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Mortgage Meltdown; Black Eye Stocks; Labor Unions; U.S. Air Traffic Control System

Aired September 2, 2007 - 15:00   ET


FREDRICKA WHITFIELD, CNN ANCHOR: Hello, I'm Fredricka Whitfield at the CNN Center in Atlanta. YOUR MONEY begins in a moment, but first these headlines.
Tragedy in an Arizona mine shaft. Rescuers found two girls who were trapped overnight in a mine shaft. One of them is dead, the other is being treated for injuries. It's not clear how the girls got in to the mine.

And parts of the Caribbean keeping a weary eye on another hurricane. Felix is north of Aruba and gaining strength, it now a powerful Category 3 hurricane with winds near 125 miles-an-hour. Forecasters say it could become a Category 4 within a day.

North Korea is apparently set to mothball its nuclear programs. Chief U.S. negotiators say North Koreans agree to declare and disable their nuclear programs by the end of this year. That word after talks between the two sides in Geneva.

And Senator Larry Craig is turning to some legal heavyweights to clear his name in the sex sting scandal. The Idaho republican has hired attorneys Billy Martin and Stan Brand. Martin represents the football star Michael Vick and Brand represented Major League Baseball in the steroids probe.

More news coming up in 30 minutes. YOUR MONEY starts right now.

ALI VELSHI, HOST: Welcome to YOUR MONEY where we look at how the news of the week affects your wallet. I'm Ali Velshi.

CHRISTINE ROMANS, HOST: And I'm Christine Romans. Coming up on today's program, discovered beauty under the battle scars as we show you five stocks with hidden promise.

VELSHI: Get your paper and pen out for that. Also ahead, see if Virgin America boss, Richard Branson, can make you like flying again with his new airline.

ROMANS: And later on this Labor Day weekend, learn how unions have changed the way you work whether or not you belong to one.

VELSHI: But first, this has been a busy business week. President Bush and fed chairman Ben Bernanke speaking on the mortgage meltdown Friday.

ROMANS: We're very pleased to have Gerri Willis now with details -- Gerri.

GERRI WILLIS, CNN NEWS CORRESPONDENT: Christine, Ali, great to see you. It was a very busy day in Washington on the housing beat, let me tell you. The president spoke and he said it's not the government's job to bail out speculators. In fact, he went through a three prong program to help individual homeowners who are struggling with this mortgage meltdown.

The first thing he wants to do, he wants to empower FHA to really help people out there who's loans are just too much of a burden for them. So guys, changes to the FHA program, which is critical for homeowners; about 80,000 are expected to be helped by this program. So, many people out there struggling with loans resetting. Resetting higher FHA comes in, they can guarantee these loans like they guarantee loans for low and middle-income folks. It's thought that this is going to be a very big help. And I got to tell you, it's not very controversial. Everyone in Washington supports this, and no big surprises there.

And there are other programs as well the government is very interested in doing, including changing tax code so that folk whose have to sell their homes don't end up facing a very big tax bill. Now, you've seen this, where people, they try to get out from under their loan before you know it a big bill from the IRS.

ROMANS: Take your shirt and then you get kicked in the pants. You know, it's horrible when that happens to people, but it's just the way it's been.

WILLIS: It's a one-two punch, it really is. There's one other program I want to talk about. The president says: hey, let's go out there, let's investigate this, see what went wrong, so this doesn't happen again. But I got to tell you, at the end of the day, most of these proposals, as we've seen, well known, well researched. They're not very controversial. And I just want to mention, there are other programs out there.

ROMANS: All right, Gerri Willis, thanks, Gerri.

WILLIS: You're welcome.

VELSHI: Now, in other housing news this week, U.S. home prices declined at their fastest pace in 20 years, this past quarter, that's according to a new report that came out earlier in the week.

ROMANS: So, does that mean that now's the time to buy? Brad Inman, founder of "Inman News" a real estate publishing company.

Brad, welcome to the program.

BRAD INMAN, PUBLISHER, INMAN NEWS: Greetings. How are you?

ROMANS: Great, now let's talk a little bit. I mean, we're about, you know, trying to find programs to help people who are going to lose their homes. We're trying to figure out, you know, how far the mortgage mess is going to spread. Is there an opportunity in here for some folks?

INMAN: Yeah. I think there's two schools of thought. You know, wait until the volatility settles down. Wait until we figure where rates are going, what's going on with mortgage lending, what's going on with home prices. The other school of thought, it's a great time to probably go out there and get a good deal, because anyone selling their home, home builders, everyone is eager to find a qualified buyer in a market where it's very tough to get a mortgage and prices are decling.

VELSHI: Except, Brad, if you think you'll buy a house now or in the next couple of months and somehow in a year it's going to be worth 10 percent more. You might see further declines. You might buy a house at what appears to be a big discount, and that might go lower over the next year, year and a half.

INMAN: Absolutely. And you're using your hard earned equity to bet on a market that is declining. And we clearly haven't hit the bottom and that is definitely the reason to hesitate, because if it drops like they're predicting, seven percent this year, as Goldman- Sachs is predicting, and seven percent next year, you could find all the hard-earned savings you put down for the house you're going to lose. So, it's a tough time to make a decision to buy a house.

ROMANS: But Brad, if you're not looking to look at a house like it's a big investment, a short-term investment, if you're looking for a house that's going to be a buy up or you know a move-up or your first family home, this might be the time, if you can stick in that house for a while to try to find that deal?

INMAN: Yeah absolutely. And it also depends on what market you're in. Some markets are declining much more than others. If you're in a stable, flat market, the risk is much lower. But also remember, you can cut a good deal. Don't get in a hurry. There's plenty of inventory out there. Negotiate hard. Finally, after 10 years of seller...

VELSHI: It is a buyer's market now.

INMAN: It is.

VELSHI: And the thing is, if you're moving from Detroit or Las Vegas or Phoenix, these really down markets to a Seattle, where the market is very strong, then that's a problem. If you've had to relocate because of your job, but if you're within the same market, isn't it a bit of a wash, if I sell my home in Detroit at a loss, but I'm buying another house at a big discount, isn't that OK?

INMAN: It's OK, but remember, there's transaction costs when you buy a house. So, you shouldn't, you know, discard that fact. It costs money to move, it costs money to buy house and so there is some risk there. But you're right, the worst-case scenario is leaving a really bad market and going to a stable or rising market. But if you're moving within the same region, you can probably can cut a good deal on the buy side, but you're going to suffer when you sell. ROMANS: Let's talk a little bit about how real estate is local and you say it's not only regional, its sub regional. I mean, you could be talking about Brooklyn, but in parts of Brooklyn, I mean, it's still really hot. You talk about, you know, the northeast, but in parts of New York, you've got the hedge fund money, you've got -- I think you call them the Google kids, the Google babies out in California and all of their money, you know...

VELSHI: Those are markets you shouldn't necessarily think are great deals right now?

ROMANS: Right. Right. Right.

INMAN: Yeah, absolutely and the "option babies" they call it here in the San Francisco Bay area. And, but you look at Manhattan, you know, there's a lot of condos coming on to the marketed in New York City, so there's opportunity there. But if you're looking at the co-opes in the upper east side where that hedge fund money goes, you're probably not going to get a very good deal because there's not a lot of inventory. So, even within particular regions, you see urban areas like Manhattan that are hot, and Long Island that's suffering. So, but these are rare -- you know, Manhattan, and parts of San Francisco that are still very strong, are very rare. Most of the country is suffering and there's a lot of misery out there with the foreclosure disaster.

VELSHI: Brad, always good to talk to you. Thanks so much for bringing us up to speed on this. And I'm sure we'll have an opportunity to talk again soon. Brad Inman is the publisher of "Inman News." Thank you.

ROMANS: You can never talk too much about housing these days.

VELSHI: No, you can't.

ROMANS: Everybody wants to know.

VELSHI: It's always a different question, all the time.

ROMANS: It totally is. OK, now, this is time for perhaps a shameless Ali Velshi plug.

VELSHI: Well, I've got a radio special, "The Ali Velshi Show: Making Sense of the Market." No, it's airing this weekend on various CNN affiliates. If you're not able to listen to it on a CNN affiliate, it's also available to everyone and anyone. You can get it on You can also go to iTune where is CNN has a dedicated page. The thing here is, we're talking about who this slowdown in housing and mortgage meltdown affects, what were you k do about it, how we can prevent this from happening again. It's a good leisurely conversation, so it might be worth listening.

ROMANS: A full hour of Ali Velshi.

VELSHI: Well, and other people.

ROMANS: In the tub, in your car, you can...

VELSHI: I wasn't going to tell them...

ROMANS: No, no, I mean, that's when you can listen to it.

VELSHI: OK, got it. But that's a good idea for a show.

VELSHI: Not necessarily.

ROMANS: "The Ali Velshi Show," in his bathtub.

VELSHI: Up next on YOUR MONEY...

ROMANS: Find out if you can learn to love a stock that sporting a black eye.


VELSHI: You know, I go on AMERICAN MORNING every morning and I do market reports sometimes and I often don't show up for work. I just -- I kind of alternately have one that says, wow, markets are really up and the other one that, markets were way down. Because that's kind of the way it's been going in this market. But, for those of you out there, you kind of have to stay investing, if can you tough out a white knuckle market like this one, there are bargains in store, there are stocks that they say are on sale. But, you have to know where to look.

ROMANS: That's exactly right. AOL personal finance editor, Hilary Kramer, has her eye on five stocks that she says have good bone structure underneath all those battle scars.

Welcome to the program, Hilary.


ROMANS: So, you know a lot the big hedge fund and the smart money, the professional investors, they've gotten into a little bit of a bind because of the subprime crisis. They've been selling. They've been selling whatever they can sell. Does that make maybe some things out there for people like us to buy?

KRAMER: Absolutely. This is a great opportunity. For the first type that really slick, smart money, that had a lot of the inside knowledge, they went too far, they bet too much, they overleveraged and they've had to sell. They've lost their money, it's an opportunity for individual investors to pick up bargains, and to buy.

VELSHI: You named a few, and I want to get to some of those. You've got specific stocks that you think people should buy, but they're not necessarily names that everybody knows about. Let's talk about one of them.

KRAMER: OK. TRC Companies. The ticker symbol, TRR, this is a $10 stock that was $15 until a very slick, smart hedge fund manager went too far and had to sell it down, it went all the way to eight. At $10 you're picking up a bargain. TRC is an infrastructure company that's working on the $1.3 trillion of upgrades through bridges, our tunnels, our hospitals and they also do environmental cleanup. They're in all the areas they're going to do well, whether we have a recession or whether we still continue with a roaring economy.


KRAMER: Absolutely.

VELSHI: What is -- or sorry, go ahead.

KRAMER: You go.

VELSHI: What about Metalico?

KRAMER: Metalico's one of my favorites. The ticker symbol is NEA. Metalico is a scrap metal recycling company, and it is in the scrap metal heap, because, again, it was sold off, sold out, a great management team, and recycling is going to continue to be an important part of our economy and globally, they also sell outside of the U.S., so regardless, Metalico it will do well. And so we should see Metalico go up to $12 or $13, with that management team.

ROMANS: You have a Sam Zell story on here, that is a garbage story. Buying garbage.

KRAMER: Sam Zell, the great real estate baron. You know, what he is now? He's an alternative energy guru and he understands the importance of garbage and waste disposal, but he turns it in to energy and it is a way to play it globally. CVA Covanta, a company that's not just here, picking up the garbage, making money on that side, they also make money turning it to energy and they're...


ROMANS: ...a pullback, too.

KRAMER: Oh, absolutely, because there was a hedge fund in Boston, a $30 billion hedge fund, that owned Covanta and they sold it from 26, down to 21. Sloppy, they just threw it into the market because they're a big player in bonds and subprime. So, it's an opportunity to cash in on Sam Zell and his brilliance and his CEO's name is Tony Orlando and...


VELSHI: That alone is a reason to look at the company. Tony Orlando is running the company. Comverge Technology, another company a lot of people won't have heard of, because it's fairly new on the market.

KRAMER: Absolutely, yes. This is an IPO from April, and converge works to prevent blackouts. They upgrade the grid system in our electric grid systems and Comverge has clients that pay the bills because they go in there and they put smart meters in, and they help improve the margins at the utilities. I love Comverge, COMV, $27, it had been $39. Again, the hedge funds, those big portfolios, they sold it down, sold it off and it's an opportunity to get into a growth area.

ROMANS: What about Pinnacle West Capital? It does not look very sexy, but it does give more of a yield. I guess if...

KRAMER: Money is sexy. Money is sexy! And that's why I like...

ROMANS: ...twenty-three percent yield, tell us about it.

KRAMER: OK, Pinnacle West, PNW, this is Arizona's electric utility company. What's going on in Arizona? There is a heat wave, 110 degrees heat wave breaking all records. So, PNW is an opportunity to get into a company that the market, Wall Street's smartest thought it was a real estate play, so they sold down this stock from 51 back down to 39. So, Pinnacle West is an opportunity to buy a utility that's safe and secure that gives you a 5.4 percent dividend yield, but at the same time, you're not buying a real estate play, so you can be smarter than the big Wall Street boys.

ROMANS: Now, you have to give us the full disclosure on which ones -- which of these stocks do you own, which ones are you looking at? Just so we know kind of your -- your own personal position on these?

KRAMER: I stand behind all of them and I have bought in to all of these stocks and I'm waiting for them to go up.

VELSHI: All right. So, for those you out there who want it look these up on your own, I'm just going to give you those tickers again. TRR, MEA, CVA, COMV, and PNW. You can type those into any Website that covers stocks and you can read up on them yourself.

Thank you so much.

KRAMER: Thank you.

ROMANS: OK Hillary, thank you.

VELSHI: Coming up after the break, even if you've never joined a union, find out why they matter to your work and your money, because it is the weekend before Labor Day. Stay with us. We're coming right back.


VELSHI: All right, Labor Day's a big holiday weekend as you hit the sales and you fire up the barbecue. Spare a thought for the people who put labor in Labor Day, that would be America's unions. They've lost a lot of power, but our next guest believes they matter more today than ever.

ROMANS: And even if you've never been a union member, she argues organized labor has made your life better in ways you might never have even considered. Beth Shulman, the labor consultant and the author of the book is, "The Betrayal of Work: How Low Wage Jobs Failed 30 Million Americans."

Beth, welcome to the program.

BETH SHULMAN, AUTHOR, "THE BETRAYAL OF WORK": It's a pleasure to be here.

ROMANS: First of all, if you don't belong to a labor union, how has labor unions changed your life?

SHULMAN: Well, labor unions have changed the lives for all working families. They've been the leader in passing things like Social Security and Medicare, paid family leave. They're leading the fight today for healthcare for all Americans. They've basically been the voice for working families through the federal, our state government, and in our local communities.

But we see the benefits of unions in our daily lives. If we have family in nursing homes, when nursing homes are unionize there's less turnover, so our parents get better service. It's the same in all industries, where there's less turnover, more commitment, because people are making better wages and benefits.

VELSHI: What do you say to folks who look at, say the auto industry, and say that because of unions, in part, because of cars that weren't made properly, in another part, but because of unions, the wages are very high in that industry and it helped it become less than competitive. What's the response to that?

SHULMAN: That's not really the answer. Really, it was the managers make very bad decisions about what kind of cars to make. Because, certainly in Europe, workers make very good wages and benefits, so it's not an issue of that. It's an issue of being competitive in terms of kind of the quality of the product, and innovation.

You know, today, what unions are doing in the service industry is really changing low-wage jobs into good jobs. Whether it's janitors or hotel workers, nursing home workers, home healthcare workers, these were low-wage jobs, but through union, a union maid in a hotel can make, you know, $13, $14 an hour, have health benefits and a pension, can finally take care of their family. That's the kind of jobs we want in America, and unions really are the path to the middle class, just as they were.

ROMANS: Many people say that the power of unions has declined considerably. I think they're less than 15 percent of the workers in America, right now, belong to unions. What do you say to people, that unions have become less relevant?

SHULMAN: Well, they're actually more relevant today, 58 percent of Americans say, that if they had the choice to join the union, they would. The problem is they don't have that choice. Joining a union in America has become a risk rather than a right and we need to change that. It should be easy to join a union. You shouldn't have to be concerned you're going to lose your job or be harassed by your employer. And that's the reality today for workers who want to join unions and make themself a better life.

VELSHI: So for people who say -- think that having unions out there, which raises wages and raises the cost of things, what's the best argument these unions actually help them better their own lives?

SHULMAN: Well, they better their own lives in terms of the service they get and the help in terms of their wages. You know, once an industry is organized, even if you're non-union, you get the benefit of having the union wage that sets the standard for whatever industry you're in.

But more important, unions really are the voice of working people. They really stand up against corporations and their interests. They stand up for everyday workers, who are trying to make better life for themselves and their family. They really are the path to the American dream, and they will continue to be, because they're the real voice for working families.

VELSHI: Beth, good to talk to you. Thank you for being with us.

SHULMAN: A pleasure to be here.

VELSHI: Beth Shulman is the author of "Betrayal of Work."

ROMANS: Coming up on YOUR MONEY, a guy who can use the word "flying" and "fun" in the same sentence with a straight face. We'll here from Virgin America boss, Sir Richard Branson.


WHITFIELD: Hello. I'm Fredricka Whitfield at the CNN Center in Atlanta. "Now in the News," Felix intensifies into a Category 3 hurricane, sustained winds of 125 miles-an-hour and higher gusts. It skirted past Aruba, Curassow, and Bonaire, drenching the island and leaving downed trees. More updates on CNN, your hurricane headquarters.

And tragedy in an Arizona mine shaft. Rescuers found two girl, one was dead, the other is being treat for injuries, both last seen riding an all-terrain vehicle. It's not clear how they got into the mine shaft.

And Lebanese troops seized control of a Palestinian refugee camp ending a deadly three-month standoff with Islamic militants. Army officials say they don't know if the group's leader escaped or was killed in today's fighting.

And security is a big concern in Australia, as it prepares for next weekend's Asia-Pacific Economic Cooperation Summit. Twenty-one world leaders are expected as well as thousands of protesters.

More news coming up in the CNN NEWSROOM at top of the hour. Now back to more of YOUR MONEY.

VELSHI: Some of you might be watching this in an airport lounge, some of you might be at home getting ready for a trip. If airline delays, if they're messing up your weekend, you're going it find out firsthand why Washington wants to upgrade the U.S. air traffic control system. This week, the FAA moved a step closer to making that happen by awarding a contract for IT&T and build the first part of revamped system.

ROMANS: Now, weather gets most of the blame for flight delays, but a whole range of problems can make a plane run late or never even take off. Greg Gunter joins us -- Greg.

GREG HUNTER, CNN NEWS CORRESPONDENT: Well listen, everybody agrees, this is a multifaceted problem, but there is a group of critics out there that say that the government has been ignoring a fix for this problem for years.


(voice-over): How many times have you seen this while waiting to fly? At New York's La Guardia Airport, for example, there are just two runways for more than 1,000 flights a day in June. That means a plane is taking off or landing every two minutes. Lack of runway space is a nationwide problem. According to Barrett Byrnes, president of the Air Traffic Controllers' Association.

(on camera): Your group asked the government to start building runways 10 years ago.

BARRETT BYRNES, PRES, AIR TRAFFIC CONTROLLERS ASSN: Correct. We asked them to build 50 miles of runway per year, just to keep up with the potential demand that we're seeing now.

HUNTER: Did they do it?

BYRNES: No, they didn't.

HUNTER (voice-over): One that did -- Atlanta's airport. The busiest airport in the country, added a fifth runway last year, and officials say, takeoff delays dropped by 78 percent. The FAA says it expects some relief with a new multibillion dollar program called "NextGen."

ANNOUNCER: NextGen is about the development of a satellite-based 21st century air transportation system.

HUNTER: It's designed to give pilots more information that allows them to safely fly closer to each other, making air traffic more efficient. But it won't start until 2013. Meanwhile, the FAA says it plans to redesign air space in the busiest part of the world, New York City, hoping to reduce delays by 25 percent. Byrnes says that just won't fix the real problem.

BYRNES: La Guardia and Newark are at 100 percent capacity right now. And that's why you're seeing three-hour delays on a consistent basis.

HUNTER: Because of the runway?

BYRNES: Because of the runways. Not enough runways. Not enough places to put these airplanes.

HUNTER: The FAA disagrees and tells CNN it's next gen plan will be able to handle two to three times the traffic that they are currently handling.


HUNTER: Now let's think about that -- two to three times the amount of traffic? La Guardia has two runways and aren't planning on building anymore runways. That's 1,000 flights a day. Right now, a plane taking off and landing every two minutes. Double that -- 2,000 flights a day, two runways, that's a flight taking off and landing, one every minute.

If you triple that, 3,000 flights a day, just at La Guardia, no more runways, that's a flight taking off and landing every 40 seconds. The guys we talked to, pilots, air traffic controllers said that's not only tight, it's impossible. The system is maxed out.

VELSHI: Well, the crowded U.S. skies and runways actually aren't going the other way, they got a little more crowded this week. Fledgling discount airline Virgin America, which is headed by Sir Richard Branson, chairman of the Virgin Group added a route between New York and Los Angeles on Wednesday.

ROMANS: Earlier this week, I sat down with Branson and asked him how flying on Virgin America is going to be any different than flying on a crowded American carrier.


SIR RICHARD BRANSON, VIRGIN GROUP: I think it will be radically different. Virgin Atlantic that's been flying across the pond for 21 years, I think brought a very different kind of service to flying internationally, and I'm hopeful that Virgin America will do the same.

We are going to try to entertain you when you come on one of our plane. We're going to offer you brand new planes. So they'll be a lot more reliable than some of the other airlines. When you're on the plane, we've got beautiful lighting, beautiful seats. We've re- introduced first class. If you talk to another passenger down the aisle, you can actually bring up your screen and have a chat with them.

ROMANS: Is this a foot-hold in to the U.S. for some other - because your company is not transportation - your company is a little bit of everything?

BRANSON: Yes. I mean, having a large airline in America with the Virgin brand on it will help the brand. But clean energy, all the profits that the Virgin Group make from our investors in Virgin America, every penny will be spent on trying to come up with a clean fuel.

So next year we've already pledged that we will fly our Virgin plane on clean fuel -- fuel that doesn't damage the environment, and so there are a lot of other areas on the mobile phone business.

America is already doing very well, Virgin Mobile. But there are a lot of other areas we want to move into in the states. Obviously the most notable of which will be Virgin Galactic, which will be putting people into space in 18 months time.

ROMANS: Does press sign up for that? Are you bringing along reporters? This program would love to go.

BRANSON: If you'd like to be the first reporter in to space, we would just -- give me a check and --

ROMANS: Oh, the check. That would not look good on my expense report, I'm afraid.

Let me ask you one last question about the JFK, the San Francisco route for this new airline. Are you going to branch out? Are you going to go to any other city? What kind of timetable is that? How's it going so far?

BRANSON: Well today we start New York to Los Angeles, and we would just start building the routes so that hopefully five years from now, most of the major routes in America, you'll be able to have a choice of flying on Virgin America or flying on those other airlines. I think once you've actually tried this Virgin, you'll stick with it.

ROMANS: I'm bringing my own airline baggage into this story, but how are you going to make sure that the people who are flying your carrier -- the seats might be better, there might be fun things to do. How are you going to make sure they're not stuck on the ground, they're not being re-routed to another airport, their baggage isn't getting lost? I mean, the American air travel experience -- I cannot overestimate how tough it has been.

BRANSON: We can't guarantee everything. We've got the youngest fleet of planes in the world here with Virgin America. They'll all be cap threes in three months' time. Which means, if it's bad weather, United will be diverted, American will be diverted, we'll be able to go straight in and land.

So you know, having a young fleet means obviously we won't have so many technical issues that the old flight carriers have with their old planes. So we'll have certain advantages but there are obviously, there are things like air traffic control that we'll suffer along with the rest.

The only advantage will be that we've got 30 of the best films. We've got games. We've got, know, just fantastic entertainment on the plane. So if you have to get stuck on the runway, we'll entertain you.


ROMANS: He's really been pushing this airline. Right now they just have San Francisco to New York, but he's hoping to expand. He's very frank. It comes at a very tough time in the American airlines business.

VELSHI: And you can deal with the entertainment while you're stuck on the runway. You can deal with landing a plane in bad weather if the airports have that space Greg was talking about. So I hope they're not overpromising. However, the one promise that caught my attention was that you might be the first reporter into space. I hope you're going to follow-up on that.

ROMANS: However, he said I have to pay for it. I'm pretty sure that CNN's not going to pay for it.

VELSHI: I think CNN paid for that Big Mac we had last week.

ROMANS: Did they really? I'm pretty sure it's going to cost more than a Big Mac.

VELSHI: We'll figure that out because it would be good to you have as the first reporter in space. I mean that in the best way and that would be a nice thing to celebrate.

ROMANS: Are you trying to get rid of me?

VELSHI: No. I'd want you back from space! We're going to have a little argument over the commercial break. Up head on YOUR MONEY, this holiday, think about your next holiday. Find out why it makes sense to book now for Thanksgiving and Christmas travel. Stay with us.


VELSHI: All right, Labor Day weekend is winding down and all your summer trips are behind you. You might feel that you can take a breather from dealing with travel plans, but what I've been doing is in fact booking the rest of my travel for the rest of the year. Thanksgiving is less than 90 days away.

Douglas Stallings is a senior editor at Fodor's Travel. He's got some tips on finding the best deals, and you're saying this is not a bad time to be looking for some of those deals. Why?

DOUGLAS STALLINGS, SENIOR EDITOR, FODOR'S TRAVEL: I would start looking now. I really think that the best sales aren't showing up yet, because I'm seeing some good prices for September, but not going forward, say, for Thanksgiving yet.

VELSHI: Now, are we talk about within the United States or outside? Because I'm finding prices and availability not as great for the rest of the year as I might have last year. It seems like flights are fuller and prices might be up.

STALLINGS: I think people are nervous and they're booking their travel a little bit earlier. There are still some deals I think to be had overseas and for domestic travel I think - I don't know, I was looking around for fares to go home to Christmas and seeing plenty of seats and plenty of flights, but not prices that I wanted to pay. VELSHI: Interesting that's happening. You brought some books as you always do, and I really enjoy them. One of them that I sort of gravitated to is Beijing. I was there maybe a year, a year and a half ago looking for any excuse to get back. Olympics are next year, so it's probably changed a great deal in a year and a half. What's your thoughts on this?

STALLINGS: There's dozens of new hotels, particularly luxury hotels. They're revamping their transit system which doesn't really go a lot of places that tourists go. But still, they're trying to clean up the city, improve the air quality. I don't know how effective that's been, but they're trying.

VELSHI: But there's some good fares?

STALLINGS: There are some very good fares. Right now, Cafe Pacific has this phenomenal $811 fare from Los Angeles and I think it's $911 from New York.

VELSHI: Budapest. Central Europe, Eastern Europe, fantastic opportunity right now. I almost think it's a great opportunity to get there in the next few years before it becomes sort of inaccessible and expensive.

STALLINGS: I would say go now, go in the next couple of years. If you want to go, say, in the off-season, Christmas markets are very big. They start gearing up around Thanksgiving.

VELSHI: Because it gets cold in these countries. It's that's OK for you, if you don't mind cold or a little snow, it can be fantastic.

STALLINGS: I usually go to trips like this in the off season because the fares are so cheap and the hotels are very pretty reasonable. There's a great Four Seasons in Budapest, one of the cheapest in Europe. It just makes it a good place to go, I think.

VELSHI: Tell me how I get the good fares. What's the best way to go about finding good fares, finding good hotels? Is it checking out all the Internet sites?

STALLINGS: Well now you have aggregators that do some of the work for you. So you can look at or to find out what all the fares are right now.

I would just go in to a site and put a hold on -- you know, put a look at things so you get an alert when there's a new fare. The fact is, some of these may last for a couple of days. If airlines are seeing that people aren't booking as quickly as they want, then they put the fare sale on or they may have a more extended sale. But you have to book things immediately, not until you're ready to go.

VELSHI: Better to package it yourself or buy a package with a tour and a hotel included?

STALLINGS: If you're waiting for the last minute in a place like the Caribbean or Hawaii which is off-season in the fall, a package is probably the best deal. There were some really good Caribbean fare sales, those are mostly over. They're continuing to some degree. But if you're booking last minute for the Caribbean, a package usually does it.

VELSHI: Douglas, good to see you again, thanks for being with us.


VELSHI: Douglas Stallings is the senior editor at Fodor's Travel. We're going to take a break here on YOUR MONEY. Coming up next, Jennifer Westhoven will be here with some of the week's top stories, particularly that speech -- maybe the speech of his career, from Fed Chairman Ben Bernanke and what does it got to do with you? Stay with us. You're watching YOUR MONEY.


ROMANS: A remarkable week in the markets and then the week ended with probably two very important people from the markets, the president and the Fed chief weighing in on the mortgage crunch.

VELSHI: On the last week of sort of summer vacations, not typically the one where you'd think of as the busiest business week around. Ben Bernanke, the Fed chief, some people called this one of the most important speeches of his career. I don't know if that's true. Jennifer Westhoven was listening to it. Was it?

JENNIFER WESTHOVEN, CNN CORRESPONDENT: Well I mean, it was the most important in the fact that there were the most people listening and there was the most potential for the market to maybe swing some way and do something really volatile about it because there's been so much attention.

There's been much expectation built in to what is the Fed going to do? So what Bernanke said is that the Fed will act as needed. So again, he's being very non-committal. Now that's to be expected. This is not a Fed policy statement, this wasn't really the time that, for Bernanke to really say what the Fed was to do.

But at the same time saying we'll act as about the as needed but, again, no promises made here at all. And I think we're really starting to see a striking difference between he and Alan Greenspan in that he had this statement that it's not the responsibility of the Federal Reserve, he said, nor would it be appropriate, to protect lenders and investors from consequences of their financial decisions.

VELSHI: That's huge.

ROMANS: Moral hazard.

WESTHOVEN: That's right.

ROMANS: If you go in there and give people insurance for risky behavior, they're going to continue to do risky behavior and that undermines the market. WESTHOVEN: Yes, he's saying we got to break this knee-jerk assumption that lenders, investors get in. They get in over their heads, they take on things that are far too risky. We talked about those ninja loans, giving loans to people --

ROMANS: No income, no jobs, no assets.

WESTHOVEN: Right, no documentation. It was just getting over the top. He's saying you can't count on us to bail you out. But he did also say you can count on us if this starts to spread into the general economy. If we see - of course we're always going to look out for the general economy. But it seems like what he's hinting, is that just while losses at one end, which is in the area of the markets where they took on this high risk --

VELSHI: Like investment banks and the hedge funds, he's not saying that the Fed is going to go in and bail them out?


VELSHI: But what happens to those people who have all lost their homes because they've been foreclosed, because their rates went up? Does that involve the Fed getting involved to bail them out in some way?

WESTHOVEN: Well that's really more of what the president has been talking about. Of course, a general rate cut helps everyone. Of course it does. But he's just saying, look, we can't just go around cutting rates, changing the entire economy.

ROMANS: And the important thing here is that there are some people who got into loans that were not right for them. You have to have some pain to learn the lesson, I think. That sounds so cruel --


VELSHI: Was it their lesson to learn? Who's to blame for this? The lender who got into a loan they shouldn't have? Was it the broker? Was it the bank? Was it the investment companies and the hedge funds? Who gets caught holding this bag?

WESTHOVEN: When you look at the way, the portfolio manager, maybe you shouldn't have been investing in this. Those are people who are paid to know better. Right? This is what the Fed is saying, we're not saving you.

When it comes to the real person who's signing loans, don't know what they're getting into, this is where we start to see why Congress people are calling for change here.

They're also saying, I think this is so crucial. Your mortgage broker has no reason to have your best interests at heart. They're not financially responsible for you. They don't have the best practices that way. They don't have to get you into the best mortgage for you, but they can act like they're doing that. Meanwhile, they're getting the best mortgage for them. VELSHI: Jennifer pointed out to us last week about how there was this tax, that if you did have your mortgage written off, you could actually be taxed on that mortgage written up. It sounded outrageous and appalling. And the president did touch on that today. So hopefully that will give people some relief.

WESTHOVEN: Yes, he said there will be tax breaks. You will not get this giant -- in one case, someone getting a $30,000 tax bill. They lost their home, and -- foreclosure.

ROMANS: Jennifer Westhoven, all right thank you so much, Jennifer. OK, looking for a perfect gift? Your wife, daughter, a co- worker, perhaps? You'd love a new designer bag.

VELSHI: It's called an anchor.

ROMANS: Maybe. Would you like a designer bag?

VELSHI: Well let me tell you. As you'll learn, this is not always appreciated equally by all anchors or friends. If you are like me, a specialty store where you can get these kinds of gifts can be a little bit intimidating.

I sat down with the CEO of Coach, Lew Frankfort. He offered me some simple advice to take the intimidation factor out of buying a gift for someone.


LEW FRANKFORT, CEO, COACH: If you're able to describe the person well enough who you are buying it for, so you might be asked, what other brands does she carry? How often, where does she shop? You'll be given a set of leading questions by the sales associate, to get a sense of who this woman is that you're buying the product for.

VELSHI: Your range, then in a handbag would probably go from, I don't know what the entry level is.

FRANKFORT: Our bags range from about $150 to about $800. And we do, of course, have a small number of items at $5,000 and $10,000. But the average handbag is about $300 or $350 in Coach.

VELSHI: Tell me the difference between a $300 handbag and an $800 handbag for my purposes? If I didn't know what it was, what's the difference?

FRANKFORT: The difference is the materials. We would use more expensive leathers, and fabrics. Second would be the level of workmanship that would go in to the product. A typical handbag takes about two hours to make, and a more expensive bag that has a more make, with more detailing and ornamentation, and levels of materials might take three or four hours.

So you're paying for the higher labor costs, associated with more hours of make and a more expensive material. VELSHI: I think of myself as a relatively fashionable guy. Probably as far as guys go, but I have a belt that I bought, and I bought it, probably about four years ago, and, see, it's time for me to have a new belt. It's not that there's anything wrong with this belt. It's this has been in my possession for far too long. I think that's pretty difficult. Guys are not looking for sort of the new fashion and the latest thing in leather goods and accessories, would you say?

FRANKFORT: That's true. Most guys are very functionally driven. They will buy something when it wears out or they were in a hotel and they forgot their belt when they left and they say oops, I don't have my belt, and they tend to buy black and brown.

VELSHI: And you do have products for men here?

FRANKFORT: Yes, but they're not very -- men tend not to be brand loyal. Do you know the brand --

VELSHI: No idea where I got it, I wish I did because I would have bought two or I'd go back, because this is a good belt.

FRANKFORT: There's no woman in America who doesn't know the brand of her bag or her wallet or her belt.


VELSHI: I'm still stuck with the belt.

ROMANS: You didn't buy a new belt?

VELSHI: No and in fact, there were lovely belts right there and I didn't buy one. I really need a belt. You probably couldn't get a good shot of that on TV, but I wasn't just making this up. My belt, really, it's time for a new one. Can you get a sense of how --

ROMANS: Why don't you just go downstairs and get a new one?

VELSHI: Because I'm a guy.

ROMANS: And you're going to keep the same thing for years until it falls apart.

VELSHI: Until it breaks. When it breaks, I'll get a new belt.

WESTHOVEN: Just make sure you're behind the desk when your belt breaks.

VELSHI: Yeah, that's right and sitting down. Jennifer, good to see you. Coming up ahead on YOUR MONEY, we're going to get inspiration for a new career. We're going to show you how a job turned into a project that is connecting children around the world. You're watching YOUR MONEY, we're coming right back.


ROMANS: We had a lot of student exchange programs.

VELSHI: Oh, yeah. I actually - one of my first trips to New York was a student exchange, in the band.

ROMANS: In the band, what did you play?

VELSHI: I don't know - this is so embarrassing. I played the tuba. People don't respect the tuba until it's gone. That was the only way you got to know -- nevermind the tuba. That was really one of the best ways you got to know other people. Nowadays I don't know, do kids need this stuff anymore?

ROMANS: I think they do. I do think they do. The student exchange programs in the past involved kids traveling to another school for a few weeks or months, and that was typically where it ended. I personally went to France in the student exchange program.

VELSHI: No tuba involved?

ROMANS: No tuba.

VELSHI: There's one person we know of, one retiree who's trying to modernize the student exchange for the YouTube generation.


VELSHI (voice-over): A picture is worth 1,000 words.


VELSHI: And photographer Phil Borges believing kids taking pictures learn value beyond words through his Bridges to Understanding Foundation.

BORGES: Bridges is a program that connects kids to particularly middle school and high school kids in our country here in the USA with kids around the world and we do it through digital storytelling.

So we have the kids produce a story about an issue in their community, we make a little multimedia piece of it, and they post it on the Web and the two classrooms discuss.

VELSHI: The Bridges program based in Seattle connects students in 15 locations worldwide, including Peru, Nepal, and most recently, South Africa. It's a student exchange program for the YouTube generation.

BORGES: What we're trying to do is get kids to build empathy across cultural barriers, and to understand one another, to learn with and from each other instead of just about each other, the way we did when we in school.

VELSHI: Borges isn't new to building bridges. He's a retired orthodontist, but he left dental work behind after 18 years to become a photographer and after traveling the globe shooting portraits of people for his books, Borges found a way to give back.

BORGES: The idea started with giving indigenous people a voice. Let them tell their stories directly, and then once we started hooking them up with schools here and I learned more about the school system, and how little global and international education was going on, that became another motivation.


VELSHI: It's a great idea. I still hope people do end up traveling for student exchanges, but what a great way to get people connected to each other. That's it for us. Thank you for joining us for this edition of YOUR MONEY.

You can catch Christine later today at 6:00 p.m. Eastern on "LOUS DOBBS THIS WEEK."

ROMANS: And can you see Ali every weekday morning on "AMERICAN MORNING." We'll see you back here next week.

VELSHI: Saturday at 1:00 and Sunday at 3:00. See you then.