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Interview with Kinky Friedman; Interview with Michael Copeland; Reports Suggest al Qaeda's Attempting To Recruit Zarqawi

Aired March 06, 2005 - 15:00   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.


(BEGIN VIDEOTAPE)
ANNOUNCER: From New York City, America's financial capital. This is IN THE MONEY.

(END VIDEOTAPE)

JACK CAFFERTY, HOST: Welcome to the program. Coming up on today's edition of IN THE MONEY. I'm Jack Cafferty, by the way:

Is he Osama bin Laden's new best friends? Abu Musab al-Zarqawi is Iraq's biggest name in terrorism and there are reports now that al- Qaeda has a job for him. They want him to attack targets on U.S. soil.

Plus, you can love her or you can hate her, but would you vote for her? Find out if Hilary Clinton's image makeover can take her all the way to 1600 Pennsylvania Avenue.

And the next best thing to a sure thing: We'll hear about some strategies for making money from real estate, whether the market is up or down.

Joining me today, a couple of IN THE MONEY veterans. "Lou Dobbs Tonight" correspondent, Christine Romans, and "Fortune" magazine editor-at-large, Andy Serwer.

So, the polls are indicating the public doesn't like the idea of overhauling Social Security. The majority leader in the Senate, Bill Frist, says well, we may get to it next year. Next year is an off- year election year for those lovely folks down in the Congress of the United States. I don't think anybody up for reelection is going to be too anxious to tamper with Social Security in an election year. And yet President Bush is on the road for two more weeks trying to sell this thing. Is it a pig in a poke? Is Social Security reform dead?

CHRISTINE ROMANS, "LOU DOBBS TONIGHT": I'm starting to hear a little bit of something called Social Security Plus. Maybe letting people have their own kind of extra government sponsored program, outside of Social Security, and the White House not exactly endorsing that just yet. But there are a lot of different variations what this might turn out to look like. But, they're not giving up on it. They really are expending a lot of political capital, the president is, on this idea.

ANDY SERWER, "FORTUNE" MAGAZINE: You know, the old cliche, Jack, of course, this is the third rail of American politics, i.e., you don't want to touch it. I think the president actually did a pretty bad job of framing the debate, because, you know, at first they called a crisis and then they had to back away because a crisis is something that's going to happen, like, in the next day or two.

CAFFERTY: Right.

SERWER: And it's not going to happen and it happens down the road, it still is a problem. So, I think he is losing political capital, here. At some point he may have to abandon ship, making this a focus of domestic policy.

ROMANS: Do you think it hurts his legacy?

CAFFERTY: Well, that remains to be seen because we don't know what his legacy's going to be, yet. But somebody suggested that maybe he the cart before the horse. That it might have been better for him to approach the subject of tax reform and get some sense that we're going to take some of that burden off of people's backs first.

SERWER: Right.

CAFFERTY: And then say now that we've made the tax situation a little easier for you, let's take a look at your retirement. I mean that's -- you know, critics and Monday morning quarterbacks are a dime a dozen, but it remains to be seen. Suffice it to say he's not where he'd like to be in the debate right now over changing Social Security.

SERWER: Yeah.

CAFFERTY: All right, on to other things. Talking about violence in Iraq and sooner or later you'll be talking about this guy: Abu Musab al-Zarqawi. He has claimed responsibility for dozens of kidnappings and attacks. And now the feds say that they have gotten word that Osama bin Laden is asking Zarqawi to think about hitting targets in the United States. Department of Homeland Security announced that new intelligence, this past week. Authorities call it "credible but not specific."

Michael Swetnam's going to help us assess the threat, and see what it says about the state of al-Qaeda. He's the CEO and president of the Potomac Institute for Policy Studies in Washington, D.C.

Mike, nice to see you. Thanks for being with us.

MICHAEL SWETNAM, POTOMAC INSTITUTE: Thank you for having me on the show.

CAFFERTY: You call Zarqawi "Dennis the Menace," which is a -- I just love that name. How so?

SWETNAM: Well, years ago, he was just nothing more than a common criminal bouncing from country to country, causing problems. He seemed to have found a niche for himself in Iraq as one of the leaders of the insurgency. And he really is just a trouble causer looking for a cause to hang his hat on or to hang his potential fame on. He's looking to be one of the big guys in the terror scheme now and he's trying to get recognized, not just by bin Laden, but anybody else who will recognize him as a force in the will world.

ROMANS: So he's kind of bottom of the barrel, but boy he really is responsible for terrible things. Does it show, maybe, some weakness in the bin Laden camp, if they're even considering reaching all the way down and aligning themselves with in guy.

SWETNAM: Very much so. It's an indication that we really have rounded up and captured or killed most of bin Laden's chief lieutenants. Khalid Sheikh Mohammed or Mohammed Atef, all have been killed, captured, rounded up or put into a position where they can't show their face without being arrested or killed. So they're reaching out to about the only guy left in the Middle East who really has credibility in raising troops and who people have been following. And so, he is a person that has shown the capability to get people behind him and to go cause us a lot of trouble. We ought to be frightened if he gets out of Iraq and comes towards us here the United States.

SERWER: Yeah, I was going to say Michael, aren't we doing a disservice here by sort of dismissing him as Dennis the Menace or bottom of the barrel? Do we understand what this guy is about? I mean, his he an Islamic, is he a terrorist, is he a criminal, does he want power in Iraq? I mean he must have some sort of objective other than just trying to wreak havoc?

SWETNAM: Well, I think his main objective over his career is to really just to bring fame to himself and to try to be seen as a leader in the world. Recently, his writings and his speeches have been such that he's been adopting many of the radical Islamic ideas that characterize al-Qaeda. But in truth, his history has just been as a trouble causer. I think he's just trying to enrich his fame around world, but we should be very afraid of him. He isn't just a trouble causer, he's a person who's shown great capability to put together car bombs and schemes that cause us an awful lot of trouble. And as I said, if he was able to escape Iraq and bring lots of followers with him, he could cause us a lot of problems here at home.

CAFFERTY: Rhetorical question, just for, you know, a dumb guy who doesn't understand the sophistication of these things, and that is, if the Department of Homeland Security knows that Zarqawi is talking to Osama bin Laden and bin Laden is talking to Zarqawi, how come we don't know where these guys are? And why can't we round them up? But that's another topic for another day. Can -- is this guy capable of attacking targets inside of the United States?

SWETNAM: I think it's very, very difficult. We're much more aware than we were before, but the truth is that still there are holes. It is possible to slip in bombs and explosives on cargo carriers and people still slip across our borders unnoticed everyday. So the potential is there. And we really have to keep our vigilance up if we're going to have any hope of catching them before they perpetrate another bad act.

ROMANS: Michael, a lot of talk this week about the whiff of democracy being smelled throughout the Middle East, this week. Does this at all diminish the chances of some sort of event on U.S. soil? Diminish the chances of this kind of insurgency in Iraq and elsewhere is continue?

SWETNAM: It certainly puts a damper on the insurgencies. A key thing to note was, a few days before the election, Zarqawi characterized the battle no longer as a fight against the occupiers, the United States, but as a battle against democracy. And almost immediately the population turned in a couple of his deputies and we were able to put a real comment his forces there. So the spread of democracy is a very good thing that'll help dampen all of these radicals and force them down into a corner. But, certain it won't get rid of them. We're still going to have to deal with the crazies of the world and he's one of them.

SERWER: Michael, do you find disconcerting that there haven't been any terrorist acts here in the United States, and let me explain, because I think it would be very easy to conduct a low-level small attack. So does that, in other words putting a bomb in a park in New York City or something like that. So does that suggest they're working on something bigger?

SWETNAM: It does. I think there have been two or three attempts that we've foiled over the last three years. And I think there's an indication that they've been attempting to go after the big one. That they haven't concentrated on putting together the small ones. And the problem with the big attack is that it takes more coordination and more people, and, therefore, our -- the potential of us catching them is higher, and in fact we have thwarted a couple of those attempts over the last couple of years, but as has been said by many our leaders, time is on their side and sooner or later they're probably either going to get away with a big one or they're going to turn to the smaller ones which is much, much harder for us to catch.

CAFFERTY: You guessed the two glaring weaknesses in national security here, that's the ports where these thousands and thousands of containers come in on the container ships every week, month, whatever. A lot of the money allocated for port security reportedly hasn't been spent for that, and then of course these borders, which particularly the one in Mexico is just a joke. Why haven't we mustered the political will or whatever it takes in this country, to tighten those things up and clamp down on this stuff? Why are the borders leaking like a sieve three-and-a-half years after they blew up the World Trade Center in the United States?

SWETNAM: Well, I think you pointed right to the problem, it's a lack of political will. The fact of the matter is we can solve those problems, but it would cost an immense amount of money, lots of people, lots of money over a long period of time, and the political will to do that is not quite there yet. Many have commented that even though we claim to be at war, a war against terrorism, we haven't really marshaled all of our forces and put all of our money against it. This is an indication, right here. If we were to really attack the problems of cleaning up our borders and expecting all of the cargo containers, we would probably double the Department of Homeland Security budget, and there probably isn't the political will to do that today in Washington. CAFFERTY: Well, and there's another school of thought that says they don't want the borders closed. That that's a source of cheap labor in this country and there's that whole debate about whether or not the corporations are in favor of having those borders just like they are.

SWETNAM: Absolutely. It costs them one way or another.

CAFFERTY: Yeah. Mike, we got to stop it there. Thank you for your insight, it's nice having you on the broadcast.

Michael Swetnam, CEO, president of Potomac Institute for Policy Studies, joining us from Washington, D.C.

When we come back, The faith factor: We'll look at what that and some other image changes are doing for Hillary Clinton's political chances.

Also ahead, you paid for your home, now it's time for your home to return the favor. Check out some market resistant tips for profiting in real estate.

And how to say "Governor Kinky" with a straight face: Find out why country singer Kinky Friedman's putting his 10 gallon hat in the ring to be the governor of the great Lone Star state of Texas.

(COMMERCIAL BREAK)

CAFFERTY: Hillary in '08? Love her or hate her, you better get use to hearing that slogan and seeing it. Observers say Senator Clinton may be pensioning herself for a run for the White House, as her speeches have become more centrist and more focused on religion. Jennifer Senior is one such observer. She is a contributing editor for "New York" magazine, and joins us now with more on this.

Is there any doubt in your mind she plans to run for president?

JENNIFER SENIOR, "NEW YORK" MAGAZINE: No. Zero doubt.

CAFFERTY: Zero doubt?

SENIOR: I can say this -- yes. I can say this unequivocal. I don't think so.

CAFFERTY: Is the choice the Democratic Party ought to be making? She is arguably one of the most decisive and controversial figures on the American political scene. The -- you know, they abound and a reputation precedes her by about eight or nine years. Is this the -- is the party's idea of what they want to have fronting the ticket?

SENIOR: It depends on who you talk to in the party. I think that are there people in the party who would like to sort of shake the Etch-a-Sketch, you know, get rid of the Clintons, wipe the skate clean. There are others who are astoundingly, like, gung-ho, they really like the idea of the Hillary candidacy. And they sound a lot less deranged about this after five minutes of discussing this. I mean, at first blush, it does seem nutty and self-destructive, but there are rational people, believe it or not, in the Democratic Party who support this idea.

SERWER: Well Jennifer, let me ask you, I mean, we've always heard that she had very high positive rating, but also very high negatives, and you know, wouldn't ultimate a Hillary candidacy just sort of result in a rerun of the Kerry scenario, where, sure, you know, you pick the blue states, you don't win the election. I mean, think about the people attending the Alabama Auburn game, down there in Alabama. Would anyone in that stadium vote for Hillary Clinton? Anybody?

SENIOR: Do I have to think about -- I don't know if that's football. This is so...

SERWER: It is, it's football. It's real football.

SENIOR: Sorry. All right, all right. Can we suspend that? For five seconds.

SERWER: We'll suspend it. You go.

SENIOR: And also Alabama. Not the right state to be examining. I mean...

SERWER: But you have to win some votes down there, you don't have to carry it, but you should win Arkansas. I mean, Bill Clinton won Arkansas, right? You have...

SENIOR: She's not bad in Arkansas. Hold on, but that's actually -- OK, if we move, you know...

SERWER: Move west.

SENIOR: Yeah, right. Yeah. We're doing better if you look at Arkansas, or if you look at, I don't know, Ohio?

SERWER: Missouri?

ROMANS: Right.

SENIOR: Florida. Again, she actually runs much better among women, among Hispanics, among blacks, one could argue, than Kerry does and did. I think that she will actually have these kind of narrow swathes of the Democratic Party that are sort of critical a democratic victory in her corner, where Kerry didn't. I mean, something like 16 percent of the, you know, black vote in Ohio went to Bush, which is quite high.

ROMANS: She is a -- she is a lightening rod, but at the same time there, is that name recognition. I mean, her name recognition has got to be, except for Bill Clinton, you know, the highest democratic name recognition in the country, at this point.

SENIOR: Yes. ROMANS: At the same time, do you think she really has been moving more centrist lately? That she's talking more about religion, that's she's been talking more about issues that might appeal to the red states? Her aides would say she's always talked this way, have spoken this way, but now all of a sudden people are being cynical?

SENIOR: Well, what aides going to say no, in fact, she's actually refashioning her, you know, discussion to meet her desire -- her objectives for '08, they can't say that. The answer is that, look, she has it in the House, right? I mean, Bill Clinton actually genuinely does think this way. She has the advantage of being genuinely religious, so it's not that big a leap for her to actually invoke god in discussion and to invoke her spirituality. It was her husband who said, and I think she agreed, that you should make abortion safe, legal, and rare. So, in some senses they're right. And another sense is, look, this is a woman who came of age in the '60s and I don't know if you can take the sort of Wellesley feminist out of her entirely, but she's been extremely discipline at keeping her, you know -- into something very -- you know, it's like the size of a tea cup, that person now. She's really squelched it deep down inside her.

CAFFERTY: You mentioned the surprising black voter turnout in Ohio per President Bush. Isn't it a bit of a tactical mistake on the part of the Democratic Party to sort of take the black vote for granted? I mean, there are a lot of middle class and upper middle class black families that, quite frankly, don't have democratic values in this country anymore, and are probably more inclined not just this Ohio, but elsewhere to vote for a republican candidate. That seems to me to be an assumption that the democrats have made at their peril.

SENIOR: You're absolutely right. It's impossible to ignore those. It's un-ignorable, it's un-dismissible and yet, they kind of ignore and dismiss it. So, I'm not sure how to answer that other than to say, you're right. I think it's not even necessarily always a question of class, but values. I mean, what they were doing in Ohio was very interesting. They were running ads on black radio that were talking about gay marriage. I mean, this is also a traditional value's question, where in the church, and in many black communities, you know, people want to see, you know, a man and a woman be married and I don't -- I guess I'm less certain about issues regarding choice and things like that. But I mean, yes, you're right. I don't think that the democrats can afford to take the black vote for granted. That's absolutely true.

SERWER: Jennifer, quick last question. New York State is actually schizophrenic, down state very liberal, upstate not so liberal, conservative. Has she been able to turn people's opinion up state do you think?

SENIOR: Utterly and completely, it's one of the most amazing things about her. In small context, in small setting, she's great at this stuff. I mean she's one on one, she's charming. I mean, you know, in a public -- in giant public setting, her speeches are still narcotizing, you know, they're like chloroform or something, but in tiny, tiny setting, she's actually, charming, and she can go, you know, farm by farm, room by room, person by person, and convert them. And make them like her. I don't know how that works out in a presidential campaign where it's all done through TV, but we will see.

ROMANS: All right. Jennifer Senior of "New York" magazine, thanks so much for joining us.

SENIOR: Thank you.

ROMANS: Coming up right after the break. The mega deal that could change the way you shop. See if investors are buying Federated's move to buy a retail powerhouse.

Plus, if you build it, will they come? Look at some tips on making money off of real estate, whether the housing market is up or down.

And, big bigness: One woman cashes in on her brush with the law in a very personal with way.

(COMMERCIAL BREAK)

ROMANS: Now let's take a look at the week's top stories in our "Money Minute." Martha Stewart is a free woman, sort of. Stewart got out of federal prison Friday, but she will now serve five months of house arrest at her home in suburban New York. Share prices for Martha Stewart living OmniMedia are way up since last year and she's going to star in her own prime-time reality show on NBC.

Fed chairman Alan Greenspan took his case for tax reform to Capitol Hill, this week. Greenspan urged Congress to simplify the tax code and start considering shifting the focus from income taxes to sales taxes.

But no change in the tax code is likely to help aeronautics and telecom businessman, Walter Anderson. The IRS charged him with, but oh $210 million worth of tax evasion, the most ever by one person. Prosecutors say he illegally hid money in Panama and Holland and the indictment also says in 1998 he paid less than, well, $500 in income taxes.

SERWER: Another big story this week was Federated's decision to buy department store rival May for about $11 billion. The deal combines Macy's and Bloomingdales with Lord and Taylor and Marshal Field's. Industry watchers say the consolidations shows just how much discounters like Wal-Mart and Target have taken from the retail department stores. Federated shares are trading near five-year highs, but some say the deal is like reinventing the wheel for the Model-T because the retail department store sector is way past its prime. That makes Federated Department Stores our "Stock of the Week."

And, you know, it is a bad business model in the sense that it's so long in the tooth. I mean, this goes back to the 19th century, but interestingly, I went back and checked. Federated stock since 1992 point in time, has tripled in those 13 years.

CAFFERTY: Wow. SERWER: Beating the market, which suggests that the federated people must know a little bit about what they're doing. One thing they've done is to roll up this business, buy all of these chains all across the country.

ROMANS: But then there goes those regional brand names. You know, I -- this is -- we talk about this a lot where everything is so national now, Wal-Mart, you know, Sam's.

SERWER: Bed, Bath and Beyond.

ROMANS: Bed, Bath and Beyond. Federated Department Stores, Bloomingdale, Macy's will now be the big name all across the country. What about those little regional department stores that have been bought up and bottled up?

SERWER: She's getting all sentimental.

CAFFERTY: Yeah, like you mean like Woolworth's.

(LAUGHTER)

CAFFERTY: The five on a dime? You know, one the thing this will do, though, and one of the keys to the success of companies like Wal- Mart, is they squeeze the suppliers, they squeeze them hard on prices. Well, Federated is going to be able to do the same thing by incorporated this additional bunch of stores and under their brand- name, when they go to buy drapes or night gowns or whatever it is they're going to sell, they can say to the suppliers, we're basically the only outlet in town for certain of these products, you've got to give us a better price.

ROMANS: You know what that means, eventually.

CAFFERTY: Yeah.

ROMANS: When you go down the food chain, it means that the stuff comes in cheap from some place else and their -- you know, U.S. manufacturers really get hurt.

CAFFERTY: But for the shareholders, I mean, it would fit Federated's plan.

SERWER: Yeah. I'm not sure, you know, this whole notion of changing all the names to Macy's, for instance, in fact, this Sunday, Federated is going to be changing the name of Bon Marche, Rich's, Burdine's, Lazarus, Goldsmith's, all across the country, we all know those stores in all these cities, to Macy's.

ROMANS: That's what I mean.

SERWER: You know, a lot of people are bemoaning that. I'm not sure who this really helps. I mean they think that Wall Street likes this by having one name and then they can go to these conferences and say, we've got one name across the country. I don't think people like it, I don't think customers like it at all. ROMANS: I think you're right.

SERWER: You know, so it'll be interesting to see if they can make this work and they are the big kahuna, they're really the only game left in town.

CAFFERTY: And as you pointed out, Federated stock price tripled in the last few years.

SERWER: Right.

CAFFERTY: So they're making that part of the business work. Do you buy the stock or not?

SERWER: You know, I wouldn't.

ROMANS: Sell the news, maybe.

SERWER: Yeah, I -- you know, at this point, I think it's going up a lot. And I could be wrong and I hope I am for all of you Federated shareholders out there.

CAFFERTY: There you go. Coming up?

SERWER: Yeah, coming up on IN THE MONEY:

Thinking smarter about the housing market: Learn about some ways to profit off of real estate, whether the business is hot or not.

Plus, Kinky and proud of it: We'll ask country star Kinky Friedman why he's running for governor of Texas.

And taking it to the bank: See what could lie ahead for Carly Fiorina after getting pushed out of Hewlett-Packard.

(COMMERCIAL BREAK)

CHRISTINE ROMANS, CNN CORRESPONDENT: Is there a bubble in the real estate market or isn't there? It's a question many investors are trying to answer as prices continue to rise in many parts of the country. My next guest says who cares? Whether you're more Pollyanna or Chicken Little about the market, he says there's money to be made no matter what. Michael Copeland, senior writer of "Business 2.0" joins me with a look at some innovative ways to cash in, no matter which way the real estate market goes. And with the real estate market up oh, what like 50 some percent since 1997, there are a lot of people out there who are saying the sky is falling. You say it doesn't matter. It doesn't matter because there are real important ways you can still make money. The first one you point out is location, location, location. Tell us about that.

MICHAEL COPELAND, BUSINESS 2.0: I will. This is not what you might expect. This is about house moving. It's sort of an arbitrage between houses that are cheap in one location and locations that are very expensive to buy houses in. And so we've talked to Ducky Johnson, who's a house mover in Florida who's got a booming business moving houses from places like Alabama to sort of coastal panhandle Florida and what you want to think about is the price of the house. You can pick one up cheap say for $17,000 in some sort of less desirable location and put it on a truck, move it 50 miles or so and double your money. It's cheaper to move wood houses because they flex a little I guess on the road and a little more expensive to move brick houses, but you can move them for $15 to $30,000 for 50 miles. So you need to think about that arbitrage and what your costs are and what you're going to get on either side.

SERWER: Old ducky must really have quite some business down there. Good stuff. Listen, I want to just take a step back though Michael and ask you about the real estate market before we go through some of your tips.

COPELAND: Sure.

SERWER: Come on, this is really getting frothy. I'm reading the paper every day, oh, we bought this vacation condo in Florida. Then we flipped it two months later made and 100 percent on our money. Come on. Things are really out of control in a lot of markets now aren't they?

COPELAND: Froth is a good word and yet it keeps going up. I would say the sort of condo -- speculative condo flipping that you see in places like Florida, Arizona, Las Vegas, as soon as there's a pullback in the market, those kind of deals are going to get crushed. You're going to see values drop on those things pretty quickly. But the question is when? We've been saying that for the last couple of years and things just keep going up.

SERWER: Keep on keeping on.

COPELAND: Yeah. Even the bubble people are sort of now kind of figuring out what we meant by a bubble.

SERWER: But that's always worst time when the bubble people say there's not a bubble anymore. Anyway, Jack you were going to ask them something weren't you?

CAFFERTY: I want to know more about Ducky Johnson and, you know -- go ahead.

COPELAND: I'm just saying, if you want to get into the house- moving business, Ducky Johnson was one of 18 kids or something like that. So you need a lot of people to move these houses.

CAFFERTY: I'd be afraid to find out what the other 17 are named. The bubble will burst. Trees don't grow to the sky. What happens when all of a sudden, you know, we get a sharp decline in the dollar, which is a possibility that triggers a big spike in interest rates and suddenly you can't find a 5 percent mortgage anywhere to be found and they go to 7, 8 percent. God forbid, but it could happen. And you're stuck with, you know, yourself mortgaged up to your eyeballs in real estate that you planned to turn for a profit. How do you make moan if the market suddenly turns and goes south? COPELAND: Well, what you're going to do is, you're not going to be looking so hard at residential real estate like that. I agree that when - if interest rates spike and hopefully the economy keeps on a sort of an up tick, but if the economy heads south, we're going to have a lot of people who can't afford their mortgages, especially those who jumped into adjustable mortgages and were sort of assuming their payment was going to be a certain place for a certain period of time, which they will, but they're going to be in trouble.

There's another area that we looked at, self-storage, which is kind of as one guy who's in the business describes it as a barge and it just sort of chugs along no matter what the market is doing and the returns are never great, but they again they don't get killed when the market heads south. And that's because, when times are good, people have plenty of stuff that they need to store and when times are bad, people have to move out of office buildings or homes, there's stuff that they want to store. So self-storage is one of those a place that just, in real estate that if you can get in and lease it up and once these things are leased up, they stay sort of 85 to 90 percent leased. You can weather things like this.

ROMANS: Let's talk about weathering it a little bit too, because Robert Shiller (ph) of course at Yale is famous for his book "Irrational Exuberance," essentially saying that the stock market was going to hit a peak and that was back in 2000 and boy, he was right. He's been banging the drum a little bit about the housing market lately, although he and a lot of other people point out that housing market is much less liquid than the stock market, so a bubble can take a lot longer to burst. But he has some interesting ideas on how to hedge financial instruments to actually hedge a decline in the prices of housing. Tell us about that.

COPELAND: Well, you've described it well. I think it's exactly. It's a financial instrument where you can -- if I just bought a house in Berkeley, California, say. And I'm worried that what you say might come true, that interest rates spike and the housing market just collapses, I can buy a financial instrument that is basically insurance against that. So I pay a certain amount to buy that insurance. If my house falls in price below a certain amount, I sort of collect on that insurance. He's trying to build that market now to provide those financial instruments. You know, you need somebody else to take the other side of that, but to date, you know, a homeowner, all you can do is buy your house and, you know, the market did what it did. If it went up, you were happy. If it went down, there was not much you could do about it but sell it for a loss. This allows you to protect yourself a little bit against a loss. And Frankly, Bob Shiller is obviously a proponent of it because he thinks it's about time for something like this and I would agree.

ROMANS: Michael Copeland, senior writer at "Business 2.0" and Ducky Johnson in Florida, thanks so much for everything. Talk to you soon.

There's lots more to come here on IN THE MONEY. Up next, spot the candidate for governor of Texas. Country star Kinky Friedman says he wants to land the extra closet space in the governor's mansion. We'll ask him what else is on his agenda.

And later on the block, a woman's personal offering is causing quite a stir on eBay. We'll take a closer look.

(COMMERCIAL BREAK)

SERWER: He's made a name for himself through his songs like get this, "They Ain't Making Jews Like Jesus Anymore" and how about this one, "Get your Biscuits in the Oven and your Buns in the Bedroom." But these days Texan Kinky Friedman is singing a different tune. The musician and mystery novelist has thrown his cowboy hat in the ring, running for governor of the Lone Star state under the slogan, why the hell not? Kinky Friedman joins us now from San Antonio, Texas. Kinky, welcome to the program. We're delighted to have you here.

KINKY FRIEDMAN, TEXAS GUBERNATORIAL CANDIDATE: Great to be here.

SERWER: I guess - there we go, nice cigar. I guess the big question is why would such a well-grounded individual as yourself want to dip his cowboy boot into the ooze of partisan politics?

FRIEDMAN: Well, aside that from what you've already mentioned, that I do need the closet space, there is something perhaps more important. I've achieved many of my dreams in my life and I'd like to see other people be able to achieve some of theirs, especially younger Texans.

ROMANS: Younger Texans. Do you think you can be a role model perhaps for some real class in politics for once. Is that what you think?

FRIEDMAN: Well, I think that I won't be really involved with politics. I'm looking for a place that's above politics. What some people are missing about this campaign or revolution or rodeo or whatever it is, is that it's not a political thing. It's a spiritual calling. It's not a political campaign. I'm a Judeo Christian and Jesus and Moses are both in my heart and I would point out that both of them were independents.

CAFFERTY: You got an Arab running your campaign, too, right?

FRIEDMAN: That's right. I'm a Jew running for governor of Texas and the campaign chairman is a Palestinian, Farouk Shami (ph). So there's the ultimate peace ticket right there.

CAFFERTY: How did you get on the ballot down there?

FRIEDMAN: It's like jumping through hoops of fire. A year from now, right after the primaries in '06, we have to collect 50,000 signatures for a petition drive to get on the ballot. Nobody who voted in either primary, Democrat or Republican, can sign the petition. So it's like these career politicians are not sending the elevator down to the rest of us. In fact, they've cut the cables if they could.

SERWER: Kinky, you got a lot of great friends down there. I know Willie Nelson is one of your buddies. I think you've suggested he would be a good energy adviser. Wouldn't he make a better tax commissioner for the state of Texas? Come on!

FRIEDMAN: That's a good idea. Willie is actually my energy adviser, handling a thing called bio diesel and if you haven't heard of it, look it up when you get home, because this is going to be the new thing. Bio diesel, it fuels Willie Nelson's tour bus and it can fuel any diesel engine and it costs about 80 cents less than regular gasoline. It's totally biodegradable and that's what we're going to be pushing. Texas led the country in gas and oil exploration. Now Willie and I are going to see that Texas leads the country in bio diesel.

ROMANS: You also point out that Texas leads the country in executions and is 49th in education and you point out that, didn't anybody learn anything from the execution of Jesus Christ? What are you going to do about flipping those two numbers around?

FRIEDMAN: Well, my spiritual adviser, Billy Joe Shaver, who is a musician -- of course, what I'm trying to do is get the state run by musicians, instead of politicians. What Texas doesn't have a life without the possibility of parole. All we have is eject or inject, you know? I'm going to be watching that one carefully. I'm not anti- death penalty, but I'm damn sure anti the wrong guy getting executed.

CAFFERTY: You're also out to prevent something called the wussification of Texas. In your humble view, Texas is all that stands between ruination of this great nation and political correctness through all 50 states. What's in jeopardy in Texas? What is the wussification of Texas consist of?

FRIEDMAN: Well, it may not be the easy way, but it's the cowboy way, which is to protect the image of the cowboy. For one thing, it's being used as a derogatory word in some quarters. The cowboy has always been a knight, a knight out of time. Remember when people were ashamed to say Merry Christmas? As a Jew, people would really be embarrassed when they slipped and they'd say "Merry Christmas" Kinky and oh, my God. I'm so sorry. This is wussification. Austin is the live music capital of the world and Austin, the smoking regulations are killing them. I want to bring back nondenominational prayer in the public schools. What's wrong with a kid believing in something? I'm going to fight this wussification if I got to do is one wuss at a time.

SERWER: Hey, Kinky is there any way you can change the rules so that out of staters who aren't residents can vote for you?

FRIEDMAN: We're working on that. We'll see what we can do.

SERWER: I want to vote for you.

FRIEDMAN: We welcome Texans and spiritual Texans all over the world because Texans are my special interest group. I have no -- no one owns me, no strings attached. And this will be a very interesting experiment, to have somebody in there that's neither plastic nor paper, but is a real person. ROMANS: Where do these politicians come from Kinky? That's my question. Musicians seem more like real people than some of these guys we got in office.

FRIEDMAN: There's no question that I'm more in tune with real Texans than any politician out there. This is something they've done since 1859, when Sam Houston was our first governor. There has not been an independent on the ballot. This is the first time and I'm running in the spirit of Sea Biscuit and I don't want to place or show. I plan to win this race.

ROMANS: Kinky "Sea Biscuit" Friedman. Thank you so much for joining us. Best of luck to you, sir.

FRIEDMAN: Thank you very much.

ROMANS: All right. Coming up, filling the corner office. We'll tell you about one possible candidate to run the World Bank and the high stakes job she just lost. If you want to weigh in on that or any other story we're running this week, drop us a line. The address is inthemoney@cnn.com.

(COMMERCIAL BREAK)

CAFFERTY: Allen Wastler joins us now with the story of what two women are doing after they both suffered losses of a very different kind. He has that and, of course, the fun site of the week. How are you doing?

ALLEN WASTLER, MONEY.COM: I'm doing fine Jack. This is sort of - well, this week we had two extremes of news. First, Carly Fiorina just lost her job at HP, looking around. She suddenly surfaced as a contender for the top job at the World Bank because the head there, Mr. Wolfeson (ph) is stepping down. So they're thinking hey, this could work.

Now, everybody could start making the jokes and, in fact, they did. OK, you wrecked HP. Now take on the world economy. I think that's kind of unfair. When you think about the World Bank job, first of all, even though if you're the top dog there, the prez, you don't really control it. It's controlled by all of the members.

SERWER: That might be a good for her then. Sorry.

WASTLER: Also the big thing you do in that Andy, is you go around glad handing most of the time. You're traveling, visiting and that was one of the big complaints about her at HP is, she's going glad handing around all the time.

SERWER: So she's perfect for the job.

WASTLER: Perfect, perfect. So you got Carly at one end. Here's at the other end we have Tawny Peaks. Do you remember Tawny Peaks Jack?

CAFFERTY: I remember the name but I can't tell you... WASTLER: She was the stripper, 64hh.

ROMANS: I remember the name, he says.

WASTLER: She knocked a guy out doing her act. Apparently she hit him with said assets of her act.

ROMANS: Her maracas.

WASTLER: Her maracas, very good Chris.

SERWER: She can say that. We can't.

WASTLER: He sued, wanting damages, claiming whiplash and that they were like big cement bricks that sort of hit him and stuff like that. It went to the people's court. Ed Koch was the arbitrator.

SERWER: Roll tape please.

CAFFERTY: Neil Cavuto doesn't do this material.

WASTLER: Anyway, Tawny Peaks has retired, but she has one of the implants. She had the implants removed, decided to become a homemaker. She has one of the implants. She put it on eBay this week. In the space of one day, the bids on that bad boy went over 11 grand. Can you believe it?

ROMANS: No!

WASTLER: Yepper!

(CROSSTALK)

WASTLER: So there you have a high profile woman.

CAFFERTY: And then another high-profile woman.

SERWER: I see how they're connected.

WASTLER: So you see, it comes together. We're better than PBS aren't we?

CAFFERTY: We're different from PBS. Let's go to the fun site of the week.

WASTLER: You had Kinky Friedman on this one, right. Did you know that one of his big hits was up against the wall redneck. So in honor of that redneck thing and I apologize to my cousins (INAUDIBLE). We have some red neck photos for you here. The first one, the redneck SUV. There you go. Now we're talking music here. How about the redneck wind chime? You got to love it.

ROMANS: Oh, yeah!

WASTLER: We have a fine collection of redneck photos on the show page for in the money. Please, go check it out. CAFFERTY: All right. Thanks, Allen. 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. You can send us an e-mail right now. We're at inthemoney@cnn.com.

(COMMERCIAL BREAK)

CAFFERTY: All right. Time now to read your answers to our question of the week about whether the United States should negotiate with the insurgents in Iraq. JoJo wrote, why not? We've tried bombing, shooting and even so torture at Abu Ghraib and it didn't accomplish anything. Talking with insurgents is OK by me if it gets our best and brightest home.

David wrote, if the insurgents are simply the remnants of Saddam's army, then talking with them may accomplish something. But if they're just religious zealots, then we shouldn't both.

And Felina (ph) wrote from Alabama, forget about talking with them. The best way to deal with the insurgents is to close the Iraq/Iran border and kick out the news media, so the Marines can get the job done.

Now for next week's e-mail question of the week it's this. Should President Bush and the Republicans give up their fight to change Social Security? Send your answers to inthemoney@cnn.com. And you should also visit our show page at money.com/inthemoney which is where you'll find the address for our fun site of the week. No insult toward rednecks intended. It's just for the yucks.

Thanks for joining us for this edition of IN THE MONEY. My thanks -- there's that music. My thanks to Lou Dobbs correspondent Christine Romans, "Fortune" magazine editor at large Andy Serwer and money.com managing editor Allen Wastler. And thank you Kinky.

Join us next week 1:00 on Saturday, 3:00 on Sunday. Or you can catch Andy and me here weekday mornings on "AMERICAN MORNING" starting at 7:00. Have a good rest of the weekend.

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


Aired March 6, 2005 - 15:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEOTAPE)
ANNOUNCER: From New York City, America's financial capital. This is IN THE MONEY.

(END VIDEOTAPE)

JACK CAFFERTY, HOST: Welcome to the program. Coming up on today's edition of IN THE MONEY. I'm Jack Cafferty, by the way:

Is he Osama bin Laden's new best friends? Abu Musab al-Zarqawi is Iraq's biggest name in terrorism and there are reports now that al- Qaeda has a job for him. They want him to attack targets on U.S. soil.

Plus, you can love her or you can hate her, but would you vote for her? Find out if Hilary Clinton's image makeover can take her all the way to 1600 Pennsylvania Avenue.

And the next best thing to a sure thing: We'll hear about some strategies for making money from real estate, whether the market is up or down.

Joining me today, a couple of IN THE MONEY veterans. "Lou Dobbs Tonight" correspondent, Christine Romans, and "Fortune" magazine editor-at-large, Andy Serwer.

So, the polls are indicating the public doesn't like the idea of overhauling Social Security. The majority leader in the Senate, Bill Frist, says well, we may get to it next year. Next year is an off- year election year for those lovely folks down in the Congress of the United States. I don't think anybody up for reelection is going to be too anxious to tamper with Social Security in an election year. And yet President Bush is on the road for two more weeks trying to sell this thing. Is it a pig in a poke? Is Social Security reform dead?

CHRISTINE ROMANS, "LOU DOBBS TONIGHT": I'm starting to hear a little bit of something called Social Security Plus. Maybe letting people have their own kind of extra government sponsored program, outside of Social Security, and the White House not exactly endorsing that just yet. But there are a lot of different variations what this might turn out to look like. But, they're not giving up on it. They really are expending a lot of political capital, the president is, on this idea.

ANDY SERWER, "FORTUNE" MAGAZINE: You know, the old cliche, Jack, of course, this is the third rail of American politics, i.e., you don't want to touch it. I think the president actually did a pretty bad job of framing the debate, because, you know, at first they called a crisis and then they had to back away because a crisis is something that's going to happen, like, in the next day or two.

CAFFERTY: Right.

SERWER: And it's not going to happen and it happens down the road, it still is a problem. So, I think he is losing political capital, here. At some point he may have to abandon ship, making this a focus of domestic policy.

ROMANS: Do you think it hurts his legacy?

CAFFERTY: Well, that remains to be seen because we don't know what his legacy's going to be, yet. But somebody suggested that maybe he the cart before the horse. That it might have been better for him to approach the subject of tax reform and get some sense that we're going to take some of that burden off of people's backs first.

SERWER: Right.

CAFFERTY: And then say now that we've made the tax situation a little easier for you, let's take a look at your retirement. I mean that's -- you know, critics and Monday morning quarterbacks are a dime a dozen, but it remains to be seen. Suffice it to say he's not where he'd like to be in the debate right now over changing Social Security.

SERWER: Yeah.

CAFFERTY: All right, on to other things. Talking about violence in Iraq and sooner or later you'll be talking about this guy: Abu Musab al-Zarqawi. He has claimed responsibility for dozens of kidnappings and attacks. And now the feds say that they have gotten word that Osama bin Laden is asking Zarqawi to think about hitting targets in the United States. Department of Homeland Security announced that new intelligence, this past week. Authorities call it "credible but not specific."

Michael Swetnam's going to help us assess the threat, and see what it says about the state of al-Qaeda. He's the CEO and president of the Potomac Institute for Policy Studies in Washington, D.C.

Mike, nice to see you. Thanks for being with us.

MICHAEL SWETNAM, POTOMAC INSTITUTE: Thank you for having me on the show.

CAFFERTY: You call Zarqawi "Dennis the Menace," which is a -- I just love that name. How so?

SWETNAM: Well, years ago, he was just nothing more than a common criminal bouncing from country to country, causing problems. He seemed to have found a niche for himself in Iraq as one of the leaders of the insurgency. And he really is just a trouble causer looking for a cause to hang his hat on or to hang his potential fame on. He's looking to be one of the big guys in the terror scheme now and he's trying to get recognized, not just by bin Laden, but anybody else who will recognize him as a force in the will world.

ROMANS: So he's kind of bottom of the barrel, but boy he really is responsible for terrible things. Does it show, maybe, some weakness in the bin Laden camp, if they're even considering reaching all the way down and aligning themselves with in guy.

SWETNAM: Very much so. It's an indication that we really have rounded up and captured or killed most of bin Laden's chief lieutenants. Khalid Sheikh Mohammed or Mohammed Atef, all have been killed, captured, rounded up or put into a position where they can't show their face without being arrested or killed. So they're reaching out to about the only guy left in the Middle East who really has credibility in raising troops and who people have been following. And so, he is a person that has shown the capability to get people behind him and to go cause us a lot of trouble. We ought to be frightened if he gets out of Iraq and comes towards us here the United States.

SERWER: Yeah, I was going to say Michael, aren't we doing a disservice here by sort of dismissing him as Dennis the Menace or bottom of the barrel? Do we understand what this guy is about? I mean, his he an Islamic, is he a terrorist, is he a criminal, does he want power in Iraq? I mean he must have some sort of objective other than just trying to wreak havoc?

SWETNAM: Well, I think his main objective over his career is to really just to bring fame to himself and to try to be seen as a leader in the world. Recently, his writings and his speeches have been such that he's been adopting many of the radical Islamic ideas that characterize al-Qaeda. But in truth, his history has just been as a trouble causer. I think he's just trying to enrich his fame around world, but we should be very afraid of him. He isn't just a trouble causer, he's a person who's shown great capability to put together car bombs and schemes that cause us an awful lot of trouble. And as I said, if he was able to escape Iraq and bring lots of followers with him, he could cause us a lot of problems here at home.

CAFFERTY: Rhetorical question, just for, you know, a dumb guy who doesn't understand the sophistication of these things, and that is, if the Department of Homeland Security knows that Zarqawi is talking to Osama bin Laden and bin Laden is talking to Zarqawi, how come we don't know where these guys are? And why can't we round them up? But that's another topic for another day. Can -- is this guy capable of attacking targets inside of the United States?

SWETNAM: I think it's very, very difficult. We're much more aware than we were before, but the truth is that still there are holes. It is possible to slip in bombs and explosives on cargo carriers and people still slip across our borders unnoticed everyday. So the potential is there. And we really have to keep our vigilance up if we're going to have any hope of catching them before they perpetrate another bad act.

ROMANS: Michael, a lot of talk this week about the whiff of democracy being smelled throughout the Middle East, this week. Does this at all diminish the chances of some sort of event on U.S. soil? Diminish the chances of this kind of insurgency in Iraq and elsewhere is continue?

SWETNAM: It certainly puts a damper on the insurgencies. A key thing to note was, a few days before the election, Zarqawi characterized the battle no longer as a fight against the occupiers, the United States, but as a battle against democracy. And almost immediately the population turned in a couple of his deputies and we were able to put a real comment his forces there. So the spread of democracy is a very good thing that'll help dampen all of these radicals and force them down into a corner. But, certain it won't get rid of them. We're still going to have to deal with the crazies of the world and he's one of them.

SERWER: Michael, do you find disconcerting that there haven't been any terrorist acts here in the United States, and let me explain, because I think it would be very easy to conduct a low-level small attack. So does that, in other words putting a bomb in a park in New York City or something like that. So does that suggest they're working on something bigger?

SWETNAM: It does. I think there have been two or three attempts that we've foiled over the last three years. And I think there's an indication that they've been attempting to go after the big one. That they haven't concentrated on putting together the small ones. And the problem with the big attack is that it takes more coordination and more people, and, therefore, our -- the potential of us catching them is higher, and in fact we have thwarted a couple of those attempts over the last couple of years, but as has been said by many our leaders, time is on their side and sooner or later they're probably either going to get away with a big one or they're going to turn to the smaller ones which is much, much harder for us to catch.

CAFFERTY: You guessed the two glaring weaknesses in national security here, that's the ports where these thousands and thousands of containers come in on the container ships every week, month, whatever. A lot of the money allocated for port security reportedly hasn't been spent for that, and then of course these borders, which particularly the one in Mexico is just a joke. Why haven't we mustered the political will or whatever it takes in this country, to tighten those things up and clamp down on this stuff? Why are the borders leaking like a sieve three-and-a-half years after they blew up the World Trade Center in the United States?

SWETNAM: Well, I think you pointed right to the problem, it's a lack of political will. The fact of the matter is we can solve those problems, but it would cost an immense amount of money, lots of people, lots of money over a long period of time, and the political will to do that is not quite there yet. Many have commented that even though we claim to be at war, a war against terrorism, we haven't really marshaled all of our forces and put all of our money against it. This is an indication, right here. If we were to really attack the problems of cleaning up our borders and expecting all of the cargo containers, we would probably double the Department of Homeland Security budget, and there probably isn't the political will to do that today in Washington. CAFFERTY: Well, and there's another school of thought that says they don't want the borders closed. That that's a source of cheap labor in this country and there's that whole debate about whether or not the corporations are in favor of having those borders just like they are.

SWETNAM: Absolutely. It costs them one way or another.

CAFFERTY: Yeah. Mike, we got to stop it there. Thank you for your insight, it's nice having you on the broadcast.

Michael Swetnam, CEO, president of Potomac Institute for Policy Studies, joining us from Washington, D.C.

When we come back, The faith factor: We'll look at what that and some other image changes are doing for Hillary Clinton's political chances.

Also ahead, you paid for your home, now it's time for your home to return the favor. Check out some market resistant tips for profiting in real estate.

And how to say "Governor Kinky" with a straight face: Find out why country singer Kinky Friedman's putting his 10 gallon hat in the ring to be the governor of the great Lone Star state of Texas.

(COMMERCIAL BREAK)

CAFFERTY: Hillary in '08? Love her or hate her, you better get use to hearing that slogan and seeing it. Observers say Senator Clinton may be pensioning herself for a run for the White House, as her speeches have become more centrist and more focused on religion. Jennifer Senior is one such observer. She is a contributing editor for "New York" magazine, and joins us now with more on this.

Is there any doubt in your mind she plans to run for president?

JENNIFER SENIOR, "NEW YORK" MAGAZINE: No. Zero doubt.

CAFFERTY: Zero doubt?

SENIOR: I can say this -- yes. I can say this unequivocal. I don't think so.

CAFFERTY: Is the choice the Democratic Party ought to be making? She is arguably one of the most decisive and controversial figures on the American political scene. The -- you know, they abound and a reputation precedes her by about eight or nine years. Is this the -- is the party's idea of what they want to have fronting the ticket?

SENIOR: It depends on who you talk to in the party. I think that are there people in the party who would like to sort of shake the Etch-a-Sketch, you know, get rid of the Clintons, wipe the skate clean. There are others who are astoundingly, like, gung-ho, they really like the idea of the Hillary candidacy. And they sound a lot less deranged about this after five minutes of discussing this. I mean, at first blush, it does seem nutty and self-destructive, but there are rational people, believe it or not, in the Democratic Party who support this idea.

SERWER: Well Jennifer, let me ask you, I mean, we've always heard that she had very high positive rating, but also very high negatives, and you know, wouldn't ultimate a Hillary candidacy just sort of result in a rerun of the Kerry scenario, where, sure, you know, you pick the blue states, you don't win the election. I mean, think about the people attending the Alabama Auburn game, down there in Alabama. Would anyone in that stadium vote for Hillary Clinton? Anybody?

SENIOR: Do I have to think about -- I don't know if that's football. This is so...

SERWER: It is, it's football. It's real football.

SENIOR: Sorry. All right, all right. Can we suspend that? For five seconds.

SERWER: We'll suspend it. You go.

SENIOR: And also Alabama. Not the right state to be examining. I mean...

SERWER: But you have to win some votes down there, you don't have to carry it, but you should win Arkansas. I mean, Bill Clinton won Arkansas, right? You have...

SENIOR: She's not bad in Arkansas. Hold on, but that's actually -- OK, if we move, you know...

SERWER: Move west.

SENIOR: Yeah, right. Yeah. We're doing better if you look at Arkansas, or if you look at, I don't know, Ohio?

SERWER: Missouri?

ROMANS: Right.

SENIOR: Florida. Again, she actually runs much better among women, among Hispanics, among blacks, one could argue, than Kerry does and did. I think that she will actually have these kind of narrow swathes of the Democratic Party that are sort of critical a democratic victory in her corner, where Kerry didn't. I mean, something like 16 percent of the, you know, black vote in Ohio went to Bush, which is quite high.

ROMANS: She is a -- she is a lightening rod, but at the same time there, is that name recognition. I mean, her name recognition has got to be, except for Bill Clinton, you know, the highest democratic name recognition in the country, at this point.

SENIOR: Yes. ROMANS: At the same time, do you think she really has been moving more centrist lately? That she's talking more about religion, that's she's been talking more about issues that might appeal to the red states? Her aides would say she's always talked this way, have spoken this way, but now all of a sudden people are being cynical?

SENIOR: Well, what aides going to say no, in fact, she's actually refashioning her, you know, discussion to meet her desire -- her objectives for '08, they can't say that. The answer is that, look, she has it in the House, right? I mean, Bill Clinton actually genuinely does think this way. She has the advantage of being genuinely religious, so it's not that big a leap for her to actually invoke god in discussion and to invoke her spirituality. It was her husband who said, and I think she agreed, that you should make abortion safe, legal, and rare. So, in some senses they're right. And another sense is, look, this is a woman who came of age in the '60s and I don't know if you can take the sort of Wellesley feminist out of her entirely, but she's been extremely discipline at keeping her, you know -- into something very -- you know, it's like the size of a tea cup, that person now. She's really squelched it deep down inside her.

CAFFERTY: You mentioned the surprising black voter turnout in Ohio per President Bush. Isn't it a bit of a tactical mistake on the part of the Democratic Party to sort of take the black vote for granted? I mean, there are a lot of middle class and upper middle class black families that, quite frankly, don't have democratic values in this country anymore, and are probably more inclined not just this Ohio, but elsewhere to vote for a republican candidate. That seems to me to be an assumption that the democrats have made at their peril.

SENIOR: You're absolutely right. It's impossible to ignore those. It's un-ignorable, it's un-dismissible and yet, they kind of ignore and dismiss it. So, I'm not sure how to answer that other than to say, you're right. I think it's not even necessarily always a question of class, but values. I mean, what they were doing in Ohio was very interesting. They were running ads on black radio that were talking about gay marriage. I mean, this is also a traditional value's question, where in the church, and in many black communities, you know, people want to see, you know, a man and a woman be married and I don't -- I guess I'm less certain about issues regarding choice and things like that. But I mean, yes, you're right. I don't think that the democrats can afford to take the black vote for granted. That's absolutely true.

SERWER: Jennifer, quick last question. New York State is actually schizophrenic, down state very liberal, upstate not so liberal, conservative. Has she been able to turn people's opinion up state do you think?

SENIOR: Utterly and completely, it's one of the most amazing things about her. In small context, in small setting, she's great at this stuff. I mean she's one on one, she's charming. I mean, you know, in a public -- in giant public setting, her speeches are still narcotizing, you know, they're like chloroform or something, but in tiny, tiny setting, she's actually, charming, and she can go, you know, farm by farm, room by room, person by person, and convert them. And make them like her. I don't know how that works out in a presidential campaign where it's all done through TV, but we will see.

ROMANS: All right. Jennifer Senior of "New York" magazine, thanks so much for joining us.

SENIOR: Thank you.

ROMANS: Coming up right after the break. The mega deal that could change the way you shop. See if investors are buying Federated's move to buy a retail powerhouse.

Plus, if you build it, will they come? Look at some tips on making money off of real estate, whether the housing market is up or down.

And, big bigness: One woman cashes in on her brush with the law in a very personal with way.

(COMMERCIAL BREAK)

ROMANS: Now let's take a look at the week's top stories in our "Money Minute." Martha Stewart is a free woman, sort of. Stewart got out of federal prison Friday, but she will now serve five months of house arrest at her home in suburban New York. Share prices for Martha Stewart living OmniMedia are way up since last year and she's going to star in her own prime-time reality show on NBC.

Fed chairman Alan Greenspan took his case for tax reform to Capitol Hill, this week. Greenspan urged Congress to simplify the tax code and start considering shifting the focus from income taxes to sales taxes.

But no change in the tax code is likely to help aeronautics and telecom businessman, Walter Anderson. The IRS charged him with, but oh $210 million worth of tax evasion, the most ever by one person. Prosecutors say he illegally hid money in Panama and Holland and the indictment also says in 1998 he paid less than, well, $500 in income taxes.

SERWER: Another big story this week was Federated's decision to buy department store rival May for about $11 billion. The deal combines Macy's and Bloomingdales with Lord and Taylor and Marshal Field's. Industry watchers say the consolidations shows just how much discounters like Wal-Mart and Target have taken from the retail department stores. Federated shares are trading near five-year highs, but some say the deal is like reinventing the wheel for the Model-T because the retail department store sector is way past its prime. That makes Federated Department Stores our "Stock of the Week."

And, you know, it is a bad business model in the sense that it's so long in the tooth. I mean, this goes back to the 19th century, but interestingly, I went back and checked. Federated stock since 1992 point in time, has tripled in those 13 years.

CAFFERTY: Wow. SERWER: Beating the market, which suggests that the federated people must know a little bit about what they're doing. One thing they've done is to roll up this business, buy all of these chains all across the country.

ROMANS: But then there goes those regional brand names. You know, I -- this is -- we talk about this a lot where everything is so national now, Wal-Mart, you know, Sam's.

SERWER: Bed, Bath and Beyond.

ROMANS: Bed, Bath and Beyond. Federated Department Stores, Bloomingdale, Macy's will now be the big name all across the country. What about those little regional department stores that have been bought up and bottled up?

SERWER: She's getting all sentimental.

CAFFERTY: Yeah, like you mean like Woolworth's.

(LAUGHTER)

CAFFERTY: The five on a dime? You know, one the thing this will do, though, and one of the keys to the success of companies like Wal- Mart, is they squeeze the suppliers, they squeeze them hard on prices. Well, Federated is going to be able to do the same thing by incorporated this additional bunch of stores and under their brand- name, when they go to buy drapes or night gowns or whatever it is they're going to sell, they can say to the suppliers, we're basically the only outlet in town for certain of these products, you've got to give us a better price.

ROMANS: You know what that means, eventually.

CAFFERTY: Yeah.

ROMANS: When you go down the food chain, it means that the stuff comes in cheap from some place else and their -- you know, U.S. manufacturers really get hurt.

CAFFERTY: But for the shareholders, I mean, it would fit Federated's plan.

SERWER: Yeah. I'm not sure, you know, this whole notion of changing all the names to Macy's, for instance, in fact, this Sunday, Federated is going to be changing the name of Bon Marche, Rich's, Burdine's, Lazarus, Goldsmith's, all across the country, we all know those stores in all these cities, to Macy's.

ROMANS: That's what I mean.

SERWER: You know, a lot of people are bemoaning that. I'm not sure who this really helps. I mean they think that Wall Street likes this by having one name and then they can go to these conferences and say, we've got one name across the country. I don't think people like it, I don't think customers like it at all. ROMANS: I think you're right.

SERWER: You know, so it'll be interesting to see if they can make this work and they are the big kahuna, they're really the only game left in town.

CAFFERTY: And as you pointed out, Federated stock price tripled in the last few years.

SERWER: Right.

CAFFERTY: So they're making that part of the business work. Do you buy the stock or not?

SERWER: You know, I wouldn't.

ROMANS: Sell the news, maybe.

SERWER: Yeah, I -- you know, at this point, I think it's going up a lot. And I could be wrong and I hope I am for all of you Federated shareholders out there.

CAFFERTY: There you go. Coming up?

SERWER: Yeah, coming up on IN THE MONEY:

Thinking smarter about the housing market: Learn about some ways to profit off of real estate, whether the business is hot or not.

Plus, Kinky and proud of it: We'll ask country star Kinky Friedman why he's running for governor of Texas.

And taking it to the bank: See what could lie ahead for Carly Fiorina after getting pushed out of Hewlett-Packard.

(COMMERCIAL BREAK)

CHRISTINE ROMANS, CNN CORRESPONDENT: Is there a bubble in the real estate market or isn't there? It's a question many investors are trying to answer as prices continue to rise in many parts of the country. My next guest says who cares? Whether you're more Pollyanna or Chicken Little about the market, he says there's money to be made no matter what. Michael Copeland, senior writer of "Business 2.0" joins me with a look at some innovative ways to cash in, no matter which way the real estate market goes. And with the real estate market up oh, what like 50 some percent since 1997, there are a lot of people out there who are saying the sky is falling. You say it doesn't matter. It doesn't matter because there are real important ways you can still make money. The first one you point out is location, location, location. Tell us about that.

MICHAEL COPELAND, BUSINESS 2.0: I will. This is not what you might expect. This is about house moving. It's sort of an arbitrage between houses that are cheap in one location and locations that are very expensive to buy houses in. And so we've talked to Ducky Johnson, who's a house mover in Florida who's got a booming business moving houses from places like Alabama to sort of coastal panhandle Florida and what you want to think about is the price of the house. You can pick one up cheap say for $17,000 in some sort of less desirable location and put it on a truck, move it 50 miles or so and double your money. It's cheaper to move wood houses because they flex a little I guess on the road and a little more expensive to move brick houses, but you can move them for $15 to $30,000 for 50 miles. So you need to think about that arbitrage and what your costs are and what you're going to get on either side.

SERWER: Old ducky must really have quite some business down there. Good stuff. Listen, I want to just take a step back though Michael and ask you about the real estate market before we go through some of your tips.

COPELAND: Sure.

SERWER: Come on, this is really getting frothy. I'm reading the paper every day, oh, we bought this vacation condo in Florida. Then we flipped it two months later made and 100 percent on our money. Come on. Things are really out of control in a lot of markets now aren't they?

COPELAND: Froth is a good word and yet it keeps going up. I would say the sort of condo -- speculative condo flipping that you see in places like Florida, Arizona, Las Vegas, as soon as there's a pullback in the market, those kind of deals are going to get crushed. You're going to see values drop on those things pretty quickly. But the question is when? We've been saying that for the last couple of years and things just keep going up.

SERWER: Keep on keeping on.

COPELAND: Yeah. Even the bubble people are sort of now kind of figuring out what we meant by a bubble.

SERWER: But that's always worst time when the bubble people say there's not a bubble anymore. Anyway, Jack you were going to ask them something weren't you?

CAFFERTY: I want to know more about Ducky Johnson and, you know -- go ahead.

COPELAND: I'm just saying, if you want to get into the house- moving business, Ducky Johnson was one of 18 kids or something like that. So you need a lot of people to move these houses.

CAFFERTY: I'd be afraid to find out what the other 17 are named. The bubble will burst. Trees don't grow to the sky. What happens when all of a sudden, you know, we get a sharp decline in the dollar, which is a possibility that triggers a big spike in interest rates and suddenly you can't find a 5 percent mortgage anywhere to be found and they go to 7, 8 percent. God forbid, but it could happen. And you're stuck with, you know, yourself mortgaged up to your eyeballs in real estate that you planned to turn for a profit. How do you make moan if the market suddenly turns and goes south? COPELAND: Well, what you're going to do is, you're not going to be looking so hard at residential real estate like that. I agree that when - if interest rates spike and hopefully the economy keeps on a sort of an up tick, but if the economy heads south, we're going to have a lot of people who can't afford their mortgages, especially those who jumped into adjustable mortgages and were sort of assuming their payment was going to be a certain place for a certain period of time, which they will, but they're going to be in trouble.

There's another area that we looked at, self-storage, which is kind of as one guy who's in the business describes it as a barge and it just sort of chugs along no matter what the market is doing and the returns are never great, but they again they don't get killed when the market heads south. And that's because, when times are good, people have plenty of stuff that they need to store and when times are bad, people have to move out of office buildings or homes, there's stuff that they want to store. So self-storage is one of those a place that just, in real estate that if you can get in and lease it up and once these things are leased up, they stay sort of 85 to 90 percent leased. You can weather things like this.

ROMANS: Let's talk about weathering it a little bit too, because Robert Shiller (ph) of course at Yale is famous for his book "Irrational Exuberance," essentially saying that the stock market was going to hit a peak and that was back in 2000 and boy, he was right. He's been banging the drum a little bit about the housing market lately, although he and a lot of other people point out that housing market is much less liquid than the stock market, so a bubble can take a lot longer to burst. But he has some interesting ideas on how to hedge financial instruments to actually hedge a decline in the prices of housing. Tell us about that.

COPELAND: Well, you've described it well. I think it's exactly. It's a financial instrument where you can -- if I just bought a house in Berkeley, California, say. And I'm worried that what you say might come true, that interest rates spike and the housing market just collapses, I can buy a financial instrument that is basically insurance against that. So I pay a certain amount to buy that insurance. If my house falls in price below a certain amount, I sort of collect on that insurance. He's trying to build that market now to provide those financial instruments. You know, you need somebody else to take the other side of that, but to date, you know, a homeowner, all you can do is buy your house and, you know, the market did what it did. If it went up, you were happy. If it went down, there was not much you could do about it but sell it for a loss. This allows you to protect yourself a little bit against a loss. And Frankly, Bob Shiller is obviously a proponent of it because he thinks it's about time for something like this and I would agree.

ROMANS: Michael Copeland, senior writer at "Business 2.0" and Ducky Johnson in Florida, thanks so much for everything. Talk to you soon.

There's lots more to come here on IN THE MONEY. Up next, spot the candidate for governor of Texas. Country star Kinky Friedman says he wants to land the extra closet space in the governor's mansion. We'll ask him what else is on his agenda.

And later on the block, a woman's personal offering is causing quite a stir on eBay. We'll take a closer look.

(COMMERCIAL BREAK)

SERWER: He's made a name for himself through his songs like get this, "They Ain't Making Jews Like Jesus Anymore" and how about this one, "Get your Biscuits in the Oven and your Buns in the Bedroom." But these days Texan Kinky Friedman is singing a different tune. The musician and mystery novelist has thrown his cowboy hat in the ring, running for governor of the Lone Star state under the slogan, why the hell not? Kinky Friedman joins us now from San Antonio, Texas. Kinky, welcome to the program. We're delighted to have you here.

KINKY FRIEDMAN, TEXAS GUBERNATORIAL CANDIDATE: Great to be here.

SERWER: I guess - there we go, nice cigar. I guess the big question is why would such a well-grounded individual as yourself want to dip his cowboy boot into the ooze of partisan politics?

FRIEDMAN: Well, aside that from what you've already mentioned, that I do need the closet space, there is something perhaps more important. I've achieved many of my dreams in my life and I'd like to see other people be able to achieve some of theirs, especially younger Texans.

ROMANS: Younger Texans. Do you think you can be a role model perhaps for some real class in politics for once. Is that what you think?

FRIEDMAN: Well, I think that I won't be really involved with politics. I'm looking for a place that's above politics. What some people are missing about this campaign or revolution or rodeo or whatever it is, is that it's not a political thing. It's a spiritual calling. It's not a political campaign. I'm a Judeo Christian and Jesus and Moses are both in my heart and I would point out that both of them were independents.

CAFFERTY: You got an Arab running your campaign, too, right?

FRIEDMAN: That's right. I'm a Jew running for governor of Texas and the campaign chairman is a Palestinian, Farouk Shami (ph). So there's the ultimate peace ticket right there.

CAFFERTY: How did you get on the ballot down there?

FRIEDMAN: It's like jumping through hoops of fire. A year from now, right after the primaries in '06, we have to collect 50,000 signatures for a petition drive to get on the ballot. Nobody who voted in either primary, Democrat or Republican, can sign the petition. So it's like these career politicians are not sending the elevator down to the rest of us. In fact, they've cut the cables if they could.

SERWER: Kinky, you got a lot of great friends down there. I know Willie Nelson is one of your buddies. I think you've suggested he would be a good energy adviser. Wouldn't he make a better tax commissioner for the state of Texas? Come on!

FRIEDMAN: That's a good idea. Willie is actually my energy adviser, handling a thing called bio diesel and if you haven't heard of it, look it up when you get home, because this is going to be the new thing. Bio diesel, it fuels Willie Nelson's tour bus and it can fuel any diesel engine and it costs about 80 cents less than regular gasoline. It's totally biodegradable and that's what we're going to be pushing. Texas led the country in gas and oil exploration. Now Willie and I are going to see that Texas leads the country in bio diesel.

ROMANS: You also point out that Texas leads the country in executions and is 49th in education and you point out that, didn't anybody learn anything from the execution of Jesus Christ? What are you going to do about flipping those two numbers around?

FRIEDMAN: Well, my spiritual adviser, Billy Joe Shaver, who is a musician -- of course, what I'm trying to do is get the state run by musicians, instead of politicians. What Texas doesn't have a life without the possibility of parole. All we have is eject or inject, you know? I'm going to be watching that one carefully. I'm not anti- death penalty, but I'm damn sure anti the wrong guy getting executed.

CAFFERTY: You're also out to prevent something called the wussification of Texas. In your humble view, Texas is all that stands between ruination of this great nation and political correctness through all 50 states. What's in jeopardy in Texas? What is the wussification of Texas consist of?

FRIEDMAN: Well, it may not be the easy way, but it's the cowboy way, which is to protect the image of the cowboy. For one thing, it's being used as a derogatory word in some quarters. The cowboy has always been a knight, a knight out of time. Remember when people were ashamed to say Merry Christmas? As a Jew, people would really be embarrassed when they slipped and they'd say "Merry Christmas" Kinky and oh, my God. I'm so sorry. This is wussification. Austin is the live music capital of the world and Austin, the smoking regulations are killing them. I want to bring back nondenominational prayer in the public schools. What's wrong with a kid believing in something? I'm going to fight this wussification if I got to do is one wuss at a time.

SERWER: Hey, Kinky is there any way you can change the rules so that out of staters who aren't residents can vote for you?

FRIEDMAN: We're working on that. We'll see what we can do.

SERWER: I want to vote for you.

FRIEDMAN: We welcome Texans and spiritual Texans all over the world because Texans are my special interest group. I have no -- no one owns me, no strings attached. And this will be a very interesting experiment, to have somebody in there that's neither plastic nor paper, but is a real person. ROMANS: Where do these politicians come from Kinky? That's my question. Musicians seem more like real people than some of these guys we got in office.

FRIEDMAN: There's no question that I'm more in tune with real Texans than any politician out there. This is something they've done since 1859, when Sam Houston was our first governor. There has not been an independent on the ballot. This is the first time and I'm running in the spirit of Sea Biscuit and I don't want to place or show. I plan to win this race.

ROMANS: Kinky "Sea Biscuit" Friedman. Thank you so much for joining us. Best of luck to you, sir.

FRIEDMAN: Thank you very much.

ROMANS: All right. Coming up, filling the corner office. We'll tell you about one possible candidate to run the World Bank and the high stakes job she just lost. If you want to weigh in on that or any other story we're running this week, drop us a line. The address is inthemoney@cnn.com.

(COMMERCIAL BREAK)

CAFFERTY: Allen Wastler joins us now with the story of what two women are doing after they both suffered losses of a very different kind. He has that and, of course, the fun site of the week. How are you doing?

ALLEN WASTLER, MONEY.COM: I'm doing fine Jack. This is sort of - well, this week we had two extremes of news. First, Carly Fiorina just lost her job at HP, looking around. She suddenly surfaced as a contender for the top job at the World Bank because the head there, Mr. Wolfeson (ph) is stepping down. So they're thinking hey, this could work.

Now, everybody could start making the jokes and, in fact, they did. OK, you wrecked HP. Now take on the world economy. I think that's kind of unfair. When you think about the World Bank job, first of all, even though if you're the top dog there, the prez, you don't really control it. It's controlled by all of the members.

SERWER: That might be a good for her then. Sorry.

WASTLER: Also the big thing you do in that Andy, is you go around glad handing most of the time. You're traveling, visiting and that was one of the big complaints about her at HP is, she's going glad handing around all the time.

SERWER: So she's perfect for the job.

WASTLER: Perfect, perfect. So you got Carly at one end. Here's at the other end we have Tawny Peaks. Do you remember Tawny Peaks Jack?

CAFFERTY: I remember the name but I can't tell you... WASTLER: She was the stripper, 64hh.

ROMANS: I remember the name, he says.

WASTLER: She knocked a guy out doing her act. Apparently she hit him with said assets of her act.

ROMANS: Her maracas.

WASTLER: Her maracas, very good Chris.

SERWER: She can say that. We can't.

WASTLER: He sued, wanting damages, claiming whiplash and that they were like big cement bricks that sort of hit him and stuff like that. It went to the people's court. Ed Koch was the arbitrator.

SERWER: Roll tape please.

CAFFERTY: Neil Cavuto doesn't do this material.

WASTLER: Anyway, Tawny Peaks has retired, but she has one of the implants. She had the implants removed, decided to become a homemaker. She has one of the implants. She put it on eBay this week. In the space of one day, the bids on that bad boy went over 11 grand. Can you believe it?

ROMANS: No!

WASTLER: Yepper!

(CROSSTALK)

WASTLER: So there you have a high profile woman.

CAFFERTY: And then another high-profile woman.

SERWER: I see how they're connected.

WASTLER: So you see, it comes together. We're better than PBS aren't we?

CAFFERTY: We're different from PBS. Let's go to the fun site of the week.

WASTLER: You had Kinky Friedman on this one, right. Did you know that one of his big hits was up against the wall redneck. So in honor of that redneck thing and I apologize to my cousins (INAUDIBLE). We have some red neck photos for you here. The first one, the redneck SUV. There you go. Now we're talking music here. How about the redneck wind chime? You got to love it.

ROMANS: Oh, yeah!

WASTLER: We have a fine collection of redneck photos on the show page for in the money. Please, go check it out. CAFFERTY: All right. Thanks, Allen. 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. You can send us an e-mail right now. We're at inthemoney@cnn.com.

(COMMERCIAL BREAK)

CAFFERTY: All right. Time now to read your answers to our question of the week about whether the United States should negotiate with the insurgents in Iraq. JoJo wrote, why not? We've tried bombing, shooting and even so torture at Abu Ghraib and it didn't accomplish anything. Talking with insurgents is OK by me if it gets our best and brightest home.

David wrote, if the insurgents are simply the remnants of Saddam's army, then talking with them may accomplish something. But if they're just religious zealots, then we shouldn't both.

And Felina (ph) wrote from Alabama, forget about talking with them. The best way to deal with the insurgents is to close the Iraq/Iran border and kick out the news media, so the Marines can get the job done.

Now for next week's e-mail question of the week it's this. Should President Bush and the Republicans give up their fight to change Social Security? Send your answers to inthemoney@cnn.com. And you should also visit our show page at money.com/inthemoney which is where you'll find the address for our fun site of the week. No insult toward rednecks intended. It's just for the yucks.

Thanks for joining us for this edition of IN THE MONEY. My thanks -- there's that music. My thanks to Lou Dobbs correspondent Christine Romans, "Fortune" magazine editor at large Andy Serwer and money.com managing editor Allen Wastler. And thank you Kinky.

Join us next week 1:00 on Saturday, 3:00 on Sunday. Or you can catch Andy and me here weekday mornings on "AMERICAN MORNING" starting at 7:00. Have a good rest of the weekend.

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