I think otherwise we are stuck between a rock and a hard place.

(CROSSTALK)

ROMANS: I know how to spell my name in (UNINTELLIGIBLE), but I'm not very good at the other flags.

LISOVICZ: Very nice fun site of the week. And I'm glad that we -- I think we passed between the two of us.

ROMANS: Better than the beer bottle one.

WASTLER: Quite well. Quite well.

LISOVICZ: Coming up next on IN THE MONEY, it's time to hear from you as we read some of your e-mails from the past week. And you can send us an e-mail right now. We are at INTHEMONEY@cnn.com.

(COMMERCIAL BREAK) LISOVICZ: Now it's time to read your answers to our question about whether you feel safer from terrorism than you did a year ago. An anonymous viewer wrote, "With an open-ended war in Iraq, new terror alerts every day and our economy crumbling because of an overextended military, I feel less safe by every measure."

But Karen wrote, "We are much safer with President Bush. If we elect Kerry, he will sacrifice that safety by kow-towing to anti- American countries in the U.N."

And Jeffrey from Austin, Texas wrote, "Yes, I feel much safer now that the extremely dangerous Martha Stewart has been sentenced to prison."

I would say that e-mail was dripping in sarcasm.

WASTLER: Yes. We got some sardonical (UNINTELLIGIBLE).

LISOVICZ: Now for next week's e-mail question of the week: What is the most important issue to you in this election and why? Send your answers to INTHEMONEY@cnn.com.

And you should also visit our show page at MONEY.com/inthemoney. That's where you will find the address for our always-popular fun site of the week and the flags of the world.

Thanks for joining us for this edition of IN THE MONEY. Thanks to "LOU DOBBS TONIGHT" correspondent Christine Romans and Money.com managing editor Allen Wastler. Join us next week on Saturday at 1:00 p.m. Eastern. We will 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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