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Issue Number One
Oil Speculation Hearing on Capitol Hill; Cleanup After Midwest Flood Damage; Saudis Hold Major Oil Meeting
Aired June 23, 2008 - 12:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
GERRI WILLIS, CO-HOST: A meeting of the oil minds in Saudi Arabia, but will it do anything to lower your gas prices?
Some folks have found a way to get a 25 percent discount on gas, but it's quite a drive.
And it's cleanup again after the Midwest floods. We're going to tell you everything you need to know about protecting yourself with flood insurance.
Issue #1 is your economy. ISSUE #1 starts right now.
Hello, everyone, and welcome to ISSUE #1. I'm Gerri Willis. Ali Velshi is on assignment.
We're talking high gas prices.
The big Saudi meeting, a hearing right now on Capitol Hill about speculators possibly driving up the price of oil. Students feeling the pain from high gas prices.
The Red Cross looking for some relief.
And where some drivers are getting a big discount on the price of gas.
Plus, we're headed out to the Midwest, where folks there are picking up the pieces after record flooding. We're going to take a closer look at flood insurance and whether or not you might need it.
From the ISSUE #1 headquarters, to the CNNMoney.com newsroom, we are all over the stories that matter to you.
We begin with a meeting of oil-producing nations. In Saudi Arabia this weekend, they were looking at how to handle the global rise in oil prices.
CNN International Correspondent Wilf Dinnick is in Jeddah, Saudi Arabia, where the meeting happened -- Wilf.
WILF DINNICK, CNN INTERNATIONAL CORRESPONDENT: Well, this is really a success for the Saudis. What they have been able to do is really pull off a bit of a public relations exercise on one hand.
They have invited all the major oil players, and they all showed up here, created a working document trying to figure out how to bring down the price of oil. They have also promised to increase production to levels not seen here in more than 25 years.
They promise to invest in their oilfields and their refineries, and they say that will allow them to pump even more oil by the end of next year if the market demands it. So that's something that's really going to please the Bush administration and some of those non-OPEC, non-Middle Eastern oil nations that are saying that they really need to see more oil on the market.
But really as an actual -- you know, what's actually been accomplished, it's hard to say, because this working document, or this joint paper that all these major oil players put together, there isn't a list of priorities here. It's not clear what they're going to tackle first, and many sides, Gerri, are still really far apart.
Back to you.
WILLIS: Wilf, do you really consider this conference a success? I mean, is there anything that they can walk away from the table and say, hey, look, this was accomplished?
DINNICK: Well, nothing really in the short term. It wasn't a success, that's right.
No, they can't say that there's, you know, a quick fix, that it's going to be ease at the pumps or the price of oil is going to come way down. But what the Saudis are saying, and even what a lot of the other major oil players are saying here, is that the fact that they have gotten together -- and they all agree, the Saudis, the OPEC nations, the West, everyone is saying the price has to come down.
And what they've done is they've been able collectively, they hope, to talk it down, to promise there's more oil on the marketplace. And eventually they say that will ease the demand. To show that everyone cares, prices are too high, there needs to be more oil out there -- Gerri.
WILLIS: Well, Wilf, everybody does care. A critically important story.
Thank you for bringing it to us.
Let's bring in two people who follow the price of oil for a living and who might be able to shed just a little light on the future of your gas prices.
Peter Beutel is the president of Cameron Hanover, an energy risk management firm. And Steven Schork is the publisher of "The Schork Report," a publication that provides analysis for the energy industry, and prices.
Gentlemen, welcome to the show. Good to see you.
PETER BEUTEL, PRESIDENT, CAMERON HANOVER: Thank you.
STEPHEN SCHORK, PUBLISHER, "THE SCHORK REPORT": Thank you. WILLIS: Of course -- Peter, let's start with you. The Saudis promised to boost daily oil production, what could be seen as pretty significantly. Is this going to have any impact at all on the prices we're paying for gas right here in the U.S.?
BEUTEL: Well, it doesn't look like we're going to have any immediate impact on the price. I don't think so.
Longer term though, it could. And if the psychology is starting to change, then it could be sooner than later. But the big question is, is how are we going to react during this week?
So far it seems to have been somewhat of a muted reaction, and that's kind of good news because they didn't really come up with anything spectacular. So the market had a chance here to really run away to the upside this morning and did not.
WILLIS: All right. Obviously we're watching those prices minute to minute.
Stephen, let's turn to you. You say this meeting could actually bring prices higher. Why?
SCHORK: Well, I don't understand the point of this meeting. We don't know anything today that we didn't already know on Friday. So why have this? Why bring it to the world's attention that, yes, now we do know the Saudis are concerned about these high prices? But they gave us no reason to sell this market.
Therefore, if the market is going to sit back -- and my fear is now, while the Saudis are trying to talk it, and they're going to say, is this all the Saudis have to offer us, then if you're not going to give us a reason to sell, this market is in an acute bull run. Then if you don't have the reason to sell, you have all the reason to buy.
And I agree with Peter, I am surprised that the price action isn't more to the upside, but at the end of the day, we're not correcting either. So obviously we are now in a consolidation pattern, a holding pattern, which I fear is going to be a springboard that could eventually take us to $150 and beyond.
WILLIS: Oh, OK.
Peter, let's turn to you for just a second.
Last week, presumptive Republican nominee John McCain said, hey, we are going to have to start drilling offshore. It's essential that we jumpstart our own domestic production.
Do you agree, and how much oil is there out there for us to actually use? Some folks say there's not very much.
BEUTEL: Well, the numbers I have seen suggest there are 18 billion barrels offshore and another 10 billion barrels in the Arctic National Wildlife Refuge. That's about 10 and five years' worth of current production, which is -- you know, divide that by four, you get how much it is in daily demand.
I kind of am one of those people who at this point thinks we do have to do that, but I also think we have to do everything the Democrats say. So I'm a political moderate who is at this point saying take everything from the left, everything from the right, and come up with some new ideas. But what are those things that we need to do?
We need to open offshore, we need to open the ANWR, we need more nuclear, we need more refineries, we need to get involved with shale. On the Democratic side, we need to start drilling on the 80 percent of the leased land that they're not.
WILLIS: Right.
BEUTEL: We need more alternatives. We need to have higher mileage standards yet again, and we need more conservation. So everything at this point...
WILLIS: That's right.
BEUTEL: ... I feel should be on the table to bring prices down.
WILLIS: What's the old saying, throw a lot against the wall -- throw a lot of stuff against the wall, I guess?
Stephen, let's turn to you. If we did open up the coastal areas for drilling, would that eventually have an impact on consumer prices? Does anything have an impact on consumer prices?
SCHORK: Well, not in the near term. But the problem is we should have been doing this all along.
And as Peter said, the fact that we're still five to 10 years -- even if you wanted to open up ANWR, we're still 10 years away. But you know what? We could have opened up ANWR 10 years ago, and we would be seeing that production now estimated at one million barrels a day.
You know what? We import one million barrels a day right now from Hugo Chavez and the Venezuelans, and we are held hostage by the geopolitical games he wants to play in this arena. So there is no silver bullet.
WILLIS: Right.
SCHORK: Opening up ANWR, opening up the coastal is not going to solve our problems, but it's a step in the right direction.
I agree that, yes, you do have to address the supply issues, which seems to be what the Republicans want to do. You also need to address the demand side, which is -- what it seems what the Democrats want to do. So a little bit of both, except for do not go after the oil company profits.
Do not tax them. That is just a (INAUDIBLE) and it is just political pandering at this point.
WILLIS: All right.
You know, guys, before you go, we don't have a ton of time left here, but I want you to talk just a little bit about this hearing that's going on in Congress. They're weighing the idea that maybe speculation is driving up the price of oil right now. Some estimates out there that maybe as much as 70 percent on the trades of the NYMEX are speculative trades.
Do you agree? Quickly, Peter.
BEUTEL: Well, I think it's not the traditional speculators that are causing the problems, but I do think that it's kind of crazy having college foundations and union pension funds buying and holding for the long term, because they could end up really regretting that at some point, in addition to causing a disruption now.
WILLIS: Stephen, quickly.
SCHORK: Congress is trying to kill the messenger. The only reason why the speculator is in this is because we have gone -- for the past 40 years we have not adjusted the supply issue while demand has grown.
The speculators realize this, they recognize this. They're making a ton of money. They deserve to make it.
Bottom line, they are forcing the fundamentals back into place. We are driving less and we are looking for more oil, so ultimately the speculator is serving a good purpose. Do not kill the messenger.
WILLIS: Well, interesting perspectives on that.
Peter and Stephen, thanks to both of you for joining us today.
SCHORK: Thank you.
BEUTEL: Thank you.
WILLIS: Well, we want you to weigh in on the oil debate. It's time for our "Quick Vote." Poppy Harlow from CNNMoney.com is here with today's question.
Hi there, Poppy.
POPPY HARLOW, CNNMONEY.COM: Hey there, Gerri.
Well, a nice start to the Monday morning for people at the gas station. Gas prices easing just slightly, falling one-tenth of one cent -- we talk about it in those terms these days -- to $4.07. But with an average of more than $4.00 in 29 states and in the District of Columbia, where are you looking for some relief?
Here is our question for you today.
Who has the most power to lower gas prices: Congress, consumers, the president, or Saudi Arabia?
Weigh in on CNNMoney.com. We'll bring you those numbers a little later in the show -- Gerri.
WILLIS: Or none of the above maybe.
HARLOW: Or none of the above.
WILLIS: Poppy, thank you for that.
We're going to get you out to the Midwest floods as the recovery begins and folks try to put their live back together.
Plus, grab a pen and paper. We have some very important tips on flood insurance you'll want to hear.
When disaster strikes, the Red Cross is always there to help. Why the relief organization may soon need some help itself.
And we'll tell you where some folks are going to get cheap gas.
We're all over issue #1 right here on CNN.
(COMMERCIAL BREAK)
WILLIS: The good news is the worst of the flooding appears to be over for Iowa and parts of Illinois. But folks in Missouri and southern Illinois are still waiting for the Mississippi River to crest.
CNN's Reynolds Wolf is in Grafton, Illinois, just north of St. Louis.
Reynolds, what are you seeing there?
REYNOLDS WOLF, CNN METEOROLOGIST: Right now we're seeing flooding everywhere, Gerri. Right now I'm in a park in downtown Grafton, where you see plenty of water everywhere. Actually standing on a picnic table, just to give you a little reference of how deep the water is. I'm going to try to step off without knocking out these microphones and whatnot.
Here you go. You take a look a little more to the right, you can see a pavilion. And, of course, you can see Aaron Cooper (ph), our producer who has been working awfully hard.
We have been keeping our gear up on some tables here, which kind of -- out of the water, which certainly lets us do our business of telling the story. And in speaking of doing some business, take a look at what we have down here on this block.
These businesses have been knocked out by the floodwaters which continue to rise. In fact, we do expect waters to go up to another about 11.5 inches as we make our way through Wednesday, to remain fairly steady for the next couple days into the weekend. And then as we get to next week, they should begin to recede. Now, this is not an unusual situation in this event. This has been happening for hundreds of miles up and down the river. Certainly a dire situation for many people. But obviously, it has been far worse.
In fact, in 1995, 1993, obviously, with the record flooding, these same places dealt with these rising floodwaters. At one point, Gerri, you had a lot of residences that were right here along the river. Those have since gone.
What happened is the government bought those places out. The people moved up on higher elevation up on the Hill. And this has actually turned into a great tourist town where people flock here this time of year.
They see the beautiful views. They have got bald eagles here. The ice cream, I'm told, is fantastic. But right now they're not serving ice cream.
You're seeing these businesses here certainly closed on a day like today. They're waiting, of course, here for the floodwaters to recede sometime next week, but then the cleanup begins, and my goodness, what a cleanup it's going to be.
Back to you.
WILLIS: What a mess. And obviously Grafton is no stranger to flooding.
I'm wondering, though, are folks really prepared? How prepared can you be when it's just an onslaught of water like this?
WOLF: Well, you have to remember, a lot of these people have been here for generations. They're not new to this kind of -- these kind of events.
In fact, just yesterday we were speaking to the mayor of the town who happens to own a cabinet shop farther down. And he was well aware that there was going to be this possibility of flooding. And with that, he cleaned out his entire inventory and moved it to higher ground. But still, every single day that passes, he's losing business.
There are a lot of restaurants up and down here. Some of them that had just opened a few months back, and these are crucial times. The summer months is when they really bring in their income.
You look over here, making our photojournalist, Emanuel Tim Bacacas (ph), jump through hoops here, but there's a place over here called Grandma's Dream, a little bed and breakfast. I don't think this is what grandma had in mind seeing these waters rise here, but that's going to be what she's going to have to deal with, and many other people, countless people up and down this river.
I don't really want to just, you know, focus like a laser beam on this town and say this is the only place, because obviously that is not the deal at all. This is going to cause so much angst for so many people. And I mean that in terms of financial, in terms of an emotional level, and of course a physical level because of the cleanup.
You know, up in Iowa we've been talking about the cleanup there. They're going to be dealing with tons. Tons and tons of debris, of mud, of trees, all kinds of wreckage that they're going to be cleaning up. That act is going to be played out again here, and, of course, hundreds of miles up and down the river.
Let's send it back to you, Gerri.
WILLIS: Well, our hearts go out to those folks there. And Reynolds, can I just say, will you please be careful out there? That's a little dangerous what you're doing with the mike and in the water.
Take care of yourself out there. Thanks for the report.
WOLF: Absolutely. Any time.
WILLIS: Well, if there's any lesson to be learned from the Midwest flooding, it's the need for flood insurance. Many homeowners didn't have that flood insurance, and some of those folks were told they really didn't need it. But here is what you need to know right now to keep your home safe.
(BEGIN VIDEOTAPE)
WILLIS (voice-over): The Midwest floods -- millions of acres of farmland are under water.
UNIDENTIFIED MALE: There it goes.
WILLIS: Tens of thousands of homes destroyed. This devastation is just beginning.
Residents are returning home to face yet another challenge, the lack of flood insurance. Only about 9 percent of homes in the affected areas have flood insurance according to FEMA.
SHAWN KIENE, FLOOD VICTIM: It's unbelievable, unfathomable that we got four foot in the living room. The muck, the mud that's left all over everywhere, the -- basically we've lost everything. Maybe if we can get the basement pumped out we might have a house that we can rebuild, but we need to decide if we even want to rebuild here.
WILLIS: Just because your insurance agent tells you don't need flood insurance doesn't mean you shouldn't buy it. Remember, floods don't happen only in the Midwest. In fact, they happen in all 50 states.
To protect yourself, assess your risk, find out how vulnerable your home is to flooding by going to floodsmart.gov. Even federal flood insurance may not make you whole if you have an expensive home. You'll get up to $250,000 for the house and $100,000 for what's inside. Supplemental coverage with higher limits may be available from private insurers.
But the good news is this: premiums vary according to your risk. So the lower the risk, the less you will pay.
An average policy costs $600. Buy flood insurance from the federal government through an insurance company.
If your agent or company doesn't offer flood insurance, you can contact the National Flood Insurance program directly at 1-888-379- 9531.
Don't wait until it looks like a flood is imminent. There's a 30-day waiting period before the policy becomes effective.
(END VIDEOTAPE)
WILLIS: And that's what you need to know about flood insurance.
One of the biggest banks in the country could soon cut thousands of jobs.
Plus, high gas prices and lower donations spell trouble for the Red Cross.
And students struggle to make ends meet. We'll show you where they're turning to for hope.
You're watching ISSUE #1.
(COMMERCIAL BREAK)
WILLIS: Citigroup is expected to start handing out thousands of pink slips to its investment banking division this week. Published reports say the layoffs are part of a plan to slash about 10 percent of the division's 65,000-member staff. What's not clear is whether the latest job cuts would be in addition to the 13,000 job reductions already in the works. And a key factor behind all of this, Citigroup has reported two straight quarterly losses totaling $15 billion.
Now, when disaster strikes, the American Red Cross is there to help. But the organization hasn't been immune to the tough economy. Faced with rising gas prices and lower donations, the Red Cross itself is struggling to make ends meet.
Kate Bolduan has the story.
(BEGIN VIDEOTAPE)
KATE BOLDUAN, CNN CORRESPONDENT (voice-over): Like so many homes in Iowa, Josh Clemens' house was under water.
JOSH CLEMENS, RESIDENT: The downstairs is pretty much a complete loss. Our kitchen ceiling has collapsed.
BOLDUAN: Now, Clemens begins the painstaking cleanup, thankful for the food and supplies the American Red Cross has offered. CLEMENS: They've already been past here a couple of times this morning already and they're doing whatever they can to help.
BOLDUAN: But that very organization needs help itself. Red Cross officials say they're out of cash and working on borrowed money.
SUZY DEFRANCIS, RED CROSS SPOKESWOMAN: It started with tornadoes throughout the central U.S. We had wildfires on the coast and now we're having this very significant flooding. And the important point is, it's only June.
BOLDUAN: Red Cross spokeswoman Suzy Defrancis says this is only the second time in its 125-year history the Red Cross has needed a loan to cover operations.
UNIDENTIFIED FEMALE: So, you need to cleanup kit? You need a shovel and a rake?
UNIDENTIFIED FEMALE: Oh yes, that would be great.
BOLDUAN: Thirty-five hundred personnel on the ground in the Midwest and about 2,000 people coordinating everything from its Washington headquarter.
(on camera): This is the nerve center of Red Cross disaster operations with daily conference calls like this one to get the latest information from the hardest hit areas. Now, when all is said and done, they estimate their efforts in the Midwest alone will cost $15 million.
(voice-over): The Red Cross says the struggling economy is also to blame for sluggish donations.
DEFRANCIS: This is a difficult time for people with gas prices and food prices going up and so, they have less disposable income.
BOLDUAN: But critics say this may be more about credibility than tough economic times. They point to rapid turnover at the top of the Red Cross which has had five CEOs in just six years.
PAUL C. LIGHT, PROFESSOR, NEW YORK UNIVERSITY: Americans have lost confidence in the Red Cross to spend their money wisely so they're holding off until the next disaster until they can actually see where their money is going.
BOLDUAN: Red Cross officials know they face a long and threatening hurricane season ahead. Image problem or not, they just hope their financial forecast improves quickly.
Kate Bolduan, CNN, Washington.
(END VIDEOTAPE)
WILLIS: Tough times all around.
Well, there is cheap gas within reach of at least some Americans at a 25 percent discount. It just takes some effort. We'll have the details.
We'll take a look, too, at how students are coping with tough times and how it has them interested in the presidential election more than ever.
You're watching ISSUE #1.
(COMMERCIAL BREAK)
WILLIS: Saudi Arabia held the big oil summit, but the entire Middle East and the state of peace there all contribute to the price of oil.
CNNMoney's Poppy Harlow is here with your "Energy Fix."
Hi, Poppy.
HARLOW: Hey there, Gerri.
Well, folks, as we have been reporting, the Saudis promised to increase oil production again, but a lot of analysts immediately dismissed that as just a token gesture, saying it really won't do much at all to alter the math between how much oil is produced around the world and how much is consumed. So this weekend's meeting has really done little to calm the market's anxiety.
Oil prices are much higher today, nearly at $138 a barrel. Not far off from the record high we've seen in recent weeks. And there is still a lot of concern that the Saudi moves are not enough, also that other oil-producing nations are not increasing their output, and worries about escalating tension between Israel and Iran.
Keep this in mind -- now, Iran, despite being pretty politically isolated, it's still a major oil producer. And if it's involved in any confrontation, that could block the Strait of Hormuz. That's a strategic waterway through which about 40 percent of the world's oil is shipped -- Gerri.
WILLIS: Well, OK, this meeting this weekend, is there any reason to think that this is a silver bullet that can actually help consumers at the pump by bringing down prices?
HARLOW: Yes, of course. Well, if anyone thought that yesterday, they're probably not thinking that today because of the price of oil, what we're seeing happening today.
It's ironic that energy consumption, folks, here in the United States, which is by far the world's biggest user of energy, has slightly pretty much flattened out. But overseas, in countries like China and India and elsewhere, energy demand is soaring. And that's likely to just continue. So in a way we are now pretty much tethered to what happens there instead of the other way around.
The bottom line, Gerri, is folks out there know it comes down to consumption. If you want to change the price that you're paying, you're going to have to change the way you live, the way you drive, how much you run your air conditioner, things like that. It's up to you now to make the change -- Gerri.
WILLIS: Yes. Big changes coming for consumers.
And, of course, at the top of the hour, John McCain will be talking about his energy fix. So we'll be listening to that, covering it live.
Poppy Harlow, thank you for that.
HARLOW: Sure, Gerri.
WILLIS: Are oil speculators to blame for oil prices? Lawmakers on Capitol Hill take a closer look at the issue today. We'll take you there next.
But first, let's get you up to speed on the latest headlines. Don Lemon is in the "CNN NEWSROOM."
(NEWSBREAK)
DON LEMON, CNN ANCHOR: I'm back at the top of the hour in the "CNN NEWSROOM." I'm Don Lemon.
Let's throw it back to Gerri in New York -- Gerri.
WILLIS: Thank you, Don.
On tap today, energy speculation -- you heard Don mention it -- and whether or not it's to blame for record high oil and gas prices. There's a hearing going on right now on Capitol Hill taking a look at the role of speculators. Brianna Keilar joins us now from Washington with all the details.
Brianna.
BRIANNA KEILAR, CNN CORRESPONDENT: Hi there, Gerri.
Yes, we're really just getting started on this hearing. We've heard from oil analysts and we're going to hear in a little bit from U.S. regulators and reps from foreign exchanges that trade U.S. oil futures. But they're all here to talk about oil speculators, pension funds, investment banks and the like who purchase oil futures since it's a pretty good bet, right, the value keeps going up, but they aren't really purchasing oil to ever physically use it. It's an investment. These are called video barrels of oil.
Among the members of this House subcommittee, the views here really cutting along party lines as to whether oil speculation is really to blame for what you're paying for gas.
(BEGIN VIDEO CLIP)
REP. JOHN DINGELL, (D) MICHIGAN: The sharp rise in energy prices during the Bush administration has been outpaced only by the rise in speculation. Energy speculation has become a fine growth industry. REP. JOE BARTON, (R) TEXAS: The speculators are not the cause of high energy prices. We have high energy prices because there's less than a 1 percent or 2 percent margin of supply over demand in world markets today.
(END VIDEO CLIP)
KEILAR: So what is the real answer for why oil and, of course, gas is costing so much? Is it this speculation? Or is it the weak dollar? Or that the Saudis perhaps aren't increasing output enough? Is it India and China's increasing demand for oil? One oil analyst put it this way to lawmakers.
(BEGIN VIDEO CLIP)
EDWARD KRAPELS, ENERGY SECURITY ANALYSIS, INC.: We'd like to blame other people for our problems. We blame the Chinese, we blame the Saudis, we blame OPEC. But I remembered earlier this morning the statement from that great American philosopher, Pogo (ph), who said many years ago, "we have met the enemy, and he is us."
(END VIDEO CLIP)
KEILAR: Now even so, agreement among analysts, including that one, that even though speculation is legal, it still does need to be reined in.
Gerri.
WILLIS: Well, Brianna, thank you for that report. I know everybody will be watching your coverage of this issue all day long.
Everyone is looking for relief from high gas prices. And unless you know something we don't, it doesn't appear you're going to get any relief anytime soon. Unless, of course, you are close enough and have the drive to drive south of the border where gas is 25 percent cheaper.
CNN's Thelma Gutierrez explains.
(BEGIN VIDEOTAPE)
THELMA GUTIERREZ, CNN CORRESPONDENT, (voice-over): The U.S./Mexico border in Tijuana, where Americans spill over for cheap gas.
RICARDO FERNANDEZ, SAN ISIDRO, CALIFORNIA: The savings, it's great. It's great.
UNIDENTIFIED MALE: It's about $1.50 cheaper.
GUTIERREZ: About $3.10 a gallon in Tijuana, as compared to $4.63 on the U.S. side. The total savings to fill a 20-gal tank, about $30. And that makes financial sense to commuter Ricardo Fernandez, who lives a few miles away in San Isidro, California. He makes the international run once a week during off hours and doesn't mind waiting in line to drive into Mexico and back into the United States.
FERNANDEZ: Right now the traffic is not bad to go back. It takes me about an hour. An hour and a half.
GUTIERREZ: Sounds like a big hassle, but Fernandez says he just makes a shopping day out of it.
FERNANDEZ: I can come shopping, you know, get some groceries and stuff like that and then I will go back. It's like saving double.
GUTIERREZ: A similar story for Pedro Hernandez, who lives in Santa Ana, California, about 100 miles north. He doesn't make a special trip to gas up, but he won't pass up a deal.
PEDRO HERNANDEZ, SANTA ANA, CALIFORNIA: We come down to visit relatives and shop around. While we're here, might as well fill up the gas.
GUTIERREZ: His savings today? $40.
UNIDENTIFIED MALE: On this truck, maybe about $70.
GUTIERREZ: Savings perhaps, but Steven Mazor, with the AAA Automotive Research Center, says Mexican gas is made with a different formula, which contains more sulfur, that over time could actually hurt your car.
STEVEN MAZOR, AUTOMOBILE CLUB OF SOUTHERN CALIFORNIA: The emission controlled equipment, the catalytic converters, the fuel injection systems, and the sensors on your newer car, or any car really, and make it a polluter and make you even fail a smog inspection and then have to spend a lot of money to repair your car because of the effects of that gas.
GUTIERREZ: But Ricardo Fernandez says his truck is running fine for now. And making ends meet right now is really all he can afford to worry about.
Thelma Gutierrez, CNN, Tijuana, Mexico.
(END VIDEOTAPE)
WILLIS: Well, whatever it takes.
Up next, we're talking about happy hour. We'll get into that age-old tradition and find out why it is people really head to the bar right after work.
Plus, we're getting you some help. Help to your ISSUE #1 questions. Send us an e-mail to issue1@cnn.com.
(COMMERCIAL BREAK)
WILLIS: The high cost of college is hitting students hard. They're paying more every day for food and gas and some say they're getting priced right out of school, which has many students taking a close look at what the two presidential candidates say they will do about higher education.
CNN's Chris Lawrence reports.
(BEGIN VIDEOTAPE)
CHRIS LAWRENCE, CNN CORRESPONDENT: Oscar Mainia came to college to study political science, but he's feeling more like a finance major as he tries to figure out how to afford tuition.
OSCAR MAINIA, UNIV. OF CA BERKELEY STUDENT: If I wasn't working, I doubt I'd be able to pay for it.
LAWRENCE: Mainia's had to increase his work study so much he filed an appeal to qualify for more hours. California recently raised tuition for the sixth time in seven years. And some students plan to hold the next president accountable for higher education.
Do you still believe any politician when they say, education is the future.
MAINIA: We don't want empty rhetoric. We want rhetoric that can be backed up. If you're going to say you're going to back up education, how?
LAWRENCE: Senator Barack Obama would give students a tax credit in exchange for 100 hours of volunteer work.
SEN. BARACK OBAMA, (D) PRESIDENTIAL CANDIDATE: Your country will offer you a $4,000 a year tuition credit if you offer your country community or national service when you graduate.
LAWRENCE: But so far Senator John McCain has been vague.
SEN. JOHN MCCAIN, (R) PRESIDENTIAL CANDIDATE: We have to provide a quality education.
LAWRENCE: Since the credit crunch has made it harder for Americans to get loans, McCain is proposing a continuity plan that would make sure student loans aren't disrupted this fall.
MCCAIN: We need to spend more funds in the right way.
LAWRENCE: Obama has only voted for two bills that specifically help students pay for college. McCain's got a longer track record but mixed results.
OBAMA: He's voted time and time again to stop us from making college affordable.
LAWRENCE: Here are the facts. Last year, McCain voted against a bill that increased Pell Grant funding and allowed some low income students to defer their loans. But that same bill increased the fee students paid to open a loan. And Obama ignores McCain's 1998 vote to lower student loan interest rates and increase work study aid to $1 billion. With the average cost of textbooks alone soaring to $1,500 a year, students like Mainia plan to hold candidates to their word. First in his family to go to college, he's wondering if he'll have enough money to come home with a degree.
Chris Lawrence, CNN, Berkeley, California.
(END VIDEOTAPE)
WILLIS: Tough times.
Well, once you graduated and entered the working world, you're probably going to be invited, well, to the occasional happy hour. And while it can be an opportunity to mingle with co-workers and network, well, there are potential pitfalls. Michael Erwin is a senior career adviser with careerbuilder.com. He's joining me now from Chicago.
OK. Can I just say, Michael, it's only 12:42 and we're already talking about happy hour. It's Monday, no less. You surveyed some 7,000 people about happy hour. Now what did they tell you about why they do it?
MICHAEL ERWIN, SR. CAREER ADVISER, CAREERBUILDER.COM: Well, a lot of people are thinking that it is a good way to network. We have found that a lot of folks out there are going to bond with their co- workers, are going to meet with the boss, and are just really going to build that camaraderie around the team. And that's the best reason to do it.
WILLIS: All right. So, you know, I was curious when you were talking about this massive survey of folks. What part of the country is it most popular to do this in? I can imagine my friends in the south would be thinking that happy hour would be the way to go. What did you find?
ERWIN: Well, we found that right here in the Midwest, more people will be attending happy hours with their co-workers followed by the west and the south. And the least amount of people going are up in the Northeast.
WILLIS: So I guess in the Northeast here, we're just more serious, I guess. And let's talk about . . .
ERWIN: Or you're too busy, right.
WILLIS: Or too busy. That's a good explanation.
Let's talk about industries. What parts of the working world are most likely to use happy hours as sort of a bonding, getting folks together kind of experience?
ERWIN: Well, the professional industries are definitely doing it, followed by the financial industries and IT. Sales comes in next. And something that surprised me was health care. Health care uses a lot of happy hours to get their people together after those long days of working. WILLIS: That's sort of funny. I mean health care folks encouraging people to drink. Who would have guessed that?
All right. So let's talk about, you know, happy hour can kind of cut two ways. It can be fun but people also sometimes sort of embarrass themselves at happy hour. There's all kind of crazy things that go on. I mean, you know, once you're doing Karaoke, goodness knows what you're going next. What are the kinds of things that you found in your survey that people are really doing that might not be a great idea?
ERWIN: Well we found that the number one thing that people were doing were bad mouthing a co-worker or management, followed by telling a secret about the company. And then that office kiss came in next. So my advice is, go out and have a great happy hour, but make sure you keep it professional. You're out with your co-workers who you're going to have to see every day. You're not friends just meeting on a weekend. So keep it professional.
WILLIS: Keep it professional, but, you know, if there was no happy hour and there was no first office kiss, a lot of people would never get married. So many folks find their first spouse through work, right?
ERWIN: That's correct. And we also wouldn't be able to do this survey. So we want everybody to keep going out to happy hour, but build those strong relationships with your co-workers and keep it professional.
WILLIS: All right. Great advice, Michael Erwin. We appreciate your time today.
ERWIN: Thank you.
WILLIS: What happens when you take condos and naked people? We'll get you a nude condo -- I'm not making this up. This is actually true, nude condos. We'll take you there.
And we'll open up the Help Desk. E-mail us, issue1@cnn.com. Answers to the questions you need. We're all over it. ISSUE NUMBER ONE right here on CNN. Stay with us.
(COMMERCIAL BREAK)
WILLIS: Welcome back to ISSUE NUMBER ONE.
Everybody has a question they want answered, but maybe you're too afraid to ask it. Not here. All ISSUE #1 questions are fair game on the Help Desk. All you have to do is e-mail us at issue1@cnn.com. Let's get right down to it.
Ryan Mack is the president of Optimum Capital Management. Stephen Gandel is a senior writer for "Money." And Stephanie Elam is a CNN business correspondent.
Welcome to tall. Let's get right down to it. Ann in Massachusetts asks: "I'm a 43-year-old parent of an incoming college freshman. My husband and I purchased our home three years ago and therefore I don't have a lot of equity to tap into. Since we're decades away from retirement, is it a reasonable option to borrow against our 401(k) and pay ourselves back, rather than finance tuition through high-interest loans?"
What do you say, Ryan?
RYAN MACK, PRESIDENT, OPTIMUM CAPITAL MANAGEMENT: Well, Ann, I know she wants to help out. I know she love her child. But the 401(k) is for retirement. You don't want to compromise the integrity of the vehicle in which it was originally intended. Go to Fastweb. Try to look for scholarships. You know, unsubsidized loans for Stafford are kicking around 6 percent right now. So, you know, raise your FICO score get other maybe private loans to get additional funding. But, you know, let her put that burden on herself and then let her be responsible when she graduates.
WILLIS: You know what I always say is that you can't finance your retirement -- Stephanie.
STEPHANIE ELAM, CNN BUSINESS CORRESPONDENT: Right. And I'm just saying, you don't want to take away from your future for your child's future. They have a lot more time to work back to pay off that good kind of debt. So just don't mess with that.
WILLIS: Yes, exactly.
All right. Let's go in the next e-mail. It's from Tapan, I believe: "I am a college student majoring in aerospace engineering and scheduled to graduate in 2009. I am debating between working in industry or getting a loan and going to graduate school. I am not sure if I should pursue another degree because of the struggling economy" -- Stephanie.
ELAM: Well, you know, I don't think you should necessarily completely base your decision on going back to school on the economy. If you can come out and get a job and get some practical experience, and you build up a little bit of wealth there that will help you pay for it when you do go back to grad school. Because what I gather from this question, I could be wrong, sounds like Tapan's going to get a loan no matter what. So might as well have a little bit more of a cushion before you head back to school.
STEPHEN GANDEL, SENIOR WRITER, "MONEY": It's not a bad time. I mean, if the economy's down, there's a chance you might not get a job. You'll get a job at a lower income. It's not a bad time. Take a few years off, learn more, boost the amount of income you're going to get when you get out.
WILLIS: Yes. And you're only this age once, right? I mean this is the time to really go out and get that education.
John in Washington asks: "I'm 21 and I just returned from Iraq and will be returning there in January 2009. I currently have around $7,000 sitting in a USAA Money Market. Should I invest in the stock market, now that it's in a slump? If so, what should I buy? My goal is to have enough for a decent down payment for a house in five years."
Stephen, this is, you know, our service people, you know, we really value them. What do you say to him? Probably a lot of folks this that situation.
GANDEL: Well, stocks are a great long-term savings investment. They're not a great short-term savings vehicle. So if your goal is five years out, you probably want to -- a money market's not bad. You can probably go for a bond fund, take a little more risk. But stocks, because of their volatility, they're not a great vehicle for just five years.
That being said, because you're going to go for these kind of less volatile investments, you're going to get a lower return, and so you're probably going to have to keep adding to that savings. The $7,000 loan is not going to do it for you in five years.
WILLIS: Right.
MACK: There's a big difference between investing, trading, and gambling. We don't want to gamble our future away. There's just as much risk of losing that $7,000 as it is of gaining that $7,000 in the stock market with a short term time period.
WILLIS: You know, I don't think -- the gap here is I think most folks wouldn't think five years as short term, but it is.
Let's get one more question in here. Leslie asks: "I am 51- years-old, own my home and have two cars and a stable job." Life is good. "I do not have a retirement plan. Is it too late for me to start? How do I catch up?"
MACK: Glad you use catch-up because they have catch-up contributions. This year, if you're 49 and under, you can put $5,000 into an IRA. If you're 50 and over, you can put an additional $1,000 a year, so $6,000 total to catch up your total retirement. In a 401(k) plan, you can put up to $20,500, as opposed to $15,500 for additional catch-up contributions. So just try to use those tax deferred savings more responsibly and efficiently.
WILLIS: Stephen, yes, weigh in here.
GANDEL: It's not a great -- I mean it's not going to sound great, but the best way to catch up is to work longer. A recent study I saw that if you . . .
WILLIS: Thanks, Stephen. Really appreciate that. Happy to work longer. You probably want me to take a second job, too.
GANDEL: Well, that's OK. If you delay your retirement from 62 to 70 and you don't take your retirement withdrawals from your savings and also you delay your Social Security, I saw a recent study that says you'll boost your retirement savings by 90 percent. By delaying those eight years, you'll boost what you've saved by 90 percent.
WILLIS: Wow, that is a lot. And, of course, as you say when you have that long-term horizon it's stocks, stocks, stocks.
GANDEL: Yes.
WILLIS: OK. All right, guys, thanks for your help today. We have Ryan, Stephen, and Stephanie. Thanks so much for your help.
Has the housing market gotten so desperate they're offering naked condos? It know it sounds bizarre, but you have to see this one to believe it.
Plus, it's not too late to be heard. Make sure your vote is counted. Who is likely to take steps that would lower your gas prices?
Log on to CNNMoney.com right now. Poppy Harlow will be back with the results.
You're watching ISSUE #1.
(COMMERCIAL BREAK)
WILLIS: Who has the power to lower gas prices? Does anybody have the power to lower gas prices? That is today's Quick Vote question. And let's check back in with CNNMoney's Poppy Harlow for the results.
What did folks say, Poppy?
HARLOW: I was really interested at these results because it's really on us.
Here are the results, folks. Forty-five percent of you who voted, nearly 27,000 of you voted, say it's consumers. Now 26 percent say look to Saudi Arabia. Twenty-two percent say Congress has the power. And only 7 percent say the president has the power. But it's all about us and how we act now with these record prices -- Gerri.
WILLIS: Well, as we know, the candidates are going to be talking about this very issue today. At 1:00, John McCain, the presumptive Republican nominee, will be making a major address. We'll be watching that.
And some are advertising free appliances or no closing costs, but one Florida builder is offering condos with something a bit different. Here's a hint -- skinny dipping.
Keith Morelli from our affiliate WFLA shows us a nude, and I mean a new approach to selling real estate.
(BEGIN VIDEOTAPE)
KEITH MORELLI, WFLA REPORTER (voice-over): On the edge of busy Hillsborough Avenue, the Arbors at Branch Creek are a nice apartment complex, but nothing out of the ordinary. A web site revealing new plans for the soon-to-be condo complex are unique. It shows models lounging around a pool and says "residents are welcome to shed more than their inhibitions."
UNIDENTIFIED MALE: We are unaware of that.
MORELLI: Apartment residents we spoke with here today told us that managers here have revealed nothing to them about turning this into a clothing optional condo complex.
UNIDENTIFIED MALE: I think that's something they probably should let us know.
MORELLI: So they're going to have a European-style clothing optional pool.
LESLIE HILL, RESIDENT: No, that's not appropriate for this family lifestyle that lives here.
MORELLI: Clothing optional resorts are nothing new in Pasco County, where Paradise Lakes and the newer, upscale Caliente (ph) resorts are thriving.
ANGIE FOX, RESIDENT/SPOKESWOMAN: Clothing optional people, in above themselves, are very friendly people, open-minded people.
MORELLI: Caliente is not affiliated in any way with the plans for the clothing optional condos, but Caliente spokesperson Angie Fox says the clothing optional lifestyle is nothing to be afraid of.
FOX: The empowerment is in the fact that naturism is a very natural part of being a human.
MORELLI: And while the real estate market in Florida suffers, Caliente is doing well. There are 351 home sites here, from small villas to million dollar homes.
FOX: Well, what's interesting about real estate as it relates to clothing optional resort is, there is a greater demand than there is supply for property.
MORELLI: Which may be why this apartment complex has plans to offer a clothing optional pool. Managers say residents will not be walking around the property naked, only at the pool. But that's more than some are willing to accept.
HILL: We'll definitely be moving.
(END VIDEOTAPE)
WILLIS: Can you imagine? I mean, I don't want to appear to anybody even in a bathing suit, much less nude. Who would do that?
HARLOW: This might just be the housing fix we need, the demand is greater than the supply. That's the only good news I've heard in the housing market in a while. WILLIS: I don't know. Have you noticed with these things that it's always the older folks who are doing this. It's not young people.
HARLOW: They're more comfortable with themselves. They're growing into their bodies.
WILLIS: I guess so.
All right. Well, the economy is issue #1 and we here at CNN are committed to covering it for you.
ISSUE #1 will be back here tomorrow, same time, 12:00 p.m. Eastern, right here on CNN.
Time now to get you up to speed on other stories making headlines. "CNN NEWSROOM" with Don Lemon and Kyra Phillips starts right now.
