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Record Highs at Wall Street Opening Today; Tax Credits for Switching Schools; Interview with Sally Howell

Aired March 05, 2013 - 09:30   ET

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


CHRISTI PAUL, CNN HOST: Record highs in sight as they open up things on Wall Street. Dow less than 40 points away from its all-time closing high that was set back on October 9th, 2007.

Ringing the bell this morning, portfolio manager for ALPS Trust, Michael Aikens (ph), is who you saw there.

I want to bring in Alison Kosik.

Alison, as I understand it, look at that; we're at 14,143. We're -- why are we getting so close so fast?

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: That is really a good question because you look at all the negative forces going on right now, those spending cuts, the uncertainty in Washington, the uncertainty about where our own economy is headed, the strength of our economy.

You know, you think about economic growth in this country, right now it's pretty much stalling out. You look at the last three months of last year. There's instability in Europe. So there's a lot of -- there's a lot of negative forces.

But, look, we just surpassed the record high for the Dow. It's now at 14,176. I don't see any confetti coming from the ceiling. I didn't hear any cheers. This is still a milestone, because look how far stocks have come. We're back to a level we haven't seen in more than five years.

But many are really kind of, you know, a little -- I think a little skeptical about this because the economic fundamentals -- meaning the strength of the economy -- it's not there. So many are believing that there's really a disconnect between what we're seeing on that screen right now and what regular Americans are feeling.

You look at the jobs picture. The jobs picture is pretty darn bad at this point. The unemployment rate is at 7.9 percent. More than five years ago when the Dow was at these levels, unemployment was at 4.7 percent. So it's a very different world right now. There are 12 million Americans out of work.

And many are asking, is this really justified? Why is it happening? The Federal Reserve has a lot to do with this. What the Fed is doing is it's pumping billions of dollars of stimulus money into the economy every single month. And what that is essentially doing is it's pushing interest rates lower.

And it's making stocks basically the best game or the best investment in town. It's basically creating this wealth effect that you're seeing right on the screen as we see the Dow reach 14,190. You know, it's getting up there, Christi.

PAUL: All right. Yes, you're right. OK.

So I want to go to Christine Romans, 14,191 is what we're looking at here, Christine. S And she was just talking about how the Federal Reserve is pumping all this money into the stimulus to try to create the wealth effect.

But how long can that last, Christine?

CHRISTINE ROMANS, CNN ANCHOR: Well, the Fed says it's going to last for the foreseeable future here because the Fed really is the only game in town. You have the sequester, the forced spending cuts in Washington. That's going to pull $85 billion out of economy over the next seven months.

Think of this. The Fed is pushing $40 billion into the economy every single month. So the Fed is really pushing this thing forward here or a big reason why it is.

David Kelly over at JPMorgan, he calls it the TINA market -- T-I-N-A. There is no alternative. People are buying stocks and they're buying houses. Those are the two bright spots, in part, because the Fed is keeping interest rates so low for housing as well.

And remember about stocks, it's very important. A lot of people say to me, look, why are you guys talking about highs in the stock market when people don't feel it on Main Street? And they're right.

Here's the thing. Stocks measure the corporate success of the companies who make up those stock market averages, right, the companies within those indices. Those companies, S&P 500 companies, for example, get, I think, 45 percent of their revenue from overseas. So it's a much more global picture.

Also, you've seen money managers and investors have been telling us for months now that they feel as though the dysfunction in Washington, that's something that Wall Street is starting to factor in. They've got trillions of dollars on the sidelines in bank accounts. They're not necessarily hiring. They're not necessarily expanding.

But they are, like, hoarding cash basically and generating more profit with fewer people and less expansion and more overseas presence. So that's why there's this disconnect so many times, it feels like, between Main Street and Wall Street, Christi.

PAUL: All right. Hey I want to get that -- thank you, Christine -- I want to get back to Alison right now.

Alison, we just saw it hit 14,200. Have we seen -- have we seen the high today already? KOSIK: It could be. But you know what the key is really going to be, Christi? The key is going to be just because it's at these levels now doesn't mean it's going to close there. You know, it could do a 180. And when that closing bell rings, we could be back below that record high.

So the real key is going to be is it going to close. Has it reached this level before, during the trading day? Yes, it has, but actually not at 14,200. It hit 14,198, just to be exact.

So yes, these are new highs that the Dow is setting. This really is sheer momentum because, once again, you know, there is that disconnect between what regular Americans are feeling -- lots of Americans are out of work -- yet we're seeing these record high numbers with the Dow. I've got even a better explanation if we've got that story ready.

(BEGIN VIDEO CLIP)

DENNIS TERSTENOVIC, OWNER, DELMONICO'S: In 2007 you had big egos and lots of spending and wines and steaks with crab and hollandaise.

KOSIK (voice-over): Dennis Terstenovic (ph) has been the owner of Delmonico's restaurant just a few blocks from the New York Stock Exchange for 15 years.

He was here when the Dow hit its record closing high, 14,164, on October 9th, 2007.

WOLF BLITZER, CNN HOST: A strong rally today on Wall Street and the Dow Jones industrial average soaring to a record high.

KOSIK (voice-over): But just months later, bankruptcies, bailouts and government assisted buyouts. This time, Barry Ritholtz (ph), a Wall Street veteran and money manager, says it feels different.

BARRY RITHOLTZ, Wall Street MONEY MANAGER: We're in a post-credit crisis environment. It's not the usual recession recovery as we've seen historically. These tend to be very slow, muddle through.

KOSIK (voice-over): Dennis (ph) sees that caution, too.

TERSTENOVIC (PH): There's definitely more cautious spending, people watching their dollar. You know, they went through a hard time. And I think this hard time really got to them. So they're putting some money in the bank, I assume. Or they just don't want to have as much fun as they did.

KOSIK: Despite the caution, we're still in a bull market. But the average bull market lasts more than 31/2 years. And we're past that. So the question is, does it have room to run? Some traders are nervous.

UNIDENTIFIED MALE: You know, you cannot see it forever.

UNIDENTIFIED MALE: In my view it's a correction waiting to happen. KOSIK (voice-over): Ritholtz (ph) says it depends on the Federal Reserve. Policymakers have been pumping billions into the economy, keeping interest rates near zero, a policy they'll continue until the unemployment rate shows more meaningful declines.

UNIDENTIFIED MALE: As long as the Fed is accommodative and profits are reasonably good, there's no reason not to think that we can average historic returns this coming year.

KOSIK (voice-over): As for Dennis (ph), he's hoping the bulls keep running.

(END VIDEO CLIP)

KOSIK: And it looks like the bulls will keep running as long as the Fed, Christi, continues to sort of keep the punch bowl open for everybody to kind of dip into, meaning if the Fed continues these easy money policies, where the Fed keeps spending all that money, pushing down interest rates, essentially, and really moving investors to really invest in stocks in a big way, what we're seeing happen right now, Christi.

PAUL: All righty. Hey, Alison, thank you.

Christine Romans, want to bring you back into the conversation.

She just made a great point in that piece about how we hit this high back on October 9th. And within months, we had bankruptcies and buyouts and everything seemed to crash.

What have we learned, if anything, this time around to try to avoid that?

ROMANS: Oh, that's a really good question. I mean, basically you've had a slow healing. We had a real crisis in the economy. And then for people who were -- for the people who were brave enough or solvent enough after those days to put money to work in stocks, there were a lot of opportunities. And those people have been rewarded.

I mean, look at the ascension of the stock market since those lows hit after the financial crisis. It's been unbelievable. It's been, you know, the fastest wealth creation for people holding stocks probably in our lifetimes, right? But at what cost? We lost so many jobs. We lost so many small businesses. I mean, it was a really wrenching time.

So when you look at new highs in the stock market, a lot of people just kind of grumble and groan and say, look, this economy still is not working for me. There's an investing class that has been rewarded, but there's a working class that has not been. And that is still something that we need to figure out how to address here.

That being said, people with a 401(k), you know, your run-of-the-mill 401(k), you've had a good run here if you were still invested and even what we call dollar cost averaging all this way. So stock investors are feeling pretty good about things in their 401(k) or in other accounts, in mutual fund accounts.

We know at the beginning of the year, Christi, in -- there was a record amount of money rushing into stock mutual funds, I think $81 billion into stock mutual funds. So people are believing that the stock market, which represents the prospects of corporate America and multinationals, that they're doing better and they want to profit from that as well.

You look at some of the tech stocks. I mean, Google; Apple has had a rough go of it lately. But some of the tech stocks have been doing quite well. So there in the investing class, people who are invested in companies have been doing pretty well.

I'll say one thing, too, about Warren Buffett's letter to his shareholders this weekend. He said that too many CEOs are too nervous. And he sort of chided them for being so nervous. He said there's been uncertainty in America since 1776. There's still uncertainty in America. But we know we've got to deploy our money. We've got to invest in projects. And we've got to move forward.

And that's what he's telling corporate investors to do and investors to do and that's certainly what has been reflected right now in what's happening in the stock market with highs.

PAUL: All righty. Christine Romans, thank you so much for walking us through this whole -- this whole thing. We appreciate it.

Right now the Dow at 14,219, which has surpassed the high of October 2007 by -- it keeps going back and forth between 50-60 points higher than what we saw back in 2007.

Stay with us. We've got more after the break.

(COMMERCIAL BREAK)

PAUL: "Political Buzz" is your rapid fire look at the best political topics of the day. Three topics, 30 seconds on the clock; playing today, CNN contributor and former Obama White House official Van Jones; and Amy Kremer, chairwoman of the Tea Party Express. Thank you both for sharing your time with us here.

AMY KREMER, CHAIR, TEA PARTY EXPRESS: Good to be here.

VAN JONES, FORMER WHITE HOUSE OFFICIAL: Good to be here.

PAUL: Thank you. All right. So first up, scandal threatens to take down Senator Robert Menendez of New Jersey. Here's what we know.

After he accused -- or is accused anonymously, mind you, of paying for sex with prostitutes, now "The Washington Post" is reporting one of the women is recanting, saying she was paid to make those claims.

But "The Daily Caller" website, which posted a video of two prostitutes who admitted to sleeping with Menendez says "The Washington Post" is confusing its ladies of the night, let's say. A bizarre turn in this story, too, as the conversation, as the conversation moves from a political career, you know, possibly in jeopardy -- so, you know, which prostitute did what, when. And I guess we're wondering, at the end of the day, will this alleged scandal even matter for Senator Menendez's political future?

Van, you start.

JONES: Well, first of all, nobody knows what's actually going on here. Something fishy is going on. If these things are true, he's in trouble and he should be in trouble.

But what I think is more disturbing is how we now have this shooting match between "The Washington Post," a respectable Pulitzer prize- winning outlet, versus "The Daily Caller," which is, you know, a partisan organization. It's got a bad reputation for editing clips and this kind of thing.

I think the way that these partisan alleged news operations pull us into these scandals is much more disturbing than any of the scandals themselves.

PAUL: All righty. You got it there.

Amy, go ahead.

KRAMER: Well, you know, I have to agree with Van that we don't know all the facts. I'm sure there's more to come out. And if, in fact, he has done this, of course it's going to affect him.

But, you know, at the end of the day, think back to Anthony Weiner. When that story was breaking, everybody said it wasn't true. And as the facts came out, it proved to be true and he ended up resigning his congressional seat. So I think we have to wait and see on this one.

PAUL: All right Amy thank you.

Let's go to day four of those forced spending cuts we've been watching. So far the earliest impact may be felt at the White House we understand. There's a new Gallup poll that shows President Obama's approval rating is slipping falling seven points just in the last week. And that of course comes as cabinet members are walking back on the dire effects of those cuts.

Among them we're talking about Education Secretary Arnie Duncan who said teachers were already being fired in West Virginia.

(BEGIN VIDEO CLIP)

ARNE DUNCAN, SECRETARY OF EDUCATION: Language is really, really important. And I want to apologize for not being as clear as I should have been last week and because I wasn't clear the spotlight was put on me. And that's never ever my goal and my goal here is to have the spotlight be on children and families. So when I said pink slips, that was probably the wrong word.

(END VIDEO CLIP)

PAUL: It's amazing how semantics can really get you into hot water, isn't it? That school district tells CNN that Duncan was mistaken. It had yet to send out any official layoff notices.

But here's our question. "Could a lower approval rating and a reversal on some of these spending cut claims hurt President Obama's ability to make a deal?" Amy?

KREMER: You know I have to say here the Republicans are blamed for everything all the time. Their approval ratings can't go much lower. So if there's any blame to go around, I think it is going to go on President Obama.

But you know it wasn't just his staff and his administration and cabinet officials that were making these false claims. I mean he stood up at the podium at the White House and talked about janitors losing pay as well.

So the American people are paying attention. And I do think this is going to eventually hurt him and especially when we woke up and the sky is still there. And traffic lights are still operating. And toilets are still flushing.

PAUL: Yes, yes. Some people are saying it just didn't have the effect we thought it would have. Van, you kind of chuckled when she mentioned that Republicans get blamed for everything. What were you thinking?

JONES: Well, I mean, I -- I think sometimes maybe deservedly so. Here's the thing. I don't think that a wayward comment from Arnie Duncan is going to have much of an impact on the President's bargaining position. Here's where I think the President has to be worried. It's not the stuff leading up to the deal. It's the deal itself he keeps talking about. He keeps saying he's willing to cut Medicaid, Medicare, Social Security. These are wildly popular programs on both sides of the aisle. In fact, most Americans would rather raise taxes than cut those programs. It's not these side comments. It's the deal itself the President is promoting. When the President sticks up for those programs he does well.

PAUL: All righty. Thank you. Ok.

Finally, the NRA and NASCAR seem to be expanding their partnership here. The gun rights group is announcing that for the first time it's going to sponsor a top level racing event.

(BEGIN VIDEO CLIP)

WAYNE LAPIERRE, CEO AND EXECUTIVE VICE PRESIDENT, NRA: NRA members and NASCAR fans love their country and everything that is good and right about America. We salute our flag. Volunteer in our churches and communities. Cherish our families. And we love racing.

(END VIDEO CLIP) PAUL: So the NRA 500, you know, takes place in Texas next month. But with the backdrop of the current gun control debate, our question is, could the NRA's increased presence there, could it hurt NASCAR Van?

JONES: Well, you know, probably not. I think there's a pretty decent overlap between the NASCAR base and the NRA base. However, you know, the NRA's brand is probably in trouble long term.

Most people still think the NRA represents gun owners. It's turning out they actually represent gun manufacturers. And they want to dump as many guns on the public as possible. With even restrictions NRA members like, NRA is against. I think NRA is in more trouble than NASCAR.

PAUL: All right, Amy, what do you say to his assertion that the NRA has some long-term issues that they're going to be dealing with?

KREMER: Well I disagree with that. I mean, obviously these gun manufacturers are being supported. There's high demand for their guns and ammunition. But at the end of the day these are freedom loving Americans just like the commercial said. And NASCAR, the brand, was built on a cigarette company, Winston.

So this is their base. And there's no place more than Texas where people love their guns and they love their racing. So I don't think it's going to hurt their brand.

PAUL: All righty. Amy Kremer and Van Jones, thank you for your perspective. We appreciate you taking the time to be here.

KREMER: Thanks for having us.

JONES: Thanks.

PAUL: Sure. Boy, it is a shouting match in the Alabama state Senate.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Point of order, madam president. Point of order, madam president.

(END VIDEO CLIP)

PAUL: New legislation will give tax credits to Alabama parents who move their kids from failing public schools to private schools. We're taking a closer look at that controversy.

(COMMERCIAL BREAK)

PAUL: Checking our "Top Stories" right now. You know, most of the cardinals, cardinal electors I should say have arrived in Rome now. But this phony father the guy with a purple scarf fair tied around his waist crashed the party on Monday. Apparently he had no problem getting close enough to greet church officials who already arrived. Wow. Officials in Central Florida are watching a new sinkhole, this one is about three miles from that home where a sinkhole swallowed a bedroom and a man inside of it. And he's presumed dead now. Crews are trying to stabilize that sinkhole with gravel after they demolished his home.

And back here at home, we're getting our first glimpse of Casey Anthony in nearly two years. There she is, it was the first time Anthony's been forced out in public since being acquitted of killing her daughter. You can hear people yelling "baby killer". A federal judge ordered Anthony to court in Florida to testify and face her creditors after she filed for bankruptcy back in January.

All right take a look at these incredible pictures from near Saturn's orbit. NASA's unmanned Cassini (ph) spacecraft has been sending back pictures of earth's twin Venus that appears to Saturn's ring as a single bright white dot. The Cassini mission is a joint space program with other countries exploring Saturn and its moons.

Back in the moment there.

All righty, let's say -- put yourself in this position that your child's in a failing public school. What options do you have to give them a better education? Well, Alabama lawmakers have come up with this plan. Take your children out of public school, get a tax credit for putting them in a private one. The bill's passage followed a shouting match in the State Senate between Democratic opponents and Republican supporters and now the legislation is expected to be signed by the Governor.

Well we have Sally Howell with us, she's the executive director of the Alabama School Boards. Ms. Howell, good morning. Thank you for being with us.

SALLY HOWELL, EXECUTIVE DIRECTOR OF THE ALABAMA SCHOOL BOARDS: Good morning.

PAUL: Sure. I know that this bill in its present form is different from the one you initially supported. So how did it evolve?

HOWELL: Oh, it is drastically different. And it is a lousy way to make state public policy. The original bill was a school flex bill and it had the support of the school leadership community. And it would allow a local school board and superintendent with permission from the state board and state superintendent to ask for a waiver from state laws for innovative programs.

We called it an innovation law or the flex law. It passed both chambers. And went to conference committee and at the conference committee level, a nine-page bill became a 28-page bill and it still had the flex components, but then this whole new concept of a tuition tax credit program was added.

PAUL: Now I know I've heard you call this an anti-public education bill. But as I understand it and please correct me if I'm wrong, it's not just to send them to another private school. They could send them to another successful public school district, could they not? HOWELL: That is an option. I don't think I've used that term. I think that that is one of the criticisms of the bill. And let me tell you Christi, we in the education community understand that we need to address the problem of low performing schools. And there were several other bills pending that would have addressed that.

So we have problems with how this legislation was enacted, but also we're not sure it's going to produce the results that the state leaders say it's going to just because a parent removes their students from a public school doesn't mean that they're going to get higher results in the school they chose.

We need to -- we need to make sure that those are quality schools that they're using.

PAUL: Well, I understand that there are currently 75 failing school districts in Alabama. So the first thing I think of is what's the problem and what would you say to parents who want their kids to have a solid education?

HOWELL: Well, we think that we need to come together as communities and at the state level to address those problems. Usually those schools are located in communities that there are a number of issues that need to be addressed.

And we already have several programs in place that are helping those schools improve. Our Alabama Reading Initiative Program is touted across the nation. We are number one in games and nape testing (ph). So we have programs in praise that are yielding result, they just haven't had enough time in place to --

(CROSSTALK)

PAUL: Yes.

HOWELL: -- fully get everyone up to speed.

PAUL: All righty, well Sally Howell, we appreciate you being with us. Thank you so much.

HOWELL: Thank you.

PAUL: Sure and best of luck to you and all the folk there is. The next hour of CNN NEWSROOM with Ashleigh Banfield begins after a break. Stay close.

(COMMERCIAL BREAK)

ASHLEIGH BANFIELD, CNN ANCHOR: Good morning everyone. I'm Ashleigh Banfield sitting in for Carol Costello.

We begin this hour with breaking news coming to us via Wall Street. The Dow is soaring and records are falling. Alison Kosik is going to tell us what's happening. Christine Romans and Ali Velshi are going to tell us what it means to each and every one of us.

Let's begin with Alison Kosik. Alison, it's not like we didn't expect this was going to happen but it's still a big deal when it happens.

ALISON KOSIK, CNN CORRESPONDENT: It is, you know, it's a great milestone if you think about it.