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CNN Live At Daybreak

Latest Developments in Iraq; A Secretary's Defense; Your Portfolio

Aired December 23, 2004 - 06:33   ET

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


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


CAROL COSTELLO, CNN ANCHOR: And good morning to you. Welcome to the last half-hour of DAYBREAK. From the Time Warner center in New York, I'm Carol Costello, along with Chad Myers.
We begin this half-hour in Iraq. We want to get the latest developments now from Karl Penhaul in the Iraqi capital.

Hello -- Karl.

KARL PENHAUL, CNN CORRESPONDENT: Hi there, Carol.

A number of events to bring you up to scratch with this morning. First in all in Karbala, the southern Shiite city, there have been six arrests there this morning -- five Iraqis. And police tell us that a sixth person, who is a foreigner, has also been arrested in connection with some of the devastating suicide car bombings in that city over the weekend.

You'll remember in Karbala on Sunday, 16 people died, and then in the sister city of Najaf, more than 50 others were killed in that bombing.

Then in Baghdad, another roadside bomb, one of these improvised explosive devices laid alongside a road in western Baghdad, that detonated as a U.S. convoy passed by. One U.S. soldier was killed and two others were wounded.

And then on north to Mosul, what's happening there this morning, we've been talking in recent moments to U.S. military commanders there. They say that military offensive operations are under way in Mosul. They say that that's pretty much par for the course. Similar operations have been conducted over the last few weeks.

What they do say, though, is that all of the bridges -- four bridges -- which connect the east and west of Mosul have been closed down; that, to limit the flow of population from one side to another, and also assist the U.S. military in their offensive operations to hunt down the insurgent groups responsible for Tuesday's devastating explosion at Camp Marez -- Carol.

COSTELLO: Karl Penhaul live in Baghdad this morning. Thank you.

The defense secretary on the defense. Donald Rumsfeld appeared before reporters contrite and then quite feisty, defending himself and the progress of the war in Iraq from critics. Rumsfeld spoke a day after a suicide bomber killed 22 people in Mosul, including 14 U.S. troops. He says his thoughts and prayers are with the families of those wounded or killed in the attack, but the United States must do what it takes to get the job done.

(BEGIN VIDEO CLIP)

DONALD RUMSFELD, DEFENSE SECRETARY: You get up in the morning, and you think about what our troops are doing. And I must say, if they can do what they're doing, I can do what I'm doing.

(END VIDEO CLIP)

COSTELLO: That was the contrite part of the news conference. And then, well, Rumsfeld was vintage Rumsfeld. Many people are calling for his resignation, even some conservatives. So, did Rumsfeld help himself at this news conference? Or was he his own worst enemy?

Political analyst and "L.A. Times" reporter Ron Brownstein joins us live now.

Good morning -- Ron.

RON BROWNSTEIN, CNN POLITICAL ANALYST: Good morning, Carol.

COSTELLO: So, Ron, it seemed Rumsfeld tried to be contrite, but upbeat about the war's progress. Did he succeed?

BROWNSTEIN: Well, he was contrite, upbeat and also cautionary. I thought one of the most striking things out of this press conference was both Donald Rumsfeld and General Myers echoing Colin Powell earlier in the week and saying that elections were not going to be the end of the violence or a guarantee of stability in Iraq.

Since the end of the U.S. election, we have seen from a number of officials, starting with the president on down, a much more cautionary tone about the state of progress in Iraq. And they are basically, I think, warning the American people that there are more tough days ahead.

COSTELLO: But, Ron, isn't this kind of like a new tactic, because so many Americans are now against the war in Iraq? In fact, a majority of Americans are. Does this tactic seem to be working? And before you answer that actually, before you answer that, we want to, like, contrast what Rumsfeld was like yesterday at the news conference to what he was like last year at the news conference when our own Jamie McIntyre questioned him as to the definition of a guerrilla war, because Rumsfeld refused to believe that a guerrilla war was actually taking place in Iraq.

Let's listen to that sound byte from 2003.

(BEGIN VIDEO CLIP)

JAMIE MCINTYRE, CNN CORRESPONDENT: Appreciating, as I do, your appreciation with the decision and language.

RUMSFELD: You got the dictionary definition?

MCINTYRE: (UNINTELLIGIBLE) definition of guerrilla war.

RUMSFELD: I was afraid you would. I should have looked it up. I knew I should have looked it up. I could die that I didn't look it up.

MCINTYRE: Paramilitary operations conducted in an enemy-held or a hostile territory by a regular (UNINTELLIGIBLE) indigenous forces. This seems to fit a lot of what's going on in Iraq.

RUMSFELD: It really doesn't.

(END VIDEO CLIP)

COSTELLO: So that was from 2003. Contrast that to the news conference yesterday, Ron.

BROWNSTEIN: Well, Rumsfeld's persona has always been in Washington as a tough bureaucratic player who does not suffer fools gladly. He has certainly behaved that way toward the press at the press conferences during the war and in the immediate aftermath and with questioners even on Capitol Hill.

But, Carol, he's in a much more difficult position politically than he was a year ago, mostly because of events. The war has not unfolded the way really anyone involved in the planned expected, and in June of 2003 Donald Rumsfeld said we were down to pockets of dead- enders.

The deputy defense secretary, Paul Wolfowitz, in testimony said we were fighting the last remnants of a dying regime.

So, obviously they've been put on the defensive by events, and also by his own handling of the question from the soldiers in Kuwait. If Donald Rumsfeld, who is famous for being tough in questioning, had been given that answer -- we go to war with the army we have, not the army we wish we have -- from a subordinate, it's hard to believe he would have accepted it. And now, clearly, I think as you see in his demeanor, his diminished political position.

COSTELLO: But isn't it too late for him to change his tune now? I mean, don't the American people have his number?

BROWNSTEIN: Well, look, I mean, the reality is Donald Rumsfeld is the defense secretary. He is not the commander-in-chief. There are a lot of people, as you mentioned earlier, from conservatives and Republican ranks, senators like John McCain and Trent Lott, conservative leaders like Bill Crystal (ph) and Tom Donnelly (ph), a defense specialist at the American Enterprise Institute, who are focusing criticism on Donald Rumsfeld.

There is something slightly disingenuous about this. These are people who are very uneasy with the course of the war, but yet are reluctant to criticize President Bush, who, after all, makes the final decisions and has decided to keep Donald Rumsfeld. He has become kind of a lightening rod for the administration, and in that way is serving a different purpose of deflecting criticism that might otherwise be directed at the president and the White House from his own supporters as well as Democrats, who are uneasy about the course of events.

COSTELLO: Politics is an ugly game. Ron Brownstein, thanks for joining us live on DAYBREAK.

BROWNSTEIN: Thank you, Carol.

COSTELLO: Still ahead this morning, from courtside to courtroom, the NBA and the players union fight in federal court about one of the suspensions.

And, dude! There's a big incentive for Dell Computers to build a new plant in North Carolina.

But first, here's a look at what else is making news this Thursday morning.

(COMMERCIAL BREAK)

COSTELLO: Managing your finances, like managing your life, is all about balance. So says DAYBREAK contributor Ali Velshi, who seems to have risen late this morning because, wow, it looks like you forgot to shave.

ALI VELSHI, CNN DAYBREAK CONTRIBUTOR: Can you really tell on TV? I didn't forget. It's all about balance. I am trying to achieve balance. Everybody is running around like a chicken with their head cut off right now. Everybody is stressed, a few days to go before Christmas. I am going to give something back to me today.

COSTELLO: Really?

VELSHI: On behalf of the viewers. I am going after this to get shaved. Then I'm going to another spa to get my head shaved, and then I'm going for a facial and a manicure. I'm going to have a little bit of fun.

COSTELLO: That's so metro-sexual of you.

VELSHI: Yes, I'm going to go and balance my chakra (ph).

COSTELLO: But that story is for tomorrow.

VELSHI: That's correct.

COSTELLO: But today...

VELSHI: If you are going to be doing something else while I'm busy balancing my chakra (ph), you might want to try balancing your portfolio.

(BEGIN VIDEOTAPE)

VELSHI (voice over): Managing your portfolio is a constant balancing act. Even if you're not an active trader, with the markets moving up and down, you need to keep an eye on what percentages of your portfolio are in the different asset classes, like stocks and bonds.

As the market moves over the course of a year, the proportions of your portfolio you have invested in various types of investments may actually change more than you think.

UNIDENTIFIED MALE: People look at their portfolio. They see it's either doing well or it's not. And they're either going to leave it alone, or they're going to make some kind of a major shift. But rarely is it a matter of them rebalancing.

VELSHI: This isn't about making a major shift in your investment philosophy. It's about making sure market moves don't result in shifts to the way you want to invest. Stocks and bonds behave differently in your portfolio, and you need to make sure you have the right amount of each.

If you started the year with a low-risk portfolio, your portfolio might look something like this: 40 percent in stocks or stock mutual funds and 60 percent in something more stable, like bonds or other forms of fixed income.

If the market had a year like it did in 2003, where stocks gained more than 20 percent, your portfolio and your risk profile would look very different.

If you did nothing to your investments, the stock portion would have grown from 40 percent to 50 percent. And the bonds would have shrunk from 60 percent to 50 percent. That means your portfolio is now higher-risk than you wanted.

While this might be more risk than you're prepared to take, your new portfolio gives you a greater chance to gain if the markets stay strong. But it also means you could lose more than you bargained for if the market goes down.

UNIDENTIFIED MALE: Balancing provides an enforceable discipline. It makes what is difficult emotionally to do, rather convenient for the investor to accomplish. The most important benefit of rebalancing is the idea that it helps reduce downside volatility.

VELSHI (on camera): Here is what your portfolio looks like out of balance. Now, what you need to do is lighten up on those parts of your portfolio which have been performing well and buy more of your underperformers. That puts your portfolio back into perfect balance.

(voice over): So, how often do you need to rebalance?

UNIDENTIFIED MALE: Realistically, once a year, sometimes twice a year if there is a great deal of market activity. But you could check it quarterly.

VELSHI: Another important reminder: Don't forget about Uncle Sam. If you are rebalancing outside of a tax-sheltered account, like an IRA, remember that there are tax implications to selling stocks that have gone up in price. Gains are good, but paying taxes on those market gains can cost you.

(END VIDEOTAPE)

So, take a look at your portfolio. It's easy to do. It's not very time-consuming. Just have a look at it and see whether you need to do some balancing going into the New Year.

COSTELLO: It's not very time-consuming?

VELSHI: No, that's the whole idea. It's supposed to be just easy. It's a discipline, yes.

COSTELLO: OK, you can come and help me with mine...

VELSHI: I'd be happy to.

COSTELLO: ... if you keep it a secret.

VELSHI: OK.

COSTELLO: Thank you, Ali.

Your news, money, weather and sports. It is 6:46 Eastern. Here's what's all new this morning.

Haiti's main airport doesn't live up to international security standards. That's the warning to travelers from the Department of Homeland Security. Airlines are being told to notify ticket-holders about security concerns.

In money news, Dell Computer was given nearly $280 million in incentives to build their new plant in Winston-Salem, North Carolina. State officials expect the computer plant to create thousands of jobs. It's the company's third manufacturing plant in the United States.

In culture, the "Real World" is coming to Austin, Texas. MTV's original reality series will start shooing early next year with episodes to begin airing in June. This will be the 16th edition of the "Real World."

In sports, the NBA and the players union will be in federal court today to argue over the Pacers Jermaine O'Neal. O'Neal was suspended for 25 games for his part in the brawl in Detroit. But an arbitrator ruled that O'Neal's suspension should be reduced to 10 games.

(WEATHER REPORT)

COSTELLO: Those are the latest headlines for you this morning.

I know you're still wondering about that new TSA guideline that they're not allowed to pat you in certain places. Bill Hemmer will have more on that on "AMERICAN MORNING."

Tell us more -- Bill. BILL HEMMER, CNN ANCHOR: Hey, we certainly will. Carol, good morning to you. We'll have more on that.

Also, the spotlight is shining rather harshly on Bernard Kerik. Now he's losing more than just a shot at homeland security chief. What does it mean for him and his future? And perhaps more importantly, what does it mean for his political boss, his old boss, Rudy Giuliani? Andrew Kurtzman (ph), who has covered Kerik's days as New York's top cop, also wrote the book, "Rudy Giuliani, Emperor of the City," we'll talk to him about it.

Complete coverage in 12 minutes. Carol, we'll see you then, all right?

COSTELLO: We certainly will. Thank you, Bill.

We're going to talk more about the weather, because parts of the Midwest are blanketed by snow, very dangerous traveling there. I know we're going somewhere live, but I don't know where it is right now. This is Indianapolis from WISH-TV, which is a CNN affiliate. You can see it's lovely weather out there. In fact, our own Jacqui Jeras is in Evansville, Indiana. And she says the drifts are really piling up, up to a foot as a matter of fact.

Do we have a live reporter from Indianapolis? We do not. We're going to have one at the other side of the break. We're going to take a break. We'll be right back.

(COMMERCIAL BREAK)

COSTELLO: It looks so calm in New York, doesn't it? But if you head out to the Midwest, it's not so calm. The first big winter storm walloped the Hoosier state with blowing and drifting snow.

Gene Rodriguez of CNN affiliate WISH in Indianapolis is with us. Ooh, it looks nasty out there.

GENE RODRIGUEZ, CNN AFFILIATE WISH REPORTER: It is nasty. In fact, we're being told not to get on the roads unless you really, really have to somewhere like a flight. But some of those neighboring airports are closed, as you've heard: Cincinnati and Cleveland.

I will tell you that we are in Hamilton County, which is just north of Marion County, where Indianapolis is. And this area was spared yesterday, while southern Indiana actually got a lot of snow. We're talking about upwards of 10 inches yesterday. Here, it didn't start until 9:00 last night. And I'm going to walk through it. You can see how much has accumulated throughout the evening.

And I'll also tell you that it continues at this hour. And it's really cold. So, this snow is going to stay here for a while. We'll definitely have a white Christmas. We're talking about 17 degrees in this area.

Again, we're just north of Indianapolis. However, I want to show you one of the major thoroughfares into this city, which we're standing right by. Keystone Avenue runs from the north part of Hamilton County all the way southward into Indianapolis. It also funnels into some major interstates.

And we're seeing the traffic picking up right now. We're also seeing a lot of plows and salt trucks on the roadways. But the traffic that's on the road right now is moving very, very slowly. Some of the vehicles that are not four-wheel drive are laboring through this snow, because it is accumulating on the roadways.

And, as you can tell, some folks are still trying to get places, even though they're being asked not to go anywhere, that a snow emergency has been declared in several counties in Indiana, meaning please don't go anywhere. Call into work and let them know you won't be there.

Reporting live, Gene Rodriguez.

Now back to you -- Carol.

COSTELLO: Gene, I just found out something about you. You're from Columbus, Georgia.

RODRIGUEZ: Yes.

COSTELLO: So, I take it you're really not used to the cold.

RODRIGUEZ: Yes. Well, it's not so cold in Columbus, right. But I did live in New Mexico, where it snows, and then you go skiing in the afternoon in the sunny weather. So, a little bit different. And I've only been here a year and a half, so I've lived through two winters. And I'll tell you, it is cold here. But my folks in Columbus are rather warm this morning.

COSTELLO: I bet they are. Gene Rodriguez from WISH-TV in Indianapolis joining us live this morning. Thank you.

They train for months with the hope of winning a gold medal for their country. I'm not talking about Olympic athletes. I'm talking about the guys who compete in the World Cyber Games.

Our technology correspondent, Daniel Sieberg, followed the team.

(BEGIN VIDEOTAPE)

DANIEL SIEBERG, CNN TECHNOLOGY CORRESPONDENT: For people who don't know anything about competitive PC gaming, explain what you do to prepare and what it's like to compete.

DAVE "MOTO" GEFFON, TEAM 3D: We prepare all year, four to five hours a day, sometimes even more, five days a week for this event. We try and do our best for it.

SIEBERG (voice over): That night, Dave and his teammates took our camera along to their strategy session.

UNIDENTIFIED MALE: The second we do this, guys, the second we do that smoke, like, the fire in the hole, like, then that's (UNINTELLIGIBLE) out. Like, when we start smoking just starting flashing that wall. I think that would probably be the best timing. Just keep them blind, so they don't get the initial shot on us.

UNIDENTIFIED MALE: This is our little scouting report on other teams that we may possibly have to play. It goes over their defensive setups and their offensive strategies.

UNIDENTIFIED MALE: It could be a big waste if we don't (UNINTELLIGIBLE) in our group.

UNIDENTIFIED MALE: Thanks for being positive, Kyle.

UNIDENTIFIED MALE: I'm just saying...

UNIDENTIFIED MALE: He'd murder us over his Gameboy.

UNIDENTIFIED MALE: Whose pretzels are these?

UNIDENTIFIED MALE: It didn't take long for Ronald to fall back asleep.

SIEBERG: The grand finals, Team 3D for the United States against the Titans for Sweden, dozens of cameras from around the world watching their every move. In another room, a crowd of hundreds has gathered to watch the play by play.

UNIDENTIFIED MALE: There it goes. Modem (ph), nice job. He needs the back on it. Beautiful shot through the window.

SIEBERG: Back in the competition hall, the teams duke it out. The match goes into overtime.

UNIDENTIFIED MALE: Good job.

UNIDENTIFIED MALE: Good job.

SIEBERG: Then double and triple overtime. The final moments, it's down to two members of Team 3D against four from the Titans.

UNIDENTIFIED MALE: I wish I could put into words. It's an amazing match, and it was really closely fought towards the end. When you do something right, you can hear the whole building engulfed in screaming, and it's a great feeling.

SIEBERG (on camera): Do you think this is going to become more of a spectator sport?

UNIDENTIFIED MALE: I think so, because I think people are starting to realize that you know what? Watching video games is actually pretty exciting.

SIEBERG: Are you going to take some time off and relax for a bit?

UNIDENTIFIED MALE: Well, no, we have to go back and we play in some leagues online, and we've got to do a ton of makeup matches.

SIEBERG: No rest at all for you guys?

UNIDENTIFIED MALE: I'm back to work.

(END VIDEOTAPE)

SIEBERG: These guys obviously get pretty excited. In case you're wondering, the U.S. name, which is Team 3D, stands for "desire, discipline and dedication." They clearly have all three. But even the best teams have off days, Carol. In a recent tournament in Dallas, the team finished eighth. But they said they're going to carry on.

COSTELLO: Well, it looks like their excitement will carry them through.

SIEBERG: Absolutely.

COSTELLO: Thank you, Daniel. Tomorrow, Daniel's video game series concludes with an escape to an alternative realty. Imagine a play with thousands of characters but with no one on the same stage. Video games this series this time tomorrow on DAYBREAK.

We're back after a quick break.

(COMMERCIAL BREAK)

COSTELLO: Hey, Chad, I've been checking out the headlines this morning.

CHAD MYERS, CNN METEOROLOGIST: How do you get that journal so early? We don't get it until, like, 7:30 down here.

COSTELLO: I can't tell you.

MYERS: I guess you're in New York.

COSTELLO: Or I'd have to kill you. No, in "The Wall Street Journal," they have this full story about the NFL players not wearing padding as they used to, like even 10 years ago.

MYERS: Yes.

COSTELLO: In fact, they say the tailbone pad is dead, the elbow pad is gone, the forearm pad is gone, the thigh pad, knee pads are endangered species. And the size of the shoulder pads has shrunk. And you would think, well, maybe the game is getting gentler, but no. The players actually do not like to wear padding for aesthetic reasons.

MYERS: What?

COSTELLO: They want to look good.

MYERS: Well, I thought... COSTELLO: They want to the natural shape of their bodies to show. And, of course, it's a little more cheesemo (ph) as well.

MYERS: Oh, man, I see a whole new industry coming along. Atomically-correct padding.

COSTELLO: Exactly. This is the quote from a Rams player: "I think they'd wear nothing if they could." Actually, it's from the Rams head coach, Mike Martz. Isn't that crazy?

MYERS: Well, I was watching the Green Bay game last week, and it was so cold. The wind chill was, like, 15 below, and they had nothing on their sleeves. Their arms were all bright red, because it was so cold. But obviously they wanted to be macho, I guess.

COSTELLO: That's the real way to play football, Chad.

MYERS: I wouldn't know.

COSTELLO: Yes. From the Time Warner center in New York, I'm Carol Costello, along with Chad Myers. "AMERICAN MORNING" starts right now.

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Aired December 23, 2004 - 06:33   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL COSTELLO, CNN ANCHOR: And good morning to you. Welcome to the last half-hour of DAYBREAK. From the Time Warner center in New York, I'm Carol Costello, along with Chad Myers.
We begin this half-hour in Iraq. We want to get the latest developments now from Karl Penhaul in the Iraqi capital.

Hello -- Karl.

KARL PENHAUL, CNN CORRESPONDENT: Hi there, Carol.

A number of events to bring you up to scratch with this morning. First in all in Karbala, the southern Shiite city, there have been six arrests there this morning -- five Iraqis. And police tell us that a sixth person, who is a foreigner, has also been arrested in connection with some of the devastating suicide car bombings in that city over the weekend.

You'll remember in Karbala on Sunday, 16 people died, and then in the sister city of Najaf, more than 50 others were killed in that bombing.

Then in Baghdad, another roadside bomb, one of these improvised explosive devices laid alongside a road in western Baghdad, that detonated as a U.S. convoy passed by. One U.S. soldier was killed and two others were wounded.

And then on north to Mosul, what's happening there this morning, we've been talking in recent moments to U.S. military commanders there. They say that military offensive operations are under way in Mosul. They say that that's pretty much par for the course. Similar operations have been conducted over the last few weeks.

What they do say, though, is that all of the bridges -- four bridges -- which connect the east and west of Mosul have been closed down; that, to limit the flow of population from one side to another, and also assist the U.S. military in their offensive operations to hunt down the insurgent groups responsible for Tuesday's devastating explosion at Camp Marez -- Carol.

COSTELLO: Karl Penhaul live in Baghdad this morning. Thank you.

The defense secretary on the defense. Donald Rumsfeld appeared before reporters contrite and then quite feisty, defending himself and the progress of the war in Iraq from critics. Rumsfeld spoke a day after a suicide bomber killed 22 people in Mosul, including 14 U.S. troops. He says his thoughts and prayers are with the families of those wounded or killed in the attack, but the United States must do what it takes to get the job done.

(BEGIN VIDEO CLIP)

DONALD RUMSFELD, DEFENSE SECRETARY: You get up in the morning, and you think about what our troops are doing. And I must say, if they can do what they're doing, I can do what I'm doing.

(END VIDEO CLIP)

COSTELLO: That was the contrite part of the news conference. And then, well, Rumsfeld was vintage Rumsfeld. Many people are calling for his resignation, even some conservatives. So, did Rumsfeld help himself at this news conference? Or was he his own worst enemy?

Political analyst and "L.A. Times" reporter Ron Brownstein joins us live now.

Good morning -- Ron.

RON BROWNSTEIN, CNN POLITICAL ANALYST: Good morning, Carol.

COSTELLO: So, Ron, it seemed Rumsfeld tried to be contrite, but upbeat about the war's progress. Did he succeed?

BROWNSTEIN: Well, he was contrite, upbeat and also cautionary. I thought one of the most striking things out of this press conference was both Donald Rumsfeld and General Myers echoing Colin Powell earlier in the week and saying that elections were not going to be the end of the violence or a guarantee of stability in Iraq.

Since the end of the U.S. election, we have seen from a number of officials, starting with the president on down, a much more cautionary tone about the state of progress in Iraq. And they are basically, I think, warning the American people that there are more tough days ahead.

COSTELLO: But, Ron, isn't this kind of like a new tactic, because so many Americans are now against the war in Iraq? In fact, a majority of Americans are. Does this tactic seem to be working? And before you answer that actually, before you answer that, we want to, like, contrast what Rumsfeld was like yesterday at the news conference to what he was like last year at the news conference when our own Jamie McIntyre questioned him as to the definition of a guerrilla war, because Rumsfeld refused to believe that a guerrilla war was actually taking place in Iraq.

Let's listen to that sound byte from 2003.

(BEGIN VIDEO CLIP)

JAMIE MCINTYRE, CNN CORRESPONDENT: Appreciating, as I do, your appreciation with the decision and language.

RUMSFELD: You got the dictionary definition?

MCINTYRE: (UNINTELLIGIBLE) definition of guerrilla war.

RUMSFELD: I was afraid you would. I should have looked it up. I knew I should have looked it up. I could die that I didn't look it up.

MCINTYRE: Paramilitary operations conducted in an enemy-held or a hostile territory by a regular (UNINTELLIGIBLE) indigenous forces. This seems to fit a lot of what's going on in Iraq.

RUMSFELD: It really doesn't.

(END VIDEO CLIP)

COSTELLO: So that was from 2003. Contrast that to the news conference yesterday, Ron.

BROWNSTEIN: Well, Rumsfeld's persona has always been in Washington as a tough bureaucratic player who does not suffer fools gladly. He has certainly behaved that way toward the press at the press conferences during the war and in the immediate aftermath and with questioners even on Capitol Hill.

But, Carol, he's in a much more difficult position politically than he was a year ago, mostly because of events. The war has not unfolded the way really anyone involved in the planned expected, and in June of 2003 Donald Rumsfeld said we were down to pockets of dead- enders.

The deputy defense secretary, Paul Wolfowitz, in testimony said we were fighting the last remnants of a dying regime.

So, obviously they've been put on the defensive by events, and also by his own handling of the question from the soldiers in Kuwait. If Donald Rumsfeld, who is famous for being tough in questioning, had been given that answer -- we go to war with the army we have, not the army we wish we have -- from a subordinate, it's hard to believe he would have accepted it. And now, clearly, I think as you see in his demeanor, his diminished political position.

COSTELLO: But isn't it too late for him to change his tune now? I mean, don't the American people have his number?

BROWNSTEIN: Well, look, I mean, the reality is Donald Rumsfeld is the defense secretary. He is not the commander-in-chief. There are a lot of people, as you mentioned earlier, from conservatives and Republican ranks, senators like John McCain and Trent Lott, conservative leaders like Bill Crystal (ph) and Tom Donnelly (ph), a defense specialist at the American Enterprise Institute, who are focusing criticism on Donald Rumsfeld.

There is something slightly disingenuous about this. These are people who are very uneasy with the course of the war, but yet are reluctant to criticize President Bush, who, after all, makes the final decisions and has decided to keep Donald Rumsfeld. He has become kind of a lightening rod for the administration, and in that way is serving a different purpose of deflecting criticism that might otherwise be directed at the president and the White House from his own supporters as well as Democrats, who are uneasy about the course of events.

COSTELLO: Politics is an ugly game. Ron Brownstein, thanks for joining us live on DAYBREAK.

BROWNSTEIN: Thank you, Carol.

COSTELLO: Still ahead this morning, from courtside to courtroom, the NBA and the players union fight in federal court about one of the suspensions.

And, dude! There's a big incentive for Dell Computers to build a new plant in North Carolina.

But first, here's a look at what else is making news this Thursday morning.

(COMMERCIAL BREAK)

COSTELLO: Managing your finances, like managing your life, is all about balance. So says DAYBREAK contributor Ali Velshi, who seems to have risen late this morning because, wow, it looks like you forgot to shave.

ALI VELSHI, CNN DAYBREAK CONTRIBUTOR: Can you really tell on TV? I didn't forget. It's all about balance. I am trying to achieve balance. Everybody is running around like a chicken with their head cut off right now. Everybody is stressed, a few days to go before Christmas. I am going to give something back to me today.

COSTELLO: Really?

VELSHI: On behalf of the viewers. I am going after this to get shaved. Then I'm going to another spa to get my head shaved, and then I'm going for a facial and a manicure. I'm going to have a little bit of fun.

COSTELLO: That's so metro-sexual of you.

VELSHI: Yes, I'm going to go and balance my chakra (ph).

COSTELLO: But that story is for tomorrow.

VELSHI: That's correct.

COSTELLO: But today...

VELSHI: If you are going to be doing something else while I'm busy balancing my chakra (ph), you might want to try balancing your portfolio.

(BEGIN VIDEOTAPE)

VELSHI (voice over): Managing your portfolio is a constant balancing act. Even if you're not an active trader, with the markets moving up and down, you need to keep an eye on what percentages of your portfolio are in the different asset classes, like stocks and bonds.

As the market moves over the course of a year, the proportions of your portfolio you have invested in various types of investments may actually change more than you think.

UNIDENTIFIED MALE: People look at their portfolio. They see it's either doing well or it's not. And they're either going to leave it alone, or they're going to make some kind of a major shift. But rarely is it a matter of them rebalancing.

VELSHI: This isn't about making a major shift in your investment philosophy. It's about making sure market moves don't result in shifts to the way you want to invest. Stocks and bonds behave differently in your portfolio, and you need to make sure you have the right amount of each.

If you started the year with a low-risk portfolio, your portfolio might look something like this: 40 percent in stocks or stock mutual funds and 60 percent in something more stable, like bonds or other forms of fixed income.

If the market had a year like it did in 2003, where stocks gained more than 20 percent, your portfolio and your risk profile would look very different.

If you did nothing to your investments, the stock portion would have grown from 40 percent to 50 percent. And the bonds would have shrunk from 60 percent to 50 percent. That means your portfolio is now higher-risk than you wanted.

While this might be more risk than you're prepared to take, your new portfolio gives you a greater chance to gain if the markets stay strong. But it also means you could lose more than you bargained for if the market goes down.

UNIDENTIFIED MALE: Balancing provides an enforceable discipline. It makes what is difficult emotionally to do, rather convenient for the investor to accomplish. The most important benefit of rebalancing is the idea that it helps reduce downside volatility.

VELSHI (on camera): Here is what your portfolio looks like out of balance. Now, what you need to do is lighten up on those parts of your portfolio which have been performing well and buy more of your underperformers. That puts your portfolio back into perfect balance.

(voice over): So, how often do you need to rebalance?

UNIDENTIFIED MALE: Realistically, once a year, sometimes twice a year if there is a great deal of market activity. But you could check it quarterly.

VELSHI: Another important reminder: Don't forget about Uncle Sam. If you are rebalancing outside of a tax-sheltered account, like an IRA, remember that there are tax implications to selling stocks that have gone up in price. Gains are good, but paying taxes on those market gains can cost you.

(END VIDEOTAPE)

So, take a look at your portfolio. It's easy to do. It's not very time-consuming. Just have a look at it and see whether you need to do some balancing going into the New Year.

COSTELLO: It's not very time-consuming?

VELSHI: No, that's the whole idea. It's supposed to be just easy. It's a discipline, yes.

COSTELLO: OK, you can come and help me with mine...

VELSHI: I'd be happy to.

COSTELLO: ... if you keep it a secret.

VELSHI: OK.

COSTELLO: Thank you, Ali.

Your news, money, weather and sports. It is 6:46 Eastern. Here's what's all new this morning.

Haiti's main airport doesn't live up to international security standards. That's the warning to travelers from the Department of Homeland Security. Airlines are being told to notify ticket-holders about security concerns.

In money news, Dell Computer was given nearly $280 million in incentives to build their new plant in Winston-Salem, North Carolina. State officials expect the computer plant to create thousands of jobs. It's the company's third manufacturing plant in the United States.

In culture, the "Real World" is coming to Austin, Texas. MTV's original reality series will start shooing early next year with episodes to begin airing in June. This will be the 16th edition of the "Real World."

In sports, the NBA and the players union will be in federal court today to argue over the Pacers Jermaine O'Neal. O'Neal was suspended for 25 games for his part in the brawl in Detroit. But an arbitrator ruled that O'Neal's suspension should be reduced to 10 games.

(WEATHER REPORT)

COSTELLO: Those are the latest headlines for you this morning.

I know you're still wondering about that new TSA guideline that they're not allowed to pat you in certain places. Bill Hemmer will have more on that on "AMERICAN MORNING."

Tell us more -- Bill. BILL HEMMER, CNN ANCHOR: Hey, we certainly will. Carol, good morning to you. We'll have more on that.

Also, the spotlight is shining rather harshly on Bernard Kerik. Now he's losing more than just a shot at homeland security chief. What does it mean for him and his future? And perhaps more importantly, what does it mean for his political boss, his old boss, Rudy Giuliani? Andrew Kurtzman (ph), who has covered Kerik's days as New York's top cop, also wrote the book, "Rudy Giuliani, Emperor of the City," we'll talk to him about it.

Complete coverage in 12 minutes. Carol, we'll see you then, all right?

COSTELLO: We certainly will. Thank you, Bill.

We're going to talk more about the weather, because parts of the Midwest are blanketed by snow, very dangerous traveling there. I know we're going somewhere live, but I don't know where it is right now. This is Indianapolis from WISH-TV, which is a CNN affiliate. You can see it's lovely weather out there. In fact, our own Jacqui Jeras is in Evansville, Indiana. And she says the drifts are really piling up, up to a foot as a matter of fact.

Do we have a live reporter from Indianapolis? We do not. We're going to have one at the other side of the break. We're going to take a break. We'll be right back.

(COMMERCIAL BREAK)

COSTELLO: It looks so calm in New York, doesn't it? But if you head out to the Midwest, it's not so calm. The first big winter storm walloped the Hoosier state with blowing and drifting snow.

Gene Rodriguez of CNN affiliate WISH in Indianapolis is with us. Ooh, it looks nasty out there.

GENE RODRIGUEZ, CNN AFFILIATE WISH REPORTER: It is nasty. In fact, we're being told not to get on the roads unless you really, really have to somewhere like a flight. But some of those neighboring airports are closed, as you've heard: Cincinnati and Cleveland.

I will tell you that we are in Hamilton County, which is just north of Marion County, where Indianapolis is. And this area was spared yesterday, while southern Indiana actually got a lot of snow. We're talking about upwards of 10 inches yesterday. Here, it didn't start until 9:00 last night. And I'm going to walk through it. You can see how much has accumulated throughout the evening.

And I'll also tell you that it continues at this hour. And it's really cold. So, this snow is going to stay here for a while. We'll definitely have a white Christmas. We're talking about 17 degrees in this area.

Again, we're just north of Indianapolis. However, I want to show you one of the major thoroughfares into this city, which we're standing right by. Keystone Avenue runs from the north part of Hamilton County all the way southward into Indianapolis. It also funnels into some major interstates.

And we're seeing the traffic picking up right now. We're also seeing a lot of plows and salt trucks on the roadways. But the traffic that's on the road right now is moving very, very slowly. Some of the vehicles that are not four-wheel drive are laboring through this snow, because it is accumulating on the roadways.

And, as you can tell, some folks are still trying to get places, even though they're being asked not to go anywhere, that a snow emergency has been declared in several counties in Indiana, meaning please don't go anywhere. Call into work and let them know you won't be there.

Reporting live, Gene Rodriguez.

Now back to you -- Carol.

COSTELLO: Gene, I just found out something about you. You're from Columbus, Georgia.

RODRIGUEZ: Yes.

COSTELLO: So, I take it you're really not used to the cold.

RODRIGUEZ: Yes. Well, it's not so cold in Columbus, right. But I did live in New Mexico, where it snows, and then you go skiing in the afternoon in the sunny weather. So, a little bit different. And I've only been here a year and a half, so I've lived through two winters. And I'll tell you, it is cold here. But my folks in Columbus are rather warm this morning.

COSTELLO: I bet they are. Gene Rodriguez from WISH-TV in Indianapolis joining us live this morning. Thank you.

They train for months with the hope of winning a gold medal for their country. I'm not talking about Olympic athletes. I'm talking about the guys who compete in the World Cyber Games.

Our technology correspondent, Daniel Sieberg, followed the team.

(BEGIN VIDEOTAPE)

DANIEL SIEBERG, CNN TECHNOLOGY CORRESPONDENT: For people who don't know anything about competitive PC gaming, explain what you do to prepare and what it's like to compete.

DAVE "MOTO" GEFFON, TEAM 3D: We prepare all year, four to five hours a day, sometimes even more, five days a week for this event. We try and do our best for it.

SIEBERG (voice over): That night, Dave and his teammates took our camera along to their strategy session.

UNIDENTIFIED MALE: The second we do this, guys, the second we do that smoke, like, the fire in the hole, like, then that's (UNINTELLIGIBLE) out. Like, when we start smoking just starting flashing that wall. I think that would probably be the best timing. Just keep them blind, so they don't get the initial shot on us.

UNIDENTIFIED MALE: This is our little scouting report on other teams that we may possibly have to play. It goes over their defensive setups and their offensive strategies.

UNIDENTIFIED MALE: It could be a big waste if we don't (UNINTELLIGIBLE) in our group.

UNIDENTIFIED MALE: Thanks for being positive, Kyle.

UNIDENTIFIED MALE: I'm just saying...

UNIDENTIFIED MALE: He'd murder us over his Gameboy.

UNIDENTIFIED MALE: Whose pretzels are these?

UNIDENTIFIED MALE: It didn't take long for Ronald to fall back asleep.

SIEBERG: The grand finals, Team 3D for the United States against the Titans for Sweden, dozens of cameras from around the world watching their every move. In another room, a crowd of hundreds has gathered to watch the play by play.

UNIDENTIFIED MALE: There it goes. Modem (ph), nice job. He needs the back on it. Beautiful shot through the window.

SIEBERG: Back in the competition hall, the teams duke it out. The match goes into overtime.

UNIDENTIFIED MALE: Good job.

UNIDENTIFIED MALE: Good job.

SIEBERG: Then double and triple overtime. The final moments, it's down to two members of Team 3D against four from the Titans.

UNIDENTIFIED MALE: I wish I could put into words. It's an amazing match, and it was really closely fought towards the end. When you do something right, you can hear the whole building engulfed in screaming, and it's a great feeling.

SIEBERG (on camera): Do you think this is going to become more of a spectator sport?

UNIDENTIFIED MALE: I think so, because I think people are starting to realize that you know what? Watching video games is actually pretty exciting.

SIEBERG: Are you going to take some time off and relax for a bit?

UNIDENTIFIED MALE: Well, no, we have to go back and we play in some leagues online, and we've got to do a ton of makeup matches.

SIEBERG: No rest at all for you guys?

UNIDENTIFIED MALE: I'm back to work.

(END VIDEOTAPE)

SIEBERG: These guys obviously get pretty excited. In case you're wondering, the U.S. name, which is Team 3D, stands for "desire, discipline and dedication." They clearly have all three. But even the best teams have off days, Carol. In a recent tournament in Dallas, the team finished eighth. But they said they're going to carry on.

COSTELLO: Well, it looks like their excitement will carry them through.

SIEBERG: Absolutely.

COSTELLO: Thank you, Daniel. Tomorrow, Daniel's video game series concludes with an escape to an alternative realty. Imagine a play with thousands of characters but with no one on the same stage. Video games this series this time tomorrow on DAYBREAK.

We're back after a quick break.

(COMMERCIAL BREAK)

COSTELLO: Hey, Chad, I've been checking out the headlines this morning.

CHAD MYERS, CNN METEOROLOGIST: How do you get that journal so early? We don't get it until, like, 7:30 down here.

COSTELLO: I can't tell you.

MYERS: I guess you're in New York.

COSTELLO: Or I'd have to kill you. No, in "The Wall Street Journal," they have this full story about the NFL players not wearing padding as they used to, like even 10 years ago.

MYERS: Yes.

COSTELLO: In fact, they say the tailbone pad is dead, the elbow pad is gone, the forearm pad is gone, the thigh pad, knee pads are endangered species. And the size of the shoulder pads has shrunk. And you would think, well, maybe the game is getting gentler, but no. The players actually do not like to wear padding for aesthetic reasons.

MYERS: What?

COSTELLO: They want to look good.

MYERS: Well, I thought... COSTELLO: They want to the natural shape of their bodies to show. And, of course, it's a little more cheesemo (ph) as well.

MYERS: Oh, man, I see a whole new industry coming along. Atomically-correct padding.

COSTELLO: Exactly. This is the quote from a Rams player: "I think they'd wear nothing if they could." Actually, it's from the Rams head coach, Mike Martz. Isn't that crazy?

MYERS: Well, I was watching the Green Bay game last week, and it was so cold. The wind chill was, like, 15 below, and they had nothing on their sleeves. Their arms were all bright red, because it was so cold. But obviously they wanted to be macho, I guess.

COSTELLO: That's the real way to play football, Chad.

MYERS: I wouldn't know.

COSTELLO: Yes. From the Time Warner center in New York, I'm Carol Costello, along with Chad Myers. "AMERICAN MORNING" starts right now.

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