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Falling Dollar Foreshadowing Economic Collapse?; Tough New Rules at TSA

Aired December 4, 2004 - 13:00   ET


FREDRICKA WHITFIELD, CNN CORRESPONDENT: Here are our top stories of the hour. President Bush is praising Pakistan's work in the war on terror. He met with President Pervez Musharraf at the White House, but he offered no criticism of Pakistan's recent cutback in the hunt for Osama bin Laden.
A pair of car bombs killed 16 people near an entrance to Baghdad's green zone. Dozens more were wounded. The zone is the headquarters of the Iraqi government and the U.S. embassy. Also today, two U.S. soldiers were killed in separate roadside bombing attacks.

In the Ukraine, the parliament has given up for now in trying to change the election laws to help prevent fraud in a new presidential runoff. They've adjourned for 10 days. The move comes one day after the Ukrainian supreme court nullified the results of the disputed November 21st run-off election and ordered a new vote for later on in this month.

The former Panamanian dictator Manuel Noriega suffered a mild stroke in prison three days ago. His lawyer says the stroke did no brain damage. Noriega is in a Miami hospital right now. He's expected to return soon to his Federal prison in Florida.

And some unfinished election business in Louisiana today. Voters are choosing representatives to fill a pair of House seats. The run- offs are necessary because no candidate got 50 percent of the vote on Election Day. I'm Fredricka Whitfield at the CNN center in Atlanta. More news at the bottom of the hour. IN THE MONEY begins right now.

ANNOUNCER: From New York City America's financial capital, this is IN THE MONEY.

JACK CAFFERTY, CNN ANCHOR, IN THE MONEY: Welcome to the program. I'm Jack Cafferty. Coming up on today's edition of IN THE MONEY, doomsday for your dollars. A top economist has a prediction that could shake up your greenbacks big time. We'll look at whether big debt and the falling dollar are driving the economy toward some sort of Armageddon.

And democracy on the line. Ukraine may be a long way away, but its election fight is about the ideas that America was founded on. See why the battle in the former Soviet republic matters to all of us.

And do as you are told. The TSA, that would be the Transportation Security Administration, Safety Administration has got some tough new rules on airport screening. A note to the TSA, don't touch me. Some people say these rules are going too far. We'll see what you might face the next time you show up for a flight. Joining me today, a couple of IN THE MONEY veterans, CNN correspondent Susan Lisovicz, "Fortune" magazine editor at large Andy Serwer. Some idiot on AMERICAN MORNING sent me this joke about a woman who waited 3 1/2 hours to get through the line at airport security. She was not patted down, but she did keep going back and getting in line for a third time.


CAFFERTY: It wasn't any funnier on AMERICAN MORNING than it was here. Time to talk now about the jobs report. It's a very tough room. 112,000 new jobs, far short of what the consensus estimates were, not enough to even keep up, some say, with population growth.

ANDY SERWER, "FORTUNE" MAGAZINE: Supposed to get 150,000 jobs a month to keep up with population growth. But you know what? This number sort of loses a little luster after the election. You don't have Democrats screaming, pointing fingers, yelling. You don't have the Bush administration getting all defensive about it. And it sort of shows that the economy is in this sort of never-neverland where we're kind of growing but we're kind of not growing fast enough. It's kind of disappointing, but we kind of got to move on.

SUSAN LISOVICZ, CNN CORRESPONDENT: Well, 112,000 is a gain, but it's a big loss from what everyone was expecting, 200,000, right?

SERWER: Oh, that.

LISOVICZ: But then you have to remember the month -- because the month before it was over 300,000. So there's always this volatility in the monthly jobs report and they are often so off. I thought one of the most surprising things Andy was retail was one of the areas of weakness in terms of job creation. Right as you're going into the holiday season.

SERWER: Well, I guess that's adjusted for the previous year so maybe that suggesting that this year won't be as strong. The service sector again is the real pillar of the economy. Manufacturing again losing more jobs there.

CAFFERTY: And the bond market made a decline all week ahead of this jobs number, anticipating perhaps 200,000 in jobs or more. When it came in this much less expected, bonds actually rallied on Friday morning so interest rates came down a little. All right. We shall see.

Any time we see the words economic and Armageddon in the same sentence, around here, we at IN THE MONEY sit up and try to take notice. They turned up together in a headline last week in the "Boston Herald." The story was about a prediction from Morgan Stanley's chief economist Stephen Roach. Not exactly Wall Street's Mr. Sunshine even in the best of times, nevertheless Roach reportedly said privately that America has no better than a 10 percent chance of avoiding an economic doomsday and that got people in the financial world, as you might expect, chattering loudly among themselves. For a look at what's behind Roach's alleged forecast and whether it's solid, we're joined now by Justin Fox, who is a "Fortune" magazine editor at large, an old buddy of ours. Hi, Justin. Good to see you.


CAFFERTY: Roach has gone around saying the sky is falling before. Is there any reason we should pay more attention to this dire prediction than we have to some of the things he said in the past?

FOX: It's got to happen some day for one thing.

CAFFERTY: The sky has to fall someday?

FOX: Well, I don't know if it has to fall, but I think the general worries about our indebtedness as a nation, as individuals, as -- in a lot of different ways, people have been screaming about them for about 15 years now. And instead of any sort of Armageddon happening, we've instead just had Americans running up more and more debt and eventually that has to stop. It doesn't, I don't think. I mean, I don't think Roche really knows what happens. No one has any idea if it has to end in some sort of horrible economic scenario or if it'll just end with people tightening their belts a bit and not borrowing so much money all the time.

SERWER: We think we have to be a little bit careful about Stephen Roach, because this a man who has called seven out of last five recessions successfully I might add.

FOX: But at the same time, he did call the last one.

SERWER: The seventh time on the fifth, anyway.

FOX: So half the time he's going to be wrong. But that's still...

SERWER: Let me ask you, I think something you said though is that it's not us who's in so much trouble. It's the foreigners. Can you expound upon that a bit?

FOX: Well, that's really the interesting part because we owe lots of money to foreigners. Right now, this year, we're going to spend as a nation, about 6 percent more than we take in. And what's taking care of that is foreigners keep sending us money, mainly to buy U.S. Treasuries, also to make other investments in the U.S. And the question is, if we were some smaller economy, like Indonesia or Malaysia in the late '90s and we owed this much money to the rest of the world, we'd be in trouble. But it's sort of the classic thing. If you owe the bank $100, it's your problem. If you owe the bank $10 million, it's their problem. If you owe the world, I think it's $3 trillion or so, net debt it's sort of everybody's problem.

LISOVICZ: You know, Justin, so the foreigners keep buying our debt, right so that we can buy their stuff, specifically China. So doesn't it kind of all work out on the end? FOX: It does, except that at some point we still have to pay the interest on that debt and pay them back. So our economy needs to keep growing enough to be able to do that. I don't think there's any super huge cause for alarm in our indebtedness to the rest of the world. It's just that it can't go on like this forever because at some point, we have to get some money from them so we can pay them back.

CAFFERTY: What about this argument Justin, that the pendulum swings both days. I mean we had a stock market bubble burst. We get into a recession. Maybe it wasn't a real deep recession but a recession nonetheless. We have a war in Iraq that's costing hundreds of billions of dollars. Now all of a sudden, the economy is starting to come back to life. It's produced a few jobs. Wall Street is starting to kind of come around a little bit. I mean fighting wars and fighting recessions with things like tax cuts tend to run up deficits. When the economy recovers from those things, we start to sometimes even run surpluses as we did in the late 1990s and actually even by accident can sometimes balance the books. The falling dollar is actually good for America's trade deficit because it will serve to reduce that. So what about the cyclical nature of things? The tide goes in, the tide goes out?

FOX: That's definitely part of it. And it looks like the federal deficit is going to shrink slightly as a percentage of GDP over the next couple of years. The difference, though, between now and what happened in the early, mid-90s was first of all, there was the political will to do something about it, to cut the deficit. I just don't sense, especially in Congress, a lot of enthusiasm about that now. And the other thing is that there's this sort of unwritten debt out there, that's not on a piece of paper, but the amount of money we owe, we've promised to people who will be retiring over the next 10, 20, 30 years. And basically, the current commitments to fund Social Security and Medicare over the next 75 years or so, to pay for that, we'd need $50 trillion right now. We need to put it in the bank and earn interest on it to be able to pay the commitments we've already made as a nation. And that is something -- I mean, we can fix that. Change the laws. But I think that's something that if there's not some sense that Washington is serious about dealing with, is going to really start to worry investors here and around the world.

CAFFERTY: Let's hope they are hearing what you are saying. Because I'm one of those people that's going to be retiring in the next 20 years and they promised me a couple of dollars. Yes, much to the delight of many of the people here at CNN, I might add. Justin, good to have you with us as always. Thank you.

FOX: Thanks for having me.

CAFFERTY: Justin Fox, editor at large "Fortune" magazine.

When we come back, Teddy bear and grizzly bear. We'll look at Russia's position on the standoff in Ukraine and see why it matters so much here in the United States.

And one for the books, Microsoft giving investors the biggest dividend payout in history. We'll find out if Wall Street is going to take part of that $33 billion to the bank.

Plus, back to the future. Just when you thought the '80s were finally over, there's a magazine about living like a Wall Street trader. Just what we need. a publication devoted to those egomaniacal young things that run around those investment houses on Wall Street. We'll be back.


CAFFERTY: The continuing election crisis in Ukraine isn't just a little squabble in some far-off place. Now that the Ukrainian supreme court is nixing a run-off and ordering new elections, it's not expected to quiet down anytime soon. Add to that, the Russian President Vladimir Putin is opposed to any kind of new election and you have the ingredients for a huge problem.

Our next guest says it's a clear clash between democracy and dictatorship. It could also create serious problems for the United States and Russia. Michael McFall is a senior fellow at the Carnegie Endowment and the Hoover Institute of Stanford University. He joins us now from Washington, D.C. Michael, it's nice to have you with us.


CAFFERTY: A lot of talk about President Bush's lack of foreign policy experience, especially as he entered his first term. If he ever needed some foreign policy expertise, it might be right this very minute in dealing with Russia and Mr. Putin in the situation in the Ukraine. What's your take on how this thing is likely to play out over there?

McFALL: They are at an impasse now because one side has called for Mr. Kuchma, the president and his candidate, former Prime Minister Yanukovych, new elections to start it all from scratch. Whereas the opposition leader, Mr. Yushchenko, who thinks and I think he's right, won the last election, if it free and fair has said no. We're not going to start from scratch. We can rerun the last round, but we're not going to go back and start the whole thing over. There's not a clear solution to how this is going to end.

CAFFERTY: But given the fact that now the high court has ruled that there must be new elections and Mr. Putin was quoted on the front page I think of Friday's "New York Times" saying that he was absolutely in favor of the old election results which, obviously, installed his guy in the top job, this thing has moved another quantum step forward and the stakes are even higher. Some people are saying this could wind up in a full-blown civil war.

McFALL: Well, I think we are a long ways away from that. And I think we should give credit to both sides in the standoff that there hasn't been bloodshed yet because, after all, these are the kinds of situations where when one foolish demonstrator or one foolish military officer takes a shot at somebody, you could really explode. It hasn't got there yet. That said, Putin is not helping the situation at all. He's cutting against the grain of everything that the mediators have been trying to do in Kiev. There has to be a new election. For him to say there shouldn't be none, he's about a week and a half I would say behind on this news story.

LISOVICZ: Right. Michael, can you assess for us how important Ukraine is to Russia? Because it would seem to me that President Putin has lost so much credibility just on his own, what he's been doing by consolidating power in his own country. Why is it that he would go out so far on a limb in the Ukraine?

McFALL: Well, from their perspective, I want to emphasize their perspective not mine, they see a series of what they call American- inspired revolutions in what they consider their sphere of influence. It started in Serbia in 2000. Then there was the rose revolution in Georgia in 2003, and now there is Ukraine, where they see American sponsorship of these revolutionary movements against their cronies. And you have to understand that for the Russians, Ukraine has been part of their country for hundreds of years. If you read Russian history books, they think that their country started in Kiev and then moved on to Moscow later. So for them, this is something that they consider within their sphere of influence. I disagree with that perspective but that's why they played it so hard and so aggressively.

SERWER: Michael, there are 50 million Ukrainians and about 70 percent of them -- or 50 million people living in Ukraine, 70 percent of them are Ukrainians, 30 percent of them are Russians. Isn't it inevitable that Ukrainians, the western-leaning forces in that country, take over, if an election is fair?

McFALL: Yes. I think the election results from November 21st, from what we've seen from the exit polls and what the electoral observers said, that Yushchenko did win that election. It was stolen from him. That's why we have the crisis we have.

CAFFERTY: How would you describe it, revolutionary activities against Moscow's cronies? I think that's called democracy. Isn't that what they are supposed to be doing over there, like the majority rules have a little debate, everybody votes and then whoever gets the most votes wins. Putin seems to be doing little more than paying lip service to this idea of freedom. It's not just in the Ukraine where he's reasserted his autocratic tendencies.

McFALL: You're absolutely right. Putin is not a democrat. Putin was trying to export his brand of regime change if you will, what they call managed democracy. That's a synonym for autocracy whereby you have the formal institutions of democracy but informally, the people's voice is not the decisive one. And I think it's high time now for us, the Bush administration and the west to say, look, this is a contradiction. You cannot have a cordial relationship with Putin on the one hand and have a Ukrainian policy that supports democracy on the other. This now push has come to shove. I think we need to make our choice if you will, which side are we going to be on, the side of democrats or the side of dictatorship?

SERWER: All right. It's an important and fast-breaking story. Thank you for joining us. Michael McFall is a senior fellow at the Carnegie Endowment and the Hoover Institute at Stanford University. Thank you.

MCFALL: Thanks for having me.

SERWER: Coming up after the break, Microsoft investors finally got their big payday. We'll talk about where that money is going.

Plus, just what you needed at the airport, more lines. We'll look at some changes in airport security.

And a fun site for the soon-to-be incarcerated. Don't make this mistake when you first get to the big house.


LISOVICZ: Now let's take a look at the week's top stories in our "Money Minute." The markets just love it when we shop. Stocks rose sharply earlier this week when the October consumer spending numbers showed an unexpected rise of .7 of 1 percent. That was the biggest increase since May. The stock market also encouraged by falling oil prices. Oil dropped below the $45 a barrel level for the first time since September. Better than expected heating oil stockpiles are helping the price drop. But market experts also say some of the biggest oil speculators are simply cashing in their hefty profits.

And from the we can't make this up file. Are you the kind of person who has a few too many and then makes a phone call to the boss or the ex that you regret in the morning? Virgin mobile has a plan for you. For a 25-cent fee, the company will block any number you ask them to stop you from calling at certain hours. The call blocking lasts from the time of your request until 6:00 a.m. the next morning.

SERWER: Christmas came early for Microsoft shareholders this week as the software giant finally doled out the long-awaited $3 a share dividend to investors. It's a payout worth more than $33.5 billion. Partly because the dividend excitement, Microsoft shares have started to perk up a bit as of late.

The stock has gained 11 percent since mid-August and now lots of market watchers believe a big chunk of that dividend money will be reinvested right back into Microsoft shares. That makes Microsoft our stock of the week. I was just checking out their balance sheet, $64 billion of cash. Now half of that is going to get paid out. This is a company that's still remarkably healthy. About a 90 percent market share in Windows, the only other two systems out there, of course the Apple and Linux. How many people do you know use that? Not too many. So it's a very strong company and they are starting to show and tell investors, we'll give you some of this money back.

LISOVICZ: It was criticized for so long and so finally when Microsoft does a dividend, it does it in a huge way and I guess the most optimistic thing is that so many investors are putting it right back into the stock.

CAFFERTY: $20 billion as I understand of that money will go right to pension funds and mutual funds. So it might not just be Microsoft shares that get bought up with this money, but the stock market in general getting a little shot of adrenaline.

LISOVICZ: Which is also good.

CAFFERTY: The fact remains though, as strong as the company is and as much cash as they have, the stock price hasn't performed very well. It hasn't been above split adjusted value, $30 a share for what, three years now?

SERWER: Yes. That's right and actually you go back to 2000, this is was $60 stock. And now, today the company has a value, a market cap, a value, overall value of $300 billion. That means back in 2000 it had a value of $600 billion.

LISOVICZ: That was the height of the market as well.

SERWER: Right and that's true. The other way to look at it though Susan is that there is a lot of upside. This is not a fast, super growth company anymore. But it is a cash cow. It's so funny now that this company, which was the ultimate growth stock is now a staid cash cow. But it really kind of is.

LISOVICZ: It's going after Google. It's got X box. It's got the Microsoft interactive. So, I mean, it's got areas for growth, if it succeeds.

CAFFERTY: Even the mundane old stuff they started out with, computer software. How many areas of the world don't have computers yet, don't have software yet and it's all in the pipeline and Microsoft will, as the computers spread around the globe, like you said, it's a cash cow.

SERWER: And that really is the bread basket for this company because a lot of those other businesses they've never made any money on. It's operating software, systems software, applications software, software, software, software. I mean that's really where they make their money. The rest of the stuff, I wish they'd never gotten into the X box really and just paid it all out to shareholders.

CAFFERTY: You sound like you have a few shares.

SERWER: My dear old mother has got a few shares. She's getting a good Christmas because she's going to be getting some of this, so a good thing for mom.

All right. Coming up on IN THE MONEY, the hassles, the crowds, the pat downs. You already know what you can expect at the airport this holiday season, but will changes in security policy bring changes for the better?

Plus, lifestyles of the rich and frantic. A new magazine focuses on what Wall Street traders do after the market closes. Oh, be afraid.

This man wants you to gamble with your money literally. He's not a broker. He's a sports team owner who thinks he can make investors more money by forgetting the stocks and betting on the slots. Stay tuned.


WHITFIELD: Hello. Hello. I'm Fredricka Whitfield at the CNN center in Atlanta.

Now in the news, President Bush is praising Pakistan's work in the war on terror. He met with President Pervez Musharraf at the White House, but he offered no criticism of Pakistan's recent cutback in the hunt for Osama bin Laden.

President Bush is calling on lawmakers to pass the intelligence reform bill when Congress reconvenes on Monday. In his radio address today, Bush said, he's ready to sign the bill into law.


GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I will continue to work with the Congress to reach an agreement on this intelligence bill. I urge members of Congress to act next week so I can sign these needed reforms into law. We have made great progress against the terrorists who seek to harm our nation. We are safer, but we are not yet safe.


WHITFIELD: In Iraq, 16 people have been killed and dozens more wounded in two massive car bomb explosions at an entrance to Baghdad's green zone. The area is home to the U.S. embassy and the Iraqi government. Earlier, two U.S. soldiers died in road side bomb attacks, one in Baghdad, another near Baquba (ph).

An accused drug kingpin is in a Miami jail cell this afternoon after a flight from Colombia overnight. U.S. officials say Giberto Rodriguez Orejuela was at one time responsible for at least 50 percent of the cocaine shipped into the states. Orejuela has his first court appearance on Monday.

And I'll have all the day's news at the top of the hour. Now back to more of IN THE MONEY.

LISOVICZ: The hassle factor for holiday travelers could be rising with new rules from the Feds on pre-flight screening. Forget about just taking off your coat and shoes. The Transportation Security Administration is checking closer than ever for hidden weapons, sometimes with intensive pat downs. And agents are taking more travelers aside for special screening. For a look at what you could face at the airport this month, we're joined by Thom Nulty of Corporate Solutions Group, a travel management firm. Welcome, Thom.


LISOVICZ: I know you travel very frequently. I guess the most vivid example of some of these changes is what occurred to your 88- year-old mother just last month.

NULTY: Yes. She and I went to Hawaii and she had a knee replacement operation and just a few weeks -- months prior to that. As she went through the magnetometer, she set it off and had to go through a pat down search. It didn't seem to bother her much, but it did sort of bother me. It was obvious it was her knee that made the magnetometer go off, but she got a full-body pat down. The reality is it's a necessity, though. I think about Mrs. Doubtfire and Robin Williams and how they were able to make him look like a grandmother. So I guess it's a necessary evil.

SERWER: Thom, that's -- Mrs. Doubtfire that's an interesting one. Let me ask you about the TSA. Aren't they in a sort of difficult position because profiling for lack of a better word, actually sort of makes sense, targeting specific people who look like they could be terrorists or could be terrorists. Obviously there are civil liberty issues there. Random searches tick people off and they're going to be going after people like your grandmother. Where do you stand on that?

NULTY: Well, you know, I think it's once again, it's a necessary evil. I don't like it. I had to go through a secondary search myself just the other night and, you know, even patted down my bare arm. I had a short sleeve shirt on. So it seemed highly unusual to me. So nobody likes it, but I don't know what the alternative is. The only real alternative that I'm aware of is some new technology, some sniffing equipment that's actually being used in Europe and in some other areas. It's actually very similar to the magnetometers you see at the airport. When you go through it, it actually puts a little puff of air and can check for explosives.

Now when those things start being installed, then this thing won't be necessary. But up until that happens, I don't think they have much of a choice. So while people don't like it, including me, I don't know what the alternative is.

CAFFERTY: Thom, Jack Cafferty, with all of the lack of inspection that goes into cargo that's placed aboard airliners and stuff, all the access that at some airports that anybody can have to the tarmac and the flight line, porous security in those areas, we're probably living on borrowed time before an airliner is taken out of the sky here. But the things that they are doing, I think are, like you say, they are necessary. It's a first step. What can I do if I'm traveling over the holiday season to maybe cut back on my aggravation when it comes to dealing with all of these safety regulations

NULTY: One of the things I'm doing is I'm dressing for travel. I'm actually wearing clothing that, without a belt, wearing shoes that I know will not set off the magnetometer. I take my cell phone off and put it in my briefcase before I go through there. And I'm trying to go through with as little as possible and if everybody does that, then the whole thing will go that much smoother. The other thing I do is I check in online and so I actually have my boarding pass before I get there. When you do that, if you can't get your boarding pass in advance, that probably means that you've been randomly selected as somebody who's going to get a secondary search. That happened to me as well just recently.

LISOVICZ: Thom, I think about some of the really stupid things, for lack of a better word, I've done in the years since 9/11, when I haven't just gone through the contents of my purse. I've had one letter opener seized, two Swiss army knives. I've worn snug fitting -- I'm no threat, not to you anyway Andy. I've worn snug fitting cowboy boots and I've had to yank them off my feet. These are things that obviously delayed me and was a pain, quite frankly, to my fellow passengers behind me.

NULTY: Absolutely. Everything you can do to make yourself ready to go through security is great. And really taking as little luggage through there as possible is really important. There's actually a company out here in Los Angeles called Baggage Direct that's starting to pick people's luggage up at home and they are approved by the TSA and they give you a boarding pass and you go straight into line. The key is, take as little as possible through there and everybody does that, we'll all get through a lot faster.

CAFFERTY: What about this idea too of carrying just, to the degree your able to, carry-on luggage as opposed to stuff you have to check, the idea being, you get to the airport. If you go up to one of those little electronic terminal things. You can use a credit card to get your boarding pass if you haven't gotten it online and then you can proceed directly to the gate or to the security line, cutting down that whole length of time you got to stand there and check your bags and stuff. I spent a week in Chicago with a single carry-on suitcase. I didn't look very good out there, but I got in and out of those airports like a jack rabbit.

NULTY: Well, that's obviously the way I travel on most of my business trips. I do exactly that. I try and get my boarding pass online the night before. But that is really the key is to not have to wait for -- not to have to get in lines. That's really the most important thing. So anything you can do to avoid lines is very, very important. And that really works, jack.

SERWER: Thom, a quick last question here. I saw a company send me some information on some sort of human X-ray machine. It struck me as kind of out there. Have you heard about this, seen it?

NULTY: I sure have. In fact, they have been tested and they really are probably labeled X-rated because they do show all body parts and no matter what you are wearing, you can actually look through the clothing. It's the superman X-ray vision that every teenage boy wanted to have.

LISOVICZ: Not only teenage boys, I might add.

SERWER: To be fair.

NULTY: It's a true voyeur type machine.

SERWER: Will they ever use that Thom?

NULTY: They have tested it in a few places and people don't necessarily like that either. This whole security intrusion is very difficult on travelers. People just don't like it. The problem is, there isn't much of an alternative. As Jack mentioned earlier, there are other areas of security we have to worry about as well and you have to start somewhere. So while I hate all of this stuff and I hate doing it, I wish I could go back to the good old pre-9/11 days where you just walk on to an airplane, that would be great. But I'm afraid 9/11 did happen and I'm afraid those days will never be with us again. Maybe we can all start wearing togas on the airplane and then we wouldn't have to worry about anything.

LISOVICZ: Well, it sounds like some very smart entrepreneurs are already rising to the occasion with handling your baggage for you. So that's a development there that could be on the positive side. Thom Nulty, partner in the Corporate Solutions Group. Thanks for your very wise suggestions.

NULTY: Great to be with you.

LISOVICZ: Lots more to come here on IN THE MONEY. Up next -- bulls, bears and bling-bling. We'll check out a magazine that's selling a lifestyle, the one Wall Street traders are supposed to lead.

And want to put money on a sporting event? Find out why a new hedge fund could be just the bet you are looking for.


SERWER: When the closing bell rings, most high level stock traders and hedge fund managers don't exactly rush home to the wife and kids. And a new magazine is looking to cash in on their free spirited and free spending lifestyle. Joining us now is the editor in chief of "Trader Monthly," a new magazine. Randall Lane, Randall, welcome to the show.


SERWER: So tell us about this idea. Is this your baby? Did you come up with it?

LANE: Magnus Grieves (ph), who's a big trader and owns a trading company in London, actually, came up with the idea. So we're generated from traders and the idea that there's a need for a community of traders to get together under a magazine and trading really is a lifestyle and that's what this magazine is trying to drive home.

LISOVICZ: And I guess the launch party, Randall, sort of set that out very clearly. It's Susan Lisovicz. Jack wouldn't be caught dead doing this, but I went to the "Trader Monthly" launch party. And for those people who weren't there, it was at a very posh ballroom, sweeping views of New York City, live band, fancy cigars, open bar, lots of food, a big crowd. I felt like "Bonfire of the Vanities." I mean, do the '80s live?

LANE: Or as far as traders call that, that's Monday.

LISOVICZ: I think it was on a Monday.

SERWER: That's just one day.

LANE: We had 800 people on a Monday. It really is amazing. These guys have such a high-pressure job during the day that at night, they need something to take it to the next level. So you see these guys in every facet of their lives, whether it's cars, whether it's watches, whether it's liquor, they want the best and they are not afraid to spend for it.

CAFFERTY: My question would be, if they are living so well, how come I'm not making more money in my account with them in the stock market?

LANE: Right now the stock market is flat. But remember that the currency market, the commodities market. I mean look at how oil is doing. Traders are doing very well this year. Even when the stock market is flat, remember that most traders then can move to other types of contracts. So traders are still doing very well. If you look at how bonuses are shaping up, traders' bonuses are actually going up for 2004, while investment bankers are flat.

SERWER: Jack, the other reason why they are doing well and you are not is because they are called brokers. Hey Randall, this is a real high testosterone group of individuals. I think they make, what, like $400,000 a year on average?

LANE: Our average reader makes $400,000 a year. It's amazing.

SERWER: So what do these guys do with their money? What are the products that they are interested in?

LANE: It's interesting because it's not just that they make so much money. It's that they spend it all. They have a different relationship than most people have with money because every day, they are up 10,000, down 10,000, up $50,000, down $50,000. So they don't relate to money the way that most people do. It's something that is meant to be enjoyed because tomorrow can be a rough day or tomorrow if you spend $50,000 on one night you can make it back. And so they are spending it on cars, the watches, the way these guys buy watches. They buy watches the way the rest of us just buy baseball cards or what not. They just collect them.

LISOVICZ: Randall, see it, make it, spend it, I believe is the mantra. You can see it with the advertisers, cognacs, fancy cars. But you and I know that the launch, the success of first-time magazines is quite high. I think 9 out of 10 magazines fail. So how long are you going to give this baby?

LANE: I think we are good. We carried 50 pages of advertising just in the first issue. Advertisers realize that this is a very hard to reach group and again, not just that they make a lot of money, which of course is very desirable for advertisers, but they spend all of it. So it's unique in that it's not just that you can target affluent people, not just affluent people, but affluent men. It's a pure buy, but then they spend everything they make. So it's a very, very unique advertising opportunity.

CAFFERTY: Are there enough of these guys out there to support a magazine like this over a period of time? LANE: We have 100,000 coming out of the gate and we actually think we're going to be able to grow from there. We had over 1 million hits on our Web site in the first week. So we think actually there's perhaps an even greater pool. For now, the top 100,000 is good with us.

SERWER: Randall, can other people read the magazine and what happens if there's a downturn? Can the rest of us enjoy this thing?

LANE: It's sold on newsstands across the country. It's 10 buck a pop, so...

SERWER: Why didn't you make it 15?

LANE: Maybe we'll make it $20.

LISOVICZ: Randall, would it be a fair description, this is , "Trader Monthly" is "Maxim" meets Bloomberg meets the Neiman Marcus holiday catalog?

SERWER: That's very good.

LANE: I think maybe a "GQ" meets (INAUDIBLE) meets "Forbes" or however you want to do it. It's a men's lifestyle magazine, but it's very high end. I mean we're talking about -- we're not going down into the gutter or anything. This is the best of everything, the best cars, the best ways to enjoy life, the best trips, as well as ways to make more money. So it's really the embodiment of what these guys do. Make it during the day, spend it at night.

CAFFERTY: Kind of thing Gordon Gecko might have read.

SERWER: He has a subscription.

LISOVICZ: Randall Lane, editor in chief of "Trader Monthly." I really enjoyed the vicarious experience, feeling like I was hobnobbing with that very exclusive circle.

LANE: Great to have you.

LISOVICZ: OK, good to talk to you, Randall and the best of luck.

Up ahead on IN THE MONEY, hedging your pets. We'll tell you about a hedge fund that works like a sports bookie, but keeps it legal.

And take a different kind of gamble and drop us an e-mail. We might wind up reading your message on the show next week. The address,


CAFFERTY: There's always some level of gambling involved when it comes to investing but Webmaster Allen Wastler is here with the story of a new hedge fund dedicated to betting money on slot machines and sporting events and he also of course has the fun site of the week. This is that crazy team owner in Texas.

ALLEN WASTLER, MONEY.COM: Mark Cuban, dot-com billionaire and then got to be the bad boy of professional sports, owns an NBA team and whatnot. He keeps a little blog on the Internet, interesting place to go and check out and see what's on his mind. He put up a letter this week saying he's going to establish a hedge fund. But the hedge fund isn't going to invest in stocks and bonds and the usual gizmos. It's going to basically bet. The fund will go and play slots, play poker, play blackjack and also interestingly enough, bet on sports teams as well, too.

LISOVICZ: Is that legal?

WASTLER: Well, you sort of wonder how the NBA is going to react to that. They have like one company owns both a casino and one of the basketball teams. So there's already a little bit of...

CAFFERTY: You have to bet that the NBA is praying this guy has a stroke. But you know what, you said the key word. He's a billionaire. How many money managers on Wall Street are billionaires? I'd be inclined to put a buck with him.

SERWER: If you read this thing that Allen is talking about, it's fun and he's actually got a very well reasoned argument. It's interesting stuff.

WASTLER: He's got a great argument. Gambling, first all, the returns are there. He says it's patrolled a lot better than Wall Street. The gaming commissions are all over those guys. In terms of sports, how much do you know about your sports team? The moment they make one little mistake, it's all over the local papers.


WASTLER: All of that, but try to get that kind of transparency on Wall Street. Even after all the governance issues we've had, it's still pretty difficult to do. So you're right, his arguments are just perfectly on there.

SERWER: It's provocative.

WASTLER: Now if you go back deeper into his blog though, he points out, maybe the sports world should do crazy stuff so we can apologize for it. It's publicity. Is this one of those things?

LISOVICZ: NFL commercializing.

CAFFERTY: What's the fun site of the week?

WASTLER: All right. We've been talking a lot about Scott Peterson this week. He's going to the big house one way or the other. So we've got some tips for him floating around the Internet.

SERWER: These will be tasteful, I'm sure.



UNIDENTIFIED MALE: Can you check on him?



UNIDENTIFIED MALE: You got a problem here?

UNIDENTIFIED MALE: Yeah, can you come here and look at this thing?

UNIDENTIFIED MALE: There's a draft and there seems to be noises coming from the ventilation room and it's cold in here. I mean it shouldn't be like that right?


UNIDENTIFIED MALE: Whoa! What a hole! Hey, have you seen this? Look! You never noticed? Well, you've been lying here for four years. Oh, you poor thing.


SERWER: Oh, this is great. You always wonder who does this stuff. Who has the time to put stuff like that together?

WASTLER: That was an advertisement for a life insurance company. It's kind of interesting. But they grab them from overseas, put them on the Internet.

CAFFERTY: They got a pool at San Quentin going, how long it's going to take Scott Peterson to be queen of the Friday night prom in that joint once he gets there. Everybody's got a bet on that.

Coming up next on IN THE MONEY, time to hear from you as we read some messages that you've written in to us over the last week. You can send us an e-mail right now if you like, perhaps regarding how tasteless the previous 60 seconds or so has been. We're Knock yourself out.


CAFFERTY: Time now to read your answers to our question about how you all avoid the Christmas commercialism that infects us all this time of year. Lynn wrote this, I give my children homemade gifts and we remember to stay together as a family during the holidays. We also avoid those cheesy snow covered decorations, especially since Christ was born in Bethlehem, not Fargo, North Dakota.

Bob wrote this, I don't avoid the commercialism, I love it. I think it's great to see people spending money, keeping the economy strong. It's also nice to see that people have money to spend. And David in California -- why avoid it? Christmas has always been loaded with commercialism. Remember the three kings showed up with gold, frankincense and myrrh, none of which were chopped liver back then. Some of it's still not chopped liver. Gold at $450 an ounce or something. Giving gifts was only de-emphasized by the Scrooge-like Victorians who tried to cut down on expenses.

Time now for next week's e-mail question of the week, which is this. Could you survive a sharp rise in interest rates over the next few years? Send us your answers at and you should also visit our show page at which is where you'll find the address for our fun site of the week. If you're on your way to prison, little things you might want to keep in mind while you're going to the big house.

Thank you for joining us for this edition of the program IN THE MONEY. My thanks to CNN correspondent Susan Lisovicz, "Fortune" magazine's editor at large Andy Serwer and managing editor Allen Wastler. Check us out tomorrow 3:00 Eastern time, when we'll look at some of the reasons why we haven't had a terrorist attack here on our soil since September 11th. There are a lot of explanations and we'll try to figure out which one is on the money here on IN THE MONEY. That will be tomorrow at 3:00. Hope to see you then.


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