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How Smart Money Plays in Wall Street Dive; What is the Power of Chinas Economy?; Why Investors Cant Choose Between Following Bernanke or Greenspan

Aired March 3, 2007 - 13:00   ET


ALLEN WASTLER, MANAGING EDITOR AT LARGE, CNNMONEY.COM: Thanks coming up on IN THE MONEY think fast. Find out how the smart money plays in the Wall Street dive like the one this week.
Also ahead, long reach. See what the Dow's plunge tells you about the power of China's economy.

And, it's your call. We'll look at why investors can't seem to choose between following Bernanke or Greenspan. All that and more after a quick check of the headlines.

FREDRICKA WHITFIELD, CNN CORRESPONDENT: Now in the news, President Bush toured the tornado-damaged high school in Enterprise, Alabama. Eight students were killed when the twister ripped through the town Thursday. Officials estimate it will cost as much as $60 million to rebuild the school. He is on his way to Americus, Georgia. His remarks we'll take live.

In Atlanta, struggling to figure out what caused a deadly charter bus accident. Six people including four college baseball players died when their bus crashed through an overpass guardrail and plunged on to the interstate below. Twenty-nine other teammates and coaches were injured.

We'll update your top stories at the bottom of the hour. Next, IN THE MONEY.

WASTLER: Welcome to IN THE MONEY, I'm Allen Wastler. Coming up on today's program, that falling feeling. We will find out how to interpret this week's market plunge and learn how to handle it next time.

Plus, heavy industry. See why China's economy carries so much weight on Wall Street.

And later, wide open spaces. New home sales are showing their biggest drop in years. Learn what that says about the housing market.

Now joining me today we have Jen Rogers and Gerri Willis. Ladies, welcome.



WASTLER: How about that Tuesday? Oh, baby, that was a ride!

WILLIS: I'm still holding my stomach. It wasn't happy.

WASTLER: From 200 points down to almost 400-plus points down, it was lots of fun if you're sort of --

WILLIS: For who?

WASTLER: Don't have a lot of money committed.

ROGERS: I was holding my breath. But I do have to say this market has been really on a tear, eight months now running, the Dow hitting all- time highs. So it was fun but I also felt like maybe we need to get a little steam out of the market.

WILLIS: Well it could be true, any way we don't want anybody to panic out there, right? Because that is the last thing you want to do if you're the individual investor.

WASTLER: Well you know hindsight was beautiful, because then the markets came back, then it waffled. Everybody said it was a correction, not a crash. Because in the first couple of second's people wondering, this must be nasty, but when it goes back and forth like that you sort of OK, it's just the bull resting for a while.

ROGERS: The bull gets tired.

WASTLER: The bull gets tired.

WILLIS: I think you ought to take a long-term view. It is all about understanding what you own, not watching the day-to-day machinations of a bunch of a bunch of traitors who frankly that is all they care about.

WASTLER: Right and actually when you think about it, it is probably the professionals the short-term guys where timing is everything that took it in the teeth during that and not the long-term people like I'm going to retire in ten, 20 years, I just park it there and let it ride.

WILLIS: That makes me feel so smart.

WASTLER: But you know who had a front row seat to this thing? Our very own Carrie Lee. She had a front row seat to the whole spectacle. Lets hear what she has to say about it. Carrie.

CARRIE LEE, CNN CORRESPONDENT: Hi, Allen. Wall Street's eight-month long bull run came to a screeching halt on Tuesday this after the Dow suddenly dropped over 500 points and then finished the session down 416 points. It was a brought-based sell off. All major markets, all major sectors affected. A lot of experts blaming an even bigger sell off in the Chinese market for the U.S. crop, and others are blaming the ever-weakening real estate sector here.

Not still others still pointing to former Fed Chief Alan Greenspan's public comments on Monday when he said a recession was possible this year. For the week the Dow fell 534 points, that is a loss of 4 percent. The Nasdaq fell 5.5 percent; the S&P 500 was down 4.4 percent.


WASTLER: Carrie Lee down at the New York Stock Exchange. Thank you so much for joining us.

Now, when the stock market falls off a cliff the way it did this week you need to know two things. One, how to read the situation. The other is how to get through it. Scott Wren is going to help us on both counts; he is senior equity strategist at A.G. Edwards and from St. Louis, Scott, welcome.


WASTLER: We are sort of muddling through like the rest of the world. You have all this market craziness this week, tell us is this a sign of impending doom? What is going on here?

WREN: Well, You know I think the first thing we're trying to get our clients to do is to put this into perspective. I think you can look at it a couple of different ways. One is of course, Tuesday was pretty much of a nightmare and I think really to be honest with you, that's a big fall for one day, certainly in number terms. But in percentage terms, 3.5 percent, I looked at our S&P database, that puts it number 31 or 32 in terms of the fall, a one-day plunge, since 1950. So really it is in the record books but it is nowhere near the top.

I think, also, you have to remember that the market was up about 14 percent last year and really just since last June, it was up 19 percent to the high. So when you have a 5 percent pullback and we're sitting here about 5 percent off the highs for these indexes, that's not the end of the world. Typically you really have 5 percent pullbacks pretty often. We haven't had one in a while. I think people have been lulled into thinking the market is just going to keep working higher and it doesn't happen that way.

ROGERS: Hey Scott I'm a girl that likes a good sale. I never buy anything unless it is discounted. Is this a good time to do some bargain hunting?

WREN: I'm of the belief that people should be methodically buying quality stocks along the way. When you get an opportunity, when you get a market pullback, you should step in, maybe an extra time, and buy and really, I'm not the technical analyst here at A.G. Edwards, but when I look at the charts and lets take the S&P 500, for instance, I was looking at somewhere in the 1340, 1350 level as pretty good support. We got close, we got down to 1375 or so, but I think we're at levels and certainly if you're a long-term investor you need to be looking in here to buy some quality stock. So I'm with you right there. I like to buy things on sale and I think stocks are on sale.

WILLIS: Buy now? Are you kidding me? We just saw this massive move on the markets. Everybody's looking at their 401(k) and saying, holy cow, what's happening? Clearly we don't want to advise people to sell. What I want to know is what you see in your crystal ball? Is there more down side for the Dow? What's your outlook near term? Am I going to have to be investing in diamonds or coal or gold?

WREN: Well, I think that in the near term, the two of the problems that I see and really the biggest one is this yen carry trade. That's kind of topic du jour this past week but then from the last couple of weeks the sub prime lending problems. I think those two issues are not going to go away in the next couple of weeks. So I think you're likely to see more down side trade. I don't think we'll see a ten-plus percent correction in total but you could see it at 1340, 1350 in the S&P 500. You know we are at 1400 or so today. So I don't think you want to try to pick the last point of the bottom.

I'd argue that this was not an incredible plunge. This was a bad week. But in the annals of stock market trading, this was anything but an incredible plunge in the market. I think when it's billed that way I think that's the wrong way to do it. It makes people scared and it causes them to sit on their hands rather than opportunistically try to get in the market.

WASTLER: Well Scott, let's talk about that for a second. What made this week sort of stand out was that 3:00 jump, but admittedly is because of a computer glitch. But you could hear the intake of breath from Wall Street at about 3:00 when it went from 200 down to more than 400 down in the space of just a few seconds really. Everybody going, now if you're an average investor and you see that going on, how do you tell -- oh, it is just a correction or it is just a crash. What tips do you have for our viewers about, OK? You say don't panic. When you look up and see those numbers drop, what should they be looking at?

WREN: Well you know Allen I'd say for one thing, the good thing is most average investors are not there sitting there watching it like you and I are. And I can remember in '87 when the market was coming apart, you were sitting there in disbelief as it was going lower and lower and lower. And certainly my breath kind of went away on Tuesday when you saw it go 200, 400, 500. There's no doubt about that. But what I try doing for myself and for our clients is to once again look at the overall economy.

In our minds, interest rates are low, inflation is low, and the Stock market valuation around 15 times is not excessive. It is pretty much in line with historical averages. You've got low unemployment. You've got an economy that's slowing down from a pretty good rate of growth to a more modest, sustainable kind of pace, the kind of pace the Fed wants to see, somewhere in that 2 1/2 kind of range. And then really, you've got earnings growth slowing to a more modest trend kind of pace. So we don't see a lot of inflation, and I think you need to take into account that macro picture.

ROGERS: Scott Wren, A.G. Edwards, thank you so much for helping us through this very bumpy week. Thank you, Gerri Willis for joining us as well. We'll see you both a little bit later.

When we come back, the Shanghai surprise. We'll look at how jitters at a Chinese Exchange can tip the Dow over the edge.

Plus in the basement, see what new homes sales numbers can tell you about the roof over your head.

And planet Wal-Mart. Find out how the big box chain is making changes with the environment in mind.


ROGERS: News of the biggest drop in Chinese markets in a decade, in part triggered Tuesday's sell off here in the U.S. We're joined now by "Lou Dobbs Tonight" correspondent Kitty Pilgrim to talk about this. Thanks for coming. How important is the relationship between the U.S. and China?

KITTY PILGRIM, "LOU DOBBS TONIGHT" CORRESPONDENT: This is a huge relationship. It's one of the most important for the United States and it is a very complicated relationship. They're our biggest trading partners; they also may be a potential military rival. So you have to have a policy that reflects both of those. We're starting to see that a bit. This week Vice President Dick Cheney said that the military buildup in China was not consistent with the peaceful rise and that was a very hard line comment. That comes several weeks after they had to destroy the satellite, which got the world's attention. Then you have Treasury Secretary Paulson who's made multiple trips to China to trade to get some sort of concession out of the Chinese and that is a very tough relationship.

WASTLER: Tell us a little bit more about that trade picture that you mentioned there. Because they are our biggest trading partner. We have this military buildup going on but at the same time there is also friction coming out of Congress now, more talk of trade protectionism. Where's that stand?

PILGRIM: Allan, it is very interesting because it is evolving in my view. Initially there was a lot of overtures to the Chinese. Paulison made multiple trips there. Just recently he's warned that this would be bad for our economy, yet he started to take a bit of a tougher line against the Chinese. He says they have to move on their currency a little bit more and they have to crackdown on piracy of U.S. products. In Congress there is a perception among some that the Chinese have a 30 to 40 percent trade advantage just from their currency and the subsidizing of their businesses.

ROGERS: Let's get a little more insight on this and bring in our next guest right now, Ted Fishman, author of "China Inc. How the Rise of that Super Power Challenges America and the World." Thank you very much for joining us. I want to talk about what happened on Tuesday. Were you surprised at how the U.S. markets reacted after the sell off in China?

TED FISHMAN, AUTHOR, "CHINA INC:" For me it was a big surprise because although as Kitty described, the links between our two economies are so strong, I think there is confusion about the direction in which those links are strong. Weakness in the Chinese economy, or the Chinese stock market, has so little to do with how the United States thrives on China that I thought there was disconnect. It shows how psychologically American investors and the business community have committed to China without looking at the real underlying dynamic there. If China suffers, if their economy goes down, labor will just be cheaper there.

Resources on the world will be more affordable. And if you use kind of the Asian financial crisis as a prelude to that, the United States did well in that. You don't wish bad things for the rest of the world. But it sometimes happens that when other economies falter, especially low- cost economies, we get a boost, at least on the consumer side.

PILGRIM: Ted the biggest question was the Chinese hold U.S. debt. Do you see any risk in that?

FISHMAN: I do see some risk in it, Kitty. Not as much as most people do. I'm a former currency trader. We've talked about that. There is such an advanced form of arbitrage that happens in the world currency markets and the debt markets that if the Chinese move to another, it will ultimately cycle through the U.S. market. I think the really unsettling thing would be if the Chinese actually do what we're asking them to do, which is invest in a big way in the U.S. market. There was some noise last week about the Chinese first auto works making a big play for Chrysler. And we want them to buy here, but we might be careful what they wish for. They could use some of those hundreds of billions of dollars to start buying marquis companies in the United States.

WASTLER: Ted you sort of eluded to this earlier. But China has been eating up a lot of commodities and there is some concern that maybe it's overheating. What do you think? Is China's economy overheating? Getting way too much out over the edge?

FISHMAN: I'm cautious about predicting those things because I've been saying it is overheating for ten years, I've learned my lesson. Their economy grows about 10 percent a year. Every time the government and World Bank say they're going to slow down and they just keep going. But we make a mistake if we focus too much on the short-term, because our economy overheats and it comes back, it overheats and it comes back but we usually come back stronger, and for China, the most important thing to look at is, what kind of competitor, what kind of partner will it be in ten to 15 years? Not in the next five months, not in the next ten months. China is going to have setbacks but these setbacks are going hone it and make it a much more potent player in the long run.

ROGERS: So set backs to come but what do you see as the single biggest challenge to the Chinese economy right now? We talk a lot about the environment over here. Is that an issue for them over there as well in terms of continuing to grow the economy?

FISHMAN: Well, you've hit the nail on the head. The environment is the one issue in China in which there is almost no good news and it is a big limiter on their growth. Water is a huge problem in China; only about 15 out of 100 people in China have potable water. It is not available for industry. The water levels in the whole country are dropping regularly and it is rather scary. There is desertification in a very, very large scale in the north and west of the country.

The environment, I would say, is a limiter, and it also spills over to the political side, because there are hundreds of protests in China every single day that we don't hear about. Big ones that the police in China take note of. And these are more often than not on environmental causes, toxins in the water, mudslides, and bad air. Things that cost the world's forest people their lives.

PILGRIM: Ted, we can't let you go without asking you about the Olympics, 2008 Olympics in Beijing. Some have suggested that there is a traditional post-Olympic drag on the economy. That might be positive for China, that the growth rate has been 10 percent over a year over a decade, and that after the Olympics we might see it sort of leveling off. Do you see the Olympics as a positive in terms of opening up the country and perhaps helping their economy along?

FISHMAN: Wow. That's interesting perspective. You know, I have a little more, even more chilling perspective than that and I hope it doesn't happen. But I say there is about a 50-50 chance that things get a little sorrier before the Olympics. China is pushing so hard to have this fantastic coming-out party. And in pushing this way, it is also pushing its own people very hard. It's going to force a million people out of Beijing, have industries shut down which means people won't be working.

It is going to be very; very cautious about the image it projects for the rest of the world. But Kitty, at the same time this is a great forum for all those people who are protesting hundreds of times a day to get an international airing of their grievances. Perhaps there is a chance this big coming-out party will be a clamping-down party and the rest of the world will cool to China even before the Olympics or at the Olympics.

WASTLER: OK. Well stay tuned. Ted thanks so much form coming and talking to us about this. Ted Fishman, author of "China Inc." And Kitty Pilgrim, thank you for bringing your expertise to us from "Lou Dobbs Tonight." Appreciate it.

Now coming up after the break, welcome to the machine. What's at stake on Wall Street as computers take over for humans?

Plus, priced to move. See what the numbers are saying about your chances of buying or selling a house.

And double vision. Investors are torn between Greenspan's take on the economy and Bernanke's. Stick around and see where you'd put your money.

WHITFIELD: In Americus, Georgia, a new visitor. President Bush there touring the tornado devastated area, 500 homes damaged or destroyed, including a hospital that was ripped apart in a town with a population of about 20,000 people. Many of the people who were part of emergency preparedness and response are there to greet president, glad to see him as he makes his trek across the southeast touring other tornado- ravaged areas, including those towns in Alabama as well. Twenty people across three states died from these string of tornados that ripped through the area on Thursday.

Our Allan Chernoff is there in Americus, Georgia. Allen, folks have been waiting all morning long to see the president there in Americus, Georgia. You described earlier the kind of devastation he'll be seeing.

ALLEN CHERNOFF, CNN CORRESPONDENT: That's right. Tremendous devastation all over town, but selected it's astounding how these tornados work. Of course we all know that a tornado is incredibly random. For example, in one spot behind me you'd see this structure just totally destroyed. In fact the president is definitely going to be seeing that. He's got the entire state troopers all set up over there so he'll be seeing that. That is where the x-rays and other activities were conducted for the regional hospital here.

But other areas, the homes just collapsed under the weight of huge trees and debris is everywhere. I mean even where I'm standing right now, you can see just insulation here, twigs, and this some of it from a pharmacy that is right next to where we're standing, a CVS Pharmacy. You can see the side of the building just ripped out. Inside there is just nothing left inside at all? There's been a big cleanup here.

A lot of debris already picked up. The streets have been cleared of all the trees that did collapse. But nonetheless, the president is really going to get an eyeful and we are expecting to hear some comments from the president here as well.

WHITFIELD: And two deaths occurred there in Americus and on the right-hand side of the screen, we're able to see the president there, kind of getting instruction and guidance from the people who work there, the man who's wearing the sheriff's hat right there. It seems at first he went over like a map, maybe perhaps tried to give the president an idea of the scope of the damage. Then drew him more specifically to damage on a truck there. The president has been very comforting when he was in Alabama in Enterprise at the high school there talking to people there and encouraging the town to really kind of stick together. How important is that for the people of Americus, you think, to hear, Allen?

CHERNOFF: There is a real history. We need to tell you a little bit about Americus. This is actually where Habitat for Humanity was founded and is based. So if there is a community that knows something about coming together, pitching in, and helping out, boy, this is certainly the area. Now the president is about to make some comments. Let's have a listen now.

UNIDENTIFIED MALE: Well, they're based right here.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Come right around the corner and start building. Because I can promise you there is a need. There are some citizens that we can't let fall through the cracks.


BUSH: We met some of them today. They don't have insurance and they'll get some federal help, but the best help they can get is when the citizens come and build their house. I asked the Red Cross man. He said they got all they need down here. Then you find out you don't have what you need. If you put out a call to the country, this country will respond.

UNIDENTIFIED MALE: We've got a world of volunteers to try to help. Our hospital is gone and we have to run a makeshift hospital.

UNIDENTIFIED MALE: They're going to try to get that back up.

UNIDENTIFIED MALE: Miss Vickie has really been a big asset to us trying to help us get some stuff here. We really appreciate all of her hard work. Can't say enough about everybody that's been here to try to help. The call went out and people came, they're working with us to try to get us back on our feet. Tough times.

BUSH: Thank you for standing strong. Thank you for being here. Mayor, thank you. Hang in there.


WHITFIELD: The president there saying to the folks there, thanks for standing strong and certainly he is encouraging the sheriff and all the other officials there that they don't want anyone to fall through the cracks, which we know can often happen with many people who don't have insurance, perhaps, after a natural disaster of this scale. And so, really a lot of congratulatory handshaking, congratulations to a lot of the emergency response people for being there at the call of duty.

CHERNOFF: Yes. Sure. There are lots of folks here who have been working very hard over the past day and a half just to get this town to recover. The scope of the damage, too, involves, according to the sheriff, just in this county, 28 miles long. At some points three miles wide. So it certainly did cut a very long path. So the president, of course certainly did see quite a bit of damage, and he did make reference to there being an alternative hospital, not an alternative, but a place that's really makeshift, one of the churches in town is basically serving as an emergency center since the hospital essentially has been demolished.

WHITFIELD: But then what would that makeshift hospital or this church-turned-hospital really be able to accommodate in terms of any real emergencies? Are we talking about some very minor emergencies like cuts or scrapes like that that people might encounter when they're trying to deal with the aftermath of a tornado? Because it seems difficult to see how a church could be converted into a real triage or emergency room.

CHERNOFF: Yeah. The church is essentially acting as a first aid facility, a place where doctors can see people who feel ill. Keep in mind; it is not only the hospital here that was destroyed, but many doctors' offices also across the street from the hospital. So the entire medical complex here is just in a state of total disarray. For people who are suffering severe, severe problems, they need to go to hospitals outside of Americus. There are two large facilities in Albany, Georgia, and two smaller facilities, one 20 miles away, one 30 miles away. So those four hospitals are going to have to serve this area for the foreseeable time.

WHITFIELD: Allen I don't know if you have a monitor in front of you, but just looking at the people that the president is interacting with right now in Americus, it looks like a great variety for people who might be city employees, some of those hospital employees, that you spoke of, and even I saw some folks who looked like military personnel. Americus is very close to a military base there. This seemed very different from the scene we saw in Enterprise, Alabama, where he was meeting with a number of the high school students who were in that devastated town. Do you have any idea as to who a lot of the folks here are at Americus who have been invited to greet president?

CHERNOFF: Well, I was over at the area of probably about a half hour ago, so I did see some of the people who were standing by. Of course, many officials et cetera. But the individuals who are from the community with the president I don't have a monitor in front of me so I actually cannot add anything to what you just said.

WHITFIELD: Allen, at the hospital that we speak of, having suffered a lot of damage, what kind of activity, if any, is taking place there as you've witnessed a number of people who have come back, including what the contractor, or designer, of a new wing at that hospital?

CHERNOFF: Right. What's happening now at the hospital is people are going in assessing the damage. There are several recovery firms here actually hoping to get the job, are going in, and doing the clean up inside. CHERNOFF: I've spoken to some of those contractors, and they are anticipating serious business there. It's a huge cleanup. Keep in mind, since it is a hospital, there are medical records, there are computers that they are hoping to be at least salvaged because we've very got expensive medical records there. So a very important catch. On the outside, there has been a lot of cleanup. A lot of the trees have fallen down. They've been carted away. By chance, there just happens to be a wood processing facility owned by Weyerhaeuser in the vicinity. That's going to help with disposing of some of these trees.

WHITFIELD: Allen, what are some of the greatest needs there in Americus, given that 500 homes were damaged or destroyed?

CHERNOFF: Well, for right now, food is an immediate problem, because the supermarket is gone, the main supermarket is gone. There is a Wal- Mart in town so that can help out, but for some of the people, they don't have easy access. Homes are not habitable at all. Power is out as well. And what's been happening in terms of power is that workers from Georgia Power have been putting lines back up today, in fact right by the hospital. They're hoping to finish the job by the end of the day. They've been working at it since yesterday. So there is a lot of work to be done, and they are hard at work right now.

WHITFIELD: What about shelter? Where are a lot of these displaced families going?

CHERNOFF: We do have some at Southwestern State University which is only a couple of blocks from where I'm standing but that school was virtually untouched so they've got plenty of space there for people to stay if they don't have friends or relatives putting them up right now. So the community certainly coming together. I was saying earlier before, this is the home of Habitat for Humanity. I've been trying to reach someone from that organization, but they haven't been, I haven't been able to do so. But I would expect that certainly they would play a role in helping the recovery here.

WHITFIELD: And perhaps that really underscores the meaning behind sheriff's comments when he said we've got a world of volunteers to help in this town. So clearly, people really are coming together to try to make things much more manageable. Given that this part of Georgia may still be part of that tornado alley, is this an experience that many people in Americus have had before? That other tornados may have come through this area? Perhaps not with this kind of velocity now that we're hearing on the enhanced Fujita scale that it measures ef 3, which means it measures between 130 and 160 miles an hour. But is this a new experience for a lot of people there?

CHERNOFF: It is a new experience actually, Fredricka. The tragedy that old-timers here refer to, and not all that old-timer, but 1994 was when there was a flood in this region, and that was actually devastating, far more people were killed during that flood. And it did damage many buildings as well, many homes. But that was the most recent tragedy here. That's the one really that people refer to for any reference point.

In this region, of course, there are tornados, but the folks around here and we did interview two sisters yesterday, 82 and 80 years old. They've lived here most of their lives. They said they've never experienced anything like that.

WHITFIELD: Have you gotten a sense from people there what they would hope President Bush would get to see? We know he's done a flyover. He's there on the ground now in Americus. But if there is yet one or two other more things that he should witness, what are some of the residents there saying he should get a gander at?

CHERNOFF: Well, it's really just the devastation, the homes. People, of course you know you lose your business, that's one thing. But you lose your home, my goodness, where are you sleeping, where are you getting your food, your water, et cetera? I mean the real basics of survival. And of course, the people are hoping that insurance is going to pick up the cost. This of course is such a huge problem after Katrina in Mississippi, New Orleans, et cetera. The hospitals told me that they, the CEO there told me they are very hopeful that their insurance company is going to step up to the plate and deliver.

So that's got to be a concern as well. I mean obviously this was a wind event. There is no debate about that. But everybody hopeful that the coverage that they do have and hopefully everybody has some decent coverage that they'll be covered here. Of course, they're also hoping for some federal aid, significant federal aid.

WHITFIELD: In fact that was my next question. Is it being made clear what kind of federal assistance will come to those who are uninsured? CHERNOFF: Yeah. We don't have any word yet on that. We don't have any information yet. But the folks from FEMA have been here. They've been certainly assessing the damage. You know, there is no doubt about it that it is very severe. This town has been brought to its knees, and they need lots of help.

WHITFIELD: Are officials saying whether the majority of those homes or businesses damaged were indeed insured properties?

CHERNOFF: You know, it's still such an early stage that surveys haven't really been done yet. Even late yesterday, last night, search teams were still out trying to make sure that there weren't more people dead. The count is still at two right now, two people found in a residential box. Officials now are just hoping that it is not going to rise. They're pretty confident there are nobody else that's been killed, in this town at least, by the tornado. But that's been the primary concern.

WHITFIELD: Just looking at some of these pictures, the president seemingly having a lot of fun with residents there. They're having a lot of fun with him, too, trying to find the lighter side to the tour and being educated about what's taking place. Lots of folks are clamoring to take pictures with him. Looks as though the sheriff is taking him to perhaps another area to survey closer some of the damage. We're going to stay with these pictures to get an idea of just where they're going. Is this, Allen, based on your understanding of the geography of where they are in Americus; are they right in the downtown Americus?

CHERNOFF: We're just a couple of blocks from the heart of downtown. I mean you can certainly say that we are pretty much in downtown Americus, but not the heart of downtown. So just a couple of blocks away. This is really the medical complex. I mean that the hospital, an annex to the hospital, which is just to my right, and the president is just standing pretty much in front of it, probably about a hundred yards in front of it. And they are pharmacies here and across the street, as I said, many medical offices. And then some homes as well. This is really the heart of the medical area.

WHITFIELD: And the two deaths taking place there in Americus, the other seven that took place in other parts of Georgia, any idea of the proximity of where those other deaths took place?

CHERNOFF: Well, a distance from here. I don't have exact mileage. But as you know, these tornados are just random, moving from one spot to the next, to the next. And it's really incredible. Some people feel that they were so lucky, so fortunate, to just suddenly be passed over, and then just the next block they see the homes totally leveled or trees falling down on top of the homes. It just is such a terribly random thing.

WHITFIELD: Yeah. And there are so many remarkable stories of survival. You profiling the nurses in the hospitals and how they tried to make sure that the babies were taken from the nursery and reunited with their mothers, while they just held on in the hallways there. Quite remarkable that people have these stories of realizing that wait a minute. This tornado is bearing down on the building that I'm in. I can't go anywhere but I better figure out a way to kind of hunker down and say my prayers and hope that everything works out OK.

CHERNOFF: Fredricka, honestly, at this very moment we were planning to be shooting another dramatic story. But we've put it off because of the president's arrival. A person, who was in one of the retail shops in a strip mall just hunkered down there, as you say, rode out the storm, and the store was just demolished. And her father came by to pick her up and they basically had to get out somehow. They did, they survived, but they were in an interior room. Everybody knew to get away from the windows. As you say, this is certainly the hurricane region rather the tornado region, so people know that they do not need to be -- they have to get away from the windows and that's a great way to stay as safe as you can be. Of course to stay low as well.

WHITFIELD: Remarkable. Allen Chernoff thanks so much for your live reporting out of Americus, Georgia. The president there getting into his vehicle, presumably on his way back to the air strip where he'll then leave Americus, Georgia, after touring that devastated area. Five hundred homes destroyed in a town of 20,000, Americus alone suffering from two deaths. This stop after making the tour over Alabama where part of that 1,000-mile swath of damage cut by the string of tornados taking place starting Thursday, he got an idea first-hand the devastation caused from these tornados throughout southeast.

The president will be heading back to Washington and of course we're going to continue to follow the developments from this tornado devastation, this weather phenomenon-taking place this week in the southeast. More news as we get it.


WASTLER: What goes up must come down. But how will we know when the housing market has hit rock bottom? Is now the time to buy? Lucky for us Gerri has been following the story closely all week. Gerri, give us a rundown on the latest situation.

WILLIS: Well you know I wish I had better news. But the numbers this week was just horrific. New home sales down 16.6 percent for January, a horrible number from the Commerce Department. Now I have to tell you, not everybody takes the Commerce Department all that seriously with their numbers but these were so dramatic that I think everybody is going to pay some attention. Then we had existing home sales out from the National Association of Realtors. On the face it looked better because sales actually increased, improved. But you know what you care about. You care how much they're selling for, what the prices are and that's where the problem was. We saw prices decline, fall, for the sixth consecutive month. Not happy news there. If you're looking, if you are asking me what the outlook is, I don't have happy news here. We could be treading water in some markets, declining in others. Overall, not positive until at least the third quarter of this year, possibly the fourth quarter.

ROGERS: Aren't you trying to sell a house?

WASTLER: Yeah, I'm trying to sell one in two or three weeks. Thanks for the rosie outlook there! But you mentioned different in different areas. Not like one massive market. Could I still be in a good market? Couldn't I?

ROGERS: Don't hold your breath.

WILLIS: Do you own a house in central, San Francisco, for example?

WASTLER: No. Jersey.

WILLIS: I think it is tough for people out there right now. So many home sales prices have gone up so dramatically in such a short period of time that there is a lot that people have to worry about. But the market as you probably know, also has to worry about this. Part of the problem with what happened in the stock market this week is that mortgages and mortgage lenders are having trouble. Particularly with sub prime, but now the problem with sub prime is so pervasive, so out there everywhere that it is starting to affect lenders who went into other sectors of the marketplace as well.

Now here is the situation if you want to refinance and a lot of people had adjustable rate mortgages that they're really worried about you may have trouble getting that new loan because you may not qualify anymore for the new loan that you want. That's the problem that's going on right now. What I think people are really going to have to deal with because those lenders out there are tightening their lending standards because they're trying to do what the Fed is telling them. But it could hurt people that really need to get a new loan who see their rates go through the roof.

ROGERS: What happens if we hear from the Fed later this month and something happens on rates, I mean what's going to happen to mortgages then?

WILLIS: I think the real things you have to worry about for the housing market out there in particular are sharply rising rates. Rates are not that high right now. Certainly not even at the long-term average of 8 percent. And, what happens to the economy? You know, conversation about recession this week isn't just bad for the stock markets; it's also bad for housing. When people lose their jobs we know what happens. Just saw a story this week that in Detroit people are walking away from their mortgages in some cases because they cannot sell those houses. Can you believe that?

ROGERS: They're under water completely.

WILLIS: They're under water completely.

WASTLER: This is sort of counter intuitive. You think the Fed cuts rates and the interest rates will go lower and you can have money coming back. But you're saying the environment is such that even if the Fed cuts rates there is a tightening that all these banks got burned in the sub prime essentially.

WILLIS: I think banks are already thinking about how can we reduce our exposure. They're not interested in lending more money to sub prime borrowers. WASTLER: Oh, well, I'm going to keep hoping, Gerri. Thank you.

WILLIS: I'll do what I can.

ROGERS: Nothing else you can do.

Well, how many people do you know who heat their home from stuff you can buy in the produce section? One family from New York is doing just that with corn. And they're saving some money, too. Our vacationing Ali Velshi has the story.


BRENDA OSTREICHER, HEATS HOME WITH CORN: Fifty pounds of corn, easy to carry. You can lift it.

ALI VELSHI, CNN CORRESPONDENT (voice over): She's not a farmer.

B. OSTREICHER: When I go down to buy the corn, the man says to me, "oh, the animals are going to eat good tonight! "I go, "yep."

VELSHI: And the corn is not for animals. It is to heat Brenda and David Ostreicher's home on Long Island, New York.

DAVID OSTREICHER, CORN STOVE OWNER: I wanted to look at another way of saving energy and helping the planet and not creating as much carbon dioxide.

VELSHI: So they bought a corn-burning stove to heat part of their 8,000 square-foot house. The stove was designed by Bob Walker. He says the savings from heating with corn quickly makes up for the $4,000 cost of the stove itself.

BOB WALKER, CEO, BIXBY ENERGY: It could be, depending on what the price of corn is, 2 1/2 to 3 1/2 years. There are people who are looking at that as being a very practical return on their investment.

VELSHI: Burning corn costs less than burning oil. It is cleaner than oil, and it appeals to the Ostreicher's in other ways, too.

D. OSTREICHER: I felt I would be giving my hard-earned dollars to American farmers rather than to people in other parts of the world that don't like us.

VELSHI: When it is cold outside the Ostreicher's can burn through about 50 pounds of corn a day! The house doesn't smell like popcorn, but it does heat up. Sometimes too much for the Ostreicher kids.

B. OSTREICHER: I said, close your window! It is an embarrassment. I said the neighbors are driving by and we have the windows open. Like we don't care.

VELSHI: Brenda doesn't mind the heat. Thanks to the stove she jokes that she can wear a bikini around the house in winter without breaking the bank.

B. OSTREICHER: I think I was miss November.

VELSHI: Ali Velshi, CNN, New York.


WASTLER: There's lots more coming up here on IN THE MONEY.

Up next this week's "Life after Work" segment.

Plus, we'll read some of your e-mails. Send us an e-mail right now at


WASTLER: More than five years ago "Wall Street Journal" reporter Daniel Pearl was killed by terrorists in Pakistan. Since then his story's been told through documentaries, and coming this summer a feature film starring Angelina Jolie. Yet what you may not know is Daniel's father has been keeping his son's memory alive in ways you might find surprising. Ali Velshi has the story.


JUDEA PEARL, FATHER OF DANIEL PEARL: The icon of an American who was decent, who gave without asking in return --

ALI VELSHI, CNN CORRESPONDENT (voice over): Judea Pearl is the care taker of that icon. His son Daniel Pearl was killed five years ago by terrorists in Pakistan. After Daniel's death Judea and his wife channel their grief into action launching a foundation in their son's name that combats religious and cultural intolerance.

PEARL: The Daniel Pearl Foundation was founded to continue the spirits of Daniel in terms of spreading friendship and love of music and understanding and learns various cultures.

VELSHI: Pearl is semi-retired from his work as a professor at UCLA due to the time he spends on the foundation's programs. Touring the world to host town hall meetings on issues that divide Jews and Muslims, and planning the Daniel Pearl World Music Day, a series of global concerts.

PEARL: It is essential to hear from Danny every day when he talks to me. To the Muslim people the message is we are not your enemy. We have a common enemy that we must fight together. And to the western world, the message is, the world can deliver hope, humanity, pluralism, and understanding.

VELSHI: Ali Velshi, CNN, New York.


WASTLER: We'll be right back with more IN THE MONEY.

(COMMERCIAL BREAK) ROGERS: Now it's time to read your answers to our question, do you give businesses that treat you poorly a second chance? No, of course not. But that's me. No one cares what I think. All right.

Tony in Myrtle Beach, South Carolina wrote, "I don't do second chances. Once a store has treated me poorly not only won't I return, but I will call the manager and tell him or her how I will tell all my friends about their bad service."

WILLIS: Oh, tough love, I love that. Bob in Clearwater, Florida wrote, "I believe in giving a company a second chance, because sometimes the problem is just a particular employee. But if I don't get a good response from a manager, then I take my business elsewhere and tell others."

WASTLER: I am sort of the in between one here. David from Massachusetts wrote, " That depends on how difficult the company makes it for me to complain about my experience, and then how effectively it deals with it. Evidence of sincere regret goes a long way."

All right. Well thanks for joining us for this edition of IN THE MONEY. Thanks to Jen Rogers and Gerri Willis for joining us, appreciate it. We will see you back here next week Saturday at 1:00, Sunday at 3:00 we will be taking attendance, see you then.



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