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ISSUE NUMBER ONE

Auto Industry Continues to Struggle; Medicare Cuts Scheduled for Today; Will Last 6 Months of 2008 See Economic Rebound?; Finding the Best Ticket Prices

Aired July 1, 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: The second half of 2008 is under way. Will the economy see a rebound? And will your 401(k) ever bounce back?
Will the U.S. auto industry get back on its feet?

We'll try to answer those questions, plus we'll tell you about some big cuts in Medicare scheduled to take place today.

And we'll show you how to score the big tickets to all those sold-out events this summer.

Issue #1 is your economy. ISSUE #1 starts right now.

Hello, and welcome to ISSUE #1. I'm Gerri Willis.

We are an hour away from getting the biggest indication of the state of the U.S. auto industry. We'll let you know what those numbers could mean for jobs, for manufacturing, for what car you may buy next.

It's been a rough first six months of 2008, but it's the past (ph) how your finances could fare in the second half of this year. And we're going to have a story. This is one you'll really want to pay attention to, how you can convert your car to run on vegetable oil and save a ton of money at the same time.

From the ISSUE #1 headquarters to the CNNMoney.com newsroom, we are all over the stories that matter to you. And the big focus today, the reason we do this show, issue #1, the economy.

ALI VELSHI, CO-HOST: Gerri, thanks.

One can only hope, as you said, that the next six months are better for Americans' bottom lines than the first six months of this year.

To help hash that out, we brought in two people who can really break it down for you. Peter Morici is an economist and a professor with the University Maryland School of Business, and he joins us from Washington, D.C. Jim Awad, is the chairman of W.P. Stewart Asset Management.

Gentlemen, thank you to both of you for being with us. Jim, let's start with you. People sometimes only take the opportunity once every quarter or ever few months to look at their 401(k)s or their IRA statements. They're looking at it and they're very concerned.

JIM AWAD, CHAIRMAN, W.P. STEWART ASSET MANAGEMENT: You're not alone if you had a bad first half of the year.

Right. Well, you know, in the long term, this is an opportunity, because you want to buy when there's blood on the streets, so to speak. But I expect the next several months to be difficult.

All of the problems that existed in the second quarter and the first quarter exist in the third quarter. So I expect it's going to be a rough summer for the economy and for portfolios. But again, if you can think long term, if you're younger, this is an opportunity to buy stocks cheaply.

VELSHI: Very hard to think long term, partially because we talk about this all the time.

Peter, what's your view on this? Is this an opportunity, is it time to get in? Because people are wondering whether this gets better in the second half of next year. But if you're a long-term investor, that may not be relevant.

PROF. PETER MORICI, UNIVERSITY OF MARYLAND SCHOOL OF BUSINESS: Well, I'm continuing to buy. I think this is a good time to get in if you're thinking more than five years, even more than three years.

Once the banks get themselves reorganized, get their business plans in order so that they're making credit again, I expect both the automobile industry and the housing industry to recover. And those are really the weak points: banking, automobiles and housing. We get those things going, the rest of the economy is solid.

VELSHI: What's happening right now, Jim? Where are there opportunities for people who are looking to invest? And I don't mean necessarily in individual stocks, because as we've discussed, if you're not an individual stock investor, don't become one now. If you're buying mutual funds, you're looking at industries, where do you see some strength right now?

AWAD: Well, the center of gravity economically has shifted to what they call the brick countries: Brazil, Russia, India, China. That's the area of long-term growth. So you want to be exposed to the growth there.

But the best companies to service it are U.S. multinational growth companies. So I would say you want to buy large cap multinational growth funds in the United States with a long-term outlook. And growth stocks are cheap relative to value stocks based on the performance over the last 10 years. So I think that's what you want to do. You want to average in and buy global companies.

VELSHI: Peter, anything on the horizon that worries you about this from the perspective of one of our viewers who would be an investor and invest in their 401(k) or their IRA? They're investing through mutual funds. Is there anything that can throw off your investment goals later this year?

MORICI: Well, my feeling is we're going to see a fundamental shift in the automobile industry in the nature of the cars we buy. And the big question is whether the Detroit automakers will be able to participate in that, or whether investors should be heavily weighting themselves towards Toyota and Honda, Nissan, the Korean manufacturers, and so forth.

It doesn't appear that Detroit has gotten it yet and is going to put together the kind of portfolio vehicles that they need. And, of course, that extends into their supplier base. So certainly, American multinationals abroad, people like GE, IBM, Good Plays (ph). The big automobile companies, I don't know.

VELSHI: Could be an opportunity, could be a disaster waiting to happen. Within the hour we'll start getting results from the automakers about what they sold in June. And we'll see about that.

Energy, though, is the number one concern. These oil prices and gas prices, could that throw your recommendation, your plan off, if these prices keep going up?

AWAD: Well, in the long term, no, it won't, because we will adjust to it, the free market will adjust to it. You'll have alternatives and people will change their consumption. But in the short term, this oil price is driving a stake through the heart of the world economies.

It is a stagflation-era tax. It sucks money from the economies and from the stock market. You would like to believe that at some point there will be some demand reduction based on the price. And I think over time it'll work itself out.

But between now and then, we have to put up with it, and there is a risk of hostilities in the Middle East over the summer. And that -- it could get worse before it gets better, but ultimately it will get better.

VELSHI: Gets better.

Jim Awad from W.P. Stewart Asset Management.

Great to see you.

AWAD: Thank you.

VELSHI: Peter Morici, always a pleasure to see you from University of Maryland.

WILLIS: Fascinating conversation.

Well, that brings us to today's "Quick Vote," where you get to weigh in. CNNMoney.com's Poppy Harlow is here with today's question.

Hi there, Poppy.

POPPY HARLOW, CNNMONEY.COM: Hey there, Gerri.

Well, we're gauging how people are feeling about the economy today. Are you optimistic or pessimistic when it comes to the economy? We want to know.

Here's our CNNMoney.com "Quick Vote" question today. "In the next year, I believe the economy is going to get worse, is going to get better, or will be more of the same?"

Please let us know on CNNMoney.com. We'll bring you those numbers a little later in the show -- Gerri.

WILLIS: Fascinating question. Thank you for that, Poppy.

HARLOW: Sure.

VELSHI: All right. Why this afternoon the number one automaker in the U.S. sales might not actually be a U.S. company. Auto sales are rolling out over the next few hours.

Plus, a way to convert your car to run on vegetable oil and save money at the same time.

And forget sold-out concerts, impossible-to-get sports tickets. We have the secrets of how you can get a hand on that ticket that you're looking for.

We're all over issue #1 right here on CNN. Stay with us.

(COMMERCIAL BREAK)

WILLIS: Well, just 126 days until Election Day, but we know how issue #1, the economy, will play into the elections.

CNN Deputy Political Director Paul Steinhauser is live right now in Washington.

Paul, what you got?

PAUL STEINHAUSER, CNN DEPUTY POLITICAL DIRECTOR: We've got brand new numbers from CNN and the Opinion Research Corporation. We were out this weekend and we asked Americans, "What's the most important vote, the extremely important vote for you for president?" And take a look at these numbers.

Fifty-eight percent of those said the economy continues to be the most -- or extremely important to your vote. Iraq at second place at 50 percent.

And here's what's really interesting, Gerri. Gas price alone, not even the other parts of the economy, just gas prices alone, 48 percent of Americans said gas prices were extremely important to their vote for president. Healthcare and terrorism, as you can see, wrap out the top five.

I asked our polling director, Keating Holland, about these numbers and here's what he had to say.

(BEGIN VIDEO CLIP)

KEATING HOLLAND, CNN POLLING DIRECTOR: In January, the economy and Iraq were virtually tied for first place in the minds of most voters. So at the start of the year, it really looked like this was going to be a two-issue election, with the economy and Iraq vying in the minds of a lot of voters.

Now it kind of looks like it's going to be possibly a one-issue election. The economy is head and shoulders above any other issue, and is possibly only going to gain in importance if the economy continues to go south.

(END VIDEO CLIP)

STEINHAUSER: And Gerri, I guess one other thing here. This means -- these new numbers mean you don't have to change the name of your show.

WILLIS: Right. Well, you got that right, Paul.

You know, to drill down into this economy issue, there are really lots of economic issues. John McCain will be exploring one on the way to Colombia and Mexico today. He's touting free trade, but some of your new polling numbers show free trade might not be very popular right now.

STEINHAUSER: Exactly. John McCain going to Colombia and then Mexico. And free trade is one of the big things he's going to be pushing. He did the same thing up in Canada just a few weeks ago as well. He's a big proponent of free trade.

What do our new numbers show? We asked Americans. They think -- a majority here, you could say, 51 percent, say free trade is a threat to the economy. Only 41 percent thinking that it's an opportunity for economic growth.

Remember, there's a lot of industrial states, a lot of key battleground states, as we call them, where a lot of Americans feel the NAFTA free trade agreement was detrimental and took away jobs. That number of 51 percent is the highest we've seen since we started polling on this question about eight years ago -- Gerri.

WILLIS: Wow, fascinating stuff. Paul Steinhauser, thank you for that.

And Ali, I guess we can just keep calling it ISSUE #1.

VELSHI: I'm happy about that. And we built a little leeway into that name. Listen, there's no polls needed in this one. The U.S. industry -- the auto industry is hurting.

We're starting to get a better sense of how bad it really is for that industry. We've got numbers just in now. Today we're getting numbers for June.

For auto sales in the U.S., Ford is reporting its auto sales were down 28 percent in June. And this is a continuing trend. We'll hear from General Motors and Chrysler and Honda and Toyota and all of them over the course of the next couple of hours.

Jennifer Westhoeven of "MORNING EXPRESS" on Headline News is here with more. She's been following this -- Jennifer.

JENNIFER WESTHOVEN, CNN CORRESPONDENT: Yes, and I think what we're really going to be looking for later on as these numbers is, who won last month? Did Toyota actually beat General Motors, not just around the world -- you've heard about that competition before -- but right here in the United States, General Motors' back yard? That is something that we're looking for. If Toyota wins, it would be a first, and a powerful symbol of Detroit's decline.

So, last month, General Motors sold 268,000 vehicles in the U.S. So I just want to give you a sense of what a tight race this is.

Look at Toyota, 257,000. Now part of the reason, it's not that Toyota's catching up, it's that General Motors is falling behind so far, so fast. Its sales last month were down 27 percent, Toyota's were down just 4 percent then. So that's how Toyota would win. They're both seeing sales losses, but General Motors' are so much worse.

And the switch that we're seeing in consumer buying habits is being called breathtaking. We are just hitting the brakes on buying SUVs and pickups, and quick-shifting to these smaller cars that get much better mileage in these days of $4 for a gallon of gasoline.

It's even shattered some of Detroit's best sellers, the mighty Ford F-Series. As long as I've been doing this job...

VELSHI: That's it, yes.

WESTHOVEN: ... that's been the number one best-selling vehicle. Right? Last month it got knocked down, not just to number two, number five, outsold by the Honda Civic, the Accord, the Toyota Corolla and the Camry. And the Honda Civic right now the number one best-selling vehicle in America.

So those are all the fights for the slices of the pie.

VELSHI: Yes.

WESTHOVEN: But the big story, of course, is also that the pie is shrinking and shrinking.

VELSHI: Sure.

WESTHOVEN: The whole pie. One estimate is that the U.S. car market could be down 23 percent this year.

VELSHI: Right, and that's not just about gas. It's a mature market.

Now, Honda, as you mentioned, taking the top spot. They're expected to be probably one of the only major gainers this afternoon. But we just got the details in from Ford.

Listen to this. SUV sales down more than 50 percent, truck sales down 47 percent.

WESTHOVEN: Wow.

VELSHI: Crossover sales down 18 percent. Car sales down, as well.

Across the board sales, but you can see it's the big, heavy, fuel-consuming vehicles. Americans are not deciding to not buy them, they are running in the opposite direction.

WESTHOVEN: Right. It's a huge reversal. That's why Chrysler's going to stop making the minivan altogether.

You know, and the hope that we have for these companies,. they also -- they have all these future plans, they're focusing. That's going to take time for those results to unfold.

VELSHI: Right.

WESTHOVEN: In the meantime, it looks like if it doesn't happen this month, if GM holds the line this month, it's probably going to happen this summer.

VELSHI: All right. Jennifer, you're on that story for us.

Jennifer Westhoven.

Thanks very much -- Gerri.

WILLIS: Well, Ali, why the next frontier of oil has a lot of folks looking north. And we're not talking about Canada.

Plus, some big cuts in Medicare scheduled to take place today. We'll check in and see if Congress is going to do anything about it.

You're watching ISSUE #1.

(COMMERCIAL BREAK)

WILLIS: Now, when it comes to record oil and gas prices, there's a lot of finger-pointing going on. CNNMoney's Poppy Harlow is back with today's "Energy Fix."

Hi there, Poppy.

HARLOW: Hi there, Gerri.

Well, with oil over $140 a barrel, right now over $142 a barrel, there is plenty of finger-pointing going on. Market speculators became popular scapegoats at a series of recent Capitol Hill hearings, and the regulatory agency that overseas the oil trading market -- that's the CFTC -- has launched an investigation.

But the International Energy Agency, that Paris-based agency, says you can forget about speculation and manipulation as the reason for sky-high prices. It says something far less sinister is happening. Simply put, more demand and not enough supply -- Gerri.

WILLIS: It's as simple as that? You've got to be kidding me?

HARLOW: You know, that's what they say.

You know, it's much sexier, folks, to think that there are scheming groups out there who are manipulating the oil market, and there are many who say that is exactly what is happening. After all, if you look at the facts in 2003, there was about $15 billion in the global commodity market. Right now, there's $260 billion. That's just four years later.

Most of that money is chasing oil. So there are plenty of reasons to think something is awry here. But they IEA points out that demand has surpassed supply for the last six quarters, going all the way back to 2006.

Analysts we spoke with say they think supply and demand really is the main factor here, even though the swings in price can be exaggerated by speculation, Gerri. So, yes, they say it comes down to supply and demand fundamentally.

WILLIS: Basic fundamentals, basic economic fundamentals.

Poppy, thank you for that.

HARLOW: Sure.

WILLIS: Ali.

VELSHI: Well, in the hunt for energy, there's a lot of talk about drilling off the coast of the United States. We mentioned that earlier in the program, but one part of the world that some folks are looking to is north. Way, way north.

CNN's Becky Anderson explains.

(BEGIN VIDEOTAPE)

BECKY ANDERSON, CNN CORRESPONDENT (voice over): A vast ocean of ice, unforgiving and unforgettable. And today, very much under threat.

I flew north over the Arctic to man's last stop before the North Pole to meet one of the world's leading climate change scientists.

JAN-GUNNAR WINTHER, DIR., NORWEGIAN POLAR INST.: What we see here is open water. And it's a prime example of climate change, because this fjord was always frozen in the winter. The last three winters, it's not been any sea ice here.

ANDERSON: If the Arctic is the barometer which measures the Earth's health, these symptoms point to a very sick planet. But ironically, the great melt is likely to yield a wealth of untapped resources.

(on camera): Well, for decades, people have been plundering the Arctic. But it's a race for oil and gas resources that is now causing concern.

(voice over): The current center of activity in this great optic gold rush is the Barents Sea off the coast of Russia, where experts say there could be as much as the equivalent to half a trillion barrels of oil.

MANOUCHEHR TAKIN, CENTER FOR GLOBAL ENERGY STUDIES: Some people talk about a quarter of oil and gas to be discovered in the world in the coming decades might be found in the Arctic Basin.

ANDERSON: Drilling for black gold can be a dirty business, so it's no surprise the Norwegian government is monitoring the situation closely.

JENS STOLTENBERG, NORWEGIAN PRIME MINISTER: All countries that would like to try to look for oil and gas in this area should respect international law. Second, they should obey to the most strict environmental guidelines and restrictions.

ANDERSON: It's the potential for environmental catastrophe that's concentrating minds.

STOLTENBERG: There will never be 100 percent guarantee, but a history of more than 30 years oil and gas activities in the North Sea, in the Norwegian Sea, and also now for actually almost 30 years in the Barents Sea, is that as long as we obey to very strict, and one mantle (ph), and safety standards, we can do it with very, very few accidents and very little spillage.

ANDERSON: At the moment, it's the lack of people and industry that makes this environment so striking. But, with oil prices rising so rapidly, the race for new reserves is on. And if, or more likely when, the search begins in earnest, this vast beauty could become a very cold, dim and distant memory.

Becky Anderson, CNN, the Arctic.

(END VIDEOTAPE)

WILLIS: Now, you took a trip that was -- was it close to there?

VELSHI: Well, maybe it was halfway up there. I was in northern Alberta, in Canada, where, you know, as oil becomes more scarce, we look deeper and further for it. And up there, the oil is in the sand. It's in the oil sands of northern Alberta.

WILLIS: Can you feel it?

VELSHI: Absolutely, you can. You can pick it up and you feel it. It's like sand that has -- that's been dipped in oil. And those are -- it's massive plants that are out there that are processing this oil, digging it up, putting it in trucks.

You know, I just want to give our viewers an idea of where we get our oil from in the United States. We talk a lot about Saudi Arabia. It's actually the second biggest source of our oil.

Canada is the biggest source of oil, and increasing. Then Saudi Arabia, Mexico, Nigeria, and Venezuela. So when we talk about these pipeline bursts or attacks in Nigeria, that's why it's relevant. We get a lot of oil from there, as well.

Starting Monday, I think, I'm going to bring you some of the information that I got in Canada.

WILLIS: I can't wait to see that. I think it's going to be fascinating. And we will enjoy that. And of course our friends to the north in Canada, we all like them.

Now, get this one, Ali. What if your boss offered you four or five tanks of gas free...

VELSHI: I'd take it.

WILLIS: ... a year? Does it sound too good to be true?

VELSHI: Yes.

WILLIS: Yes, it does. Well, it's not for some employees of the Houston district -- school district.

VELSHI: No kidding?

WILLIS: Yes.

VELSHI: All right. Well, Susan Roesgen's got this story. Let's see what it's about.

(BEGIN VIDEOTAPE)

CHARLIE REED, PUBLIC SCHOOL BUS DRIVER: Seventy-five dollars. And that probably will last me about three or four days. That's ridiculous. The gas price is ridiculous.

SUSAN ROESGEN, CNN CORRESPONDENT (voice over): They are ridiculous, and Charlie Reed spends more time at the wheel than most. He does plenty of driving as a public school bus driver in Houston.

And to get to his job, he drives his Ford pickup 17 miles from home and back. But here's the worst of it: Reed earns just $15 an hour. That means that every time the gas pump reads $75, Reed has to work five hours just to pay for that one tank of gas.

REED: So that just shows you how great an effect the gas increase is having on me.

ROESGEN: But a little help is on the way. For the first time, the Houston Independent School District has decided to give all employees who earn less than $30,000 a year a one-time check to buy gas. Ten thousand cafeteria workers, custodians, clerks and bus drivers will get a $250 check in September.

TERRY ABBOTT, HOUSTON SCHOOLS SPOKESMAN: A lot of people who have to drive a long way to work, and right now these gas prices are just killing them.

ROESGEN: But the $250 should only cover about four or five tanks of gas at best. And the head of the employees union says the union had hoped for $500.

WRETHA THOMAS, PRESIDENT, SCHOOL EMPLOYEES UNION: If you've got to choose between gas and food, you're going to choose food.

ROESGEN: To pay for the gas checks, the school district will spend about $3 million. Affordable, according to the district spokesman, and greatly appreciated by bus driver Charlie Reed.

REED: So the more money I spend in gas, the less more I can do to support my kids.

ROESGEN: Besides the kids he drives on the bus, Reed has five children of his own. Who knows how much gas will be when they're behind the wheel?

Susan Roesgen, CNN.

(END VIDEOTAPE)

WILLIS: Wow. A tough situation for so many people out there right now.

VELSHI: And we all pay the same money for gas. You know, it doesn't matter what you earn. So it really, really hits people on low incomes disproportionately.

WILLIS: You bet. You bet.

VELSHI: Well, why Medicare is facing a major cut, and what Congress can do right now to stop it.

WILLIS: Plus, how you can be the one running your car on vegetable oil, saving a whole lot of money and helping the environment at the same time..

VELSHI: And how to score tickets for the hottest sold-out event of the summer. Stay with us. You're watching ISSUE #1, the economy on CNN.

WILLIS: That's right.

(COMMERCIAL BREAK)

WILLIS: Well, you probably know Medicare is an often debated subject. Even more controversial, Medicare cuts. And starting today, because Congress failed to act, doctors will be getting 10 percent less from Medicare.

CNN Medical Correspondent Elizabeth Cohen is live right now with the very latest.

Elizabeth, what does this mean for seniors who depend on Medicare?

ELIZABETH COHEN, CNN MEDICAL CORRESPONDENT: Oh, this could really be a problem, Gerri. Already, seniors are finding it tough to find a doctor who is willing to accept Medicare.

Medicare doesn't reimburse that well, so some doctors just won't take you if you have Medicare. So look at what this means, according to the American Medical Association.

Already, 30 percent of patients have trouble finding a new doctor. Now, add on top of that, with this cut that started today, 60 percent of doctors say that they will have to limit the number of new patients that they take. This has prompted the head of the American Medical Association to say that the nation is on the brink of Medicare meltdown -- Gerri.

WILLIS: Well, is there any relief in sight? I mean, where is the help going to come from?

COHEN: Well, some people say that when Congress comes back from its July 4th recess, that they will reverse these cuts. So if that's true, then the impact will be relatively minimal.

WILLIS: Well, Elizabeth, do you have any good advice for people out there who are looking for a doctor that will accept Medicare if so many of them aren't going to take new patients?

COHEN: That's right. Even if these cuts are reversed, people are still having problems finding a doctor who accepts Medicare.

What you want to do is go to CNN.com/tips, and we have several Web sites where you can go. And you can find lists by state of doctors who accept Medicare. You'll still have to make phone calls, you'll still have to do legwork, but at least this will get you started.

WILLIS: All right. Well, Elizabeth Cohen, thank you for that.

COHEN: Thanks.

WILLIS: Time to get you up to speed on the latest headlines. Don Lemon is in the "CNN NEWSROOM" -- Don.

DON LEMON, CNN ANCHOR: Hey, Gerri, thank you very much.

A lot of new laws taking effect across the country. One of them in Georgia allows people with a weapons permit to carry firearms into several public places, including restaurants, public trains, and buses and at state parks. Critics complained it could increase gun violence.

Florida is another state with a new law that's coming under fire. Beginning today, you can bring your gun to work as long as you leave it in the car. Specifically the law allows workers and customers to keep guns in their cars when parked in lots owned by private and government employers. It's been challenged in court.

One other note, Illinois and Wisconsin are the only states that do not permit carrying a concealed weapon. Most states allow it under certain circumstances as long as you have a permit for it.

We'd like to hear your comments, your questions on -- or your concerns on concealed weapons laws. E-mail us at cnnnewsroom@cnn.com. And we'll read some of your e-mails on air coming up in the CNN "Newsroom" beginning at the top of the hour at 1:00 p.m. Eastern.

Meantime, insurgents killed in Afghanistan. The coalition says a reconnaissance plane spotted militants carrying heavy machine guns and rocket-propelled grenades. The coalition says its war planes killed about 33 insurgents. It happened last night in the Khost province about five miles from Pakistan.

I'm back in the "Newsroom" at the top of the hour, 1:00 p.m. Eastern. Now let's throw it back to New York and Mr. Ali Velshi -- Ali.

VELSHI: Don, always a pleasure to see you.

LEMON: Good to see you.

VELSHI: And we'll catch up with you a little later this afternoon.

LEMON: All right.

VELSHI: Now this next story is very cool. Imagine that you take vegetable oil, same stuff you cooked last night's dinner with and you still use oil, and you use it to fuel your car. You've probably heard stories about people doing this. But you can actually do it too with a little bit of help.

CNN's Thelma Gutierrez has the story.

(BEGIN VIDEOTAPE)

THELMA GUTIERREZ, CNN CORRESPONDENT (voice over): Imagine a world where the price of gas is irrelevant and fuel, almost free, is everywhere. Sounds farfetched, but that's exactly the world that Jeff Phillips, Justin Dervaes, and Robert Metcalf have created for themselves. Jeff Phillips is a former Hollywood musician on a mission to convert diesel cars into vehicles that run on vegetable oil.

How busy are you right now?

JEFF PHILLIPS, CEO, THE GREENLAB: I am slammed right now. In the last month, I've probably gotten more business than I have in the last year.

GUTIERREZ: Justin Dervaes is an urban farmer who makes biodiesel out of old fryer grease to run his '88 diesel Chevy Suburban.

If you had to gas up this car, how much would it cost?

JUSTIN DERVAES, USES BIODIESEL FUEL: It would cost about $250 to fill up a 40-gallon tank on diesel.

GUTIERREZ: And Robert Metcalf is a mechanical engineer, who now dumpster dives for restaurant waste to convert into fuel that he puts into the gas tank of his '83 diesel Mercedes. Metcalf says this isn't just about being green, it's about surviving the squeeze at the gas pump. Fed up with paying way over $4 a gallon, Metcalf bought an old Mercedes for $700 and took it to Jeff. It cost $1300 to get it running and another $850 for a vegetable oil conversion kit.

UNIDENTIFIED MALE: Five gallon.

GUTIERREZ: A word of caution, the EPA doesn't recognize vegetable oil as a motor oil and drivers can be fined for using it. But Metcalf says it's the ultimate in recycling.

ROBERT METCALF, USES VEGETABLE OIL FUEL: In the carbon cycle it's what you'd call closed carbon because there's carbon in the air. The plants breathe it, metabolize it into the oil, which I am then putting back in, oxidizing it, and turning it back into carbon dioxide.

GUTIERREZ: And, he say, it's the best investment he's made.

METCALF: I already have a waste oil source, so I don't actually have to pay for the oil. And so I get to save $450 or $500 in gas every month. So in four months it'll pay for itself.

GUTIERREZ: Justin Dervaes is getting similar results another way. Instead of converting his diesel SUV, he converts the waste restaurant oil into biodiesel, which is a legal fuel.

So this stuff comes right out of the fryer at a restaurant?

DERVAES: Yes.

GUTIERREZ: It looks pretty nasty. Isn't this bad for your car?

DERVAES: It is nasty.

GUTIERREZ: The waste has to first be filtered and processed, which cost about $1 a gallon.

DERVAES: We have an electric water heater. And we pump in this oil and heat it up. And this little container here is -- it's clear -- it's methanol and lye mixed together. When you mix those two at high temperatures, you mix them for a couple of hours, the reaction is biodiesel.

GUTIERREZ: Biodiesel that doesn't smell, isn't flammable, and doesn't produce black smoke.

You don't have to worry, like everybody else does, about the cost of gas.

DERVAES: Yes, that's empowering right there in itself. It's freedom.

GUTIERREZ: The kind of fuel freedom that's keeping Jeff in high demand.

PHILLIPS: Just really trying to get a lot of these cars on the road and get a lot more people more educated.

GUTIERREZ: An option that takes commitment. If you convert to biodiesel, you still have to register your car with the state and pay an 18 cents a gallon fuel tax. And there's the time and labor involved collecting the fryer grease and turning it into biodiesel.

(END VIDEOTAPE)

VELSHI: Wow, what a story, Thelma. So the second guy was converting it to biodiesel. The first guy was putting vegetable oil or cooking oil straight into his car. He can go right into the Mercedes with that?

GUTIERREZ: You know what, you definitely don't want to go straight from the fryer grease right into your Benz. And here's why. If you take a look at this filter. This is the stuff that you'd end up putting into your car that came right out of the fryer. You know, pieces of egg rolls, and french fries, and falafel, whatever is in there.

But -- so you want to do first is you have to filter it. So you take some of this oil, you put it through this container here, which has a filter, you clean it, then from there you're able to put it into a clean container. He'll pump it right out here. OK. So now this oil has been filtered. And so now it's actually safe to put right into your car.

VELSHI: Does the whole operation smell like fish and chips?

GUTIERREZ: You put that right into the Jetta.

VELSHI: Does the whole thing smell like fish and chips?

GUTIERREZ: You know what, that's one of the down sides, Ali. That you'll end up smelling exactly like the last thing that was fried in that oil. And in this case, these people took this from a falafel restaurant. So that's what they'd end up smelling like. But the other downside is the cost conversion. This Jetta here cost about $2,500 to convert. That's because it needs a second gas tank. Conversely, this Benz here is about $850 because it does not need a second tank.

Now, the other part of it is you have to pay a road tax, 18 cents a gallon, and you have to be willing to go through this hassle to go out and collect the fryer grease and then filter it and put it into your car. And a lot of people probably are not willing to do that -- Ali.

VELSHI: As the gas price creeps up, we'll see if that happens. I must say, to some people, it smells like fried food. And to other people it probably smells like money.

Thelma, good to see you. Thank you.

GUTIERREZ: That's it.

WILLIS: Great story from Thelma.

Well, the crop report is out and it's not just for farmers anymore. Find out if you're going to be paying more at the grocery store. Plus, how to get your hands on the hottest tickets of summer. Grab a pen and paper. We have the inside scoop. ISSUE #1 rolls on next.

(COMMERCIAL BREAK)

VELSHI: Flooding is having a devastating impact on corn farmers and that means the price of corn will likely remain high. And you can expect to pay more for food. A new agriculture department report says farmers will harvest nearly 9 percent fewer acres of corn this year than last. The report says that while farmers planted more corn than they had planned, some of that was washed away in the floods.

WILLIS: Thank you, Ali.

You know, it's summer time. We're talking the hottest sporting events, the coolest concerts. The only problem is, so many of the hot sporting events and cool concerts are sold out. But not to worry. That's why we have Tod Marks of "Consumer Reports.

It's good to see you, Tod.

TOD MARKS, "CONSUMER REPORTS": Hi, Gerri. How are you?

WILLIS: Excellent.

OK. You want to talk ticket resellers? But aren't these just high-tech scalpers? And wouldn't it make more sense just to go to Ticketmaster or something like that?

MARKS: Well, it's a complicated issue. First, it is scalping in its truest form but it's also market pricing. People that are -- think that ticket prices are too low to begin with say, you know what, we're going to establish the real price by virtue of what the market will bear. They put these tickets out there on places like Stubhub and Razor Gator and Tickets Liquidator and Tickets Now, which are kind of modern day scalpers if you will. But they are a licensed, regulated business and there's more of a -- much more modicum of safety than there is if you buy from a guy in a trench coat in front of a venue, but you're paying a lot for it.

WILLIS: Oh, OK, well that makes sense. You're paying a lot? I was going to ask you, are these tickets more expensive or can you get deals?

MARKS: You can get deals. If it's a one-shot event. Say the all-star game at Yankee Stadium this year. Chances are you're going to pay pretty much for those tickets. They're not going to get too much discounting. But if it's an every day ball game, because each home team plays 81 games a year, season ticket holders can't possibly go to them all. We at "Consumer Reports" did an experiment. We paid less than -- $30 less than face value for those tickets, which would have cost $60, we paid $30. So you can get deals.

WILLIS: You can get last-minute deals, too?

MARKS: Yes.

WILLIS: But you know how this goes. You want to see something. You hear about it at the last minute and you try to get tickets. You have a hard time. Can you use these reselers to pick up tickets cheap, late?

MARKS: Oh, yes, I like the resellers because you can buy your event ticket at the last minute. Do you really want to buy those ball game or concert tickets months and months in advance? You don't know what's going to happen five months down the road. The opportunity, especially if your team is losing, to get tickets at a steal is really great at the last minute. And don't have to wonder about the vagaries of weather.

And we did another experiment trying to get concert tickets for a Santana concert out on the West Coast. When the tickets were first put up, they were about $90, went up to $232 at their peak. We tracked it over a period of time. When we went right before the show, we got it just about at face value and we didn't have to commit our money in advance.

WILLIS: All right. Let's get down to some advice here because you have some really great advice. You say before you even try the resellers, there may be better things to do.

MARKS: Yes. You want to try to get the primary market, the Ticketmaster market, if you will. First thing to do, try to avoid Ticketmaster if you can. Go to the box office itself because . . .

WILLIS: That's old-fashioned.

MARKS: It is and it may not be practical for every event. But if you can, you will save all the fees, delivery, shipping, convenience, those onerous things. So you can get them at true face value.

WILLIS: I love that. OK. How do you shop the resellers, though, if you decide to use them? I mean is it simple? You just order what you want? There's got to be a good strategy.

MARKS: The minute you decide you want to go get a ticket to an event that's on the resell market, track the ticket over time. Find out what the going rate is at the primary box office or at Ticketmaster. Find out over a period of days whether it's going up or down. Then wait as long as you can because if it's an event that's not a one-time deal, there is going to be a lot of fluctuations. As we said, in our experience, we got pretty good deals right before the event. So don't commit to it before market value has been established.

WILLIS: All right. Well, Tod Marks, thank you for that fascinating conversation.

More about resellers, Ali, you like that?

VELSHI: Yes, tell Tod to stick around because I want to talk to him about Yankees tickets. We have some business to do.

Great advice, Tod.

Starting today, by the way, which city do you think has the highest sales tax in the country? Here are your choices, New York, L.A., San Francisco, or Chicago? We're going to have the answer for you.

Plus, we're going to have answers to your e-mail questions. Make sure to log on and e-mail the Help Desk. They're setting up right behind me. Issue1@cnn.com.

The economy is issue #1. We are all over it right here on CNN and we are coming right back.

(COMMERCIAL BREAK)

VELSHI: All right. Starting today, Chicago is more than the windy city. It's also the costly city. Chicago is now home to the highest sales tax rate of any big city in the nation. A whopping 10.25 percent. To put things in perspective, New York stands at 8.375, which is a real pain to calculate, Los Angeles is 8.25 percent. While the rate hike likely won't be felt on smaller items, this was the scene yesterday as consumers packed stores in Chicago to purchase big ticket items before the increase went into effect today. Good for you trying to dodge that tax -- Gerri.

WILLIS: Well, that's crazy.

Well, you have questions. Questions about your money. And that's where the Help Desk comes in. Answers to the e-mails you sent us at issue1@cnn.com. Let's get right down to it. Stephanie Auwerter is the editor at smartmoney.com, Greg McBride is with bankrate.com and Stephanie Elam is a CNN business correspondent. It is the Stephanie panel this morning.

All right. Let's --

STEPHANIE ELAM, CNN BUSINESS CORRESPONDENT: Got to work on that, Greg.

WILLIS: Exactly. No, I won't call you that.

Cain in Georgia has a question. "I recently graduated from college and am starting my first job this summer. What can I start doing right away to avoid getting myself into financial trouble in such a shaky market?"

Stephanie, you want to start this up. I think a lot of people feel like they might get in trouble in this shaky market.

ELAM: The thing about this, through Cain is cool because he's already thinking about what to do and a lot of people don't even think to think about it. So, that's great. First of all, though, don't rack up a whole bunch of debt now that you do have a little bit of a salary and start paying into your 401(k).

Start saving. I know you're thinking retirement is a way far in the distant future. You can't start early enough to putting away money. And you can build your credit at this point as well. Maybe start with a secured credit card. Maybe even a gas card. Start little, but don't spend more than you can afford.

WILLIS: Greg.

GREG MCBRIDE, BANKRATE.COM: And work on that emergency savings account. I think that's a big one. Another one that I see, particularly with young people starting out the career, resist the urge to go out and splurge and buying a big, new car because they come with big, new payments and you don't want to saddle yourself with that.

WILLIS: Right. That's really a good insight. I think that's a problem a lot of men have. Just saying, OK.

Stephanie Auwerter, weigh in here, though, because I know a lot of people out there, you know, they're seeing what's going on in the stock market, just down 160 points, the Dow Industrial average, just moments ago. What's your advice for people out there?

STEPHANIE AUWERTER, EDITOR, SMARTMONEY.COM: Well, the advice is to participate. When the stock market is falling, the natural inclination is to avoid it or to sell. And that's so often times the worst thing you can do, especially if you are young and you are planning for retirement. The market's going to come back between now and then. So really do participate. Focus on the fact that you're buying more shares at a lower price right now, rather than focusing on the fact that your balance is going down. WILLIS: It's like a shoe sale. Would you avoid a shoe sale? No, you would not.

Nancy asks, "my husband passed away in 2005 and I put the life insurance in CDs. My bank has been purchased by another bank that will not insure each deposit. They insure each depositor up to $100,000. What do you advise?"

Now, Greg, what should she be looking for?

MCBRIDE: Well, one of the options that investors have is retitling the account in order to lift that insurance coverage ceiling.

WILLIS: Retitling.

MCBRIDE: Retitling. However, this may not be an option as a widow. Very often that works very well with joint couples because they can each have an individual account, then they can have a joint account. They can keep all the money at the same bank and be insured up to $400,000. If that option is not available to her, then split that money among multiple banks. The idea is, you want to maintain complete coverage, complete FDIC insurance coverage, and do so without sacrificing the old. Make sure you shop around and get the best yield on those CDs.

WILLIS: Those are the magic letters, FDIC. You always want a bank account that's insured by the FDIC.

Tom in Florida asks, "I was just laid from my government job and am considering moving to a better area to find a new job. What are the down sides of moving now with the poor housing markets" -- Stephanie?

ELAM: Well, my advice here would be to first get the job or be very confident that you are moving to an area where you can find a job before you move and then start looking around. That can be a recipe for disaster. If you do have a job lined up, there's some attractive tax benefits when it comes to the cost of moving.

I think you shouldn't be too focused, if you're going to be living there for the long haul, on the current housing market. This will also come around eventually. But you do want to be secure in the idea that where you're moving to there will be a job for you.

WILLIS: Well, and, Greg, you know, a lot of places are booming, right? I mean you may be going to that new market and not be able to even afford the new house?

MCBRIDE: One of the other complications might be selling the home that you own. You know, that could throw a wrench into the plan. So even if the market you're going to is booming, even if home prices are affordable, if you're saddled with two mortgage payments because you're still carrying that home that you left, that could throw a wrench into the plans as well.

WILLIS: Debt, debt, debt, right, Stephanie? I mean a lot of people facing it.

ELAM: Yes. Well, I had the same thought that Stephanie had. Is that if you're moving from some place where you are stable and going some place else, it could just make your life way more complicated. And so you want to keep things as smooth as possible doing (ph) these transitions.

WILLIS: Oh, I love that advice.

OK, Jay in Florida asks,"with the dollar at an all-time low, what has to happen before the dollar regains value?"

Stephanie, you want to -- who wants to start off this conversation?

ELAM: It's really every -- it's kind of the thing about supply and demand if you look at it. You know, for a lot of money there. You want to make the dollar stronger, take the money out. And, you know, take a look at what the Fed's been doing. They've been easing. This last meeting they decided to hold things steady. But if we want the dollar to get stronger, then the Fed has to go ahead and tighten. But, obviously, no one really wants to see that happen because it has adverse effects as well. So it's kind of a balancing issue here.

WILLIS: Balancing issue. What do you say, Greg?

MCBRIDE: Well, in the short-term, it's the interest rate, relative interest rates, U.S. versus particularly western Europe. Also inflation. If we had lower inflation, higher interest rates, that would help the dollar in the short-term. But in the long-term, it's things like the budget deficit, the trade deficit, Social Security, and Medicare, those are big weights dragging down the dollar.

WILLIS: Big, big complicated issues, but you guys tackled them all, our two Stephanies here and also Greg McBride from bankrate.com. I want to say thanks to the panel, great job with tough topics -- Ali.

VELSHI: Thanks, Gerri.

Tough times for one of the hottest vacation spots in the United States. We are taking you there.

Plus, don't forget to vote. Do you think the economy will get back on track in the next year? Log on to CNNMoney.com and be heard because you are watching ISSUE #1 right here on CNN.

(COMMERCIAL BREAK)

WILLIS: All right. What do you think next year will hold in store for the economy? That's today's Quick Vote question. CNN Money's Poppy Harlow is back with the results.

OK, I'm afraid to ask.

HARLOW: Disappointing. Very disappointing, folks. Fifty percent of you said the economy is going to get worse next year. Twenty-one percent think it's going to get better. So some optimists out there. Nineteen percent say it's going to hold steady just about where we are at now. So a little disappointing. More than 27,000 people voted. So they're concerned. We give you a lot of tips on this show, though, how to help.

WILLIS: That's right. We give you tips and hopefully we can find some optimists out there -- Ali.

VELSHI: I'm an optimist.

WILLIS: I know you are.

VELSHI: But the slumping economy mean that people do have less money to spend on vacations. And if you add fuel costs into that, they cause airfares to spike. So that's a double whammy for the island of Hawaii, or the islands of Hawaii, which depend so heavily on tourism.

CNN's Chris Lawrence has more from Honolulu.

(BEGIN VIDEOTAPE)

CHRIS LAWRENCE, CNN CORRESPONDENT, (voice over): Things aren't so perfect in paradise. Two airlines have gone bust. Others are adding huge surcharges on flights to Hawaii. Cancellations are up at some hotels. The high cost of fuel is making an island vacation more expensive.

PETER KIM, OWNS RESTAURANT CHAIN: Doesn't mean that we'll lose 20 percent of our business? That remains to be seen.

LAWRENCE: Peter Kim owns dozens of restaurants and he's sure some of them will take a hit.

KIM: Without the tourism, our businesses is going to go down.

LAWRENCE: Tourism officials are spending millions to convince Americans they can still afford Hawaii.

UNIDENTIFIED MALE, TELEVISION AD: Save on your trip to the islands when you book your vacation right now.

LAWRENCE: Hotels and restaurants are offering discounting to make the overall trip less expensive. And so far, compared to April of last year, people are staying longer, spending more money.

MARSHA WIENERT, STATE TOURISM LIAISON: And total visitors to the islands were down 7 percent. Mow, that's not a crisis.

LAWRENCE: But it doesn't tell the whole story. Visitors from the West Coast dropped 15 percent from a year ago. That's Hawaii's single biggest market.

PROF. IRA ROHTER, UNIVERSITY OF HAWAII: I don't see that people are going to continue to come to Hawaii. It's going to be too expensive.

LAWRENCE: For years, Professor Ira Rohter has been encouraging officials to diversify, promoting smaller, localized, eco-friendly tours and break the independence on mass tourism.

ROHTER: Because if a 30-year economy is linked to the outsiders coming here and paying for things, what happens when they stop coming?

LAWRENCE: Peter Kim's wondering the same thing. He's paying more to import his ingredients while facing pressure to discount his menus and attract tourists.

KIM: But how can you reduce the price when you're paying more money for the raw materials? So I think it will get very messy.

LAWRENCE: The one thing everyone agrees on, the days of cheap fuel and cheaper flights are done. And tourism officials are going to have to live with this new reality for quite a while.

Chris Lawrence, CNN, Honolulu.

(END VIDEOTAPE)

WILLIS: Can I just say, how does Chris Lawrence get these assignments?

VELSHI: How did he get that? Yes, I was in northern Alberta walking in sand that had oil in it. He's in Honolulu.

WILLIS: I think we should go to Hawaii. There's a big, big story in Hawaii.

VELSHI: We need to (INAUDIBLE) some how. ISSUE #1 on the road.

WILLIS: Exactly.

VELSHI: I like it.

WILLIS: I vote, yes.

VELSHI: I'm in.

WILLIS: All right. OK. It's done.

For more ideas, strategies, and tips to save you money and protect your house, watch "Open House," Saturday at 9:30 a.m. Eastern right here on CNN.

VELSHI: And for more of how the news of the week affects your bottom line, tune in to "Your Money," Saturday's at 1:00 p.m. Eastern and Sundays at 3:00 right here on CNN.

WILLIS: The economy is issue #1 and we here at CNN, we're committed to covering it for you. ISSUE #1 will be back here tomorrow, same time, 12:00 p.m. Eastern, right here on CNN.

VELSHI: Now it's time to get you up to speed on other stories making headlines.

"CNN NEWSROOM" with Don Lemon and Kyra Phillips starting right now.