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YOUR MONEY

Concerns Grow Over Fannie Mae and Freddie Mac; Where We Get Our Oil and How It Impacts Your Wallet; Two Energy Plans: One from a Congressman and One from an Oil Tycoon

Aired July 13, 2008 - 15:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


(NEWSBREAK)
ALI VELSHI, CNN HOST: Welcome to YOUR MONEY where we look at how the news of the week affect your bottom line. I'm Ali Velshi.

Coming up on today's program, stocks tumble as concerns grew over mortgage companies Fannie Mae and Freddie Mac this week. The Dow, S&P 500 and NASDAQ are all if a bear market. But many on Wall Street think things look brighter ahead for investors. Find out what this means for you.

Plus, oil hit a new record this week on news of tension in Iran, the possibility of renewed violence in Nigeria, and a planned labor strike in Brazil. But the U.S. doesn't get the majority of its oil from any of those places. We are going to tell you where we get our oil and what impact that's having on your wallet.

And breaking our foreign oil habit was a hot topic on Capitol Hill and on Main Street last week. We're going to hear two energy plans. One from an oil tycoon and from a congressman that could get us back on the right track.

But first the stock markets took a beating this week. Susan Lisovicz joins us now from the New York Stock Exchange -- Susan.

SUSAN LISCOVICZ, CNN CORRESPONDENT: Ali, as you know the stock market is a reflection of the economy and there were worrisome news stories out this week relating to the economy. Oil is getting closer and closer to $150 a barrel. It went over $147 for the first time Friday and then mounting tensions about Iran and the possibility that if conditions deteriorate it could close the Strait of Hormuz. The passage way for 40 percent of the world's oil. That would make supplies tighter and prices higher.

And then there was the freefall of Fannie Mae and Freddie Mac. Shares of the two government-sponsored lenders lost about half of their value this week alone. Amid reports that the Bush administration was mulling over the possibility of taking over the giant home lenders. Fannie and Freddie, together, own or guaranty nearly half of all U.S. home mortgage debt.

Both stocks paired their losses late Friday on a report that Federal Reserve chairman Ben Bernanke offered them access to the emergency discount window. That is already open to troubled Wall Street firm. And that made investors even more nervous about the financial sector which also took a pounding. We get quarterly earnings reports from financial companies in just a few days -- Ali.

VELSHI: All right, thanks, Susan.

While stocks took another hit this week, many investors are concerned about the impact of the slowing economy and the credit crunch on upcoming earnings reports but David Bianco, U.B.S. chief market strategist says fear not. He joins us now with a very bullish prediction on the markets for this year.

David, thank you for being with us. You have a very, very bullish outlook on the S&P 500, which is 500 of the biggest companies in America. And the types of stocks that many of our viewers are invested in through their 401(k) or their IRA. You think it might be up 25 or 30 percent by the end of the year.

DAVID BIANCO, CHIEF MARKET STRATEGIST, UBS: Yes, thanks for having me.

I do think from these levels the market's going to be up 30 percent by the end the year and there's a very bullish story out there about this market. It's an untold story, and that is the S&P 500 is very different from the U.S. economy and many of these challenges facing the U.S. economy, the U.S. consumer. And even many of the mortgage finance companies.

Most the S&P 500s are well removed from these problems. Continue to generate robust earnings growth and with these interest rates we think we're looking at some of the one most attractive --

VELSHI: Let's talk about that, because often people come on this show and tell our viewers that we're not professional investors. That if you don't know where to park your money park it in the S&P 500, in the Spiders, the exchange traded funds that invest in the S&P 500 or in index funds because it's thought to be fairly diversified because it's 500 companies.

But the biggest thing weighing on people's minds on a daily basis today is still energy prices. How do high oil prices, high energy prices affect the performance of the S&P 500 companies?

BIANCO: Well, the S&P 500 right now, the largest sector from a market cap as well as an earnings standpoint is the energy sector. It's overtaken the financial sector. So one of the biggest challenges this economy has is high energy costs and yet the S&P 500 benefits from high energy prices and clearly the energy sector does but also there are many industrial and energy companies that benefit as suppliers to the energy sector.

There's going to be a lot of investment in this country and world wide to produce more commodities and to use energy a lot more efficiently and look toward industrials, materials, and tech companies. Many tech companies actually can benefit from this trend.

VELSHI: Now, there are still some people who say you can't have an economic recovery if the financial sector is in the turmoil that it's in. We still don't know how bad things are for the financial sector. We still don't know if some of these major banks will have big write-downs related to the subprime mortgages and those secondary investments that they sold because of those. How does that affect your call on the markets?

BIANCO: Well, correct, American mortgage finance has a lot of challenges to work through. And certainly that's going to keep the U.S. housing market damp for probably quite some time as we expect here at UBS. However the view for the market is more driven by the outlook for the foreign economy, business investment on industrial capital goods, information technology capital goods.

And this is where we feel confident that there are good opportunities and while I do believe the entire S&P 500 is significantly undervalued including the financial sector; my three preferred sectors are energy, industrials and technology.

VELSHI: Let me ask you about this, we've taken a recent poll, CNN and Opinion Research Corporation and we've found that -- our respond that 75 percent of them thought that the United States was in a recession right now and while that is down a little bit since the last polled them in April, the bottom line here is that we always hear that the U.S. economy is so dependent upon consumers and their sentiment. How does that affect what you think about the markets?

BIANCO: Well, here at UBS we believe that we're in a recession, the United States right now. Things early in the year held up a bit better than expected. We think we're in a recession now and we've got concerns for the outlook. What I would say is -- the thing is that the economy's very different from the S&P 500. And we do things that, overtime, we will have a strong rebound in the S&P 500 as you typically do when the economy has recessions and the worst of the fears blow over.

VELSHI: OK so you're saying don't use the S&P 500 as a proxy for the economy. If our viewers are invested in that, stay invested in it. If they're not go ahead with that, because as we come out of this recession, you think there will be a big benefit in stocks. Is that a fair characterization of what you said?

BIANCO: Yes and I would elaborate. The U.S. economy has these concerns for the energy and the outlook the consumer spending what's often not appreciated is the S&P 500 has far less exposure to consumer discretionary spending than the overall U.S. economy. The U.S. economy consumer discretionary spending is about 25 percent of it. For the S&P 500, no more than 15 percent of its profits come from consumer discretionary spending.

VELSHI: Very interesting points that you've made, David, thank you for joining us. We really appreciate it. David Bianco is the chief market strategist at UBS.

Well coming up next on YOUR MONEY presidential plans. Can the next president of the United States really reduce the deficit and balance the budget? And at what cost, we're going to have a look next.

(COMMERCIAL BREAK) VELSHI: Your money is issue number one in this election season and the presidential contenders have taken notice of that. Both candidates have turned their attention toward tackling the huge federal budget deficit with skeptic's lining up on both sides. Republican presidential candidate John McCain says if elected president he would balance the federal budget by the end of his first term.

CNN senior correspondent Allan Chernoff has analyzed McCain's plan extensively. Allan, can John McCain balance the budget in his first term?

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Ali, you know in theory it sounds wonderful and theoretically anything is possible but analysts say let's not count on it.

(BEGIN VIDEOTAPE)

CHERNOFF (voice over): John McCain claims he can balance the federal budget.

SEN. JOHN MCCAIN, (R) PRESIDENTIAL CANDIDATE: American workers and families pay their bills and balance their budgets and I'll demand the same thing of our government which you're not getting now.

CHERNOFF: Is there any way it can be done? The nonpartisan congressional budget office says yes even predicting a surplus by fiscal year 2012 under current law. How? Because the Bush tax cuts are scheduled to expire in 2010. And the alternative minimum tax, introduced in the '70s to ensure the wealthy pay income tax, is due to affect more middle income households but that is not what John McCain has in mind.

MCCAIN: American families need tax relief and I, not my opponent, will deliver it.

CHERNOFF: McCain pledges to extend the Bush tax cuts and protect millions of Americans from paying the alternative minimum tax. Those promises, some experts say, would dramatically increase the budget deficit.

BOB GREENSTEIN, CENTER FOR BUDGET AND POLICY PRIORITIES: The chance that he would really balance the budget by the end of his first four years, near zero.

CHERNOFF: On the spending side, John McCain says he won't back down in Iraq or Afghanistan. But the wars are costly. Budgeted at $188 billion this coming fiscal year.

STEPHEN BIDDLE, COUNCIL ON FOREIGN RELATIONS: To the extent that it becomes possible to draw troop levels down in Iraq was going to be a tremendous demand, not to bring them home, set them down and not use them, but to swing them, or at least some significant fraction of them to Afghanistan.

CHERNOFF: Even if U.S. troops in Iraq were cut by 80 percent, the Urban Brookings Tax Center says McCain would still face a deficit of nearly $450 billion. To balance the budget McCain would have to make cuts as severe as chopping Social Security by 50 percent or slashing Medicare by 70 percent.

(END VIDEO CLIP)

CHERNOFF: That is not going to happen. One more note, John McCain says balancing the budget will also depend upon reasonable economic growth but given the lousy state of the economy right now it is reasonable to assume that growth is going to be sub par when the next president takes office and of course, Ali that means less tax revenue, not more.

VELSHI: Right. It's a complicated issue because John McCain talks about cutting taxes in order to stimulate economic growth. It is complicated but it sounds good. I'm going to balance the books.

What's Barack Obama got to oppose that?

CHERNOFF: Well, you know, Obama is not going to do the same to the upper class, to the middle to upper class.

VELSHI: Right.

CHERNOFF: But he is saying he will cut taxes for people earning far less. For the middle class, lower class. So he's still going to do some tax cutting over there.

VELSHI: He is just not make any promises about a balanced budget.

CHERNOFF: And on the spending side he's got plenty of ideas to spend money. Lots of social programs dealing with this housing crisis so I don't think any -- any analysts outside of the campaign is really saying either of these guys is going to be able to balance the budget during a first term.

As a matter of fact a really good indication of the flip-flopping going on here, originally McCain said, yes, I'll do it during the first term. Then he changed. In April he said no it'll take until the end of the second term and now it's back to the first term.

VELSHI: And as you know we've sort of tracked this overtime, sometimes the president has some impact on this and as you just mentioned, sometimes it's where the economy is.

CHERNOFF: That's right there's only so much control, so much power that the president has. He has to deal with of course with Congress. Congress has to approve the spending. And you really are a victim; you're subject to the economists.

VELSHI: So in many ways this is John McCain underscoring his long-held beliefs that Congress spends too much money and they don't have discipline. He's saying I will apply my discipline to our budgetary process.

CHERNOFF: And analysts are saying that won't even be enough. He's saying we'll get rid of all those earmarks.

Well, that would be about $17 billion and this is in a $3 trillion budget. So that won't be enough. It's really going to be critical that we see the economy not only turn around but grow very rapidly and then the tax cutting can trickle down and trigger huge increases in revenue. We've seen it before.

VELSHI: Yes, it could happen. More to see on this and you'll be covering it for us. Allan Chernoff, thank you very much. CNN senior correspondent, Allan Chernoff.

Coming up after the break you are not going to believe what might be missing from your next flight. Wait until you hear what the airlines have in store for you.

And later I will take you on a tour of the technology that just may reduce your energy costs.

(COMMERCIAL BREAK)

VELSHI: Well, CEOs from 12 major airlines are pulling together, asking consumers to lobby Congress on their behalf. Their claim is that it's not their fault. That it's more expensive to fly these days. They say blame oil speculators.

Carol Costello has the story.

(BEGIN VIDEOTAPE)

CAROL COSTELLO, CNN CORRESPONDENT (voice over): It's getting harder and more expensive to fly, but the airlines say, don't blame us. Blame the oil speculators. CEOs from 12 airlines signed an open letter to their customers. Asking them to pull together to reform the oil markets. Then urging flyers to go to a Web site to lobby Congress on the airline's behalf to regulate market speculation.

UNIDENTIFIED FEMALE: It just seems inappropriate.

DAVID CLARK, AIRLINE PASSENGER: To blame the oil speculators is ridiculous as well. The price of oil is going up. It's not because of the oil speculators. It's because more people around the world are demanding and using oil.

COSTELLO: The airlines plea to pull together may be the toughest part for many airline passengers who have been trapped on runways for hours with little explanation. Forced to pay 15 bucks for checked bags, charge $25 for a fuel surcharge, et cetera, et cetera. And if you read the whole open letter, there is no guarantee things will improve for consumers even if fuel prices do go down.

TYSON SLOCUM, PUBLIC CITIZEN: Maybe these airlines should have thought a little harder about this e-mail that they sent out to make some pledges of improved service on their own before asking consumers to act on their behalf to call Congress to explain it these speculators. COSTELLO: Still Slocum says the airlines are not insincere about what fuel cost and about what they believe speculators are doing to their industry.

SLOCUM: There is a legitimate case to be made. That the airlines are not necessarily the culprit of recent fare increases but rather sustained high oil prices.

COSTELLO: And Slocum, who heads a consumer group, is slated to testify before Congress himself to say oil speculators are driving up oil prices. And he says while the airlines' open letter isn't perfect, he does agree wholeheartedly with this line -- the nation needs to pull together to reform the oil markets and solves this problem.

I called on four of the airlines to ask if the price of a ticket would go down, if oil prices dropped. I really didn't get an answer to that question. But those fuel surcharges that some airlines charge; they will probably go away if oil prices go down.

Carol Costello, CNN, Washington.

(END VIDEOTAPE)

VELSHI: And Jennifer Westhoven joins us now with more on airlines. I don't know if those airline fees are going to go down when oil prices go down. One can only hope but you've got more on airlines.

JENNIFER WESTHOVEN, CNN CORRESPONDENT: We do. I mean they had a lot more bleak news this week. It was tough. Northwest Airlines is going to cut 2,500 jobs and it's blaming the unprecedented spike in jet fuel prices. Its CEO even said if oil prices don't defend, more airlines will go bankrupt. Fuel prices have doubled from last year and more fees from Northwest. It is joining that American Airlines' plan to charge you $15 check to even check one bag.

If you want a frequent fryer ticket to change in your miles it'll be $100. And then if you need to change your ticket higher fees for that. And then at US Airways, better bring a book, a computer, knitting something that you will do during the delays because no more movies. The airline says it's a move to save money. It's not that the movies cost so much, it's the equipment. It weighs about 500 pounds and they want to get those planes as light as possible to save on fuel.

VELSHI: And that's under the seats, you'll notice when you have a movie console and in the seat ahead of you there will be something underneath the seat. The machines that they want to get rid of.

Toyota brought in these big trucks they were making in the United States to compete with the U.S. automakers and even those are not selling.

WESTHOVEN: They're not; they are cutting production of those. They're also going to cut production of this Highlander because that means for the first time they are going to be making the world's most popular hybrid the Prius in the United States. So Toyota will start making that at a plant that it's building in Blue Springs, Mississippi, outside of Tupelo and it was originally meant for the Highlander but right now the demand of course is so huge for the gas-saving cars. The Prius was only built in Japan and China before this.

VELSHI: This week people would have this first chance this weekend to get their chance on the new iPhone, the iPhone 3g. You and I had a chance to get our hands on this and play with it a little bit. I was relatively impressed by it.

WESTHOVEN: yes, it's really -- I think the thing that's most impressive about it right away when you start using it is the speed of it, right? It moves so quickly.

VELSHI: That was one of the criticisms of the iPhone when it first came out?

WESTHOVEN: Yes and on this AT&T 3g network it means it goes with broadband speed almost. You don't have to be in a perfect wireless range. You're not sitting around, hanging waiting for the page to load for quite as long. So we will see if it can beat the slow down. There was huge lines out in front the stores I am sure that you have seen but I think that they want to see people on the suits in the lines right now.

VELSHI: That's the big deal. Until now it seemed to be something that was more -- it was nifty, it was cool looking but corporations weren't going to use it.

Right and the BlackBerry still owned that market.

WESTHOVEN: So they say this is going to work with Microsoft office, which of course is ubiquitous. Everyone has it at work. So we'll see in terms of the I.T. boards getting on board with that but it moves very quickly which is great if you're on business and also if you're on the phone, you could use it for other you know things that you can send a document.

VELSHI: Which I can't do on I'm a BlackBerry guy but I can't do that. That's an interesting advance in the developments of the iPhones. So we'll see what happens. Cheaper than the existing one.

WESTHOVEN: yes and I think that the speed is like the floor. Right? That is the baseline that you need but they've also got this at the store. Where there is going to be thousands of ways to customize it with business documents, games, the whole gamut.

VELSHI: Is this the thing that makes us carry one device, the thing we've all been looking for for 15 years.

WESTHOVEN: I still can't type on it and there is no flash on the computer.

VELSHI: On the camera?

WESTHOVEN: Yes.

VELSHI: All right, fair enough.

Jennifer, we'll keep testing it. Thank you for joining us, Jennifer Westhoven.

Coming up, more oil than all the reserves in Saudi Arabia can be found in the sand in a country, I'm going to will tell you about when we come back. We'll tell you where it and what it could mean to your wallet.

And later, big plans for a big problem. Oil tycoon T. Boone Pickens says he knows how to reduce U.S. oil imports by more than 30 percent but is America up to the challenge? We will find out when we come back. You're watching YOUR MONEY.

(NEWSBREAK)

VELSHI: The price of oil hit record highs this week on news of turbulence in Iran. The possibility of renewed violence in Nigeria and a planned labor strike in Brazil so it might surprise you that the largest known oil deposit in the world isn't in any of those places. It is in Canada. The number one supplier of oil to the United States. And unlike in, say Saudi Arabia, where the oil lies beneath the sand, in Canada the oil is in the sand.

(BEGIN VIDEOTAPE)

VELSHI (voice over): One-third of the world's known oil deposits are right here in the dirt. So that's where we headed on our energy hunt from New York to Fort McMurray Alberta. All right this is it. We're literally walking on like gold. This is what we came here to see. This is oil sand. It's sand that's encased if water and oil.

In fact, this is about 10 percent crude oil. Large quantizes of oil embedded in sand only occur in two places in the world, Venezuela and Canada. Giant shovels scoop up 100 tons oil-laden dirt at a time, hundreds of trucks move across the landscape all day and night every single day.

You need a lot of earth to make oil, it takes about two tons of oil sands to make one barrel of oil. Now this big hauler holds 400 tons of oil sand. So once that's all filled up and made into oil, you'll have about 200 barrels of oil. That's right; 2 tons oil sand makes one barrel oil.

But at today's oil prices it's wildly profitable. That's why major players, like Exxon Mobil Shell, Chevron and others squeeze 1.5 million barrels of oil out of this land every day and they send most of it to the U.S. It's costlier than getting it from a simple land well because the tar-like oil has to be separated from the sand. And that uses lots of natural gas and warm water.

The result is a heavy molasses-like oil which has to be upgraded into a lighter, high-quality form of crude that can then be easily refined into gasoline, home heating oil and other petroleum products. Canada produces much more oil than it needs. So the excess oil is sold and sent by pipeline to its best customer, the United States. Notice there's no pipeline to Canada's west coast. There is one proposed and it's backed by China.

(END VIDEOTAPE)

VELSHI: While most of the oil from the oil sands comes to the U.S., right now it's not clear that that will always be the way. If the pipeline to the west coast of Canada gets built the oil could just as easily be shipped to china.

Now, how much oil can we get from Canada? Optimistic predictions are that Canada can increase its daily oil sands production between 4 and 5 million barrels per day within the next decade. That will be about a third of all U.S. imports. Whether that oil comes from Canada to the United States or goes anywhere else in the world, the bottom line is there will probably be demand for it for a long time.

And that's what's giving birth to a boomtown called Fort McMurray, Alberta.

(BEGIN VIDEOTAPE)

VELSHI (voice over): This once sleepy little town in northern Alberta, Canada, is surrounded by forest, pristine lakes, with lots of mosquitoes. You don't see nearly as bothered by the bugs as my people are.

UNIDENTIFIED MALE: Probably not. Oh no, that's trendy, little critters.

VELSHI: Friendly little critters until they bite you. But what sets this place apart is what's beneath it. Fort McMurray, Canada, population growing fast toward 100,000. It's the rapidly beating heart of the oil sands. The largest known oil deposit in the world.

It is a bona fide boomtown. It has a major hot bed, traffic jams that would shame a city ten times its size. These people are all headed for work in the oil sands, 24/7. And almost everyone works the maximum allowed overtime. It's tough work, long hours but for really good pay.

JESSE BRETHER, OIL WORKER: You could say all of the bad things you want about this town. The traffic is terrible. You know pollution, it stinks. You know what for $50 an hour, I'll deal with it. I'll deal with being stuck traffic for an hour. I can take it, right? I'm making over $100 grand year. I am 22 years old.

VELSHI: His story is typical and with so many workers it's hard to find a place to live. The median price for a single-family home is just under $700,000. Roughly the same as San Francisco. Just buying a little piece of land and dropping a mobile home on it will set you back half a million buck, although plenty of people are doing it.

So what do you do with these now? Robert Cree was the chief of a local band of native Canadians whose people once thrived on the abundance of natural resources here, hunt, fishing, and trapment.

ROBERT CREE, GREGOIRE LAKE RESERVE RESIDENT: There is so much happening; there is a shortage of housing. There's the medical its health situation is right through the brink.

VELSHI: Problems have followed this boomtown. Drugs are readily available and drinking. Lots of drinking. But do the opportunities outweigh the problems?

BRETHER: I come here and every teacher that ever told me, well, you don't do good in school. You will never make it. I'm making triple of what they make.

(END VIDEOTAPE)

VELSHI: Not bad for an old beaver pelt trading post. Fort McMurray has the highest per capita income in Canada as well as the highest median home prices. And in fact it's commonly referred to as Fort McMoney.

Well coming up next, at what cost, Canada's oil sands are an important energy source but it may come at a very high price to the environment. We will have a closer look at that next.

And the list of the top stolen cars in the country is out. You'll want to find out if your car is on it. You're watching YOUR MONEY.

(COMMERCIAL BREAK)

VELSHI: Welcome back to YOUR MONEY.

As we've been discussing, Canada's oil sands pump 1.5 million barrels every day into the United States as long as oil prices stay above $50 a barrel, there is much more oil to come from that region. And some say that's a win/win situation for Canada and the U.S.

But others say the cost to the environment is too high.

(BEGIN VIDEOTAPE)

VELSHI (voice over): Robert Cree lives on an Indian reserve in Canada. He is 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.

This is oil sand. It's basically little grains of sand with a little bit of water in it. And bitumeum and it sort of smells and feels a little like tar. It you separate the bitumeum from the water and the sand and when you purify it, it comes out like this. It's like molasses. It is very thick and heavy. That heavy stuff has been upgraded into usable light 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 emissions. And then there's the land. The oil sands are under 54,000 square miles. An area the size of Florida, 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.

CREE: I called the Borial forest, the lungs of the earth. And if the Borial forest were depleted to a point then 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, fine sand blows across a vast surreal devastated landscape.

Locals have reported deformed fish, discolored meat in the wildlife. And a local health board study says there has been a spike in illnesses. Both Alberta and the oil companies dispute those claims citing their own research. 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: While the environmental concerns have spread to the United States, some U.S. mayors are urging major American cities to ban the use of gas that's made from oil sands in municipal vehicles. Although it's virtually impossible to trace the origins of a given gallon of gasoline. In spite those environmental concerns big oil players in the United States see the benefits of oil derived from the Canadian oil sands.

We caught up with one American oil tycoon who says he is all for it.

(BEGIN VIDEO CLIP)

T. BOONE PICKENS, CHAIRMAN, BP CAPITAL: I'm a big believer. And I used to live in Canada. I there was in 1967, when great Canadian oil sands started. So I followed it for years and years. It's a great resource. We're lucky to be the ones that get the oil. A lot of the oil from the oil sands.

And I don't want them to see them build that pipeline from the oil sands to the West Coast because I think that then some of the oil goes to the Chinese. And that -- we shouldn't let that happen.

(END VIDEO CLIP)

VELSHI: That was legendary oilman T. Boone Pickens and he wasn't just talking oil sands this week. Pickens also made headlines with his plan to reduce U.S. oil imports by more than 30 percent. Coming up next on YOUR MONEY, he'll explain how that could happen.

(COMMERCIAL BREAK)

VELSHI: T. Boone Pickens unveiled a new energy campaign earlier this week. The legendary oil tycoon says the United States should turn to wind power to decrease its dependence on foreign oil. Pickens plan aims to reduce U.S. oil imports by more than 30 percent and shift American energy production toward renewable and natural resources.

I had the chance to speak to Boone Pickens and asked him how he would achieve this.

(BEGIN VIDEOTAPE)

PICKENS: Let's hit the problem first. We are exporting dollars. $700 billion a year for the purchase of foreign oil, that's what I'm after. I've got to reduce that or we will break the country.

OK the way I propose to do it is that we have an unbelievable wind corridor from west Texas to Canada it's partially being developed now but it should be developed faster than it is and Congress can help us do that by giving us corridors east and west out of wind corridor to the east and west coast. If I can get the wind to replace the natural gas, then the natural gas will -- I can put it in transportation fuel.

VELSHI: You'd take the electricity that's generated by natural gas, replace that with wind, and then take that extra natural gas you've got and use that as automobile fuel or transport fuel. How are we going to get that done? That's an infrastructure change alone getting cars and trucks to run off of natural gas in America.

PICKENS: Well, you've got -- you've got GM that builds 19 natural gas vehicles but all of them outside of the United States. So would it be very easy for the car manufacturers to give you the vehicles. Second, you would need a production tax credit for the windmills and you'd need it for ten years and that would be $15 billion a year.

So all of that's cheap to -- what you need, Ali, is leadership. You need somebody that understands a plan that somebody has step forth and has the position to do so like the president of the United States.

VELSHI: And you're saying this needs to be treated like a war, at least a national emergency. You want the new administration, whoever's there, to implement some sort of plan within the first 100 days. Is anybody biting?

PICKENS: I haven't heard from anybody but I sent word that I didn't want to talk to any one of them until I had launched my plan and then I'll be more than happy to sit down with both of them at the same time and let's talk about it because you're going to sit down and talk about something like war. It has nothing to do with politics. And I would like for them to look at my plan and then you know question me on the plan. See if I know what I'm talking about. I'll be glad to do that.

VELSHI: Now you're a lifelong Republican but there is nothing in John McCain's energy plan that goes anywhere close to where you want to go. Are you going to make a special attempt to get him to listen?

PICKENS: I'm not going -- the only way I talk to him is if I talk to him together or wait until one of them is president. I'll be glad to talk to them.

(END VIDEOTAPE)

VELSHI: Well, Pickens says as you just heard is ready to discuss energy policies with both presidential candidates. One Republican congressman has proposed an incentive-based alternative energy plan on all his own; he calls it in the New Manhattan Project. Representative Randy Forbes of Virginia joins us now to discuss.

Congressman Forbes, thank you for being with us. You know we have a guest on our show from time to time, gentleman named Stephen Leeb. He's an economist and he calls this a war. He says we have to treat it like a war. Boone Pickens used the term war. He talks about a national emergency.

There's some sense that unless we treat this with the urgency of things like either the race to the moon or as you call it the Manhattan Project, we're not getting this done in the normal course of business.

REP. RANDY FORBES (R), VIRGINIA: Well, Ali, I think you're exactly right but I think there are two things that we need to look at as respectfully and humbly as I can state it I think most of the plans that we've seen around the country are just too small. We've got to have a larger project that is no less significant than when we created the atom bomb and when we placed the man on the moon and the second thing while I absolutely agree it is like a war, there is a silver lining in this.

I think if these foreign countries hadn't gotten so greedy and energy prices hadn't reached the levels that they were today we'd never have the backbone and the courage to perhaps stand up and do some things that could really place America on a new innovative trail for years to come. So I think the key is whether we can harness the private and public sector and put them into something as dynamic and as inspiring as this New Manhattan Project could be.

VELSHI: All right so, Congress has held about 40 hearings this year on oil price and gas prices and speculation or not speculation or whatever the case is. Bottom line is that's not working, what is it you propose that the government should do that would have a different result than what we've seen so far. FORBES: First of all, the politicians can't do it, Ali, that's what's happened because leadership on both sides of the aisle is far more concerned with convincing people that their opponents are wrong than they are in creating something that's going to be right for America.

What the New Manhattan Project does is first of all, it pulls together a team of the best scientists and engineers that we have in the country to form a commission to tell us a plan within a year of how we can become 50 percent less dependent on foreign oil in 10 years and a 100 percent in 20 years.

The second thing it does, is it does what America does best and that is harness the innovative capabilities that we have from the private sector by putting huge prizes out for people that reach energy goals. What we found is if we put a $1 billion prize out, private sector will spend $40 or $50, a hundred billion dollars to try to obtain it.

But the third big component is we energize a whole new generation of young Americans to go into math and science so that can do just what you are talking about and that is fighting this huge war and put America on a footing that carries us with a great deal of strength into future decades.

VELSHI: We're keeping count of ideas that come up. We liked yours which is why we invited you back to talk about this. I like the fact that Boone Pickens has put one out. Regardless of whether you think his plan will work or not. But as I asked him, I'm going to ask you. Has anyone bitten, has anyone asked you, how do we get started?

FORBES: Actually, we've had an incredible response from the American people. Because the American people understand that that's why Congress approval rating is nine percent now because the American people understand this is not a war between Republicans and Democrats, this is a war between the United States and these foreign dictators who control much of our energy.

So I think the American people are energized they realized we've got to have big plan, big ideas. That's what this New Manhattan Project does. We hope to have 30, 50 Mr. Pickens across the country who bring all of his ideas to the table and get a taptory that helps carry us home.

VELSHI: That would probably be the answer. Why did you decide on prizes as opposed to say tax incentives?

FORBES: Tax incentives are a situation where government basically says this is what we want you to do and we are going to reward you. With prizes, we don't tell them what to do, we set goals and we use American innovation and in imagination to see how we reach those goals. You know as well as I do when Americans come together and do that, sometimes it's an idea that nobody thought of in Washington that ends up carrying the day and get us to where we want to go. VELSHI: Well I wish you and T. Boone Pickens well. I hope that other people come out with ideas, and we'll continue to follow it very closely here on CNN. Congressman Randy Forbes thanks for joining us.

FORBES: Thank you, Ali.

VELSHI: Well coming up on YOUR MONEY. Ten cars that get stolen most often. You want to find out if yours is on the list. But first this week's "Right on Your Money."

(BEGIN VIDEOTAPE)

CHRISTINE ROMANS, CNN CORRESPONDENT (voice over): To spend or not to spend. That's the question many of us ask ourselves every day. "Money Magazine's" Walter Updegrave says one way to save money is to trick yourself. Like signing up for automatic investing plans.

WALTER UPDEGRAVE, SR. EDITOR, "MONEY MAGAZINE:" The money that comes out of your paycheck before you get a chance to get your hands on it and spend it.

ROMANS: And give yourself incentives to save.

UPDEGRAVE: You set yourself a goal of $5,000 a year and you say when I reach this goal, I'm going buy myself an iPod or something like that.

ROMANS: If the carrot approach doesn't work Updegrave says try the stick.

UPDEGRAVE: Some people may operate better from fear of punishment than the promise of a reward. You can't watch your favorite TV shows for a month or maybe you can't eat out for a month, something that's enough of a penalty where you don't want to incur it. So you have enough motivation to save.

ROMANS: Christine Romans, CNN, New York.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

VELSHI: How appealing is your car to a thief? If you have a 1995 Honda Civic parked in your driveway, keep an eye on it, according to the National Insurance Crime Bureau the '95 Civic was the most frequently stolen car in the United States last year, that is followed by the '91 Honda Accord, and the '89 Toyota Camry, the '97 Ford F-150 and the '94 Chevrolet C/K 1500 Pickup.

Rounding out the top 10, the '94 Acura Integra, the 2004 Dodge Ram pickup, followed by the '94 Nissan Sentra, and the '98 Toyota pickup and the 2007 Toyota Corolla that is about the only new car on the list.

The good news especially if you own one of the cars I just mentioned, vehicle theft in the United States has dropped nearly nine percent in 2007. I assume that's because people don't want to pay for the gas.

Let's hear what you've got to say in this last week. From Wisconsin, Sam writes to us, "We hear a lot on gas and diesel prices skyrocketing. I would like to hear your view on something no one is addressing: heating your home this winter with natural gas, fuel oil, or electric. What can we do now and not when get hit with our first winter."

Excellent, I'm going to make a note of it right now. We're going to bring you information on heating oil and natural gas.

Charles says, "How can we not be in a recession? Why is the business community so afraid to call it as it is? I am tired of people, who make big money, telling us "that it's not so bad. Remember 1973?" Give me a break. Go food shopping, buy a tank of gas, and pay an electric bill. Wake up."

You are absolutely right Charles. We don't buy it either. If you're feeling it then it must be true.

Lastly, Terri writes, "Most of the media is having difficulty with what is really going on in the economy. The oil crisis, the food shortage, et cetera, are not real. This is a direct result of the falling dollar. It's caused by the over printing and over borrowing of the dollar. I would not recommend people to put their stocks in their portfolio, without balancing it with foreign currency.

The good news about the falling dollar is this will promote the ramping up or our manufacturing, including using our own USA materials. Imports will become too expensive, so I would tell Americans to open up their shops. Make, buy, and sell only 100 percent USA goods and all will be well."

I think we're probably a little too interconnected for that but I think your sentiment is interesting.

Thank you for your e-mails. Do send them to us because it makes us think about things that we want to cover for you and report on those stories.

Thank you for joining us for this edition of YOUR MONEY, we'll see you back here next week Saturday at 1:00 and Sunday at 3:00. See you then.

(COMMERCIAL BREAK)

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