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Possible Flu Vaccine Shortage; The Federal Reserve's Role In Rebuilding New Orleans; Inflation Concerns; Administration Urges Americans To Save Energy; FAA Considers Cellular Phone Usage On Airplanes; Continental Airlines Mildly Profitable; New Cervical Cancer Vaccine Nearly 100 Percent Effective

Aired October 8, 2005 - 13:00   ET


GERRI WILLIS, CNN ANCHOR: I'm Gerri Willis at the CNN Center in Atlanta. Here's what's happening "Now in the News".
The death toll is climbing in south Asia after the region's strongest earthquake in more than a century. The 7.6 magnitude quake was felt some 400 miles from its epicenter near Islamabad. Government officials in Pakistan say the death toll could surge into the thousands. Villages along the border with India have been flattened and more than half dozen major aftershocks rumbled across the region.

And new details are emerging on the alleged terror plot that prompted intense security in New York's subway system. Sources tell CNN that yesterday and tomorrow were mentioned as possible dates to strike. Two separate incidents yesterday both proved to be false alarms.

And President Bush went on the offensive and on the air this morning to defend his nomination of Harriet Miers to the U.S. Supreme Court. Mr. Bush used his weekly radio address to support Miers amid complaints from leading conservatives over the nomination.

I'm Gerri Willis at the CNN Center in Atlanta. More news at the bottom of the hour. IN THE MONEY starts right now.

JACK CAFFERTY, CNN ANCHOR: Welcome to the program. I'm Jack Cafferty. Coming up on today's edition of IN THE MONEY, the storm after the calm. Wall Street's on edge about how this year's big hurricanes could wind up hitting the economy. We'll see if it's time for investors to take cover.

Also coming up why Iraq's oil riches were supposed to get the country on track, remember that? Also, help America pay for the war. Remember that? Well with gas prices rising, we'll look at what happened to the big bonanza, which isn't.

Planning for tomorrow by thinking like yesterday. More and more Americans saving energy with strategies from the '70s. Find out how a warm sweater has turned into a hot fashion item.

Joining me today a couple of IN THE MONEY veterans, CNN correspondent Susan Lisovicz, and "Fortune" magazine Editor-at-large Andy Serwer. So it's the fall, the flu season the bird flu season. We're being told there could be a pandemic. I shouldn't make light of it, but didn't we go through this same kind of scare sort of a year ago?

ANDY SERWER, EDITOR AT LARGE, "FORTUNE" MAGAZINE: Well we did. And you know, it seems like it is like clockwork now. Every winter, we have flu fever scares and they don't have the vaccines. Remember when they got this vaccine out of Liverpool, England, this company Chiron was supposed to make and they messed up?

This is a weird system, where it's partially privatized, partially not. I think it's broken, but also the Bush administration is making hay out of this, too.

SUSAN LISOVICZ, CNN CORRESPONDENT: Well and perhaps because there has been so much drama in the world, whether it is the Gulf Coast or Iraq, the president or the administration seems to want to be in front of this one. But ...

SERWER: On top of it.

LISOVICZ: Yes. But you know, in meeting with pharmaceutical heads on Friday, it's not a very profitable area for the pharmaceuticals. There's a lot of liability involved if there's side effects. Finally, they have to make a fresh batch every winter, so you have to throw it out if it's not used. It's not something that, perhaps there are going to be a lot of players in that, just like with the regular flu we all come down with every year.

CAFFERTY: If you're so inclined as to believe the warnings that this is a possibility, can you just go down to the corner health clinic and get a shot for this? I don't think you can.

LISOVICZ: I don't think so.

SERWER: Not right now, no.

CAFFERTY: So we're left to just kind of sit and worry.

SERWER: Just look at those chickens.

CAFFERTY: Just be frightened. Keep an eye on the chicken. If the chicken gets sick, call 9-1-1.

Everybody knew that this year's big hurricanes, Katrina and Rita, were going to have an impact on the U.S. economy. The unknown is how big an impact or how long it might last. Now, some post-hurricane economic numbers are coming to Wall Street. Investors trying to figure out how to ride the storm surge without taking a bath.

For one take on what these reports all mean, we're joined now by John Rutledge, chairman of Rutledge Capital, a private equity investment firm. He's also served as an advisor to the Bush White House on economic matters. John, nice to have you back with us. Welcome.

JOHN RUTLEDGE, CHAIRMAN, RUTLEDGE CAPITAL: Great to be here, Jack. Thank you.

CAFFERTY: Real early estimate, I think it came from Treasury Secretary Snow, that Katrina would probably cost GDP in the short run about a half a percentage point, but the rebuilding of the city of New Orleans, in particular, and the surrounding areas would ultimately add about a half a point to GDP. Do you have a sense what kind of long- term impact these hurricanes are going to have on us economically?

RUTLEDGE: We saw an estimate this week from the CBO that said that the up afterwards, during the rebuilding, is bigger than the down. You know hurricanes are temporary, but dumb policies last forever. That's what's happening right now. We're having a press conference about once an hour out of the White House trying to make people feel like someone's in command here. I think we're in grave danger of having policy mistakes made.

LISOVICZ: Let me guess where you're going with this. The Federal Reserve, which totally spooked the market this week, because Fed is indicating that we're not in the ninth inning anymore of interest rate hikes -- that perhaps we're in the seventh inning stretch. There's more on the way.

I don't understand it, because the Fed tightens to slow down inflation. Inflation is coming from the higher energy prices. But the higher energy prices are eating into our discretionary spending and it's costing companies more, right? So the higher energy prices are slowing down the economy anyway?

RUTLEDGE: Well Susan, there's a technical term, a financial term for this. It's called dumb. And that is exactly what's happening. I'm old enough; I was there in the 1970s, during the first oil embargo. In fact, I was in New Orleans advising the mayor at that point. And back then we learned that an oil problem is a restriction of supply. It makes less output and higher prices.

The Fed only controls demand. We need to have the Fed not give us two doses of reduction in output. They need to let this price level go up one time, because of the energy, after which inflation is not really an issue here. Inflation is held down by China, India wages and prices. So they're making a mistake. We have tax policy issues. And then of course we have the imaginary bird flu that came up this week, too.

SERWER: John, leaving aside the bird flu situation, I see you're not wearing any glasses. But maybe you're wearing some rose colored contact lens there's. Come on, inflation is definitely a problem. There's no question that Katrina and Rita are causing prices to rise. I don't see how you can say that inflation is not a problem. I mean you see higher energy prices, higher gas prices. That means higher plastic prices, higher steel prices, and higher lumber prices trucking prices going up. How can you say there's no inflation?

RUTLEDGE: Andy, you said two different things. You said there's an inflation issue and there are energy raising prices. Those are different statements. Let me tell you why. When the word inflation was first used, it was used to measure an increase in the money supply. That means the Central Bank creating demand. Inflation was printing too much money and devaluing the currency. That's not what's happening now.

What's happening is we're having pressure on commodity and resource prices, both temporary because of hurricanes, and medium term because of the growth of China. Those are one-time bumps. When those are in place, the Fed is not going to make oil cheaper by tightening interest rates. All they're going to do is restrict demand and slow the economy.

But we have a silver lining here. The silver lining is that we have a $13 trillion GDP, we have a $155 trillion asset base in the United States and no one, not Alan Greenspan, not the Federal Reserve, not Katrina, and not Rita, are going to knock that over.

These hurricanes are a speed bump, 200,000 jobs lost in New Orleans is about four weeks of normal job creation in the U.S. Hold your breath, four weeks, this will be over. But the tax rates won't, the Fed policy won't, price controls wouldn't be, and other things we could do to prolong this.

CAFFERTY: How do you explain the behavior of the stock market last week, John? I mean if it's a forward-looking instrument, it's not liking what it's seeing. It's one of the bigger sell-offs we've seen in several months now.

RUTLEDGE: Actually, Jack, the top 10 stock markets in the world are all Arab oil producing stock markets. This is an oil story this year, a price bump oil story. But we also had a big drop in oil prices this week and the oil stocks went down. And then after the job report, the stock prices went up again.

People have got their buttocks clenched out there, because they're scared of hurricanes, they are scared of the bird flu. I think the administration ought to be ashamed of themselves for trying to preach to people about bird flu and other grave dangers while people are still recovering their senses from the hurricanes. Bird flu was a problem two weeks ago; it is going to be a problem in two weeks. It's not the stuff of press conferences right now.

CAFFERTY: Yes. But if you were the guy running the government that fell on its face during Katrina and Rita, wouldn't you rather talk about bird flu?

RUTLEDGE: I would rather find some way of getting people to not focus on FEMA. I think that's exactly what's happening here. This is a public relations story. I think reporters ought to be standing there with their microphones asking about that when they have press conferences.

CAFFERTY: John we have to leave it there. It is interesting stuff. Appreciate you being with us. We'll do this again.

RUTLEDGE: It is great being with you, Jack.

CAFFERTY: All right. John Rutledge, chairman of Rutledge Capital. As IN THE MONEY continues, jamming the pipeline. The insurgency is just one reason why Iraq isn't delivering that oil that we were all expecting. Find out what happened to the stuff that was supposed to fund reconstruction over there.

Plus, living out loud. The best thing about flying on business is getting away from cell phones. See why that could be changing and why, if it does, I will not fly anymore, because I hate people who sit near me and talk on cell phones, whether it's in the car, a restaurant, an airplane or wherever!

And how to stop a cancer in its tracks. The birth of a breakthrough vaccine. Stick around for the debut of a new feature on IN THE MONEY called "Brainstorm".


CAFFERTY: Iraq's oil minister narrowly escaped an apparent assassination bid this week. A roadside bomb hit his convoy but it didn't reach the minister's car. That story started us wondering what happened to all that Iraqi oil we were supposed to be seeing flowing by this point.

Youssef Ibrahim is going to help us figure that out. He's a former senior Middle East correspondent for the "New York Times", and he is now managing director of Strategic Energy Investment Group in Dubai. Mr. Ibrahim, nice to have you with us. Welcome.


CAFFERTY: What happened to all this oil we were supposed to be using to pay for the war by now? Where is it?

IBRAHIM: Well, regardless of whether you're pro-war in Iraq or anti-war in Iraq, one of the major things that happened is that we -- the insurgents have destroyed the oil facilities. Before the war, Saddam Hussein was exporting and smuggling three and a half million barrels of oil a day. Today, Iraq will be lucky, if they don't blow pipelines here and there, would be lucky on any day to export 1.5. So we've lost 2 million barrels of oil a day from Iraq at a time when China and India alone are requiring another 2 million barrels of oil a day. So the hands -- the $70 price we're seeing.

There is another consequence of what is happening in Iraq, though. The insurgents who are coming from several countries are using -- have discovered that the sabotage of oil facilities is the way to bring down a government, to create chaos and fight the United States. I am very worried that this concept, the novel concept of using, attacking oil facilities is going to travel, because we have Saudi insurgents and these guys are going back home to Saudi Arabia.

SERWER: Youssef, let me jump in here. I think it's terribly ironic or a terrible irony, I guess I should say, that there is less law and order in Iraq today than under Saddam Hussein. What can we do about these insurgencies, though? Pipelines are virtually impossible to protect, aren't they? IBRAHIM: Totally. The northern pipeline, which is -- was shipping a million and a half barrels to Turkey, hasn't operated, practically speaking a single day. They keep blowing it up every day. We've discovered one thing from this war, that we cannot secure oil by military power. So when trouble starts happening in Saudi Arabia, our troops in the region will not be able to protect Saudi supplies.

LISOVICZ: So you said we're paying more for oil because we're not able to get the three and a half million barrels that Saddam was pumping out. But also, we, Americans, are paying for the rebuilding -- we shoulder more of that responsibility because the oil can facilitate that, yes?

IBRAHIM: The big irony is this is the country that has the second largest oil reserves in the world after Saudi Arabia. And we are supplying them with gasoline because all their refineries have been destroyed during the -- during the invasion, while our troops were sitting there watching insurgents burning them down.

The other reason of course for the high oil prices, is we are entering a new paradigm on oil. There simply isn't enough oil to go around. And the big oil lakes like the North Sea are peaking. Alaska is practically dry. So really it's a new oil tsunami heading our way.

I don't mean to be an alarmist. But I think in the winter, we're going to be seeing prices that are closer to $90. And this is not going away. We just don't have enough oil in the world.

CAFFERTY: We talked about the possibility that should the insurgents begin sabotaging Saudi oil fields and other oil facilities in the Middle East, I mean, they're not stupid. They understand what the equation is all about. How soon might we start to see this kind of thing happen? And what are the price implications when that starts?

IBRAHIM: Look, any incident -- the system is so stretched now that any, any turbulence pushes the price by $10 a barrel. It's called the fear factor, the anxiety factor. I can't think of a greater anxiety attack than any sabotage in the world's largest oil exporting country, Saudi Arabia. Now, we know that there are many Saudi insurgents operating in Iraq. We know they have now learned the concept that the way to bring -- to create chaos and bring down the regime is to attack and sabotage oil facilities.

That is a principle we've never seen before. During the Iranian revolution, the Khomeini people never attacked oil facilities. For 10 years, we've had a civil war in Algeria, a major oil exporter. The Islamofascists who are attacking the government never attacked oil facilities.

It's the first time insurgents begin to accept the concept of attacking oil facilities.

SERWER: Youssef, you know -- I mean, your views are somewhat controversial obviously, because there are a lot of people who say there's plenty of oil out there. The Saudis of course say there's plenty of oil out there. And we really don't know to be fair to the Saudis whether or not that's true. Why do you think we're running out of oil? There's supposed to be more oil out there.

IBRAHIM: I know that people like OPEC (ph) and the oil industry itself are propagating the view that there is no problem; there is plenty of oil out there. Of course, the oil industry would say that. They sell oil. And they haven't developed any alternative sources of energy.

For example, for 10 years we've been talking about solar energy. Until today, solar energy is more expensive than oil. The problem is Saudi Arabia has not spent a nickel for 25 years in developing the infrastructure that would allow us to pump more oil. I'm a little skeptical whenever the Saudis make announcements saying they can pump more oil. They've been saying this for two years. The question is, where is it? If you can pump it, why aren't you? Every country in OPEC, the entire OPEC group is pumping every last barrel they can.

LISOVICZ: Which of course, leads up to your analysis or your forecast that there could be $90 a barrel oil. I think we all hope that that is not the case. Youssef Ibrahim, we'll have to leave it at that -- energy consultant. Thank you so much for joining us.

IBRAHIM: Thank you.

LISOVICZ: Coming up after the break, flying high. Continental is doing something a lot of other big airlines can't. We'll see how that is affecting the stock.

Plus, saving energy, '70s style. Find out why you might be in the market for a Jimmy Carter cardigan.

And the deal that isn't always a deal. See why buying an end-of- season car now might not pay off at resale.


LISOVICZ: Now let's take a look at the week's top stories in our "Money Minute."

Millions of Americans are about to face a new kind of oil and gas price crunch. The Department of Energy estimates the cost of heating an average home with oil or gas will be more than $1,500 this winter. It is going to be a steep burden for the thousands of poorer Americans who only get about $300 from the government to cope with winter heating costs.

GM may finally be getting a handle on its healthcare costs. Published reports say GM and the United Auto Workers Union are close to making a deal that would shave $1 billion off the company's $6 billion a year healthcare bill.

And thanks to regular customers like you and me, the big banks are doing pretty well these days. The FDIC says American banks collected about $38 billion in routine fees and service charges last year. That was more than double what they raked in 10 years ago.

SERWER: Not every airline is facing cloudy skies these days. Continental Airlines says increased passenger traffic will result in a mildly profitable -- I'll say that again -- mildly profitable third quarter at that company. The news sent Continental shares much higher by the end of the week, but they're still a far cry from the $16 range they enjoyed in the middle of the summer.

Continental Airlines is our "Stock of the Week".

Never mind $16. That was a $60 stock a couple years ago. I got two words for why this airline is doing so well: Gordon Bethune. He was the CEO of this company for a long time, retired last year, but his legacy lives on. He ran this airline right. It's not quite JetBlue and he's not quite Herb Kellner, but he really had his act together.

They have a new CEO there, Larry Kellner, and I think he is enjoying the fruits of what Mr. Bethune did. But they're doing some stuff right there.

LISOVICZ: And you know it's interesting, because Continental is one of the old style airlines. People ask, why can't you be like Southwest Airlines, because it has a completely different, you know, business model. It's still the hub -- it still has a big hub in Newark for instance, Houston and I think in Ohio. But you have to give up. People don't like giving up things, the pillows, the blankets, and the extra flights. And they've had to do that, and they've been able to, well, get somewhere, I guess we should say.

CAFFERTY: How is it the Continental can say they'll be mildly profitable and the rest of the major airlines -- the Delta's, the United's, and the Americans -- are either in bankruptcy or are headed there next week?

SERWER: Well I think they've got some better union contracts for one thing. The other thing, they have $2 billion in cash on their balance sheet.

CAFFERTY: That helps.

SERWER: They really helps. They said they only took a $25 million hit with these hurricanes, which is surprising to me, because they do a lot of business in that part of the country.

LISOVICZ: In the South yes.

SERWER: I really think, Jack, it just speaks to blocking and tackling and doing the right thing. This business, you get the people on the planes and you fly 'em somewhere. Yes, you've got fuel prices. And yes, you have unions, but it can be done.

And I think Susan's dead-on when she says everyone says Southwest is the exception. It's not true. I mean, there are airlines in Europe, there are airlines in Asia that make money as well. I mean, it really says something about the airline industry when all these players are doing badly. It speaks poorly of them, I think.

CAFFERTY: In terms of their management and their business plan and the way they're approaching flying people from one place to another.

SERWER: Yes. I mean they can point a lot of fingers. But at the end of the day, you know, they're responsible for what happens.

CAFFERTY: Yes. If airline A can do it, then airline B, C, D and E can probably do it, too.

LISOVICZ: It puts the pressure on those couple of airlines that are still in bankruptcy protection.

SERWER: Yes. And sadly, we will be following that story for many months to come.

CAFFERTY: Many months.

SERWER: All right. Coming up on IN THE MONEY, energy-saving tips from the days of disco. Find out how more and more people are lifting strategies from the '70s as oil prices rise.

Also ahead, hold the phone. Airplanes are just about the last public place where you can get away from cell phones. We'll look at why that may not last.

And a feel-bad film to feel good about. See what a smart edit can do to the horror movie classic "The Shining." It is our "Fun Site of the Week."


WILLIS: I'm Gerri Willis at the CNN Center in Atlanta. Here is what is happening "Now in the News".

South Asian officials say the death toll has now topped 1,300 following a massive 7.6 magnitude earthquake today. It was centered in Pakistan, but it could be felt some 400 miles away. Authorities are working in to the night, trying to free as many as a 100 people believed trapped beneath the rubble of an apartment building in Islamabad. The Associate Press is reporting 250 girls were killed in northwest Pakistan when their school collapsed.

A car bombing in western Baghdad has killed a police officer and left 12 other people wounded. Authorities say the suicide car bomber detonated the explosives as he drove into a police patrol at the scene of a traffic accident.

And senior U.S. military commanders have been told to begin developing ideas on how to operate in case of a pandemic, such as one involving bird flu. According to a senior military official, some ideas deal with protecting forces who go into an affected area and sharing state National Guard troops. The same official says military medical capacity will be overrun right now in a large pandemic.

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

LISOVICZ: The Bush administration is taking a page out of Jimmy Carter's playbook. The White House is encouraging consumers to save like it's the 1970s. That means turning down your thermostat this fall and driving less at lower speeds. Sounds simple enough, but is that really going to save us from an energy crisis? Let's find out.

Steve Nadel is director of the American Council for an Energy Efficient Economy. He's joins us now with a look at how successful this campaign can be. Welcome.


LISOVICZ: Steve, I predict fleece sales going to be enormous this winter. Having said that, the American way is that maybe we'll start to be less fuelish while we have to, but then we get back to it. I mean the 1970s, it taught us that's what we do.

NADEL: Yes, you're right. People tend to have short memories. However in this case, I think some of the high prices will be with us a bit longer, so hopefully their memories will be longer term. Hopefully the government will enact policies as well to help keep the momentum going so we don't quickly forget.

CAFFERTY: Yes, when pigs fly. We've been there and done all this before. There was the gas lines in 1973, which I can remember sitting in. Now we're right back, we've got $3 a gallon gasoline, a war raging in the Middle East. And the government's answer is to print up some catchy little posters saying wear your cardigan.

I mean, where is the national will -- for want of a better word -- to do something about our dependence on imported oil in a meaningful way? Asking us all to set our thermostats at 68 degrees is an interesting idea, but I mean, is this really the answer to anything? Or is this just jingoism and sloganeering when we lack the national will to do something important about the dependence on imported oil.

NADEL: I think it's a useful first step, but we need to do much more. Yes, consumers can do a lot and these public campaigns can help. We need to sustain this campaign, not just in October, but for years to come. We also need to back it up with other policies. Or else, as you referred to, it will be a flash in the pan.

SERWER: And Steve, I know you talk about insulating windows and fixing chimneys and taping things up and using caulk and grout. And that's important, it's good stuff. But we did a lot of that in the 1970s and all the homes built since then all have these fancy Andersen windows and what-not. So can we really make any progress there?

NADEL: Yes, we can still make significant progress. There are a lot of hidden heat leaks, for example, that most builders don't know about, like places in the attic and basement where heated air can escape. So trying to plug those up can reduce energy 10 percent. Even in the newer homes, that's generally possible. Older homes, people often didn't do everything they could have done or some of the things may have gotten removed, you know, when they were doing other work around there. So yes, people can still do quite a bit. LISOVICZ: You know Steve, I replaced my windows when I moved, but boy, that was such a major expense, I probably almost had to take out a loan just to do it. That is just not feasible for a lot of Americans. Having said that, the Congress just passed a major energy bill, and there is not a whole lot of it in there that really encourages us to conserve.

NADEL: No. There are a few provisions that will increase the efficiency of various types of equipment. But for the most part, it's pretty limited. We should have done more. Hopefully we will in the near future.

CAFFERTY: How rough is it going to get this winter? Natural gas prices have been going up and up and up, and there are very dire predictions about what the average homeowner's going to play to heat the place, come the cold weather.

NADEL: Right. The Department of Energy is predicting that natural gas prices will be up 50 percent. And electricity prices almost 20 percent. That's for a normal winter. If it's a real cold winter, it could be with much worse.

SERWER: All right. Steve I just appointed you energy czar of the United States of America. What is your five-point plan, just spell it out. What should we do?

LISOVICZ: The Marshall Plan.

NADEL: Let me quickly think. First, we need to do something about automobile fuel economy. The average new car gets fewer miles per gallon than in 1987. In the last 20 years, we've moved backward. We need to increase fuel economy standards as well as set up programs to reward people who buy more efficient cars and penalize people who don't. You know kind of a revenue neutral type system. That would be one.

Two, we need to ask our electric and gas utilities to all operate energy saving programs that target what they need to achieve each year. There are such policies in Texas, Nevada, Hawaii and Pennsylvania. We need to make that nationwide.

Third, I would continue the public education campaign the government has begun. They need to substantially expand it. State of California, in 2001, did a major campaign, and they cut use 6 percent that year. That's enough to actually soften the markets up a bit and bring the prices down. Short of a major sustained campaign, we wouldn't do much.

LISOVICZ: And some of these steps that you take are time consuming, like more fuel-efficient cars. Having said that, Steve, there's all these states that are suing the Department of Energy -- the very department that should be in the vanguard here -- because the states say the Department of Environmental Protection, for instances saying that they're not doing enough to make our households more fuel- efficient. NADEL: That's correct. Laws were passed in the 1980s and 1990s, asking the Department of Energy to make appliances and equipment more efficient. They're supposed to be revised every few years. The department has gotten way behind schedule. There are more than 20 products that they haven't set standards on, even past the legal deadline. The states are suing them to get them to step it up. Really, the federal government, in particular, should do more. Some of the states are stepping in, but the federal government's not doing much.

LISOVICZ: Letting us down in Washington. How unusual. Steve Nadel, executive director of the American Council for an Energy Efficient Economy. There's something to hope for in this century, hopefully. Thanks for joining us.

NADEL: Certainly.

LISOVICZ: There's more to come here on IN THE MONEY. Up next, the ring thing. Passenger jets are a no cell phone zone. But that might be changing. See why some business travelers actually like being out of the loop for a while.

And fast money? Buying a car that's an end-of-season bargain might not pay off later. Find out why it can be smarter to think ahead a little.


SERWER: The FAA and FCC are rethinking a ban on cell phone use on plane flights. That's angering more than just the technophobes of the world like Jack. Some people who eat, breathe and sleep technology aren't happy either. Our next gust says that is because at 35,000 feet, it's one of the only places in the world you can be truly unavailable.

Jim Katz is the director of the Center for Mobile Communications at Rutgers University. He joins us now to talk about this subject. Professor, I want to ask you a question before we get into the inconvenience and the bothering problem. Has it ever been, was it ever dangerous to use a cell phone on a plane? Would it interfere with communications like they always told us?

JAMES KATZ, DIRECTOR, CENTER FOR MOBILE COMMUNICATIONS AT RUTGERS UNIVERSITY: It certainly seems to be a distinct possibility and it's something that the Federal Aviation Administration, the FAA is really putting a flag in the fan, saying we're not going to allow them on the aircraft until we're completely satisfied there is no danger. At this point, we can't say there is no danger. So the risks are there. They seem minor. After all, only one aircraft going down can be a huge tragedy.

LISOVICZ: Professor, I can put up with the security delays, you know, going through the x-rays and all that. I can put up with the lack of pillows, the no meals in-flight, with the fewer flights. I cannot envision sitting in economy class, cramped with a lot of cell yell. How can this happen? KATZ: Well, part -- it's likely to happen because people want to have that connectivity, though you don't want the person next to you to be yakking away for six hours. When you feel that you have a need to get a hold of somebody or there's some important business decision, you want to be able to have that opportunity to make the call. So it's kind of a one-way street. We want to have the advantage for ourselves, but we don't like it when people around us take advantage of that opportunity.

CAFFERTY: How are they going to handle it? Are we they going to like segregate the cell phone people in the baggage compartment would be my suggestion?

KATZ: That is right. There will probably be a cell phone area and quiet area. They've done it on Amtrak, and it's been enormously successful. When they don't do it, there is lots of conflict and indeed that is something that the flight attendants are concerned about is that the passengers are going to start squabbling and fighting over that.

CAFFERTY: As well they should.

SERWER: I want to get back to the security thing. Aren't there other countries that allow cell phones on their planes? Surprising there haven't been any crashes. So how dangerous is this? I mean I think the whole thing has been a myth and the myth has been propagated by the companies that sell those air phone services, those phones that cost $100 a minute that you can't hear on that they put on those seats.

KATZ: Well sure there are some real technical problems in trying to get that system running. In a sense, the systems you mentioned make the airplane a little mini no-cell zone, flying through the air. It's true; the quality isn't what it should be. But right now, there is, as I understand it, no airlines that allow people to make in-flight cell phone calls.

LISOVICZ: I'm actually interested in the business aspect of this, because there are a lot of interested parties in this. On the one hand, the carriers, very financially strapped, could benefit from these additional revenues. On the other hand, all the people, the front-line people, like the flight attendants, are worried about passenger rage.

KATZ: Sure. And at the same time, there's not really a lot of money that the transportation companies can make. It costs about $100,000 to equip an airplane with the cell technology that's envisioned. So it's going to cost them a lot of money. Right now, the people fly on the airplane without their cell phone usage and that could continue.

LISOVICZ: Right, but the airlines want it, right?

KATZ: Some do, some don't. There's divided opinion.

LISOVICZ: Yes. And there is very divided opinion among those passengers who are paying for those flights, that's for sure. I'm in the Jack Cafferty camp for sure. James Katz, director, for Center for Mobile Communications at Rutgers University. Thanks for joining us.

KATZ: My pleasure.

LISOVICZ: There is more to come here on IN THE MONEY. Still ahead, a shot at stopping cancer before it starts. See if a new vaccine from Merck can deliver the goods and boost the stock. Our new feature called "Brainstorm" is up next.

And if you want to play TV critic about that or anything else on the show, our address


SERWER: All right. How do you like them tunes? I like that. Breakthroughs in science and technology fuel the business world. That's why we're starting our new weekly series "Brainstorm" which focuses on that relationship. This week we had an easy choice. Merck -- it seems to be getting a shot in the arm from some positive news about the company's new cervical cancer vaccine. The first major study of Gardasil found the vaccine to be nearly 100 percent effective.

But will it be enough to turn things around for Merck and reverse the bad publicity that surrounded big pharma for more than a year? Of course we are talking about Vioxx and all the trouble it has had with that. And you know sometimes we forget that big pharma really relies on scientists who do this incredible research to come up with these vaccines, 100 percent effective is staggering, right?

LISOVICZ: It is almost unprecedented. One of the people involved with it said we're breaking the champagne open as we speak. It's great news for Merck. That is their lifeline because ha at a certain point you get a blockbuster drug. When it loses its patent, guess what everybody gets in on it. So you need to have all the stuff coming up.

Cervical cancer, the second leading cause of cancer deaths for women. So it's a huge find if, if in fact, it's nearly 100 percent effective.

CAFFERTY: I don't want to blow the candles out on the birthday cake just yet, but Vioxx was a blockbuster drug, too. Then all of a sudden down the road came information that turned out to be a little less than it was being billed to be in the beginning.

How much risk is involved in celebrating too early on something like this drug, saying we did all the tests and the test results are very encouraging? Vioxx was very encouraging, too.

LISOVICZ: Late clinical trials, though.

SERWER: First of all you get no champagne. Second of all, it doesn't have FDA approval yet. I mean that should be mentioned right at the onset. And I think that you know this Vioxx situation and those COX inhibitor drugs very unusual. Because you know the FDA gets criticized most often for approving things too slowly. It's very rare that a whole class of drugs like that comes under such fire after being approved by the FDA. They have a pretty good track record in terms of that kind of stuff. It can happen, right?

LISOVICZ: And one would think Merck got religion after this one that is, and it's extra careful in making sure that the side effects are well documented and so on.

CAFFERTY: All right. We'll watch for more news on Gardasil. Where we have 500 Vioxx lawsuits in the pipelines?

LISOVICZ: Five thousand.

CAFFERTY: Five thousand.

SERWER: As it stands.

CAFFERTY: Coming up next on IN THE MONEY, a fresh twist on an old favorite. "The Shining" was a horror hit in 1980. But in 2005, it is looking more like the feel feel-good movie of the year. Allen Wastler will explain that.

Plus we will read some of your emails from the past week. You can send us an e-mail right now if you are so inclined; we are at Back after this.


CAFFERTY: You know what we pay for that music? Nothing. This is the time of year when car dealers flood the airwaves about how they're basically giving away last year's models in order to make room on the show room floor for this year's brand new hot models. Not so fast, the deals may be better if you wait.

That's the topic of Allen Wastler's "Inside Out."

ALLEN WASTLER, MANAGING EDITOR, MONEY.COM: Ah yes, Jack. You know all these deals come in quick. We got to move them out. We'll give you the best price ever.

But you got to think about this. Wait a minute. When you sell that 2005 car down the road, it's a 2005, even though you weren't driving it for a year, everybody says, oh, it's a 2005. It's been out there a year extra than the 2006. And that is what it comes down to when you're figuring out should I buy the 2006 or the 2005?

Now if you're going to keep the car beyond five years and down the road, the price between a 2005 and 2006 sort of converge. OK? But if you're going to pop it in two years, three years, resale value is really going to matter, OK?

CAFFERTY: I just bought a 2005.

SERWER: Sorry, Jack.

CAFFERTY: I was confident that I had really made a good deal. Thank you so much for shattering my whole concept ...

WASTLER: Sorry Jack.

CAFFERTY: No, I actually did. I understand what you're saying, though, the minute you buy a 2005, if the 2006s are available you're buying a one-year-old car.

WASTLER: In some cases, it makes sense to buy the 2005.

CAFFERTY: If you still drive it when you're 117.

WASTLER: So you know, you know what? There's still hope. You can go look up what the resale values are and it changes from car to car. Just for you, Jack, on, we've come out with our regular list of cars that retain the best resale value. Would you like to see three?

We selected three. The first in the sedan class, it would be the Honda Accord Hybrid. The hybrid. Very popular, holding its resale value very, very well. A lot of that is because of the fuel savings, thank you very much.

Next up, one of my favorites, the Toyota pickup, the Toyota Tacoma.

CAFFERTY: So far, there's not a lot of Detroit iron on this list.

WASTLER: No, there isn't. Actually, there is. There is, if you get a little sporty and fun. Go to the convertible. There you go, the Chevy Corvette, honey, resale value. Those are just a few of the models we decided to show you. We have many, many more on Check it out. You'll love it.

CAFFERTY: All right. What's the "Fun Site of the Week?"

WASTLER: The power of editing. We in the business know what a soundtrack can do. You loved "The Shining"? A horror classic. Let's look at it changed a little bit.


ANNOUNCER: Meet Jack Torrance.

UNIDENTIFIED MALE: I'm outlining a new writing project.

ANNOUNCER: He's a writer looking for inspiration.

UNIDENTIFIED MALE: Lots of ideas. No good ones.

ANNOUNCER: Meet Danny. He's a kid looking for a dad.

UNIDENTIFIED MALE: There's hardly anybody to play with around here.


ANNOUNCER: Jack just can't finish his book.

UNIDENTIFIED MALE: I don't want to sound melodramatic but there's no way to make it economically feasible. Here's to five miserable months.

ANNOUNCER: But now, sometimes, what we need the most is just around the corner.

UNIDENTIFIED MALE: I'm your new foster father. I'd do anything. I love it.


SERWER: Oh, it's an uplifting story.

WASTLER: The feel-good movie of the year.

SERWER: We never knew.

CAFFERTY: That's great.

WASTLER: It's a wonderful site.

CAFFERTY: Very good. There are some people that just don't have enough to do in this world, can sit around and figure that out.

WASTLER: God bless them.

All right. Time now to read some of the answers to our "Question of the Week", about whether the hurricanes will have a lasting effect on the way the politicians do their jobs.

Ryan in Texas wrote this: "It already has. The evacuations in Houston and Galveston went much better, thanks to the lessons from Katrina. Also with Mike Brown acting as the media's new scapegoat, elected politicians have clearly learned to make sure an appointee gets the brunt of the criticism.

Editor's note, that would be me. Mike Brown is an incompetent moron.

SERWER: Yes, it's not our fault.

CAFFERTY: Charles from Lake Placid, New York, wrote this: "No, they won't change, but here's what they should do in the wake of the disasters. One, institute gas rationing. Two, reinstate the draft so local relief agencies have plenty of personnel. And three, cancel all the tax breaks for the rich. These were the kinds of things we did during World War II."

And Jody wrote this: "Define what you mean by lasting effect. Do you mean until the next photo op or fundraiser or election?"

Now, next week's e-mail "Question of the Week" is as follows. Do you think the economy is at a low point or do we have farther to fall before it gets better? Send your answers to You should also visit our show page at, which is where you will find the address of the "Fun Site of the Week." Check it out.

On that note, I thank you for joining us for this edition of IN THE MONEY. My thanks to CNN correspondent Susan Lisovicz, and "Fortune" magazine Editor-at-large Andy Serwer, and managing editor Allen Wastler.

Hope to see you back here next week Saturday at 1:00, Sunday at 3:00. Until the next time, enjoy the rest of your weekend.



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