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Issue Number One
Iran Fires Second Missile Test; Building Up Shrinking Nest Eggs; McCain Talks Economy in Detroit
Aired July 10, 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: Another day, another long-range missile test by Iran. Why what is happening there could affect your gas prices here.
Two of the most powerful money guys in the country head to Capitol Hill. What they're saying about your economic future.
And we're going to show you how to build your nest egg the right way.
Issue #1 is your economy. ISSUE #1 starts right now.
From the ISSUE #1 headquarters to the CNNMoney.com newsroom, we are all over the stories that matter to you.
Hello, everyone, and welcome to ISSUE #1. I'm Gerri Willis.
Tension builds in the Middle East as Iran is working to show it can defend itself from any military attack. That could have a very big impact on the price of oil.
We've been talking about Medicare on this program and how the program faced a major cut. Well, there's been a major development.
And saving for your retirement is so important, yet so complicated in this type of economy. We'll show you how some folks are building their nest egg the right way.
But the big story today, more threats from Iran.
ALI VELSHI, CO-HOST: Gerri, Iran once again test-fired long- range missile overnight. Now, these couldn't reach the United States, but they could reach Israel and the other parts of the Middle East. And that's why you are going to want to watch this story closely.
Now, let me show you. When you think about the Middle East and you think about oil, most people will think about Saudi Arabia. But look at that, the area around the left side of the Persian Gulf. That's where so much of the oil in the Middle East is found.
And along that coast of Saudi Arabia, right where that Persian Gulf tag is, those are some of the biggest refineries in the entire world. The oil that comes from there doesn't leave by pipeline generally. Very little of it does. Most of it gets on super tankers, and those super tankers ride southeast and then east, and they get to that point there, the Strait of Hormuz. Now, that is a strait that at its narrowest point is 21 miles wide. That point is controlled by Iran. And Iran constantly says that if they are attacked or threatened by the United States or Israel, they will shut down the Strait of Hormuz. Let me give you a sense of how important that is.
Forty percent of all of the oil in the world that is put on a ship goes through the Strait of Hormuz. If Iran were to shut that down, that would spike the price of oil. And it is when these threats and these saber rattling incidents occur that we start to see a spike in the price of oil. And when we feel there's some relief from that, you sometimes see a drop back in the price of oil.
It's only one of the things that affects the price of oil. But in the world of oil, Iran is much more important in some ways than Saudi Arabia is. It is also, by the way, independently the fourth largest producer of oil in the world.
Now, there are some people out there who believe the United States military will never let the Strait of Hormuz be shut down.
CNN's Barbara Starr is live right now at the Pentagon with more on that -- Barbara.
BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well, you know, Ali, the only people watching the Strait of Hormuz more closely than U.S. military these days may, indeed, be those oil traders. This is the place in the crosshairs. But there's a lot of rhetoric and there's a lot of reality, so we thought as people talk about more of this, we'd break some of it down.
Indeed, a second day of missile launches by Iran. Inside Iran right now, there are two things going on in regards to these missile launches.
We're seeing some of those long-range missiles, possibly, that could hit into Israel being test-fired. But we're also seeing some shorter-range missile activity as the Iranians also have an exercise going on along their coastline in the water at the northern end of the Gulf, testing their own capabilities about what they could do in the Strait of Hormuz.
When you go back and look at that map that you showed just a minute ago. That's really the battlefield, if you will. The battlefield for the struggle for power through the strait and the battlefield for oil shipment.
Yesterday, Defense Secretary Robert Gates tried to address some of this, knowing that tensions are being ratcheted up everywhere, that oil markets are reacting to this. And he basically told everybody to please take a deep breath.
(BEGIN VIDEO CLIP)
ROBERT GATES, DEFENSE SECRETARY: The reality is there is a lot of signaling going on. But I think everybody recognizes what the consequences of any kind of a conflict would be.
(END VIDEO CLIP)
STARR: So could Iran shut down the strait? Technically, the assessment is yes. But it would be for an extraordinarily short period of time.
It is a matter of U.S. policy and U.S. military capability. They will not let Iran do that. The U.S. military patrols those waters constantly.
What would happen if Iran tried to shut it down? I think it's safe to say you would very quickly see U.S. warships escorting oil tankers through that strait, U.S. aircraft flying combat air patrols over that region, even moving against some of those Iranian shore defenses if it all came to that.
But the assessment in the U.S. is that Iran has a long way to go before they would take that kind of risk because of what you were talking about -- Saudi Arabia is a neighbor, the United Arab Emirates, the other oil producers whose economies and livelihood depend on this. Iran may want to cross paths with the U.S., but they may not want to cross paths with their neighbors in such a hostile fashion -- Ali.
VELSHI: And Barbara, even Iran's own economy is so heavily dependent on oil. So, at this point, this is one of those things that the informed parties to this discussion, while it may be saber rattling, all seem to have the view that not a lot of people would benefit from a major confrontation at this point, a military confrontation with Iran.
STARR: Well, let me add something very critical to the point you just made. Absolutely right, that is the assessment. But what does worry the U.S. military every minute of every day is that phrase they use, "strategic miscalculation."
These waters are very tight, a number of countries operate there. Shipping traffic is very brisk through there. And what the U.S. worries about is somebody's going to misinterpret what somebody else is doing, and there's no maneuvering room for mistake.
You know, we saw those Iranian boats buzz Navy ships some months ago. If that kind of activity goes on and the U.S. Navy is compelled to react to that, perhaps by firing warning shots or something even more dire, what they worry about is suddenly everything, frankly, goes to pot very quickly.
VELSHI: Yes. Very interesting point.
STARR: And that's when oil markets will jump.
VELSHI: It's 21 miles wide. You have to be very careful what anybody does there.
Barbara, thank you for that very much.
Barbara Starr at the Pentagon.
WILLIS: Well, here at home, the need for better regulating America's financial markets on the minds of both Federal Reserve Chairman Ben Bernanke and U.S. Treasury Secretary Henry Paulson. Both of those men today testifying before the House Financial Services Committee, saying there are greater lessons to be learned from the recent collapse of Bear Stearns and its ensuing impact on the economy.
Both Bernanke and Paulson endorsed updated regulatory procedures which would allow the government to take more control of a banking firm in financial free-fall. And the time to do so is now, according to Treasury Secretary Paulson. If the proposal suggested by both are enacted, they would mark the biggest regulations for Wall Street since the Great Depression.
And there is another big issue on Capitol Hill -- Medicare. Congress returned to deal with something they let slip before the July 4th holiday. That is major cuts to Medicare, very important to our viewers.
Dr. Sanjay Gupta joins me now with more.
Hi, Sanjay.
DR. SANJAY GUPTA, CNN CHIEF MEDICAL CORRESPONDENT: Hi.
It is sort of an amazing process. On July 1st, most physicians around the country saw their cuts by about 10.6 percent, which was pretty significant. A lot of doctors calling us, saying we're having a hard time we're having a hard time getting the money to pay rent, take care of our patients.
Most importantly, is for patients. They said, we're going to stop being able to take care of patients who come to us with Medicare. A big issue, obviously.
HHS froze those cuts, then Congress and the Senate sort of had to act to reverse them. That was sort of the drama over the last several days.
We saw Ted Kennedy actually come out to the Senate floor yesterday. Pretty dramatic. You know, obviously he had brain tumor surgery last month. And actually cast a vote, as well, inspired a lot of his Democrats, I think, to vote. Ultimately, those cuts did get reversed by 69 to 30 vote.
Keep in mind, you've got about, you know, 40 million or so people who are dependent on Medicare, a lot of military members and their families dependent on this. So this was a big deal to doctors, certainly, but millions of patients, more importantly.
WILLIS: Millions of Americans across -- because so many people concerned about this money. What is the White House saying here? What is their stance?
GUPTA: Well, you know how it goes, right? Congress, then the Senate, and now the White House. This is not veto-proof from what we're understanding. It could potentially be vetoed.
And what we're talking about here is a large federal program, Medicare.
WILLIS: Right.
GUPTA: I think what's at the heart of this, is that the Bush administration, at least members of the Bush administration, are saying there's something known as Medicare Advantage, which is sort of a Medicare HMO. It's sort of a private-public sort of thing. And some of them believe that that's where a lot of the money that would from those cuts should go. Obviously, many people, Senator Kennedy, a lot of people who voted against those cuts, saying keep Medicare solvent, make sure the pot of money is available to take care of people who are on Medicare today.
WILLIS: All right. So lots of disagreement even now.
But let's talk for just a second about why does this always come up? This isn't the first time this has happened.
GUPTA: Well, you know, these federal entitlements really came about in '65, right? So over 40 years now. And I think almost since their inception, they've been insolvent. And it's just this question of continuously getting to the point where there's a lot of money being spent, and Congress sort of swooping in and reversing cuts that would try and, you know, keep the money sort of flowing.
So it's going to happen again. There's no question. They're saying now January of 2010. So the next president's going to have -- this is something they're going to have to deal with. But this happens every few years, the cycle. And there's a lot of drama, a lot of tension when it happens.
WILLIS: Wow. Great stuff.
Sanjay, thank you for your help today.
GUPTA: All right. Thanks.
WILLIS: And don't forget, you can catch Sanjay every Saturday and Sunday morning at 8:30 a.m. Eastern for "HOUSE CALL."
VELSHI: All right. And we want to take you live now to John McCain, who is in Belleville, Michigan, speaking to a group of undecided voters. Belleville is just outside of Detroit. And he's been speaking about the economy.
Let's listen in.
(JOINED IN PROGRESS)
SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: ... folks in Michigan are out of a job. That's 8.5 percent of your workforce. You know these things. But we have to understand the urgency of the situation, and we should remind ourselves time after time. And these aren't just numbers. Behind every one of those 425,000, there's a name and there's a family.
There's a name and there's a family, and they're sitting around the kitchen table tonight saying, how are we going to stay in our homes? How are we going to get a new and good job? How are we going to educate our kids? How are we going to get health care? That's what they're doing tonight and this morning, and tomorrow and the day after.
The new job creation in America has fallen sharply. I don't have to tell you, because you had to get here this morning, that for the price of gallon of gas, it's gone over $4 a gallon. By the way, I was in California recently -- as Governor Schwarzenegger calls it California -- recently, and I was in Santa Barbara, California. The price for a gallon of gas was over $5 a gallon. And I'd like to look you in the eye and tell you that the price of oil is going to come down if we do nothing.
My friends, we've got to do something, and we've got to do a lot of things.
I have a plan to get this economy growing again, create more and better jobs, and get America moving again. We've got to reform government, we've got to keep tax rates low, we've got to bring tax relief to families. We're going to have to achieve energy security and we're going to have ensure affordable healthcare.
That sounds like a large menu. And right now we are gridlocked in our nation's capital. We are gridlocked. We're doing nothing except fight with one another.
I don't know if you saw it or not, but yesterday, there was an approval rating of Congress of nine percent. Nine percent approval rating.
If there's anyone here in that nine percent, I'd like you to raise your hand. The fact is, that we're working in a partisan fashion and trying to harm one another rather than help America.
And my friends, I'll begin and end my comments to you with this statement: My whole life has been spent in putting my country first. I will put my country first and we'll fix these problems, and all of us together will restore our economy. And we'll move forward for a better and greater America, and opportunities for every single American in this country.
I promise you that.
(APPLAUSE)
And I believe in the greatness of America. And I believe in it. And I believe the men and women here are living examples of that, of entrepreneurship, of innovation and progress. And I'm optimistic when I visit places like Bayloff Stamped Products, and I'm encouraged when I go to other places in America where innovation and technology are being best used.
So let me just remind you of what you know.
Job creation starts with small businesses. Small businesses, really the only bright spot in our economic horizon, created 233,000 jobs so far this year.
My opponent would like to have small businesses have mandatory health care, which would add $12,000 to the cost of employing anyone with a family. And that obviously means new jobs won't be created. And it means existing employees will have their wages cut to pay for health care.
The last thing we need in an economic downturn, my friends, is a raise -- is increasing your taxes. Senator Obama wants to raise the capital gains tax, he wants to raise small business taxes, he wants to raise the state taxes, he wants to raise a broad variety of taxes.
And my friends, I just want to establish one fundamental fact with you. If you want to a candidate, if you want a president of the United States that's going to raise your taxes, I'm not your candidate. I'm not your candidate. Senator Obama is. I just want to make that very clear.
So I'll help you make up your mind if you're undecided at this moment. If you are in favor of tax increases, they're not -- I'm not your candidate.
My friends...
VELSHI: All right. That is Senator John McCain, presidential candidate, Republican presumptive -- Republican nominee in Belleville, Michigan, speaking to a group of undecided voters.
He was just trying to make decided voters by saying he is not the candidate of people who are interested in tax increases. Senator McCain is continuing that conversation. We'll keep plugged into it.
However, I should tell you, Senator McCain's -- one of his chief economic advisers, former Texas senator Phil Gramm, who now works for UBS, made a comment a little earlier, saying that the United States is in a mental recession and that we are a nation of whiners.
We're going to follow up on that comment, too.
We're going to take a quick break here on ISSUE #1.
Up next, it's time to bring out your inner MacGyver. We are talking about gadgets that can lower your energy costs.
And Canada's oil sands, an important energy source, but it may come with a huge cost to the environment.
We'll explain next.
You're watching ISSUE #1, right here on CNN. (COMMERCIAL BREAK)
WILLIS: Well, any time you're paying $4 a gallon for gas, you're probably looking for an energy fix. That's why we have "Energy Fix" every single day on ISSUE #1 with CNNMoney's Poppy Harlow.
Hello, Poppy.
POPPY HARLOW, CNNMONEY.COM: Hey, Gerri.
This is such a cool energy fix. It'll really help people.
But first we want to tell you folks about all of the scams out there, the things to avoid. "Popular Mechanics" magazine has tested these things and these items and says they simply do not work.
Check this thing out. It's a magnet. It goes around your gas line. The problem is, gas is not magnetic, folks.
It tries to break up clumps in gasoline. Doesn't work at all.
This fan, you can buy it on the Internet, cool down your engines. It doesn't work either.
This thing is $400. It injects water into your engine. It's used in World War II planes. But Mike Allen from "Popular Mechanics" says it is a waste of money for today's vehicles.
(BEGIN VIDEO CLIP)
MIKE ALLEN, SR. EDITOR, "POPULAR MECHANICS": Here's a fairly expensive device. It actually injects water into your intake manifold so you can burn water in your car. It was over $400. It actually increased fuel consumption when I tested on it.
(END VIDEO CLIP)
HARLOW: You heard that right -- it made his fuel efficiency even worse. And you know what? The Better Business Bureau also said some of these devices could void your warranty. Mike Allen also says be wary of simple solutions because the automakers have thought of them all.
(BEGIN VIDEO CLIP)
ALLEN: There are no simple devices to hang on your car that will increase your fuel economy. If it was that simple, they'd already be there. The best way to change your fuel economy is to change your driving habits.
(END VIDEO CLIP)
HARLOW: Of course, that brings us to the things that do work, like this. This is $150 scan gauge. It allows you to see how many miles per gallon you're getting at any moment when you're driving. Allen says he was getting about 20 miles per gallon in his car and then he tried this gadget.
(BEGIN VIDEO CLIP)
ALLEN: I installed this scan gauge in, and then started driving by paying attention to the miles per gallon read on it. Fuel economy jumped to 28 miles per gallon.
HARLOW: Wow.
ALLEN: Same car, same gasoline, same commute. The only difference was my right foot.
(END VIDEO CLIP)
HARLOW: Pretty amazing results there.
So, if you spend $100 a week on gas, and you can up your efficiency by 40 percent, like Allen did, that's a $40 savings. So it wouldn't take much to make up for the cost of $150 for the scan gauge.
There's a fancier version. It's this. It's called a Kiwi (ph). Brand new, won't even hit the market for about a week or so. It goes for about $300, and it actually has a tutorial that teaches you how to drive more efficiently.
These devices are already showing up in some hybrid vehicles and could eventually come in your next new car.
You can see my full interview with Mike Allen on our Web site, CNNMoney.com.
But Gerri, here are things to stay away from, and some things that could save you a lot of money.
WILLIS: You know, you can always just drive slower. That's always a good idea.
HARLOW: You could. You could.
WILLIS: Poppy, thank you for that.
HARLOW: Sure.
VELSHI: Well, our "Energy Hunt" continues. This is the third and final installment of our series on Canada's oil sands, which today pump 1.5 million barrels of oil into the United States every single day.
Now, as long as oil prices stay above $50 a barrel, there's much more oil to come from that region, and some say that's a win-win situation for Canada and for the United States. But other people say the cost to the environment is too high.
(BEGIN VIDEOTAPE)
VELSHI (voice-over): Robert Cree lives on an Indian Reserve in Canada. He's worried about the future of his ancestral land. His home sits on top of the oil sands, the world's largest known reserve of oil.
(on-camera): This is oil sand. It's basically little grains of sand with a little bit of water in it and bitumen, which is -- yet, it sort of smells and feels a little like tar but it's not actually tar.
Now, what you do is you separate the bitumen from the water and the sand. And when you purify it, it sort of comes out like this. It looks like molasses. It's very thick and heavy.
(voice-over): That heavy stuff is then upgraded into usable like crude oil. 1.5 million barrels of it per day and growing fast. Most of it U.S. bound. So what's the problem?
Critics say the upgrading process emits three times as much carbon dioxide as drilling for conventional oil and transporting it to market. Shell, one of the major operators in the area, disputes that saying it's only twice as polluting.
Still, the oil sands are responsible for three percent of Canada's total greenhouse gas emission. And then there's the land. The oil sands are under 54,000 square miles. An area the size of Florida. And some of that area woodland has to be clear cut to be surface mined, creating the largest industrial zone on earth.
Robert Cree says cutting the forest down could bring environmental disaster.
ROBERT CREE, GREGOIRE LAKE RESERVE: I call the Boreal Forest lungs of the earth. And if the Boreal Forest were depleted to a point and what's going to happen?
VELSHI: And then there's the water taken from the local river used to wash the oil from the sand. The used water is then left to evaporate in huge lined ponds required by law to ensure it doesn't leak back into the earth.
After it's gone, a fine sand blows across a vast, surreal, devastated landscape. Locals have reported deformed fish, discolored meat in the wildlife, and a local health Ford study says there's been a spike in illnesses. Cree Chief George Poitras wants new oil sands production to stop until the dangers are clearly established.
CHIEF GEORGE POITRAS, MIKISEW CREE FIRST NATION: And like any kind of resource boom anywhere in the world, people will come and exploit and then they'll leave. And we'll be here with land that is decimated.
VELSHI: The oil companies are required to replant the land that they displace. They show off this former mine complete with bison as an example of what the land can look like once it's reclaimed. It's a process that can take up to 50 years.
(END VIDEOTAPE) VELSHI: Well, the environmental concerns have spread to the United States. Some U.S. mayors are urging major American cities to ban the use of gas made from oil sands in municipal vehicles, although it's virtually impossible to trace the origins of a given gallon of gasoline.
One note. If you missed any of these "Energy Hunt" pieces, you can catch them all on tomorrow's ISSUE #1 -- Gerri.
WILLIS: Coming up, the art of negotiation. We'll tell you what you need to know to get a good deal on just about anything.
You're watching ISSUE #1.
(COMMERCIAL BREAK)
VELSHI: Hey, we've got some good news with today's jobless claims report from the Labor Department. Fifty-eight thousand fewer people filed for unemployment benefits last week. And that's the biggest drop in nearly three years.
WILLIS: Today, new numbers out on the foreclosure crisis across the country. Foreclosures were down in June. So does that mean a recovery is under way for the housing market?
Here to break down those numbers for us, Rick Sharga with RealtyTrac, a firm that monitors foreclosure filings.
Rick, great to see you.
RICK SHARGA, REALTYTRAC: Good to see you, Gerri.
WILLIS: All right. What happened in June?
SHARGA: June, we just saw a nominal decline in the month-to- month rates, but we're still up over 50 percent from a year ago.
WILLIS: Wow.
SHARGA: And June was still the second highest month we've ever cracked historically since we started tracking foreclosures in January of '05. So, we're certainly not out of the woods yet.
WILLIS: So, big increase last year. You know, compared to that, it's not as impressive.
Let's drill down though into the numbers, because I think people want to know, what's going on in my neighborhood? Where did you see the biggest increase in foreclosures?
SHARGA: The states that are still skyrocketing are places like California. Ohio jumped up quite a bit, although it's been in the top 10 for a couple of years now.
Arizona continues to climb up. Utah jumped into the top 10 for the first time in a while. We're looking into that. But the top states are still Nevada, California, Arizona, Florida and Ohio. And Michigan's right behind them.
WILLIS: You know, the same culprits, as you mentioned, California and Florida, being two really tough states. We saw that Cape Coral and Fort Myers really tough areas. Why? What is going on there that makes it so difficult for folks to hold on to their homes?
SHARGA: It looks like Cape Coral and Fort Myers is pretty much a microcosm of what's gone wrong in Florida from a real estate perspective. The market was overbuilt, the market was overpriced, people overextended themselves using bad loans to get into the properties. And as these loans have reset, there isn't a market for community (ph) homes. So the people are just losing them back to the banks.
WILLIS: All right. Let's talk about California, the West Coast for just a second. You know, that's a place that saw such incredible price gains. Just unsustainable there. What's the story?
SHARGA: That is the story, that the price gains were unsustainable and they were artificial. They were brought on by real estate money being so cheap and the banks' lending practices being so lax.
So, what you had was unqualified people buying overvalued homes with somebody else's money. And all the risk was built into this. It was only a matter of time until it blew up.
WILLIS: Stockton, Modesto, we were just seeing numbers for individual communities. Let's talk about the country as a whole now for just a second.
Are we at the peak? Are we coming off the peak? Are we about to have a turnaround? What's going on?
SHARGA: No, we forecast that there'll be over three million foreclosure filings on over two million properties this year.
WILLIS: Wow.
SHARGA: And we're probably going to have to adjust that number up. We can't...
WILLIS: Why is that, Rick?
SHARGA: Well, there are about $60 billion to $70 billion worth of subprime adjustable rate loans that are resetting now through the fall. These loans have been the ones that have foreclosed at the highest rates. And there's no reason to suspect they'll behave any differently now than they have for the last year.
WILLIS: All right. So when you look at these numbers, and you are spending all your time scouring these numbers, such an important number for consumers here in this country, what is in your crystal ball, really? I know you don't expect any kind of near term recovery. But it looks like we're going to have more all days (ph), more subprimes defaulting. What is the silver lining? Is there a silver lining here?
SHARGA: Assuming you can get a loan, which is a big assumption, it really is a very good time to buy if you're looking for a house to live in. If you're an investor in a cash position, you probably never had better market opportunities. And you'll have selection like you won't believe in the next couple of months. We're anticipating over a million bank homes on the market by the end of the year. So there is an upside there for people that have been priced out of the market that have credit that can get back into the market now. But, really, it's mostly a kind of glum picture.
WILLIS: All right. Well, Rick Sharga, you'll let us know when that changes, I'm sure.
SHARGA: Absolutely.
WILLIS: Thank you for that.
SHARGA: Thanks, Gerri.
VELSHI: Coming up next, the secretary of the Department of Housing and Urban Development stops by. We'll get his take on the proposed solutions to the foreclosure crisis in this country.
Plus, the art of negotiation. We're going to tell you what you need to know to get a good deal on just about anything.
You're watching ISSUE #1 right here on CNN.
(COMMERCIAL BREAK)
WILLIS: Building your nest egg is easier said than done in this economy. That story is next. But first, let's get you up to speed on the latest headlines. Don Lemon in the "CNN NEWSROOM."
Hi there, Don.
DON LEMON, CNN ANCHOR: Hello, Gerri. You doing OK today? You certainly look nice.
WILLIS: Oh, you're so sweet. Why don't we go to Don every hour, every 20 minutes?
LEMON: We'll just, you know, sit here and talk to each other and talk about how great we look. But, unfortunately, we've got some news to tell you about.
All right. Thanks, Gerri. Talk to you in a little bit. We want to tell you now about the headlines.
Iran. The thunder of launching missiles. The rumble of new warnings. Iran's state TV says it has launched more medium and long- range missiles in a second day of military exercises. There is no way to verify if the missile video is authentic. And Iran says it's responding to threats from the U.S. and Israel. And, in fact, Israel is within striking distance of Iranian missiles. And on another ominous note, Tehran says its missiles have "special capabilities." It does not explain what that means, however.
I want to get you now to John McCain. He takes his presidential bid to the swing state of Michigan today. Right now McCain is holding a town hall meeting with workers and undecided voters in the Detroit suburb of Belleville. And you're looking at live video of that. Of course, we'll bring to you any news that happens about that at the top of the hour in the CNN "Newsroom." He is focusing on jobs and small businesses. Later today, McCain visits his regional headquarters in St. Paul, Minnesota. We'll continue to follow that one.
Barack Obama and Hillary Clinton get together for breakfast. On the menu, money. The two appeared at a "Women for Obama" fund-raising breakfast in New York this morning. Clinton stressed the importance of Democrats coming together to elect Obama in November. Next hour, Obama discusses the economy with women voters at a town hall meeting in Fairfax, Virginia.
Jesse Jackson's disparaging remarks about Presidential Candidate Barack Obama caught on camera. We have seen him -- Jackson has apologized, but there is way more -- way more to the story with that. And we'll tell you what you haven't heard about the story. I'm going to speak with Reverend Jackson live and in-depth about it next hour in the CNN "Newsroom."
What do you think about what he said?
Send an I-Report to us at ireport.com or go to "CNN NEWSROOM" at CNN.com and send your comments on we'll get them on the air. We'll share some of your comments with you on the air in the "CNN NEWSROOM."
I'm back in the "NEWSROOM" at the top of the hour. Now let's throw it back to Ali Velshi in New York.
Are you looking as good as Gerri today? Let's see. You've got . . .
VELSHI: I've got no time to worry about how I'm looking. Gerri was on her way out and wanted me to tell you that you are looking fine.
LEMON: You've got dots and stripes. Not enough patterns today, Ali. I don't know what's going on.
VELSHI: I'll have to get bolder.
Don, good to see you buddy.
LEMON: Have a great day.
VELSHI: All right, Don Lemon there.
The stock market's drop into bear territory is impacting millions of Americans who have been counting on the market for their retirement.
Allan Chernoff joins me now with the story of several investors who actually work as a team -- Allan.
ALLAN CHERNOFF, CNN SR. CORRESPONDENT: Ali, when you're dealing with a treacherous stock market like this, sometimes there's a lot of comfort in numbers. In Brooklyn, New York, there's a group of investors who have been pooling their money for 21 years. They started right after the crash of 1987. Pretty good timing. They've seen other stock market tumbles, but this one, well, it's starting to trigger their nerves.
(BEGIN VIDEOTAPE)
CHERNOFF, (voice-over): It's been a stomach-turning first half of the year for members of the Future Best Investment Club. They've watched their portfolio lose 9 percent of its value. Funds that members are counting on for retirement. Monica Noel, a financial planner who is in the club, thought the stock market would have rebounded by now. Today, she's not so sure.
MONICA NOEL, FINANCIAL PLANNER/INVESTOR: How low will it go? That's a big concern.
CHERNOFF: An even bigger concern for Monica, her personal investments. Especially her individual retirement account, which she manages more aggressively than the club's money.
M. NOEL: I had done very well in the past. But over the past year, I think I'm down 10 percent to 15 percent.
CHERNOFF: Her brother Ruthven, also a club member, is only five years from his planned retirement.
DR. RUTHVEN NOEL, INVESTOR: Although I'm getting closer to retirement, it's a little bit more worrisome now than before.
CHERNOFF: Millions of Americans have put much of their savings into the stock market, expecting gains will help carry them through their retirement years. Bear markets can ruin those plans. Frank Powell is already well into his retirement years. He's 81 and counting on the club to help him in his future years.
FRANK POWELL, INVESTOR: It wouldn't be a natural thing if you went perturbed, of course, unless you were one of the big boys. But right now, it's a little apprehensive.
CHERNOFF: Even so, the club is planning to buy more stocks.
R. NOEL: I think Gentech is holding up very well too.
POWELL: Yes, yes, yes, it's appreciating right now. That's right, yes.
M. NOEL: You can't withdraw from your investments when the market is down.
CHERNOFF: Careful research and buying quality companies has paid off for these investors. Even with this year's losses, Monica says over the past five years, the portfolio is still up more than 13 percent a year. Far outperforming the stock market's leading indices.
(END VIDEOTAPE)
CHERNOFF: It's a good strategy, but not easy to do. If you are investing for the long-term, you want to keep a long-term focus. Now a good way to do that is keep putting money to work on a regular basis even when the stock market is down. Ali, the veteran investor, Hugh Johnson, one of the smartest guys on Wall Street, says the secret to successful investing is in time, not timing.
VELSHI: Very good. That's good advice. Time. Keep on going and just stick it there for a long time.
CHERNOFF: Exactly.
VELSHI: Allan, thanks very much.
WILLIS: All right. Well, trying to get a handle on the mortgage meltdown. We'll be talking live with HUD Secretary Steve Preston.
And make you get what you want every time. It's all in the art of negotiation. And we're going to let you in on all the secrets.
ISSUE #1 rolls on next.
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WILLIS: Well, since we first told you about the start of the mortgage meltdown, now nearly two years ago, many fingers have been pointed. Blame has been placed on everybody from mortgage lenders, to mortgage brokers, to borrowers and lawmakers in Washington, D.C. So you could say Steve Preston sort of stepped into the fire when he was named secretary of the U.S. Department of Housing and Urban Development back in June, partially charged with helping to turn the mess around. Secretary Preston joins us now from Washington.
Secretary, thanks for joining us today. We appreciate it.
STEVE PRESTON, SECRETARY OF HOUSING AND URBAN DEVELOPMENT: You're welcome.
WILLIS: All right, to start with, we have to talk about this bill that's in the Senate right now. There seems to be some consensus about this bill that would aim to sort of solve some of this problem with the housing meltdown and yet you oppose it. It's been in the works for months and months and months. Why do you not like this bill?
PRESTON: Well, there's some very important things in the bill, actually and some of the things we like very much. For example, there's language in that bill that would provide a much stronger regulator for Fannie Mae and Freddie Mac. These are two institutions that today represent somewhere between 80 percent and 90 percent of the mortgage market, along with the federal home loan banks. And we've seen all sorts of news on those two institutions this week. And it's very important that America has confidence in those institutions because they are so critical to Americans getting access to capital for mortgages.
There are things we don't like in the bill, much of which relates to FHA, which is a HUD institution. We provide insurance for private mortgages that helps Americans get access to those mortgages cheaply. Right now, hundreds of thousands of Americans are coming to us to refinance their mortgages. Many of them are trapped in these subprime mortgages that are resetting. They're in situations they can't pay for. We're an island of hope for those people because we can put them in a 30-year reliable mortgage. Challenges . . .
WILLIS: And not only hope (ph), secretary, but let me interrupt you here because I think it's important to note that this bill would allow people that are in some of these risky loans to get new loans. Loans backed by the FHA. And you said that this bill would actually put too many risky loans into FHA, putting FHA at risk. Isn't that the department's job to take on the risk of people who are low-income? People who have been really thrown into harm's way by this mortgage meltdown?
PRESTON: Well, there are two things here. First of all, we're already trying to expand the help that we give to people who are having difficulty paying. In fact, next week, we're opening up FHA more broadly for people who have had a hard time paying for mortgages.
The problem is, is the Senate bill will not allow us to charge more money for those people and, as a result, the rest of Americans who are getting help from the FHA will have to pay more or will have to cut off helping those people altogether or we'll need an appropriation from Congress to pay for it. So there's a whole tier of people that are coming to us that we can help today, but we would be blocked by this bill.
There's a second piece that you're referring to, which is the Senate bill would ask us to take very risky mortgages. So much beyond the level of -- that we're talking about here. Very risky mortgages. They would ask Fannie Mae and Freddie Mac to fund almost $1 billion to cover those. And the question there is whether or not FHA should be taking on people who have that degree of risk, very significant risk, and paying for it.
WILLIS: And that's precisely what I was asking you is, isn't it the job of FHA to help folks out there who were really struggling?
PRESTON: Well, that's exactly our job. That's what we're trying to do. The irony about this bill is, the people who are sort of on the edge that are having a hard time making their payments, we may not be able to help. But the people who already are a much greater credit risk, we would give money to help them. So the irony is, there's a group of people that we're trying to help that we're moving forward on and they'd basically be saying you can't do that because we're not going to give you the tools to do that without raising fees on all Americans or getting additional appropriation.
WILLIS: We'll see. Preston, so much to talk about, so little time. Thank you for being with us today and I hope you come back again to report on your efforts to help us with this mortgage meltdown.
PRESTON: Thank you very much.
VELSHI: Well, everyone wants to win. And to win, sometimes you have to know how to negotiate. Peter Johnston is an international negotiator, adviser and mediator who's clients range from U.N. officials to wall Street bankers, convicted felons, and cheated spouses. He's also the author of a book called "Negotiating with Giants."
Peter, thank you for being with us. Let's, first of all, talk about giants. You're talking about people with whom you're negotiating who have more power than you, basically. They're bigger than you in some fashion.
PETER JOHNSTON, INTERNATIONAL NEGOTIATOR: They're bigger than you, Ali, in resources and clout. And that could -- they could include huge companies, governments, high net worth individuals, your school board. It could be a medical system.
VELSHI: All right. What's the basic premise here? What's the nut to success for negotiating with someone who's got more than you have?
JOHNSTON: To answer that question, we researched through hundreds of years. We looked all the way back to people like Ben Franklin and what he did in negotiating America's independence. We looked at Mandel and what he did to take power in South Africa. We looked at hostage takings. Anywhere where there was that huge imbalance in power, as you say. And the biggest take away is, when you're negotiating with a giant, given the size differences, you want to stay away from the negotiation table as long as possible because you want to arrange the table so that it suits your interests as you get to the table.
VELSHI: And you start off your book with that. An example of a situation that you were in where it looked like you were -- you held the power, but you didn't, because it was on somebody else's terms basically. You take that time to establish the premise for a negotiation. You don't just go headlong into it.
JOHNSTON: That's right. So what these successful, smaller players do -- I call them size wizards because they can make themselves bigger, they're giant smaller and their opportunities much larger than they would otherwise be -- is they stay away from the table, they build coalitions, they infiltrate their giant, influence their giant internally, get in their giant's head, using seven different helpers. They use these consistently across history and we can all use them today.
VELSHI: When we think of negotiation, we think of you -- two people sitting here coming to some sort of a deal. You're saying, it's the homework, it's the back office where the most work gets done?
JOHNSTON: Exactly. And it's not just passive homework, it's active homework, building those coalitions, using the media to your advantage, worsening your giants' alternatives to doing a deal with you. So that by the time you get to the table, you've leveled the playing field somewhat.
VELSHI: Tell me what role personality plays in this. Is it -- do people -- are people more successful of their outward personalities or can anybody be successful at negotiations with somebody who holds more power than they do?
JOHNSTON: My book, "Negotiating with Giants," is all about saying, essentially, personality really isn't where it's at. It's important. You've got to have hootspa. You can't be intimidated by these giants. But really, when you think about the game being away from the table, then it's more strategic in nature and less personality driven.
VELSHI: The book is interesting. It's not a straight out book of tips. It's got some things that you have to sort of study to understand it, but very valuable. Peter Johnston is the author of "Negotiating with Giants."
Thanks for being with us.
JOHNSTON: My pleasure. Thanks, Ali.
WILLIS: I love that hootspa.
Well, we'll tell you which city is the fastest growing in the U.S. and important info on the topics that you say are most critical to you. It's the Help Desk. E-mail us, issue1@cnn.com.
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WILLIS: Well, it's time now to talk about the issues that matter most to you. It's the Help Desk. Let's get right down to it. Mike Santoli is with Barron's, Stephanie Elam is a CNN business correspondent and Allan Chernoff is a CNN senior correspondent.
Welcome all. All right. Let's get right to those e-mails.
John in Illinois asks: "I am 18 years old and trying to decide if I should invest in the stock market, a mutual fund, et cetera. Should I wait until this crisis blows over or should I get started?"
All right, Mike, I want to start with you because I know you watch the markets very intently.
MIKE SANTOLI, ASSOCIATE EDITOR, BARRON'S: Sure. Well, first of all, if you're 18-years-old, presumably you don't need this money for decades, so it doesn't really matter to try to be to cute about being too cute about picking your entry point. And when this crisis blows over is another way of saying, when stock prices are already higher. OK. So in other words, it's a little bit like saying, now that things have been coming down in price, should I wait until they get more expensive before buying them?
WILLIS: I'm going to avoid the shoe sale and I'm going to buy them at full price.
Stephanie, let's talk about bear markets for just a second. I mean, when you look at these bear markets, how long do they last? What does it mean? Define them for me.
STEPHANIE ELAM, CNN BUSINESS CORRESPONDENT: Well, you know, when you take a look at a bear market, you're looking at 20 percent drop- off from the peak of that cycle. So not from the all-time high, but just when it hit its high, a 20 percent drop. That means we are officially in a bear territory market. Now the thing is, let's say next week we go and we're like just down 18 percent from our high. That does not mean we're out of a bear market territory. That means we are still in one until we get out of that whole trough. So that's why we're looking at this period being in that place.
WILLIS: But, Mike, tell me, you know, bear markets, do they just go to 20 and stop? I mean what's the typical pattern of stocks when they are in the toilet like they are right now?
SANTOLI: It so happens that when -- historically, when the market gets to a 20 percent loss, it usually did not then turn on a dime and go higher. But a majority of the losses of that bear market are usually over with by the time you get to 20 percent, they get to 30 percent down. Sometimes a little bit less than that. Sometime a little bit more.
I would contend that this previous bull market that came before this bear market was not of the sort of exuberance and excess. That means we have to have a particularly bad bear market right now the way we did in 2000 and 2002.
WILLIS: We had too much fun?
SANTOLI: We didn't have too much fun. In 2000 we did. And the market was cut in half.
WILLIS: Oh, OK.
Well, Allan, you know, I really think that people should ignore this noise. What do you think?
CHERNOFF: Yes. A lot of people, they see, oh, we're in a bear market. Oh, maybe I should sell. I'd like to think of the advice that Frank Grets (ph), a very smart, technical analyst on the street always gives. He says, it's OK to panic if you panic early. It's very late to panic. Meaning panic sell in a panic, try to get out of your stocks.
As Mike pointed out, the odds are that the majority of the declines have already occurred. Doesn't mean that you shouldn't not sell some of your stocks, perhaps, if you really think something's going to be, as I say, dead money. But this is no time to be bailing out of the stock market.
WILLIS: Are there sectors that look good now? SANTOLI: You know, it's actually for the brave. The sectors that have been depressed the most, the consumer and finance sectors, I don't think are going to be the leaders any time soon. It seems to me it is more of these sort of materials, natural resources areas that have already really appreciated so much. I think you should rotate out of the stuff that's done well and slowly start buying the stuff that's been depressed.
WILLIS: Well, interesting conversation. We appreciate your help today. Mike, Steph, Allan, thanks for helping us out.
VELSHI: OK, everybody, time to guess what U.S. city is the fastest growing city in the country. Here's a hint, it's a city on the rebound. We'll tell you about the fastest-growing places in the country when we come back on ISSUE #1. Stay with us.
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VELSHI: The big easy is on a big rebound. According to a report released today by the U.S. Census Bureau, New Orleans is the fastest growing large city in the United States. Now that's a city with a population of at least 100,000. Keep in mind, so many who called the crescent city home blew out of town before the Hurricane Katrina debacle. But going by the numbers, the big easy's population went up almost 14 percent just last year at just under 240,000 current residents.
WILLIS: Well, that's some good news, finally, for a city that has really been through the ringer.
VELSHI: Yes. Still half of what it was before the hurricane, but we'll see.
WILLIS: Good news.
All right. Well the economy is issue #1 and we here at CNN, we 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.
VELSHI: Time now to get you up to speed with other stories making headlines. "CNN NEWSROOM" with Don Lemon and Kyra Phillips starts right now.
